PHILIPPINE
L_STITUTE Working
STUDIFS
FOR DEVELOPMENT Paper
ON THE WOOD BASED
LEATHER
PRODUGTS
MANUFACTURING
STUDIES
83-01 FURNITURE,
A_D FOOTWEAR INDUBTRIES
Ok THE PHILIPPINES
ACKNOWLEDGEMENTS
We wish
to express
the cooperation, out whom o
our sincerest
assistance
these studies
Dr. Filologo and Mr. Mario
and enaouragement
would
Pante,
appreciation
not have been
Jr., Dr. Romeo
Ferramil
of
and gratitude
the following,
for
with-
completed:
Bautista,
of the Philippine
Mr. Isaac Puno
Institute
III
for Develop-
ment Studies ; o
Dr. Magdaleno
Albarracin,
U.P. Business
Research
o
The SGV Foundation,
o
Messrs.
o
Prof. Romeo
o
Foundation,
of Business
Messrs.
Edgardo
Center;
of Premiere Patalin_hug
Financing. C_P,; of the U.Po
Administration_
Reyes
Industries
Mayor Osmundo
Balbin of the
Inc. and the SGV Development
dela Paz and Dr. Epictetus
College
Remedios
Inc.
Jaime Cari_o and Jose Cabacaa
Furniture o
Jr. and Prof.
and A1 de Lange,
Jr. of the Chamber
of
of the Philippines;
de Guzman
and Mr. Domingo
Antonio
of the Marikina
Shoe Trade Commission; o
Atty.
Manuel
Cruz of the Tanners
o
Atty. Cora JacOb of ÂŁhe leather
o
Messrs.
Gregorio
furniture
Timbol
Prof. Honesto
Nuqui of
o
Mr. Cristopher
Gomez,
Mr. Saturnino
_omputer
products
and Juvenal
of the Philippines;
manufacturing
CatejQy
industry;
of the wood-based
industry;
o
Magno,
Association
programming;
the U.P. Computer for statistical
Navarrete and
and_,
Center;
advice,
and Mr. Roberto
Ps_el_-
Verdejo,
for
- ii -
o
Our research Dacmnay,
assistants,
Ms. Gina Villa
corps of interviewers
Ms. Araceli
Paraiso,
and Ms. Ma. Victoria
who helped
S. Poblador,
B{enveoido
Ad_-i-amoO. Solis,
M. Aragon of
and the
our data.
Team*
Roy C. YbaSez,
the U.P. Business
tion, Inc. and the U.P. College
Taro,
us put together
The Research
(* Niceto
Mr. Ernesto
Research
of Business
and
Founda-
Administration.)
- iii -
TABLE
I.
OF CONTENTS
INTRODUCTION A.
B.
Objectives
and Scope of the Studies
1.0
Objectives
of the Studies
I-i
2.0
Scope of the Studies
I-2
3.0
Limitations
1-3
of the Studies
Method
i .0
II.
Definition •of Terms
1-4
2.0
Sampling
I-7
3.0
Data Gathering
4.0
Analytical
WOOD-BASED
Overview
B.
General
Procedures
1-21
Tools
FURNITURE
A.
C.
Procedures
1-26
INDUSTRY
of the Industry Characteristics
1.0
Size Distribution
2.0
Product
3.0
Organizational
Production
II-i of the Sample
of Establishments
Lines
Inputs
II'-8" IIUl5
Characteristics
II-23
and Practices
1.0
Production
Fanilities
2.0
Production
Capacity
and Major
Practices
II-26
and Capacity
Utilization
II-37
3.0
Labor
Force
II-42
4.0
Raw Material
II-47
5.0
Product
II-51
6.0
Production
Design/Technology
P rac rices
Support
Facilities
and II-53
- iv-
D.
Marketing
Practices
1.0
Channels
2.0
Seasonality
3.0
Pricing
4.0
Credit
5.0
Downpaym_mt
6.0
The Export
F.
General
II-70 on Sales
Market:
Some Problems,
Institutional
Sources
Functions
and Budgeting Linkages
of and Problems
Sources
of Financing
Major Problems Conclusions Financing Export
FOOTWEAR
II-93 11-96 11-98
in Financing II-i01
in Financins
If-106
and Recommendations
for the Small Manufacturers
Promotion
II-i14 II-I18
Biblio 8raphy
llI.
II-74
Management
3.0
/2.0
II-74
and Prospects
Planning
1.0
II-69
Sales
2.0
Rajor
11-59 II-65
Practices
Major Managerial
.2.0 G.
of Sales
1.0
i. 0
Prospects
of Distribution
Issues E.
and Export Market
If-121
INDUSTRY
A.
An Overview
B.
General
of the Industry
Characteristics
of the Sample
Ill-i 111-6
1.0
Location
III-6
2.0
Years of Operation
III-6
3.0
Types of Business
Organizations
!II-8
- V -
Page 4.0
5.0 C.
D.
Size Distribution
of Respondents:
Labor
Force and Output
Product
Type Distribution
Production
_pj_s
No.
Levels
111-8 Ill-ll
and Practices
1.0
Sectoral
2.0
Production
3.0
Other Facilities
IIl-18
4.0
Labor
111-18
5.0
Raw Material
6.0
Production
7.0
Quality
Control
8.0
Sources
of Information
9.0
Summary
Marketing
Distribution
III-ii
of Output
IIl-ll
Equipment
111-14
Force Inputs
III-22
Practices
III-23 111-27 on Technology
III-28 III-30
Practices
III-31
1.0
Channels
2.0
Seasonality
Iii-34
3.0
Credit
111-46
4.0
Pricing
5.0
Modes of Transport
111-38
Export
111-40
6.0 7.0
of Distribution
111-31
Sales Practices
111-38
Market
Summary
111-50
E.
General
Management
F.
Sources
of and Needs
1.0
Sources
2.0
Financing
3.0
Other Problems
4.0
Summary
Practices
111-51
for Financing
of Financing
and Working
of Equipment in Financing
III-54 Capital
III-54 III-59 111-.59 III-64
-vi-
Pap_e No. G.
Major
Conclusions
1.0
The Domestic
2.0
Export
3.0
Additional
and Recommendations
III-65
Market
III-66
Market
III-68
Considerations
for Growth
Bibliography
IV.
LEATHER A.
B.
C.
D.
III-70 III-74
INDUSTRY
Overview
of
the Industry
1.0
Ori_,_insand Structure
IV-i
2.0
Economic
IV-2
3.0
Some Industry
4.0
Investments
General
Significance Statistics
in the Industry
Characteristics
IV-6 IV-8
of the Sample
1.0
Capacity
IV-8
2.0
Years in Operation
IV-9
3.0
Organization
IV-9
4,0
Employmemt
and Location
IV-10
Marketing 1.0
Supply and Demand
for Leather
2.0
Distribution
I_-ll
3.0
Pricing
IV-II
4.0
Prospects
and Credit Practices
IV-10
IV-13
Production 1.0
State of Technology
IV-13
2.0
Capacity
IV-14
3.0
Large
and Utilization
Tanneries
and the "Sipa-Sipa"
IV-15
- vii -
P_e No.
