Improved business environment to boost manufacturing growth

THE NATIONAL ECONOMIC and Development Authority said efforts to improve the business environment should be ramped up to help manufacturing grow, which is on a declining trend.

The Philippine Statistics Authority (PSA), in its Monthly Integrated Survey of Selected Industries (MISSI), reported the sixth consecutive month of decline for the sector this year. The year-on-year growth of the Volume of Production Index (VOPI) shrank by 10.5 percent while the Value of Production Index (VAPI) declined by 9.6 percent.

“We need to instil a sense of urgency in government to implement economic reforms. Manufacturing output will likely remain muted in the near term as business and consumer outlook for the third quarter of 2019 turned less upbeat,” Socioeconomic Planning Secretary Ernesto Pernia said.

Pernia said production could be stifled as the seasonal slack in domestic demand and business activities during the rainy season limits overall manufacturing growth. “Moving forward, domestic demand expansion is needed to support the growth of manufacturing, especially given the slowdown in global demand” he said. “The now markedly slower inflation rate, which is back to government’s target range, bodes well for producers of manufactured goods.”

He said lower prices of food staples such as rice, the anticipated downward adjustment in electricity rates, and the recent peso appreciation tempered inflation pressure in July. Pernia said that the significant reduction in the intensity of El Niño will also soften the risk to the supply of raw materials for the food manufacturing subsector.

As of end-july 2019, only nine provinces are expected to experience drought compared to 32 provinces as of end-june 2019, he said. “The government has been working to strengthen the transport and logistics sector as it is crucial to prop up manufacturing growth,” Pernia said.

A joint administrative order among various relevant agencies has been proposed, which aims to reduce shipping costs and port congestion. “The passage of the amendment to the Public Service Act is expected to encourage competition in the air, maritime and road transport, as well as logistics services, and enhance the productivity and efficiency of service delivery,” Pernia said.

Moreover, the issuance of the Implementing Rules and Regulations of the Ease of Doing Business and Efficient Government Service Delivery Act is expected to boost cooperation among agencies, as well as encourage the alignment of efforts to address bureaucratic concerns.

“We need to also accelerate public works spending during the second semester of 2019 which will contribute to increases in employment and disposable incomes, thus raising the demand for consumer goods,” he noted. (With additional report from Cebu Examiner.)