Isang mapagpala at mapagpalayang hapon sa inyong lahat. Thank you for your warm welcome.

I congratulate former Secretary Babes Singson for his election as MAP President for the second half of 2022.

Thanks to MAP for allowing me to speak today before the MAP members and guests as the new Secretary of the Department of Trade and Industry.

MAP and DTI share a vision. We both want to see our country sustain its economic recovery and growth, attract foreign and domestic investors, improve the ease of doing business, and create more high-quality jobs and help MSMEs in our means. In line with MAP’s 2022 theme, we want to push for change to promote a better future for all.

While the country has shown remarkable growth despite the pandemic, our industries continue to contend with increasingly stiff competition from our neighbors in both domestic and export markets while novel technologies from the Fourth Industrial Revolution (or Industry 4.0) are changing the global market dynamics.

To survive and thrive, business enterprises in our country need to embrace innovation and pursue digitalization. Doing so requires even more improvements in our human capital, technology capability, infrastructure, and legal and regulatory environment. Amid these challenges, DTI is embarking on a strategy driven by science, technology, and innovation (STI) to prepare our country for a better future. The goal is to grow our economy and develop globally competitive and innovative industries that support inclusive growth and quality of life for all Filipinos.

DTI, as a government agency, will leverage the power of partnerships and collaborations in developing and implementing our projects and program. DTI’s partners may include private sector businesses, civil society organizations, and/or academic institutions. DTI will also collaborate with other government agencies in pursuing its priorities.

Let me now discuss some key DTI priorities for the next few years and encourage you to view these priorities as opportunities for both DTI and MAP to work together for shared goals.

MSMEs are the backbone of our economy, comprising 99.5% of business establishments in the country, employing 63% of the workforce, and contributing almost half of our gross domestic product. For MSMEs to continue to grow and develop and graduate from micro to small, small to medium, and medium to large eventually, we need to address the constraints to access to finance, technology, and the market.

To upgrade, upskill, and upsize MSMEs, DTI will promote digitalization and digital transformation programs for MSMEs in collaboration with DICT. By using e-commerce platforms, MSMEs can access bigger markets for their products. Digital systems operated by startups like GrowSari, for example, are already connecting sari-sari stores to manufacturers and financing firms and can accumulate cashflow data on sales and other transactions, use enterprise data for credit scoring, and provide access to cashflow-based credit.

DTI will implement science, technology, and innovation (STI)-driven programs in collaboration with DOST. With STI-driven strategies and programs, MSMEs will be better positioned to address growth challenges and meet changing market demands for quality and new products and services. By embracing digital transformation, MSMEs can operate efficiently, reduce costs, and earn profits while manufacturing more affordable products. Adopting new technologies and digital platforms will lead to competitiveness improvements that would allow MSMEs to integrate into domestic supply and value chains as well as to penetrate the global value chains of multinational companies.

Our country’s 110 million population represents a sizeable consumer market with a growing middle class. Such a large customer base should attract the establishment of industries that target the gains and benefits from the potential domestic demand from the country’s consumer market. Building a solid domestic base is essential to support eventual forays into the export market, especially in developing agri-based manufacturing industries.

In developing domestic industries, our country needs to strengthen local preference, particularly in government procurement, and develop mechanisms for supporting domestic production capacity through such purchase orders. We can also consider limited government equity investment to catalyze new industries, and DTI has the National Development Company that can seed pioneering ventures.

Aligned with DTI’s STI-driven strategy, the establishment of the Center for Artificial Intelligence (AI) Research (CAIR) and the Industry 4.0 Pilot Factory (I4PF) can serve as drivers in creating new and innovative products and services using the latest technologies like AI. The AI Center and Pilot Factory can help solve issues and problems affecting the operations and competitiveness of growing enterprises. DTI will help make such enterprises become globally competitive and innovative market players.

New technologies offer new opportunities to create new enterprises and employment. Many breakthrough innovations are coming from startups. DTI will continue to support the growth and development of robust startup ecosystems by providing acceleration and incubation services as well as linking startups with farmers, MSMEs, and the universities in the various regions of the coutry, not just the National Capital Region. An effective startup ecosystem is crucial in unlocking the potential for innovation and use of new technologies leading to the creation of more new products, services, and new business models.

