Chapter 3- Industrya Nd Services

8/2/2019 Chapter 3- Industrya Nd Services

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6Competitive Industry and Services Sectors03CompetitiveIndustry &ServicesSectors


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62 Philippine Development Plan 2011-2016

Several measures of competitiveness reveal fundamental weaknesses in major

development aspects compared to the rest of the world. Compared with itsneighbours, the countrys economic performance in terms of investments, exports

and competitiveness is unsatisfactory and need to be reversed. The Philippineeconomy over the past years has been characterized by a reduced share of

manufacturing sector in the countrys gross domestic product (GDP) and declininggross domestic investment rate.

Enabling the industry and services sectors to contribute signicantly to economic

growth and employment requires addressing a number of constraints to theirdevelopment. Strategies shall therefore be pursued to help raise the competitivenessof industries by improving the business environment; raising productivity and

efciency and inculcating quality consciousness among manufacturers andproducers to offer quality goods and services comparable with global brands.

Business competitiveness will be enhanced by improving governance, strengtheningeconomic zones, and strengthening national brand identity/awareness. To

increase productivity and efciency, government shall focus interventions on keypriority areas, provide rm level support to MSMEs, increase market access,

expand industry cluster development and intensify the culture of competitiveness.Proactive measures to empower consumers, promote competition and enforce

trade regulations shall also be pursued.

Competitive Industry &Services Sectors

By addressing the countrys problem olow competitiveness, this Plan aims topromote higher growth in per capita GDPand boost employment. Te ocus shall beto enable the industry and services sectorsto contribute to massive job generation,provide opportunities or Filipinos torise above poverty, and ultimately oer ameaningul choice or Filipinos to pursuegainul employment here or abroad. TePlan shall adopt a deliberate, ocused

approach that addresses the countrysbusiness environment, anchored oninvestments in human capital andimplementation characterized by aback to basics approach coupled withinnovation and whole o government asunderlying principles.

Te chapter ocuses on three medium-term goals: (i) improved business

environment, (ii) increasedproductivity and eciency and, (iii)enhanced consumer welare.

For a better business environment,government and the private sectorshall work to improve governance,as well as investment promotionareas and ampliy a National Brandand Identity Awareness. Businesscompetitiveness will be enhanced by

promoting a consistent, predictable,and responsive policy environment,streamlining bureaucratic proceduresand ostering transparency,promoting e-commerce and IC-enabled automation, and encouragingpartnerships with the private sector.

Te system o licensing, registration,and issuance o permits shall beimproved to reduce the cost o doing


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63Competitive Industry and Services Sectors

business. o promote investments,government shall give priority tokey policy concerns, namely: labor,telecommunications, transport(aviation and domestic shipping),

energy, peace and order and therule o law. A national branding ormarketing awareness campaign willbe launched to bring pride in qualityPhilippine-made products and to givea distinct identity to the country as asource o products that are valued

worldwide.

o increase productivity and eciency,government shall give priority tothe development o areas that havethe highest growth potentials andgenerate the most jobs. Tese include:tourism; business process outsourcing(BPO); mining; agri-business andorest-based industries; logistics;shipbuilding; housing; electronics;inrastructure; and other industries

with high growth potential. Likewise,the government will also increase itsmarket access and urther promotePhilippine goods and services abroad.A culture o competitiveness shallbe intensied, whereby the countrys

human capital shall be developedthrough market-sensitive educationand training. Government shall workto promote mutually agreed workarrangements between employers andthe labor sector and to strengthentripartite councils to achieveindustrial peace. More importantly,an entrepreneurial culture will beostered by encouraging Filipinos toinvest in their own businesses andbecome successul and innovativeentrepreneurs. A two-pronged

approach shall be adopted, consistingo rm-level assistance to potential/new and existing micro, small, andmedium enterprises (MSMEs)and the use o the industry-clusterapproach. Government shall promotesustainable livelihood and microenterprise development, harnessingthe Overseas Filipinos (OFs)community as a source o capital.

Program interventions shall be supportedto develop the core values needed to orman enterprising nation.

Te nal key strategy is inculcating

quality-consciousness amongmanuacturers and producers to oerquality goods and services comparable

with global brands. Consumerexpectations shall be promoted as theimpetus or suppliers to deliver qualitygoods and services that give value ormoney. Te concerns o both businessesand consumers shall be balancedthrough proactive measures to empowerconsumers, promote competition, andenorce trade regulations. Governmentshall: (1) promote consumer educationand consumer advocacy; (2) intensiyconsumer protection and traderegulation; and (3) develop product andservice standards. In addition, the entiresupply chain shall reduce production anddistribution cost particularly on basic andprime commodities

Assessment andChallenges

CompetitivenessCompetitiveness indicators have orsome time now been used to measure thecountrys business landscape. From 1994to 1999, the Philippines ranked between32 to 35 in the International Institute orManagement and Development (IMD)Global Competitiveness Report butslipped to 49 rom 2000 to 2007.

Several measures o competitivenessreveal weakness in major developmentaspects compared to the rest o the world.

In the World Economic Forum (WEF)Global Competitiveness Index Ranking,the Philippines ranked 87th out o 133countries, and last among the ASEAN-6subset o countries or the period2009-2010. In specic categories, thePhilippines ranked 113th in institutions;113th in labor market eciency; 99th ininnovation; and 98th in inrastructure.


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In 2009, the Philippines ranked 43rd out o57 countries and last among ve ASEANmembers; next to last in inrastructure;and 51st in economic perormance in theIMD Global Competitiveness Report;

and placed 139th out o 180 countries(6th among the ASEAN-6) in the

ransparency Internationals CorruptionPerception Index. In 2010, the countryranked 144th among 183 countries andalso last among the ASEAN-6 in theInternational Finance Corporation/

World Banks (IFC/WB) Doing Business2010 Report. 1

Compared with its neighbors, thecountrys economic perormance interms o investments, exports, andcompetitiveness is unsatisactory andneeds to be improved. Over the past

years, the Philippine economy has beencharacterized by a reduced share o themanuacturing sector in the countrysGDP and declining gross domesticinvestment rate. Te country continuesto lag behind its neighbors in terms ooreign direct investments. (FDI). Te

Arangkada Philippines 2010report notedthat inows o FDI into the Philippines

were lowest among six ASEAN countries,

and that many multinational rmsnot already present in the Philippinesbypassed the country.2

In the 2010 IMD GlobalCompetitiveness Report, the countrysoverall inrastructure quality rankedbelow that o Singapore, Malaysia, and

Tailand and was closer to Indonesiaand Vietnam. Te inadequate and poorquality o inrastructure diminishedthe countrys overall competitivenessand its capacity to attract investments.

Aside rom cumbersome businessprocedures and high cost o power,inecient transport network raisesproduction cost, all causing a highercost o doing business. Inrastructure

and communication problems alsohinder access to raw materials anddistribution o goods and services toconsumers.

Te Doing Business survey o theIFC/WB also consistently identiesthe high cost o doing business inthe Philippines as a major obstacleto competitiveness. (able 3.1). TeIFC/WB Doing Business Report2011, on the other hand, reportedthe 148th ranking o the Philippinesin terms o ease in doing business, anding related to the diculties otransacting with the local governmentunits (LGUs) and national agenciesin terms o length o time, steps,signatories, costs and other indicators.

Tere is broad agreement that theprocess o applying or a businessrenewal registration is a long, dicult,and tedious process. Starting abusiness in a Philippine city involvesan average o 15 procedures, takes

38 days, and costs 29.7 percent oincome per capita. Te country waslisted among the countries with highnumber o procedures or starting abusiness, although wide dierencesexist across dierent Philippine cities3.

Measured competitiveness aectsthe countrys capacity to attracttrade and investments. Te economicsituation remains a challenge orthe Philippines, which is seen asalling short o its true potential or

Several measures of

competitiveness revealfundamental weakness in majordevelopment aspects compared

to the rest of the world.

1 Te Annual Meeting o the Global Federation o Competitiveness Councils held in Washington D.C. in December2010 agreed to adopt new paradigm metrics beyond the existing competitiveness reports and surveys. Metrics ocompetitiveness substantially dierent rom current indicators will be used in uture surveys. Te new measures, due bythe end o 2011, will ocus on the creation o a sound business environment or rm-level productivity.

2 Te same report notes that in the period 1970-2009, Indonesia, Malaysia, and Tailand each received twice or three timesas much FDI as the Philippines, and that only 4.5 percent o total FDI in six ASEAN countries came to the country.

3 Such variations could be due to diering procedures and practices at the local government level, dierential perormanceo local branches o national agencies, and variations in local taxes and ees.


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Country Number of start-

up procedures

Time to start a

business (days)

Cost to register

business

Procedures to

enfore a contract

Time to enforce a

contract (days)

Rigidity of

employment

index: 0 (less

rigid) to 100

(very rigid)

(% of GNI pc)

2004 2009 2004 2009 2004 2009 2004 2009 2004 2009 2004 2009

Philippines 15 15 60 52 25.4 28.2 37 37 862 842 29 29

PR China 13 14 48 37 15.9 4.9 35 34 406 406 28 31

Malaysia 9 9 30 11 25.1 11.9 30 30 600 585 10 10

Hong Kong 5 3 11 6 3.4 1.8 24 24 211 280 0 0

Indonesia 12 9 151 60 131 26 39 39 570 570 40 40

S Korea 10 8 17 14 15.7 14.7 35 35 230 230 27 38

Singapore 7 3 8 3 1 0.7 21 21 120 150 0 0

Thailand 8 7 33 32 6.7 6.3 35 35 479 479 11 11

Vietnam 11 11 56 50 30.6 13.3 34 34 356 295 33 21

Table 3.1: Cost o Doing Business Indicators

Source: World Bank, Doing Business 2005 and 2010 (http://www.doingbusiness.org)

attracting both domestic and oreigninvestment, given its human, natural,and capital endowments4.

