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Manufacturing key to economic growth

Businessmen have welcomed the revival of the manufacturing sector as a growth engine and as promised by the new administration. But the private sector is still waiting for the blueprint that will make the sector resurgent.

“Manufacturing growth is high and that’s a good sign. However, that’s a carryover from the past administration,” businessman and beverage magnate Alfredo Yao said.

“The challenge now is how to sustain, more so, surpass the gains,” he said adding manufacturing is a base of growth in any country, unless the agriculture is strong enough to push the local economy.

Industry data showed that the manufacturing sector grew by an average of 12.7 percent in the last six years from 2010 to 2014 from 0.4 percent in 2005 to 2009.

Businessmen like Yao, however, sees disincentives like taxes as deterrent to the manufacturing sector.

“For private companies like us, the real challenge is the proposed additional tax measures on raw materials. As a beverage producer, my company is very much concerned about the proposal to increase taxes on sugar as sweeteener. For the households the increase may not be so much, but if you are a producer of beverage consuming tons and tons of the sweetener, it is big deal,” said Yao.

The Lower House is considering to impose a sugar tax of P10 per liter for beverage.

The measure, for one, will effectively increase the price of softdrinks by 70 percent. A liter of softdrink is equivalent to four bottles of the beverage adn when translated, softdrinks will be sold at P6 per bottle from the current price of P3.50 per bottle,.

“Sugar is a very sensitive product, it is a poor man’s trade. And if raw materials like sugar are burdened with additional taxes, the industry will become uncompetitive,” Yao said.

Yao noted that the new thrust on manufacturing is vaguely encapsuled in the government’s 10-point agenda. The agenda actually did not cite a specific, or even a general plan, for manufacturing.

Manufacturing could broadly fit into the first and third agenda, which promised to continue and maintain current macroeconomic policies, including fiscal, monetary, and trade and increase competitiveness and the ease of doing business, respectively.

The Trade Department and the Board of Investments have launched several projects to pursue an integrated approach in implementing the manufacturing resurgence program.

Board of Investments director Corazon Halili-Dichosa said the department expects no less than the full support of the new administration to carry on the programs of the agency.

“We feel that the budgetary requirement should be higher next year. There are more industry roadmaps now that will require additional funding,” she said.

The BoI monitors around 40 roadmaps of several industries and is working on a budget of P110 million for 2016.

The programs aim to resurrect the manufacturing industry based on a roadmap finalized in 2013 and adopted and budgeted for 2014.

She added the program would need more funding to migrate to higher technology production with higher value added content, especially for medium technology in electronics.

Topics: Manufacturing , economic growth
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