USAID/Philippines commissioned the Duke GVC Center to undertake two studies for the Philippines Department of Trade and Industry Board of Investments in support of the country’s new industry development policies. The objective of the study was to understand the participation of the Philippines in various value chains. The first project focused on manufacturing GVCs and included aerospace, automotive, chemicals, electronics & electrical, paper and shipbuilding. The second focused on agricultural industries and examined the coffee, cocoa, rubber, mango sectors. The ultimate goal was to provide a set of recommendations to the government of the Philippines to enhance the participation and upgrading in the industries selected.

This study was made possible by the generous support of the American people through the United States Agency for International Development (USAID). The contents are the responsibility of the Duke GVC Center and do not necessarily reflect the views of USAID or the United States Government.

The Philippines in the Shipbuilding Global Value Chain

This report provides an overview of the shipbuilding global value chain and the Philippines current position and opportunities for upgrading. It was prepared for USAID/Philippines, through the Science, Technology, Research and Innovation for Development (STRIDE) Program.

The Philippines in the Rubber GVC

This report uses the Global Value Chain (GVC) framework to examine the Philippines’ position in the global rubber industry and identify opportunities for upgrading for the sector. While the nation is situated in the belt of rubber-producing countries close to the Equator and often ranks among the top 10 exporters of raw or semi-processed rubber, the domestic sector consistently generates the lowest unit value for its exports of any country in the top 15. Furthermore, the industry appears to have undergone economic downgrading in recent years, with businesses that used to process raw rubber into crumb rubber instead sending unprocessed natural rubber—cup lumps—to plants in Malaysia. As the Philippines investigates ways to increase its output of higher-value rubber goods, especially in growth sectors such as health products, the challenges associated with production and initial processing will need to be first addressed to enhance the country’s competitive position.

The Philippines in the Cocoa-Chocolate GVC

The cocoa-chocolate global value chain (GVC) is a multi-million dollar industry that connects cocoa bean producers, often located in developing nations, with manufacturers and consumers of chocolate. The demand for chocolate has grown rapidly in the last decade, encouraging countries to expand and improve cocoa bean production. Taking advantage of increased global demand, the Philippines is interested in participating in the sector.

The Philippines in the Mango GVC

This report uses the Global Value Chain (GVC) framework to examine the role of the Philippines in the global mango industry and identify opportunities for the country to upgrade. The globalization of mango production and consumption is a relatively new phenomenon that is experiencing rapid growth, although the export market is quite concentrated and dominated by developing countries located in the Tropics. The Philippines holds a relatively significant position in the mango GVC, and in 2015, the country ranked seventh amongst exporters of fresh and dried mango, with US$91 million in exports and a 4% share of the global market. However, despite climatic advantages, fresh mango exports have declined considerably in recent years due to failure to meet strict SPS requirements in key markets.

The Philippines in the Coffee GVC

This report uses the Duke GVCC Global Value Chain (GVC) framework to examine the Philippines’ position in the global coffee industry and identify opportunities for upgrading for the sector. While the country has a rich history as being a significant exporter of beans, a variety of impediments—coffee rust, shifting dynamics within the global industry, and insufficient government support—have caused the domestic industry to atrophy in recent decades. The Philippines is an important coffee market in other respects. The country has been a leading importer of instant coffee by volume since 2011 and is projected to become one of the world’s largest five consumers by 2021. The robust demand has, in turn, boosted fortunes of businesses participating in the retail segment in the country. In an effort to help domestic producers take advantage of both the local and global markets, policymakers have engaged with the stakeholders to facilitate economic upgrading. In order for those efforts to gain traction, further process and product upgrades are necessary to improve the quality of Filipino coffee.

Philippines Participation in GVCs: Analysis and Findings

Key findings for the Philippines in Manufacturing Global Value Chains project were presented at a public forum at the Makati Diamond Residential Suites in Manila on June 2, 2016. The presentation highlighted the position of the Philippines in each of the five industries (aerospace, automotive, electronics & electrical, chemicals and paper) and focused on potential upgrading trajectories for each.

The Philippines in the Paper Global Value Chain

This report uses the Duke Global Value Chain (GVC) framework to examine the role of the Philippines in the global paper industry and identify opportunities for upgrading. The Philippines’ paper sector is a domestically oriented industry that provides significant indirect employment opportunities for wide swaths of workers as well as indirect exports for sectors such as electronics, food and beverage, and cosmetics. However, the country’s overall participation in the paper GVC is limited, with raw material constraints hindering export development. Abaca pulp production, a niche product category that uses the Manila hemp plant to generate specialized outputs such as tea bags and bank notes, is the country’s most dependable export, but even with the export value of abaca pulp approaching an all-time high in 2014, the overall paper industry only generated US$127 million in export revenue, 54th among 193 countries in the world.

The Philippines in the Chemical Global Value Chain

This report uses the global value chain (GVC) framework to examine the role of the Philippines in the global chemical industry and identify opportunities for the country to upgrade. The Philippine chemicals sector is growing rapidly alongside economic expansion and a revival in manufacturing. By 2013, the chemicals sector as a whole accounted for 6.7% of GDP. Chemicals exports reached US$2.2 billion in 2014, approximately 3.5% of the country’s export basket. The sector’s expansion has outpaced both global and regional trade; with a compound annual growth rate of 13% since 2007, three times as fast as global exports, and twice as fast as Asian regional exports. Participation in the export market is based primarily on commodity products in the oleochemicals and petrochemicals sub-sectors. Within these segments, exports are driven by a small number of products, with the top 10 accounting for approximately three- quarters of all exports. While the country is a small player in the global chemicals trade, accounting for just 0.2% of exports in 2014, it has generally been successful in carving out a presence in these niche products, and is one of the global leaders in most of its top product categories.

The Philippines in the Electronics and Electrical Global Value Chain

The electronics industry has been the backbone of Philippine manufacturing exports over the past decade. This report uses the global value chain framework to support the country’s efforts to expand beyond its role in semiconductor assembly and testing towards higher value products and market niches. In addition, it examines potential to leverage synergies with other manufacturing sectors in the country.