Policies that distort competition arethe main impediments to economicgrowth. Protectionist paradigms

were embodied in awed policiesmaniested through market poweror the extent to which a rm caninuence the price o an item byexercising control over its demand,supply or both, barriers to entry, andrent-seeking practices. Clearly, somebusinesses do not get level playingelds.

Philippine products and services acesome challenges in the internationalmarket. For instance, there is lack oinormation on the standards o othercountries. A certication system orexported products is still not ullyin place. Laboratory and commonservice acilities are either incomplete

and outdated or inadequate. Te costs oISO certication can be borne only bythe more liquid traders and producers.

With taris reduced, dicultiesexperienced by manuacturers, exporters/traders will increasingly pertain totechnical barriers such as standards andconormity assessment. Standardization,a component o the technicalinrastructure, protects consumersand accelerates product integrationinto the global trading system.Other components o the technicalinrastructure, such as metrology,accreditation, certication and testing,are dispersed with dierent agencies

involved in conormity assessment,spreading government resources thinly.A robust and harmonized technicalinrastructure would not only help thecountry overcome trading barriers andprotect the buying consumers, but alsocut redundant overhead costs due tomany regulatory bodies.

4 See, or example, the World Banks Country Assessment Report 2005.


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But for the global economiccrisis, the last ve years wouldhave been a favorable period for

exports.

Table 3.2: Export Perormance (2004-2010)

FOB Value (US$ billion) Growth Rate (%)

2004 2005 2006 2007 2008 2009 2010 2004 2005 2006 2007 2008 2009 2010

Goods &services

Plan target 43.1 47.4 52.3 58.2 65.4 74.3 84.3 10 10 10 11 12 12 13

Actual 42.8 44.8 52.9 59.2 57.9 48.6 63.9 10.6 4.6 18.3 11.9 -2.2 -16.1 31.5

Percent totarget (%)

99.3 94.5 101.3 101.9 88.6 65.4 75.8

Of which:goods

Plan target 39.8 43.8 48.2 53.5 60.0 67.1 75.8 10 10 10 11 12 12 14

Actual 38.8 40.3 46.5 49.5 48.3 37.6 50.7 9.8 3.8 15.6 6.4 -2.5 -22.1 34.8

Percent totarget (%)

97.5 91.9 96.5 92.5 80.4 56.1 66.9

Source: Bangko Sentral ng Pilipinas with basic data rom the National Statistics Oce

Exports of Goods andServices

I not or the global economic crisis, thelast ve years would have been a avorable

period or exports. Te countrys exportsgrew by an average o 10.65 percent rom2004 to 2007, supported by continuedstrong growth in global trade. Teexpected negative eect o the 9/11terrorist attacks in 2001 was mitigated bythe renewed condence on saer trade asensured by more stringent export regimeso the European Union (EU) and theUnited States (US).

Export growth peaked in 2006, whenexports surpassed targets and grew by18.3 percent, driven by rising sales to thecountrys traditional trading partners,the US and Japan, as well as China,the Netherlands, Germany, Singapore,Malaysia and Korea. Tis pace could notbe sustained in the ollowing years, owingto the slowdown in the US market, highproduction costs, particularly in energyand logistics, and a strong peso.

In the ourth quarter o 2008 the sectorelt the eects o the global economic

crisis, actually contracting by 2.19percent relative to 2007. As the globalrecession dragged on in 2009, export

value ell drastically, contracting by16.1 percent compared to 2008. In

2010, however, exports began torise again, surging ahead with two-digit growth rates in line with theexpectations o global economicrecovery (able 3.2).

For 2010, merchandise exportsamounted to US$48.3 billion,growing 34.8 percent over exports in2009. Tis was supported by increasesin exports o manuactured goodsand total agro-based products, bothat about 36 percent. Te countrystop ten export commodities alsoregistered increases particularlycoconut oil, communication/radarand semiconductor devices. Exportsregistered positive growth with therecovery o global trade.

Te movement o Philippineelectronic exports has ollowedglobal trends. Electronic productsstill account or the bulk (61 %)o Philippine merchandise exports


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during the period. Semiconductorshipments, making up 77 percent oelectronics exports, grew 53 percentin 2010.

Te countrys traditional tradingpartners, Japan and the US, remain asthe countrys top export destinations,ollowed by Singapore, China,Hong Kong, Germany, Netherlands,Republic o Korea, Tailand and

aiwan in the top ten destinations.

Exports o services meanwhile grewby 150 percent rom US$4 billionin 2004 to US$13.2 billion in 2010.Other business services, travel, andcomputer and inormation servicesaccount or 48 percent, 21 percent,and 16 percent, respectively, o totalservices exports.

Globally, the evolution in technology,prioritization o business strategies,migration, innovation and trends,environment-consciousness, and

value or money have inuenced theemergence o technology based sectors,strengthened hospitality services andincreased the capability or borderless

transactions. Te Government has beenvigilant in the growth o these industries,two o which are the BPOs and tourism.

Business Process Outsourcing(BPO)

Te BPO industry is acknowledgedas a driving orce or economicgrowth and employment in thecountry. wo distinct drivers largelycontributed to the growth o BPOdemand: (1) increasing globalization

which led to the lowering o barriersto trade that allowed companies toexplore alternative locations to loweroperating costs without sacricingthe quality o service; and (2)advancements in inormation andcommunication technology (IC)

which enhanced service deliveryusing the internet in a cost ecientand timely manner.

ypical outsourced services includethe operation o human resourcesdepartments, telephone call centers,distribution centers, research needs,computer departments or services,

and the design and/or engineeringo components or end-products. TePhilippines introduced BPO services inthe country through the call centers orvoice services. However, the industry hasevolved to higher value, non-voice BPOunctions such as nance &accounting,human resource and administrativeservices, and transcription services. Te

years 2007 to 2008 marked the turningpoint and remarkable growth in the backoce and knowledge process outsourcing(KPO) such as research, analytics andlegal services; with more than two-oldgrowth in revenues rom US$400 millionto US$830 million.

In 2010, the BPO industry has attainedits US$9 billion revenue target whileemploying about 530,000 ull-timeemployees (FEs) (Figure 3.1). Te USremains the prime source or outsourcingactivities and opportunities or thePhilippines as well as the major suppliero outsource work to the European and

Japanese companies.Because o its ready supply oproessionals equipped with the requiredlanguage skills, cultural anity with theUS and UK markets, and strong customer

The BPO industry is

acknowledged as a drivingforce for economic growth andemployment in the country.

Source: Business Processing Association of the Philippines

Figure 3.1. BPO/IT Outsourcing 2004-2011


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service orientation, the Philippines hasgained considerable traction as a BPOdestination. For the years 2007, 2008 and2010, the country has been recognized bythe National Outsourcing Association

o UK and cited it as the OshoringDestination o the Year.

In 2010, the Philippines posted almostUS$5.70 billion o pure voice-basedrevenues, which is even higher thanIndia. Tus, in stand-alone voicebusiness, the country ranks number oneglobally. However, India continues to bethe leader in the global BPO industrymainly with its strong presence andcapacity in inormation technology (I)such as sotware development. On thesupply side, while the country produces480 thousand graduates per annum,the number o available workorce isundersized compared to Indias 3 milliontalent pool. Te country would need toenhance the capability o its proessionalsin the I sector to capture opportunitiesrom Indias BPO market in the I sub-sector.

Aside rom labor resource, the countryalso needs to develop suitable locations

to ensure that BPO investments andexpansions can be accommodated. Physicaland I inrastructures are key solutions toaddress growth o the industry.

Te National Capital Regiondominantly houses majority o theBPO companies in the country. In2009, the government and the privatesector collaborated on a project

dubbed as the Next Wave Citieswherein ocus will be directed onlocations with high-growth potentialin the BPO services. en cities wereidentied namely: Davao; Santa Rosa,Laguna; Bacolod; Iloilo City; MetroCavite (i.e. Bacoor, Dasmarias,Imus); Lipa, Batangas; Cagayan deOro; Malolos, Bulacan; Baguio City,and Dumaguete. In 2010, ve citiesare being eyed as BPO-potentialdestinations, namely: Dagupan,Legaspi, Metro Subic, Metro Naga,and General Santos.

Tourism

From 2004 to 2009, the averageshares o tourism in GDP and intotal employment were 6.12 percentand 9.68 percent, respectively. In themidst o global and national economic,political and social upheavals, thetourism sector remained resilient.Visitor arrivals in the past six years

grew at an annual average o 8.21percent rom 2.29 million in 2004to 3.01 million in 2009. Te threato terrorism and nancial crisis has

Tourism Contribution Visitor Arrivals Tourism Receipts

Year% Share to

GDP

% Shareto NationalEmployment

Growth Rate% Shareto GlobalArrivals

% Share toAsia and the

Pacifc

Growth Rate% Share toTotal Exports

2004 6.17 9.62 20.1 0.30 1.61 30.7 4.252005 6.16 9.55 14.5 0.33 1.71 12.3 3.98

2006 6.15 9.54 8.4 0.34 1.71 23.1 5.18

2007 6.18 9.66 8.7 0.34 1.70 7.4 4.31

2008 6.05 9.77 1.5 0.34 1.71 -17.87 3.62

2009 6.03 9.96 - 3.9 0.34 1.67 - 7.9 4.09

Average 6.12 9.68 8.21 0.33 1.69 7.96 4.23

Table 3.3: Percent Share o Tourism to GDP, Employment and Total ExportsVis--vis Visitor Arrivals Globally and in the Asia Pacic

Sources: National Statistical Coordination Board, Department o Tourism and World Tourism Organization

In the midst of global and

national economic, political andsocial upheavals, the tourismsector remained resilient.


