PH manufacturing industry on the mend

Aya Lowe
The Philippines manufacturing industry is seeing a resurgence from foreign companies after winning its first investment grade from Fitch

Manufacturing on the rise following Philippines' first investment grade

MANILA, Philippines – The economic benefits of the credit rating upgrade the Philippines won from global ratings firm Fitch Ratings come in two waves, businessmen and industry analysts said.  

“If you’re looking at the evolution of the cycle, the first capital that comes in goes into the stock market,” Fernando Zobel de Ayala, president and COO of Ayala Corp., the country’s oldest conglomerate, said on the sidelines of Ayala Corp’s stockholder meeting on Friday, April 19. 

“The second cycle is really in the larger assets, manufacturing plants, and other investments,” Ayala stressed when asked how their businesses benefit from the country’s first investment grade. 

The Philippines can then expect to see a revival in manufacturing if the local economy sustains its stellar performance.

According to his brother, Jaime Zobel de Ayala, chairman and CEO of Ayala Corp, two things can account for this:

“Two things have been mentioned. One, the increase in wages has been gradual and the problems we used to have in the past of unrest with unions is no longer the case. It’s a stable market. The last part is that people want to position themselves within ASEAN. It’s in a very strong position of the people looking at the Philippines right now,” the CEO said.

Manufacturing revival

Industry experts have already reported a resurgence of the manufacturing industry following its slowdown in 2009.

Flooding in Thailand and the escalating tensions between Japan, Taiwan and China due to longstanding territorial disputes have resulted in Japanese and Taiwanese firms eyeing up the Philippines as a possible new destination.

According to Julius Guevara, associate director for research and advisory at Colliers, they have received a number of inquiries from Japanese companies interested in putting up manufacturing facilities in industrial areas in and around Manila.

“In the past 6 to 12 months there has been an increased activity of Japanese moving manufacturing to the Philippines,” said Guevara at a press briefing in February. 

“We received inquiries during the past year asking about locations. Mostly [in] different industrial properties close to Metro Manila,” he added. According to Guevara, this interest is a “small bright spot in a sector that has been in the doldrums in the past 10 years.” 

Choice investment destination

In the press conference after the Philippine Yearend Economic Briefing on Wednesday, February 13, Trade Secretary Gregory Domingo told reporters that the Philippines is now earning a reputation as an ideal manufacturing hub for high-end value-added products.

Domingo said thar the Philippines is now becoming a cheaper destination for manufacturing firms abroad because of rising wages in countries like China. Domingo said these new plants will boost the growth of the manufacturing sector and help support economic growth in the next 2 to 3 years.

“We’re seeing now a huge interest from Japanese companies in putting up plants here in fact we’ve been doing that since the start of 2011 and the reason why, the big surge in manufacturing is because some of these plants that have been put in place have been operating,” Domingo said in a previous interview.

However, high electricity rates and labor costs have been a big hindrance in attracting foreign firms so set up here said Domingo.

Central Luzon

Continuous infrastructure developments such as airport, seaport and highways between the Clark Freeport Zone (CFZ) and Subic Bay Freeport Zone (SBPZ) has opened up new areas of investment for the manufacturing industry. 

Ingasco, Inc., a corporation under the partnership of Taiyo Nippon of Japan and Caloocan Gas Corp., is set to develop a US$40 million air separation plant which aims to support the immediate demand of manufacturing firms in CFZ.

A Japanese aircraft parts manufacturer, Jamco, is set to invest PhP172 million for a facility to produce commercial aircraft interior components and subassembly parts, according to a recent report by property consultant CBRE.

As a result of this renewed interest, central Luzon which is already on its way as the 3rd biggest contributor to the national economy contributing 9.1% share of the GDP in 2010, maybe be the country’s new hot spot for investment. –