Ladies and gentleman, a pleasant afternoon to all.

We are once again gathered today to provide a platform for the government, industry sectors, academia, and the international community to exchange views on the opportunities and issues that confront Philippine manufacturing, as well as the future challenges that are on the horizon.

Last year’s summit tackled the pandemic’s adverse impact to the industry such as disruptions to production and supply chain and how new technologies can drive inclusive, sustainable, and resilient industrialization amid the pandemic.

In this year’s summit, we aim to continue the conversation equipped with new insights, learnings, and experiences to focus on the critical task of supporting the manufacturing sector’s recovery and industrial resilience.

A critical component of this year’s summit is to also culminate all the efforts that we have all worked together over the past five years to boost the manufacturing sector and secure its resilience and sustainability amid an ever changing economic and business landscape.

The year 2016 marked the very first manufacturing summit which initially focused on maximizing the opportunities and addressing the challenges of the sector. Over the years, the annual Manufacturing Summit has successfully covered different policy issues and generated key industry insights which all have shaped and influenced the sector’s performance as we see it today.

In 2016, the Philippines was at the wave of a Manufacturing resurgence attributed to the country’s strong macroeconomic performance, growing middle class, more conducive business environment, and a young, highly educated, and English-speaking workforce. Philippine Manufacturing was strongly performing at a 5.6% Annual Average Growth from 2011-2016, the second in Asia and ASEAN and just next to Vietnam.

It was a window of opportunity for us to create a solid vision to push again for an inclusive and sustainable industrialization for the Philippines. While we have experienced strong industrial growth, unemployment rate decreased only by little from 7% in 2011 to 5.5% in 2016, and the share of manufacturing to the economy declined from 19.8% in 2011 to 19.1% in 2016, as investments in services remained to grow faster. Industrial growth, then, did not create yet the supposed structural transformation to provide adequate jobs and uplift people from poverty.

Thanks to the hard work and efforts of our Board of Investment (BOI), we entered this administration equipped with comprehensive industry roadmaps that articulate the different industrial opportunities and challenges to sustain this growth momentum. In collaboration with the private sector and the academe, we have identified the binding constraints to growth that need to be addressed such as complex business procedures, foreign ownership restrictions, high cost of power, logistics, and connectivity, together with infrastructure, access to finance and technology, lack of skilled workers, limited standards and certifications, weak industry-academe linkages, and disjoint production systems.

Department of Trade and Industry (DTI) had a monumental task to sustain our manufacturing growth momentum, eliminate the barriers to constraints, and prepare our industries for the challenges of globalization and the Fourth Industrial Revolution. It was for these reasons that we crafted the country’s new innovation-centered and science- and technology-based industrial policy, Inclusive Innovation Industrial Strategy (i3S).

Our strategic mission right from the start was clear and simple but is no means an easy task: we need to propel more and better jobs, create investments, and achieve a shared prosperity for all.

This new industrial policy aims at growing innovative and globally competitive manufacturing, agriculture, and services while strengthening their linkages into domestic and global value chains. In doing so, innovation is crucial in addressing the challenges not only from globalization but also from automation, robotics, artificial intelligence and other new technologies.

We believed that the government should coordinate policies and provide support measures for industries to take advantage of market opportunities and act as an engine for sustained, inclusive growth, job creation, and poverty reduction.

Our new industrial policy has six strategic actions: (1) Upskill and Reskill the Workforce; (2) Link our innovation and entrepreneurship ecosystem; (3) Ensure Ease of Doing Business; (4) Develop Innovative SMEs and Startups; (5) Integrate our Production Systems; and more importantly (6) Embrace Industry 4.0.

We are focusing on 15 strategic industries to date which include automotive, chemicals, agribusiness, furniture & garments, creatives, iron & steel and tool & die, electronics and electrical, shipbuilding and ship repair, IT-BPM, e-commerce and the digital economy, climate change and mobility solutions, aerospace and aircraft maintenance, construction, transport & logistics, and tourism.

