The following article was published in Business World - August 6, 2013 Eliminate, Simplify, Integrate BY JOVY J. JADER Manufacturing: The key to sustainable growth Is manufacturing the key to sustainable growth? Karen Joyce Ang, in “The call to revive manufacturing,” a May 2013 article in BusinessWorld’s Popular Economics, wrote that manufacturing is a large job generator as it creates not only industrial employment but fuels growth in the non-manufacturing sector as well. However, in the past four decades, manufacturing’s share of domestic output has dropped. She opined that the sector has been “neglected.” In the United States, efforts are made to revive the manufacturing sector to spur economic activities to create employment. Re-shoring, or bringing back manufacturing activities in the US from low-labor rate countries, is one initiative to generate more employment. On the local front, Norio Usui of Asian Development Bank, during his talk at The Philippine Manufacturers and Producers Summit held on Nov. 11, 2011, emphasized the role of the manufacturing sector in the country’s ability to drive sustainable growth. His assessment shows that the Philippines’ growth has been largely led by services, characterized by stagnant industrialization and limited job opportunities. Professor Benjamin Diokno, in his column, questioned the government’s lack of priority on the manufacturing sector. He emphasized that manufacturing, whose share to total economic output is almost twice that of agriculture, is and could be a major contributor to job creation. Mr. Diokno also cited the Philippine challenge vis-à-vis our ASEAN neighbors in a column published in March this year: “[The government] has to fix many constraints to growth: strong peso, poor infrastructure including inadequate, costly and unreliable power supply, and high costs of doing business.” Except for the strong peso, these constraints are not new. Several years ago, I did a facilities site selection study for a multinational firm where the Philippines was among the more than 10 probable plant sites in Asia. The CEO almost fell from his seat in astonishment when I cited the long and unpredictable travel time from Manila Port to Batangas, which is just about 50 to 60 kilometers away from each other. Another issue then was the rate of minimum wage increases relative to our ASEAN neighbors. While the Philippine labor wage rate may be lower than some countries, the year-to-year increases are expected to bring labor costs higher than those of most Asian nations in a few years, if the costs here are not steeper already. This does not mean that the Philippines does not have any semblance of competitive advantage. In my more than 20 years in the manufacturing sector, I witnessed a multinational company set up a manufacturing plant in the Philippines because of higher productivity by Filipino workers. A firm in Baguio City that produces high-quality aviation parts expanded their operations, which resulted in more employment from the local labor force. A major furniture exporter decided to maintain operations in Cebu City because of its continuing confidence in Philippine management talent and skilled labor. And another domestic exporter just outside Manila continues to find ways to improve its operations to sustain competitive exports of handmade products to Europe and North America. The Philippines has what I would call “pockets of manufacturing excellence.” Despite all the constraints, there are not a few Philippine-based companies that manage to excel in the world arena and continue to reap praises from global customers and consumers. It is fair to say that the government and private sectors are active in increasing the competitiveness of the manufacturing sector. The Philippine Economic Zone Authority and the Department of Trade and Industry have programs and initiatives in place. Various manufacturers’ and producers’ organizations such as the Production and Operations Management Association of the Philippines and the Federation of Philippine Industries seek better ways to maintain the viability of the manufacturing sector. What might be lacking, however, is a more coordinated effort from the different stakeholders to have a comprehensive manufacturing strategy and direction. Perhaps the time is ripe to create a Department of Manufacturing to consolidate and harness the efforts of the different sectors. A Department of Manufacturing solely focused on this vital industrial sector, whose main task is to increase manufacturing contribution to GDP, increase employment, and create sustainable growth, might be the right catalyst to spur the country’s economic growth as well as its attractiveness to global industry. Jovy Jader is a consultant and regional speaker on supply chain management. He has directed and implemented supply chain management projects both local and international, which have resulted to company-wide improvements in inventory, total cost, response time, quality, and on-time delivery. Mr. Jader was formerly with Procter & Gamble Philippines and Coopers & Lybrand/PricewaterhouseCoopers. Should you have questions or comments e-mail to jovy@highimpactasia.
Posted on: Mon, 02 Sep 2013 01:57:44 +0000
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