Steel Asia Manufacturing Corporation, one of the largest steel manufacturing companies in the Philippines, recently broke ground on new plants in the province of Quezon and Batangas.
The soon-to-rise steel wire-rod manufacturing facility in the town of Candelaria, Quezon Province, will occupy a 32-hectare land and could employ more than 1,500 workers.
Meanwhile, the two production lines of integrated steelmaking and steel section rolling in Lemery, Batangas Province—said to be the country’s first steel beams manufacturing plant—is expected to create 1,500 jobs and will have a multiplier effect that has the potential of creating thousands of additional jobs from various industries that will support the plant’s operations.
Benjamin Yao, who hails from Lucban, Quezon, and chair and chief executive officer of Steel Asia, relayed his firm’s gratitude for the cooperation and support of both the provincial and municipal governments for the steel manufacturing projects.
“The Province of Quezon, the Municipality of Candelaria and the barangay of Malabanban Sur will be home to the most precise, most efficient and most environmentally friendly wire-rod manufacturing facility in the world. This is something we should be proud of,” Yao said.
The wire-rod manufacturing facility in Quezon augurs well for the provincial development and investment, such as the toll way and road extension project, processing plants, and industrial parks, amongst others.
Lemery Works, the steelmaking facility in Batangas, will recycle steel scrap, which is currently being exported. Yao said, “By recycling steel scrap in the Philippines, we keep job generation within the Philippines.” He also noted that by processing local steel scrap instead of importing beams, the country stands to save precious foreign exchange.
The Philippines will soon have its 3D printing R&D institution as construction is underway for the Advanced Manufacturing Centre (AMCen). Spearheaded by the Department of Science and Technology (DOST), the centre is aimed at promoting research and development in additive manufacturing (AM), commonly known as 3D printing technology.
AMCen will feature two state-of-the-art research facilities that will focus on additive manufacturing R&D. AM allows rapid fabrication of various three-dimensional objects, ranging from small parts to automobile and aircraft, and even structures as big as bridges.
The DOST tapped Dr Rigoberto Advincula, a Balik Scientist and Case Western Reserve University professor, as consultant for AMCen.
“The AMCen presents a unique position for the Philippines as it will be one of the first government-led centers in the ASEAN region that aspires to be a game-changer leading to Industry 4.0 goals,” said Dr Advincula.
With the support of DOST-PCIEERD (Philippine Council for Industry, Energy and Emerging Technology Research and Development), Dr Advincula will lead the development of the centre together with researchers from the DOST- Industrial Technology Development Institute and the DOST-Metals Industry Research and Development Centre.
AMCen is likewise seen to strengthen the country’s capabilities in 3D printing and advanced design and manufacturing in the following areas: aerospace and defence; biomedical and healthcare; printed electronics; agricultural machinery; and automotive.
Ever Win International Corporation, California-based manufacturer and supplier of accessories for smartphone devices and laptops has shut down its factories in China and relocated some of its production to Philippines. Ever win has started operations last month after registering with the Philippine Economy Zone Authority (PEZA).
Senen Perlada, director of the Export Marketing Bureau of the Department of Trade and Industry said that the move was due to rising manufacturing costs in China. “The US-China trade war is immaterial to the decisions of these companies to move out of China. It’s more of sustainability and stability issues since China is fast becoming expensive,” said Perlada.
Ever win has further plans to relocate in other ASEAN countries to spread the risks. Furthermore, Perlada said that two other US electronic companies involved in artificial intelligence and integrated chips manufacturing would soon join Ever Win. These companies are also keen on investing and moving their manufacturing operations from China to Philippines.
According to the Philippines Department of Trade and Industry (DTI), Mitsubishi Motors Philippines Corp. (MMPC) would start exporting locally produced vehicles to different parts of Southeast Asia in 2019 and the company has also expressed a desire to help develop the local electric vehicle industry.
In particular, MMPC would be exporting the Mirage and L300 units in a bid to address the Philippines’ worsening trade deficit as well as the decreasing revenues in the entire local vehicle industry. Currently, MMPC is producing Mirage and Mirage G4 units domestically under the multibillion-peso Comprehensive Automotive Resurgence Strategy (CARS) programme, which is an initiative under the Aquino administration that aims to produce a total of 200,000 car units by 2023.
