" " THE FUTURE OF PHILIPPINE MANUFACTURING – The Bohol Chronicle

THE FUTURE OF PHILIPPINE MANUFACTURING

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THE FUTURE OF PHILIPPINE MANUFACTURING

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one voice picTHE PHILIPPINE GDP GROWTH  rate is -in a way- unique in that it is largely Consumer-driven. But it has been second only to China in Asia for some years now.  Many growing economies rely on their Manufacturing sector.

The Consumer-driven GDP growth is due to the dollar inflows coming from our top earners (OFWs and BPO which  total about US$50-B a year) plus Tourism, the third dollar earner. The many cars, motorcycles,appliances and houses one sees around are the fruits of these earnings.

RP has not also been export dependent at only (34%) of  our GDP  in exports compared to our neighbors (data: 1993-2013) : Malaysia (81%), Singapore (199%), Thailand (68%), Vietnam (61%) -thus shielding the country from the downturns in the importing developed countries.

In a way Service (not Agriculture which has contributed a mere 12% of GDP on average) has been the linchpin -and the World Bank has long noticed this pattern of Philippine growth.

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Our take is that if we let policies of the incoming post Aquino government propel Agriculture- we truly will have a more formidable GDP (than we have now) since Manufacturing has its own redeeming strengths.

Oxford Economics forecast Manufacturing growth in the country (from 2013-2030) will be 5.5% while value-added for manufacturing has grown 7.9% from 2009-2013.

The Philippines could yet become a manufacturing hub in Asia. It is a fact that some businesses are relocating away from China to the Philippines and Vietnam because these two countries have lower labor cost. It is forecast that up to 2030 China will have a plus 3 factor increase in labor cost compared to only Factor Plus 2 for RP and Vietnam.

Moreover, RP has a big market- over 100 million Filipinos (12 th largest in the world) and a rising Middle Class which now has a per capita of US$3,344 having doubled from 2006. It is also a participant in the unfolding ASEAN integration involving 600 million people and a trade potential of US$ 2.7 Trillion. Of course, RP is not far from China, a major consuming country with at least over a billion potential buyers.

Except for skirmishes in Mindanao, there has been industrial peace the past many years of the Aquino administration. If the elected president  in June will be of the same reformist mold as Aquino, RP has got a good chance of accelerating GDP growth farther.

The twin drawbacks could be price of power and taxes (30% corporate tax)-both of which are one of the highest in the region. Often, depending on the type, manufacturers ‘ cost of power input is 12-40% of total cost (for instance, electronic companies  pay P12 per kwh here).

This is confirmed by the comparative cost of electricity in Manila to other Asia cities : Manila- 23 ($) cents,  Beijing -7 ($) cents, Seoul, Hanoi- 8 ($) cents, Bangkok, Bangladore 11 ($) cents, Kuala Lumpur -(12 ($) cents and Taipei- 17($) cents and Hongkong -19($) cents.

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Aside from corruption (diminishing) ,  power and taxes could also be the reason why RP has attracted the least FDI (Foreign Direct Investments-circa 2013) at only $900-M  compared to Singapore (S64-B), Indonesia ($19-B),  Malaysia ($12-B),  and Thailand ($7.4-B).

But in  sum, the future of manufacturing in RP has more plus than minus.

Particularly in electronics (main performer) and shipbuilding.  In shipbuilding- there is a backlog of 106.8 tonnage of ship that still has to be erected by the four  major shipbuilders hosted in RP: Tsuneishi, Hanjin, Keppel, Herma and Colorado.

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An Ayala Corporation -owned electronic company called Integrated Micro Electronics Inc -(IMI)into electronic manufacturing services (MFS)  and power semi-conductor assembly  and test services is the country’s biggest and has 15 manufacturing sites/offices in China, RP, Singapore, Bulgaria, Czech Republic , USA and Mexico. In many of these locations are highly skilled and motivated Filipino staff, according to Integrated’s President and CEO Arthur Tan.

Industrial Automation and Robotics is zooming up to speed, according to him, and many industrialized nations have robots in factories ,like Japan (306,000), North America (232,000), China (182,000),  South Korea ( 175,000) and Germany (170,000).

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Innovation is in vogue and through the world-class engineering skills of IMI- the first fully automated cars will be manufactured out of  their factories in China,Mexico and the Philippines in that order.

How that car model can -in the future- jell with an electric powered car- speaks volumes about the capability of manufacturing to provide a rich future for the world at large.

For comments: email to dejarescobingo@yahoo.com or bohol-rd@mozcom.com

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