Strategic Action 1: Upskill and Reskill the Workforce

The need to reskill our workforce is crucial to increase and sustain industrial competitiveness under the Fourth Industrial Revolution. As such, the BOI has implemented several industry- specific human resource development initiatives for key industries particularly on aerospace, automotive, electronics, and tool & die and metal casting.

Furthermore, as the Fourth Industrial Revolution calls for bridging and closing the skills gaps of workers, we are working on the Philippine Skills Framework, patterned after the Skills Frameworks of SkillsFuture Singapore, which will become a common reference or language that employers and workers share in order to ensure the match between jobs and skills in our priority sectors. We have already launched the first Skills Framework for the Logistics sector last June and we are currently working on the Skills Framework for Manufacturing.

Strategic Action 2: Link our innovation and entrepreneurship ecosystem

In order to achieve the overall vision of creating an inclusive innovation and entrepreneurship ecosystem, DTI and Department of Science and Technology (DOST) have started establishing Regional Inclusive Innovation Centers (RIICS) to promote inclusive growth and development in the regions.

Through the RIICs, we are bridging the gaps and forging linkages among innovators, entrepreneurs, and enablers in the regional innovation and entrepreneurship ecosystem, to support enterprises, especially the micro, small and medium enterprises (MSMEs), to innovate their products, processes, and business models, to address market gaps and societal needs. To date, there are eight RIICs in Davao, Cagayan De Oro, Legazpi, Cebu, CALABARZON, Central Luzon, Cagayan, and Zamboanga.

Strategic Action 3: Ensure Ease of Doing Business

DTI continues to champion measures that ease doing business through soft and hard infrastructure. We can see this in the 2020 Ease of Doing Business Report released by the World Bank (WB), with the Philippines ranking 95th out of 190 economies. This is a 29-notch improvement from the 124th in 2019.

As the lead agency implementing the “Ease of Doing Business and Government Efficiency Act of 2018, DTI has been improving its operational efficiencies. With the help of Anti-Red Tape Act (ARTA), we’ve been streamlining business processes and promoting business competitiveness from business registration, business processes, and customs administration. We have made business registration faster and closer to the people both online processing, and offline through our more than 1,000 Negosyo Centers.

In line with the administration’s “Build, Build, Build” Program, the DTI is an ardent supporter of the government’s industry-developing infrastructure projects in priority economic and manufacturing zones in the Philippines that will expand industry and trade. Seamless and efficient logistics is also in consonance with the national policy direction of reducing cost of production for manufacturers and developing regional economies outside mega cities.

To date, the administration’s total infrastructure spending was at P4.13-T, covering a total of 104 projects as of 19 August 2020 in which 91% accounts to the transport and mobility sector, followed by the water and the ICT sectors with 12% and 10%, respectively.

Strategic Action 4: Develop Innovative SMEs and Startups

The Philippine startup ecosystem is young and has very abundant opportunities for investment. It keeps growing – with over 700 startups, more than 200 co-working spaces, over 35 incubators and accelerators, and numerous potential investors and venture capitalists nationwide.

Despite the struggle of traditional businesses, tech startups have continued to emerge and provide solutions and services to the public amidst the pandemic. Between 2018 and the first half of 2020, the total amount already invested to Philippine startups reached USD547-M. During the pandemic, more than USD50-M in investments were made to our local startups like Kumu, Paymongo, Plentina, Great Deals Ecommerce, GrowSari, and NextPay, among others.

With the enactment of the Innovative Startup Act, which provides benefits and removes constraints to encourage the establishment and operation of innovative new enterprises, we expect to see the accelerated development of new and innovative startups and enterprises that will address future societal problems and challenges of our country.

Furthermore, the country’s National Artificial Intelligence (AI) Roadmap will position the Philippines as an AI powerhouse. The National Center for AI Research (NCAIR) will be a regional AI center of excellence where local and multinational manufacturing companies and MSMEs, in the Philippines and abroad, can explore various AI R&D projects with the Philippine government, its researchers, and its linkages with universities and research institutes.

