23 September 2019, Sofitel Philippine Plaza, Pasay City
As delivered
[Acknowledgements]

Ladies and gentlemen, good morning!

Thank you all for coming to the Department of Trade and Industry’s (DTI) Inclusive Innovation Conference. As the world enters the Fourth Industrial Revolution—also known as 4IR or Industry 4.0—the Philippines must prepare itself to ensure that it remains competitive. By pooling our knowledge and experience together, I am confident that we can work together to realize President Rodrigo Duterte’s vision of a future where all Filipinos have a better life.

With that in mind, the World Economic Forum’s (WEF) “Readiness for the Future of Production Report 2018” gave its assessment of how countries are being affected by the changing nature of production via the adoption of rapidly emerging technologies. In the report, it cited the Philippines as the archetype of a legacy country. That is, it is a country that has a strong production base today but is at risk in the future that we need to work on across the Drivers of Production. These Drivers are: (1) technology and innovation; (2) human capital, (3) global trade and investment; (4) institutional framework; (5) sustainable resources; and (6) the demand environment.

The Report likewise stated that legacy countries like the Philippines need “to carve out a strategy for the future.” Their three most pressing challenges are “Institutional Framework, Human Capital, and Technology & Innovation.” Furthermore, they need to “reskill and upskill workers, upgrade their technology platform, seek frugal innovations, and ensure the fundamental building block of good governance is in place to perform well in the future of production.”

Recognizing these challenges, DTI has various plans, policies, and programs in place in order to better prepare the Philippines for the Fourth Industrial Revolution.

PREPARING FOR THE TECHNOLOGY (Plans and Policies)

First of all, our plans and policies for preparing for Industry 4.0 are guided by our Inclusive Innovation Industrial Strategy (i³S). The i³S aims to grow innovative and globally competitive manufacturing, agriculture, and services industries by focusing on three major areas. These are: (1) the creation of an innovation and entrepreneurship ecosystem; (2) the removal of obstacles to growth to build industry clusters; and (3) the strengthening of domestic supply and value chains, which would deepen our participation in global and regional value chains and networks.

The i³S relies on strong government-academe-industry collaboration. However, the government needs to act as main coordinator and facilitator in addressing the most binding constraints to the growth of industries. The strategy stands on 5 major pillars: (1) building new industries and industry clusters; (2) capacity-building and human resource development (HRD); (3) innovation and entrepreneurship; (4) growth and development of Micro, Small, and Medium Enterprises (MSMEs); and (5) ease of doing business and investment environment.

The core principles of i³S are reflected in our plans for industry development, which are our industry roadmaps. Since the beginning of our Manufacturing Resurgence Program (MRP), we have formulated—and are implementing—over 35 roadmaps across agribusiness, manufacturing, and services sectors.

With the advent of the Fourth Industrial Revolution, we recognize the need to update our roadmaps to incorporate innovation as a key element. We also need to include corresponding measures that will enable our MSMEs and industries to upgrade and sustain their competitiveness. As such, we are doing these through a number of initiatives:

UNIDO Leveraging 4IR Project

We are partnering with the United Nations Industrial Development Organization (UNIDO) with the “Leveraging 4th Industrial Revolution for Inclusive and Sustainable Industrial Development in the Philippines” project. Also called the Leveraging 4IR, this project will foster inclusive and sustainable industrial and economic development in the country through a smooth transition of our industries towards Industry 4.0.

The project focuses on the automotive, electronics, aerospace, and agribusiness sectors. It aims to promote the uptake of Industry 4.0 technologies and business models by firms in these sectors, as well as crafting the roadmap for adoption of Industry 4.0 among them. The objective for us is to have an innovation ecosystem that supports technological learning and innovation of small- and medium-sized enterprises.

Included in its outputs are the establishment of an SME Academy to provide Industry 4.0 trainings for SMEs, an Industry 4.0 pilot factory, and 4 Industry 4.0 Roadmaps covering the automotive, electronics, aerospace, and agribusiness sectors. This project will also include Industry 4.0 Training for government policymakers to enhance their capacity to implement Industry 4.0 policies and programs.

Artificial Intelligence (AI) Roadmap

Second, we will be starting the process of formulating an Artificial Intelligence (AI) Roadmap for Philippine industries soon. Our AI Roadmap will define our national AI strategy for our priority like agribusiness, manufacturing, and services sectors. Likewise, we will establish an AI Task Force, a multidisciplinary group composed of public and private sector members.

The Roadmap will be done in coordination with other national government agencies like the departments of Science and Technology (DOST) and Information and Communications Technology (DICT). Also included are key stakeholders from the industry and the academe. NEDA will always be part of this.

