Overview of the Philippine Auto Industry Roadmap Rafaelita M. Aldaba PH Department of Trade and Industry Board of Investments 29 January 2016, Acacia Hotel, Alabang, Manila
Presentation Outline NEW CARS MACRO PERFORMANC INDUSTRIAL PROGRAM E POLICY Roadmaps for upgrading industries to foster sustainable & inclusive development, transformation, & growth
PH MACROECONOMIC PERFORMANCE PH REMARKABLE GROWTH PERFORMANCE
Macro Performance Quarterly Growth 2009-2015 20.0 15.0 10.0 5.0 0.0 09Q1 09Q2 09Q3 09Q4 10Q1 10Q2 10Q3 10Q4 11Q1 11Q2 11Q3 11Q4 12Q1 12Q2 12Q3 12Q4 13Q1 13Q2 13Q3 13Q4 14Q1 14Q2 14Q3 14Q4 15Q1 15Q2 15Q3 15Q4 -5.0 -10.0 GROSS DOMESTIC PRODUCT AGRI., HUNTING, FORESTRY, AND FISHING MANUFACTURING SERVICES • Robust growth due to strong macro fundamentals supporting domestic demand & shielding us from global weaknesses • Rising trend in manufacturing after sluggish growth in 80s-90s
PH a new growth area Industry Growth: PH vs Selected East & Southeast Asian Countries 20.0 15.0 PH 10.0 TH in % INO 5.0 VN 0.0 PRC 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 MAL -5.0 -10.0 Year • PH Industry growth: 7.3% (‘12); 9.3% (’13, highest), 7.5% (‘14 highest) 5
WHAT MAKES PH DIFFERENT • Growing market, middle class • Demographic sweet spot Market • Young, English speaking, highly trainable • Moderate wage increases Labor • Strong macro fundamentals • Political stability, strong business/consumer confidence Operating environment • New Industrial Policy • Investment Promotion Agencies Policy focus • Improved competitiveness ranking (World Economic Forum #47 from #52) Competitivenness
Comparison of Wage Rates • Wages for workers & engineers are relatively lower than China, Malaysia, & Thailand Korea 1734 Taiwan 2325 1619 2263 Hong Kong Hong Kong Taiwan 1230 Korea 2255 Singapore 1143 Singapore 1456 China 352.375 Malaysia 944 Thailand 345 Thailand 698 Malaysia 344 China 635.75 Philippines 259.5 Philippines 387.5 Indonesia 205.5 Indonesia 373 Vietnam 133 Cambodia 298 74 285.75 Cambodia Vietnam Myanmar 53 Myanmar 138 0 500 1000 1500 2000 0 500 1000 1500 2000 2500 Workers Engineers (mid-level) source: Japan External Trade Organization (JETRO)
THE NEW INDUSTRIAL POLICY FOR STRUCTURAL TRANSFORMATION MANUFACTURING, AGRIBUSINESS, & SERVICES ROADMAPS
New Industrial Policy • Industrial policy best way to create jobs, Jobs, reduce poverty, & Competitive- achieve inclusive ness growth Regional economic integration, FTAs* Inclusive • Competitiveness crucial in growth upgrading, rising regional integration & global value chains * Free Trade Areas
Strategic Industrial Policy GOAL: Improve • Upgrade industries Competitiveness • Remove growth obstacles • Create proper environment for private sector Government as development Facilitator • Private sector: proximate source of growth • How to plug in regional production networks GVC-focused, • Move up the value chain Cluster-based • Build strong regional economies
MANUFACTURING ROADMAP VISION: globally competitive & strongly linked with other sectors, a main growth driver Phase III 2022- Phase II 2018- 2025 2021 -move to high tech Phase I -high value added transport equipment, 2014-2017 chemicals, electrical activities upstream machinery industries: -automotive, -manufacturing hubs chemicals, iron & aerospace parts in regional & global steel, med-tech electronics, production networks basic & fabricated garments, food, for auto, electronics, resource-based metal machinery, garments, industries, food chemicals, furniture, tool & die, shipbuilding
Major Strategies Coordination mechanism Horizontal Vertical measures measures • Promotion • Close supply chain gaps • Power, smuggling, Manufacturing • Expand domestic market logistics, --15% to GDP & exports infrastructure • HRD & skills trainings • Improve regulation, • SME development reduce cost of doing • Innovation business • Green growth • Competitive exchange rate open trade regime, sustainable macro policies, sound tax policies & administration, efficient bureaucracy, secure property rights, institutions
Strategic Actions: Manufacturing STRATEGIC ACTIONS Close Supply/Value Chain Gaps : Copper, Furniture, Tool & die, Paper, Iron & steel, Petrochemical, Plastic Domestic Market Base & Exports: Automotive , Shipbuilding HRD & Skills/Trainings : engineers, design, tool-making, prototyping, molding, die casting, technical-vocational SME Development & Innovation: Finance access, compliance with product standards, Incubation, Quality testing, R&D, Industry-academe linkages, Fablabs, SME Business Centers Aggressive marketing & promotion to attract investments Horizontal issues : high cost of power & domestic shipping, smuggling & streamline & automate government procedures 13