E.
F.
G.
4.0
Expansion
5.0
Raw Material
6.0
Leather-Using
7.0
Prospects
General
Possibilities Supply
Ownership
2.0
Planning
Quality
Industries
and Alternatives
Management
1.0
_d
IV-16
IV-18 IV-19
Practices
and Management
IV-21 IV-22
Financing 1,0
Sources
2.0
Problems
Summary
of Financing in Financing
of Findings
IV-23 IV-23
and Recommendations
1,0
Major
Findings
IV-24
2.0
Some Recommendations
IV-25
Biblio graphy
Vo
IV-17
LEAIKBR
IV-28
PRODUCTS
A,
Overview
B.
General
INDUSTRY
of the Industry Characteristics
1.0
Scope
2.0
Organization
3.0
Years
4.0
Location
5.0
Size by Labor
V-I of the Sample V-I
and Ownership
in Operation
V-2 V-2 V-2
Force and Sales
V-6
- viii -
Page C.
D_
NO_
Production 1.0
Raw Material
2.0
Craftsmanship
3.0
Product
4.0
Mechanization
Quality
and Supply
and Quality
v-6
Control
V-10
Design
V-II V-12
Marketing
"f
1.0
Channels
2.0
Pricing
3.0
Prospects
.
of Distribut_" and Selling
V-12
Terms
in the Export
V-14
Market:
_
Vil8
,
E. Management 1.0
Extent of Ownelr Participation
in
- .,. -" •
Management 2.0
V-I 8
Extent of Pr_-paration. and NSe of .Busines s /Finaucial: Repot ts
3.0 F.
Planning
V-20 V-20
Finance 1.0
Financing
2.0 Sources 3.0
ProBlems
and Terms
V-24 of Financing
Uses for Available
g. Conclu io acom
Funds
V-27 V-28
dations
1.0
Raw Materials
V-29
2,0
Export Marketing
V'29
"7,
3.0
Technical
4.0
Financing
BibliograPhY ...
VI.
SUMMARY _.
Assistance
V-30 V-30 V-31
"'Trl-I
- iX -
LIST
Table No.
OF TABLES
Descri_
I.i
Summary of Sample Populations of Manufacturing Establishments (by Industry and by Area)
I-ii
1.2
Distribution of Sample Population, WoodBased Furniture Manufacturing Establishments (by Area jnd by Size)
1-12
I. 3
Distribution of Sample Population, Leather Tanning Establishments (by Area and by Size)
1-13
1.4
Distribution of Sample Population, Leather Products Manufacturing Establishments (by Area and by Size)
1-14
1.5
Distribution of Sample Population, Footwear Manufacturing Establishments (by Area and by Size)
!-15
1.6
Summary of Derived end by Area)
1-16
1.7
Distribution of Derived Sample, Wood-Based Furniture Manufacturing Establishments (by Area _nd by Size)
1-17
1.8
Distribution of Derived Sample, Leather Tanning Establishmemts (by Area and by Size)
1-18
1.9
Distribution of Derived Sampler Leather Products Manufacturing Establishments (by Area and by Size)
1-19
I.i0
Distribution of Derived Sample, Footwear Manufacturing Establishments (by Area and by Size)
1-20
I.ii
Summary
1-24
of Results
Sample
Sizes
of Field
(by Industry
Survey
Operat_oms
- X -
Table No. II.i
Descz_ption to
Gross Value Added
Gross
P a_e No. Domestic
11-3
Product (Manufacturing), Wood-Based Furniture and Fixtures (1970-1980, at Constant 1972 Prices) 11.2
Philippine Exports of Wood-Based Furniture and Fixtures as a Percentage of Total Philippine Exports (1976-1980, in FOB $ Values )
II-5
II. 3
Percentage Distribution of Philippine Exports of Wood-Based Furniture and Fixtures Accor-
II-6
ding to Principal in FOB $ Values)
Raw Material
(1970-1979,
11.4
Location
of Respondents
II-9
11.5
Distribution Force
II.6
Use of Household Fo rce
Ii.7
Distribution
II.8
Number of Respondents Engaged in the Manufacture_ Subcontracting and/or Resale of WoodBased Furniture, by Major Product Type
II-17
II.9
Distribution of Respondents According Location and Principal Raw Material
II-18
II.10
Distribution of Respondents Who Exported During the Period 1976-1980, by Location and Principal Raw Material
II-20
Iioli
Distribution of Respondents •_qqo Exported During the Period 1976-1980; According to Number of Years Actually Exporting in the Period, and to Principal Raw Material
II-21
11.12
Number of Respondents Who Have and/or Are Ensaged in Export of Wood-Based Purniture, by }_jor Product Type
11-22
11.13
Distribution of Years First Exported
11-22
11.14
Distribution of Respondents Years in Operation
of Respondents
Labor,
by Size of Labor
by Size of Labor
of Respondents
bY Gross
in Which
Sales
to
Respondents
by Number
of
II-lO
II-13
II-14
11-25
- Xi -
Table No.
Descri_
Pa_e No.
11.15
Distribution of Respondents According to Number of Types of Equipment, by Principal Raw Material Used
11-28
11.!6
Distribution o f Respondents According to Number of Pieces of Equipment, by Principal Raw Material Used
11-29
11.17
Common Types
11-30
11.18
Distribution of Respondents According to Ratio of Number of Pieces of Equipment to Size of Labor Force, by Principal Raw Material Used
11-33
II.19
Reasons Given for Subcontracting/Passin_ on Production of Certain Products/Components
11-36
11.20
Distribution of Respondents According to Proportion of Job Orders to Total Production
11-38
II.21
Estimated
11-41
11.22
Compensation for Household Labor Force
11.23
Number of Firms Using Various for Services of Employees
11.24
Reasons for Use of Piecerate/Batchwork of Compensation of Workers
II.25
Sources
11.26
Reasons Given as to Why Machinery Constitutes a Problem
11.27
Sources of Financing to Maintain Other than Own Capital
11.28
Types of Market Outlet
Used
11.29
Types of Market Outlet
Used
as Main Outlet
11-61
11.30
Types of Market Outlet o f Sales
Used, by Percentage
11-62
11.31
Major Reasons Given for Using Market Outlet Exclusively
11.32
Major Reasons Given of Market Outlet
of Equipment/Machinery
1980
Capacity
of Information
in Use
Utilization Labor,
by Size of
Modes
of Payment
as Mode
on Technology
11-44
11-46
11-48
11-52
Breakdown
Inventories,
11-55
11-56
11-60
One Type of
for Most Preferred
Type
11-63
11-64
- xii -
Tabl__eNo_u.
Descri t2_9_ ' Major Reasons Givenfor Type of Market Outlet
11.33
Least Preferred
II.34
Modes of Transport/Delivery
11.35
Months With dents
Ii.36
Pricing
iI.37
....