Regarding the export of MMPC manufactured vehicles, Trade Secretary, Ramon Lopez, has said, “We keep saying that building an export manufacturing base is the way to go. It is also a good import substitution strategy. Through this initiative, we will address the trade imbalance and provide more jobs to our countrymen.”
MANILA – Increasing tension between the USA and China has caused a diversion of manufacturing activities from China to Southeast Asia due to rising labour costs, tariffs and political instability.
In accordance to the manufacturing production index from the Japan Center for Economic Research, five key Southeast Asian countries (Indonesia, Thailand, Malaysia, the Philippines and Singapore) have a recorded 4.5 percent increase in manufacturing for 2017 while China experienced a corresponding 15.7 percent decrease. Similarly, for the first half of 2018, the Philippines’ experienced a 13.8 percent rise in its manufacturing production index due to infrastructural initiatives from President, Rodrigo Duterte’s government. A trend that was also replicated by the 4 to 5 percent rise in manufacturing by Indonesia, Malaysia and Thailand due to increased GDPs, exports and infrastructural growth.
Under newly developed China-plus-one strategies, manufacturers have been looking to tap onto manufacturing facilities in Southeast Asia before exporting to China to circumvent tariffs and increasing Chinese labour costs induced by the Trade War. A strategy that German automaker, BMW, has deployed by building some of its models in Thailand, an automotive industry hub, before exporting to China. Taiwanese power components supplier Delta Electronics also plans to re-divert its key production bases in China to Thailand by converting its Thai affiliate, Delta Electronics (Thailand), into a subsidiary while contract electronics maker, New Kinpo Group, is looking to build new facilities in the Philippines as it shifts its focus away from China. A sentiment that is shared by the group’s CEO, Simon Shen, as the company eyes a further expansion in Thailand and Malaysia due to increasing demands from clients who are looking towards Southeast Asia as a manufacturing base.
This could signal a continued downward trend in China’s lead in real GDP growth although Makoto Saito, an economist at the NLI Research Institute in Japan has said “If the U.S. economic cycle enters a downward phase in 2019, Southeast Asia could face a slowdown as well”.
BANGKOK: Bombardier, Thailand’s second largest train provider, will be expanding its infrastructure investments in Asia, building upon its existing 28 offices and production sites established across the region. Laurent Troger, president of Bombardier Transportation, has said: “We will maintain our market share among the top three in the ASEAN market by providing more technology, innovativeness, service, and also customise our products to serve demand in this region”.
In particular, APAC’s urban mass transit and advanced railway networks have been identified as key areas of interest and this is evidenced by the company’s increasing supply of metro cars, trains and mainline systems across Asian cities such as Shanghai, Manila, Thailand and Singapore. Furthermore through the establishment of state partnerships with the State Railway of Thailand (SRT), Bombardier has been able to rapidly develop infrastructural projects such as the re-signaling of the full BTS Skytrain route and the implementation of its CITYFLO 450 communications-based train control (CBTC) solution. Currently, the company has also signed a prolific agreement with BTS Group to build two monorail systems worth more than Bt20 billion in Thailand and was awarded multiple contracts by the Singapore government to upgrade existing rail networks, provide auxiliary support and metro cars.
As of the end of 2017, Bombardier Transport has reported a total revenue of US$8.5 billion. This accounts for more than half of the total reported earnings of US$16.2 billion by Bombardier Group and is expected to increase exponentially due to the company’s rapid expansion plans in Bangkok, Singapore, Vietnam, Malaysia, Philippines and Indonesia. All of which comprise significant and fast growth markets within APAC which holistically represents a dynamic growth of 2.5 percent, as reported by the the UNIFE 2010 market study.
With a relentless implementation of new technologies combined with a surge in investment deals, it is not erroneous to say that the automotive industry in Southeast Asia is experiencing a positive transition. Before the proposed introduction of Vietnam’s VinFast, Malaysia was the only Southeast Asian nation that had its own national car, in the form of Proton. Having said this, the automotive market of not only Vietnam, but the Philippines has seen tremendous growth and should be lauded by the ASEAN community.