AGRIBUSINESS ROADMAP DRIVE REGIONAL ECONOMIC TRANSFORMATION Transform & upgrade agriculture from traditional farming to a globally competitive agribusiness sector Phase III 2022- 2025 Phase II 2018- 2021 Phase I 2014- -deepen 2017 -strengthen agro- participation in processing & its GVC -rubber, coconut, linkages to -PH as mangoes, coffee, production: R&D; agribusiness cacao, banana, palm strengthen supply regional hub oil & other high chains, upgrade value crops commodity clusters; -supply chain gaps access to technologies, finance; regulatory & certification system
SERVICES ROADMAP Glue That Binds All Sectors Together Globally competitive services, create quality jobs, move up the value chain, enable structural transformation Phase III 2022- 2025 Phase II 2018- 2021 Phase I 2014- - PH as regional 2017 - Education, design, hub: training R&D, finance, - upgrade services, -Labor-intensive infrastructure manufacturing sectors: tourism, - Services embedded related services to construction, ship in manufacturing sustain growth & repair, MRO - HRD & skills training job creation -accelerate - Innovation infrastructure ecosystem linked with investments manufacturing -move up IT-BPM GVC
Comprehensive National Industrial Strategy (CNIS) EXTERNAL FACTORS: GLOBALIZATION, REGIONAL/BILATERAL/MULTILATERAL TRADING ARRANGEMENTS, GLOBAL & REGIONAL PRODUCTION NETWORKS AGRICULTURE FISHING, MANUFACTURING SERVICES FORESTRY MINING INTERNAL FACTORS: GOVERNMENT POLICIES &PROGRAMS, INSTITUTIONS, INFRASTRUCTURE, MACRO STABILITY, RULE OF LAW, PEACE & ORDER, POLITICAL CLIMATE • THREE IMPORTANT CHANNELS AFFECTING INDUSTRY GROWTH: COMPETITION, INNOVATION, PRODUCTIVITY 16
Philippine Industry Development Council Industry Development Council Eminent Persons IDC Secretariat (IDC) Group (EPG) 5 industry leaders IDC Executive Committee DTI – Chairman • 11 representatives from government • 7 representatives from private sector • 1 representative of academe • 1 representative of research institute/think tank • 1 representative of labor • 1 CSO representative IDC Technical Committee DTI - Chairman • DTI, NEDA, DA, DOF, OP; Private sectors representatives Natural health petrochemical Metal casting, Mass housing Ceramic tiles Automotive Iron & steel Motorcycle Retirement Chemicals, Electronics Aerospace Tool & die Furniture Biodiesel plastics, Copper IT-BPM Rubber Paper
COMPREHENSIVE AUTO RESURGENCE PROGRAM Auto roadmap visions, goals, strategies, timeline
Current State and Strengths Industry Characteristics Rated capacity: 200K units/year 4 carmakers Pampanga Parts & components: 272 Metro Manila Direct Employment: 68K Net exporter of parts: Cavite Exports US$4.3B (7% of total) Strong current comparative Laguna advantage: ignition sets, radio receivers, external power, lead- Batangas acid electric accumulators, brake Vehicle Parts system, transmissions, air filters for engines, tires, etc 7 plants 3 stamping, 5 transmission, electro- 6 wiring harness, 2 large Highly skilled labor & technical deposition injection, 3 suspension manpower painting system, 2 tool & die, 50+ systems others
PH Auto Industry Sales & Growth 350000 50% 321532 40% 300000 269164 30% 250000 20% 10% 200000 0% 150000 -10% -20% 100000 -30% 50000 -40% 0 -50% 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 Total Industry Growth • PH: high population with low vehicle ownership o Motorization rate: PH: 35; VN:20; INDO:73; THA:200; MAL: 395 • Significant market potential as the share of households who can afford to buy vehicles increased from 26% to 36%
PH Market Potential • Share of HH who # of households in the income range Millions of households can afford to buy vehicles up from 21.6 20.8 26% to 36% 20.0 19.3 18.6 33% • Significant 39% potential in 42% 47% PhP43K to1.1M <5k 56% income bracket 33% 32% • Up from 21% to 32% 31% 28% 16% 5-10k 27% 14% • Over PhP1.1M 10-15k 13% 11% 12% 15-25k 9% from 5% in 2013 to 9% 8% 7% >25k 5% 8% 6% 5% 4% 3% 8% in 2017 2009 2011 2013 2015 2017 Source: Ayala & Mckinsey 21
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