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Targeted manufacturing activities in 2014 IPP

The Board of Investments (BOI) has come up with a preliminary list of targeted activities with strong bias for manufacturing and logistics, but a possible delisting of IT-BPM (business process management) sector, during Friday’s inter-agency meeting for the crafting of the 2014 Investments Priorities Plan (IPP), which hopes to revive domestic manufacturing to address the bugging issue of joblessness against the country’s strong economic growth.

This developed as the Department of Trade and Industry (DTI) convened the Industry Development Council (IDC) to collaborate with stakeholders in implementing the Industry Roadmap Project and the Comprehensive National Industrial Strategy (CNIS). The various industry roadmaps will also be the basis in identifying economic activities under the 2014 IPP.

Based on the preliminary list, areas in the manufacturing sector being considered for the grant of incentives include motor vehicle assembly, engineered products consisting of engines, transmissions and trans axle, large injection molded parts, motor vehicle controller assembly, aerospace, cars and components, shipbuilding and parts and components, copper wire rod, paper pulp and simple compound molds.

To support agri-business and fishery, the list proposed the inclusion of mechanized agriculture support services for harvesting, cropping and cold storage facilities.

The list still includes mass housing with focus on economic and low-cost housing projects as well as a list for power generation projects under the energy sector.

In the case of logistics, the BOI list includes projects under the Public Private Partnership, ports and seaports for cargo and passenger, newly purchased ships, aircraft and RORO vessels. It also noted a duty-free privilege for the importation of capital equipment for mass transport system.

On the services sector, the BOI list includes IC design; ship repair; testing facilities; charging station for e-vehicles; maintenance, repair and operation; and industrial waste treatment.

One sector the BOI is likely considering for delisting is the IT-BPM sector, which refers to the contact center and business process oustsourcing operations in the country.

While the BOI noted the significant contribution of the IT-BPM sector in the country’s services exports, it also stressed the skills gap between graduates and the demand of domestic industries as key constraint this sector has to address. It likewise acknowledged the need for strong marketing and promotion support for this sector.

Having identified these key constraints in the IT-BPM sector, the BOI believes the grant of incentives to this sector may not be the solution to make IT-BMP more sustainable.

Economic activities listed in the annual IPP are eligible for tax and fiscal incentives of the government. These perks include income tax holiday and one percent duty on the importation of capital equipment.

The BOI, however, is way behind its schedule to come up with the annual IPP but said the process in crafting the list is more thorough as the thrust is to identify specific activities that are needed to fill up the gaps in the supply chain and to make local industries competitive.

In his opening remarks at the IDC meeting, DTI Secretary Gregory L. Domingo cited the Philippines’ advantages in labor cost, high labor productivity, low inflation rate, stable business environment and good governance compared with neighboring countries.

“The IDC is a collaboration to further strengthen local industries and enhance their competitiveness to take advantage of the opportunities with the implementation of the ASEAN Economic Community (AEC) in 2015 and the other Free Trade Agreements,” he said on the need to reactivate the IDC.

The IDC will be the coordinating body for the DTI-initiated Industry Development Program (IDP). Launched in 2012, the IDP spearheaded public-private collaboration in the development of industry roadmaps. To date, 28 industry roadmaps have been submitted and 18 Technical working groups (TWGs) composed of public and private sector members are implementing these roadmaps.

“The common recommendation in all of these roadmaps is to establish a formal institutional mechanism for consultations, policymaking and coordinated execution of the industry roadmaps,” BOI Managing Head and Undersecretary Adrian S. Cristobal Jr. said.

The government is focusing efforts on revitalizing the industrial sector of the economy, particularly manufacturing, to generate more quality and decent jobs to absorb the growing work force. The sector could propel the economy not only to higher growth, but more importantly to inclusive growth (ADB 2013). Per Philippine Statistical Authority data, the manufacturing sector grew by 10.5%, nearly double the 2012 growth of 5.4%. The DTI envisions “a country with competitive industries providing stable job opportunities by 2016,” that serves to complement the goals of inclusive growth and poverty reduction of the Philippine Development Plan (PDP) 2011-2016.

“The reactivation of the IDC will be directed towards the Manufacturing Resurgence Program (MRP) and the resolution of vertical issues of manufacturing and services industries. IDC will be the main coordinating body for effective execution of the MRP,” Cristobal added.

The IDC was created on December 2, 1996 by virtue of E.O. 380 signed by then President Fidel V. Ramos to recommend approval of the Industrial Development Plan of the Philippine (IDPP), which shall be consistent with the then Medium-Term Philippine Development Plan (MTPDP) and the Philippine Export Development Plan (PEDP). It was amended on April 27, 1998 by E.O. 480 and further amended on April 12, 2000 by E.O. 225.