AMONG the hundreds of government agencies that make up the bureaucracy, the Department of Trade and Industry (DTI) carries significant weight as its every move has a direct effect on our people.
Not only is the DTI responsible for generating investments, jobs and business opportunities, it also plays a key role in laying down policies to make local industries more competitive. All these, while protecting consumer rights and intellectual properties.
One of the best moves President Duterte has done was to put partisan politics aside when naming his economic team. The appointment of Ramon M. Lopez as secretary at the DTI along with Sonny Dominguez, Ben Diokno and Ernie Pernia of the Departments of Finance, Budget and Management and NEDA, respectively, have been crucial in keeping business confidence on an even keel despite unrelenting political noise.
I’ve worked with Mon Lopez back in the ’90s when he was still a top executive of RFM Corp. Even then, he was competent, wise beyond his years, and above all, humble. He is a fellow economist, a product of UP and Williams College in the US. I always looked forward to meeting Mon as his optimism and patriotic streak were infectious. Despite the poor performance of the economy back then, Mon would always find the lessons to be learned and the silver lining to it all. Before RFM, Mon served in government as member of the Presidential Management staff and NEDA.
It’s no secret that I have criticized some of political policies of this administration. I have called it out on its foreign policy, particularly towards China’s territorial encroachment, the bullying tactics of the Department of Justice and Malacañang’s inaction towards Speaker Alvarez’s interference in the infrastructure program. However, credit must be given where it is due.
On its first anniversary in office, the DTI, under Secretary Mon Lopez’s, has met expectations. It has delivered results where it is needed most — particularly, in generating foreign direct investments (FDI’s) and jobs, widening our manufacturing base and empowering micro, small, and medium sized enterprises (MSMEs).
ON FDI’S AND COMPETITIVENESS
On the back of favorable economic fundamentals coupled with the promise of tax reform and constitutional amendments relating to foreign investments, the DTI received a whopping 1,108 investments missions last year. Investor interest went beyond IT-BPOs, but also in the realms of manufacturing, agribusiness, infrastructure & engineering, and property development. Interestingly, the missions were no longer composed of the usual suspects — the Japanese, Koreans, Taiwanese and Americans; strong interest was palpable among the Russians, Canadians, Qataris, Chinese, and Europeans as well.
From January to April, approved investments for new and expansion projects reached $4.95B from the Board of Investments and Philippine Export Processing Zone. This was a 14% more than the value of projects last year. Collectively, 74,000 new jobs were created.
On a national level, FDI’s topped $1.560 billion in the first quarter, a 17 % increase from the same period last year. While this pales in comparison to Vietnam’s $7.23 billion and Indonesia’s $7.71 billion, there is a strong likelihood that an investment windfall is heading our way given the commitments generated by the President’s recent trips abroad. In the pipeline are $29 billion worth of projects from China, Japan, Thailand, Saudi Arabia, Bahrain, Qatar and Russia.
The Philippines is now on the radar of multinational corporations having been named the 11th most attractive investment destination worldwide. This is the first time we broke into the magic fifteen. It must be said, however, that there is a lot of room for improvement, particularly in terms of ease in doing business.
The Philippines dropped eight places in the latest “Ease in Doing Business Report” conducted by the World Bank. We are now at 99th position, the lowest among ASEAN’s six largest economies.
Last year, 25 government agencies slashed hundreds of redundant procedures relating to business permits. It is still not enough. Computerization is the name of the game and unless permits can be facilitated with a flick of a cursor, an improvement in our standing will continue to elude us.
The good news is that the Department of Information, Communications and Technology along with the DTI’s National Competitive Council is spearheading a project called the Inter-Agency Business Processing Interoperability Program (IABP). The intent of the IABP is to allow businessmen to obtain and renew permits across 55 agencies through the Internet. It will take two years before the IABP can be rolled-out.
On the downside, an issue that requires the DTI’s urgent intervention is the state of our IT-BPO Industry. Records show that from January to May, PEZA-approved investments contracted by 35% to P7.08 billion, from P10.88 billion last year. The number of projects approved also dwindled from 103 to 87. This is due to the looming withdrawal of VAT exemption on the industry. While the effect on BPO cost structures should be minimal what with the eligibility to claim VAT refunds, the move nevertheless erodes Philippine competitiveness in the IT-BPO space.
The IT-BPO industry is a strong leg of the economy contributing nearly 10% of GDP and 1.3 million jobs. We simply cannot afford to rock the boat given what is at stake. I spoke to Sec. Lopez about this a few weeks ago and expressed my strong sentiments on the plan. I would rather see stiffer excise taxes on consumer goods rather than erode the competitiveness of an industry that generates the most jobs for our people. There is still time for the DTI to reconsider its stance on the plan. I’m hoping the good secretary doesn’t relent and fights to keep BPO industry thriving and competitive.
MANUFACTURING RESURGENCE
One thing I appreciate about Sec. Lopez is that he is not one to cancel a perfectly good program just because it was initiated by the past administration. This says a lot about his character.
Under the watch of former DTI Secretary Greg Domingo, the DTI completed the country’s revised comprehensive national industrial strategy. At the heart of it is crafting development road maps for specific industries. These road maps provide the framework and the chronological steps in which to take certain industries from its current state to a level of global competitiveness. At the moment, more than 50 industry road maps have been drafted.
Sec. Lopez has taken the national industrial strategy to higher gear by closing the gaps in supply chains and expanding export markets for Philippine manufacturers. The goal is to align Philippine-made products with the supply chains of international production networks.
Sec. Lopez has also set a goal of achieving a 30% value-added for locally manufactured products, 7% more than its current level. Value added on Philippine made goods have been on a decline since its peak of 28.2% in the ’70s. This is because we import most of our raw materials.
The manufacturing sector has grown by 7% across all subsectors, dispelling doubts that a resurgence is upon us. This provides relief to the 13.5 million agricultural families who are finding it increasingly difficult to eke out a living in traditional agriculture. The manufacturing sector is where farmers migrate for higher paying jobs. Last year, new factories provided jobs for 5% more of the work force than it did last year. The average worker earns 57% more in manufacturing than they do in agriculture.
The DTI has also made great strides in empowering MSMEs what with programs like Kapatid Mentorship, Shared Services Facilities, Go Lokal and Pondo sa Pagbabago at Pag Asenso. MSME’s have always been close to the secretary’s heart given his 11 year involvement with the advocacy group, Go Negosyo. For lack of space, I will reserve the details of DTI’s MSME program for another time. Suffice to say that it has assisted more than 111,000 enterprises get their business started and/or level up.
All in all, I reckon that the DTI has not disappointed on its first year. This time in 2018, I hope to report of a DTI growing from strength to strength in terms of investments, jobs and manufacturing resurgence. — By Andrew J. Masigan
Andrew J. Masigan is an economist.
