ECONOMIC AND SOCIAL COMMISSION FOR ASIA AND THE PACIFIC
SECTOR INFORMATION
PHILIPPINES
1995
(Sample Information)
Brief profiles on the following sectors are included on the basis of information prepared by the Board of Investments of the Philippines:
Shrimps and Prawns
Canned Tuna
Processed Seaweed/ Carrageenan
Machinery and Components
Tools and Dies
Paper-based Packaging
Glass Containers
Plastic-based Packaging
Metal-based Packaging
For further information please contact:
Board of Investments (BOI)
One-Stop Action Center for Investment
Ground Floor, Industry and Investments Building
385 Sen. Gil J.Puyat Avenue, Makati
Metro Manila, Philippines
Tel: (632) 818 - 1831 to 1839
Fax: (632) 816 - 1577, 4816
The world software and services revenue in 1990 according to the International Data Corporation amounted to US$140 billion in 1990 and is expected to reach US$225 billion in 1993. The global market is anticipated to have a growth rate of 15% for the next 4 years.
The United States is considered the single largest market for computer software and services valued at US$40 billion in 1991. The Japanese software market is the world's second largest market, amounting to US$18 billion in 1990 and forecasted by Japan Information Service Association to reach US$33 billion in 1995.
The Philippine Software Association (PSA) had estimated an export revenue of US$30 million in 1990, which further increased to US$36 million in 1991.
There are around 80 software houses and EDP consultancy firms. Software houses created by individual entrepreneur spinoffs from large corporations represent 95% of total software companies. The industry has a large composition of smallscale entrepreneurial companies capitalized at less than P1 million. They rely on their own funds in order to finance software development, acquiring the necessary computer hardware and software.
These companies prefer tieups with foreignbased firms to increase capital, source foreign opportunities, facilitate transfer technology, and to formulate national marketing networks.
Most of the software houses are experts in a wide scope of systems capabilities and in different operating environments such as project management, conversion, turnkey systems development, programming and maintenance analysis and design of operating systems. Applications software have been developed for international clients and for several industries engaged in banking, manufacturing, insurance, transportation, retail management, construction, pharmaceutical and utilities.
Contract programming, which is done locally on an export platform basis, dominates the Philippine exports.
The companies have highly qualified and motivated staff, forwardthinking policies, and are proactive in market trending. They have developed good marketing presentations. PSA, with 15 software companies, claims to account for about 70% of the total industry output.
The industry aims to generate export service revenues of US$300 million by 1998, thereby becoming the biggest supplier in Southeast Asia. The specific priority target markets are the United States, Germany, United Kingdom, France and Japan.
To obtain the targets, the industry recommended that the following measures be taken:
- imported computer hardware and peripherals
- imported computer software
Consumer Electronic Products Manufacturing Association (CEPMA)
Ms. Maritess E. Domingo
c/o Philippine Electrical and Allied Industries Federation
3rd Floor Ajinomoto Building Sen. Gil J. Puyat Avenue, Makati
Metro Manila, Philippines
Tel. No.: (632) 8185487
Semiconductor Electronics Industry Foundation, Inc. (SEIFI)
Mr. Villamor Torres, Administrator
5th Floor Kings Court ll Pasong Tamo corner Dela Rosa Street Makat
Metro Manila, Philippines
Tel. Nos.: (632) 877938, 866995
Philippine Software Association, Inc.
Ms. Emma Teodoro, President
115 Aguirre Street, Legaspi Village Makat
Metro Manila, Philippines
Tel. No.: (632) 8185368
Fine Jewelry
The fine jewelry industry is one of the more promising areas for investments in the Philippines owing to several factors. One is the abundance of raw materials for the industry in the country, particularly gold, of which the Philippines is a major supplier.
Because the industry is laborintensive, the government also offers many incentives for investments in this industry. These include income tax holidays, tax and duty exemptions on imported and domestic capital equipment, as well as tax credits for taxes and duties on raw materials.
There are about 10,000 privatelyowned cottagetype establishments engaged in manufacturing, gem cutting and trading. Most of these, however, are cottagetype industries with only about 30 firms that can be considered large corporations. These firms have foreign connections and established foreign markets.
Fine jewelry produced in the Philippines consist mainly of precious metal jewelry made of gold or silver, which may be mounted with precious or semiprecious stones, as well as loose pearls and precious and semiprecious cut stones such as diamond, ruby and emerald.
The main raw materials used by the industry are gold, white gold, sterling silver, precious or semiprecious stones and diamonds. The supply of these raw materials is stable and sufficient.
