The country is on a steady path to a strong post-pandemic recovery and a robust economic expansion.
We see the challenges of the COVID-19 pandemic, the Fourth Industrial Revolution, the climate change has opportunities to transform the Philippine economy into one that is sustainable, inclusive, and resilient.
To pave the way for our country’s industrial transformation, we consider science, technology, and innovation or STI, including digital technologies, as our main drivers.
STI can develop new goods, services, and even industries; increase production efficiency; and strengthen industrial linkages. Such advancements can foster industrial competitiveness and generate more jobs, quality jobs, and income opportunities.
In the Presidential visits to Singapore, Indonesia, and the United States that we have last month, the President and the economic team have informed foreign investors of recent policy reforms. The amendment to foreign investment act, for example, allows high-tech companies to set-up in the Philippines with 100% ownership. We build in knowledge, technology that we need to inspire industrialization act.
Because the amendment to the public service act has opened up sectors to foreign investments up to 100% ownership and the Retail Trade Liberalization Act has also opened that is sector to 100% foreign ownership.
The Corporate Recovery and Tax Incentives for Enterprises or CREATE, Act has reduced the corporate income tax rate for foreign corporations and rationalized investment incentives. The CREATE Act has also empowered the President to tailor-fit incentives for desirable investments. This will match the practice in neighboring countries like Vietnam to tailor fit incentives for investments to attract them to attract them to the country. Now we have capability under CREATE Act.
The working visit to the US alone generated around USD4.0 billion in investment pledges and these investments, if they come about—I’m sure they will—will create over 100,000 jobs.
In line with a recent World Bank study done in collaboration with DTI, our industrialization strategy for the Philippines takes advantage of megatrends, including disruptive technologies, servicification of manufacturing, and strategic adjustments in supply chains, are the move towards in getting alternative sources of supply that are shaping global trade and global value chains (GVCs) now and even before the pandemic.
At the same time, we will avail of an opportunity to diversify into three double value chain clusters that are going through restructuring, namely: the Industrial, Manufacturing, and Transportation (IMT) cluster; Technology, Media, and Telecommunications (TMT) cluster; and the Health and Life Sciences (HLS) cluster.
The first cluster, the Industrial, Manufacturing, and Transport cluster covers aerospace, automotive, and semiconductors.
In 2020, the country moved up five spots to 34th place in the Aerospace Manufacturing Attractiveness Index Ranking. The same year, at the height of the pandemic, we also exported around USD407 million of aerospace parts. The number one aircraft interiors company in the world (Collins Aerospace) and the world’s leading aircraft maintenance-repair-overhaul company (Lufthansa Technik) are headquartered in the Philippines. In August, we joined Lufthansa Technik’s inaugurating its Hangar A1 expansion around the NAIA.
To attract other suppliers and expand the cluster, we aim to be the Asia-Pacific hub for manufacturing and aftermarket services of the aerospace industry. We are also developing the aerospace value chain. The airports being constructed in Bulacan and now operating also in Clark, as well as the kick-start of the Philippine Aerospace Agency, can also generate investment opportunities. Exports in the aerospace sector are seen to reach PHP2.6 billion by this year.
As climate change prompts the shift to electric vehicles, we are keen to enter the global Electric Vehicle value chain. We welcome foreign direct investment (FDI) that brings relevant technologies, such as for developing green vehicles, IT in vehicles, and precision metal components.
On semiconductors, we seek FDI that captures added value cause now in the semiconductor business the basis of competition is value addition and the engineering aspect of producing semiconductors.
Second cluster, the Technology, Media, and Telecommunications cluster includes IT-BPM these are the BPOs, hyperscale data centers, the digital economy, and the products using Artificial Intelligence, among others.
The IT-BPM boom as earlier pointed out is evident last year in its 10.6% revenue growth to almost USD30 billion and the projection points that it will double by 2028 by the end the current administration. The 9.1% total headcount climb to 1.44 million workers that is also expected to reach over 2 million workers by 2028. As of June 2022, new investments have been approved for 148 IT-BPM or BPO projects valued at USD231 million and creating more than 31,000 jobs.
With the pandemic, interest in data centers has also increased around the world. Our country’s strong BPO record and hyperscale roadmap are drawing the attention of hyperscalers. We consider hyperscalers as our next engine of growth.
In July this year, we launched the PLDT Jupiter Cable System. This subsea cable system will serve as an added superhighway for digital data, attracting hyperscalers to the country. This cable system will connect the Philippines, Japan, and US.
The pandemic has expedited the adoption of cloud-based services. GlobalData, a leading data and analytics company, forecasts that Philippine enterprise spending for cloud-based services is expected to grow from USD1.8 billion in 2020 to USD2.6 billion in 2024. A big jump.
The next decade will witness the BPO segment as a cross-cutting contributor to the competitiveness of the global value chains. With 82% of BPOs and shared services centers in the Philippines serving global markets, this becomes a positive area for leverage for our participation in the Technology, Media, and Telecommunication industry cluster.
BPO firms can now have up to 100% set-ups and still enjoy the same incentives by simply transferring their registration from one government agency to another, all paper work assigned to government nothing much to be done by the BPOs.
