Manufacturing revival aims to create 4-M new jobs by 2022
Business groups yesterday called on government to revive low-cost labor-intensive and high value manufacturing industries to create 500,000 new jobs a year in 2015 for a total of 4 million new jobs by 2022 through the creation of new economic zones, relaxed labor policies, and increased training of workers.
The 19 foreign and local business groups presented this as part of the recommendations in their policy brief entitled “Manufacturing: Creation Million of Better Jobs,” which they said would be submitted to Malacañang and other government agencies for appropriate action.
The policy brief has called for the creation of an average of 500,000 new jobs a year in manufacturing beginning 2015 for a total of 4 million by 2022 to double the manufacturing labor force to 7.5 million from 3.5 million in 2012. Every new manufacturing job created would benefit 16 million Filipinos. This would also ensure that the manufacturing sector attain 30 percent of GDP share by 2022 compared with 21 percent in 2012.
To attain these goals, the businessmen also presented a two-track strategy calling for the establishments of new economic zones, relaxed labor policies, and increased increased training tailored to either low or high-value manufacturing.
Low cost, labor-intensive manufacturing industries are food and beverages; garments, leathergoods, footwear, and textiles; and furniture, toys and household items. The high-value manufacturing are semiconductors, computers, phones, electrical and homes appliances; transportation equipment and parts (aircraft, motor vehicles, ships; and chemicals, plastic, and rubber products.
Low cost may not require huge investments but these are labor intensive. For instance, a garment firm’s investment of between $2-$3 million is expected to employ 3,000 apparel workers while a woven textile manufacturing company with an investment of $40 million to $80 million will only employ 1,000 workers.
The garment industry, which employs mostly non-college workers, used to export $3 billion prior to the lifting of the garments quote in 2005 and employed 800,000 workers. Now, the industry’s exports have gone down to $1.3-billion level or less than half in 2004 with direct employment of 200,000 only.
To grow low-cost, labor-intensive manufacturing such as the food, garments, footwear, and furniture industries, the policy brief also proposed the establishment of Domestic/Export Enterprise Zones (D/EEZs) in non-industrialized areas.
To jumpstart the D/EEZs, the business groups have pushed forward 13 temporary incentives.
These incentives include allowing the use of public lands for the private sector to develop into D/EEZs under a public-[private joint venture scheme; low rent factory space for a fixed period; assurance of transport access; TESDA-trained apprentices should receive partial pay from TESDA, DOLE or from the Conditional Cash Transfer; employers allowed to doube deduct wages and training expenses of apprentices in calculating taxes; suspension of security of tenure and minimum wage; lengthen apprenticeship to 18-24 months from the current 6 months; access to least expensive power through open access; and encourage competitive sourcing of local raw materials.
These incentives are expected to attract both foreign and local investors to locate in D/EEZs to save from the high cost of labor and power.
Roberto Batungbacal, chair of the American Chamber of Commerce for manufac turing committee, noted that the biggest challenge of the Philippines is to create more and better jobs.
He noted that despite the growth in GDP this has not translated to the creation of more job opportunities especially for the least skilled Filipinos in the countryside. There are over 1 million people entering the labor force annually. Unemployment has remained high and rising at 7.3 percent or 3 million and underemployment at 20 percent or 7 million. In addition, 21 percent of the unemployed Filipinos are college graduates.
“We need to shift labor into the manufacturing sector,” he said noting that there are 11 million rural workers.
John D. Forbes, Senior Advisor at the American Chamber and one of two authors of the policy brief, said that countries that have developed their industrial sector have been exporting more.
“Indonesia, Malaysia, Thailand, and Vietnam — economies exporting two to four times more than the Philippines — have each developed its industrial sector to over 40% of the economy, making industry and manufacturing a development backbone,” Forbes said.
Forbes further said that the Philippines has not really maximized its opportunities as an expanding economy with a young labor force, increasing middle class, a steadily increasing domestic demand and improved international image of the country.
The Philippines has not also taken advantage of the opportunities in the region where manufacturing firms are relocating to low cost production areas because of the increasing cost of production in China and other neighboring countries.