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Manufacturing Industry Roadmap

ELMER K. TALAVERA, CESO IIIExecutive DirectorNational Institute for TESD (NITESD)Technical Education and Skills Development AuthoritySeptember 23, 2014CEAP, Davao City1Situating TVET in the ASEAN Economic Community (AEC) 2015

1ASEAN: Association of SEA Nations2Member nationsDateIndonesia, Malaysia, Philippines, Singapore, & ThailandAugust 8, 1967 signing of the ASEAN DeclarationBrunei DarussalamJuly 7, 1984VietnamJuly 28, 1995Lao PDR, MyanmarJuly 23, 1997CambodiaApril 30, 1999Joel Yuvienco, ASEAN 101: Or how to be ready from a very personal lens (part 1), Manila Bulletin, September 8, 2014Q: What is ASEAN CommunityA: ASEAN Vision 2020 outward looking, living in peace, stability and prosperity, bonded together in partnership in dynamic environment and in a community of caring societies. (1997) January 27, 2007 12th ASEAN Summitstrong commitment to accelerate the establishment of an ASEAN Economic Community by 2015. 3Joel Yuvienco, ASEAN 101: Or how to be ready from a very personal lens (part 1), Manila Bulletin, September 8, 2014Q: What is ASEAN CommunityA: AEC composed of 3 pillars:

ASEAN Political Security CommunityASEAN Economic CommunityASEAN Socio-Cultural Community

Each pillar has its own Blueprint, and together with the Initiative for the ASEAN integration (IAI), Strategic Framework and IAI Work Plan Phase II (2009-2015), they form the Roadmap for the ASEAN Community by 2015.

4Joel Yuvienco, ASEAN 101: Or how to be ready from a very personal lens (part 1), Manila Bulletin, September 8, 2014Q: What is ASEAN 2015 Readiness?A: readiness to meet the vision of:single market and production basea highly competitive economic regiona region of equitable economic development, anda region fully integrated into the global economy 5Joel Yuvienco, ASEAN 101: Or how to be ready from a very personal lens (part 1), Manila Bulletin, September 8, 2014ASEAN Networked Readiness Index 2014 . A World Economic Forum (WEF) measure of global economic readinessRank (out of 148) Value (1-7)Networked Readiness Index (2014)783.9Networked Readiness Index 2013 (out of 144)863.7A. Environment subindex903.81st pillar: Policies and regulatory environment873.52nd pillar: business and innovation environment924.0B. Readiness subindex814.63rd pillar: Infrastructure and digital content893.54th pillar: Affordability755.25th pillar: Skills695.1C. Usage subindex763.66th pillar: Individual usage912.97th pillar: Business usage433.98th pillar: Government usage674.1D. Impact subindex623.69th pillar: Economic impacts483.510th pillar: Social Impacts753.7Joel Yuvienco, ASEAN 101: Or how to be ready from a very personal lens (part 1), Manila Bulletin, September 8, 2014Singapore 2ndMalaysia 30thBrunei 45thIndonesia 64thThailand 67thPhilippines 78thVietnam 84thCambodia 108thLao PDR 109thMyanmar 146th

6MVP on AEC readinessThe Ph government must now act to prepare local industries, especially the agriculture sector to compete in the new economic regime. If tariffs go down by the end of 2015 as mandated by the ASEAN Free Trade Agreement, then we have the ability to import sugar that is much cheaper from Thailand, so paano yun? It will kill the sugar industry. Will we let the sugar industry to get slowly killed by that kind of regime?

By making our sugar more efficient, we can be competitive, otherwise we will be out of business

7Will there be as a matter of regulation, a requirement to be accredited in the ASEAN countries? There lies the possibility of lack of mobility. Because one particular country, I would imagine, will try to protect its own doctors and nursesDTI Sec. Domingo & former NEDA DG HabitoAs of January 2010, 99.6% of all the products have already been traded at zero-tariffs among the ASEAN-6 members Brunei, Indonesia, Malaysia, Singapore, Philippines and Thailand. This means that we are almost there, and AEC is not just coming in 2015, but is already here. Nothing earthshaking will happen at the end of 2015. (Domingo)

If AEC will indeed unleash a tsunami of ASEAN products into the Philippines, it should have already happened back in 2010. (former NEDA Chief Cielito Habito)What others sayprotecting the countrys agricultural and financial services sectors as well as the labor sector would be necessary for the implementation of AEC by 2015. While some businesses see the AEC as an opportunity, the integration would be more of a threat to local firms.