Gold, silver and semiprecious stones are sourced locally. Gold can be bought not only from the Central Monetary Authority (the former Central Bank) but also from local miners, panners and refiners. Silver is common in Baguio while pearls are abundant in Southern Philippines. There are also cultured pearl farms in Davao, while semiprecious stones like jade are sourced mainly from Mindoro and Mindanao.
The more valuable raw materials, such as diamonds, emeralds and other precious stones, are sourced from abroad, including Hong Kong, Thailand, Japan, Italy and Israel.
Legislation has recently been introduced to reduce if not completely abolish duties and value added taxes on imported raw materials, tools and equipment, parts and accessories used by fine jewelry producers, as well as the excise taxes and import duties levied on jewelry items.
These proposed tax reforms should help lower the cost of raw materials and encourage producers to buy from authorized sources rather than from illegal suppliers as is being widely done now.
Most of the people employed by the fine jewelry industry are primary or secondary school graduates.The main mode of training workers is through apprenticeship. However, the Meycauayan Jewelry Industry in Bulacan has established the Meycauayan Jewelry Making Training Center to teach young people in the area the techniques of jewelrymaking.
The sector's existing technology is still below international standards. Production is still done mostly manually, with the use of tools such as mallets and tweezers. Few local jewelers have casting machines and wax injectors. Upgrading of technology is being undertaken to make the industry more competitive in the world market.
The world market for fine jewelry, which investors can target in addition to the local market, is estimated at US$15 billion. Today, most fine jewelry makers still cater only to the local market. Only a handful export regularly, mainly to the United States, Hong Kong and Japan.
RP TOTAL FINE JEWELRY EXPORTS (1989 1991)
Year In Million US$
The proposed reduction of tariff and taxes applicable to the fine jewelry industry is expected to boost export of this product significantly.
The government is also promoting Philippine fine jewelry more vigorously abroad. An official hallmark to be stamped on Philippinemade jewelry products as a guarantee of quality is being contemplated. The industry is also starting to participate actively in international jewelry and gemstones fairs or shows.
Fine jewelry producers are seeking extension of the distribution network by authorizing gold and silver outlets to sell gold/silver sheets, wires, grains, etc. as well as solder in various karats/purities. Outlets should be assigned especially on areas that produce fine jewelries.
Producers also expect that, if the market for gold, silver and gemstones trading is opened, specialized foreign refiners may be attracted to invest in the country. New technology will be introduced into the country resulting in a better quality of finished product. Finished gold with better quality could also be exported at a higher price.
Contact Persons/Addresses
Tel. Nos.: (632) 785243, 706842
Fax No.: (632) 7216897
Fax. No.: (632) 7215073
Shrimp production comes from fishing and aquaculture, but it is in aquaculture where bright prospects for investment exist.
Aquaculture is composed of four major sub-sectors, namely: hatchery, grow-out, feedmill and processing.
There are currently about 47,776 hectares of grow-out farms for shrimp production, 461 shrimp hatcheries with a total capacity of 2.18 billion pieces of fry, 18 feedmillers with a capacity of 150,000 MT and 35 shrimp processors with a capacity of 75,000 MT. Total production over the last 3 years is shown below:
Year Production Production Production
(MT)Fishing (MT)Aquaculture (MT)Total
1989 3,537 43,539 47,076
1990 1,835 47,591 49,426
1991 1,526 45,740 47,266
Production
Production involves both marine capture and culture operations. Production from capture tends to fluctuate while aquaculture production has been rising steadily. The common species raised from culture farms are white and tiger prawns. Endeavour prawns or what is more commonly known as suahe comes from marine capture.
There are three (3) major companies involved in integrated operations, namely: Dole Philippines, Inc., San Miguel Corporation and AA Export and Import Corporation.
Dole Philippines, Inc. is an American-owned corporation which is engaged in hatchery, grow-out and processing with a total capacity of 5,000 MT processed shrimps. A foreign-owned firm like Dole could engage in aquaculture if a least 70% of the production will be exported.
Other large producers include: Erma Industries Inc.; Fil-Ocean Export Corp.; Mindanao Food Corp.; Philippine Marico Corp. and SMI Fish Industries.
Export Market
The main export market for shrimps are Japan and the United States. These two countries absorb about 74% and 19% respectively of the total annual exports. The balance goes to European countries such as France, Denmark and United Kingdom.
The competitive advantages of going into the shrimp and prawn industry are as follows:
Those wanting to invest in this industry need to contend with some problems. Among these are the high production cost associated with high tariff on imported ingredients and insufficient supply as the industry is still dependent on spawners and broodstock caught from the wild.
The key to the success of new entrants would be on the ability to maximize productivity as a means of reducing production costs.
