the philippines' competitive advantage on business environment in comparison to other asian...

Philippines’ Competitive Advantage on Business

Environment in Comparison to other Asian Countries

March 2012Japan External Trade Organization (JETRO)

Manila

CONTENTS1. 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

Source of Japanese Listed Company’s Profits

Source of its Profits by Region

4

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


2. Advantages of the Philippines• Cost Competitiveness• Quality of Labor or Human Resource• Incentives


1.1 Problems of increasing financial costs(%)

Source: JETRO, 2011 Survey of Japanese-Affiliated Firms in Asia and Oceania (Aug-Sept, 2011)* All the succeeding data has the same source.

1 1

1.2 Problems in shortage of land/offices, rising land prices/rental

(%)

2

1.3 Problems in skyrocketing payroll costs(%)

3

2.1 Difficulty in recruiting general staff(%)

4

2.2 Difficulty in recruiting executives(%)

5

2.3 Low rate of worker’s employment retention

(%)

6

2.4 Problems of worker’s competency(%)

7

2.5 Difficulty in Quality Control (Manufacturing only) (%)

8

3.1 Salary Base up Rate (2011-2012) (%)

9

3.2 Annual Salary *Manufacturing Staff

(US $)

* including bonuses, allowances, SSS, etc 10

3.3 Annual Salary Manufacturing Engineer

(US $)

11

3.4 Annual Salary Manufacturing Managers

(US $)

12

3.5 Annual Salary Non-Manufacturing Staff

(US $)

13

3.6 Annual Salary Non-Manufacturing Manager

(US $)

14

Reason for embarkation to each city

Jakarta Manila Bangkok Hanoi

Incentives1990's 3.1% 26.9% 21.4% 21.1%2000's 2.8% 26.1% 8.1% 14.5%

Free Trade Policy1990's 0.0% 3.0% 3.6% 0.0%2000's 2.8% 2.9% 5.4% 3.6%

Well-maintained Traffic Infrastructure

1990's 25.0% 12.7% 5.4% 7.9%

2000's 22.2% 4.3% 2.7% 5.5%

Market Volume1990's 9.4% 16.8% 26.8% 15.8%2000's 11.1% 27.5% 21.6% 18.2%

Request from Assembler

1990's 9.4% 2.5% 8.9% 15.8%2000's 5.6% 1.4% 5.4% 10.9%

Cheap Labor Cost1900's 0.0% 5.1% 1.8% 5.3%2000's 0.0% 7.2% 5.4% 1.8%

Source: Survey of ERIA, 2007

15


2. Advantages of the Philippines• Cost Competitiveness• Quality of Labor or Human Resource• Incentives


Japanese Companies Contribution for Employment

No. of

CompaniesNo. of Covered

CompaniesNo. of Filipino

EmployeesAverage no. of

EmployeesMore than 500

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

Business Challenges in Asia(Rated by Japanese Expats in each country)

India Vietnam Indonesia Thailand Malaysia China Philippines

Salary Increase 80.3 Salary Increase 83.3 Salary Increase 75.2 Salary Increase 68.3 Increase in procurement costs 61.5 Salary Increase 84.9

Fluctuation in the exchange rate of

local currency against US$

55.4

Power Shortage and brown outs 71.6

Ability and awareness of local

employees63.2 Burden on taxes 62.1 Ability and awareness

of local employees 58.8Emerging

Competitors (cost competition)

57.4Increase in

procurement costs

64.1

Difficulty in the local

procurements of raw materials and

parts

54.7

Inadequate Infrastructure for

logistics64.8

Cumbersome procedures such as

customs62.4 Inadequate

Infrastructure 60.5 Increase in procurement costs 56.7 Salary Increase

55.0

Ability and awareness of

local employees53.5

Ability and awareness of local

employees50.8

Complicated tax policies and procedures 63.0

Difficulty in the local procurements of

raw materials and parts

61.6Complicated tax

policies and procedures

59.2 Emerging Competitors (cost competition) 55.4



52.1

Emerging Competitors

(cost competition)

53.3 Inadequate Infrastructure 50.4

Emerging Competitors (cost competition) 62.3 Power Shortage and

brown outs 61.6Emerging

Competitors (cost competition)

57.8

Takes too much time in customs clearance 57.4 Increase in

procurement costs 53.6Ability and

awareness of local employees

56.4* Items described herein are considered major and serious issues/challenges by the managers of the Japanese firms in each country. Only the items with 50% or higher survey response were included.Only the items with 50% or higher survey response were included.

Cumbersome procedures such as

customs56.2

Difficulty in hiring future leader-class

talent52.8

Insufficient Legislative system

and its opaque application

54.8 * Specific answers are being shown for similar questions with the response rate of 50% or higher.

Increase in procurement costs 54.5

Complicated government

procedures (permits, licenses, etc.)

50.7



52.2

* The survey was conducted from August 1 up to September 15, 2011 (1.5 months)

Difficulty in the local procurements of raw materials and parts

54.5 Increase in procurement costs 51.9

(Source) 2011 Business Activity Survey Among Japanese Companies in Asia and Oceania, October 2011 by JETRO

Complicated government procedures (permits, licenses, etc.)

52.5Inadequate system

of disseminating notices and rules

51.3

17

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