Strategic Action 5: Integrate our Production Systems

An equally important imperative was to link local production systems and integrate the Philippines in the different Global Value Chains and maximize access to key foreign markets.

To date, the country boasts of its membership to eight key regional free trade agreements (FTAs), one of which is the recently concluded Regional Comprehensive Economic Partnership (RCEP). These are also complemented by our strong bilateral FTAs, with key markets such as Japan and the European Free Trade Association. This will ultimately increase our market access, improve trade and investment, enhance transparency, integrate supply chains, and strengthen economic cooperation.

DTI champions exporters through strategic promotion activities such as capacity building and mainstreaming of Philippine products, business matching missions, market consultancy and upgrading, or scaling up of production and services to accelerate their global value chain (GVC) integration.

These FTAs are complemented by a robust and strong domestic fiscal policy to make industries and investments more innovation-driven. CREATE, the largest fiscal stimulus package for businesses in the country’s history, provides private enterprises more than 1 trillion pesos worth of tax relief over the next 10 years with a significant cut on the tax rate for corporations. Our MSMEs will benefit the most from Corporate Recovery and Tax Incentives for Enterprises (CREATE), as it provides for an immediate 10% reduction in the CIT rate, bringing it down to 20%.

As part of the law, the SIPP will be guided by its key principles of High Value, Technology Oriented, Openness, Sustainability, and Inclusivity as its key baseline in determining the appropriate support that the state will provide.

These efforts are reflected by the stellar performance of the export of goods sector at 10.1% annual average growth and as share to GDP rose to 15.8%, from 2016-2019. In 2019, we reached a record high of P3.1-T value of goods exports. Despite the challenges of the pandemic, the export sector fared relatively better by still posting P2.9-T in 2020, a decline of -8.6%.

Similarly, export complexity and sophistication of our exports, which reflects the country’s technological know-how, has likewise shown encouraging figures. In the 2019 Economic Complexity Rankings, we ranked 28th again, and has gotten us closer to our regional peers Thailand and Malaysia.

In terms of investments, the Philippines recorded P165-B in approved investment as it enters 2021. 83.6% (P138-B) of which is attributed to BOI. This performance shows that the Philippines is already on its path to recovery as it also reports a 65.6% increase in approvals from its investment leads. In terms of investment flows, the majority of which went to the Electricity, Gas, Steam and Air Conditioning Sector. While Manufacturing has placed third in investment receipts at P12.7-B, it has the most number of projected employment creating 9,514 jobs.

DTI also develops specific strategic industries, as in the case of the country’s creative sector, through crafting Roadmaps across multiple sub-sectors, which will help define our action plans, strategies, and policy priorities.

The creative industries also form part of the country’s manufacturing sector, covering garments and textile; leather, handbags, and shoes; woodworks; paper and publication; arts and crafts; audiovisuals; glasswares; metalworks; furniture and fixtures; and fashion accessories, among others.

The DTI has been promoting the growth of the sector, highlighting its ability to generate high value activities and employment. The country’s creative goods exports contribute substantially to our international trade, noting its 4.2% annual average growth, from 2015-2019. More so, we are committed to supporting the passage of key legislations to strengthen our creative economy.

The BOI is also preparing the automotive industry for the future of autonomous, connected, electric, and shared transportation. We are preparing the Electric Vehicle Investment Strategy to attract investments in key activities critical to the industry’s development such as EV assembly, auto electronic and other parts manufacturing, EV battery charging and energy storage systems manufacturing, battery recycling, and engineering service outsourcing.

The new EV strategy will build on our progress and experience from the Comprehensive Automotive Resurgence Strategy or CARS Program. The CARS Program to date has generated P9.1-B of CAPEX investments, produced 147,000 vehicles, registered 9 parts makers, saved the economy USD700-M in foreign exchange, created 100,000 jobs, and can save the economy an additional USD1-B in foreign exchange by 2024.

