Thanks to Manny Lopez for taking the lead in organizing today’s UP Leadership Forum and for inviting me to be as speaker.
In my talk this morning, I will present the key points of DTI’s industrialization strategy for the next six years. This plan is aimed at supporting the current administration’s efforts to achieve an all-inclusive economic transformation of our country.
As the country enters the post-pandemic future, implementing an inclusive, sustainable, and resilient industrial policy is imperative to build a more competitive economy. Through science, technology, and innovation (or STI) and the use of essential digital technologies, industries will be in a better position to face competition in both domestic and export markets and pave the way for industrial transformation.
We view the adoption of new technologies as a way to promote innovation. Innovation leads to the creation of new products and services in the market resulting in quality jobs, that is, more stable and higher-paying jobs. Innovation also results in the emergence of new industries and the production of environmental goods. Through smart manufacturing, for instance, production efficiency improves, leading to more efficient energy use, industrial competitiveness, and the creation of linkages to supporting industries in the supply chains. The use of science, new technologies and innovation is a crucial step to upgrading our industries toward a more inclusive and sustainable industrial development. The same wave of technologies will help our industries in transitioning toward a rapid and resilient economic recovery
The goal is to grow and develop globally competitive and innovative industries that support inclusive growth and improved environmental sustainability and quality of life for Filipinos.
To achieve the goal, we will build a dynamic industry ecosystem on six pillars. Correspondingly, we will pursue six strategic actions that require a whole of government and a whole of society approach. Thus, we will need to collaborate with other government agencies, industry, academe, and other stakeholder partners.
The first strategic action is to embrace Industry 4.0.
The Fourth Industrial Revolution brings unprecedented change. It is merging our biological, physical, and digital worlds. And it is shifting our approach to developing our economies. Industry 4.0 technologies such as artificial intelligence (AI) and smart manufacturing can help improve enterprises and industries and increase the share of STI-intensive sectors to our country’s GDP.
The second strategic action is to develop innovative micro, small, and medium enterprises (MSMEs), as well as entrepreneurial startups.
This strategy will involve accelerating MSMEs’ growth by enabling them to scale up from micro to small, from small to medium, and from medium to large. We will develop MSMEs prepare for digital transformation.
For new, promising entrepreneurs, we are building a robust startup ecosystem.
The third strategy is to integrate trade, investment promotion, and industry development policies.
We will integrate our production systems for instance, by linking, for instance, by linking manufacturing, agriculture, and services; by deepening GVC participation; by pursuing a more aggressive trade and investment policy; by expanding and diversifying our exports, trade, and investment partners.
The fourth strategic action is to develop capacity-building and human capital programs to prepare the workforce for future production.
While many jobs will be lost as a result of automation, new jobs will emerge through the adoption of technologies that will increase worker productivity. Tapping these benefits would require increasing investments in skills development along with greater efforts by companies themselves to upskill their workforce to perform new and higher order roles complementary with machines. Current systems of learning and signaling job-fit are not enough to provide the agility that lifelong learners will require hence the need to shift to a skills-based system that can provide more efficient mechanisms.
The fifth strategic action is to promote regional industrialization through innovation and entrepreneurship.
To be responsive to nuances in the country’s regional growth, we know all about these inequalities of our various regions. One direction is to support regions and urban centers to specialize where they have the most competitive advantage.
In focusing our efforts on regional industrial transformation, we aim to use STI and entrepreneurship as means, for example, to modernize our agro-industrial activities.
The sixth strategic action is to create and foster an enabling economic environment to attract more investment.
This action entails policies that attract investors and entrepreneurs to the Philippines. Aside from rationalizing regulations, it would also cover building competitive physical and digital infrastructure. Doing so reduces the cost of doing business and attracts more investments.
Let me know discuss with you our priority industry clusters.
Manufacturing is the country’s guarantee of sustainable and inclusive growth because it provides more stable and higher paying jobs. DTI will lead in positioning the manufacturing sector for success and link it with agriculture and services, especially the creative industries, research and development activities, IT-business process and knowledge process outsourcing, software development, and the digital economy in which the country possesses strategic advantages.