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not dampened the industry as itdemonstrated moderate improvementin its market share to the global andAsia and the Pacic arrivals rom 0.30percent in 2004 to 0.34 percent in

2009 and rom 1.61 percent in 2004to 1.67 percent in 2009, respectively(able 3.3).

ourism receipts rom inboundexpenditure o oreign visitors rom2004 to 2009 also expanded at anaverage o 7.96 percent rom US$ 1.99billion in 2004 to US$ 2.23 billionin 2009. Consequently, the share otourism receipts to total exports in the

economy grew at an annual average o4.94 percent during the same period.

Tese receipts have driven private andoreign investments in the accommodation,

transportation, recreation, entertainmentand miscellaneous services sectors o thetourism industry. ourism is regarded asthe ourth largest contributor to oreignexchange receipts. Te top three areelectronics and semiconductors, overseasFilipino remittances, and BPO.

Outside Manila, the most requenteddestinations visited by oreign touristsincluded: Boracay Island, agaytay,

Countries 2009 2008 2007 2006 2005 2004

Malaysia 23,646 22,052 20,973 17,547 16,431 15,703

Thailand 14,146 14,584 14,464 13,822 11,567 11,737

Singapore 7,488 7,7778 7.957 7,588 7,079 6,553

Indonesia 6,324 6,234 5,506 4,871 5,002 5,321

Vietnam 3,747 4,236 4,229 3,584 3,468 2,928

Philippines 3,017 3,139 3,092 2,843 2,623 2,291

Cambodia 2,046 2,001 1,872 1,591 1,333 987

Table 3.4: Visitor Arrivals to ASEAN Countries (000)

Source: World Tourism Organization

Country Regulatory Framework Business Environment and Infrastructure

Prevalenceof ForeignOwnership

PropertyRights

TimeRequiredto Start aBusiness

Cost toStart a

Business

Qualityof Air

TransportInfra

Number ofOperatingAirlines

InternationalAir

TransportNetwork

Qualityof

Roads

Quality ofGround

TransportNetwork

Cambodia 75 118 124 124 87 75 86 80 116

Indonesia 24 117 122 114 75 37 57 105 51Malaysia 67 38 33 73 20 27 33 17 21

Philippines 98 92 114 94 89 48 76 94 115

Singapore 3 4 4 8 1 28 2 3 4

Thailand 89 61 90 39 28 13 26 32 31

Vietnam 104 75 112 77 92 39 91 102 58

Table 3.5: Philippines Travel and Tourism Competitiveness in comparison with selected ASEAN Countries, 20

Source: World Economic Forum, and Travel and Tourism Competitiveness Report 2009


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Cebu, Laguna, Batangas, Cavite, Bohol,Pampanga, Palawan and Davao. Amongthe activities undertaken by most touristsduring their visit in the country wereshopping or local crats and delicacies;

sightseeing, beach holiday, scuba diving,visiting riends and relatives, honeymoon;attending business meetings; and lookingor investment opportunities. Manytourists also engaged in various cultural,nature and adventure experiences tocomplement, perhaps, their medical andhealth activities. In 2010, oreign touristsspent an average o US$ 83.93 per dayand stayed an average o eight nightsduring their visit.

However, the Philippines ranked onlysixth in attracting oreign tourists vis--

vis its ASEAN neighbors, whose marketshares have rapidly grown, while thato the Philippines expanded modestly.Visitor arrivals in Malaysia in 2009totaled 23 million; Tailand, 14 million;Singapore, 7.5 million; Indonesia, 6.3million; and Vietnam, 3.7 million. (able3.4).

More work is needed to enhance thecountrys competitiveness as a tourist

destination. Te countrys attractivenesshinges on the availability o supportinrastructure (air, land and water),a healthy business environment, andtransparent and proactive rules andregulations. Te WEF 2009 Reportranked the Philippines lowest amongcomparable ASEAN neighbors in termso the number o airlines with scheduledights originating in the country andthe availability o good air connectionsto overseas markets to provide access ormore oreign visitors. Te Philippines

also lagged behind in terms o quality oroads and ground transportation networkthat oers ecient accessibility to majortourism centers and tourist attractions(able 3.5).

Restrictions on oreign ownershipo companies and property rightsremained a handicap in attractingtourism investments, especially rom

international chains and the networko accommodation operators. Tetime and cost needed to start a tourismenterprise also deserve attention.

Te Philippines contributes activelyto global policy-making as well asobserves and promotes internationalagreed principles and norms in thedomestic setting. As global andregional economies become moreintegrated, internal policy decisions

will inevitably inuence decisions andpolicies o other countries, and vice-

versa. Tis reality enhances internalcoordination and cooperationmechanisms and external country-team representation protocols amonggovernment instrumentalities and

various stakeholders in society. Anoutward-looking orientation mustbe complemented by an alignmento laws and regulations that acilitatethe expected benets and lessen anyadverse eects o interacing closely

with the world economy. Internalprocesses and legal ramework mustbe strengthened to take advantage oopportunities presented by the globaleconomic environment. At the same

time, small and medium enterprisesneed to be inormed o how thesepolicies will benet them in tradingtheir goods in the internationalcommunity.


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Investment

otal approved local and oreigninvestments increased rom 2004 to2008 but declined in 2009. Te top

two sectors, i.e. manuacturing and

electricity, accounted or more than halo the total approved investment. Te topour sectors (manuacturing, electricity,nance and real estate, and privateservices) account or 78 percent o the

total (able 3.6). In 2004, the mining

Industry 2004 2005 2006 2007 2008 2009 2010

Agriculture 212 770 4,734 1,856 2,498 2,873 2,272

Communication - 2,079 47,042 14,222 2,186 6 -

Construction 1,140 83 3,857 14,090 216 179 1,080

Electricity 8,564 21,659 45,403 139,078 131,923 32,296 189,920*

Finance & R. Estate 7,158 10,019 28,833 54,927 114,088 89,111 72,108

Gas 106,521 269 - 561 - 17 -

Manufacturing 54,330 150,161 151,984 94,677 75,518 106,300 215,153

Mining 1,512 8,294 16,147 13,776 48,269 2,019 8,108

Private Services 41,006 15,344 29,105 37,631 71,417 29,353 40,255

Storage 388 26 35 1,340 1,059 - -

Trade 517 357 26,332 780 531 2,155 1,461

Transportation 467 22,172 3,530 10,329 16,516 3,830 12,248**

Water - - - 2,537 - 45,975 -

Total 221,815 231,233 357,002 385,804 464,221 314,114 542,605

Table 3.6: Total Approved Investments o Foreign and Filipino Nationalsby Industry, In Million Pesos (2004 2010)

Source: National Statistical Coordination Board* Data lumped or Electricity, Gas and Water**Data lumped or Transportation, Storage and Communication

BOI PEZA TOTAL

2010 2009 % Change 2010 1/ 2009/2 % Change 2010 2009%

Change

Project Cost(P)

302,100 124,171 143.29 204,395 175,365 16.55 506,494 299,537 69.09

Foreign (P) 22,329 10,397 114.76 142,167 103,421 37.46 164,496 113,818 44.53

Local (P) 279,771 113,775 145.90 62,227 71,944 (13.51) 341,998 185,719 84.15

No. ofProjects

246 248 (0.81) 518 502 3.19 764 750 1.87

Employment 36,751 95,372 (61.47) 84,340 79,435 6.17 121,091 174,807 (30.73)

Table 3.7: BOI-PEZA Approved Investments (2009-2010)

Source:Board o Investments and Philippine Economic Zone Authority1/ Locator investments - PhP 176.753billion; Developers - PhP 27.641 billion2/ Locator investments - PhP 140.987billion; Developers - PhP 34.378billion


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industry was revitalized as the SupremeCourt ruled on the constitutionality othe Philippine Mining Act o 1995.

A review o share by sector/industry

shows no trend in increase or decreaseo particular sector, with approved

investments in most sectorsuctuating annually.

