Corruption, high power and shipping costs main burden to industries – BOI

MANILA, Philippines — The high costs of power and shipping, coupled with smuggling and corruption continue to burden majority of Philippine industries, a report by the Board of Investments (BOI) showed.

In a policy brief, the BOI said opportunities abound for the Philippines to transform and upgrade its industries given the country’s 105 million consumer market, rising middle class, and young and English-speaking workers.

The agency, however, said various constraints persist which prevent the country from taking advantage of these vast opportunities.

“Based on the review of the roadmaps and industry consultations that were conducted by the DTI-BOI, the most common constraints that were identified were in the areas of infrastructure and logistics, particularly the high costs of power and domestic shipping, as well as in governance and regulation, specifically smuggling, bureaucracy, and red tape and the lack of streamlining and automation of interrelated government procedures,” the policy brief said.

The BOI said the concerns were gathered across 35 industries which included rubber, copper, biodiesel, furniture, engineered bamboo, chemicals, petrochemicals, cement, motorcycle and parts, automotive and parts, tool and die, iron and steel, plastics, paper, metal casting and shipbuilding.

The report indicated that the high cost of power has been raised as a major constraint by almost all sectors, particularly the copper, cement, paper, auto and auto parts, chemical, petrochemical, biodiesel, and iron and steel sectors.

High shipping and transportation costs, meanwhile, were cited as major concerns by the furniture, copper, chemicals, and iron and steel industries.

The problem of smuggling products has likewise been cited by almost all industries, while the proliferation of counterfeit products and parts has been raised specifically by the motorcycle industry.

“The industries have also indicated the lack of streamlining in government procedures, particularly at the Bureau of Customs,” the policy paper said.

The report also showed that firms in various sectors continue to face major constraints such as lack of domestic raw material suppliers, parts, and components, as well as lack of highly skilled workers.

“The underdevelopment of parts and components industries and high cost of raw materials have severely affected their competitiveness. In the face of increasing competition from imports arising from the various episodes of trade liberalization, the lack of adjustment measures like temporary industry support measures and training and job search assistance for displaced workers led to the inability of firms to cope with the new operating environment,” it said.

The policy brief also pointed out the weak linkages between the country’s small ad medium enterprises (SME) with large domestic and multinational corporations, resulting in the failure of the growth experienced by the large firms to spill over to the SME sector.

“Compared with large enterprises, SMEs continue to face growth and market entry difficulties due to underdeveloped financial markets, overly complex administrative arrangements, and poor infrastructure. With their subdued performance, SMEs have not generated sufficient manufacturing value added and employment to increase market contestability and improve the country’s industrial source,” the report said.