Opportunities could be available not only in the production of prawns but also in the production of feeds and fingerlings. Facilities for storage and transport of frozen products are still inadequate and new investments in these areas (support facilities, sale of technology, etc.) could yield attractive returns.
The prawn industry has given the Philippines the technology that could be applied to the culture of other marine products. Fish culture and the production of other species of shrimps could be attractive to those who have the technology and process knowhow.
Even with the problems facing the industry, investing in this sector can bring good returns, given the export potential of the product. Prawn culture is possible anywhere in the country, and the export potentials of the product are immense.
Under the Omnibus Investments Code, shrimp and prawn projects for export can avail of the following incentives:
2. Canned Tuna Sub-Sector
There are four major tuna species for canning available from Philippine marine waters: the skipjack or "gulyasan" (Katsuwonus pelamis), the yellowfin or "tambakol" (thonnus albacores), the eastern little tuna (Tuthynnus yaoito), and the frigate tuna or "tulingan" (Auxix thazard).
These kinds of tuna are harvested from numerous tuna fishing areas in the country. About 1618% of the country's total catch is sourced from the Southern Mindanao waters, namely the Sulu Sea, Moro Gulf, the adjacent waters of the Celebes Sea and also from the Bohol Sea. New fishing grounds have also been found in the northwestern and northeastern parts of Luzon.
Canned tuna is made from tuna's white meat, and is usually packed in brine or vegetable oil depending on market preference. Some markets demand canned tuna in vegetable broth, sesame oil and olive oil.
The canned tuna industry mainly serves the export market, with about 95% of its production sold abroad.
The Philippines has sixteen (16) firms with tuna canning facilities capable of producing an aggregate of about 7.9 million cases annually at an estimated 90% capacity utilization in 1992. The forerunners of the industry are: RFM Tuna Corporation, Permex Producers and Exporters Corporation, Sancanco Canning Corporation, Mar Fishing Companyand Century Canning Corporation.
At present, the Philippines fills about 5% of the total world demand for tuna. The biggest tuna export market is the United States, which absorbs at least 27% of the country's production. Canada, Europe, Australia and the Middle East are also significant markets for tuna.
Canned tuna exports enjoyed an average growth rate of 9.33% in the last five (5) years since 1988. After a setback in 1990, it rebounded with a 15.75% upsurge in 1992.
Year Volume (MT) Value ($US'000)
1990 44,696 95,198
1991 46,120 104,472
1992 51,724 89,690
Technology
The industry utilizes conventional methods in the processing of tuna. Much of the advancement in technology is still derived from the services of foreign nationals who are employed by many local firms to impart valuable and practical know-how in modern tuna processing techniques, particularly in the area of quality control.
Among the advantages for those who enter this industry, aside from the abundance of fish in its waters, is that world demand for tuna is likely to remain strong in the next five years.
The U.S. market will account for a large percentage of the demand. Although fragmented, the European market likewise will be attractive.
Another major advantage of the Philippines is its competitive labor costs. This gives it an edge in the international market, posing strong competition against other countries producing canned tuna.
Southern Philippines could be an attractive location for increased tuna processing and canning in view of its proximity to the fishing grounds visavis present locations in other countries where the catches are brought for processing.
With tuna processing and canning as base, new investment prospects could be explored in the areas of waste utilization and in the processing and canning of other fish species caught together with tuna.
The industry suffers from lack of trade contacts and adequate promotional activities. It is also wanting in packaging materials (tin cans and carton boxes) that are of good quality and competitively priced, hence the need to negotiate for a higher quota level in the United States. The industry is also burdened by the high cost of financing.
All these problems, however, are manageable. Any foreign investor who can provide strengths in these areas and avail of the competitive advantages can go very far in this business.
While the industry is still in need of good quality packaging materials, such ancillary industries as tin plate manufacturing and equipment & spare parts supply which pose barriers to industry development offer an avenue of opportunity for foreign investments.
Marketing assistance and marketing tieups in the form of exclusive distributorship, infusion of technology in packaging and product labeling are also promising investment areas. Other areas of investment potential include: packaging materials such as cartons, tin cans, glassware, foil wrappers & plastic bags, storage & handling facilities and costefficient distribution systems.
Joint venture arrangements or even 100% foreign investment may be allowed provided at least 70% of production is geared for export.
The Omnibus Investment Code offer a package of incentives to investors who register with the Board of Investments provided at least 70% of production is for export for enterprises that are more than 40% foreignowned.
The Philippines is one of the world's leading suppliers of Eucheuma seaweed and carrageenan manufactured through conextractive method. Likewise, it is one of the few countries in the world that has successfully grown marine algae (seaweed) in commercial quantities.