Leveraging on the Fourth Industrial Revolution technologies and our existing industrial strengths and competencies, we will leapfrog into new and emerging industries by (i) modernizing our manufacturing base, (ii) implementing our innovation and digital transformation plans towards manufacturing, agriculture, and services development, and (iii) upgrading our participation in the global technological platforms.
Given the changes in consumer trends and with the acceleration of the adoption of new technologies in the last two years of the pandemic, the following four industry clusters are seen as potential sources of growth for our country: (i) the Industrial, Manufacturing and Transport (IMT) cluster, (ii) the Technology, Media and Telecommunication (TMT) cluster, (iii) the Health and Life Science (HLS) cluster, and (iv) the Modern Basic Needs, Resilient Economy cluster. The first three clusters are currently undergoing global reconfiguration and provide an opportunity for the Philippines to upgrade, diversify and reposition its global value chain participation.
The first cluster—Industrial, Manufacturing, and Transport or IMT—includes aerospace; electric vehicles; advanced electronics chips and products; semiconductors; and advanced manufacturing technologies, among others.
In terms of aerospace, the Philippines already hosts the number one aircraft interiors company in the world, Collins Aerospace; and the world’s leading aircraft maintenance, repair, and overhaul company, Lufthansa Technik.
We expect more developments in this area. For instance, just two weeks ago, I attended Lufthansa’s expanded operation in the recent opening of Hangar 1A at the Macroasia Special Economic Zone in Villamor Airbase.
In the automotive global value chain, we expect a shift—as compelled by climate change—from combustion engines to electric vehicles or EVs. As automotive companies shift to all-EV manufacturing, DTI is keen to help promote EVs.
We have the Electric Vehicle Industry Development Act or EVIDA. EVIDA provides for the Electric Vehicle Incentive Strategy, which can offer targeted incentives to EV model and parts manufacturers in the country.
DTI, with the assistance from UNIDO, will also implement a 3.8-million US dollar project, deploying EV and charging infrastructure to key cities from 2022 to 2027. The project will further provide technical assistance to national and local governments as they enhance their EV environment.
The semiconductor industry—which remains one of our largest export industries—has produced semiconductor devices manufactured from materials on consignment basis. The industry can gain more from increasing skills in R&D, which can improve business for firms in Outsourced Semiconductor Assembly and Test.
Across these IMT subsectors that I have discussed, the common thread is that the electronics and electrical parts that are part now of the global value chains.
One more point under IMT. Mineral processing is crucial given our resources of green metals such as nickel, copper, and cobalt that can be used for downstream industries such as EV battery manufacturing, wiring harness production, hyperscaler data centers, and renewable energy projects. These could serve as key inputs for production and manufacture of technology products. The Philippines can be a vital partner for these critical minerals not only as exporter of raw ores, which is what is happening now, but as processor and producer of semi-finished and finished products. We have a model to copy, Indonesia has done it and are reaping the benefits.
The second cluster—Technology, Media, and Telecommunications or TMT—includes IT-BPM; hyperscale data centers; the digital economy; and products using AI, robotics, 5G, and Internet of Things.
In the BPO sector, the next decade will witness the BPO segment as a cross-cutting contributor to the competitiveness and efficiency of the global value chains it supports. From cost saving, it will shift to value addition. With 82% of BPOs and shared services centers in the Philippines serving global markets, this becomes a positive area for leverage. We hope that by taking advantage of these developments, we can be more active in the TMT global value chain.
With the pandemic, interest in data centers has also increased around the world. Our country’s strong BPO track record, future of work programs, and hyperscale roadmap are drawing the attention of hyperscalers that seek to expand geographically. We are prioritizing data centers and hyperscalers in our investment promotion campaign, “Make It Happen in the Philippines.” And we consider the sector as the next engine of growth for the country.
Last July, we also launched the PLDT Jupiter Cable System. This subsea cable system will serve as an added superhighway for digital data, and further attract hyperscalers into the country.
The third cluster—Health and Life Science or HLS—plays a strategic role with the COVID-19 pandemic at the root of the current global economic distress and as the turning point for recovery.
The cluster includes pharmaceuticals; biotechnology; medical devices; and digital health products and services.