Automotive sector in the Philippines
According to a forecast by Frost & Sullivan, the number of new car sales in the Philippines (both commercial and passenger cars) will grow 11.5% to 576,959 units this year.
Over the next five years, the Philippine economy is expected to grow by 6-7% due to consumer expenditure and investment, with new car sales supported by strong economic improvement. The manufacturing industry in the country has expanded by over 7% since 2010. Participating in the automotive industry revitalisation initiative (Comprehensive Automotive Resurgence Strategy or CARS program), Toyota Motor Corporation and Mitsubishi Motors’ overseas subsidiaries will have a positive impact on local production capacity.
This automotive progress is facilitated by a pledge made by the Philippine government that will oversee a US$160 billion infrastructure upgrade in Manila. This initiative encompasses the building of roads that are of higher quality than before. President Rodrigo Duterte has also upped the ante by planning the construction of more highways that could offset traffic congestion in the capital. Such a move might potentially lead to an increase in car owners. It is also worth noting that 61 of the 75 important projects of the national infrastructure development plan or ‘Build Build Build’ relates to the automotive/transportation sector.
Automotive progress in Vietnam
With the car ownership rate in Vietnam at about 20 units per 1,000 people, the domestic automotive market has tremendous potential for further growth, with consumption-oriented, middle-income households being a catalyst for this shift. A report by Frost & Sullivan has highlighted that new car sales volume in 2018 is expected to grow to 256,000 units, up 6.8% from last year.
Furthermore, a steady elimination of tariffs for passenger cars through free trade agreements (FTA) will create positive ripples across the automotive pond, this year. Not only that, demand for commercial vehicles is expected to increase due to infrastructure development projects that are focused on road traffic.
According to Reuters, a point that could strengthen Vietnam’s current automotive success is the building of a car factory by Vingroup, the country’s leading property dealer in a project worth US$1-1.5 billion in the first phase. VinFast, Vingroup’s construction brand, is responsible for signing a Memorandum of Understanding (MoU) with Credit Suisse for the bank to extend US$800 million in financing the project.
However, there are potential challenges that might come to the fore, which could possibly hinder new car sales growth in Vietnam. The issuance of Decree 116, which was introduced in October of last year, has tightened controls for imported automobiles in terms of origin, types, technical safety, and environment protection requirements. As a consequence, automobile juggernauts like Toyota and Honda have announced a halt to exporting cars to Vietnam because they are unable to obtain a Vehicle Type Approval (VTA) certification issued by authorities in the exporting country.
This divisive clause may spell an end to small-scale auto importers in the country, as there will be minimal probability that international car manufacturers are agreeable to allowing an unofficial dealer to recall any of their products.
The expanding automotive sectors of both, the Philippines and Vietnam should be commended. The potential release of VinFast in Vietnam and Duterte’s proposed infrastructure plans in the Philippines could spur success for the automotive sectors of these two countries. The competition among automotive players in the region could possibly be the catalyst that propels ASEAN’s automotive industry to greater heights in the coming years.
With Asia well-poised for future economic success, the Philippines is slated to be one of the region’s growth leaders, so long as a few hurdles are overcome along the way. By Michael E Neumann
As long as Philippines strives to invest public monies to build key infrastructure and solve its electric generation and transmission issues, the country is well-positioned to be one of the fastest-growing economies in the region. This is according to “Competitiveness: Catching the next wave: The Philippines”, a report released by Deloitte Global.
Manufacturing A Strong Growth Driver
The report also projected the key industries that will likely drive Philippines’ growth over the next two decades. They include manufacturing, business process outsourcing (BPO), construction, as well as transportation and logistics.
Steps that the government can take to make the region more attractive to business were also highlighted, including increasing corporate governance and reducing corruption.
“The strong growth in global manufacturing to 2033 will drive world growth, and this presents the Philippines with great potential to integrate into the global supply chain of high-value manufacturing,” said Gary Coleman, managing director, global clients and industries, Deloitte Global. “If the government makes smart investments in infrastructure—including roads and harbours—that would help to boost the construction and transportation sectors and lead to higher productivity growth in the coming years as well.”