Seaweed of the species Eucheuma Cottonil and Eucheuma Spinosum are processed to produce carrageenan, a colloidal substance use as an essential gelling agent, stabilizer or emulsifier in various food, personal care, pharmaceuticals and industrial products worldwide. Carrageenan is available in crude, semirefined, refined and highly refined forms.
There are about 13 seaweed processors/exporters in the country which are registered with BOI. Four (4) of these firms are registered for the production of refined carrageenan and the rest are engaged in the processing of seaweed in the form of crude and semirefined carrageenan.
At present, only one (1 ) firm is in commercial production of refined carrageenan. The other three (3) are not yet operational.
The existing capacity of crude and semirefined carrageenan is now fully utilized.
Exportation of various forms of processed seaweed started in the 1 970s which were then mostly dehydrated or sundried seaweed.
The major markets for processed seaweed are Japan, the United States and the United Kingdom. Other countries in the European community could be explored as new markets for these products.
Philippine exports of processed seaweed in crude or semirefined carrageenan from 1990 to 1993 are as follows:
Year Volume (MT) FOB Value ($US '000)
1990 35,346 49,833
1991 26,828 21,232
1992 30,448 48,003
1993 (Jan - Jun) 15,348 30,026
Competitive Advantages
With seaweed growing abundantly all over the coastal and reef areas of the country and with the island regions of central and southern Philippines having ideal conditions for the fertile sea algae plantations, availability of raw materials poses no problem to the manufacturers.
With regards to the technology in the production of carrageenan, the Philippines (which used to be the only Eucheuma farming country in Southeast Asia) has developed the new internationallyknown technology to commercially farm and refine eucheuma into worldclass carrageenan.
Labor for the industry can be had at costs lower than most other countries
Foreign majoritycontrolled firms engaged or proposing to engage in the processing of seaweed are eligible to register with the Board of Investments to be entitled to incentives provided at least 70% of production is for exports.
The government is also assisting investors in mariculture with emphasis on the suitable species, mariculture techniques and development of other production areas, with the end in mind of expanding seaweed production farms.
Contact Persons/Addresses
Philippine Chamber of Food Manufacturers
Mr. Vicente Lim
8th Floor, Liberty Building
Pasay Road, Metro Manila, Philippines
Tel. No.: (632) 865011
Philippine Wood Processors and Exporters Organization
Ms. Clara M. Lapuz
c/o Marigold Commodities, Inc.
131 F. Manalo Street, San Juan
Metro Manila, Philippines
Tel. No.: (632) 772763
Seaweed Industry Association of the Philippines
Mr. Benson Dacay
Room 307308, Casa Mendoza
Ariston Cortes Avenue, Mandaue
Cebu City, Philippines
Tel. Nos.: (032) 84012, 83456
Philippine Association of Prawn Growers
Mr. Edgardo Sarrosa
c/o NPPMCI
Ground Floor, JTL Building
North Drive, Bacolod City
Philippines
Tel. No.: (000) 24426, 81404
Philippine Fish Canners Association
/Tuna Canners Association of the Philippines
Mr. Willie Ortaliz
Room 106 Cabrera Building I
130 Timog Avenue, Quezon City
Metro Manila, Philippines
There are about 2,600 metalworking shops in the country, most of which are small, employing about 268,000 persons. Only one (1) firm is into closeddie impression forging and around three (3) companies can be contracted for nonferrous die casting. While the local metalworking association lists around 20 membercompanies in steel fabrication, only around 3 or 4 have catered to overseas projects, and while the said association lists 11 membercompanies in machining, only 3 or 4 can serve international machining subcontracting work.
There are, however, around 1,400 welding shops, 153 foundries, and around 500 smallscale electric plating shops.
The expansion of the metal products sector is being actively promoted by the Philippine Government since there are excellent opportunities for investors-Filipinos and foreigners alike.
The local demand for metal products is estimated at close to US$4.2 billion per year. Imports account for around 55% (US$2.28 billion) of the demand, representing 20% of total Philippine imports. Local production was estimated to be US$1.9 billion. Exports are now in the US$300 billion level, representing 15% of local production.
The market for metalcastings is over 220,000 tons per year and imports, including die castings, account for around 90,000 tons. Around US$90 million worth of forgings are imported each year.
The export market offers excellent prospects for overseas investors. The country presently exports around 8,000 tons of metal castings per year and a small amount of forgings because of the strong local market demand for these products.
The Philippines would be a very logical location for exports to the dynamic growth areas of South Asia. Its growing number of Englishspeaking engineering and technology graduates, which average 54,000 annually, provides a solid base for rapid growth in the sector. While they have the basic technical know-how, they can further be trained to handle modern techniques and specialized equipment.