With focus on building a pool of data scientists, our aspiration is for the Philippines to become an AI Center of Excellence. We aim to be ready with the Roadmap in the first half of 2020.

Human Capital Development and Reskilling and Upskilling of Workforce

The changing nature of work in Industry 4.0 requires corresponding improvements in our human capital and workforce. The economy of the future demands lifelong learners who are able to reskill themselves and upgrade their skill set in a world of cyber-physical systems.

To address this, we have forged a Memorandum of Understanding (MOU) with SkillsFuture Singapore (SSG) to adopt a similar approach to human capital and workforce development. Through the development of a skills framework that will be incorporated and harmonized with our industry roadmaps, we intend to design training programs and other forms of support. These will assist members of our labor force to thrive in the new world of work.

Updating of the e-Commerce Roadmap

We have the e-Commerce Roadmap 2016-2020, which presents the country’s strategic plans, policies, and other support measures to harness the benefits of e-commerce for the Philippines. While our current goal is for e-commerce to contribute at least 25% of GDP by 2020, we are in the process of reviewing these and revising our targets.

Innovation Laws

Fifth, in addition to enhancing our roadmaps and other plans, we are looking forward to the implementation of two landmark laws on innovation. These laws, which were recently signed by President Rodrigo Duterte, are the Philippine Innovation Act and the Innovative Startup Act.

The law’s main objective is to generate and scale up action in all levels and areas of education, training, and research and development (R&D). This will promote innovation and internationalization activities of MSMEs as a driver of sustainable and inclusive growth.

The law also calls for the formulation of a National Innovation Agenda and Strategy Document (NIASD). This will establish the country’s vision and long-term goals for innovation. It will provide a roadmap and strategies for improving innovation governance through clear-cut delineation and complementation of innovation efforts across agencies.

More importantly, the law creates an Innovation Fund, which is a revolving grants fund of Php1B sourced from the General Appropriations Act (GAA). This fund will be administered by the NIC. There will also be an Innovation Development Credit and Financing as well as Credit Quota programs, to provide funding for innovation initiatives.

Among the key provisions of the law is the creation of the Philippine Startup Development program, which will be composed of programs, benefits, and incentives for startups and startup enablers. These include subsidies, grants-in-aid, and expedited processing of applications. The law calls upon DTI, DOST, and DICT as lead host agencies to promulgate appropriate policies and guidelines for the coordinated implementation of the program.

The law further creates under each lead host agency a Startup Grant Fund to provide initial and supplemental Grants-in-Aid for startups/ startup enablers. It also calls for the creation of Startup Visas and the establishment of Startup Ecozones.

DTI is primarily responsible for a number of tasks. One is the promulgation of rules for the efficient registration and assessment of startup enablers to be registered under the program. We are planning to setup one-stop shops all over the country to facilitate this. What’s more, we will administer and manage the Startup Venture Fund (SVF), in coordination with its attached agency, the National Development Company (NDC).  The SVF will be used to match investments by selected investors in startups based in the Philippines.

In coordination with the Board of Investments (BOI), DTI will also develop a Startup Investment Development Plan (SIDP). Covering short, medium, and long-term strategies, this plan will spur investment in, and promote the growth and development of startups and startup enablers of the Philippines.

It is important to support the growth and enable the scaling up of our startups. DTI will lead in pushing for more market-oriented research through the conduct of market and feasibility studies and accelerators or mentoring programs. These will further complement the R&D programs of DOST, as well as the Department of Agriculture (DA) and the Commission on Higher Education (CHED). In turn, our startups will fuel our country’s innovation drive through their new products, new services, and new business models.

The Implementing Rules and Regulations (IRR) for both laws are currently being formulated and are expected to be out by next month.

Industry 4.0 Fiscal Incentives being discussed under CITIRA

Sixth, the use of new technologies as well as the shift to Industry 4.0 technologies are among the criteria proposed in selecting industries and activities to be included under the Strategic Investment Priority Plan (SIPP). From these would be drawn a list of priority industries that would be entitled to new incentives under the proposed Corporate Income Tax and Incentives Rationalization Act (CITIRA).

Included here are the use of modern or new technologies like AI, as well as investments to upgrade and introduce new processes, products, services, or business models. Among the priority sectors identified under the SIPP are innovation, R&D activities, and startups.

Industries covered under the SIPP are: electronics and electrical; automotive; machinery and equipment; aerospace; IT-BPM and e-commerce; agribusiness; chemicals; and transport and logistics.