Furthermore, we continue to strengthen local production integration and trade participation of other key industries through domestic initiatives. In the iron and steel sector, BOI collaborated on a feasibility study on the best value-adding methods for our magnetite sands. In the electronics sector, the recent MOU between SEIPI and ACSIEL provides a chance to lessen France’s dependence on China for certain parts.

We have also launched the Leyte Ecological Industrial Zone master plan which provides for the clustering of the copper industry. Lastly, we continue to promote internationally the Philippine Garments, Leather Goods Industries & Fabric Expo and establish the Philippines as an original and innovative design manufacturer.

Strategic Action 6: Embrace Industry 4.0

Our strategy highlights the need to embrace new and advanced technologies arising from Industry 4.0. Our approach to Industry 4.0 is to ensure the end-to-end government support and assistance to manufacturing enterprises, especially the MSMEs, in their digital transformation journey.

To date, we have conducted Industry 4.0 workshops to more than 200 C-level Executives in the automotive, electronics, aerospace, chemicals, food manufacturing, and the construction materials sectors. DTI has also partnered with the World Economic Forum (WEF), the Asian Development Bank, and Siemens to scale up the adoption of Smart Industry Readiness Index (SIRI) among Philippine manufacturing firms.

We are also ready to support the crafting of the Industry 4.0 roadmaps for these companies, and we are working on the feasibility study of establishing an Industry 4.0 Pilot Factory and an SME Academy for Industry 4.0 technology training, demonstrations, and simulations. All of these, together with the crafting of the Philippine Skills Framework for Manufacturing and the National Center for AI Research, will serve as catalyst to fast-track the Industry 4.0 transformation of manufacturing enterprises, especially the MSMEs.

Manufacturing setbacks during COVID-19

A critical juncture in implementing these programs was in 2020 with the onslaught of the pandemic. The GDP, manufacturing, and the exports sector have all experienced a deep crunch by -11.4%, -9.8%, and -8.6% respectively.

Beyond the overarching economic impacts, the livelihoods of our workforce have also experienced hardships. An estimated 8.7 million jobs were lost cumulatively. In April 2020, the unemployment rate was at a high of 17.6% while the underemployment rate was at 18.9%.

These setbacks led to a decline in the confidence in the market. Different measures of business expansions, confidence, and consumer optimism were all at all time low at the height of the restrictions.

Responsive Manufacturing Against COVID-19

Despite being one of the most pandemic-affected sectors, manufacturing was a strategic partner in surviving the pandemic. It was manufacturing which heeded the call of addressing the country’s shortage of PPEs and medical devices when our frontliners needed these the most.

DTI and BOI, through the Manufacturing Repurposing Program had to ensure a robust, efficient, and connected PPE Ecosystem and healthcare manufacturing by partnering with the private sector to pivot towards high-value and essential products such as PPEs, disinfectants, aerosol boxes, ventilators, and IR thermometers. Today, the production capacity of our manufacturers in producing different PPEs and medical devices has grown substantially.

Apart from ensuring reliable production, demand coordination was also critical to ensure the sustainability of our local producers. The DTI led this demand generation through different initiatives such as the Libreng Face Mask Para sa Masa Project, the Protective Outerwear Project (POW) for government employees, and the Domestic Bidders Certificate of Preference. With the help of UNDP, we have also launched EMPOWER PH which aims to connect manufacturers, suppliers, buyers, and beneficiaries in a digital platform.

Where We Are Now

As we look back at the years that DTI pursued its commitments to the manufacturing industry, it is encouraging that from 2016-2019, we have seen record performance with an annual average growth of 6.0% indicating a continued resurgence of production amid global economic slowdown and rising protectionism.

While the pandemic has slowed our manufacturing growth, as we safely and gradually reopen the economy, we see early signs of gradual recovery. In second quarter of 2021, GDP posted 11.8% growth while manufacturing posted the highest growth at 22.3% among all sectors in the economy. While this may be a phenomenon attributed to the huge declines this year, I am confident that we’re slowly adapting to the changing market environment.