Investment opportunities exist in the following areas:
The machinery and components industry has been identified as a priority area for development in order that the Philippines will be an NIC by the year 2000. Investment opportunities for foreign companies or joint ventures lie in the following:
There are about 750 companies in the sector employing some 65,000 workers. Most of these are small scale, with total assets ranging from P5 20 million. The sector caters primarily to the capital goods market, specifically replacement parts of capital goods. Local manufacturers, however, account for only 15% 20% of the total domestic demand.
The local demand for machinery and components is projected to reach P6.7 billion by the year 2000, and the sector's exports are projected to reach US$445 million during the same year.
Being at the center of the South Asia growth center, the Philippines offers a strategic offshore location for foreign companies to export to the dragon economies and NlEs of the region. It has a large domestic market which is expected to grow as the country's economy grows. Its Englishspeaking, highly trainable and competitivelypaid work force is a resource which is hard to find in any other country.
Investment opportunities are seen in the following areas:
Cognizant of the role of the tool and die sector in the country's planned industrialization, especially in the parts processing industry, the Philippines has been actively promoting the growth of the sector.
Investment opportunities lie in the establishment of jointventure or fully owned tool and die facilities capable of producing the repairing complex dies.
The ultimate goal, however, is to be able to export dies and molds after the parts processing industry of the country shall have been developed and after the increased demand for dies and molds at that stage in the country's industrialization shall have been met.
The tool and diemaking industry in the country is in its early stages of development. The Metals Industry Research and Development Center lists around 40 firms in and around Metro Manila that offer tool and diemaking and repair services, but these are for molds/dies of low complexity. Tool engineering services are being offered by only three tool manufacturers.
The sector presently caters to the needs of the local semiconductor/consumer durables and machinery/automotive parts industry.
As the manufacture of parts for metal products and electronics are transferred to countries like the Philippines which are in their early stages of industrialization, the demand for dies and molds is expected to grow. The country is just waiting for this opportunity as it already has a trainable workforce to undertake the processes in mold and diemaking.
Contact Person/Address
Packaging
The packaging industry of the Philippines provides local manufacturers with the four (4) basic types of packaging materials for products both for domestic and export sales.
The demand for packaging materials is highly dependent on the performance of the user industries such as food and beverages, drugs and pharmaceuticals, garments, electronics, gifts, toys and housewares, cosmetics, cement, as well as the agricultural and mining sectors.
While there is no actual data on the output of the industry as the figures have been integrated with those commodities of the same material (e.g., plastic bags with other fabricated plastic products such as toys and corrugated boxes with other paper products), it has been estimated that sales of packaging materials grew from P15 billion in 1988 to about P25 billion in 1990.
The plastic packaging materials subsector has the highest share of the market (47%), followed by the paperbased materials (21%).
It is estimated that around 60% of all packaging products is consumed by the food and beverage processing sector.
The actual exports of packaging materials are not recorded as these form part of the exported products. Except for a few plastic bags and recently, glass containers, there is no direct export of packaging materials.
The packaging material, besides serving as a container for a product, protects a product during its storage and delivery such that it is received by the ultimate consumer in acceptable condition, makes handling or use of the product convenient for the consumer, provides information about the product and makes the product attractive to consumers.
The four basic types of packaging materials are the following:
Both domestic and export producers rely mainly on locallymanufactured corrugated carton and folded boxes for their requirements, except in cases where special printing is required.
Approximately 50% of the raw material for corrugated carton boxes (kraft paper) can be supplied locally. Imported kraft paper, however, is required for sturdier boxes such as those for appliances and fruits for export.
Due to the low level of technology in printing (i.e., in color separation), printed cardboards of labels have to be imported for export products.
Die cast corrugated carton boxes are now produced to meet the demand of the cutflower, banana, mangoes and fresh tuna fish exporters.
At present, only one (1) export oriented foreignowned fruit processor due to the growing trend toward pelletization packages its canned fruits and juices in corrugated boxes topped with shrinkable film. Such packaging, besides being lightweight (thus economical) for export deliveries, makes the canned fruits ready for display in supermarkets.
With paper accounting for 65% of boxes, manufacturing cost pricing competition is fierce.
Except for bottles, jars and vials of special shapes or specifications (the required volumes of which do not warrant local production), glass container requirements of local industries are met by local glass manufacturers.
Two out of eight glass plants existing before the 1970s modernized their facilities starting 1990. It is expected that with the improvements, production costs shall be reduced as a result of increased machinery efficiency and lower fuel consumption.
