38th Joint Meeting of the Philippines-Japan

Economic Cooperation Committees

“Promoting Philippines-Japan Business

through Innovation and Digitalization”

SECRETARY RAMON M. LOPEZ

Department of Trade and Industry - Philippines

27 September 2021

The PH-JP Bilateral Trade Relations

9.88

10.91 10.81 10.57

8.61

6.08

11.67

10.85 10.32

10.67 10.03

6.20

-

2.00

4.00

6.00

8.00

10.00

12.00

14.00

-

12.00

2016 2017 2018 2019 2020 2021(Jan-Jul)

Imports Exports

PH-JP Bilateral Trade in Goods Performance

2016 -2020 (USD Billion)

2020 PH-JP Trade in Goods

Key Performing Commodities

Commodity Value (USD Thousands)

Digital Monolithic Integrated Circuits 980,685

Ignition Wiring Sets And Other Wiring Sets 920,049

Bananas, Including Plantains 714,517

Other Vessels For The Transport Of Goods And Other

Vessels545,033

Nickel Oxide Sinters And Other Intermediate Products 401,991

Source: Tradelines Philippines

Exports of Goods

Commodity Value (USD Thousands)

Digital Monolithic Integrated Circuits 571,164

Materials, Accessories And Supplies For Electrical

And Electronic Machinery, Equipment And Parts498,660

Parts And Accessories Of The Machines Of Automatic

Data Processing Machines (84.71)487,498

Other Materials, Accessories And Supplies For

Semiconductor Devices279,661

Other Digital Monolithic Integrated Circuits, N.E.S. 257,003

Imports of Goods

The Philippines and Japan continues to maintain a strong trade engagement amidst the pandemic reporting

US$ 18.65 Billion in Total Trade Value; which makes Japan the 2nd biggest trade partner of the Philippines.

-Agriculture, Forestry, and Fishing (-0.1%)

Manufacturing (22.3%)

Services (9.6%)

Industry (20.8%)

Gross Domestic Product …

-30.0

-20.0

-10.0

0.0

10.0

20.0

30.0

Gro

wth

Rate

s (

%)

Philippines is now showing signs of economic recoverySince the gradual reopening of the economy in 2020Q3, the picking up of business & consumer confidence, and the

optimism in vaccine roll-out, 2021Q2 is now showing signs of gradual recovery.

2019Q1 2019Q2 2019Q3 2019Q4 2020Q1 2020Q2 2020Q3 2020Q4 2021Q1 2021Q2

Agriculture, Forestry, and

Fishing 0.5 0.7 3.0 0.8 -0.3 1.6 1.2 -2.5 -1.3 -0.1

Industry 5.0 3.6 6.0 7.1 -2.5 -21.8 -17.6 -10.6 -4.4 20.8

Manufacturing 5.0 2.7 1.4 5.6 -3.3 -21.2 -10.4 -4.9 0.5 22.3

Services 7.3 7.4 6.9 7.4 0.1 -17.1 -10.6 -8.0 -4.1 9.6

Gross Domestic Product 5.9 5.6 6.3 6.6 -0.7 -17.0 -11.6 -8.3 -3.9 11.8

Innovation in the Philippines remained resilient despite COVID-19 setbacks

GII: Philippines continues to perform above expectations for its level of development

5054

737374

83100

2020201920182017201620152014

51

2021

2021 Global Innovation Index Rankings

• Philippines is considered an

”innovation achiever” for 3rd year

Indicator Global Rank

High-tech imports, % total trade 1

High-tech exports, % total trade 1

Firms offering formal training, % 8

Utility models by origin/bn PPP$ GDP 8

Creative goods exports, % of total trade 10

ICT Services exports, % of total trade 13

Graduates in science and engineering, % 19

GDP/unit of energy use 21

Applied tariff rate, weighted avg., % 22

Domestic market scale, bn PPP$ 27

Philippines Strengths:

E-commerce adoption in the Philippines has also grown

from 70% in 2019 to 76% in 2020 and 80.2% in 2021.