The sub-sector performance of manufacturing is also reflective of its overall recovery. Almost all sub-sectors posted double-digit growths. Some of the top performers for Q2 are Other non- metallic mineral products, furniture, leather and footwear, wearing apparel, transport equipment, wood and bamboo products, and metal products.

While conscious of our gains, our optimism for the manufacturing sector needs to continue further and translate into more robust production. While second quarter of 2021 posted stellar growth rates, this performance hasn’t offset yet the huge declines experienced in 2020. Many sectors haven’t reached their pre-pandemic outputs back in second quarter of 2019.

Our employment situation is likewise showing better performance. As of June, of this year, employment is at 45.1M of which 3.5M is at manufacturing representing 7.8% of total employment. Our June employment is the highest figure recorded this year, a huge difference from the 33.8M employed in Q2 of 2020.

Recovery Strategies

The government’s focus in the past year has been to provide much-needed social protection to our workers and immediate financial & regulatory relief to enterprises in order to preserve businesses and employment.

Bayanihan I and II served as stimulus programs that aimed to support businesses and revitalize growth by strengthening our healthcare sector. These provided the necessary measures to enable business recovery, especially with our MSMEs and critical industries.

In our economic recovery, we are working on several national strategies to build back better. DTI’s REBUILD PH Strategy aims to pursue a virtuous cycle of job and income generation, demand stimulation, and increased production. In June 2021, President Rodrigo Roa Duterte signed Executive Order (EO) No. 140, officially adopting the National Employment Recovery Strategy (NERS) as the Philippine master plan for the restoration of the country’s labor market.

Road Ahead for PH Manufacturing

As we journey towards recovery, there are still risks that we have to manage such as new variants, future lockdowns, and possible delays in vaccination roll-out. These are the uncertainties that we still need to prepare for.

We are certain that Digital Technologies will play a crucial role in ensuring a swift reaction to crisis, ensuring business continuity, accelerating recovery, and most importantly protecting workers and their employment. The innovative firms have thrived during the crisis, while others were left behind.

In this day and age, organizations which are resilient to external shocks will have a competitive advantage. Firms and enterprises must be agile to rapidly tailor production and supply systems and develop new capabilities to adapt to changes in consumer behavior.

Equally important, amid changing production patterns, new technologies can be utilized to enhance supply chain visibility and reliability within domestic and global value chains.

Finally, it will be a shared responsibility and close collaboration between the government and the private sector to address social, economic, & environmental challenges.

Strategic Immediate Policy Priorities

As DTI and BOI embark on a new journey next year, I am confident that they will continue to fulfill their commitment to the development and progress of the manufacturing sector, and to the broader Philippine economy. We have already seen the momentous performance and the feat that we have achieved through collaboration and cooperation between and among all sectors of society, however, there is still much work to be accomplished:

  1. Restore consumer and business confidence through sound health and economic policies
  2. Boost Innovation and Entrepreneurship to create businesses and jobs
  3. Ensure access of enterprises to digital technologies,  R&D facilities, expertise, and innovation financing.
  4. Close skills gaps and address digital divide to drive inclusion
  5. Improve digital connectivity and upgrade ICT Infrastructure
  6. Government programs that will enable enterprises, especially SMEs, to diversify into higher value goods and services
  7. Expand e-commerce and digital trade participation of SMEs in local and foreign markets while managing risks, standards, regulations, and consumer protection.

In closing, allow me to express my heartfelt gratitude to our industry champions, academe partners, development partners, colleagues in the government, and my team at the Department of Trade and Industry and Board of Investments for the success and an eventful journey. Together, we can help sustain a strong manufacturing industry that will build back better a more competitive and innovative Philippines, as envisioned by President Rodrigo Roa Duterte.

Maraming salamat po.

Date of Release: 25 August 2021