Inclusive Innovation Industrial Strategy (i 3 S) Propelling Jobs, Investments, and Shared Prosperity for All DR. RAFAELITA M. ALDABA ASSISTANT SECRETARY, Department of Trade and Industry (DTI) 29 November 2017, Fairmont Hotel, Makati City
Presentation Outline AIM: PH strategy for industrial development to create more & better jobs, innovation challenges to industry growth & government academe industry linkages • Response to Japan’s Inputs to Philippine Industrial Vision • New Industrial Strategy: inclusive, innovation industrial strategy (i 3 s) - Framework: competition innovation productivity - Top 12 Industries - Five Pillars and Strategic Actions • Innovation at the front and center of PH industrial strategy (i 3 s) - Current state of innovation - Inclusive Innovation & Entrepreneurship Journey: Regional FGDs
Part 1: Response to Japan’s inputs industrial development vision of no one left poor • Focus on employment generation • Large scale employment: foreign companies, spill-over to local companies, foreign SMEs, new industries, GVC participation • High value added employment: promotion of entrepreneurship, startups, innovation, university incubation base • Employment thru local industry development: agriculture, IT/BPO led by LGUs • PH: sustainable & inclusive growth, more & better jobs, shared prosperity for all
Part 2: New Industrial Strategy GLOBAL & DOMESTIC ENVIRONMENT PH as Asia’s Emerging Economic Tiger 16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0 200020012002200320042005200620072008200920102011201220132014 -2.0 -4.0 PH TH INO VN PRC MAL • Philippines as Asia’s emerging economic tiger, manufacturing resurgence, Industry 4.0, GVCs, global slowdown, creeping protectionism, Brexit, Make in India, Made in China, Thailand 4.0 , US TPP pull out, bring back jobs to America, RCEP
Industry 4.0: driving force is technology, disrupting business models at an accelerated pace • Impact on PH industries • Opportunities & challenges • Future skills needed: human capital development critical Science, Technology, Engineering Mathematics • Innovation-led technologies to improve productivity, transform PH economy
Underlying Framework of PH industrial strategy w COMPETITION- INNOVATION-PRODUCTIVITY GLOBALIZATION, INDUSTRY 4.0, FREE TRADE ARRANGEMENTS, GLOBAL VALUE CHAINS, EXTERNAL REGIONAL PRODUCTION NETWORKS FACTORS agriculture, INDUSTRIAL mining services construction manufacturing fishing, forestry SECTOR GOVERNMENT POLICIES &PROGRAMS, INSTITUTIONS, INFRASTRUCTURE, MACRO INTERNAL STABILITY, RULE OF LAW,PEACE & ORDER, POLITICAL CLIMATE FACTORS UNDERLYING INNOVATION COMPETITION PRODUCTIVITY FRAMEWOK Entrepreneurship • Innovation is at the heart of the PH Industrial Strategy - Innovation is an important ingredient for long-run growth - Globalization, ASEAN integration, Industry 4.0, competition increases, role of innovation is crucial 6
Inclusive Innovation Industrial Strategy i 3 S w Integrating PH industries, Closing value/supply chain gaps Overall Goal: globally competitive & innovative industries • Growth oriented action to upgrade industries SUSTAINABLE INCLUSIVE • Remove obstacles to growth attract investments • Build inclusive innovation ecosystem INNOVATION- LED • Strengthen domestic supply chains • Deepen participation in global value chains INDUSTRIAL STRATEGY Role of Government: Enabler & facilitator • Address coordination & market failures -- the most • Global Value Chain-focused binding constraints preventing industries from growing • INNOVATION & • Create proper environment for private sector development ENTREPRENEURSHIP-centered • Industry cluster-based
Building new industries, clusters, agglomeration Inclusive Innovation Industrial Strategy Capacity building Government HRD i 3 SFive Major Pillars Strategic Actions w Industry Innovation Entrepreneurship Academe MSME growth, development Ease of doing business Investment environment
