DTI Clustering Coco Coir Peat

Industry Clustering using the Value Chain Approach

Transforming Relationships to Increase Competitiveness and Focus on End Markets

Undersecretary Merly M. CruzDTI-Regional Operations Dev’t Group12 March 2012

OUTLINE OF PRESENTATION

I Introduction (Concept, Legal Basis)

II Value Chain as a Tool

III Industrial Governance Framework

IV National Industry Cluster Capacity Enhancement Project (NICCEP)

V Sample Application (Coco Coir & Peat)

CONCEPT

Industry Clusters are groups of competing, collaboratingand interdependent businesses within a value chain.

It has increasingly been recognized as an effective approach in industrial development and promotion of micro, small and medium enterprises as it encourages competitiveness.

The clustering process necessitates the operation of upstream (raw material suppliers, production inputs) and downstream (logistics, value-adding, packaging and marketing) economic activities to support the whole value-chain.

VALUE CHAIN - The value-creating flow of a good from RM, production,

commercialization, & ultimately delivery to end-users or consumers.

INDUSTRY CLUSTER- A geographic concentration of interconnected

businesses, suppliers, & associated institutions creating direct & indirect synergies among them.

DEFINITION

Alignment to PDP 2011-16

In the Philippine Development Plan for 2011-2016,

Inclusive growth and poverty reduction goal Increase productivity and efficiency of the industry and

services Contribute more to economic growth and employment.

The strategy towards clusters should have coordinated interventions to provide an integrated response to the needs of the industry clusters.

The PDP recommends maximizing public-private partnerships (PPP) in the identification of solutions for the challenges and problems of the industry clusters.

Provision of specific inputs

Specific input providers

Production Transfor-mation Trade Final Sale

Primary producers

Logistics centers, industry

Traders Final Sales point/Retailer

Basic Functions (chain links)

Categories of Chain Operators and their relations

Provide- Equipment- Inputs

Grow Harvest Dry etc,

Classify Process Pack

TransportDistributeSell

Specific consumer

market

Source: ValueLinks Manual, gtz

Value Chain Framework

Mapping the Institutional & Policy Environmentfor Agro Industry

Agro industry

Farmer

Vendor

Association Supplier

Distributor Modern Retail Consumer

Importer Wholesaler

Collector Food Services

Key Institutional/Policy Factors Influencing Chain Dynamics and Actor Behavior

Production WholesaleCollection Retail Consumption

Processing

Tenure Private Standards

Marketing regulations

Services Tariffs

Public Standards

ForeignInvestmentPolicy

Cultural Preferences

Cooperative law

Main types of industrial clusters in developing countries

Clusters of large national firms and local suppliers

Clusters of Small & Medium Enterprises

Subsidiaries of MNCs and local suppliers

Cluster-based Industrial Development Strategy

Advantages of Industry Clusters

It’s demand-drivenRequires raw material production and optimizes utilizationReduces costs of operation and encourages productivityRequires specialization of major players Provides an avenue for leveraging on another’s specialties Increases opportunities for innovation to be competitive Players pursue joint solutions to common problems They build on common labor pool, technology and infrastructure They learn collectively what it takes to be competitiveCluster-based Industrial Development Strategy

Guidelines for Cluster Development

Clear view of the goals Let the private sector lead One size does not fit all Match initiatives to the level of government

support/program Build a cluster organization Promoting and supporting , networking and

co-operation


The way forward: new forms of industrial governance

Cluster based development strategies are formulated and implemented at local/regional level through partnerships between the government, the industries and the institutions of the innovation and learning system;

Support policies and joint programs focus on improving the innovation and learning system :

- promoting external linkages between clusters & global partners; - developing technical and managerial skills ; - enhancing technological and innovation capabilities and efforts ;- supporting entrepreneurship, SMEs and networking;- Improving connectivity ( road and telecom infrastructure)


Framework on Industrial Governance

Global industries

Local industrial clusters

Industrial Governance

Framework Macro Conditions

Source: Griffiths, Martin. A Presentation of the Flinders University

The industrial system

National Industry Cluster Capacity Enhancement Program (NICCEP)

Presenter

Presentation Notes

Recognizing the industry cluster model as an effective collaborative strategy for regional development, DTI saw the importance to upscale the Davao Industry Cluster Capacity Enhancement Project (DICCEP) in all regions nationwide called NICCEP. DICCEP received the 2010 Official Donor Agency (ODA) Good Practice Award – Strategies for Achieving Outcomes category. The DICCEP was selected as a good practice based on the following criteria: achievement of results; innovativeness; replicability; sustainability; and social responsibility. What is DICCEP? DICCEP is a joint project by the JICA, DTI, and industry stakeholders in the Davao Region to provide capacity building for the eight (8 )industries via clustering approach, namely: banana, mango, seaweeds, coconut, wood, mining, tourism, and ICT. The Davao region experience showed that most of the sub-projects implemented can be shared and expanded to other regions in similar conditions all over the country. JICA Philippines strongly recommended the expansion of the industry cluster approach to other regions called NICCEP.