P__,e No_______.
to Market
Peak Sales9 As Cited _
11-64
Outlets
by R_pon,
_
11-67
' " II-69
Practic&S
Distribdtion Percentage
II-66
of Respondents According of Credit Sales to Total
II-71
l!1.38
Credit
11.39
Application of Receivables, Purchase Orders and/or Postdated Checks to Supplier's 1 Credit or Other Financing
11-73
11.40
Distribution of Respondents According Usual Downpayment on Sales
11-75
11.41
Growth in Philippine Exports of Wood-Based Furniture and Fixtures in Comparison with Growth of Total Philippine Exports !
11-76
11.42
Major Countries of Destination of Philippine Exports of Wood-Based Furniture and Fixtures (1976-1980, in FOB $ Values)
11-78
I_ITM_jor llCOl_tries of .Destirmtionilof Philippine Exports of Wood-Based Furniture and Fixtur_s, Including Builderl's_woodwork (19761980_ in FOB $ Values)
11-79
11.43
Terms on Sales_ Sly Buyer
to Sales
'
11-72
Type
to
".[
I!.44
Distribution of Respondents Export Sales (1976-1980)
According
11.45
General CharacteriStics of Exporter-Respondents Compared go Entire Sample
11-87
II.46 '_
Extent of Owner's Responsibility Managerial-Functions
II-94
11.47
Number of Piersons Primarily Responsible Major Managerial Functions
11.48
Extent of Preparation
11.49
Reasons
of Business
for Preparation
to
11-85
in Major
for
Reports
of Business
Reports
ii-94
11-97 11-97
- xiii -
Table No.
Descri_ with
Pa_e No.
Iio50
Registration
C_vernment
11.51
Average
Total
II.52
Sources
of Financing
11.53
Supplier's Credit as a Percentage Total Borrowings
11.54
Major Problems
II.55
Collateral Requirements Source of Financing
11.56
Imputed
11.57
Major
Borrowings
I!-i00
in 1980
11-102 11-103 of
11-104
in Firmncing
Interest
Problems
Agencies
II-108
According
to
Rates on Supplier's
11-109
Credit
Cited by Respondents
11-115
III.I.
Regional Distribution turers, 1977
111.2
Gross Value
II!. 3
Location
111.4
Distribution Operations
111.5
Types of Business
111.6
Distribution of Responden=s Labor Force
by Size of
111-9
III. 7
Distribution Capacity
by Output
III-9
111.8
Number of Respondeuts Engaged in Manufacture, Subcontractin_-_ and Resale of Footwear
I_I-12
111.9
Output Share of Respondents Force
111-1.3
III.10
Machinery/Equipment
lll.ll
A_e Distribution
of Principal
111.12
Age Distribution
of All Machinery
111.13
Use of Household
Labor
Added
of Footwear
11-112
Manufac-
of the Foo_mOlrlndustry
111-3
111-5
of Respondents
1-11-7
of Respondents
by Years
of
111'7
Organization
of Respondents
111-9
By Size of Labor
of Footwear
Firms
IIl-15
Machinery
111-17
by Size of Labor
111-19 Force
111-21
~ xiv -
Table No.
Description
Pa_e No.
111.14
Compensation of Household of La_@Z Force
111.15
Distribution Workshift
of Respondents
III.16
Distribution Days
of Firms by Number of Working
Iii.17
Ave;age Capacity Utilization by Size of Labor Force
III.18
Sources
III.19
Types of Market
Outlets
III-32
III.20
Distribution of Firms by Percentage of Sales, by Type of Market Outlet Used
111-32
III.21
Seasonality turers
III-35
III. 22
Pricin_
III.23
Modes of Transport/Delivery Outlet
III.24
Exports and Imports Footwear industry
III.25
Composition
III.26
Top Ten Countries of Destination for Philippine Footwear Exports_ 1976-.1980
III-49
111.27
Number of People Primarily Responsible Major Managerial Functions
111-52
III,28
Extent of Owner Responsibilit? l_na_erial Functions
111.29
Extent
11!.30
Reasons
for Preparation
III. 31
Sources
of Financing
III. 32
Size Distribution
III.33
Maturity
of Information
of Sales
Labor
by Size
111-21
by Length of
of Respondents
on Technology
of Footwear
111-24
III-25
II1-26
III-29
Manufac-
Practices
111-39
of
of Footwear
of Preparation
to Market
III-39
the Philippine
III-41
Exportsj
III-43
for
in Major
of Business
Reports
of _usiness
Reports
111-52
III-53 III-53 III-55
of Borrowings
of Suppliers'
1979
Credit
III-55 III-57
- XV -
Table No.
Dgscription
III. 34
Problems
111.35
Use of Collateral
111o36
Interest Rates on Borrowings of Financing
Pa_e No.
in Borrowing
III-61
by Source
of Financing
111-62
by Source
111-63
IV.1
Gross Value Added Leather Product
in the Leather and Industry, 1970-1981
IV.2
Values of Philippine Exportation and Leather Products
IV.3
Philippine Goods
IV.4
Selected Characteristics of Leather and Leather Products Establishments with Five or More Workers, 1956-1978
IV-7
IV.5
Selected Ratios for Leather Product Industries
IV-12
Impcrts
of Leather
IV-3
ef Leather
and Leather
and Leather
V.l
Number of Respondents and Sub Contracting Product Type
Engaged in Manufacturin8 of Leather Products, by
V.2
Distribution Op era tion
V. 3
Location
V.4
Distribution of Respondemts Labor Force
v.5
Employment Process
V.6
Distribution Sales
V. 7
Types of Market
V. 8
Pricing
V. 9
Distribution of Firms by Percentage Credit Sales to Total Sales
of Respondents
by Years
of
of Respondents
IV-4
IV-5
V-3
v-4
V-5 by Size of
of .Household Member
of Firms by Level
V-7
in Production
V-8
of 1980 Gross
V-9
Outlet
V-13
Practices
V-16 of
V-17
- xvi -
Table No.
D_s criptipn
V.10
Extent of Owner Participation Managerial Functions
V. II
Sources of Information Technology
on Design
and _@_._
V-21
V.12
Extent of Preparation
of Business
Reports
V-22
V.13
Reasons
V.14
Problems
V.15
Sources
for Preparation in Securing of Financing
in Major
of Business
Financing
Reports
V-19
V-23 V-25 ?-26
I-i
I.
INTRODUCTION These studies and footwear undertaken
manufacturing
meat Studies.
grant
In addition,
the leather
A.
Objectives 1.0
financial
To conduct
an analysis
for Develop-
industry was
the leather
The studies
products
were
com-
from the SGV Found-
Corporation.
of each industry's particularly
and general
management
and technological
structures
and prospects,
and socio-economic To provide policy
rationalization among
financial
market
performance,
costs. planning
for each industry,
as institutional
operations
development,
benefits and
status
in the areas
management,
inputs to government
formulation
such areas
1.4
(UPBRF),
of the Studies
of organization
1.3
tanning
were
Inc.