Anew plant was erected in 1992 with Japanese investment and technology, and is said to be the most modern plant in Southeast Asia. It has been reported that production cost is very competitive in the international market such that glass bottles are now exported to Australia.
Plastic sheets and bags dominate the industry. Other products include polypropylene woven sacks, expanded polystyrene foam (styrofoam) either to cushion delicate products from shock or to maintain the temperature of a food product, and polyvinyl chloride (PVC) shipping tubes for exported integrated circuits.
Since 1986, new plastic materials were introduced into the market. Polyethylene air cap sheets as shock protection material for gifts, toys and housewares as well as PVC shrink films mainly for food were produced locally. Polyethylene terepthalate (or PET) bottles are starting to be produced including the returnable and refillable type, to replace bottles in the soft drinks and mineral water markets. Plastic lids and closures have been locally manufactured.
A recent development is the manufacture of woven polypropylene bags with capacities between 0.5 to 1.0 MT. These are very convenient in the export of activated carbon and some mineral ores and are returnable to boot.
Among the synthetic resins produced locally are polyvinyl chloride (PVC) for sheets, bags and transparent bottles, polystyrene (PS) for styrofoam, jars, and bottles as well as polyester for PET bottles. Until a petrochemical industry is established, all other resins have to be sourced abroad.
The food processing industries are the biggest users of tin cans and metal closures.
In the past, tin cans of limited sizes were being manufactured locally, i.e., those for milk, sardines, and ordinarysized canned tuna. However, with the growth of the food processing industry in the export market, particularly canned tuna, a wider range of sizes (e.g., the institutional size) and types (sanitized and 2piece cans) were developed. However, there is no manufacturer of beverage cans in the country. Pilferproof metal closures are also manufactured for the pharmaceutical industry.
A foreignowned tuna canning enterprise, directing all its products to exports, has its owncan making facilities.
About 65% of the tin plate requirements is sourced locally from the National Steel Corporation but some have to be imported due to quality problems.
Manufacturers of packaging materials have preference for Metro Manila and surrounding areas as plant sites mainly due to the concentration of the manufacturing sector in the vicinity.
Except for the materials from the two (2) glass plants in Cebu, four (4) corrugated box makers in Mindanao and one (1) in Cebu, and a few plastic bag manufacturers in these same areas, the bulk of the supply of packaging materials still come from Luzon.
Considering industrial developments in Cebu and Mindanao and the proximity of raw material suppliers (tin plates and kraft paper are manufactured in Mindanao), the packaging industry should expand in these areas. Curiously, industry sources have it that "supplying Davao from lligan could be costlier than getting it done from Manila"-a situation that illustrates the need to inject more development funds to rehabilitate infrastructure in Mindanao.
The manufacturers of packaging materials enjoy the following characteristics of the industry:
2. Local availability of raw materials. The bulk of the raw materials of glass makers come from local sources. About 50% of the kraft paper and 85% of tin plates required by the industry are from local sources. Some plastic resins are likewise locally available.
3. Easily disposable packaging wastes. In the Philippines, almost all packaging materials are recovered for recycling or reuse. The Filipinos are longtime masters at recycling.
The industry's challenges come from the following:
2. Power intensive operations. The glassbased and plasticbased packaging material manufacturers have been heavily affected by the power outages.
4. High cost of brand new equipment. Stateoftheart, electronicallycontrolled equipment from Germany and the United States are expensive and could be obsolete in a few years with the rapid changes in technology in electronics.
As the country strives to reach a newly industrialized economy by the year 2000, the opportunity for the packaging industry to expand exists.
Changes in consumer behavior as incomes increase would result in new methods of marketing consumer goods via improved packaging. Convenience food products should experience increases in demand .
Environmental concerns and increasing quality packaging requirements for food and pharmaceutical products also pose opportunities for manufacturing new types of packaging materials, both for the domestic and export markets.
Legislation here and abroad and international agreements limiting the consumption of packaging materials due to environmental concerns are threats to the industry. But since the Filipino is used to handling problems related to recycling, the Philippines should not be found wanting in addressing this issue.
Packaging Institute of the Philippines
Ms. Carmencita Abelardo
216 Comfoods Building Sen. Gil J. Puyat Avenue Makati
Metro Manila, Philippines
Tel. No.: (632) 8172936
The local petrochemical industry is currently still a downstream industry limited to the manufacture of synthetic resins primarily for the plastic processing, surface coating and textile industries.
The locallymanufactured plastic resins consist principally of polyvinyl chloride (PVC) and polystyrene (PS) resins. The limited scope of the petrochemical industry is due to the absence of an upstream facility to supply the necessary basic petrochemicals, i.e., monomers, which are currently being imported.
