By Czeriza Valencia (The Philippine Star), Dec. 23, 2016
MANILA, Philippines – As the government institutes reforms to revive the manufacturing sector, it should also improve the regulatory regime for services needed by producers and exporters, state think tank Philippine Institute for Development Studies (PIDS) said.
In a new discussion paper, PIDS said reliable and affordable services for the manufacturing sector are needed to support the resurgence in factory output.
The government is pursuing the Manufacturing Resurgence Program (MRP) under the Comprehensive National Industrial Strategy (CNIS). This program aims to rebuild the existing capacity of industries, strengthen new ones and sustain the momentum of industries with competitive advantage.
MRP also seeks to build up agriculture-based manufacturing industries through product development, value-adding and integration to big enterprises for marketing and financing purposes.
It aims to close the gaps in industry supply chains, provide access to raw materials, and expand domestic markets and exports for Philippine manufactured products.
The key goal is to enhance the competitiveness of domestic manufacturing industries so these can be integrated in higher value-added, ASEAN-based production networks and global value chains.
At a general level, this goal can be achieved by addressing hindrances to production and trade such as smuggling, high cost and lack of reliability for power, high cost of transport and logistics, uncompetitive exchange rate; as well as issues with supply chain, market share expansion, human resource development, integration of small- and medium-scale enterprises, and innovation.
Among the ongoing MRP projects are the Comprehensive Automotive Resurgence Strategy Program, Die and Mold Making and Design Training, and the Philippine Rubber Investment and Market Encounter.
“With the focus on the manufacturing sector, the question arises as to whether attention should be given to the services sector,” said PIDS fellow Ramonette Serafica.
She said special attention should be given to services needed by producers and exporters to enable firms to participate an move up in global value chains (GVC).
Services required for moving up the GVC include those involved in process upgrading (streamlining the production process); product upgrading (moving into more sophisticated product lines); functional upgrading (acquiring new functions or abandoning old functions to improve the skill content of production activities); and chain upgrading (moving into new but related industries).
Serafica noted that when compared to other countries in Asia, the share of services embodied in Philippine manufacturing for exports is among the lowest (second lowest to Indonesia). Expressed in percentage, services form only 26.67 percent of the manufacturing process for Philippine exports. In Malaysia, services make up 32.76 percent of the entire production process while in Singapore, it makes up 43.03 percent of the whole process.
“Moving forward, the manufacturing sector needs to ramp up servicification in order to sustain competitiveness and move up higher value added activities as envisioned in their roadmaps. This will be possible if reliable, good quality services are available and affordable,” Serafica said. “While all producer services are important, ‘ICT services’ and ‘other business services’ are especially critical based on the pattern observed in other countries with more developed manufacturing sectors.”