Institute
assistance
and future prosp_cts_
1.2
the, Philippines
upon
Financing
products,
and Scope of the Studies
Objectives ioi
bears
industries.
ation, Inc. and the Premiere
leather
_Research Foundation,
industry
and footwear manufacturing additional
of
from the Philippine
as this latter
pleted with
furniture,
industries
by the U.P. Business
under a research
studied,
on the wood-based
including
development,
and technological
and
industry
development,
others,
To provide
the private
prehensive
review of each industry.
To generate
useful
the conduct
of industry
sector with
experiences
a fairly com-
and insights
studies.
in
TM
I-2
2.0
Scope of the Studies These industry
covered
as defined
population Manila,
studies
the major
in the next
for each industry
Bulacan,
Rizal
section.
was drawn
and Laguna,
furniture
included
as well.
'_he studies
covered
of each
The sample
from Metro
wi_h
of that for the wood-based Cebu and Pampanga
sectors
the exception
industry,
the following
primary
which
aspects
of each industry: 2.1
Organization managerial
and general management, practices
and capabilities
including of firms
in the: industry; 2.2
Production as well
facilities_
systems
as technological
and capabilities,
development
trends in
the industry 2.3
Market
factors
and marketing
pects_ particularly demand, 2.4
market
Financial
prafitmbility,
and pros-
in the areas of supply and
structures,
growth
problems
and pricing_
nnd perfor_-_nce in terms of
investm_'_ntand financing
problems
and trends 2.5
Input factors
2.6
Socio-economic
and related impact
foreign exchange environmental
issues;
and
in terms of employment
generation,
implications째
as well
as other
and
I-3
(All references
to operations
firm in the survey were based unless otherwise Findings
on calendar
year
1980,
specified.)
were
the industry,
and status of each
used to evaluate
and, wherever
future
possible,
prospects
make policy
of
re-
co--halations. 3.0
Limitations
of the Studies
The restriction Metro Manila,
of the coverage
Bulacan,
Rizal
of each study
and Laguna
and Cebu in the case of the wood-based industry)
was necessitated
sources.
The PIDS indicated,
for future extension such expansion results
of coverage
obtained
would
areas above-mentioned, secondary to a
data allows
nationwide
however,
principally
apply only
except where for extension
the
to the of
of such findings
firmncial
information
or even preventing,
limiting, analysis
initially
team realizes
analysis
of the data
derived
to be relatively
by way spotty,
much of the
contemplated. that,
resources
generated
findings
permitting,
in the survey
by the team is desirable,
to further significant ations.
While
availability
thereby
firms conducted
a possibility
is not yet attainable,
have proven
further
re-
coverage.
of a field survey
The study
budgetary
scope/magnitudeo
In general,
financial
(and Pampanga furniture
by limited
to a nationwide
to
of
and may lead
and/or policy
redommend-
I-4
B.
Metho d 1,0
Definition i.i
of Tenns
_94ood-Based Furniture
Industry"
the six sub-classifications Standard
Industry
(Manufacture except
3321(0) I/-
Classification
Manufacture
3323(0)
(PSIC) code # 332
These
and fixtures,
are:
and repair Of wood
including
- Manufacture
fur-
upholstery
and repair of rattan
furniture
(feed_ wicker
including
uphostery
- Manufacture
to five of
Philippine
furniture,
of metal).
niture, 3322(0)
under
and repair of
primarily
refers
and cane),
of box beds and
mattresses 3323(0)
- Manufacture lockers,
of partitions,
and office
shelves,
and store
fix-
tures 3329(0)
- Manufacture
and repair
and fixtures_ metal, 1.2
"Leather
Products
sub-classifications ture of leader substitutes
except
not elsewhere
Industry"
refers
under PSIC
and products
of furniture
primarily
of
classified. to the following
code #323
of leather,
and fur, e.xcept footwear
(Manufacleather
and wearing
apparel) :
-- A P$1C code presented in the form xxxx(O) is used to denote a four-digit classifications whose only five-digit sub-classification is itself.
I-5
32321
- Manufacture
of luggage,
handbags
and
of products
of leather
wallets 32329
- Manufacture leather
substitutes,
and
not elsewhere
classified. This study,
however,
those leather genuine
has been
products
leather
manufacturers
as raw material
some of their products. tanning '_ covers and leather 1.3
"Footwear
only use
for at least "leather
- Tanneries
finishings.
Industry"
rubber,
refers
to all classifications
#324
(Manufacture
plastic
or wood
sub-classification 355 (Manufacture ture of plastic
under
except
of footwear,
footwear)
products
of wood
and wood
- Manufacture
of leather
32491
- Manufacture
of slippers
32492
- Manufacture
of other
plastic
classified), and cork
shoes and sandals
footwear,
or wood
except
footwear,
classified
3552(0)
- Manufacture
of rubber
35602
- Manufacture
of plastic
33193
- Manufacture
of wooden
accessories
(Manufac-
as follows;
3241(0)
alsewhere
356
not elsewhere
furniture),
rubber,
and one
each of PSIC code numbers
of rubber products),
and 331 (Manufacture products,
input
#3231(0)
to
which
In addition,
PSIC code
under PSIC code except
restricted
footwear foot, ear footwear
and
not
I-6
1.4
"Establishments"
or "firms" within
refer to those actually of the products
engaged
as defined
turing is a minimum
well
and/or
While
requirement,
purchase
as any other
in the manufacture
above.
or firms may, in addition, tracting
the industries
manufac-
the establishments
be engaged
in subcon-
for sale and/or
activity
resale,
(e.g., repair),
as
apart
from manufacturing. 1.5
"Employees" cluding
refers • to personnel
household
members
or not the latter compensation 1.6
'"Labor force" hold members
of the firm, ex-
and/or
are pald
helpers,
salaries
for work
undertaken
refers
to employees
and/or helpers
in the production
process
whether
and/or
other
for the firm. and those
directly
participating
(i_e., directly
involved
at some or all stages of the transformation or semi-finished i. 7
'YBorrowings" includes
supplier's
understood
to the ave_.e
to refer
throughout
"Types
of market
buyers
transacting
from endusers
include
credit,
of
and is
aggregate
includes
directly
to retailers,
manufacturers
products).
amount
Cf 1980.
outlet"
In the case of leather
of raw
all forms of indebtedness
the firm, including
outstanding 1.8
goods into finished
house-
with
all types of the firm,
wholesalers
ran?_in_
and others.
tanning,
this would
of leather
products.
also
1-7
1.9
"Wholesaler",
as used in this study, refers
buyer who buys a firm's resale, whileas primarily
product
"retailer '" refers
for sale to endusers.
buyer of leather
from a tannery
to manufacturers
of leather
a wholesaler, leather
without
actually
Accordingly,
primarily
sold
depart
For instance, who sells
a
primarily
is treated
to the quantity
as
of
to these manufacturers.