Embrace Industry 4.0

Upskill/Reskill Workforce

Integrate Production Systems

Ease Of Doing Business

Innovative SMEs & Startups

Innovation & Entrepreneurship Ecosystem

• Use and adapt new technologies

• Simplification of processes, automation

• Power, logistics, infrastructure

• Upgrade education curricula

• Skills training programs

• Improve digital skills

• Prepare SMEs for Industry 4.0

• Build startup ecosystem

• Link manufacturing with agriculture & services

• Participation in global value chains

• Promote research commercialization

• Creation of new products, services, business models

Inclusive Innovation Industrial Strategy (i3S)

Priority Industries for Domestic and Export Markets

Auto & Auto Parts Chemicals Agribusiness Furniture, Garments Creative Iron & Steel,

Tool & DieElectronics &

Electrical

Shipbuilding &

Shiprepair

Aerospace &

Aircraft MaintenanceConstruction Transport, Logistics TourismIT-BPM

E-Commerce

Digital Economy

Climate Change,

Mobility Solutions

Considering Global Value Chain Participation, Missing Markets, Employment, Innovation and R&D, Regional Development, Linkages, Poverty

Reduction, Spillovers

Vehicle Technology –

connected car technology

Resilient Technology

Audio, Video, Edtech

Smart

Assistants

E-gaming

Digital Health

Smart Buildings &

Smart Home Technology

A vision for

the FUTURE

Creating new products or solutions with technology building blocks

Voice Recognition, AI, AR, robotics, 5G connectivity, and IoT

#1ROBOTICS

ENGINEER

CYBERSECURITY

SPECIALIST#2

CUSTOMER

SUCCESS

SPECIALIST

#3

DATA

SCIENTIST#4

SALES

DEVELOPMENT

REPRESENTATIVE

#5

FULL STACK

ENGINEER#6

DEV-OPS

ENGINEER#7

DATA

ENGINEER#8

JAVA SCRIPT

DEVELOPER#9

CLOUD

ENGINEER#10

Source: LinkedIn

Top Emerging Jobs in the Philippines

Engineering &

Technology

39%

IT Related

36%

Mathematics1%

Medicine & Health Related

20%Sciences4%

25.7

28

30

37

38

41

Opportunity to Upskill and Reskill our Young….

…and highly educated workforce

Source: Commission on Higher Education

Me

dia

n A

ge

790,000+ annual college graduates

200,000+ in the engineering, information

technology and medical-related fields

Industry 4.0 is already reshaping the

landscape of employment in the PhilippinesAI, Data Analytics, and AI-related jobs are on the rise

Source: DTI Survey on the Technology Utilization Status of Manufacturing Companies in the Philippines

77%

67%

microenterprises are

familiar with

Industry 4.0

small and

medium enterprises are

familiar with

Industry 4.0

83%

largeenterprises are

familiar with

Industry 4.0

Primary Considerations for Shifting to Industry 4.0

28%

Improvement in

Productivity and

Competitiveness

13%

Innovation and

Technology

Advancement

13%

Cost of

Investment &

Funding

10%

Market Conditions

7%

Others

29%

Not Considering/

Unfamiliar

Barriers to Industry 4.0 Transformation

#1

Lack of financial

capability

#2

Unfamiliar/Not

Considering

#3

Other Company

Reasons

#4

Market

Conditions

#5

Lack of Skills,

Knowledge, and

Expertise

#6

Poor Digital

Infrastructure

Internal Corporate Strategy, Prospective Loan Application,

In-House R&D, and Skills Development and Management Training are

the most common actions to overcome Industry 4.0 transformation barriers.

Industry. 4.0 Openness of Philippine Manufacturing Enterprises

Industry X.0

Information, Education, and Communication Firm Readiness Assessments

Roadmap Development

Simulation and Pilot Demonstration

Pursuing & Sustaining Industry 4.0

12

3

4

5

Host demonstrations, simulations and and case applications of Industry 4.0

technologies that enterprises, especially MSMEs, can access to determine actual

impact of recommended technologies in the roadmap

Industry 4.0 Pilot Factory & SME Academy

Outlining a clear roadmap towards Industry 4.0-ready factory based

from the SIRI assessment

Industry 4.0 Roadmaps

Industry 4.0 Workshops Introduce Industry 4.0 tools and concepts to government,

industry, and academe to achieve critical mass

Development of skills frameworks for

industries’ reskilling/upskilling path

Philippine Skills

Framework

Incentivize Industry 4.0 upgrading

activities through process innovation

CREATE Incentives

Smart Industry Readiness Index Assessments

(Digital Maturity Assessments)