To address regional growth and development disparities in the country, DTI will promote and support regions and urban centers specializing in industries where they have most competitive advantage. DTI’s One Town, One Product (OTOP) Program will be broadened to have a regional scope based on the regions’ natural endowments and comparative advantage.

DTI will partner with the National Academy of Science and Technology (NAST) and the Philippine American Academy of Science and Engineering (PAASE) to innovate the OTOP. DTI regional offices will work with their respective Regional Development Councils to advance the implementation of production-based regional development.

DTI will also collaborate with CHED and DOST in strengthening a selected state university in each region to serve as the knowledge hub in the region. The chosen university will perform research and development (R&D) work for enterprises and train entrepreneurs and enterprise employees, among others. In the future, the state universities and colleges in a specific region can be clustered or amalgamated to form a regional university that will serve as the region’s Inclusive Innovation Center.

Such Inclusive Innovation Centers will be the platforms for linking startups, spinoffs, and MSMEs with other stakeholders such as funders, R&D and Science &Technology parks, accelerators and incubators, government, and other services providers. These platforms will promote a more innovative culture and accelerate the commercialization of R&D investments in the regions.

To help address the food security challenges, DTI will collaborate with the Department of Agriculture to improve the food value chains through upgraded transport and logistics facilities, including cold storage and cold chain facilities. Moreover, DTI will increase community-level value-adding and pursue effective local government-enabled market matching mechanisms for food waste reduction. DTI will promote digital technology to assist in streamlining agricultural supply chains to link producers directly to the markets and possibly eliminate rent-seeking intermediaries through technology-led systems. DTI will transform the agriculture and agribusiness sectors through the adoption of new technologies and innovation.

Some Filipino agritech startups are already providing digital services to farmers. An example is Agrabah Marketplace, which empowers Filipino farmers through an online platform that connects them to institutional consumers and partners. A second example is e-Magsasaka which tries to shorten the supply chain of fresh fruits and vegetables by forecasting the harvest of farmers weekly and marketing their produce before actual picking. A third example is Fox Forward, which provides a portable GPS tracker with RFID technology used in supply chain management to help farmers and improve their productivity. DTI will work with DICT to improve these systems.

Manufacturing is the country’s guarantee of sustainable and inclusive growth because it provides more stable and higher-paying jobs. DTI will lead in positioning for success in the manufacturing sectors in which we possess strategic advantages.

Given the changes in consumer trends and the acceleration of the adoption of new technologies in the last two years of the pandemic, the World Bank has identified three industry clusters, in collaboration with DTI, as potential sources of growth in the country. DTI will reconfigure its exports to prioritize the industrial sectors in three clusters:

• Industrial, Manufacturing, and Transport (IMT): aerospace (aircraft interiors; maintenance, repair, and overhaul), automotive (electric vehicles), semiconductors
• Technology, Media, and Telecommunication (TMT): digitalization services, IT-BPM, artificial intelligence and data analytics, cybersecurity, hyper-scale data centers, creative industries
• Health and Life Sciences (HLS): biopharmaceuticals, pharmaceuticals, medical devices, healthcare services

The Industrial, Manufacturing, and Transport (IMT) cluster provides the Philippines with upgrading opportunities in aerospace (e.g., aircraft interiors; aircraft maintenance, repair, and overhaul), automotive (electric vehicles), and semiconductors.

Over the last decade, the Asia Pacific, the fastest growing region for airline activity, benefited from the introduction of the Boeing 787 Dreamliner, the production of which spurred a wide geographical spread of suppliers. The Philippines hosts the number one aircraft interiors company in the world (Collins Aerospace) and the world’s leading aircraft Maintenance, Repair, and Overhaul (MRO) company (Lufthansa Technik). However, extra effort is needed to attract other suppliers and expand the cluster.