Project Brief Project Duration : 3 years (2012-2015)

Implementation Date : April 2012

Target Industry Clusters

Meeting between DTI & JICA Advisor Minoru YAMADA & his Team on June 27, 2011 at DTI-RODG Makati.

Luzon (8) - Milkfish, Dairy, Coffee, Bamboo, Tourism, ICT, Health & Wellness (H&W) and Wearables & Homestyles

Visayas (5) - GDH, Tourism, ICT, Seaweeds and H&W

Mindanao (8) – Rubber, Poultry, Tuna Oil Palm, Banana, Mango,

Coconut, Seaweeds, Wood, Mining, Tourism

and ICT

Presenter

Presentation Notes

JICA validation workshop for participating regions was conducted on Sept 15-Oct 30, 2010 in Makati, Cebu and Davao. The supplemental survey and meetings on June 27-20, 2011 were intended to primarily firm up and discuss details on the nature of NICCEP, its project design and arrangement of its implementation with the Department of Trade and Industry as the proponent and implementing agency of said project and conduct site visit to selected industry cluster in Southern Luzon.” NICCEP was officially approved on 28 October 2011 by MOFA. The Record of Discussions was signed on 22 November 2011 by JICA Country Representative and DTI Secretary.

NICCEP’s overall goal is to facilitate increase in the contribution of the selected priority industry clusters to the national economy particularly in terms of o creation of jobs, o development & strengthening of SMEs,o increase in value-adding, o improvement in the business environ,

more importantly impact on the poverty.

GOAL

Enhance the capacity of selected industry clusters throughout the country to plan, implement, facilitate service delivery, evaluate projects, and improve industry competitiveness.

Replicate DICCEP experience on industry clustering approach nationwide. (Note: DICCEP ended 2010 with a recognition as the 2010 Official Development Assistance (ODA) Good Practice Award under Strategies for Achieving Outcomes category by NEDA. )

OBJECTIVES

Presenter

Presentation Notes

What is the objective of NICCEP? The objective is to enhance the capacity of selected industry clusters throughout the country to plan, implement, facilitate service delivery and evaluate projects, improve industry competitiveness.

INPUTS

JICA

Dispatch of the Experts Counterpart trainings in Japan Training/workshops/monitoring Local activities of target clusters

DTI

Staff allocation Office space for Japanese Experts Counterpart Costs for Trainings/Workshops/Monitoring &

Local Activities of the Target Clusters Others (ID for Experts, Available data & info related to the

Project, etc)

SPMO【DTI-Region VII (Cebu)】

-Satellite Project Director-Satellite Project Manager-Staffs for daily operations

H&WR7

ICTR6

TourismR7

GDHR8

NPMO 【DTI-RODG】-National Project Director -National Project Manager -Staffs for daily operations

South Luzon Visayas

H&WNCR

BambooR3

DairyR2

TourismR4B

CoffeeCAR

ICTR4A

SPMO【DTI-Region IV-A

(Laguna)】-Satellite Project Director-Satellite Project Manager-Staffs for daily operations

SPMO【DTI-Region III (Angeles)】


Implementation Structure of the Project

North Luzon

*NPMO: National Project Management Office*SPMO: Satellite Project Management Office*DTI: Department of Trade and Industry*RODG: Regional Operations and Development Group*GDH: Gifts, Decors, House wares*H&W: Health & Wellness*W&H: Wearables & Homestyle

DTI-CAR

DTI-Region II

W&HR5

Milkfish

R1

DTI-Region IDTI-Region V

DTI-NCR

DTI-Region IV-

B

DTI-Region VIII

DTI-Region VI

BananaR11

MangoR11

Mining

R11 TourismR11

CoconutR11

ITR11

SeaweedsR11

WoodR11

SPMO【DTI-Region XI (Davao)】


RubberR9

PoultryR10

TunaR12

Oil PalmR13

Secretariat

Industrial Cluster Development Unit DTI- Office of Secretary

SeaweedsR7

Mindanao

DTI-Region XIII

DTI

-Reg

ion

XII

DTI-Region IX

DTI-Region X

Presenter

Presentation Notes

Priority Industries for National Convergence

OUTPUTS

Practical and sustainable operational workflows for promoting and mainstreaming the industry cluster approach are designed & practised

