News article from Bworldonline.com by K.A. Martin

The Makati Business Club Vice-Chairman Roberto Ocampo said that public-private partnership (PPP) program would be a channel for the government to acquire better investment. He emphasized that PPP projects particularly in infrastructure would aid in achievingsustainable growth. Hence, the 21 projects which are related to transit lines, expressways, roads, airports and school infrastructure projectare already lined up for PPP.These projects have already received approval from Investment Coordination Committee (ICC) Cabinet Committee and only awaitsfor President Aquino III’s final approval.1

From this news, the relation of iron and steel industry may not be known initially. However, steel is highly utilized in this type of projects. Sincethe output of this industry is mainly used as a key input by other sectors such as automotive, shipbuilding, electronic, packaging, and in the constructionof buildings, railroads and bridges, it suggests that steel is one of the basic industries that contribute significantly to achieving development and industrialization.

The record of Sectoral Breakdown of Philippine ASC (2008) showed that 74% of total supply of iron and steel products is accounted by construction, 19% for light and heavy fabrication such asautomotives, and 7% packaginglike tin plating for canned goods. Recently, from 2011 record, consumption of construction increase to 81%, light and heavy fabrication decrease to 14%, while packaging and others constitute to 5% of the total demand for steel. As of now, the government continues to enhance performance of iron and steel indirectly through recent projects similar to 3 million units backlog from housing development, and public-private partnership (PPP) program for infrastructure development. And because of the continuous increase in demand for iron and steel in construction, the industry acknowledges the need to produce more billets locally. These semi-product billets are then casted as structural, bars, rails mills, pipe and tubes used for construction.

In the article, it was also stated that Energy Secretary Jose Rene D. Almendras said that more energy investments are needed to support the growth of the economy and that there is a need to find as much energy sources in the Philippines. The efforts to be done to address electricity issues would highly affect iron and steel industry.  One of the industry’s Achilles heel is identified to be energy consumption because it generally accounts for 20-45% of the entire industrial energy demandsince it requires a huge amount of heat to cast steel into different forms.

Nevertheless, with a generally optimistic macroeconomic outlook because of the vibrant real estate sector that is supported by sustained OFW remittances, an additional 3 million units backlog from housing development, and most speciallythe public-private partnership (PPP) program of the government on infrastructure development, there is an optimistic outlook towards steel consumption.

[1]K.A. Martin, “Power, factory, infrastructure ventures sought for growth,” Business World, July 25, 2012, Economy Section, http://
http://www.bworldonline.com/content.php?section=Economy&title=Power,-factory,-infrastructure-ventures-sought-for-growth&id=55772 (accessed July 26 2012).



Authors:
Agas, Tyrone Dale
Molleno, Paolo Miguel
Panganiban, DanicaLeane

 

News article from Journal.com.ph by Ryan Ponce Pacpaco

The Charter change issue has been revived by Senate President Juan Ponce Enrile and House Speaker Sonny Belmonte. But this time the Charter change that they were proposing focused only on re-strategizing the restrictive economic provisions of the 1987 Constitution, and not dealing with the other aspects. According to Belmonte, if the country wants an investment-led growth, it must reform the Constitution, so to get rid off the deficiencies of the existing FDIs policies, which imposes the 60-40 Filipino-Foreign rule ownership.

The Iron and Steel Industry has been revived by the Bureau of Custom (BOC) in the 2012 Investment Priority Plan (IPP) because of its attractiveness to foreign investors. Good news for the said industry (especially now that its major consumer, Construction, was projected to boom) and the local economy. However, the plans may not go well.  Many projects may end up falling short of their target growth and employment generation. Or worse, investors may pull-out their investment from the industry as what happened in Ford Philippines in Laguna because of high cost of doing business. The aforesaid case is related to the Iron and Steel Industry, with its skyrocketing utility cost. But more than that, the 60-40 Filipino-Foreign rule ownership exacerbated their problem. In that note, there is maybe a need for reforming FDIs policies.

The Philippines recorded a sluggish Net FDIs growth from 1990-2009, 0.6%-1.9%, second to the lowest among ASEAN-6.[1] A study showed that fiscal policy (e.g. tax incentives) were proven inadequate to boost FDIs. In fact, those efforts by the government just increased transaction costs as some policies were redundant, which means, these investments would have been carried out even without the incentives.

Therefore, the growth and development of the Iron and Steel Industry can be guaranteed and speed up by first amending the restrictive economic policies in our Constitution. By doing so, the country can create a good investment climate necessary.

[1] Arangkada Philippines. “Low Foreidn Direct Investment Flows,” www.investphilippines.info http://www.investphilippines.info/arangkada/agribusiness/ (accessed July 20, 2012)

Authors:
Agas, Tyrone Dale
Molleno, Paolo Miguel
Panganiban, Danica Leane
 

Article from Steelorbis.com

     One determinant of the growth of any industry is the expansion of demand and the supply structures. In the news given, the growth of the Philippine Iron and Steel Industry is explained by the behaviour of its dominant consumer, which is the Construction Industry. Last year, the Iron and Steel Industry posted growth around 3-5%, which is lower than the previous year. This is highly caused by a 6.4% decline of the growth of the Construction Industry. A rebound of at least 10% however is expected to happen in 2012 due to the revitalization of the domestic housing. The aggressiveness of real state giants, such as Ayala, DMCI, and Megaworld, is the ones behind this revitalization.

     The Executive Director of University of Asia and the Pacific Capital Market Research, Dr. VictorAbola, asserted that the country is at the early stages of a construction boom given the continual recovery of the housing sector in 2011 and the robustness of the real estate sector supported by the OFW remittances and an improved confidence in the property industry. He also underscored the fact that the demand for housing would continue to remain strong due to the fact that there is a 3 million housing backlog that needs to be filled. With that note, the expected 10% growth in Iron and Steel Industry must not be far-fetched.

     Relating the news to the objective of our study, which is capturing the value added of the Iron and Steel Industry, monitoring the sectoral demand for iron and steel products plays a crucial role. Studying the major consumer of these products will help us formulate solutions about improving the demand structure—it can be by addressing issues related to constructions, for example, or attracting new customers. And this news contributes to the process of formulating solutions.

Authors:
Agas, Tyrone Dale
Molleno, Paolo Miguel
Panganiban, Danica Leane