Manufacturing continues to be one of the most significant industries in the country, with its multiplier effect on high-value employment, income, and outputs, and its strong inter-industry and inter-sectoral linkages. Growth in the industry also results in upgrades and diversification in the agricultural sector and increases the demand for higher-value services.
The ongoing lockdowns, social distancing measures, and shifts in consumer priorities, however, have resulted in severe supply-and-demand disruptions: factories saw temporary shutdowns or total closures, those which remained open operated below capacity, and while there was an increased demand in essential goods, discretionary categories such as fashion had to manage inventory build-up while ensuring their new supplies are new and on-demand. Some firms have pursued cost-cutting strategies such as layoffs and furloughs, sought debt assistance, and registered for government-backed loans and aid.
As one of the initiatives to sustain the manufacturing sector and contribute to economic recovery, the Board of Investments (BOI) is encouraging manufacturers to repurpose their facilities to support the production of medical-grade supplies that are currently in demand. These goods include the likes of Personal Protective Equipment (PPE), face shields and masks, medical-grade machines (i.e. ventilators), and other COVID essentials.
Repurposing facilities to help deal with the crisis
While a number of industries were able to adapt through digital means such as telecommuting and e-commerce, a good number of manufacturers are contributing to hospitals through donation drives, even going as far as repurposing their production lines. For PPE alone, member companies of the Confederation of Philippine Manufacturers (CPMP) added USD36 million worth of investment to serve the local demand.
Data from the BOI show that local manufacturers are now producing 60 million masks monthly—an increase of 900% compared to only 6 million in January. BOI expects a continuous rise before the end of 2020. The agency also notes that 3.2 medical-grade overalls, 60,000 thermometers, and 6,054 ventilators per month have been produced locally by companies to counter more expensive imported essentials. Other manufacturers became more creative, using alcoholic liquor to create alcohol disinfectants, turning ready-to-wear garments into office uniforms and PPE, and even making medical gloves from rubber balloons.
Garment manufacturer and exporter Reliance and electronic, semiconductor and medical subcontracting group EMS, to cite other examples, repurposed facilities to produce PPE. Spirits manufacturer, Destileria Limtuaco, recently converted some of its production activities into making ethyl alcohol, a vital ingredient for hand sanitizers. San Miguel Corporation (SMC) has also publicly announced how its liquor arm Ginebra San Miguel Inc. started producing alcohol disinfectants round the clock in their Cabuyao plant. So far, they have donated 29,300 liters of 70% Ethyl alcohol to 77 hospitals around Metro Manila and the Department of Health. They have also mobilized more of their facilities to produce ethyl alcohol to be able to supply other institutions nationwide.
Automotive factory Hyundai also joined in on the initiative by dedicating a good portion of its local factories to producing the much-needed masks. Other assistance came in the form of volunteerism, including reputable restaurants that gave out packed meals to frontliners, and big corporations like banks, telecommunications companies, hotels, insurance companies, and fast-food chains donating millions of pesos to the government and other medical facilities.
BOI’s business support for the production of COVID-19 related products
To further encourage these initiatives, BOI has pledged to aid manufacturers through tax incentives. For instance, as part of its COVID-19 response, the agency has developed government programs that provide financing support and more fiscal and non-fiscal incentives to assist companies in their repurposing initiatives. The Philippine government has not imposed any restrictions on the export of COVID-19 critical products, including PPE, allowing companies to serve both domestic and export markets. The government, in partnership with the United Nations Development Programme (UNDP) and other relevant stakeholders, has also established a business matching platform for PPE materials suppliers, manufacturers, consumers and beneficiaries to better coordinate the country’s demand requirements.
Foreign investors donating PPE to their workers in the Philippines, and intended only for company use, are not required to apply for clearance from the Food and Drugs Administration (FDA) to pass through customs. BOI can also aid in bolstering a company’s capabilities, navigating them and their product lines through this pandemic, while manufacturers focus on their core competencies in product development, logistics, production systems, and their skilled professionals. Tax incentives also await those who wish to donate PPE to the national government, hospitals, or LGUs while manufacturers of COVID-19 essentials have been offered grants and tax incentives to produce PPE, vital medical equipment, and medicines deemed critical by the Department of Health.
BOI also proposed in its 2020 Investment Priorities Plan (IPP) the addition of pandemic-mitigating activities, such as the manufacture of COVID-19 essential goods, to eligibility for investment incentives including income tax holidays and exemption from tax and duty on imports of capital equipment recently. This is currently for approval by the Philippine President.
BOI and manufacturers gear up for a post-COVID normal
With COVID-19’s massive disruption on the manufacturing industry, businesses were pushed to adapt with the times, with government agencies providing support through aid and incentives.
Interested businesses are encouraged to visit the BOI’s resource hub at https://boi.gov.ph/COVID-19-resources/, or may book an appointment with a BOI specialist via the agency’s Facebook page (https://www.facebook.com/boiphilippines/).
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