A presentation made by JETRO to DTI and BOI

1. Philippines’ Competitive
Advantage on Business
Environment in Comparison to
other Asian Countries
March 2012
Japan External Trade Organization (JETRO)
Manila

2. CONTENTS
1. Trend of Japanese Companies and its Background
• Moving of production base and sales market to Asia
• From “Selection & Concentration” to “Portfolio”
• Following to Assembler
2. Advantages of the Philippines
• Cost Competitiveness
• Quality of Human Resource
• Incentives
3. What shall we do?
• Strengthening of Industrial Linkage
• Strengthening of Manufacturing Sector
• Improvement of Infrastructure

3. Source of Japanese Listed Company’s Profits

4. Source of its Profits by Region
アジア大洋州で実に４分の３を稼ぐ日本企業
内円；１９９８年度
外円；２００８年度
（ Source ） JETRO Headquarter 4

5. CONTENTS
1. Trend of Japanese Companies and its Background
• Moving of production base and sales market to Asia
• From “Selection & Concentration” to “Portfolio”
• Following to Assembler
2. Advantages of the Philippines
• Cost Competitiveness
• Quality of Labor or Human Resource
• Incentives
3. What shall we do?
• Strengthening of Industrial Linkage
• Strengthening of Manufacturing Sector
• Improvement of Infrastructure

6. 1.1 Problems of increasing financial costs
(%)
Source: JETRO, 2011 Survey of Japanese-Affiliated Firms in Asia and Oceania (Aug-Sept, 2011) 1
1
* All the succeeding data has the same source.

7. 1.2Problems in shortage of
land/offices, rising land prices/rental
(%)
2

8. 1.3 Problems in skyrocketing payroll costs
(%)
3

9. 2.1 Difficulty in recruiting general staff
(%)
4

10. 2.2 Difficulty in recruiting executives
(%)
5

11. 2.3 Low rate of worker’s employment
retention (%)
6

12. 2.4 Problems of worker’s competency
(%)
7

13. 2.5 Difficulty in Quality Control
(Manufacturing only) (%)
8

14. 3.1 Salary Base up Rate
(2011-2012) (%)
9

15. 3.2 Annual Salary *
Manufacturing Staff (US $)
* including bonuses, allowances, SSS, etc 10

16. 3.3 Annual Salary
Manufacturing Engineer
(US $)
11

17. 3.4 Annual Salary
Manufacturing Managers
(US $)
12

18. 3.5 Annual Salary
Non-Manufacturing Staff
(US $)
13

19. 3.6 Annual Salary
Non-Manufacturing Manager
(US $)
14

20. Reason for embarkation to each
city
Jakarta Manila Bangkok Hanoi
1990's 3.1% 26.9% 21.4% 21.1%
Incentives
2000's 2.8% 26.1% 8.1% 14.5%
1990's 0.0% 3.0% 3.6% 0.0%
Free Trade Policy
2000's 2.8% 2.9% 5.4% 3.6%
Well-maintained Traffic 1990's 25.0% 12.7% 5.4% 7.9%
Infrastructure 2000's 22.2% 4.3% 2.7% 5.5%
1990's 9.4% 16.8% 26.8% 15.8%
Market Volume
2000's 11.1% 27.5% 21.6% 18.2%
Request from 1990's 9.4% 2.5% 8.9% 15.8%
Assembler 2000's 5.6% 1.4% 5.4% 10.9%
1900's 0.0% 5.1% 1.8% 5.3%
Cheap Labor Cost
2000's 0.0% 7.2% 5.4% 1.8%
Source: Survey of ERIA, 2007
15

21. CONTENTS
1. Trend of Japanese Companies and its Background
• Moving of production base and sales market to Asia
• From “Selection & Concentration” to “Portfolio”
• Following to Assembler
2. Advantages of the Philippines
• Cost Competitiveness
• Quality of Labor or Human Resource
• Incentives
3. What shall we do?
• Strengthening of Industrial Linkage
• Strengthening of Manufacturing Sector
• Improvement of Infrastructure

22. Japanese Companies Contribution for
Employment
No. of No. of Covered No. of Filipino Average no. of More than 500
Companies Companies Employees Employees employees
Total 731 608 209,942 345/firm 91 firms
Manufacture 440 354 178,588 504/firm 80 firms
Service 291 254 31,354 123/firm 11 firms
Source: JETRO Manila Survey, December 2011
16

23. Business Challenges in Asia
(Rated by Japanese Expats in each country)
India Vietnam Indonesia Thailand Malaysia China Philippines
Fluctuation in the
Increase in exchange rate of
Salary Increase 80.3 Salary Increase 83.3 Salary Increase 75.2 Salary Increase 68.3 procurement costs 61.5 Salary Increase 84.9 local currency 55.4
against US$
Difficulty in the
Ability and Emerging Increase in local
Power Shortage and Ability and awareness
71.6 awareness of local 63.2 Burden on taxes 62.1 58.8 Competitors (cost 57.4 procurement 64.1 procurements of 54.7
brown outs of local employees
employees competition) costs raw materials and
parts
Inadequate Cumbersome Ability and Ability and
Inadequate Increase in
Infrastructure for 64.8 procedures such as 62.4 60.5 56.7 Salary Increase awareness of 53.5 awareness of local 50.8
Infrastructure procurement costs 55.0 local employees
logistics customs employees
Difficulty in the local Fluctuation in the Emerging
Complicated tax
Complicated tax policies procurements of Emerging Competitors exchange rate of Competitors Inadequate
63.0 raw materials and 61.6 policies and 59.2 55.4 52.1 53.3 Infrastructure 50.4
and procedures (cost competition) local currency (cost
procedures
parts against US$ competition)
Emerging
Emerging Competitors Power Shortage and
62.3 61.6 Competitors (cost 57.8
(cost competition) brown outs
competition)
Ability and * Items described herein are considered major and serious issues/challenges
Takes too much time in Increase in
57.4 procurement costs 53.6 awareness of local 56.4 by the managers of the Japanese firms in each country. Only the items with 50% or higher survey response
customs clearance
employees were included.
Only the items with 50% or higher survey response were included.
Insufficient
Cumbersome Difficulty in hiring
Legislative system * Specific answers are being shown for similar questions with the response
procedures such as 56.2 future leader-class 52.8 54.8 rate of 50% or higher.
and its opaque
customs talent
application
Complicated Fluctuation in the * The survey was conducted from August 1 up to September 15, 2011 (1.5 months)
Increase in procurement government exchange rate of
54.5 procedures (permits, 50.7 local currency 52.2
costs
licenses, etc.) against US$
Difficulty in the local (Source) 2011 Business Activity Survey Among Japanese Companies in Asia
Increase in
procurements of raw 54.5 51.9 and Oceania, October 2011 by JETRO
procurement costs
materials and parts
Complicated Inadequate system
government procedures 52.5 of disseminating 51.3
(permits, licenses, etc.) notices and rules
17