"wholesaler"
in this study_
for
to one who buys
products
regard
to a
and "retailer",
from their
as used
common volume-
based usage. 2.0
Sampling 2.1
Procedures
Sampling
Fra_
The sample population
was arrived
supp.rposition of thre_ listings, 2.1.1
1978 Preliminary
at by a
as follows_
List of Large
2/
Establish-
merits--- This is a publication
of the
National
Office
Census
containing
and Statistics
a list of establishments
ing_ in the case of industrial ments,
i0 or more people째
industry,
employ-
establish-
It contains
region and address
(NCSO)_
the
of each firm.
_/The use of the term "large '" in this publication (i0 or more employees) is inconsistent with the standard definition of 20 employees or more.
I-8
2.1.2
NAC!DA
List of Registered
compilation
of all firms
tries which
registered
with
the National
lopment 1979.
registry
in the three indus-
as cottage
(NACIDA) _enerated
Of firms, which
upon 2.1.3
address
Deve-
from 1963 until from NACIDA's
contains
firmWs year of registration, prietor,
industries
Cottage Industries
Authority This was
Firms - This is a
and number
each
name of proof employees
registration_
NCSO Computer
Printout
- This
list prepared
in 1977,
based
is a census on a 1975
census of establishments, _ • It contains among others,
coded
of employment
and revenue of each
List excludes
2.1.1,
apart
from being only
establishm._Its with
O_ the other hand_ firms which tO other
data relative
have become
locations,
or changed
list
preliminary,
less than 10 employees.
2.1.2
includes
non-existent_
NACIDA
a number
as NACIDA
inasmuch
transferred
registration
for five
(5) years
believed
that many NACIDA-registered
and non-renewable.
the ownership, person
of
force,
does not update
registry,
the name of another
firm.
gro,_n in size of labor
proprietors.
ever, transfer
to size
is valid
It is firms, how-
and registration
(usually
its
a member
in of
I-9
the family or a friend) re-registered
(under another
tinue to avail
of privileges
NACIDA-registered
firms.
not been updated
end relative
the firm to be
proprietor) usually
Finally,
for the years
Since each of lists •inherent
to enable
2.1.1
accorded
].976 through through
serve
of the studies_
tion process,
2.1.3
weaP_%esses, it was
of the three lists
the overlaps
1979. has
decided
would
best
with some of
traced and eliminated. as expected_
to
list 2.1.3 has
that a combination the purposes
and con-
/The elimina-
was not quite
thorouEh:
that some firms were
double-counted
lisK was established
in the course of the survey.
Nonetheless, rently
such cases of double-counting_
due to the above-cited
tions with NACIDA_ of final
sample
In order size of labor
proved
to attain force,
for purposes
small
registra-
to be manageable
consistency
the definition
(4.2?_
in treatment
(i0 employees
were
used
or more)
or more),
employees
unknown). 3_/
was
Thus,
for size of labor
(less than i0 employees),
employees
of
in list 2.1.1
of classification.
three classifications force:
multiple
appa-
size).Z
of "large _' establishment adopted
in the composite
and unclassified
large
(i0
(number of
3/The standard classifizations, unorganized (less than 5 employees)_ small (5 to 19 e_p_loyees) and large (20 employees or more), were used in the analysis of survey data_ however°
I-i0
The sample populations classified
were,
accordingly_
by area and by size.
/Refer to Tables
1.2, 1.3, 1.4 and 1.5 for summaries populations tanning, ments,
of the wood-based
leather
respectively,
and size. sample were
Table
then drawn
for every
2.2
Sample
of
establish-
according a summary
to area
of all four samples
out o_ each of the four
points being
drawn at random
(each stratum being
a size versus
the establishments).
size per stratum total_
adjustments of certain
strata
1.9 and I.lO, sample
in certain owing
down by area.
sizes
tanning,
by pro-
cases where
to the small
Tables
hand,
leather
products
respectively,
per
1.7, 1.8,
summarize
for the wood-based
sizes /--Table
size, as determined,
on the other
establishments_
was determined
in tl_ sample population.
the sample
i_%dustry, broken
leather
except
were necessary
1.6 presents
deter-
furniture,
and footwear
each broken
down by
and by size./ Final
smaller ating
leather
Size
portion'to
area
classified
separately
stratum
Sample
mined
and footwear
hy area째__/ Stratified
sample
listing
furniture,
1.1 presents
populations
populations,
area
products
of the sample
sample
sizes,
than the derived
constraints.
however, sample
were
sizes
In particular,
in general due to oper-
a very large
I-ii
TABLE
I.l
SUI,_ARY OF S_PLE
POPULATIONS OF MANUFACTURING (BY INDUSTRY AND BY AREA)
ESTABLISHMENTS
Indus.try Wood-Based e____a Ar
Furniture
FO o tWe_
Leather
Leather
Products
_
Total
Metro Manila !I/ ist District
i185
25
50
0
260
2nd District
300
788
198.
0
1,286
3rd District
162
18
50
4
234
4th District
185
32
24
0
Laguna
55
423
4
0
482
Bulacan
86
24
37
25
172
Rizal
57
43
6
0
106
Cebu/2/ Pampan_a-
Total
21 (by industry)
1/First
Dis=rict:
Second
District_
265
-
-
-
265
236
-
-
-
236
_
i_353
369"
Quezon
City, San Juan, Mandaluyong,
Caloocan
Fourth
Pasay City, l_akati, Las PiCas, Taguig, Pateros
2/Only
for wood-based
29
3,28__2
City of Manila
Third Districts District_
241
City, Malabon,
furniture
indust_'.
Navotas,
Pasig_ Marikina
Valenzuela
Para_aque,
Muntinlupa,
1-12
TABLE 1.2
DIStrIBUTION OF SAMPLE POPULATION_ WOOD-BASED FURNITURE MANUFACTURING ESTABLISI_4ENTS (BY AREA AND BY SIZE)
Size of Labor
Force, To tal
Small
Large
Unclassified
(by area)
Metro Manila ist District
142
41
2
185
2nd District
153
116
31
300
3rd District
107
54
1
162
4th District
72
106
7
185
Cebu
168
87
i0
265
Pampanga
146
8_
6
236
Bulacan
51
34
!