For incentives, the Income Tax Holiday (ITH) will be given to the following. Good improvements in the CITIRA, which is being deliberated. (1) 4 years as base for products that are expanding and moving up the value chain; (2) 5 years for Special Activities like Agribusiness and investments outside Metro Manila; (3) 7 years for intermediate parts and components; and (4) 10 years for superior to high-tech products that are not yet present in the Philippines

There will also be Reduced Corporate Income Tax:  18 % for 2019; 17% for 2021; 16% for 2023; 15% for 2025; 14% for 2027; and 13% for 2029. There will additional deductions as well for the following: (1) accelerated depreciation; (2) deduction on labor expense; (3) R&D expense; (4) trainings; (5) infrastructure development; (6) Net Operating Loss Carry-Over (NOLCO); (7) domestic inputs; and (8) reinvestments.

Electric Vehicle Incentive Strategy (EVIS) Program

Seventh, we have the Electric Vehicle Incentive Strategy (EVIS) program. This program will provide comprehensive fiscal and non-fiscal support to enable the traditional motor vehicle industry to shift to EV and jumpstart the development of the EV industry.

The fiscal support is necessary to narrow the cost gap between EV and conventional vehicles. It will also attract investments in Completely Knocked-Down (CKD) manufacturing, the manufacture of strategic parts and components like batteries, the establishment of testing facilities, and the production of charging facilities.

I would like to reiterate that our incentives for this program—are consistent with that of CITIRA, as well as for all our other programs—will be time-bound, targeted, performance-based, and transparent. To stimulate market demand, government procurement of vehicles will prioritize models produced under this program.

Among the fringe benefits we will give to this program are the following. These are proposals: (1) priority in registration and issuance of plate numbers; (2) exemption from the Unified Vehicular Volume Reduction Program (UVVRP); (3) free parking in commercial centers and commercial-business district (CBD) roadsides; (4) priority in PUV franchise application; (5) provision of space for charging stations; and (6) annual vehicle registration fee exemption with a 3-year registration interval. We have to create the demand to attract producers.

APPLYING THE TECHNOLOGY (Programs and Projects)

While we put in place plans and policies in preparation for Industry 4.0, we are also implementing various initiatives to build our innovation and entrepreneurship ecosystem.

Regional Inclusive Innovation Centers (RIICs) with USAID STRIDE

Our Inclusive Filipinnovation and Entrepreneurship Roadmap aims to increase the country’s ability to innovate.

In partnership with DOST and other agencies, we are building Regional Inclusive Innovation Centers (RIICs) in different parts of the country under the i³S. For this initiative, we have technical assistance from USAID’s Science, Technology, Research, and Innovation for Development (STRIDE) program being implemented by RTI International. We have 4 pilot RIICs to date: Legazpi in Region V; Cebu in Region VII; Cagayan de Oro in Region X; and Davao in Region XI. Some of the key drivers of the RIICs are here with us today.

The RIIC consist of a network of innovation agents that collaborate in order to commercialize market-oriented research towards competitiveness in the regions. It is a government initiative in cooperation with the industry and the academe as well as R&D institutions, which aims to generate better employment opportunities, more entrepreneurial activities, and sustainable economic prosperity in the country’s regions.

To sustain the initiative per RIIC region, the support of the Regional Development Council (RDC) is obtained. A Core Group of regional stakeholders from government, academe, and industry is also formed to drive efforts forward.

In the last ten months, the RIIC initiative has conducted a lot of trainings and sessions. For example:

• Pilmico Foods Corporation in Iligan is expanding their collaboration with the Mindanao State University-Iligan Institute of Technology (MSU-IIT) on particular R&D needs. These include increasing quality control processes of their products. Pilmico wants to introduce sensor technologies to identify and lessen the presence of pests in their products.
• Limonero Fruit Drinks in Cagayan de Oro is working with the University of Science and Technology of Southern Philippines (USTP) to develop a prototype that will improve its distribution network within local schools.
• Eng Seng Food Products of Davao is expanding its partnership with the University of Southeastern Philippines (USeP) to help improve manufacturing processes in their durian and coconut products.
• Leslie Pili Products of Sorsogon has partnered with Bicol University and submitted a proposal for funding under DOST’s Collaborative Research and Development to Leverage Philippine Economy (CRADLE) program. This program funds projects wherein the academe solves problems identified by the industry. SLERS Industries, together with Xavier University, also submitted to CRADLE a proposal for their spent pork lard to be used as fuel additive in their factory.
• In Cebu, Knowles Electronics supports Cebu’s aspirations to increase its innovation capacity. They signed an MOU to develop a Professional Science Masters (PSM) program with the Cebu Institute of Technology University (CIT-U), which will cover such topics as industrial automation.

In addition, we have ongoing partnerships and are intended to utilize disruptive technologies to better prepare for 4IR.