From 2004 to 2009, direct investmentsgrew by 7.8 percent5, although 2009

saw investment ows decreasing by32.3 percent, reecting the eects

Country 2004 2005 2006 2007 2008 2009 2010

Japan 26,596 27,539 20,066 38,587 16,116 70,737 58,333

USA 27,108 14,913 8,199 36,089 19,721 12,947 13.159

Korea 3,260 10,828 4,327 12,076 39,954 9,624 31,182

Netherlands 1,473 19,208 188 14,401 45,354 2,070 36,784

Singapore 1,524 889 396 44,246 6,565 3,468 7,283

UK 1,683 195 5,887 10,182 25,272 3,439 1,065

China (PROC) 127 195 7,935 1,822 2,307 2,392 5,657

Br. Virgin Islands 208 658 450 670 2,111 1,176 7,654

Others 111,916 21,382 18,432 56,010 25,281 15,963 48,098

Total 173,895 95,807 65,880 214,083 182,681 121,816 196,069

Table 3.8: Total Approved Foreign Direct Investments by Country o InvestorFrom 2004 - 2010, In Million Pesos

Source of basic data: National Statistical Coordination Board

5 Based on compounded annual growth rate

Figure 3.2. Investment by Industry Sector in PEZA EconomicZones (1995-2010)

Source: Philippine Economic Zone Authority

uipment) 6.78%

5.46%

3.31%

ments 2.84%

2.11%

2.03%

1.40%

0.99%

0.76%

14.47%

Electronics/

Semiconductors

42.88%

Basic Metals (Minerals)

9.29%

Information Technology

Services

7.69%

Transport

(Shipbuilding, Car

Parts, Equipment)

6.78%

Electrical Machinery and

Apparatus

5.46%

Tourism

3.31%

Medical, Precision and

Optical Instruments

2.84%

Medical Tourism

2.11%

Fabricated

Metal Products

2.03%

Rubber and Plastic

Products

1.40%

Chemical and Chemical

Products

0.99%

Garments and Textiles

0.76%

Other Manufactures

14.47%


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o the global crisis, there werehopeul signs o a rebound. In 2010,investment commitments rom bothoreigners and Filipinos increasedto PhP542.6 billion compared to

PhP314.1 billion in 2009. More than60 percent o investments approvedduring the period came rom Filipinoinvestors with PhP346.5 billion

worth o pledges.

O the PhP542.6 billion worth oinvestment pledges o both oreignersand Filipinos in 2010, 39.7 percentor PhP215.2 billion are intended orprojects in manuacturing. Electricity,gas and water garnered 35.0 percentshare or PhP189.9 billion, andnance and real estate at 13.3 percentor PhP72.1 billion. Tese industrieshave been consistent recipientso investment commitmentsrom oreign and Filipinoinvestors. Potential investments inmanuacturing as well as in electricity,gas and water increased signicantlycompared to nance and real estate,

which dropped to PhP72.1 billionrom PhP89.1 billion.

otal BOI-PEZA-approvedinvestments or 2010 amounted toPhP506.5 billion, a 69 percent surgeover approvals in 2009 (able 3.7). Tis

was brought about by resurgent investorcondence, which reached an all time

high in the second quarter o 2010. Teseapproved investments generated 121,091

jobs.

By country o origin, the US and Japan

have been the two top sources o FDI inthe Philippines. In recent years investmentsrom the Netherlands, the United Kingdomand South Korea have also increased (able3.8).

Investments with the Philippine EconomicZone Authority (PEZA) in 2009 posted anincrease o 13.3 percent over the previous

year despite the global nancial crisis. Directemployment in PEZA zones also grewslightly (by 0.44 percent) notwithstandinglayos in many business establishments inthe country and worldwide during the sameperiod.

From 1995 to 2010, investments inenterprises located inside PEZA-registered economic zones came mostlyrom the electronics/semiconductorindustry. Locators rom the electronics/semiconductor sector contributed 42.88percent o total investments in the ecozones.Following this was the basic metal/mineralindustry (9.29%); inormation technology

services (7.69%); transport (shipbuilding,car part, equipment) (6.78%) and electricalmachinery and apparatus (5.46%). Tesecomprise the top ve sectors garnering thelargest number o investments over the past15 years o PEZAs existence (Figure 3.2).

The Philippine MSME sector is

a critical driver for the countryseconomic growth. However, thegrowth of the MSME sector has

not been vigorous enough topropel the economy.

Operating Economic Zones 2004 2005 2006 2007 2008 2009 2010

Manufacturing 53 51 53 60 62 63 64

IT 16 28 37 88 112 127 148

Tourism 1 2 5 7 9 12

Medical Tourism Park 1 1 1 1

Medical Tourism Center 1 1 1

Agro-Industrial EZ 6 13

Total Operating 69 80 92 154 183 207 239

% of Growth Over Previous Year 16% 15% 67% 19% 13% 15%

Table 3.9: PEZA Operating Economic Zones (2004 2010)

Source: Philippine Economic Zone Authority


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Te majority o PEZA-registeredenterprises are owned by oreignnationals. Te Japanese, owning 25.97percent o total PEZA-registered locatorenterprises in 2010, top the list o oreign

owners. Tese are ollowed, in order, byKoreans (10.62%), Americans (10.12%),Singaporeans (3.96%), British (2.99%),

aiwanese (2.23%), Dutch (2.15%),Chinese (1.77%), Australian (1.69%),Malaysian (1.39%), German (1.35%),and various other nationalities (7%).

In 2010, the economic zones operatingunder PEZA management totaled239 (able 3.9). In the next six years,initiatives will be pursued to enhance andincrease the number o economic zonesollowing the observed growth patterns.Eorts shall include exploration o newareas such as agro-industrial and tourismzones, opening to new markets such asthe Middle East, Germany, Australia andNew Zealand, and strengthening prioritymarkets o Japan, USA and Korea.

Since ecozone applications are privatesector initiated and market-driven,prospective locators may locate in certainareas or as long as they meet the criteria

stipulated in Section 6 (Criteria or theEstablishment o Other Ecozones) o TeSpecial Economic Zone Act o 1995.

Opportunities or investments alsoare attributed to sound policies andreorms to attract investors. Policies orinvestments such as exhibiting soundincentives to distinct industry have been

unstable.

Reorms are required to appropriatelyoer incentives to investments insectors that will have high impacton employment as well as inux oreserves in the country. However, it isalso important that sectors are reviewedand monitored to determine industrysectors that should be prioritized inproviding incentives. Likewise, reormsare necessary to oster public and privatepartnerships in boosting investmentareas, programs and projects.

Micro, Small and MediumEnterprises (MSMEs)

Te Philippine MSME sector is acritical driver or the countrys economicgrowth. Te sector serves not only aspotential supplier and subcontractorto large enterprises and exporters butis also a part o the support system orlogistics services.

Te MSME sector accounted or 99.6percent o total establishments in the

Total Micro Small Medium Large MSMEs

2008 Number ofEnterprises

761,409 697,077 58,292 3,067 2,973 758,436

% Distribution 91.6 7.7 0.4 0.4 99.6

2008 Employment 554,4590 1,663,382 1,314,065 418,058 2,149,085 3,395,505

% Distribution 30.0 23.7 7.5 38.8 61.22006 Value Added(in million pesos)

2,108,546 103,918 431,340 216,685 1,356,603 751,943

% Distribution 100 4.9 20.5 10.3 64.3 35.7

2006 Value added perworker (in pesos)

380,289 62,474 328,248 518,313 631,247 221,452

% of large enterprises 9.9 52.0 82.1

Table 3.10: Micro, Small and Medium Enterprise Prole

Source: National Statistics Oce


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country, and contributed 61.2 percento the countrys total employmentand 35.7 percent o total value-added.However, the growth o the MSMEsector has not been vigorous enough to

propel the economy (able 3.10).

Te size-distribution o rms haschanged little in the past two decades,

with the proportion accounted or bymedium sized enterprises remainingsmall. As a result, the countrys industrystructure is oten characterized by amissing or hollowed middle.

Te perormance o MSMEs wasconstrained by various actors. Teseinclude high cost o doing business,lack o access to nance and marketinormation, and low productivityand competitiveness. Poor businessconditions are a greater challenge orMSMEs given their limited resources.Many are unable to qualiy or bank loansor lack o the necessary track record andcollateral. Te lack o credit inormationalso makes it more dicult or banks todetermine MSMEs creditworthiness.

With limited management and nancialcapabilities, many MSMEs are unable

to respond dynamically to the domesticand export markets.

MSMEs have a low ability to meet thethreat o local and global competitionbecause o lack o inormation neededor market access and businessenvironment; ailure to attain scaleeconomies needed to produce qualitygoods and services; and the sectorslaid-back approach to seeking newmarkets and responding to marketneeds.

Te low productivity o MSMEscan be attributed to the sectors lacko access to new technology, weaktechnological capabilities, and itsailure to engage in innovation andresearch and development (R&D)activities. Te result is wasteul

duplication and non-optimal use olimited resources. Furthermore, lack oawareness or science and technology(S&) and scarcity o S& humanresources are limits to production

optimization.

While the value-system o workers andemployees undoubtedly aects the totalproductivity o rms, low productivity inthe industry and services sectors may alsobe due to their inexible organizationalset-up and processes. Firms cannot easilyadjust to the ast-changing needs anddemands o their clients, consequentlyaecting their level o productivity.In addition, the countrys domesticmanuacturing is not strongly linked withits exports manuacturing compared to itsneighboring countries.

Employment

Rise in employment in industry andservices

In 2008 the number o employed personsincreased rom about 31.6 million in2004 to around 34 million in 20086.

Tis meant almost three million personsjoined the Philippine labor orce over a

period o our years.Te agricultural sector continues toplay an important role in employmentand in jobs creation as it has employedabout 10.6 million Filipinos in 2008. Inaddition, the shing sector employedabout 1.42 million persons in 2008. MostFilipino workers thereore, are still in theagriculture and shing sectors while therest are in non-agricultural sectors suchas industry and services.

Nonetheless, workers and employeesin the industry and services sectorscombined outnumber agricultural

workers and comprise more than hal othe employed rom 2004 to 2008. Teeconomic role o nonagricultural workers,especially those in the services sector, isthereore crucial, especially in the era o

6 2009 Yearbook o Labor Statistics.