9I think that the Philippine industries are not ready yet (Nestor Tan, Management Association of the Philippines).

Sec. Baldoz on sugar workersTo keep pace with the competition, the government aims to increase the efficiency and competitiveness of the sugar industry. This can be done not only through an increase in production but also through the enhancement of productivity and empowerment of the sugar workers, small sugarcane farmers, mill workers and other workers in the sugar industry.Part of the HRD plan includes engaging small planters and sugar workers in policy- and decision-making; development and training of sugar workers through capacity building and skills training.

DG Villanueva on readinessThe agency has laid the groundwork to make the tech-voc education industry-driven and competency-based to allow flexibility and adaptability of its graduates to the changing work requirements. TESDA has continuously enhanced its partnerships with the private sector, industries and local government units to guarantee quality and relevant training and assure employment for the graduatesLet us not rest everything on fatalism and sa bahala na. Let us move forward knowing what needs to be done. I believe that our quality-assured TVET system is ASEAN 2015-readyKey MessagesChallenges, threats, opportunitiesOpportunities: FDI, market access, lower input costs, lower transactions costs, better quality goods & services at lower pricesBusinesses & SMEs: participation in production networksStrong competition: uncompetitive sectors Government Strategy: enhance competitiveness facilitate adjustment process to AEC integrationFirm strategy based on global perspectiveIndustry upgrading & restructuring: move up the value chainStrengthen institutional & regulatory environment

AEC 2015 Free flow of goods, investment, services, skilled labor, capitalTrade facilitation, harmonization, standardization, conformance, transport connectivityRafaelita M. Aldaba | 27 August 2014 | Tagaytay International Convention Center12FREE FLOW OF goods, investment, services, skilled labor, and capital12Free Flow of Skilled Labor Greater mobility of qualified service professionals in the region by accepting common standards of some professionalsMutual recognition arrangements (MRAs)Medical practitionersDental practitionersAccountancy servicesEngineering servicesNursing servicesArchitectural servicesSurveying qualifications

Rafaelita M. Aldaba | 27 August 2014 | Tagaytay International Convention Center13Part 2. Potential ImplicationsBenefits & Opportunities Investment liberalization, facilitationOwn 100% of companies in ASEANOwn 70% of services companiesAccess to capital marketsEqual treatment as local companies

Labor mobility: visa, economic testMutual Recognition Arrangements

Transport & logistics, trade facilitation& conformance: lower transaction costsImproved administrative processes Easier/less costly movement goods

Market access opportunities for Filipino firms to expand600 million people

Rafaelita M. Aldaba | 27 August 2014 | Tagaytay International Convention Center14Challenges & ThreatsIntense competition Bigger, more financial capability, better technical products/service systemsMay get support from home countries

How to manage short term adjustment costs? Winners: firms that gain from market expansion & improved competitiveness, workers who get employed in growing sectors, government to collect higher revenue, consumers from wide variety of goods & services at lower pricesLosers: inefficient, uncompetitive sectors How to ensure SME survival chances? Lack of access to finance, technology, skilled labor, inability to comply with standardsWeak linkages to high tech sectorsPenetrating export market a major challenge

Rafaelita M. Aldaba | 27 August 2014 | Tagaytay International Convention Center1515Strategic Actions: Manufacturing16ACTION AREASSME Development: Finance access, compliance with product standards, Quality testing, SSF, clusters Innovation: industry-academe linkages, R&D for new product development, applied technology for raw materials/products, incubation Aggressive marketing & promotion to attract investmentsHorizontal issues: high cost of power & domestic shipping, smuggling & streamline & automate government proceduresCompetitive exchange rateRafaelita M. Aldaba | 27 August 2014 | Tagaytay International Convention Center164. Final Thoughtsupgrade industries to take advantage of market opportunitiesAEC: enabler ASEAN integration, facilitator of industrial development

Industry Roadmaps: moving up the value chain, productivityDevelop industrial base & technology upgradingDeepen participation in regional production networks

Government as coordinator & facilitatorInterventions: productivity, skilled workers, technology, regulations, infrastructureIndustry Roadmap for Region IVTESDA: Tech-Voc Skills trainings, Cooperation with DTI-BOI

Firm/Industry Level: Productivity & CompetitivenessStrategy from a global perspectiveSupply chain gaps: raw material, logistics Product niches: know your consumerInnovation: product, process, marketing Comply with rules of origin requirements, product standards, conformance procedures, Joint ventures/partnerships

Rafaelita M. Aldaba