Recommendations (Manufacturing)
Headline Recommendations
- Increase priority given to manufacturing. Working with the private industry, the government should: (1) develop an industrial master plan, identifying the best opportunity sectors for the export of goods and services to global markets created by FTAs; (2) support the plan with consistent policies, fiscal incentives, legal, administrative, and other reforms; and (3) put a strong economic team in the cabinet that works in tandem with designated private sector leaders of the targeted global industries.
- Improve the business climate and level the playing field: (1) reduce the costs of doing business including electricity, transport infrastructure, domestic logistics, corruption, and red tape; (2) increase E2M coverage for customs; (3) professionalize the bureaucracy; (4) allow industry to operate free of government interference, such as price controls; (5) link minimum wage policies to productivity enhancements; (6) rationalize holidays; and (6)eliminate smuggling by sending smugglers to jail.
- Ramp up promotion of Philippine exports and investment: establish an export development fund to promote exports and investment; aggressively promote the Philippines at international trade fairs. Allow duty and tax-free importation of capital equipment.
Recommendations: (17)
A. The private sector should make a strong, collective statement to the government that reforms are needed for global manufacturing companies to remain in the country. The private sector should urge an end to corruption and smuggling, an end to inconsistent rules, and an end to tolerating “businessmen” circumventing laws to earn money. In the absence of reforms, more companies will close and more jobs and potential revenue will be lost. (Immediate action private sector)
B. The Philippines must be prepared to increase the priority given to manufacturing and to make serious efforts to offer a competitive business environment to be able to keep existing companies and to attract new investors into the country. (Immediate action DTI)
C. There should be a clear overall policy supportive of the manufacturing sector from the president. There should be high level, dynamic collaboration between priority industries and the government. There should be a solid commitment from all government agencies to implement such policy. (Immediate action OP and DTI)
D. Working with private industry, the next administration should: (1) develop an industrial master plan, identifying the best opportunity sectors for the export of goods and services to global markets created by FTAs; (2) support the plan with consistent policies, fiscal incentives, legal, administrative, and other reforms; and (3) put a strong economic team in the Cabinet that works in tandem with designated private sector leaders of the targeted global industries to implement the plan. (Immediate action DTI and private sector)
E. Professionalize the bureaucracy by limiting political appointees. Public officials dealing with priority industry sectors should be highly qualified and competitively compensated. They must create long-term consistency in regulation and policy and in their application to manufacturers. (Immediate action OP, DTI, and CSC)
F. Diversify Philippine exports by giving priority to developing manufacturing export sectors (in addition to electronics) where the Philippines enjoys competitive advantage, such as creative industry products, manufactured goods, minerals, and processed foods. (Medium-term action DENR, DOST, DTI, NEDA, and private sector)
G. Reduce costs of doing business, where possible, including corruption, high electricity prices, inefficient domestic logistics, holiday overtime pay, red tape, and inefficient transport infrastructure. (Medium-term action DOE, DOJ, DOTC, DTI, Ombudsman, and private sector)
H. Consider removing or reducing the EVAT on electricity and fuel for domestic manufacturers who can establish domestic market loss from foreign imported goods. This 12% tax is not applied to export manufacturing because the products would be less competitive in export markets. (Medium-term action DOF, DTI, and Congress)
I. Increase E2M coverage for customs. The E2M program should be applied to all customs offices. (Immediate action BOC)
J. Reduce unwarranted government interference in industry matters, such as price controls. Experience everywhere demonstrates that populist price control policies harm the intended beneficiaries more than they help. (Immediate action DOH, DOJ, DTI)
K. Link minimum wage policies to productivity enhancements. Study the experience of Malaysia in exempting key global industries from minimum wages. Resolve wage policies in tripartite discussions with labor groups, the private sector, and government and not by legislation. (Immediate action DOLE and private)
L. On the issue of labor contracting and security of tenure, government should continue to engage in tripartite discussions with labor groups and the private sector to address the issue of abuses in the law rather than adopt arbitrary legislation. Regularization of employees should not be made at the expense of meeting labor quality and productivity standards. Contractual arrangements, when they comply with the existing law, should meet both business and employee needs. (Immediate action DOLE and the private sector)
M. Rationalize holidays. (Medium-term action DTI, OP, and Congress) (See recommendations under BPO and Part 4 Business Costs)
N. Fight smuggling vigorously; send smugglers and corrupt officials engaged in smuggling to jail. End official protection of smuggling syndicates. The private sector should lobby strongly against smuggling, emphasizing that it destroys jobs. Identify Congressional allies in districts where smuggling is creating unemployment. Expose smuggling syndicates and their protectors. (Immediate action BOC, DOF, DOJ, Ombudsman, private sector)
O. Pass the Rationalization of Fiscal Incentives bill, maintaining incentives to stimulate investments that produce multiple benefits of job creation, exports, and technology transfer. The private sector should show strong support for the legislation in the Congress. (Immediate action DOF, DTI, Congress, and private sector)
P. Allow duty and VAT-free importation of capital equipment for manufacturing in priority industries. Revisit the 70% output to export requirement for capital equipment to be imported duty free. (Immediate action DOF and DTI)
Q. Increase funding for and promotion of Philippine exports, inward foreign investment, and tourism. Establish an Export Development Fund to promote exports. Aggressively promote the Philippines at international trade fairs as recommended by industry associations. Increase the DTI budget for investment promotion and the DOT budget for tourism promotion. Target the major traditional markets of Europe, Japan, and the US, and new markets in China and India. (Immediate action DOT, DTI and private sector)