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the knowledge- and skills-based economy,the most evident local maniestation isthe booming outsourcing industry.

As o 2010, a total o 38.9 million were

reported to be in the labor orce romamong the 60.7 million population over15 years o age. O the three sectors(i.e. Agriculture, Industry and Services),Services accounts or the biggest shareo total employment (able 3.11). Tecurrent Plan calls or total employmentto grow by six million by 2016.

Te MSME contribution toemployment in 2008 totaled 3.4million. Ranked by subsector,

wholesale and retail trade contributedthe bulk o employment at 35.1

percent, ollowed by manuacturingwith 18.7 percent and hotels andrestaurants with 12.46 percent(Figure 3.3).

Among microenterprises, wholesaleand retail trade contributed 47percent o total employment,

Table 3.11: Employment per Major Industry Group

Major Industry Group 2008 2009 2010

Ave Jan Apr Jul Oct Ave Jan Apr Jul p Oct p

ALL INDUSTRIES 34,089 35,061 34,262 34,997 35,508 35,478 36,047 36,000 35,413 36,285 36,489Agriculture 12,030 12,043 11,846 12,313 11,940 12,072 11,974 11,804 11,512 12,317 12,261

Agriculture, Hunting andForestry

10,604 10,582 10,446 10,841 10,476 10,563 10,505 10,346 10,073 10,835 10,765

Fishing 1,426 1,461 1,400 1,472 1,464 1,509 1,469 1,458 1,439 1,482 1,496Industry 5,048 5,093 4,856 5,088 5,273 5,154 5,394 5,323 5,487 5,391 5,373

Mining and Quarrying 158 166 152 166 177 169 199 193 212 193 197Manufacturing 2,926 2,894 2,849 2,841 2,947 2,937 3,031 3,009 3,063 2,995 3,057Electricity, Gas and Water

Supply130 142 134 130 145 160 150 157 137 140 164

Construction 1,834 1,891 1,721 1,951 2,004 1,888 2,014 1,964 2,075 2,062 1,955Services 17,011 17,925 17,560 17,595 18,294 18,250 18,680 18,874 18,414 18,577 18,855

Wholesale & Retail Trade,Repair of Motor Vehicles,Motorcycles and Personal andHousehold Goods

6,446 6,736 6,635 6,681 6,725 6,901 7,040 7,063 6,885 7,050 7,161

Hotels and Restaurants 953 1,010 988 976 1,064 1,012 1,063 1,104 991 1,034 1,121Transport, Storage and

Communications2,590 2,679 2,660 2,628 2,694 2,735 2,721 2,736 2,741 2,697 2,709

Financial Intermediation 368 369 337 389 376 375 399 384 383 419 411Real Estate, Renting and

Business Activities953 1,064 1,044 1,023 1,090 1,100 1,147 1,120 1,061 1,164 1,243

Public Administration &Defense, Compulsary SocialSecurity

1,676 1,749 1,659 1,794 1,772 1,771 1,846 1,823 1,959 1,831 1,771

Education 1,071 1,138 1,157 1,068 1,157 1,168 1,175 1,146 1,156 1,234 1,165Health and Social Work 392 421 435 408 428 412 450 432 447 456 464Other Community, Social and

Personal Service Activities

833 877 857 907 876 868 913 950 984 862 855

Private Households withEmployed Persons

1,729 1,880 1,785 1,718 2,110 1,908 1,925 2,114 1,804 1,829 1,954

Extra-Territorial Organizations& Bodies

1 2 3 3 2 - 2 2 3 1 1

Notes:1. Details may not add up to totals due to rounding.2. Based on past week reerence period.3. Industry classifcation is based on the 1994 Philippine Standard Industrial Classifcationp PreliminarySource o basic data: National Statistics Oce, Labor Force Survey


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ollowed by manuacturing with a15 percent share, and hotels andrestaurants with 13 percent. Tis isthe same employment pattern orsmall enterprises with wholesale

and retail trade accounting or 26percent, ollowed by manuacturingand hotels and restaurants withcontributions o 19 percent and 13percent, respectively. Te patternis somewhat dierent or mediumenterprises, where manuacturingmakes the biggest contribution (31%)ollowed by wholesale and retail trade(14%) and real estate, renting andbusiness activities (12%). Tis patternis repeated or large enterprises,

with manuacturing contributingalmost 37 percent o employment,ollowed by real estate, renting andbusiness activities (21%) and nancialintermediation (10%. )

A survey by the Bureau o Laborand Employment Statistics reportsthat employers have diculty llingup vacancies because o a shortageo applicants with the right job

competencies and qualications, althoughtwo million Filipinos were unemployed.

Te 2006 National Manpower Summitemphasized that unemployment in thecountry arose mainly rom a mismatch

between skills needed or available jobsand skills possessed by job-seekers; and ageographic mismatch between locationso job opening and job seekers. Whileshortages o skills are evident in certainoccupations and areas in the country,oversupply o other skills are likewiseobserved.

o date, there are reported shortages inmedical and health services, as Filipinonurses are in high demand abroad.High turnover rates and low hiringrates meanwhile continue to worrystakeholders in the BPO industry. Onthe other hand, an oversupply o skillsin certain occupations is also reported.For instance, the educational systemcontinues to produce large numberso liberal-arts graduates or whom thedemand is either not encouraging or stillto be identied.

Increasing the national

awareness of consumer rights,responsibilities and options forredress encourages a vibrant

sector that will demand betterproducts and services.

Figure 3.3: MSME 2008 Employment Share by Sector

Source: National Statistics Oce

.

6.4%

ation 5.3%

Social and Personal Service Activities 4.5%

ork 2.8%

and Communications 2.8%

and Forestry 1.8%

1.3%

Water 1.2%

0.5%

ng 0.1%

Wholesale and Retail

Trade, 35.1%

Manufacturing,

18.70%

Hotels and

Restaurants, 12.5%

Real Estate, Renting and

Business Activities, 7.2%

Education, 6.4%

Financial Intermediation,

5.27%

Other Community,

Social and Personal

Service Activities,

4.48%

Health and Social

Work, 2.8%

Transport, Storage and

Communications,

2.81%

Agriculture, Hunting and

Forestry,

1.76%

Construction,

1.25%

Electricity, Gas and

Water, 1.2%

Fishing, 0.5%

Mining and

Quarrying, 0.1%


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In addition, the countrys low laborproductivity due to mismatched ordecient skills relative to available jobscontributes to the low productivityin output o goods and services. Tis

also aects compensation, since somecompany owners are unable to raise

wages and salaries owing to missedrevenue opportunities which in turn arecaused by low production.

Reports during the consultations orthe DOLE Project Jobst 2020 alsonoted a concentration o hard-to-lloccupations in the high-end categories,such as accountants and engineeringproessionals. Hard-to-ll vacancies werealso noted or associate proessionals andclerks.

Tis square pegs-round holesphenomenon, which has aectedeciency in the labor market, may beaggravated by the ast-changing demandor skills in the global labor market.

Consumer Policy

Consumers have a vital role in theeconomy. When they are empowered,

consumers can improve economicperormance by helping drivecompetition, productivity and businessinnovation.(OECD oolkit, 2010)

In the Philippines, emphasis is madeon policies and programs that promoteconsumer welare and protection.Republic Act (R.A.) 7394 or theConsumer Act o the Philippines statesthe policy o the State to protect theinterest o the consumer, promote his /hergeneral welare and establish standards o

conduct or business and industry. Tus,Government is mandated to pursue theollowing objectives:

a. protection against hazards to healthand saety;

b. protection against deceptive, unairand unconscionable sales acts andpractices;

c. provision o inormation andeducation to acilitate sound choiceand the proper exercise o rights bythe consumer;

d. provision o adequate rights andmeans o redress; and

e. involvement o consumerrepresentatives in the ormulationo social and economic policies.

Empowered consumers are aware otheir rights and are inormed o airtrade laws. Product quality and saetystandards have become eectivestimuli or manuacturers to improvetheir products and consequentlyenhance competition among rms.Increasing the national awarenesso consumer rights, responsibilitiesand options or redress encourages a

vibrant sector that will demand betterproducts and services.

In 2007, an Awareness, Knowledge,Attitude and Practice Study wascommissioned by the Departmento rade and Industry (DI) todetermine the publics concern or

their rights and responsibilities asconsumers. Te study showed thathal o the respondents were awareo the programs or consumers andsaid these were satisactory butneeded improvement. Te studyrecommended a more creativemessage development, coordinationand closer partnerships with LGUsand consumer-advocates in eachregion, strengthening the role o theconsumer welare desk/customerservice in addressing consumer

complaints, and integration oconsumerism in the schools andcommunities.

In 2010, consumer complaintsreceived by Consumer Welare Desksboth in government eld oces andin business establishments reached75,000, majority o which wereabout consumer products and service


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warranties, liabilities on productsand services, and product qualityand saety. While 99 percent o thecomplaints were eventually resolved,there is a clamor or a shorter

resolution period.

Responsibility or developing andimplementing consumer policy andprogrammes rests on the NationalConsumer Aairs Council composedo the DI, DepED, DOH, DA,several consumer groups and businessorganizations, tasked to improvethe management, coordination, andeectiveness o consumer programs.

Strategic Framework

Te Plan seeks to enable the industry and

services sectors to contribute signicantlyto economic growth and employment.