Smart Manufacturing Survey

To enhance our interventions to support our manufacturing sector, we are conducting a smart manufacturing survey using a framework developed by the Manufacturing Enterprise Solutions Association (MESA). This survey aims to assess the technology utilization status of manufacturing firms and understand their status or position in terms of Industry 4.0 preparedness.

It covers 8 dimensions: (1) planning and scheduling; (2) manufacturing activity management; (3) equipment connectivity and data management; (4) materials management and handling; (5) equipment maintenance; (6) shop floor visibility; (7) quality; and (8) cybersecurity.

There are also ongoing discussions for possible collaboration with companies. For example, there is Wave Computing for the training of data scientists and other AI skills to be demanded by the AI industry. There is also Siemens for a country roadmap including EV, intelligent transport system, and smart manufacturing.

Industrial Human Resource Development (IHRD) Project & Supply & Value Chain Development with JICA

In the light of Industry 4.0 technologies, the Japan International Cooperation Agency (JICA) has funded a project that aims to strengthen industrial HRD, as well as supply and value chain development. This program will focus on auto and auto parts, supporting industries, and fusion areas of IT and electronics.

The components of this project include:

• Strengthening linkages between universities and industries, which will be handled by CHED;
• Enhancing technical knowledge and skills for auto parts suppliers, to be handled by the Technical Education and Skills Development Authority (TESDA);
• Providing business assistance for e-PUV, to be handled by our very own BOI;
• Conducting Kaizen consultation to auto parts, also by BOI;
• Providing Capacity Development on Die and Mold Engineering for Local Companies and the Metals Industry Research and Development Center (MIRDC), to be handled by DOST-MIRDC;
• Holding matching seminars, by BOI; and,
• Forming a Startup Ecosystem between the Philippines and Japan, by DTI’s own Competitiveness and Innovation Group (DTI-CIG)

SUPPORT SYSTEMS AROUND TECHNOLOGY (Innovation Environment)

We have also included a new category called “Innovation Drivers” among the list of Preferred Activities that may avail of incentives under BOI’s Investment Priorities Plan (IPP). This category includes:

• Research and Development (R&D) activities;
• Innovation Centers, Business Incubation Hubs, Fabrication Laboratories (FabLabs) and Co-working Spaces
• Commercialization of New and Emerging Technologies – These cover but are not limited to: (1) agricultural biotechnology tools; (2) disaster mitigation/ prevention hardware or software; (3) hardware or software for increasing agricultural productivity; (4) mechanized means for natural resources conservation; (5) portable technologies; (6) hardware or software for the prevention of disease outbreaks; (7) remote monitoring devices or systems; (8) professional services for remote sensing; (9) hardware or software for the upgrading of local industries; (10) photonics; (11) nanotechnology; (12) and natural health products..

CONCLUSION

In closing, the government, under President Duterte’s promise of Tapang at Malasakit, is determined to pursue inclusive innovation. By this, we mean that everyone—MSMEs, startups, skilled, less-skilled, urban centers, and provinces—can advance even if at different paces. More importantly, no Filipino shall be left behind in the Fourth Industrial Revolution.

What’s more, we are committed to provide support to those who need assistance in adopting advanced technologies and adapting to new realities despite the disruption these may bring. Lastly, we want to ensure that the positive impact and benefits of Industry 4.0 innovations are felt by all of us in our country, regardless of geography or generation.

As the necessary ingredients to increase our country’s competitiveness, these will lead to higher productivity, more investments, more and better jobs, more sustainable and inclusive growth, and shared prosperity for all. In simple terms, with innovation at the front and center of our industrial policy, our strategic industrial framework for growth can be summed up with the following formula:

INNOVATION + ADOPTION OF NEW TECHNOLOGIES + HRD + ENABLING BUSINESS ENVIRONMENT = HIGHER COMPETITIVENESS & PRODUCTIVITY→ INCLUSIVE & SUSTAINABLE GROWTH

Preparing for Industry 4.0 is also happening even within DTI as we are now in the process of evaluating various datasets collected by different groups. We plan to integrate and connect these datasets, as well as digitize and apply modern technologies such as data science and blockchain. This will enable us to improve our policies and programs and—through automation—deliver our services in a more efficient manner that translates into faster and reduced cost for our stakeholders. 

As we go through this digital and economic transformation journey, let us all work together to ensure that our industries, our workers, and our companies are ready for Industry 4.0. Through our collective effort, we can bridge the digital transformation divide among our people, between the public and private sectors, and across the regions.

 Thank you at mabuhay tayong lahat!♦

Date of Release: 24 September 2019

Also posted under Press Statements.