Philippines Executive Summary Is your trade support network working?

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1 Philippines Executive Summary Is your trade support network working? The Government of the Philippines has been committed to export-led economic development since the middle of the 70s. It has developed and experimented with a variety of strategies, approaches and networking activities which have been designed to increase export capacity, enhance international competitiveness, and promote global companies. Unlike many developing countries, the Philippines trade promotion effort has been institutionalized in an Export Development Act (EDA) which operates within the parameters of a 3-year Philippine Export Development Plan (PEDP). The current Plan the PEDP was designed to identify and promote a clustering approach as a key strategy for export promotion. Clustering is defined as the grouping of firms and companies in an industry; the allied businesses which support the industry through the provision of goods, services, machinery or equipment, and specialized inputs; and the buyers (both domestic and foreign) all operating under an environment shaped by Government, the physical and cultural heritage, and available infrastructure (soft and hard). An efficient interaction of the cluster is the key to boosting the systemic competitiveness of specific industry sectors. The PEDP is now undergoing review and update for the year New developments in global trade and in the Philippine situation as well as their impact on Philippine exports will be reflected in the Plan. There will be more active participation by the private sector, including those in the Visayas and Mindanao, in the crafting and validation of the Plan. To ensure continuity in the export development thrust, the succeeding Plan will be based on the same strategic medium-term framework, with relevant updates. The new Plan will continue the industry cluster approach and will similarly be directed towards developing globally competitive industries and firms. A conscious effort will be taken to ensure that the succeeding Plan will build on, rather than diverge from the gains realized from the PEDP implementation from 1999 to The Department of Trade and Industry (DTI), through its International Trade Group (ITG), is the primary agency responsible for the Plan s implementation. DTI s involvement and the participation of other government agencies as well as the private sector in the export strategy is being co-ordinated by the Export Development Council (EDC). The EDC chairman is the DTI Secretary while the vice-chairman comes from among the private sector members. This mechanism ensures public-private sector partnership in strategy formulation and management. Balanced representation of the public and private sectors in all EDC networking committees and the product/market teams under the Council also ensure solid partnership in all aspects of export activities. At the Secretariat level of the Council, public-private sector partnership exists when both DTI and the accredited export organization designate their personnel to run the day-to-day activities of the Council. The functions and responsibilities of the ITG offices, composed of 8 bureaus and agencies under the current organizational set-up, come into play through the provision, facilitation and co-ordination of specific assistance to existing exporters and potential exporters, particularly those from the SME sector. Unlike a single trade promotion organization (TPO) in many developed countries as well as newly-industrialized economies as Singapore, Hong Kong and South Korea, the ITG s unique feature is that it is composed of different agencies with specialized functions working closely to deliver their services to clients.

