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The Department of Trade and Industry (DTI) has set out on a path to industrialization for the next six years. Our aim is to support the current administration’s efforts to lead the country toward an inclusive economic transformation.
STI will define our industrial policy and our path to a more inclusive and sustainable industrial development.
As the Philippines moves toward a post-pandemic future, an inclusive and sustainable industrial development is imperative to build a more competitive economy. Through science, technology, and innovation (STI) and the use of essential digital technologies, industries will be better positioned to transform, and to face competition in domestic and export markets.
Innovation—and the new technologies it entails—leads to the creation of new goods and services in the market. This results in quality jobs and economic opportunities for Filipinos. Specifically, we aim for more stable and higher-paying jobs. Innovation also results in the emergence of new industries and the production of environmental goods.
A new technology such as smart manufacturing, for instance, leads to improved production efficiency. This in turn leads to more efficient energy use, industrial competitiveness, and linkage to supporting industries. The use of science, new technologies, and innovation is a vital step to upgrade our industries toward a more inclusive and sustainable industrial development.
STI will define our next era of industrialization. The same wave of technologies will help our industries in transitioning toward a rapid and resilient economic recovery. Globally competitive and innovative industries can support inclusive growth; and improve environmental sustainability and quality of life for Filipinos.
We will pursue six strategic actions toward a dynamic industry ecosystem.
To achieve our goal of inclusive growth and quality life for all Filipinos, we will build a dynamic industry ecosystem on six pillars. DTI cannot and will not do this alone. We shall take on a whole-of-government and a whole-of-society approach to pursue these six strategic actions.
The first strategic action is to embrace Industry 4.0.
The Fourth Industrial Revolution brings unprecedented change. It is merging our biological, physical, and digital worlds. It is shifting our approach to developing our economies. Industry 4.0 technologies such as artificial intelligence (AI) and smart manufacturing can help advance enterprises and industries; and increase the share of STI-intensive sectors to our country’s GDP.
The second strategic action is to develop innovative micro, small, and medium enterprises (MSMEs), as well as entrepreneurial startups.
This strategy will involve accelerating MSMEs’ growth by enabling them to scale up from micro to small, from small to medium, and from medium to large. We will further prepare MSMEs for digital transformation.
The third strategy is to integrate trade, investment promotion, and industry development policies.
We will integrate our production systems, for instance, by linking manufacturing, agriculture, and services. We shall deepen our global value chain (GVC) participation; pursue a more aggressive trade and investment policy; and expand and diversify our exports, trade, and investment partners.
The fourth strategic action is to develop human capital and capacity-building programs to prepare our workforce for the future.
While many jobs will be lost as a result of automation, new jobs will emerge through the adoption of technologies that will increase worker productivity. Tapping this opportunity will require increasing investments in skills development. We also would like to persuade and support companies to upskill their workforce so that workers can perform newer and higher order roles that complement the work of machines.
Current systems of learning and signaling job-fit are not enough to provide the agility that lifelong learners will require. We therefore need to shift to a skills-based system that can provide more efficient mechanisms.
The fifth strategic action is to promote regional industrialization through innovation and entrepreneurship.
In our effort to be responsive to nuances in the country’s regional growth, we acknowledge the inequalities among our various regions. How can we respond to this? One direction is to support regions and urban centers to specialize where they have the most competitive advantage.
In focusing our efforts on regional industrial transformation, we aim to use STI and entrepreneurship as means to modernize our agro-industrial activities, among others.
The sixth strategic action is to create and foster an enabling economic environment to attract more investments.
This action entails policies that attract investors and entrepreneurs to the Philippines. Aside from rationalizing regulations, it will also cover building competitive physical and digital infrastructure. Doing so reduces the cost of doing business and attracts more investments.
We will prioritize four key industrial clusters.
Given our industrial strengths and competencies, changes in consumer trends, and emerging technologies in the last two years of the pandemic, we see four industrial clusters as sources of growth for our country:
- The Industrial, Manufacturing and Transport (IMT) cluster;
- The Technology, Media, and Telecommunication (TMT) cluster;
- The Health and Life Sciences (HLS) cluster; and
- The Major Basic Needs, Resilient Economy cluster.