Growth Highlights
The report noted that the BPO industry will be a source of employment for new graduates. However it also cautioned that in order to achieve long-term growth, the Philippines must reduce unemployment and the government must implement policies to improve the business climate. Reform measures aimed at reducing corruption in the procurement process, civil servant training and wages, and instituting reporting and enforcement mechanisms were also recommended.
Additional industry driving growth highlights include:
Manufacturing: To help boost manufacturing initiatives, the government should introduce a number of special industrial zones that benefit from a combination of supportive government policies. The Philippines should also begin to specialise in higher-value manufacturing.
Construction: Construction of roads, harbours, and other public infrastructure can boost the nation’s employment, productivity, and economic output. Reconstruction efforts following the devastation of Typhoon Haiyan and upgrades to existing infrastructure should contribute to a growth rate of 5.2 percent per year from 2014 to 2033.
Transportation and logistics: The poor quality of the transportation infrastructure has held back the economic development of the Philippines for many years. With policies designed to address ongoing transportation infrastructure issues, a baseline forecast of 4.9 percent growth in sector between now and 2033 can be expected.
“Relaxing limits on foreign ownership could boost foreign direct investment, increase efficiency and prompt higher levels of competition,” said Chaly Mah, chief executive officer, Deloitte Asia Pacific. “Additionally the government should look to public-private partnerships to help speed investment spending on infrastructure, reduce bottlenecks, and implement policies that promote inclusive economic growth.”
Leading Growth In ASEAN
The report also projected that the Philippines will grow faster than Southeast Asia as a whole over the next two decades, with overall GDP expanding by 4.8 percent per year up to the forecasted period of 2033.
“Compared to other regions that have experienced slower economics, the Philippines story is quite remarkable, said Mr Mah. “There are great opportunities—if the Philippine government can seize them—to fuel growth and become one of the most competitive nations in the region.”
Philippine 2017 GDP Up 6.7%
A recovered agriculture sector, strong government consumption, as well as better exports and imports made it possible for the Philippine economy to grow above six percent for the 6th straight year in 2017, according to Philippines national statistician Lisa Grace Bersales.
Ms Bersales recently announced that the gross domestic product (GDP) grew 6.7 percent in 2017, slightly below the 6.9 percent growth recorded in 2016. This still saw the Philippines being ranked among the fastest-growing economies in Asia, after China’s 6.9 percent and Vietnam’s 6.8 percent.
Socioeconomic Planning Secretary Ernesto Pernia added that GDP growth in the last quarter of 2017 was backed by growth of 14.3 percent in government consumption, a substantial increase from 4.5 percent in the same period in the previous year.
Industry Shows Biggest Growth
Industry was the fastest grower among the major sectors, expanding by 7.3 percent. Services followed at 6.8 percent. However, this was a decrease from 7.9 percent and 7.2 percent recorded respectively in the same period in 2016.
The Philippines’ BPO industry also expects annual growth to slow down to nine percent until 2022, due to factors such as a larger scale, sluggish global industry growth, and security headwinds in the country.
Construction On Decline
The construction industry also saw a reduced rate of slowdown, at 2.8 percent compared from 10.7 percent recorded in the same period a year ago.
“We also recorded stronger public construction spending at 25.1 percent that offset the 2.9 percent contraction in private construction,” Mr Pernia said. He linked the decline in private construction spending, which accounts for 74.9 percent of total construction investments, to the onset of the holiday season.
The country’s economy had started 2017 sluggishly due to the slow implementation of big-ticket infrastructure projects, which gradually began to pick up in the 2nd quarter.
High Rates Of Forecasted Growth
The effect of more government spending, as well as a recovering agriculture sector, also contributed to better-than-expected third quarter growth, which was recently revised upwards to seven percent.
World Bank and the Asian Development Bank both expect the Philippines to remain as one of the fastest-growing economies in the region in 2018, with forecasts of 6.7 percent and 6.8 percent growth, respectively.
Philippines: The local automotive industry’s volume sales reached 94, 000 units in the first quarter of 2017, an increase of 23 percent from 76,400 units sold in the same period last year, according to the Chamber of Automotive Manufacturers of the Philippines Incorporated (CAMPI).
Philippines: The Department of Transportation in the Philippines will begin construction of the Manila-Clark railway project in the fourth quarter of this year, and will be completed by 2021.
