Of patterns and linkages
Business Mirror
November 16, 2016

The team at home is also looking at a second industry—shipbuilding and repair.  The Philippine domestic-shipping industry is composed of general cargo (27 percent), fishing (20 percent), passenger (15 percent), tanker (11 percent), tug (10 percent), deck cargo (9 percent) and others. Seventy percent of these vessels are older than 30 years, which, in all respects, may have been the single biggest cause of maritime mishaps in the last few decades.

Purchase of low-priced, quick-delivery, secondhand vessels was the norm in the domestic marine-vessel market.  If new vessels were purchased, demand was filled with low-priced, low-quality vessels.

This is all about to change, as the same team that worked together on automobiles has rolled up its sleeve to build a shipbuilding/ship-repair road map. Part of the plan is to review the current taxation and financial schemes for ship owners, to encourage local production. In fact, the seventh-largest shipbuilder in the world in terms of volume, may be joining the bandwagon. The Japanese company recently expressed interest to enhance HR development; provide funds for infrastructure support, such as rural development via the use of advance technologies in two projects: ship recycling and biomass fuel. Where it gets interesting is how the project gets to integrate traditional shipbuilding operations with agribusiness and renewable-energy ventures.

Contract farming for pelletized feedstock for export to Japan will provide employment to marginalized sectors and, at the same time, meet the energy needs of community and industries across the archipelago, using the latest in clean-energy technology. This project again neatly exemplifies the trade-investment/industry-agriculture relationship paradigm.

Further, in the past three years, we have seen industrial clusters emerge around Philippine Economic Zone Authority-based Japanese anchor tenants, in printer and peripherals and medical devices. For us to become a legitimate regional and global hub for these two sectors, we must encourage investments that will build up the supply chain by, among other things, riding the wave of Abenomics—a policy that encourages the migration of 10,000 Japanese small and medium enterprises (SMEs) to Asean.  These SMEs can fill gaps in the supply chain, serve as technology providers, create diversity in the market for products and services, and build value to the local economy.

Japanese SMEs most often do not have the administrative experience to operate competitively overseas nor the capital to set up under traditional arrangements of building factories from the ground up. Perhaps, we should review the real-estate proposition that dominates current operations in our economic zones and industrial estates, and see how this can be expanded to include special zones that cater to SMEs via affordable plug-and-play facilities. This is already being done with lucrative success by Vietnam, Thailand and Indonesia.

To attract foreign investors in specialized industrial-estate development, we may also consider a 75-year freehold land arrangement, with rent offset by investments in needed utilities and infrastructure for locators that bring in cutting-edge research and technology, new and sustainable industry clusters.

Previously associated anathemas notwithstanding, perhaps the time is ripe for government to look into subsidies to investors in RD&E for ICT and green field technologies. Current incentives are directed mostly toward  the provision of income-tax holidays, duty-free importation of capital equipment and raw materials to enterprises. Given that R&D work is primarily developmental and not income or profit driven, the scope has to be expanded. Another compelling reason is we cannot develop a pool of high-tech workers who can help propel industries to more lucrative niches of the global value chain, without an environment that encourages local and foreign investments in RD&E. These are particularly important to integrated circuit design, next-generation motors and microfabrication projects. A move in this direction might help actualize our own brand of Taiwan’s ITRI and Silicon Valley.

Last, there is another kind of 3C we want to promote in Japan, but this has nothing to do with electronics and high-technology industries. It carries greater bearing with how we should exploit the country’s natural-resource abundance with the products of our soil—coffee, calamansi and cocoa. The prospects are exciting, but we reserve discussions on this for the next time.□

Dita A. Mathay, Foreign Trade Service Corps / Department of Trade and Industry