The switch from the combustion engine to electric vehicles (EVs) will be the main change in the automotive global value chain (or GVC). Automotive companies are committing to switching to all EV manufacturing in the near future, and this change will provide some opportunities for the Philippines to enter the EV GVC.

Finally, the semiconductor industry will benefit from the recent boost of digitalization during the COVID-19 pandemic. However, Outsourced Semiconductor Assembly and Test (OSAT), the segment in the Philippines, is the most vulnerable to disruptive technologies. Vietnam is starting to overtake the Philippines in the electronics contract manufacturing segment. Increasing skills to undertake R&D functions could help improve business for Outsourced Semiconductor Assembly and Test (OSAT) firms in the Philippines.

The opportunity for the Philippines lies in upgrading its participation in the electronics and electrical parts and components GVCs, a common thread between these three IMT subsectors, by attracting FDI in design capacity so that more value-added is captured and manufacturing retained and expanded. DTI will continue to develop the country into a center of excellence in the design of semiconductors and strengthen the electronics sector.

With the pandemic, interest in data centers has increased across the globe. The Philippines is now seen as the destination of new data centers that are being established worldwide. The local data center market has seen significant activity beginning last year, with several players announcing their plans to develop facilities across the country. The Philippines has become an attractive location for hyperscalers as the country tops social media and internet usage worldwide. Growth in e-commerce adoption increased substantially from 76% and 80% in 2020 and 2021, respectively.

The Technology, Media, and Telecommunication (TMT) cluster will provide the Philippines opportunities from the pandemic-driven digitalization of services. The key trend for the BPO sector moving forward is the switch from cost saving to value addition where we need more skilled labor. The next decade will also witness the BPO segment as a cross-cutting contributor to the competitiveness and efficiency of other GVCs they support. Artificial intelligence-based cloud analytics and enterprise resource planning (ERP) will continue trending while working from home will be here to stay for many.

That 82% of BPOs and shared services centers in the Philippines serve global markets is a positive attribute that can be leveraged by targeted policies to increase the country’s participation in the TMT GVC cluster.

With a health crisis at the root of the current global economic distress, the Health and Life Science (HLS) cluster plays a strategic security role, opening income-generating opportunities in all countries, including the Philippines. Over the next decade, manufacturing medicines faster and cheaper will continue to be the mantra of multinational companies. The sector will also witness smaller, innovative, more agile companies taking a more critical role in bringing medicines to market. The nascent nature of life sciences and the biotechnology ecosystem in the Philippines is a significant constraint to the growth of the biopharmaceutical sector. However, as pharmaceuticals, medical devices, and healthcare services move to be more integrated could also facilitate the emergence of an HLS cluster in the Philippines.

In the pharmaceutical sector, DTI will encourage multinational pharmaceutical companies operating domestically to outsource their contract manufacturing to local players.

Concerning our traditional mineral exports, DTI will promote the processing of green metals such as copper, nickel, and cobalt before exporting them. The Philippines has an estimated 1.1 billion MT of copper reserves, 2 billion MT of nickel reserves, and 260,000 MT of cobalt. Mineral processing is crucial given our resources that can be used for downstream industries such as EV battery manufacturing, wiring harness production, hyperscaler data centers, and renewable energy projects. With the vast resources of metals that could serve as critical inputs for the production and manufacture of technology products, the Philippines can be a vital partner for these essential minerals, not as an exporter of ores but as a processor and producer of semi- finished and finished products.

Tapping the benefits from the adoption of new technologies would require increasing investments in skills development along with greater efforts by companies to upskill their workforce to perform new and higher order roles complementary to machines. Current systems of learning and signaling job-fit do not provide the agility that lifelong learners will require hence the need to shift to a skills-based approach that can provide more efficient mechanisms. DTI will collaborate closely with DepEd, CHED, and TESDA to match students’ skills development with the job requirements of industries. This will entail implementing curricular reforms to integrate 21st- century skills into our education system and designing human resource development and training programs to improve skills.