86
Laguna
35
4
55
Rizal
Total
16
,.32
(by size)
906 ,J
2__5
563 _
O
6_22
57
1-13
TABLE 1.3
DISTRIBUTION OF SAMPLE POPULATION, LEATHER TANNING ESTABLISHMENTS (BY AREA AND BY SIZE)
Size of Labor
Force Total
Area
Small
Bulacan
_
Unclassified
(by.area)
9
16
0
25
ist District
0
0
0
0
2n4 Bis trict
0
0
0
0
3=d District
0
2
2
4
4th District
0
0
0
0
Laguna
0
0
0
0
Rizal
0
0
0
0
18
2
29
Metro Manila
Total (by size)
9
1-14
TABLE 1.4
DISTRIBUTION _FACTU_ING
OF SAMPLE POPULATIONp LEATHER PRODUCTS ESTABLISHMENTS _BY AREA AND BY SIZE)
Size of Labor
Force Total
Area
Small
Large
Unclassified
(by area)
Metro Manila ist District
39
6
5
50
2nd District
150
43
5
198
3rd District
37
i0
3
50
4th District
20
4
0
24
25
ii
1
37
Laguna
3
i
0
4
Rizal
4
2
278
77
Bulacan
Total (by size)
0
14
.6
36__99
1-15
TABLE 1o5
DISTRIBUTION 'OF SAMPLE POPULATION, FOOTWEAR MANUFACTURING ESTABLISHMENTS (BY AREA AND BY SIZE)
Size Of Labor
Force To tal
Area
Small
Large
Unclassified
(by area)
Metro Manila ist District
9
7
9
25
2nd District
232
60
496
788
3rd District
7
i
I0
18
4th District
12
7
13
32
278
33
112
423
Rizal
35
5
3
43
Bulacan
17
6
i
24
Laguna
Total
(by size)
59__00
ii__99 , J,,
644
1,353
1-16
TABLE 1,6
SU_IARY
OF DERIVED
(BY INDUSTRY
SAMPLE
SIZES
AND BY AREA)
Indus try Wood-Based Are__a
Furniture
Footwear
Leather
Leather
Total
Products
Tanning
(by area)
Metro Manila ist District
17
4
6
0
27
2nd District
29
90
23
0
142
3rd District
ii
2
4
0
17
4th District
II
I
5
0
17
Laguna
2
70
0
0
72
Bulacan
6
4
5
i0
25
Rizal
5
i0
1
0
16
Pampanga
19
-
-
-
19
¢_bu
i_/7
-
_C-
--
44
lO
Total
(by industry)
i17.
1.8,,i
17
352
I-i
TABLE 1.7
7
DISTRIBUTION OF DERIVED S_4PLE, WOOD-BASED FURNITURE _ANUFACTUP.ING ESTABLISHMENTS (BY AREA AND BY SIZE)
Size of Labor
Force To tal
Are____a
Small
Large,
Unclassified
(by _area)
1st District
i0
6
.!
17
2nd District
16
l0
3
29
3rd District
6
4
i
ii
4th District
6
4
1
ii
Pampanga
ii
7
1
19
Cebu
i0
6
1
17
Bulacan
3
2
1
6
Rizal
3
2
0
5
1 .........
1
0
2
Metro
Manila
Laguna
Total (by size)
66
42
9
11__/7
1-18
TABLE I. 8
DISTRIBUTION OF DERIVED SAMPLE, LEATHER TANNING ESTABLISHMENTS (BY AREA AND BY SIZE)
Size of Labor
Force Total
Are__.__aa
Small
Large
Unclassified
Bulacan
3
7
0
i0
Metro Manila
0
0
0
0
Laguna
0
0
0
0
_i_al
Total
0o_
(by size)
3
0___
0___
_
0_
o
"
i0
1-19
TABLE 1.9
DISTRIBUTION MANUFACTURING
OF DERIVED SAMPLE, LEATHER PRODUCTS ESTABLISHMENTS (BY AREA AND BY SIZE)
Size of Labor
Force Total
Area
Small
_
"Unclassified
Metro Manila ist District
.3
2
1
6
2nd District
12
9
2
23
3rd District
2
1
1
4
4th Dis trier
3
2
0
5
Bul_can
3
i
I
5
Rizai
i
0
0
i
L_gun_ Total
(by size)
.,0
O
0_
O
24
15
_
44
1-20
TABLE I.!0 DISTRIBUTION OF DERIVED _d_UFACTURING ESTABLIShmENTS
Size of Labor
S_4PLE, FOOTWEAR (BY AREA AND BY SIZE)
Force Total
Area
Sma__ l.l
La_
Unclassified
(by area)
Metro Manila ist District
2
0
2
4
2rid District
39
8
43
90
3rd District
1
0
1
2
4_h District
i
0
0
i
31
6
33
70
Rizal
5
2
3
i0
Bulacan
2
1
i
4
17
83
Laguna
Total
(by size)
8__1
18!i
1-21
number
of firms listed
leather
products
not actually as input.
m_nufacturin?, establishments
use leather
/As a result,
of completion
of field
only 29 leather desired
sample
interviewed,
C_athering Procedures
301
The Interview
the fact
and/or
was finalized
/Most of the more were
_:iven pra-coded
small number were
schedule
regarding
after
of th_i:sehypotheses report
a pre-test
responses_
involved
only a
were
submitted
data,
of
hypo~
A number
discusse:_ in part in the by the study
being
team to
had to be
put together
of the insufficiency
mary and secondary
hundreds
certain
beforehand.
as the data were
or quality:_
was
than one hundred
k/Some of these hypotheses
because
interview
criticalproblematic
some of which
theses had been formulated
analyzed
by interviewers.../
left open-ended./
The interview
abandoned
that a full
an 18-paEe
unde_'_aken on some of the more
the PIDS.
(66% of the
sample popula-
visited
team developed
which
preliminary
arrived,
Schedule
The study
variables,
substitutes)
manufacturers
(85% of the total
Data
questions
did
by the time the target date
notwithstanding
variJ_:ies.
of
size ef 44) had been successfully
tion) had been sought
schedule,
(only leather
survey operations
products
315 establishments
3.0
in the sample population
and
of both
pri-
in terms of quantity
and/
"r-22
3.2
The Field
Survey
The conduct
of the field
survey
passed on to a private
firm with
(largely owing
experience
takings).
The study
checking already
activities
quest_ns,
typ.g
ponses subject
are deemed
and the second
firms were
those highly
cant number
of cases,
to two res-
unlikely
to be
questions by the inter-
type, all other
the field survey
asked
questions
or simple
the study
cross-
firms
according
discrepancies
under-
undertook
little or no explanation
Due to major
suspend
type,
to memory lapses,
requiring viewer;
The sampled classified
capability
in related
by way of sampl<ng
(_%e first
for _hich
expected
team, however,
interviewed.
selected major
to past
was initially
noted
questions). in a signifi-
team decided
and to conduct
to
a total
resurvey. The lessons
drawn from
the field survey
pointed
to a strong
depth and early 0n-the-job as well
as a continuous
their work. the study
view schedules째 and close
also edited
to the respondents
and/or
rectify
certain
in many
responses.
of
for in-
of interviewers, and review of provided
completed
of the intensive
interviewers
return
conduct
need
was directly
Inspire
supervision_
training
monitoring
Supervision
team, which
the initial
still cases_
by
inter-
training had to to clarify
1-23
The
study
a scheme
team's statisticalc0nsultant
for automatic
respondent"
replacement
in a fixed sequence each primary
stances
of substitutes.
where
fail to materialize.
the sequence
was applied.
substitut_o_
a sequence
of substitutes automatic
eliminated
bias
the possibility
in the choice of a subs-
(including
undertaken
time interviewers, with
sired aggregate
with lasted
333 successful
operations
sample
larFely
brought
little
to be
tion to other
in section
factors.
of results of
of i0 full-
(94.6% of the de-
of success about
of inter-
more than 4 months,
size of 352).
using leather
(as discussed
sunmmry
an average
had to be given a specific
of manufacturers input
training
interviews
due to the marglnality stages,
were
to the interviewer.