The first three clusters align with trends in the global reconfiguration of GVCs. They provide an opportunity for the Philippines to upgrade, diversify, and reposition its GVC participation. The fourth cluster reinforces the foundations for the country’s economic recovery, and long-term sustainable and inclusive growth.
For the IMT, our experience in the electronic and electrical components value chain will help us expand our share in aircraft maintenance. We are keen on maximizing the opportunities in the fast-expanding electric vehicle market and the increased activity in the semiconductor industry.
With the country’s expanded share of the BPO world market, we would like to further shift from mere cost-saving to value-adding applications in the TMT. As the demand for data centers increases worldwide, we aim to be the investment destination of choice. Our country’s strong BPO track record, future of work programs, and hyperscale roadmap are drawing the attention of hyperscalers that seek to expand geographically. Last July, we launched the PLDT Jupiter Cable System. This subsea cable system will serve as an added superhighway for digital data, and further attract hyperscalers into the country.
The DTI has also designed the Malikhaing Pinoy Program to provide support for the TMT industry through a creative venture fund, creative learning academy and innovation centers, and creative market acceleration initiatives.
The HLS cluster also saw agility during the pandemic. Our goal is to be self-sufficient in this area. We also hope that the integration of pharmaceuticals, medical devices, and health services with the help of digitalization will facilitate the emergence of this industrial sector.
Last but not the least, there is also a need to prioritize the Major Basic Needs of a Resilient Economy. A resilient economy needs to have strong support for food security, 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.
Our dynamic industry ecosystem will be driven by innovation, nurtured through facilities such as the Center for Artificial Intelligence Research and Industry 4.0 Pilot Factory.
To drive a dynamic industry ecosystem, we need to foster innovation. DTI is establishing the Center for Artificial Intelligence Research (CAIR) and the Industry 4.0 Pilot Factory.
In partnership with the UnionBank of the Philippines (UBP) and Global Learning Solutions (GLS), we launched CAIR in San Pedro, Laguna on September 9, 2022. CAIR will be a hub where data scientists and researchers can perform collaborative AI research and development (R&D). The R&D can then lead to the development of AI products and services, provide AI training programs, and support the digital transformation of industries.
CAIR further supports the growth of the digital economy; the development of new business ventures in trade, agriculture, manufacturing, and services; and the promotion of entrepreneurship by implementing cutting-edge digital technologies in these industries. At present, the Philippines already hosts more than 50 technology startups that use AI as their core technology.
Complementary to CAIR, the Industry 4.0 Pilot Factory will host pilot, demonstration, and learning laboratories for relevant technologies. These include robotics, intelligent manufacturing, and cyber-physical systems.
This Pilot Factory will further serve as a hub for cutting-edge technologies and solutions—a space where MSMEs, researchers, and universities will have hands-on lessons on robotics, automation, and smart factory, among others. The Pilot Factory can serve as prototyping sandbox and as a platform to showcase use-cases of products.
Space for the Pilot Factory in Bonifacio Global City has already been offered by a partner conglomerate. We will soon be able to bring in equipment donated by Siemens of Germany. We are also looking for additional spaces that can house these massive equipment outside Manila.
The two facilities, CAIR and the Pilot Factory, are being set up in partnership with the private sector without specific budget from the government. They are expected to self-generate funds, while we also request and raise millions of grant funds for MSMEs to develop their systems with the use of any of the two facilities.
The facilities are also open to existing corporations so we can help upgrade their technologies, building on existing industrial strengths and competencies. Some of our largest corporations have their own R&D. For example, there is already a manufacturing plant in Marikina that upgraded its production using robotics for high-risk tasks. We want to make available support to those who will not be able to fund their own R&D.
We are promoting improvements in digital infrastructure through investments and partnerships.
Digital infrastructure is key enabler of the many of our forward-looking initiatives. We are working with the Department of Information and Communications Technology (DICT) to either promote or accelerate digital infrastructure projects in the pipeline.
In our recent economic briefing in the United States (U.S.), we shared that the amended Public Service Act, allowing for 100% foreign ownership, has paved the way for Starlink (operated by SpaceX) and other enablers of digital infrastructure to enter in the Philippines. The Board of Investments has also registered milestone telecommunications infrastructure projects of U.S. companies such as SBA Towers and America Towers.
