Increased gov’t support sought in reviving manufacturing sectors

The Joint Foreign Chambers and local business groups are seeking increased government support in reviving labor-intensive industries and expanding high-value-added manufacturing sectors, which are expected to accelerate and sustain economic growth.

In a presentation of a policy brief titled “Manufacturing: Creating Million of Better Jobs” Thursday, 19 foreign and local chambers, Philippine business groups and industry associations bared targets, core strategies and critical recommendations that would enable the country to support both high-value and labor-intensive manufacturing industries.

The targets, according to policy brief co-author Roberto Batungbacal, were to double the manufacturing sector’s current labor force to 7.5 million from 3.5 million in 2012 and raise the sector’s contribution to GDP to almost 30 percent by 2022 from 21 percent last year.

Batungbacal noted that with a multiplier effect of three indirect jobs for every one new manufacturing job, some 16 million Filipinos were expected to benefit from a huge boost in the local manufacturing sector.

The policy brief, which will be submitted to President Aquino and various state agencies, also contained core strategies that include the creation of new domestic economic zones, provision of incentives to labor-intensive manufacturing projects; implementation of more relaxed labor policies, and increased training for workers in both low-  and high-value manufacturing.

Also discussed in the policy brief were 10 “horizontal cross-cutting reforms” that detailed the actions necessary to address concerns on electricity costs and power reliability; land transport infrastructure; land ownership; maritime infrastructure; labor policy; human capital; red tape; weak planning; smuggling and tax policy.

“Indonesia, Malaysia, Thailand, and Vietnam—economies exporting two to four times more than the Philippines—have developed their industrial sectors to (account for) over 40 percent of (their respective) economies, making industry and manufacturing a development backbone,” the policy brief stated.

“High-value manufacturing is more capital intensive and thus harder to create many jobs compared to labor-intensive manufacturing. The proposal of the business groups could create a large number of jobs at a time of high unemployment in rural areas, especially after this year’s disasters,” added John D. Forbes, senior adviser of the American Chamber of Commerce and co-author of the policy brief.

To grow low-cost, labor-intensive manufacturing such as food, garments, footwear, and furniture industries, the government should establish Domestic/Export Enterprise Zones (D/EEZs) in non-industrialized areas as well as invigorate an apprenticeship program for high school graduates, noted Henry Schumacher, vice president for external affairs of the European Chamber of Commerce.

These ecozones should provide investors a menu of incentives including low-cost leases and electricity rates, and more attractive labor policies. Public-private partnership (PPP) contracts should also be considered to attract real estate firms to develop such ecozones using government land to further reduce costs.

The government was also asked to consider temporary incentives such as the suspension of security of tenure and observance of no more than 10 paid holidays to jump-start these D/EEZs.

For high-value manufacturing, the policy brief recommended the strengthening of the following critical inputs: low-cost capital, technology, higher education, research and development, and industry integration particularly for the following industries: electronics, appliances, transportation equipment and parts, as well as chemicals, plastics, and rubber products.

Forbes stressed that there was a huge window of opportunity that favored the growth of manufacturing in the Philippines such as a huge English-speaking work force; steadily increasing domestic demand from growing middle class and remittances; improvement in the international image of the Philippines; high GDP growth rate, and rising labor costs in other countries in Asia.