Our goal is to make the Philippines self-sufficient in pharmaceuticals, as well as relevant and related areas such as healthcare services and therapeutic systems.
Over the next decade, multinational companies will aim to manufacture medicines faster and cheaper. The sector will also witness smaller, more agile pharmaceutical companies taking a more critical role in bringing medicines, including generics, to the market. As pharmaceuticals, medical devices, and healthcare services become more integrated, this facilitates the emergence of an HLS cluster in the Philippines.
Finally, the fourth cluster: modern basic needs and resilient economy. This cluster refers to modern basic needs such as food, shelter, infrastructure, education along with activities that foster economic resilience. Given the need to pursue food security and modernize our agricultural and fishing sector along with other goals such as quality education, clean water and sanitation, and affordable and clean energy; these activities offer opportunities for new investments to support the country’s economic recovery and long-term sustainable and inclusive growth.
Let me now talk of two important innovation facilities that DTI is establishing soon. Aligned with our STI-driven thrust, we are establishing the Center for Artificial Intelligence Research (or CAIR). CAIR is among our initiatives to make the Philippines an AI Center of Excellence. At present, the Philippines already hosts more than 50 tech startups that use AI as their core technology.
CAIR will be instrumental in boosting AI’s contribution to the economy. With the support of our private sector partners, which are among the largest conglomerates in our country, CAIR will be a hub where data scientists and researchers can perform collaborative AI R&D. The R&D can then lead to the development of AI products and services, provide AI training programs, and support the digital transformation of industries.
Complementary to the CAIR, we are establishing an Industry 4.0 Pilot Factory, that will host pilot, demonstration, and learning laboratories for relevant technologies. These include robotics, intelligent manufacturing, and cyber-physical systems.
This Pilot Factory will further serve as a hub for cutting-edge technologies and solutions, a space where MSMEs, researchers, and universities will have hands-on lessons on robotics, automation, and smart factory, among others.
Aside from providing a learning and co-working space, the Pilot Factory can serve as prototyping sandbox and as a platform to showcase use-cases of products.
Siemens of Germany is helping us put up this Pilot Factory. When I was in Singapore the past two days, I had the opportunity to visit the exactly the type facility of Siemens in Singapore so I know what to expect and how to organize it here in the Philippines. I am also scheduled to visit the main Pilot Factory in Germany when I go for discussion in the European Union. And we expect the host hub to be inaugurated very soon. These two facilities will be co-located in an innovation hub in the UnionBank Innovation Campus, which we inaugurated with the President, in San Pedro Laguna, helping to diffuse innovations beyond Metro Manila.
In embracing Industry 4.0, we aim not just to transform our industries. We seek to enable MSMEs, too, so that they can upscale and adapt to digital transformation. By embracing digital transformation, MSMEs can operate efficiently, reduce costs, and earn profits.
DTI will initiate and onboard MSMEs to e-commerce using a platform that DTI will soon launch in collaboration with the Department of Information and Communications Technology, or DICT. We have here the Usec of DICT David Almirol, he’s our direct partner in putting up this e-commerce platform, which has special functions that will enable the initiation and incubation of MSMEs in their preparation for onboarding to an e-commerce platform and eventually up or down to more commercial e-commerce platforms like the ones we know.
In the work toward the development of our industries, upscaling of MSMEs, and promoting trade and investment beyond our shores, we cannot forget that our goal is shared prosperity. This means that we have to help ensure the development of our regions.
We have established Regional Inclusive Innovation Centers or RIICs. RIICs connect innovation agents and other stakeholders in the regions. Together, they can advance innovation and entrepreneurship to drive regional industrialization. My dream when I was UP President was to facilitate the consolidation of SUCs in the different parts of our country into regional universities that will be the knowledge hub in each of our regions in the country.
In closing, let me say that through DTI’s new STI-centered industrialization plan, we hope to accelerate the development of globally competitive and innovative industries that have strong linkages to domestic and global value and supply chains. Such an ecosystem will enable the building of a robust and modern Philippine manufacturing sector that will serve as the engine of the country’s industrialization, create high-paying jobs, and accelerate poverty reduction. This will take some time, we hope we can do as much as we can in the six years of our administration.
Thank you and good morning to all.
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Date of Release: 10 September 2022