In line with our efforts to promote STI, we will develop an ecosystem for startups to thrive. We have the Incubation, Development and Entrepreneurial Assistance Program. The program will provide opportunities for technology startups in particular to link with those who can help them, such as investors and government agencies.
Growing startups can benefit from the scaling-up assistance through Accelerating Development, Valuation and Corporate Entrepreneurship Program. We are initially working with a PHP500-million Startup Venture Fund. In addition, we encourage and incentivize enterprises leaning toward technology and thus either making use of or helping improve our digital infrastructure.
In embracing Industry 4.0, we aim to transform not just our industries, but also our MSMEs.
We aim to enable MSMEs to embrace digital transformation—an objective forming part of DTI’s strategy to upgrade, upskill, and upsize MSMEs.
MSMEs are the backbone of our economy—comprising 99.5% of about a million registered 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 upscale, we need to address the constraints to access to finance, technology, and the market.
To help ease MSMEs’ access to services, we have established 1,344 Negosyo Centers throughout the country, covering all cities and 66 percent of municipalities. There were 167 Negosyo Centers established last year and 16 so far established this year. Provided for by the Go Negosyo Act, these centers serve as mentoring hubs, and provide links to business development services.
Addressing access to finance
To help MSMEs access financing, the DTI is developing a number of instruments that will cater to the different capacities of MSMEs. We have a grant-matching facility that supports agri-businesses in selected regions. We work with the agri-businesses that address gaps in the food value chain in developing their business through the grant facility. We will also expand loan facility of our attached agency, Small Business Corporation (SBCorp), for other agri-businesses that are under the mentorship of DTI.
Further, SBCorp implements the Pondo sa Pagbabago at Pag-asenso (P3) program. P3 offers affordable interest rates and charges that suit the capacities of enterprise borrowers with relatively small asset size and of business centers in the poorest provinces. Along similar lines, the RISE UP loan program provides MSMEs that have hurdled the pandemic with multi-purpose loans on soft terms.
Addressing constraints to technology: Digital transformation
Aside from helping respond to MSMEs’ challenge of access to finance, we are enabling MSMEs to embrace digital transformation. This way, MSMEs can operate efficiently, reduce costs, reach bigger markets, and earn profits. 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.
To support MSMEs, DTI will initiate and onboard MSMEs to e-commerce using a platform that DTI will soon launch in collaboration with the DICT. The e-commerce platform has special functions that will prepare MSMEs including their business processes to make the most of and thrive in the platform.
Further, DTI calls on large conglomerates to support the Big Brother-Small Brother Digitalization Project, an initiative to digitalize the supply chain which also involves MSMEs.
In line with the directive of President Ferdinand Marcos, Jr. to steer the country toward digital transformation, DTI has also been coordinating with the DICT to promote e-governance in bringing services to the public, and to increase investments in digital infrastructure. With the help of the Department of the Interior and Local Government (DILG), we are working to enable local government units to digitize their data and digitalize their operations.
Addressing constraints to market and expanding MSMEs’ reach: Regional development promotion
To enable MSMEs’ contribution to regional development, DTI has broadened the “One Town, One Product” (OTOP) into a regional scope based on regions’ natural endowments and comparative advantages. We are partnering with research institutions in innovating OTOP. DTI regional offices are also working with their respective regional development councils to promote each region’s productivity and competitiveness, including those of MSMEs.
DTI is also collaborating with the Commission on Higher Education (CHED) and Department of Science and Technology (DOST) to strengthen selected state universities in regions. These universities shall serve as the knowledge hub in the region—doing R&D work for enterprises such as MSMEs, and training of entrepreneurs and enterprise employees.
What we envision is a prosperous economy driven by competition and productivity. We want to build dynamic industry ecosystems as the foundation for generating quality jobs, creating new products and services, improving environmental sustainability, and ensuring shared prosperity for all. This is the direction toward all these efforts are headed. And this is what I hope will help define the next era of growth and development in the Philippines.
Thank you.♦
Date of Release: 21 October 2022