With support from:

AI services to optimize production

National Center for

AI Research

DTI’s Industry 4.0 Approach: Awareness to AdoptionDTI provides support throughout the journey of Industry 4.0 transformation of manufacturing enterprises covering all facets of production: skills, financial support, and technology expertise Industry 4.0 Smart Factory

Industry 4.0 Workshops

Conducted Industy 4.0 Workshops to more than

200+ C-level company executives

of leading manufacturing firms in the Philippines to

introduce Industry 4.0 concepts and technologies and

discuss how these can be leveraged to future-proof their

factories.

Sectors: automotive, electronics, aerospace, chemicals,

food manufacturing, and the construction materials

sectors.

1. Assessment of the Industry 4.0-readiness of the

company’s production dimensions;

2. Benchmarking of the company’s current performance

compared to its local and international peers in the

industry which have also taken the SIRI Assessment;

3. Determination of the prioritized areas for improvement

based on their impact, viability, and alignment to the

company’s overall growth strategies.

Piloting 21 companies for 2021

Sectors supported: Food and Agri-business, Automotive, Electronics,

Textile/PPE, Chemicals

Smart Industry Readiness Index Assessment:

Sectoral

Information

Occupations/Job

Roles

Skills

Description

Career

Pathways

Training

Programmes

Launched in 2021, the PSF is a common reference or language that employers and

workers share in order to ensure the match between jobs and skills.

For Employers: Identify the must-have skills and competencies for

potential employees; Design HR and talent development plans

For Job-Seekers: Define ways forward or upward in a particular

industry by specifying the skills and competencies needed to be

acquired

For Educational Institutions: Use the skills framework to revise existing curricula or design new courses

Philippine Skills Framework (PSF) Initiative

The PSF Initiative was launched last 25 June

2021 through a Memorandum of Understanding

(MOU) among DTI, DA, DepEd, DICT, DOLE,

DOST, DOT, CHED, PRC, and TESDA.

Priority Sectors: construction, creatives, food (agriculture and fishery); health

and wellness; IT-BPM; logistics and supply chain; manufacturing; and tourism.

a

Government

Universities

Funders

Event

Meetups

R&D Labs,

S&T Parks

Co-Working

SpacesAccelerators/

Incubators/

Innovation Hub

Large, Small, Medium

Enterprises, Startups

Service

Providers

Support

Organization

REGIONAL INNOVATION &

ENTREPRENEURSHIP

ECOSYSTEM

REGION V – Legaspi

Pili

REGION VII – Cebu

Electronics

REGION X – Cagayan de Oro

(Processed Food) & lligan

REGION XI – Davao

Functional Food

REGION II

Cagayan

REGION III

Central Luzon

REGION IV-A

CALABARZON

REGION IX

Zamboanga

Building Regional Inclusive Innovation Centers (RIICs):Strong Government-Industry-Academe Collaboration

Networks of creative communities innovative and entrepreneurial Filipinos, who are driven by their desire

to do things better, provide solutions, make better products, and address market demands.

BRIDGE

BICOL

AI technologies can unlock $1 trillion to Southeast

Asia’s GDP; $92B to PH GDP.50+ tech startups in the Philippines are using AI

as a core technology in their business model

Indonesia

12% | $366 billion

Thailand

13% | $117 billion

Singapore

18% | $110 billion Malaysia

14% | $115 billion

Vietnam

12% | $109 billion

Philippines

12% | $92 billion

Economic impact of AI in 2030 (% of 2030 GDP)

Source: EDBI and Kearney (2020)

Applications cover a wide range of industries including

fintech, e-commerce, advertising, healthcare, and IoT

Specific objectives:

1. To maintain the regional and global competitiveness of local industries

noting that AI is one of the biggest drivers of innovation for enterprises.