2 The package of assistance being provided by the ITG agencies is integrated and well-coordinated starting from the development of SMEs as local sellers to the promotion of SMEs as international sellers. The phasing of such assistance is as follows: Phase I - Product design and development (PDDCP) Phase II - Training (PTTC) Phase III - Product/Market research and consultancy (BETP) Phase IV - Trade fair participation (CITEM) As soon as the SMEs are ready to export, or have generated actual sales, the FTSC and BITR may later assist them in commercial intelligence work and market access negotiations. Special assistance may be provided by GTEB for garment manufacturers, exporters and subcontractors and by PITC for export/import trading operations. Certain functional overlaps exist among the ITG agencies but efforts are being made to synchronize plans and programmes among the agencies. The regular ITG Management Committee (Mancom) meetings, presided by the ITG Undersecretary, serve as a venue for information sharing and as a forum for resolving issues and concerns affecting programme scope and implementation. Co-ordination is more programme-based since while the ideal working relationship is for each agency to work on their respective mandates or activities, specific assistance is sought by an agency from another agency in many programmes and projects. Likewise, the ITG agencies also co-ordinate with other government departments and offices that play critical roles in export development. Export programmes are initiated as a result of strategies drawn up by the product and market teams and from the respective ITG agencies. The programmes are conceptualized with action plans during the ITG planning sessions as well Mancom meetings. Export performance is monitored monthly by EDC and the ITG agencies, specifically BETP. Other measures such as the extent of strategies implemented, policies adopted, enterprise assisted, etc. are also monitored against the targets set. These are done through co-ordination with concerned agencies and the private sector. The Bureau of Export Trade Promotion (BETP) The product/market teams, each chaired by export industry champions and whose members come from the ranks of BETP specialists, are more closely linked with the industry and the private sector, as they become the sounding board of the EDC for issues and concerns that are to be addressed by the networking committees. Such issues may be industry-specific or cut across several sectors, such as market promotion, product quality, procedures simplification, financing, material supply chain, productivity, agricultural policies and local government policies. BETP provides the draft strategy and recommendatory measures for each of these issues. The Center for International Trade Expositions and Missions (CITEM) CITEM organizes and implements international trade fairs and missions. Of particular importance among CITEM s fairs is the Manila FAME International, which seeks to institutionalize Manila as a source of top-quality Philippine products and to establish the show as a regular event for foreign buyers who source products from Asia. By organizing the fair, CITEM strengthens its linkages with relevant ITG agencies to ensure a successful show twice a year. CITEM co-ordinates with BETP for market profiles and export data provided to MFI exhibitors; with PTTC for exhibitors training tailored to their needs; with PDDCP for design direction and developing new products; and with FTSC for assistance in buyer campaigns abroad.

3 The Foreign Trade Service Corps (FTSC) FTSC provides direct, frontline trade promotion work in overseas markets and gathers commercial intelligence for exporters. It is equally active in investment promotion, contacting, and facilitating visits by, investors to the Philippines. Among the broad range of services that are needed to support the export sectors, FTSC undertakes some of the most crucial activities to facilitate exports from and investments into the country, by providing its services at the very source of buyer and investor opportunities. FTSC s challenge is to deliver services promptly and accurately. Information technology, such as e-promotion and e- marketplaces, has made it possible to transmit information at the click of a button. It has allowed buyers and suppliers to do business quickly. FTSC should be able to harness this technology to enhance the delivery of its services. The Philippine Trade Training Center (PTTC) PTTC s thrust has always been to develop world-class exporters through its training programmes. Within the ITG, it is the only agency devoted to train exporters and business persons. This positions PTTC at the forefront of developing the capabilities, particularly of the SME sector, in the areas of international marketing, quality and productivity, e- commerce, and trade fair management and participation. Other ITG agencies tap PTTC for any project that has a training component on it. Additionally, through PTTC s partnership with local and foreign institutions, its training programmes reach a wider base and are coordinated more efficiently. It was PTTC s linkage with local trade and industry organizations and government institutions that created greater impact in many industries. PTTC coordinated a multitude of seminar packages for or in partnership with these organizations. The Product Development and Design Center of the Philippines (PDDCP) PDDCP promotes design as a tool for improving the quality and competitiveness of Philippine products by serving the design needs of industry and entrepreneurial groups and associations. Manufacturers are provided with design services based on their specific needs and are referred to other agencies or support systems to ensure that the quality and standards of product or package design and development objectives are met. Through its trainers training programme, technologies and technical know-how that ensure the success of product design and development objectives are transferred to identified beneficiaries who will utilize the newly-acquired knowledge in product development. PDDCP is also involved in technical committees of the Bureau of Product Standards in reviewing and formulating standards for school furniture. The Garments and Textile Export Board (GTEB) The GTEB has evolved from a regulatory agency into a trade support body that oversees the development and promotion of the garments and textile export industry. To strengthen public and private sector linkage, a Garments Advisory Council composed of representatives from major garments and textile associations was formed. The Council meets regularly with GTEB officials and provides inputs for policy and strategy formulation, raises current issues and problems faced by the industry, and co-ordinates the implementation of GTEB projects requiring major private sector participation. With the impending quota phaseout in 2005 under the WTO Agreement on Textiles and Clothing, export promotion and development strategies have been designed, in the short-term, within the limits set by the existing quota regime, and in the medium-term, beyond the constraints imposed by garment quotas. The Philippine International Trading Corporation (PITC) PITC is a state trading company and the only ITG agency that is financially self-sustaining through profits realized from its engagement in export and import trading operations. A key component of its export activities is to identify and develop new manufacturers and