Five Major Pillars and Strategic Actions • Address supply/value chain gaps; Expand domestic market, Building new industries, attain economies of scale, export hubs; investment clusters agglomeration promotion; incentives; domestic ecozones • HRD, training programs to improve skills; tie-ups with Capacity building, HRD universities & training institutions • Link government, academe, & industry; strengthen Innovation, collaboration towards market oriented research; R&D Entrepreneurship incentives; shared facilities • 7Ms: mindset, mastery, mentoring, money, machine, MSME Growth & market, models; SSFs; access to finance & technology; Development linking with large enterprises • Address corruption, smuggling, bureaucratic practices, Ease of doing business, streamlining, automation, single mechanism for investment environment coordinating registration, permits
PH Inclusive Innovation-led Industrial Strategy: Top 12 Priorities • Complex regulations Auto & Auto Parts Electrical & Opportunities Chemicals Shipbuilding • High cost of Aerospace Electronics RORO power Parts • New high level • Lack of ports, growth trajectory airports, roads • Growing market, • SME access middle class to finance • Political stability • Supply chain • Young, English Tourism Furniture, gaps speaking Garments, Creative workforce • Stable business Challenges confidence • AEC & FTAs Transport & Logistics Tool & Die Iron & Steel Agri-business IT Business Process Management, Construction E-Commerce S K I L L S T R A I N I N G , H R D , N E W I N D U S T R I A L P O L I C Y, B O L D E R T R A D E P O L I C Y I N N O V AT I O N & R & D , G R E E N G R O W T H , I N C R E A S E I N F R A S T R U C T U R E S P E N D I N G , M S M E D E V E L O P M E N T I N T E N S E I N V E S T M E N T P R O M O T I O N
Connecting Industries AUTO: The future prospects of the industry remains bright 500000 50 450000 Vehicle Sales 40 400000 30 350000 20 300000 10 250000 0 Total 200000 -10 Industry Growth 150000 -20 100000 -30 50000 -40 0 -50 • Sales reached 400K units in 2016 (4x the sales a decade ago) and grew by 24% • 3rd wave of motorization already taking place - PH: high population with low vehicle ownership, motorization rate in 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% • Rising trend is expected to continue as PH high growth trajectory is sustained: 1 M by 2027
Electronics: PH largest source of exports • Electronics: 51% of total Electronics Exports vs. Total Exports 1991-2016 exports in 2016 ($29B) 80 70 • 50% of total exports in the 60 first half of 2017 ($15B) 50 • Average growth in the 40 30 2000s: 2%; 1990s: 37% 20 • Semiconductor 10 components/devices 0 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 comprise the bulk of electronics exports STRUCTURE OF ELECTRONIC COMPONENTS: % Share 90.00 o 2015-2016: 72% share AUTOMOTIVE ELECTRONICS 80.00 o Jan-June 2017: 71.53 COMMUNICATION RADAR 70.00 COMPONENTS/DEVICES (SEMICONDUCTORS) growth 60.00 CONSUMER ELECTRONICS 50.00 • Auto electronics, consumer CONTROL & INSTRUMENTATION 40.00 ELECTRONIC DATA PROCESSING 30.00 electronics, medical, MEDICAL/INDUSTRIAL INSTRUMENTATION 20.00 telecommunications OFFICE EQUIPMENT 10.00 TELECOMMUNICATION 0.00 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
IT-Business Process Management: Current State & Key trends Revenue by Sector: 2016 Revenue & Employment Performance Animation & 1600 25 Game Development 0 1400 20 Contact Center & 1200 BPO Employment 20 1000 15 800 IT Services 10 600 11 56 400 5 Healthcare 200 13 Information 0 0 Management 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Global In-House Revenue (US$B) 3.4 4.5 6.1 7.1 8.9 11 13.2 16.1 18.9 20.5 22.9 Centers Employment('000) 236 298 371 424 527 640 777 917 1071 1200 1345 • In the past 10 years, PH has become a strong participant in the IT-BPM GVC • In voice BPM, PH is #1 destination for voice related services • PH is rapidly growing its capability for non-voice IT-BPM services • Industry revenue forecast for 2022: annual growth of 9.2% & US$38.9B in 2022 • Employment: from 1.15M in ‘16 to 1.8M in ‘22 (more technology-enabled high value jobs) • Slower growth: maturing sector & anticipated impact of technology
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