The third cluster, Health, and Life Science cluster includes pharmaceuticals; biotechnology; medical devices; and digital health products and services. Our goal is to make the Philippines self-sufficient in pharmaceuticals, as well as healthcare services and therapeutic systems.
On top of the foregoing three clusters, there’s a fourth one — Major Basic Needs of a Resilient Economy. A resilient economy needs to have strong food, shelter, infrastructure, and education. DTI is seeking new investments to build them better, which will be vital in achieving the country’s long-term inclusive and sustainable growth.
Take note that the country is a heavy consumer of imported goods and those goods can readily be the basis for establishing the industries to substitute or import. This is not saying that we will go into a import substitution strategy, it’s just maximizing the values we can generate for the economy by establishing a base to take care of basic needs in the country and use that as a platform for reaching out or accessing the export markets.
We promote long-term sustainable and inclusive growth through food security and development of green ecosystems. We will also link manufacturing and agriculture. Very important in our country with more than 110 mouths to feed.
The Philippines is committed to build reliable and robust infrastructure. Following the President Marcos Jr.’s directives, we shall build better more. Build better more or in short, BBM.
We are widening our network and local road infrastructure that connects our ecozones, trade centers, and manufacturing and logistics hubs. Beyond promoting vibrant trade, this helps create more balanced growth between urban centers and rural communities, across regions.
As an example, we are stretching Manila’s direct catchment area for talent to support our advanced sectors. It is full speed ahead for the 147-kilometer North-South Commuter Rail that will connect our technology zones in Calabarzon to Clark Airport. Our big-ticket projects in Visayas and Mindanao like the almost-74-kilometer Metro Cebu Expressway and Iloilo-Capiz-Aklan Expressway remain priorities.
Acknowledging the critical role of the private sector in infrastructure development, we are looking at Public-Private Partnership as a mode of funding. Because the private sector will bring it not just capital but also technology, and more importantly management that is incentivized by performance. As mentioned earlier, we have opened public services such as railways, air transport, and airport development to 100% foreign ownership that could be another basis for improving transport infrastructure in the country.
Let me talk about energy. Beyond developing our industry and infrastructure, we are also in pursuit of energy security and clean energy for that matter.
In terms of energy requirements, we have existing 27,000 Megawatt installed as of June 2022, and 807,860 Megawatt estimated potential renewable energy capacities. We also presently have an estimated total of 28,200 Megawatt projects in the pipeline.
The Philippine Energy Plan, which will run up to 2040, supports a technology-neutral approach for the optimal energy mix to energy security. We are pursuing studies on energy fuel and technology options, and the feasibility of adopting nuclear energy.
The first half of 2022, the Board of Investments (BOI), which is under DTI, has approved renewable energy (RE) investments worth approximately USD6 billion. If these investments push through, they will generate 3,000 new jobs—direct jobs.
A recent decisive development on the policy front is the Department of Justice’s legal opinion on the country’s Renewable Energy Law. This was part of the points I raised in the first cabinet meeting. The IRR Renewal Energy Law or Foreign Ownership in solar, wind, and tidal energy.
With the Department of Justice’s opinion, foreigners can now own 100% of the Philippines’ Renewable Energy projects, including solar, wind, and tidal.
We have approved investments in five renewable developers of solar energy resources across the country with a 1,680-Megawatt peak capacity. One major project will be generating 1,300 Megawatt electricity by solar, it’s the one being developed on Laguna Bay which can occupy 2,000 hectares of the Lake’s surface. That’s a very long percentage given the lake has more than 90,000 hectares in area
Digital infrastructure is the sector with the biggest potential in growth amidst and beyond the pandemic. So I have already talked about that earlier.
BOI has also registered milestone telco infrastructure projects of US companies such as SBA Towers and America Towers. We also support companies such as Black and Veatch and Digital Bridge.
To mark the take-off of the Philippines’ Artificial Intelligence Roadmap, a roadmap prepared by DTI earlier on. We launched in early September this year the Center for AI Research and the Industry 4.0 Pilot Factory.
The country already hosts over 50 tech startups that use AI as their core technology. The AI Research Center is part of our efforts to make the Philippines an AI Center of Excellence.
With the support of the private sector, the center will be a hub where data scientists and researchers and academics can collaborate to create AI products and services, and support our industries’ digital transformation.
The industry 4.0 factory is the other innovation hub we are establishing as a compliment to the AI Research Center. This pilot factory will serve as a hub of cutting-edge solutions and a space for MSMEs, researchers, and universities can learn robotics, automation, and smart factory, among others. It can also serve as co-working space and prototyping sandbox.
Our partner to the Pilot Factory is Siemens of Germany. Siemens has already established a facility in Singapore, and what we will establish here in Philippine is similar to what they established in Singapore.
To diffuse innovation throughout the country and drive regional industrialization and help in developing various of regions in the country, we are establishing Regional Inclusive Innovation Centers to lead stakeholders in the regions toward entrepreneurship and innovation.
In closing, as we execute our strategies for industrial transformation, we recognize that investors serve are key partners in our country’s development. So I invite you all to consider Philippines. ♦
Date of Release: 3 November 2022