Following are current local producers of PVC and polystyrene resin and their capacities:
Name of Firm Product Capacity (Mtpy)
a
Mabuhay Vinyl Corp. PVC resins 30,000
Phil. Vinyl Consort. Inc PVC resins 20,000
D&L Industries Polystyrene resins 4,800
Phil. Petrochemical Polystyrene resins 18,900
Products Inc.
Polystyrene Mfg. Co. Inc. Polystyrene resins 6,000
SMP. Inc. Polystyrene resins 14,100
The increasing usage and importance of plastic products in many sectors and industries is an indicator of the large potential for growth of the petrochemical industry. At present, the major resins being used for plastic fabrication are polyethylene (PE), polypropylene (PP), polystyrene and polyvinyl chloride. Local requirements for PE and PP resins are supplied solely by imports. On the other hand, PS and PVC requirements are both locallymanufactured and imported.
In 1991, the apparent consumption of these resins based on foreign trade and production statistics were as follows:
Product Imports Local Exports Apparent Net Production Consumption Polyethylene 121,376 none 152 121,224 Polypropylene 107,485 none 2,522 104 ,933 Polytyrene 5,453 11,063 3,834 12,682 PVC 40,920 17,999 1 58,918
Export Markets
As far as the export market is concerned, prospects for Philippinemade plastic products are becoming increasingly bright. This is largely due to the GSP status accorded to Philippinemade plastic products and the corresponding loss of GSP status of products from the newlyindustrialized countries (NlCs).
There is also still much room for growth in the export market since as of 1986, Philippinemade plastic products accounted for only less than 1% of total imports of plastic products of most of the country's major trading partners.
Furthermore, at present Philippine exports of plastic products consist mostly of those made from PVC, polypropylene and polystyrene. Hence, there is also still plenty of opportunities for expansion as far as exports of plastic products made from other types of resins are concerned. This growth could be facilitated by a reliable and affordable local supply of plastic resins.
Various opportunities also exist for the manufacture of inputs to exportoriented industries e.g., consumer durables, garments, etc.
On local supply of feedstock, developments at the Malampaya oilfield are indicative that the Philippines could soon be producing commercial quantities of oil and natural gas. Shell Exploration Philippines, the operator of the Malampaya oil field, is considering putting up a pipeline for transporting natural gas from Palawan to Luzon. Commercialization of oil and natural gas production would definitely augur well for the development of the petrochemical industry which to date is largely import dependent.
As far as naptha production is concerned, figures of the Department of Energy reveal that naptha production volume for 1992 was about 3.5 million barrels. However, the program to reduce the lead content of gasoline could reduce the availability of naptha for local petrochemical production as the local oil refineries have revealed that more naptha would be needed in the production of low lead or unleaded gasoline.
The current inadequate supply of power in the country, particularly in the Luzon area, could pose a problem as the manufacture of petrochemicals is a powerintensive activity. With the government's program to assure energy supply to industries gaining headway, this problem can be surmounted.
As far as feedstock is concerned, this is available locally from the three (3) existing oil refineries, which are in the process of implementing expansion and debottlenecking projects to increase their output of refined petroleum products. However, it should be noted that the supply may not be sufficient for an economic size petrochemical facility.
Government legislation has also been enacted to eliminate the ad valorem tax (formerly 48%) and to reduce the tariff rate (from 20% to 10%) on naptha. Such measures were done to ensure an affordable foreign supply of feedstock in the event of a shortage of local supply.
The manufacture of petrochemicals may be considered to be a strategic activity, due to the many uses/applications of petrochemical products. As such, the government has been promoting this area of activity through listing in the Investment Priorities Plan (IPP). The manufacture of petrochemicals is currently listed in the IPP as a pioneer preferred area of activity. Registered enterprises engaged in this activity are entitled to various incentives.
In the short term, the petrochemical industry should be able to provide local plastic fabricators and converters with a local source of polyethylene and polypropylene resins. In the long term, the petrochemical industry is envisioned to be able to provide the petrochemical requirements of many other industries as well.
At present, the government does not pose any restrictions on petrochemical projects. Since the manufacture of petrochemicals is listed in the IPP as a pioneer preferred area of activity, foreign equity participation may even constitute 100% of the project's equity. The Board of Investments likewise does not have any special policies to cover investments in the area of petrochemicals, including naptha cracking. Investments in this area are given the same treatment as investments in other areas of activity.