2. To identify key areas (in both R&D and technology application) for

investing both time and resources of government, industry, and society.

3. To recommend ways for effectively fostering a triple-helix (Government-

Industry-Academe) R&D collaboration, essential to national development.

4. To suggest approaches for preparing the future workforce for the jobs of the

future.

5. To attract the biggest industries to set shop in the country, and thus

generating more jobs for the Filipino people.

Philippines as a Center of Excellence in Artificial Intelligence

National AI Strategy for the Philippines focuses on how AI can be used to uplift

he lives of our people, improve the productivity of our enterprises, and

enhance the competitiveness of our economy.

Focus Areas:

• Manufacturing | Services | Precision Agriculture | Construction | Finance/banking | Healthcare | Resilience Technology |

Smart Cities

National Center for AI Research (N-CAIR)Accelerating Innovation and MSME Digitalization with AI

The AI Center is a public-private partnership hub for data scientists and researchers to:

• Perform collaborative AI R&D and technology application among government agencies, researchers,

universities, research institutes, startups, and MNCs;

• Offer consultancy services and AI tech products to support digital transformation of local industries,

generate investments, and create employment;

• Conduct data literacy programs and develop learning modules to upskill and reskill the workforce;

• Attract leading global firms to set up R&D activities in the country.

• Export enterprise: export at least 70% of its total production or output

• Domestic market enterprise (DME): any enterprise registered with IPA other than export enterprise

• ITH: income tax holiday

• SCIT: special corporate income tax rate for export enterprise, tax rate of 5% GIE

• ED: enhanced deductions

YEARS OF INCENTIVES

EXPORT ACTIVITIES DOMESTIC MARKET ACTIVITIES

LOCATION TIER I TIER II TIER III TIER I TIER II TIER III

NCR

14(4 Years of ITH

and 10 Years of

ED/SCIT)

15(5 Years of ITH

and 10 Years of

ED/SCIT)

16(6 Years of ITH

and 10 Years of

ED/SCIT)

9(4 Years of ITH

and 5 Years of

ED)

10(5 Years of ITH

and 5 Years of

ED)

11(6 Years of ITH

and 5 Years of

ED)

METROPOLITAN AREAS AND AREAS

OUTSIDE OF AND CONTIGUOUS OR

ADJACENT TO NCR

15(5 Years of ITH

and 10 Years of

ED/SCIT)

16(6 Years of ITH

and 10 Years of

ED/SCIT)

17(7 Years of ITH

and 10 Years of

ED/SCIT)

10(5 Years of ITH

and 5 Years of

ED)

11(6 Years of ITH

and 5 Years of

ED)

12(7 Years of ITH

and 5 Years of

ED)

ALL OTHER AREAS

16(6 Years of ITH

and 10 Years of

ED/SCIT)

17(7 Years of ITH

and 10 Years of

ED/SCIT)

17(7 Years of ITH

and 10 Years of

ED/SCIT)

11(6 Years of ITH

and 5 Years of

ED)

12(7 Years of ITH

and 5 Years of

ED)

12(7 Years of ITH

and 5 Years of

ED)

Philippines’ fiscal incentive system is now innovation-drivenUp to 17 years of incentives for activities that are export-oriented, innovation-intensive, and located far from NCR

Stronger PH-JP Partnership in PJEPA and RCEP

PH remains committed in concluding the General Review of the PJEPA and that while both the Philippines

and Japan are parties to the RCEP and the AJCEP, the bilateral track still remains to be the best option

for parties to undertake further mutually beneficial commitments.

Japan Economic Partnership

Agreement (PJEPA)

PJEPA is a core element of the strategic

partnership between PH and JP, and has been

mutually beneficial throughout its 13-year

implementation.

One of the main objectives for the PJEPA

General Review is to improve market access for

some of the PH’s top agricultural and industrial

export products to Japan.

2nd 2020 Top Trading

Partner of the PH 5th 2020 Highest

Investment Source 1st 2020 Export Market and

PH Product Destination2nd 5th 1st

Investments in new technologies, digitalization, and innovation are

investments on resilience, sustainability, competitiveness, and

long-term business growth which are all necessary as we enter

our economic recovery.