The resurvey viewers),
was
substitution
titute if_ say, a pool of substitutes left open
For in-
This system of automatic
effectively
of interviewer-based
of
tapped one after another
exhat_qted, an alternative procedure
by one
In general,
was assigned
to be
an interview
in the original
to be interviewed)
respondent
these substitutes, should
of a "primary
(i.e., a firm included
list of establishments
devised
The field cutoff
date
in the latter
by the preponderance substitutes
only as
2째2 above),
in addi-
/._Referto Table l.ll field operations,_/
for a
Such
TABLE
I.ll
Distribution
OF FIELD
by Industry Leather
Furniture
_anning
Products
Footwear
Total
1,531
29
369
1,353
3,282
size
117
i0
44
181
352
7.6
sought/visited
342
15
315
332
1,004
22 o3
sample
population
sample
Frequency
Success ful interviews Cannot be located Transferred location Closed/stopped operations Non-amnufacturer (dealer only) !_ot in industries as defined (different product lines) Not operating in 1980 Refused to be interviewed outright Difficult to interview (dropped after 3 or more visits) Inconsis tent/insufficient data
Total
counted firms
in list
sought/visited
Leather
Leather
Fu,
Tanning
Products
115 86 18 35 8 13
i0 0 0 0 0 0
29 80 26 26 1 126
179 59 6 43 5 i0
333 225 50 104 14 149
3 27
0 1
2 15
i 17
24 4
1 i
5 2
9 342
2 15
Samp_le Population
Wood-Based
Leather
Leather
Furniture
Tannin S
Products
100.0%
100.0%
% to T_al
Wood-Based iture
OPERATIONS
% to Total
Leather
Derived
Double
SURVEY
Wood-Based
Total
Fir_q
SI_@IARY OF RESULTS
Footwear
Total
100.0%
100o0%
100.0%
34.5
11.9
13.4
i0.7
51o 7
85.4
24°5
30.6
[_. of Firms
Sought/Visited
Wood-B_se_/
Le_.ther
Leather
Furniture
Tannin g
Products
33.6% 25.2 5 o3 i0.2 2.3 3.8
66.7% 0 0 0 0 0
9 °2% 25.4 8o 3 8.3 0.3 40.0
6 60
0o9 7.9
0 6.7
0o6 4.8
0o3 5.1
0.6 6°0
ii i
41 8
7.0 i. 2
6.7 6.7
1.6 0.6
3.3 0.3
4ol O. 8
3
0
14
2.6
13.3
1.0
0
1.4
315
332
Footwear
Total
i_004
100.0%
100.0%
100.0%
Footwear _ •9_Iv J_ .$. 17.8 i. 8 13.0 1.5 3.0
100.0%
Total 33.2% 22,4 5.0 i0.4 1.4 14.8
100.0%
|
1-25
marginal
success
rate,
the incremental Table 33.2%
costs
leather
tanning,
products).
an overall
success
success
leather
another
substitutes
33째 7% either
or had transferred
tion provided the oriKinal
products,
of firms soughtvisited
to be using purely
by people
location
turned out
could not be (per informa-
at or in the vicinity
of
address),
115 suc_.essful interviews
of tanneries
there were
of wood-based
fi_;,_ (98.3% of the 117 desired
furniture
sample size), i0
(100% of !0), 29 of leather
nmnufacturers
products
(65.9% of 44), and 179 of footwear
establishments Secondary
40% o_
as raw
At the close of field operations,
3.3
for
at _ "'' for leather
In the case of leather
material., while
rate of
rate was at 66.7%
and the lowest
the total number
located
felt, did not justify
ivnolved.
I.ll shows
(the highest
it was
(98.9% of 181).
Data
In addition
to primary
data ?>athered from the
survey of 333 establishments, gathered,
principally
secondary
frem the _ational
data were Census and
/
Statistics
Office
(NCSO)_
the Natfonal
Economic
and
/
_uthority the Philippines Industry Certain
(NEDA),
(CBP),
the Ministry
(M_I)) and various publications
resp ec t.
_he Central
were
of Trade
industry
likewise
Bank of and
associations.
used
in this
1-26
4.0
Analytical 4.1
Tools
Statistical
Considerations
Stratification area and size stratified
of the samples
(as was
analysis
done) would
of
data, except
according sarily
population
match with
actual
For instance_ 56,4%
that distribution
Table
force
i0 persons
interview
results.
i.7 indicates
to be in the "small" employed).
yielde,? only
employment
Interview
shows a weakness
indicated
a¢cordin_
(This discrepancy
is probably
growth of firms which
not possibly
suggest,
hand,
lists
cottage
(and other)
industries. )
used to arrive the basis
to size collapses. brought
likely
about
by the
in the business_
of when
have not been
registerini_-with NACIDA would employment
i_,_,, the data on
a situation
it is highly
than
this category.
remained
be taken account
gistry or NCSO's the other
have
(less
data, however,
Accordingly,
for stratification
as the data would
for wood-based
in the listings
at the sam_,le population.
at least
category
36% (41 out of 115)in
discrepancy
the sample
did not neces-
(66 out of 117) of lthe sample
furniture
This
for the observ-
and, hence,
to size of laher
to
have allowed
ation, early on in the analysis_ of the sample
according
that
could
NACIDA's updated.
reOn
that firms
tend to understate
data in order
to qualify
as
1-27
In view of the above, not be made
to proceed
along
tified in the sampling study
sample
derived
derived
size would
4 °2
original
sample
_ampling
procedure
the
indicated
for each industry
that Would
of the sample population;
without
likely have
iden-
Nevertheless,
consultant
still be representative a sample
of data could
the size strata
frame.
team's statistical
the original
analysis
stratifying
the same
so stratified, <_cu_se4
according
composition considering
in Section
to
as the the
2.0 above.
Computations C<;_:_2_terizationof data was University
of the Phi!ippi_es
had to be sources
tentatively
of the project
computer
services
proved
of
within
frequency
a result,
financial The
the SGV Foundation,
a grant
volume
for computer
of data
Center). generated
most of the computer
the limited
tabulations
re-
budget
outputs
were i4 the form
and cross-_tabulations.
data analysis was pri_%cipally limited
chi-squar_
tests.
ther data analysis with
Center, but
(extended by the SÂŁ-'VDevelopment
f_om the field survey,
at the
inadequate.
after
the UPBRF with
D_le to the enormous
possible
Computer
_n_t elf after
work was resumed
Inc. provid_d
initiated
additional
significant
The study
team feels
(e.g., correlation
resources,
findin[.s and/or
As to
that fur-
analysis),
may lead to further policy
recommendations.