Tis requires interventions that addressthe countrys competitiveness byimproving the business environment;increasing productivity and eciency;and promoting a dynamic consumersector that demand globally competitive/quality goods and services oering best

value or money.

Figure 3.4. Strategic Framework or Industry and Services


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Vision

A globally-competitive and innovativeindustry and services sector thatcontributes signicantly to inclusive

growth and employment generation.

Ten-point Agenda

Clear and concrete strategies and actionplans are necessary to achieve doablegoals and targets.

Goal 1: Create a better businessenvironment

Te government shall continuouslywork or an environment characterizedby transparent and predictable publicpolicies. Processes shall be streamlined,business procedures standardized; andquality o transactions ensured. Tiscompetitive advantage inuences thedecision to invest in the Philippines; as

well as raises the capability to promoteand channel local products and servicesin various global markets. Tus, toensure a better business environment,the government shall aim to be in theupper third in the global competitiveness

ranking (i.e. IFC/WB Doing BusinessReport).

Improve Governance

1. Streamline bureaucratic procedures andfoster transparency

Improvements in the BusinessRegistration/Permits and LicensingSystem (BPLS) shall be pursued bothat the national and local governmentlevels. Te BPLS will help standardizethe procedures or acquiring permits and

licenses to operate new business. It willnot only reduce the time to secure permitsbut also eliminate corruption by limitingace-to-ace contacts between theapplicant and regulator. Te government

will implement a customer-orientedapproach to policies, rules and regulationson procedures. Public service qualitystandards or all rontline services othe government and international-based

management systems throughoutthe government shall be adopted.

Te National Government shallstrengthen LGUs capacity or goodgovernance and LGU commitment

in promoting a unied approach. olower transaction costs and promotebetter transaction ows, Governmentshall enhance collaboration betweenthe public and private sectors (Reerto Chapter 7: Governance).

2. Promote a consistent, coherent,cohesive, predictable, and responsivepolicy environment

o address investor condence andretain existing investors, governmentshall give priority to key concerns,namely: labor, telecommunications,transport (aviation and domesticshipping), energy, peace and order,and disaster risk-reduction programs.Government shall address the actsand the reality behind the countryslagging competitiveness indices,particularly those pertaining to:(1) international investments, (2)basic inrastructure, (3) scienticinrastructure, (4) education (5)business legislation, (6) energy, (7)

exports, (8) ethics, (9) labor, and (10)barriers to entry and exit.

As the world recovers rom the globaleconomic crisis, competition oropportunities is bound to tighten. TePhilippines is among nations vying ora strategic place in the global market.Considerable challenges conrontthe countrys eorts to compete ortourists, capital, entrepreneurship, andlinks to global supply chains.

In the medium term, the ollowingpolicy reorms shall be pursued:

Amendments to ExecutiveOrder (E.O.) No. 226 or theOmnibus Investment Codeo 1987- to strengthen theinvestment promotion andindustrial development unctionso the Board o Investment (BOI).


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Enactment o an Anti-rust/Competition Law - to levelthe business playing eld bystrengthening the legal andinstitutional ramework to combat

unair trade practices, prohibitcartels and monopolies andsanction key ocials o companiesthat violate air competition.

Amendments to the ExportDevelopment Act - to incorporatesignicant changes in the globaltrading environment as well asestablish lasting solutions torecurring export developmentissues, with emphasis on sanctions,enorcement, and the privatizationo export promotion unctions.

Reorms in the AviationSector- ull implementation oE.O. No. 219 providing or an openand competitive internationalaviation sector that allows localand oreign air carriers to expandtheir operations, maintain a strongaviation industry, and ensureinternational connectivity.

Land Use Plan - to providea sound basis or the localtourism development, includingthe designation o tourismenterprise zones by the ourismInrastructure and EnterpriseZone Authority (IEZA).

Amendments to the ariand Customs Code o thePhilippines- to support air tradeand oppose all unair trade policiesand practices, especially on

smuggling and to be compliantto the international standards oncustoms procedures under theRevised Kyoto Convention to

which the Philippines acceded.

Amendments to the LocalGovernment Code- to providean environment conducive tobusiness.

Amendments to the Labor Code-to address labor-related issues, andharmonize and strengthen labororce and management and ensurethat countrys labor policies is aligned

with international treaties and ratiedInternational Labor OrganizationConvention.

Reorms in public research anddevelopment (R&D) prioritizationand unding system and ullimplementation o the echnology

ranser Act o 2009 (R.A. 10055)-to ensure social return on publicR&D investments. Measures tobe considered include a systematicnational research inventory; aclearinghouse or new major researchinvestments; and a systematic eortto translate outputs o completedresearch into actionable policymeasures or into potential productdevelopments or innovations.

Reorm o the R&D tax incentiveunder R.A. 8424- to encourageinnovative and collaborative behavioramong private rms.

Amendments to the IntellectualProperty Code- to serve the needso the copyright-based industries as

well as strengthen the enorcementcapability o the Intellectual PropertyOce.

Passage o the Data Privacy andAnti-Cybercrime Bills- to ensure thesecurity, integrity, and dependabilityo the countrys inormation andcommunications structure.

Amendments to theStandardization Law- to strengthenthe national standards body.

Amendments to the BarangayMicro Business Enterprises(BMBEs) Act- to support the growthand development o microenterprises.


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Amending and transerringthe unction and mandate o thePhilippine Council on ASEAN andAPEC Cooperation to the PhilippineCouncil on Regional Cooperation.

Government shall ormulate acomprehensive national industrialstrategy that spells out opportunities,coordinates and promotes the growth oorward and backward linkages in priorityareas and high-potential growth sectorsas well as prepares other industries toattract investments and generate jobs.

Tis plan entails a regular review onational investment incentives to examinetheir thrust, adequacy, and consistency

with local regulations especially thosepertaining to priority sectors i.e., mining,tourism, agribusiness and BPO-I. Tegovernment shall include programs toimplement disaster-mitigating measures,sustain socio-political stability, andcreate necessary conditions to ensure saeand peaceul business environment orinvestors.

Furthermore, government shall supportpolicies and legislation that shall:

a. promote a working balance betweenthe interests o labor and capital as wellas provide avenues or dialogue andcooperation based on mutual benet;

b. pursue anti-corruption, anti-redtape, anti-smuggling and integrityinitiatives;

c. provide a ertile landscape orPhilippine domestic and oreigninvestments (i.e. power regulation,cabotage principle, etc.). Te problem

o high cost energy must be addressedby achieving a price range comparableto energy costs among ASEANpeers (i.e., Indonesia, Vietnam andMalaysia); and

d. mainstream Disaster Risk reduction(DRR) and Climate ChangeAdaptation (CCA) in industry andservices sectors by:

Establishing compliancemechanisms or business sectoron DRR standards.

Strengthening implementation

o or reorm existing laws onland-use and related laws such asbuilding code or disaster-resilientindustry and service sectors.

Assessing the level o DRRawareness and activities amongthe private sector and disseminateinormation, education andcampaign (IEC) materials onDRR to ensure their support,participation and cooperation

Te ollowing programs will also bepursued to support DRR and CCA:

Develop and operateinnovative nancing schemesto secure sustainable nancingor programs on climatechange. Tis can take theorm o payment or ecosystemservices including collection oees or water consumption byindustries and ees rom tour

organizers, lodging and othertourist acilities or ecotourism.

Design and implement DRRand CCA measures or miningcompanies. Areas suitable ormineral resources developmentshall be dened based onscientic inormation on climatechange risks and vulnerability oecosystems and communities.

Develop synergy between

small-scale, medium and large-scale mining operations takingclimate change and prudentmineral resources developmentinto consideration.

The Philippines needs to be

known as a country offeringvast opportunities for trade andtourism and will be promoted as

a conducive investment haventhat is now open for business.


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3. Promote e-commerce and ICT-enabled automation

Automation and computerizationo government processes shall bepursued to reduce transaction costs

and make public service more ecient.Te e-Commerce Law shall be ullyintegrated in the policy environmentor business.

4. Encourage Public-PrivatePartnership (PPP)

Te government shall provide anenabling business environmentor private sector investments andpartnerships by pursuing a stablemacroeconomy and sound publicpolicies. Government shall recognizethe essential role o the privatesector as the engine o the countrysgrowth and development. Tegovernment shall provide or thetransparent bidding o PPP projectsor the period 2011-2014. It shallalso promote the Philippines as anideal partner in PPP-inrastructuredevelopment; and closely monitorand ensure transparency in themanagement o PPP projects.Planning, implementation, nancial

accountability, and evaluation shallensure that such investments aresaeguarded.

Strengthen Economic Zones

Te government shall continue thepromotion o private sector-leddevelopment o economic investmentpromotion areas by both oreign andlocal investors. Moreover, governmentshall also provide the needed supportin the setting up o investmentlocations.

Economic zones shall be promotedand special economic zones shallbe strengthened. Experience hasshown that acilitating economiczone development by the privatesector is eective in attractingexport enterprises to locate in saidzones, given the support acilities,inrastructure and services available in

such areas. Te development o economiczones generates employment andbusiness opportunities by establishinglinkages among industries in and aroundthe economic zones.

In addition, the government shall pursuethe issuance and ull implementationo the rules and regulations or thedesignation o tourism enterprise zones,envisioned to expand the current roomcapacities and diversiy products intourist destinations.

Strengthen National Brand/IdentityAwareness

Government will initiate and implementa national branding and marketingcampaign to promote the Philippinesnot only as an investment site and touristdestination but as producer and supplier oquality world-class products and services.