4 subcontractors in the countryside who can participate as suppliers in PITC s export programmes. Grouped together, these entities form PITC's pool of suppliers from which the company's requirements for the export market is derived. In a typical export transaction, PITC is designated as a buying agent in the Philippines by a foreign importer and is tapped to take whatever action and services are necessary to ship goods of the desired specifications, quality, quantity and price to the consignee indicated within a delivery period. In essence, PITC while acting as buying agent for an importer, is conversely performing marketing functions for local manufacturers and subcontractors by bringing them export orders they can serve. Is it the best approach? In a paper prepared on the Philippines for the 1999 Executive Forum, strategic approaches and solutions were presented that had helped evolve export development into a national effort. These approaches were: Signing into law of the EDA enshrining exports as a priority economic strategy; Integrating the export strategy (PEDP ) into the overall economic development plan (MTPDP ); Promoting public-private sector partnership through the EDC (networking committees) and strategy implementation teams (product/market teams); Designating one umbrella organization (Philexport) to represent the sector s concerns and interests; Implementing export promotion in tandem with investment promotion strategies; and Adopting the clustering approach on the basis of common priority support needs of various industries. The approaches are in place, and are being implemented with effectiveness. In particular, the industry-clustering programme was advocated by EDC to DTI s Regional Operations Group (ROG). The identification, analysis and planning for specific clusters are carried out in partnership with the private sector and other government agencies, including the local government units. Presently, the establishment and monitoring mechanism of industry clusters are being institutionalized so that the work programmes continue with the change in government. This has also been resorted to because newly elected government officials have not pursued some existing clusters. The change in administration, particularly of the DTI top management, has drastically changed the implementation of the PEDP. During the first stages of PEDP s implementation in 1999, all systems were in place. For example, the product strategy/market strategy teams institutionalized even prior to 1999 have not been as active now as they were used to be. Many of the technical working committees (TWCs) established as a venue for the government and the private sector to address specific concerns are also inactive, and only a few remaining sectors continue with their meetings. The National Communications Plan as embodied in the PEDP has not been implemented in view of the delay in setting up the implementing structure in the DTI. The structure referred to is the PEDP Management Committee which will review the strategy formulation prioritized by the product and market teams. As far as the ITG agencies are concerned, perennial overlaps with each other on functional activities have been experienced. Problems also arise when one agency wants to shine and draw recognition for programmes that result in a decreased co-ordinative effort of the agency and less commitment from other agencies. Similarly, operating procedures followed

5 by ITG on PEDP implementation are changed or reversed whenever there is a change in the DTI management. Despite some drawbacks, the co-ordinative mechanism already in place between EDC and its networking committees, the product/market teams and the ITG agencies vis-à-vis the private sector and other government agencies has been substantial in leading to best practice in the process of national export strategy management. Efforts are currently being exerted to link the product/market teams with the regional/sectoral clusters. The TWCs are being revived to serve as a forum for industry champions, product/market specialists and the regional cluster representatives. As to ITG s response to the question of whether its trade support network is working, the answer is categorically YES. The PEDP provides a definitive direction and identifies the specific initiatives and programmes that will help achieve the objectives of the export strategy and meet the export targets. Based on this master plan, the EDC as co-ordinating body and the ITG agencies interact with each other and expand their networking resources to incorporate into their respective annual work programmes the components and activities assigned to them. The key objective of the Philippine Government s trade support network, as represented by the EDC and ITG agencies, is to develop the widest possible consensus regarding the overall export development programme. This will require consultations at both national, regional and local levels to ensure that the strategies and activities outlined in the plan are well-understood and well- accepted, and that they will be put into effect within a high degree of cooperation, collaboration and networking.