Petrochemical projects are entitled to the following incentives granted to pioneer enterprises as specified in the current Omnibus Investment Code:
Based on historical figures, the demand for polyethylene and polypropylene account for fifty percent (50%) and thirty percent (30%), respectively, of total demand. As was the case in 1986, the projections for the domestic demand of these two resins from 1993 onwards are as follows:
Year Polyethylene Polypropylene__________
1993 160,800 138,400
1994 185,300 159,000
1995 213,500 182,700
1996 245,000 209,900
1997 283,400 241,200
1998 326,500 277,100
1999 376,200 318,400
2000 433.400 365.800
VMC and Styrene Monomer
VCM is locally produced by Mabuhay Vinyl Corporation (MVC) but only for inhouse use. There are no local producers of styrene monomer (SM).
Again using the historical growth rates, the following demand projections derived are:
Year VCM SM
1993 21,900 23,300
1994 26,600 27,000
1995 32,400 31,300
1996 39,400 36,200
1997 47,900 41,900
1998 58,300 48,500
1999 70,900 56,200
2000 86,300 65,100
Contact Person/ Address
Samahan Sa Pilipinas ng Mga Industriyang Kimika (SPIK)
Mr. Oscar Barrera,President
c/o Mabuhay Vinyl Corporation 4th Floor, Gammon Center
126 Alfaro Street, Salcedo Village Makati
Metro Manila, Philippines
Tel. No.: (632) 8178976
Processed fruits come in the following forms:
There are about thirtysix processing plants for prepared and preserved fruits with an aggregate capacity of 715,000 MT per year. There are in addition numerous small processors with individual capacities of about 300 MT.
There are currently 24 dehydrated/dried fruit manufacturing firms and 15 puree plants registered with the Board of Investments. They have an aggregate capacity of 134,683 MT and 70,752 MT respectively.
These products are both for domestic and export markets. The home market is largely concentrated in the Metro Manila area where most of the big institutional markets such as hotels, restaurants and hospitals are located. The industry is highly competitive particularly in the Metro Manila area where the urban populace enjoys a comparatively higher purchasing power.
Processed fruits and vegetables exports in 1992 reached a value of US$337.2 million.
Philippine exports of processed fruits excluding canned pineapple and pineapple juice have declined by 8.53% from 1991 (US$55.10 million) to 1992 (US$54.81 million). The U.S. is the largest market which absorbed 23% of total exports. It has grown by 7.55% in 1992 (at US$12.43 million) from 1991 (at US$1 1 .56 million).
Philippine exports of banana chips in 1992 amounted to US$4.47 million, and showed an 8.47% increase from 1991. The U.S. is the third largest market, after Hong Kong and Singapore, absorbing 11% of total exports valued at US$497,000 in 1992. The American market increased by 2.4% in 1992 compared to 1991.
Philippine exports of soursop puree, juice and juice concentrate in 1992 amounted to US$10.47 million, and showed an 18% increase from 1991 exports of US$8.85 million. The U.S. is the second largest market after Hong Kong and absorbed US$1.76 million worth of mango juice, puree, and juice concentrate-about 16.77% of total Philippine exports of these products.
Being a tropical country, the Philippines grows a large variety of fruits, a good number of which are still unknown in the importing developed countries. So far, majority of the country's exports consists of canned pineapple. Thus, the potentials of other fruits can be exploited.
The growing health consciousness in Western countries also presents an opportunity to market Philippine tropical fruits as healthpromoting food.
Also, in developed markets, consumers are becoming more sophisticated and adventurous. Because of its exotic appeal, processed Philippine fruits can become popular in these markets. The proximity of a large export market like Japan is also a plus.
Firms engaged or proposing to engage in the activity are eligible to register with the Board of Investment (BOI) for incentives, provided:
Prospects of the industry in the export markets are mainly contingent on active market orientation and development. The share of processed fruits and vegetables in the world trade market can be increased.
In order to develop further to higher stages, the industry must expand trade contacts and undertake more promotional activities. It also needs to disseminate market information such as product standards, packaging and labeling requirements and consumer preferences on quality in the export markets.
Philippine Chamber of Food Manufacturers, Inc.
Mr. Vicente Lim
8th Floor, Liberty Building
Pasay Road, Metro Manila, Philippines
Tel. No.: (632) 86501 1
Philippine Wood Processors and Exporters Organization, Inc.
Ms. Clara M. Lapuz
c/o Marigold Commodities, Inc. 131 F. Manalo Street, San Juan
Metro Manila, Philippines
Tel. No.: (632) 772763
Philippine Fish Canners Assn., Inc./Tuna Canners Assn. of the Phils.
Mr. Willie Ortaliz
Room 106 Cabrera Building I
130 Timog Avenue, Quezon City
Metro Manila, Philippines