Te Philippines needs to be known as acountry oering vast opportunities ortrade and tourism and will be promotedas a conducive investment haven, nowopen or business.

Te Plan intends to pursue thedevelopment and promotion o Brand

Philippines. Te aim is to achieve amongglobal buyers a Philippine First mindsetby creating a distinct Philippines brand

widely accepted and recognized in theglobal export market connoting quality,

value and reliability. Moreover, to beknown as Asias trendsetter in exportproducts and services, and setting thehighest standards o creativity, innovationand excellence.

A new tourism marketing campaign/branding shall be developed in consonance

with the countrys international image andtrade promotion thrust, with emphasisgiven to our countrys vast retirementpotential and epicurean attractions.

Moreover, judicious selection andprogramming shall be undertaken inmounting a compelling and meaningulPhilippine participation in variouscultural, tourism, airs and trade

The government shall pursue

innovation as an essentialfactor in harnessing culture ofcompetitiveness.


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expositions worldwide with preerence orthose sanctioned by oreign governments,global associations and inter-governmentorganizations.

Goal 2: Action agenda to improveproductivity and efficiency

Higher productivity and eciency oindustry and services sector must bemaniested in increased levels o exports,investments, tourism revenues, andentrepreneurship. By 2016, the ollowingtargets are laid down: (a) US$ 91.5billion in annual merchandise exports;(b) US$28.9 billion in annual servicesexports; (c) PhP3,796.47 billion incumulative approved investments (d)a doubling o annual visitor arrivals to6 million by 2016; (e) US$4.5 billionin annual tourist receipts by 2016;( ) a national goal o six million jobscumulatively generated by 2016, about4.6 million o which will come romindustry and services. O these, twomillion will come rom MSMEs.

Intensiy the Culture oCompetitivenenss

A culture o competitiveness pursues the

development o a positive, innovative,and creative mindset through training,paving avenues or enhancements,reinorcement o shared values, andemphasis on linkages o skills anddevelopment as contributor to economicgrowth. It will make the ullest use oPPP wherein results directly impact oncompetitiveness. Eorts shall be pursuedto instill a national consciousness thatappreciates the signicance o achievingcompetitiveness in process and quality.

Because the delivery o any productor service should respond above all tothe needs o the customers, policiesthat oster a customer-centric businessenvironment will be given close attention.An aggressive education and inormationcampaign through productivity andquality-related training, seminars, andpromotional materials, in print andmass media, are necessary. Development

o customer-service standards setsthe norms. Incentives, recognitionschemes and quality awards canserve as rewards and inducements tohigh-perorming, customer-ocused

organizations.

In addition, the government shallpursue innovation as an essentialactor in harnessing culture ocompetitiveness. Along these linesgovernment shall: (1) review therole o higher education institutionsin the countrys innovative system;(2) review investments in science,technology and innovation (SI)human resources to directly linkthem with strategies in retaining thebest and brightest Filipino SItalents; and (3) promote a cultureo multi-disciplinary collaboration,knowledge sharing, open dialogueand cross-ertilization o ideas asextremely relevant and important inthe emerging global competitivenessenvironment.

Government shall promote a nationalculture o competitiveness byinstilling customer ocus and a sense

o pride in job well done. A culture ocompetitiveness is a national psychetoward achieving excellence in thedelivery o products and servicesthat respond to the needs o thecustomers. Embodying a cultureo competitiveness requires theollowing initiatives:

1. Developing Human Resources

Government shall develop humanresources that instill a national cultureo excellence by developing and

harnessing a broad range o vocational,clerical, technical, managerial andentrepreneurial skills, propagatingrm-level productivity and boostingcompetitiveness awareness.Harnessing skills and human capitalas asset, propagating rm-levelproductivity and competitiveness shallbe promoted in line with ull humandevelopment. Program interventions

With its limited resources,

Government shall focus itsinterventions on key areas thatare job generating, where the

country enjoys comparativeadvantage, and with high growth

potential.


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shall be pursued to develop the corevalues or an entrepreneurial mindset.

Such a mindset is one that will bolsteror an enterprising mindset and a

proactive attitude will be pursued.Tis mindset leads to constantimprovement and innovation,creativity in oerings and processesand thereore becoming competitiveat all times. Individuals become sel-driven, resourceul, always positiveand optimistic, opportunities andsolution-oriented.

o ensure market-responsiveeducation and training, the supplyside o the labor equation shouldbe addressed through qualityeducation/training and eectiveassessment and certication systems.

Te government shall undertakeand maximize capacity-buildingprograms with the support o oreigngovernments and intra-governmentorganizations under the rameworko various bilateral and multilateralengagements. Likewise, linkagesamong Filipino skilled workers andtheir business network, technical

experts and Filipinos involved inepistemic communities abroad shallpursue various multi-stakeholdertalent-sharing and brain-gain andskills enhancement initiatives (e.g.Science and echnology AdvisoryCouncil, the Balik-Scientist Programand ERD).

In addition, sunrise industrial orservice activities with global potentialshall be identied by roadmaps thatorecast and prepare initiatives or

skills requirements on employmentneeds. From 2007 to 2010, ourroadmaps were developed or suchindustries: (a) electronics, (b) BPO/I enabled-services, (c) medicaltourism, and (d) health and wellness( including the retirement ) sectors.By 2016, roadmaps or the remainingsunrise industries namely agribusiness,eco-mining, value chain materials,

and manuacturing, shall be developedto complement the employmentrequirements. In cooperation withhigher education institutions and theprivate sector, niches shall be identied

and matched with the employment needsand strategic positioning o local rmsand industries.

2. Mutually agreed-upon workingarrangements

Mutually agreed-upon workingarrangements increase eciency andstreamline operation. Tus, they are essentialor the competitiveness o enterprises. Tesemust be consistent with the promotion oemployment and protection o basic rightso workers accompanied by adequate socialsaety nets to protect the vulnerable workers.

Te government shall establish acilitationmechanisms and services accessible to

workers and enterprises alike.

3. Strengthen existing TripartiteIndustrial Peace Councils

In line with democratic institutions andtraditions, policies should encouragethe strengthening and reactivation orcreation o more industry tripartitecouncils nationwide and rm-based

dispute settlement schemes that aregeared toward sel-regulation governedby voluntary codes o good labor-management practices. In addition, thegovernment will adopt conciliation-mediation and alternative disputeresolution mechanisms at dierentlevels (LGU, industry, and national);implement a less than 30-day mandatoryconciliation-mediation o all laborcases under the single-entry approach;and campaign or less industry-based

voluntary code o good practices.

Focus Interventions To IncreaseExports/ Investments/ Tourism

With its limited resources, Governmentshall ocus its interventions on key areasthat are job generating, where the countryenjoys comparative advantage, and withhigh growth potential.


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1. Investment promotion, industrydevelopment in job-generating areas

o increase exports and encourageoreign and domestic investments,the government shall pursue intensive

promotion and industry development aswell as oer a more ocused incentivespackage to stimulate the economyand allow all development partners anopportunity to take advantage o thegains rom increased economic activities.

Te Philippine Export DevelopmentPlan 2011-2013 and 2014-2016 shallprovide detailed strategies to implementthe over-arching strategy o MovingUp the Value Chain to Double Exports.

With more investments pouring in andmore revenues rom exports and tourism,

consumption is boosted by higherpurchasing power rom a vibranteconomy. With the undamentals inplace, this whole process becomesa cycle that leads to growth. o

maximize the gains rom targeted andholistic interventions, the ollowingkey areas will be pursued in themedium term:

a. Tourism

ourism is a powerul driver oreconomic growth, inrastructuremodernization, local area development,and employment generation. Teincrease in visitor expenditure andinvestment arising rom tourismactivities create livelihood and jobs in

Figure 3.5: Strategic Destination Area or Tourism

Source: Department o Tourism and Japan Bank or International Cooperation- Sustainable Management Plan or Central Philippines.


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many local communities, which helpsreduce poverty.

ourism development will bepursued in a sustainable manner to

continuously create jobs and livelihoodor local communities and generateoreign exchange or the economy

while ensuring a high level o visitorsatisaction. Adherence to sound andmanageable environmental practicesin the development and promotiono tourist destinations as well asenhancement o tourism products andservices will serve as cornerstones orplanning, product development, humanresources development, and marketing.Aiming to make the Philippines adestination o choice or tourism in theAsia-Pacic region, the governmentshall take the ollowing measures:

Encourage the diversicationo existing destinations, andcreation o new tourism areas andproducts including the expansionin room capacities through theimplementation o the rules andregulations or the designationo ourism Enterprises Zones

(EZs). Mobilize the enormouscapacity o the countrys LGUs atthe provincial, city and municipallevels by strengthening theircapacity to plan, regulate andguide tourism developmentso that it is environmentallyand socially sustainable as wellas economically inclusive and

viable. Moreover, increase thecompetitiveness o the countrys

tourism enterprises and productsby implementing partnershipwith the LGUs and the privatesector to implement a mandatorysystem or the accreditation otourism enterprises, including theormulation o a national standardsand certication program ortourism acilities and services toensure the highest quality and

international comparability o thecountrys tourism products.