Pilot models of industry cluster approach are established within Luzon and Visayas

Models of upgraded industry clusters are established in Davao to provide lessons and best practices for other regions

Coconut Coir Industry(SAMPLE )

Sample No. 1

Quick Facts…Areas Planted to Coconut

3.04 M hectares27% of total agricultural land68 out of 79 provinces are coconut areas1,195 coconut municipalities

Coconut trees1,195 coconut municipalities341.3 Million bearing trees

Nut Production15.1 Billion nuts/year (average – 2005-2009)45 nuts/tree/year (average – 2005-2009)

The Philippines is one of the Top 3 producers around the world

Source : PCA Website

Coconut by-product:Coco Coir & Coco Peat

Coco Coir is a light, bulky, long fiber extracted from coconut husk

Coco Coir Peat is the 'coir fiber pith' or 'coir dust' produced as a by-product when coconut husks are processed for the extraction of the long fibers from the husk. Coco Coir Peat is the binding material that comes from the fiber fraction of the coconut husk.

Traditionally thrown away as waste material or used as fuel

When processed:From Coco Husks

To 30%Coco Fiber

and 70%Coco Peat

Uses of Coco Coir

Geo Textile for Soil Erosion Control

Widely used as bed mattresses

Car seat

Upholstery

Other uses

RopeCoco pots

DEMAND for Coco Coir Products

Source : BETP

Annual demand: 100M beds/mattresses(4.5 kg of coco fiber to make 1 mattress)

1. Mattress for China

Import of raw coco fiber in 2009o 200,000 MT (US$ 56 M) o Phil exported 1,123 MT (0.5% only)

China’s demand increases @ 20% every year or US$11 M

…demand for China

2. Geo Textile-Erosion Control Materials

• Estimated at 270,000 sq kmconcentrated mostly in theNorthern part, i.e., provinces ofBeijing, Harbin, among others

• Desert areas increasing around 1.27% every year due to sandstorms occurring during the months of October to December

For China’s Desertification

project

Uses of Coco Peat

Brick Type Block Type Loose Form

Europe market: for cut flower (exports more than $2B/year)

Locally: for nurseries, grow-outs of trees, landscaping

Green houses using soil-less, hydro-phonic systemBeing

exported to Japan for animal bedding

2

Used as a filter for water treatment systems (high-end but a very small market -around 0.1%) 3

Multi-purpose soil conditioner & growing medium

(horticulture & vegetation)

1

Major Export Markets

People’s Republic of ChinaTaiwan/HongkongSingaporeJapanUSA

Japan

KoreaPeople’s Republic of ChinaTaiwan/HongkongJapanSingaporeUK, USA & Canada

Baled Coco Coir

Nets of Coir

Coco Peat

Comparative Coconut Production and Volume of Exports of Coir Products2009

CountryArea Planted(million ha.)

Production(B nuts)

Coir ProductsExports (in MT)

Sri LankaIndiaThailandIndonesiaPhilippinesMalaysia

0.3951.8950.2393.8503.4020.100

2.85315.7302

1.10416.4981

15.6683

0.379

151,06183,09453,82714,6034,561

1,738 (2008figure)

Source: PCA

Coc

onut

Tre

e Pl

anta

tion

(In

hect

ares

)

Source : PCA Website/DA-BAS, 2009

CAR - 281 haI - 11,540 ha

II - 13,661 ha

III - 24,088 ha

IV-A - 343,568 ha

IV-B - 179,321 ha

VI - 119,663 ha

V - 447,764 ha

VIII - 383,546 ha

VII - 128,707 ha

IX - 369,013 ha

X - 300,575 haXIII - 219,107 ha

XI - 375,952 ha

XII - 169,254 haARMM – 315,490 ha

Approx. Sri Lanka

Coc

onut

Pro

duct

ion

(In

Met

ric T

ons)

Source : PCA Website/DA-BAS, 2009

I - 38,023 MT

II - 71,896 MTIII - 199,730 MT

VI - 478,331 MT VII - 434,589 MT

XI - 375,952 haXI - 2,691,905 MT 1

VIII - 383,546 haVIII - 1,776,916 MT

2

IX - 1,744,738 MT3

X - 300,575 haX - 1,743,338 MT

4

IV-A - 343,568 haIV-A - 1,430,128 MT

5V - 447,764 ha

ARMM – 315,490 haARMM – 1,250,971 MT

7

XIII - 219,107 haXIII - 985,427 MT

8

CAR - 906 MT

IV-B - 179,321 ha

XII - 169,254 haXII - 895,086 MT

9

IX - 369,013 ha

Highest Productivity

IV-B - 668,361 MT10

V - 1,257,211 MT6

Map

ping

of t

he C

oco

Coi

r/Pea

t Se

ctor

Reg 3 - (1)Cap. (no data)

