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Government measures to spur manufacturing recovery in 2018

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The government will aggressively implement measures to ensure the recovery of manufacturing this year, the National Economic and Development Authority said, as it notes the four-month decline of manufacturing from September to December 2017.

In the Monthly Integrated Survey of Selected Industries (MISSI), the Philippine Statistics Authority reported that the Volume of Production Index (VoPI) for manufacturing contracted by 9.7 percent in December 2017, a reversal from the 21.7 percent growth in the previous year.

The Value of Production Index (VaPI), likewise decreased by 10.3 percent, resulting in the year-to-date growth of VoPI and VaPI by 0.4 and -0.5 percent, respectively.

“The recent declines in manufacturing are a cause for concern but we are also fully aware of the opportunities that lie ahead: robust domestic consumption demand, increased demand from government, and government’s resolve to improve the ease of doing business,” Socioeconomic Planning Secretary Ernesto M. Pernia said.

“With the higher take home pay of around 99 percent of Filipino income taxpayers because of the TRAIN law, household consumption will likely increase,” Pernia said, referring to the recently passed Tax Reform Acceleration and Inclusion (TRAIN) law.

He added that the continuous roll out of infrastructure projects and programmed increase in social spending, among others, will also increase domestic demand for manufactured goods.

“To enable the manufacturing sector to take advantage of the increased demand, the government will continue to pursue policy reforms to facilitate business transactions,” Pernia said.

However, the NEDA chief said that the government must remain cautious on the short-term upward inflationary impact of TRAIN as this may largely affect the cost of production, particularly of those energy-intensive manufacturing firms.

“Inflationary pressures, higher global raw material costs, and peso depreciation will continue to be a challenge to the sector’s growth,” Pernia added.

To support the growth of manufacturing, Pernia said local suppliers of raw materials and intermediate goods, especially the small and medium enterprises (SMEs), must enhance their production capacity so that they can meet the expected higher domestic demand and recovering external demand. This can be done by expanding technology diffusion programs such as the Small Enterprise Technology Upgrading Program and the Shared Service Facility Project.

Pernia also said it is important to construct road networks and rehabilitate damaged roads for linking sources of raw materials and intermediate goods to processing sites.

“In terms of expanding market reach, we are continually pushing for the National Single Window and integrate it with the ASEAN Single Window. This will effectively reduce the cost of doing business,” he added.

Pernia likewise emphasized the need to encourage competition in telecommunications by easing or lifting relevant restrictions on foreign participation. “Fast, reliable, and affordable internet services are needed for efficient business transactions and government services online,’ the NEDA chief said.

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