Formulate a national tourismdevelopment plan (NDP) as the

ramework or the identication otourism destinations and products,domestic and international markets,marketing and promotion as well asprioritization o tourism inrastructurerequirements by the Department oPublic Works and Highways and theDepartment o ransportation andCommunications, and designationo EZs by the IEZA. Tis willalso provide the basis or LGUs tosubsequently ormulate their localtourism development plans. (Figure3.5)

Encourage LGUs to developtourism related-products andservices using the community-based and ecotourism approachesas implemented by innovative andentrepreneurial local governments inBohol, Palawan, and Bicol, and havecontributed to poverty reduction,protection o the environment, andgender equality in local areas. o this

end, LGUs can seek the assistanceo capable public and private highereducation institutions in their areas,

whose academic, research andextension programs in tourism-relevant disciplines and technicalexpertise can be tapped or localtourism/culture planning, tour guideservices, standards-setting and qualityassurance or the hospitality sector, siteand institutional development, andthe showcasing o cultural heritage.

Undertake a ocused and sustainedinternational and domestic tourismpromotion campaign and programsusing both traditional and the newsocial networking media targetingexisting and new markets as well asOFs.

Launch ocused and sustainedinternational and domestic tourism


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programs using the new media withthe support o OFs. Likewise, thesupport and cooperation mechanismor private sector and nongovernmentorganizations participation shall be

enhanced. Ecient intra-governmentcoordination system shall be putinto practice in tourism promotionaland planning activities. Tese shallinvolve the ourism PromotionsBoard (as mandated by the ourismAct o 2009) and the respectivetourism related promotional units othe Department o Foreign Aairs(DFA), Department o Health(DOH), Philippine RetirementAuthority (PRA), BOI, DI,Department o Environment andNatural Resources (DENR), NationalCommission or Culture and the Arts(NCCA), and the various agencies andcouncils supporting culture and thearts (i.e. CCA, FDCP, and so orth).

Te entry o tourists under thematicprograms (e.g. health and wellnessand employment generation) shallbe urther acilitated in coordination

with the DFA, Department o Justice(DOJ) and the BOI. Such a multi-dimensional stakeholder approach

shall maximize the promotiono medical tourism; retirement;meetings, incentives, conventionsand exhibitions (MICE); adventureand ecotourism; lm production,and Philippine cultural and culinarydiversity.

Develop and implement a newtourism marketing campaign/branding in consonance with thecountrys international image andtrade promotion thrust.

Promote public- private-sectorpartnerships both in inrastructuredevelopment and capacityexpansion and modernization inthe accommodation and recreationsectors, among others. Te privatesector will be engaged in extensiveconsultation to identiy gaps, policyreorms and programs that will assist

the tourism sector achieve its goalsand objectives in the mediumterm. Te ourism CoordinatingCouncil shall be the vehicle tostrengthen such partnerships.

b. Business Process Outsourcing

Te Philippines is now the second-largest destination or outsourcingand is soon expected to lead the globalindustry in terms o revenue earningsin voice/call center operations. TePhilippines is projected by oreignanalysts to lead in all aspect o BPOoperations worldwide in the next ve

years. Tus, it is imperative to buildthe right value proposition to sustainboth prevailing and prospective globalpositions.

BPO, I and I relatedservices comprise both voice(e.g., call centers) and non-voice(e.g., back oce/knowledgeprocess outsourcing (KPO),I outsourcing, EngineeringServices Outsourcing (ESO)and design process delivery,transcription, animation, andgame development. Even as

the Philippines takes the topposition in the contact-centersegment o the BPO industry,there is a need to nurture thegrowth in the KPO segmento the BPO industry, urtherenhance wage and workconditions, and strengthenthe multi-stakeholder supportramework. Tus, an averageannual export growth o 20percent shall be achieved romthe ollowing strategies: (1)

development o a sustained datacollection system or the servicessector; (2) implementation o acomprehensive export brandingprogram; and (3) legislationor data privacy and againstcyber-crime in order to reducerisk perception o Philippine


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BPO services as well as pursuelegislation o the Magna Cartaor Call Centers Workers.

In addition to BPO, Services

and Creative Industries shallbe promoted and enhanced.

Tis will include other servicessuch as accounting (proessionalservices and outsourcing),education, engineering,ranchising, interactive media

with ocus on animation, andgaming, health and wellness, andshipcrewing/ship management.

o support the industry, there isa need to nurture the talent pool,develop the inrastructure andregulatory support, and improve thesocioeconomic environment. o thisend, government shall:

Enhance investmentpromotion and industrydevelopment strategies bysynergizing initiatives andprograms o the governmentand private sector to maximizeresources;

Harmonize the educationalsystem with the changing needso the industry;

Advocate talent developmentthrough training andopportunity building, creatingawareness that BPO provideshigh-paying jobs/careers, andocusing on expanding thetalent pool;

Sustain governmentcommitment thru scal and non-scal incentives and acilitatethe conduct o industry-ocusedroad shows overseas;

Improve the long-term riskperception and overall businessenvironment; and

Expand the development oNext Wave Cities in partnership

with private sector.

c. Electronics

Te electronics sector is a major drivingorce o the Philippine economy andhas consistently been a source o high-

value, high-impact investments preerredOriginal Design Manuacturer (ODM)and Original Equipment Manuacturer(OEM). Likewise, the country alsohouses some o the worlds top electroniccompanies. Tere are two major playersin the electronic components sector:the third-party subcontractors, whichare mainly Filipino-owned, and themultinational plants which cater to therequirements o their parent companies.

Te electronics industry will continueto be the driver o growth o Philippinemerchandise exports. Shipments areoreseen to exceed US$30 billion by2010. At an annual growth rate o 10percent, electronics exports are expectedto hit more than US$ 50 billion by 2016.

Te priority sub-sectors or promotion orelectronics are: (1) components/devices

(semiconductors); (2) electronic dataprocessing; (3) automotive electronics;and (4) solar power or photovoltaic cells.

o show the reliability o Philippineelectronics and increase exports, countryimage branding and investment aresignicant. Likewise, this would entailaggressive promotion by: targetingemerging markets; conduct o high-levelinvestment missions; integration o theelectronics industry; establishment ohuman competencies throughout the

value chain such as continuously growingtalent pools in MS and PhD levels as longterm strategy; and attract new players inpotentially competitive sub-industriessuch as solar cells, growing capacity in ICdesign and the countrys collaboration

with aiwan.


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d. Mining

Te Philippines is situated along a well-dened belt o volcanoes called theCircum-Pacic Rim o Fire making itone o the most mineralized countries in

the world.

Te Mines and Geosciences Bureau(MGB) estimates that some nine millionhectares o the Philippine total land areao 30 million hectares are geologicallyprospective or metallic minerals.Some o these areas may be developedurther, particularly large ore bodiesand linked with downstream processingindustries. Te operation o processingplants and value-adding activities whichhave a demand-pull eect on primaryproduction will serve as a catalyst orthe development o other industries andsectors generating economic activities.

Te multiplier eects o these industrieswill oster the growth o the miningindustry throughout the country.

Te Philippine Mining Act is regardedas among the rst worldwide to mandatecorporate social responsibility in miningprojects and activities.

Te current export oriented miningindustry should aim at producingmanuactured goods and industrialproducts based on an industrializationramework and supported by a strongR & D program on ecient and stateo the art technologies. For instance,copper production should be linked

with smelting and rening operationsdown to the manuacture o cable wiresand other high value nished products.

Te Iron and Steel Industry should berationalized to address not only the local

requirements but should also compete inthe export market.

Generation o more investments inmining and mineral processing andmineral based manuacturing industriesis the key to doubling exports by thesector by 2016. Policies, goals, objectives,strategies and programs o both nationaland local government entities need to be

in sync and ocused on promotingmining and mineral processing toestablish industrial zones in identiedareas with substantial mineraldeposits.

In the short-term, investmentpromotion activities o the BOI, DFA(and its Foreign Service Posts), andDI (and its Foreign rade ServiceCorp) may ocus on pre-identiedmining projects determined by boththe BOI and the MGB as problem-ree in terms o mining permits, incollaboration with the LGUs, and inconsultation with local community.Other recommendations to urtherincrease the sectors competitivenessand contribution to economicdevelopment are the ollowing:

Develop the ramework or theindustrialization o the PhilippineMining/Mineral Industry tosupport the countrys exportactivities and vertical integrationto stimulate downstream andupstream industries and encouragedomestic processing o mineralsor the export markets;

Strictly enorce compliancewith environmental and socialdevelopment commitments;

Cleanse inactive miningapplications and non-perormingmining contracts;

Continue public inormationcampaigns and increase dialogues

with concerned groups. Inorm thepublic about responsible mining

that minimizes environmentalimpact;

Harmonize national andlocal government policies,goals, objectives, strategies andprograms; and


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Ensure international linkagesto relevant global sustainableextractive industry standards andbest practices and benchmarks(e.g. Extractive Industries

ransparency Initiative or EII).

e. Housing

Investing in mass and socialized housingwill enable investors to enjoy incentives,as the government seeks to address thehousing gap o 5.8 million units rom2010 to 2016 or about 800,000 units per

year. Te government has also increasedthe target number o housing loansrom 75,000 to 150,000 housing units.

Tis is in line with the governmentsthrust o acilitating access to a varietyo housing options that are decent,aordable, and responsive to the diverseand changing needs o the people byproviding incentives to low-cost masshousing developers.

f. Agribusiness/Forest-based Industries

As one o the identied priority areas,market-driven and competitiveness-ledagribusiness/orest-based and livestockindustries shall be continuouslypromoted

Chapter 3- Industrya Nd Services

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