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Regional Manufacturing in the Philippines

Regional Manufacturing in the Philippines

We’ve written a lot about the resurgence of the Philippine manufacturing sector, as well as the different manufacturing sub-sectors in the country. A recent trip to Davao made me think about how the regions of the Philippines contributed to the national growth of manufacturing. Using three sets of data, the attached bubble chart shows each of the 16 regions in the Philippines in terms of size (using manufacturing value added, MVA), growth rate (between 2011 and 2013) and manufacturing’s share of regional GDP. Each region tells a different story, here’s how interpret some of them…

Region 4A, is by far the largest manufacturing region in the Philippines, hosting some of the largest export zones in the country, with electronics and semi-conductor as the leading sub-sector, but this region is really more diversified than it seems. They include machineries, motor vehicle and parts manfacturing, metal products, chemicals, plastics, food products, beverage, tobacco and so much more. In 2013, total manufacturing value added in Region 4A, at current prices, reached Php 948 billion. Manufacturing is the largest sector in the region, with a 53% share of its GDP. However, Region 4A’s manufacturing sector is growing at a slow rate of 4%. It’s important to understand the region’s growth constraints. Is it the weak export market, lack of new zones to host additional investments, or lack of manpower. It is critical to unlock these constraints given that region 4A is the largest, and probably the most complex and sophisticated manufacturing region in the country.

National Capital Region (NCR) is the second largest manufacturing region, with total MVA reaching Php 485 billion in 2013. It is only half of the total manufacturing output of Region 4A, but NCR turned out to be the fastest growing manufacturer in the country with an annual growth rate of 19%. NCR plays host for most of the central offices of companies in the Philippines, so this number may actual reflect activities not confined to NCR alone, yet NCR continues to have many manufacturers in Quezon City, Manila, Caloocan, Valenzuela,  Pasig and Muntinlupa. I find Valenzuela City particularly interesting as it hosts thousands of small, medium and large scale companies forming a complex value chain all in close proximity.

Central Luzon is the 3rd largest manufacturing region, host to a wide range of local and foreign manufacturers, to serve the large and growing domestic market, as well as export from two major economic zones, Clark and Subic. There are significant manufacturing activities in Bulacan and Pampanga as companies expand beyond Metro Manila, and Bataan hosts heavy industries like oil refining and petrochemicals.  However Central Luzon is growing very slow in the time period of 2011-2013, with a growth rate of only 1%.

Regions to watch are the rapidly growing regions of the Zamboanga Peninsula, Davao Region, Western Visayas, all growing at 15% or more. Next set of regions, growing at around 10% are Sockssargen, Northern Mindanao and Central Visayas.

Eastern Visayas, which was affected by Typhoon Haiyan/Yolanda will need sometime to resume growth. CAR, with a more concentrated group of manufacturing companies in its region is also experiencing negative growth for the moment.

There are a number of regions with very little manufacturing. While Ilocos has a significant economy, only 5% comes from manufacturing. Likewise, Bicol Region’s manufacturing only has 3% share of its economy. There’s a few more regions with negligible manufacturing. But for inclusive growth, we need to think about how to engage these regions in the fastest growing sector of the Philippines.

In our next post, we’ll be talking about Davao, which in my opinion, is poised for rapid manufacturing growth.

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