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Status of Manufacturing

10 surprising facts about the Philippine manufacturing sector

The rapid growth of the services sector has diverted our attention from the manufacturing sector. Mistakenly dismissed as a dying and uncompetitive sector, there are many misconceptions about its significant contribution to the economy. Fortunately, there is renewed interest in this sector as policy makers search for new sources of growth after the global financial crisis. To sustain our renewed interest and understanding of its strategic significance to the economy and to our future, it’s important that the state of manufacturing be assessed with a wider set of metrics and perspectives. So here are some interesting and surprising facts about the manufacturing sector that may help policy makers, businessmen, workers and consumers understand that we have a robust, diverse and viable sector poised for rapid growth given the right industrial policies, investments and public support.

1.     Manufacturing is still the largest sector of the Philippine economy at 21% of GDP.
Here’s a breakdown of Philippines GDP from NSCB 2010 National Accounts: Agriculture and fishing 12%, Forestry 0%, Mining & Quarrying 1%, Manufacturing 21%, Construction 6%, Electricity, Gas and Water Supply 3%, Transport., Stor., and Comm. 6.5%, Trade and Repair of Motor Vehicles, Motorcycles, Personal and Household Goods, 17.4%, Financial Intermediation 7%,R. Estate Renting & Bus. Actvt 11%, Public Administration & Defense 4%, Other Services 1%. Source: NSCB.

2.     Manufacturing generates the most revenue, reaching Php 3.4 trillion pesos in 2009.

Manufacturing generates the largest revenues among all the sectors in the Philippines. Based on the National Statistics Office’s 2009 Annual Survey of Philippine Business and Industry (ASPBI).

3.     Manufacturing is growing, at average of 9% per annum in the last 13 years.
Contrary to popular opinion, manufacturing is not declining in the Philippines, in fact it’s been growing at nearly double digits rates for a long time.  Based on gross value added at current prices, it grew an average of 9% from 1998 to 2011. Calculated from National Accounts of the Philippines. Source: NSCB.

4.     The Philippines ranks #20 out of 120 countries in terms of manufacturing’s share of GDP.
Based on UNIDO Industrial Statistical database, at 21% of GDP puts the Philippines at number 20 out of 120 countries. In term UNIDO’s Competitive Industrial Performance, the Philippines ranks #33 out of 120 countries. Source UN Statistics.

5.     As a % of GDP, Philippines manufacturing ranks higher than that of Japan, Italy, Canada, US and UK,  Brazil, Russia, India.
The same UNIDO database shows that the share of manufacturing in the Philippines is higher than many OECD countries and higher than BRIC Countries except China. Source: UN Statistics.

6.     100% foreign ownership is allowed for manufacturing….except for the publishing subsector.
The are restrictions to foreign ownership to certain sectors of the economy, but nearly all of the manufacturing activities in the Philippines allows 100% foreign ownership except for a handful of subsectors like publishing. Source: BOI.

7.     Manufacturing accounts for 85% of all our exports.
Philippine exports are highly dependent on the manufacturing sector since most of Philippines exports are manufactured products. In 2012, 85% are from the manufacturing sector, last year it was 82% and in 2010 it was 86%. Agro, mineral and petroleum contribution still remains limited. In can be argued that the Philippines converts her natural resources to higher value manufactured products, but this is really not the case. Instead there are self imposed constraints preventing the country from harnessing its own natural resources.Source: NSO.

8.     Manufacturing accounts for the majority of registered FDIs in the Philippines.
Manufacturing has been the largest contribution to foreign and domestic investments. In terms of value, manufacturing accounted for 86% of all registered foreign direct investments in 2010. In 2011 it was 55%. In fact, it represents 38% of total investments in the last 10 years. Source: NSCB and BOI.

9.     Philippine manufacturing is quite diversified, with non-hi tech sectors gaining share.
While semiconductors and electronics dominate our export, we actually produce a wide range of products and the non-hi tech sector has been growing rapidly. Food manufacturing has the largest share, followed by semiconductors and electronics, chemicals and petroleum products. Based on NSO’s ASPBI 2009 and NSCB National accounts.

10.  While electricity prices are high, electricity accounts for an average of only of 4.8% of total production cost in the Philippines.
Electricity cost in the Philippines is known to be very high, as they say next only to Japan. However, such comparisons are usually based on residential rates, not industrial rates which can be significantly lower. Furthermore, not all manufacturing activities require a lot of electricity, this ranges from a high of 45% to a low of less than 1% of total cost. So the average of 4.8% of total production cost is in fact not far from the Other Services sector which is at 3.8% of total cost.  Mining is at 7.7%.  This was based on ADB Senior Economist Dr. Norio Usui’s calculations from the Philippine I/O table.

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