DTI will also continue collaborating with DepEd, CHED, and TESDA to implement the Philippine Skills Framework to ensure the match between jobs and skills. Employers can use the skills framework to identify the necessary skills and competencies, while job seekers can define ways forward or upward in a particular industry. For educational institutions, the framework is used to revise existing curricula and design new courses to bridge the skills and competencies of the workers as they upgrade to desired occupations. The priority sectors for developing the skills frameworks are manufacturing, construction, logistics and supply chain, health and wellness, food and agriculture, creatives, tourism, and IT-BPM.

Creating an enabling environment by improving the ease of doing business is necessary to attract local and foreign investments as well as new businesses. DTI will work towards reducing regulatory burdens through streamlining and digitalizing institutional and regulatory requirements and expanding the Ease of Doing Business Act in coordination with the DICT by increasing investment in digital infrastructure. DTI will support the e-government initiatives of DICT and collaborate with the DILG in getting LGUs to digitalize their operations so they can be more efficient in dealing with businesses.

On another front, DTI will implement measures to foster greater investment and competition in logistics and connectivity services. DTI will also continue to push for the full implementation of policies already in place to inspire confidence in both firms and consumers. In close collaboration with other DPWH, DOTR, and DICT, DTI will help fill the country’s infrastructure gaps, especially in physical and digital connectivity. Increased infrastructure investment in physical and digital infrastructure, power and logistics, and modern and efficient air, land, and sea infrastructure will reduce business costs and boost industry competitiveness and aggregate productivity.

DTI will continue to push for the immediate ratification of the Regional Comprehensive Economic Partnership Agreement (RCEP) and other trade agreements. With only 10 FTAs, the Philippines has the least number of FTAs among the ASEAN six countries. Singapore signed 27 FTAs, Malaysia 17, Thailand 15, Indonesia 15, and Vietnam 15. These agreements will diversify the country’s exports in terms of products and services and country destinations and enhance the country’s attractiveness to foreign investments.

Most foreign investments in China, for instance, are export-oriented industries. They are from big multinationals having transferred their production facilities to China and using China as a production place. Without these FTAs and RCEP, the Philippines would not be an attractive location for such types of export-oriented enterprises.

As the country moves toward post-pandemic economic recovery, technical infrastructure, and critical services that aid industry development, spur economic activities, and ensure maximum consumer protection must be in place. DTI, through its Consumer Protection Group, will intensify consumer protection measures by establishing mechanisms that will empower consumers, including enhancing consumers’ rights.

DTI will also help ensure the availability of basic and necessary products and commodities (BNPCs) at reasonable prices by closely monitoring prices and negotiating with manufacturers. To this end, DTI will keep track of price shifts from raw materials to finished products. DTI will conduct an intensive review and verification process on granting requests for price adjustments.

To raise the quality of the Philippines’ products and services, improve market access, and increase competitiveness in the domestic and international markets, DTI will promulgate all available international standards as Philippine National Standards. DTI will apply digitalization and automation solutions to product standards that adapt to the changing needs of its stakeholders in the digital era.

DTI will strengthen its monitoring and enforcement functions on online businesses in compliance with the country’s product standards.

We consider consumer protection a priority since the consumer is essentially the heart of a business and a partner in nation-building.

In line with the President’s directive for rightsizing, DTI will review the organizational structure and processes and cut or reduce bureaucratic layers in decision-making caused by a hierarchical structure. With the shift to digital technology, DTI will improve employees’ digital expertise and skills and empower them in their respective jobs. DTI will be transformed into an agile organization. To fully harness the capabilities of people, DTI will break down silos between departments and between DTI and its attached agencies and GOCCs.

In closing, I invite you all, my colleagues and friends in MAP, to join me in re-igniting the private sector as our country’s engine of growth, run with me in re-setting the momentum – not in a hundred-meter dash – but in a sustained marathon of sorts facing a multi-kilometer run challenge to revitalize the heart of Philippine commerce and to strengthen the muscle of industry.

We in DTI will assist businesses “do well” in terms of profits. We will encourage businesses to also “do good” by sharing prosperity with our countrymen.  ♦

Date of Release: 14 July 2022