Reg 4A - [9], (2)Cap: 916.70 MT/year *

Reg 5- [11], (4)Cap: 2,300 MT/year*

Reg 6 - [2], (1)Cap: 84 MT/year *

Reg 8 - [5], (19)Cap: 1,768 MT/year

Reg 11 – [18], (1)Cap: 7,220 MT/year *

Reg 12 – [4], (3)Cap: 2,910 MT/year *

Reg 13 – [ 2], (3)Cap: 960 MT/year *

Reg 2 - (1)Cap: 360 MT/year *

XI - 2,691,905 MTXI - 375,952 ha

1

VIII - 1,776,916 MTVIII - 383,546 ha

2

IV-A - 1,430,128 MTIV-A - 343,568 ha

5V - 1,257,211 MT

V - 447,764 ha

6

ARMM – 1,250,971 MTARMM – 315,490 ha

7

XIII - 985,427 MTXIII - 219,107 ha

8

Non-operational - 35 Total estimated production capacity (Philcoir) - 30,000 MT / year Operational - 52 Total estimated installed capacity (Philcoir) – 120,000 MT/year 87

Reg 9 - (2)Cap. 60MT/year

IX - 1,744,738 MTIX - 369,013 ha

3

XII - 895,086 MTXII - 169,254 ha

9

Reg 10 - (3)Cap. 84 /year

X - 1,743,338 MTX - 300,575 ha

4

Propagation HuskDecorticators

Coco Peat Processors

Traders /Exporters

Distributors/Malls

Local Farms/Nurseries/Commercial Gardens/

Grow Bags/etc

Government Institutions: DA-PCA/CIIF/DTI/DOST/LGUSmall Coco Farmers/Coops/Assoc’ns/Processors/Exporters/Traders

Phil Coconut Industry Cluster Team (Coir & Peat)

Actvated Carbon

Coco Water

Dessicated Coco + Oil

Coco Sweetener

R & DNursery

Production& Expansion

Fertilization

Edible Oil/Industrial Oil

Baled Fiber /GeotextileProducers

GTH Manufacturers

MARKET

SUPPORT INDUSTRIES (Transport/Machineries/Ancillaries)

Growing World demand for Geotextile / coco coir and peat

Underutilized capacity

Unstable/limited supply of coco husks

Abundant supply ofCoconut : 15.668 B nuts

High transport cost (farm to processing sites)

High cost of equipmentHigh labor costHigh cost of power (unstble suppl)High local shipping cost

Potential domestic & export market demand for coco coir and peat valued-up products

Trading /Exporting

Processing

Decorticating

Husk Gathering

Low Price for Coco Peat in the export market (Production & transport cost is higher than buying price )

Based on inputs from the Industry Players

Readily available capacity of approx 90,000 MT

VISION

Quadruple the Export Earnings Grow the Phil COIR & PEAT

(ave annual growth of 25%,2011-2016 )

Targeted Philippine Export Earnings (Coco coir products)

Year Philippine Exports(UD$000)(25% AAGR)

2008 (base year) 1,0952009 1,3682010 1,7112011 2,1382012 2,6732013 3,3422014 4,1772015 5,2212016 6,526

To develop and expand domestic supply-base for coco coir

To strengthen access to market information (domestic & export)

Redistribution Strategy(Upscale Community-based business model)

Market Devt & Promotion (Use Anchor Firm/Exporter as Big Brother – ind’l mkt)

To strengthen market linkage among actors within the VC

Productivity & Efficiency Improvement (Management of the local Supply Chain)

Urgent Action…

Improve the supply of coco husk thru a nationwide drive.

“MAY PERA SA BUNOT DRIVE”

Develop collection and marketing system.

2011 Priorities

Plan of Action

1. Advocacy (value chain as a tool)“May Perasa Bunot”

Campaign

Capacity Building

Entrepre-neurshipTraining

Farm to Market Roads

2. Extensive campaign for replanting and fertilization

3. Financing (ACEF, GFIs, others)

Plan of Action

2012-2013 PrioritiesTechnology development –techno transfer

Continuous Value Chain and Cluster Development Training

Consultative mechanism for price rationalization

Plan of Action

2014-2016 Priorities

Structure for Industrial Governance2

Sustained Promotion1

Enabling Policy3

Good day!

DTI Clustering Coco Coir Peat

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