1-28
Chapter
!I of this report presents
on the wood-based the footwear
furniture
industry.
ning and leather these chapters
and recommendations summarizes
Chapters
products
contains
industry,
relative
while
Chapter
IV and V discuss
manufacturing
a section
the findings of our study
industries.
discussing
to the industry
the same over all these industries.
III deals with
the leather While
our major concerned,
tan-
each of
conclusions Chapter
VI
I!-i
I%o
A.
Overview
WOOD-BASED
of the Industi_
The dulang (low bed made
(low table), ba_ki-_o
primarily
in the Philippines (_mio /--i7)
Today, Philippines
_ngaged
(by subcontracting),
care t:o consider.
wood-based
or (Cody
may not be all that
One estimate in 1977
furniture
Cia_sification
directly
presen_ce of many unregistered
manufacturers
and repair of furniture metal),
of the Spa_ard_
to _ome 50,.000 persons
industry
five of the six s_b--c!assifications Industry
in u_e
furnit.ure manufactu-
employment,
howe_er,
manufacture,_s.
furniture
_e
already
in th_ _lanufacture of wood-based
providing
due to the believed
"backvard"
arrival
for as long as a_}:_would
â&#x20AC;˘Such statistics,
reliable
to the
that _ood-based
and fixtures,
indirectly
15,000
even prior
and
the Ch_:._berof Furniture Industries of the / (CFIP) estimates that there are from 4,000 to
5,000 establishments furniture
(low stool)
of bs_iboo siats) were
indicati_
ring has been here
/--3_).
FUPd_ITURE INDUSTRY
(P$iC)
st,_tes as _,'_any as (_7orld Bank /--67). is tak_n to _refer
under Philippine
code number
to
Standard
332 (manufacture
and fix turas_ -except primarily
Of
as f_;llows:
3321(0) 1/ - Manufacture including
and repair of wood
furniture_
uph#istery.
1/The fom_,_t xxxx(0) .is intended to indicate a one-to-one correspondence between four- e._d five-digit sub-6lassifications o
II-2
3322(0)
-
Manufacture
and repair of rattan
(reed, wicker
and cane),
including
3323(0)
-
Manufacture
of box beds
3324(0>
-
Manufacture
of partitions,
and office 3329(0)
-
Manufacture
In 1980,
elsewhere
classified.
_192 million prices),
at constant
our roughly
3325(0)
lockers,
1972 prices of _zoss
and
of metal, not
- manufacture
_enerated
0.81%
shelves,
primarily
and venetian
the industry
and mattresses
and repair o_ furniture except
shades
upholstery
fixtures
fixtures,
One sub-classification, and door screens,
and store
furniture
of window
blinds,
was disregarded.
a _ross
value
(P474 million domestic
added of at 1980
product
for
menu fac turi ng.2/ "ThÂŁ_ industry
is widely-dispersed
country., but the l_rFer mainly
in Metro Manila
to the major sources site shippin_ engaged
and export-oriented and Cebu, because
of raw materials,
and tradins
in the export
principal national
degree,
is characterized source of rattan,
Qeaport.
firms are located
as well
as the requi-
(Cody/3J,
furniture
by proximity
Firms
are mostly located
;regales City.
Cebu,
to Mindanao,
and the presence
The _reater number
the entire
of their proximity
facilities. _
of rattan
in Cebu and, to a lesser particular,
throughout
in the
of an inter-
ef wooded
furniture
2/The National Accounts Staff, Statistical Coordination Office, NEDA has data shc_inF _hat gross value added (at constant 19,72 prices) increased from _88 million to _192 million between 1970 and 1980, indicatin_ a modest increase in share of _ross domestic product for nanufacturin_ from 0.74% to 0.Sl%. This share was decreasinK from i972 to 1977_ _hou_h. (Refer to Table If.l).
II-3 TABLE II. 1 GROSS VALUE ADDED TO GROSS DOMESTIC PRODUCT (MANUFACTURING), WOOD-BASED FURNITURE AND FIXTURES.. (1970-1980,
Gross
AT CONSTANT
1972 PRICES) -_/
Value Added,
Wood-Based Furniture ?/ and _Fixtures (_million):-'
Yea_..._r
% to Gross Domestic P roduc_ _(Manufacturing)
1970
88
0.74%
1971
98
0.78
19 72
86
O. 64
19 73
90
0.59
19 74
88
0.55
1975
74
0.45
19 76
79
0.45
1977
90
0.46 - 0.74
1978
15_ /
19 79
167/3/
0.74
19 80
1923/
0.81
--
_
"
1/Sources 2/At
-
,
National
constant
â&#x20AC;˘3--/ASrevised
,i
Accounts
Staff, Statistical
Coordina%ion
Office,
NEDA.
1972 prices_ in the 1982 Philippine
Statistical
Yearbook
(a NEDA
publication',
11-4
exporters
are located
Exports
of wood-based
$6.3 million values, over
or an equivalent
furniture
these
respectively,
in 1976 and 1980. $i16.3 million,
average
However_
and 0.85%_
or 0.60%
has been
accounting
for 86.7%
1970-1979,
reaching
wood
furniture
furniture
1974 to a measly
Philippine
"it would untapped having
economy
exports,
raw material), over the period
in 1979.
The share
of
o_ wood-based
from a high
/
(DRC) for wood using NCSO's
for 1969o
of 37.6%
in
Buri_ bamboo
relatively
picked
up
that _ vast
favorably
as o.. furniture
table of the
for 1974 was with
the 8.88
They observed
export potential
competing
the
and rattan furniture
input-output
DRC for manufacturing. also
2--/estimated
l_e DRC figure
compares
for such nOn-impor_
low DRCs
was
exports
and fixtures
to total exports
and Associates
cost
at 6_99,
appear
Philippine
exports
in contrast hsve
Power
average
exports
for 1976-1980
(as principal
has dropped
even lower at 5.77, which weighted
for only
(Refer to Table !I .3째)
resource
and fixtures
accounted
0.8% in 1978 and 1.1% in 1979.
in 1978 and 1979o
domestic
rate of 65%
II .2 .)
a high of 92.4%
and other materials,
..... _ Bautista,
in FOB US $
growth
amount
of aggregate
and fixtures
grew from
total Philippine
furniture
and fixtures
in 1980,
amounts
(See Table
in rattan
/--17.)
and fixtures
of aggregate
The bulk of wood-based
(See Amio
annual
of
The aggregate
over the same period.
however_
Manila.
in 1976 to $46.9 million
the period.
0.25%
in Metro
industries
and fixtures
that
remained in 1969
(both metal
T,_LE
II.2
PHILIPPINE EXPORTS OF WOOD--BASED F_NITURE AS A PERCENTAGE OF TOTAL PHILIPPINE (1976-198D,
_ear
AND FIX_JR_S EXPORTS
IN FOB $ VALDES)
Total
Philippine Exports of Wood-basad
% to Total
Philippine Exports of Wood-based Furniture snd
Philippine or_ E
Furniturel_d Fixtures --
Philippine Exor_
Fixtures, Builder's $16,424,207
Includingll Woodwork _="
% to Total Philippiue E__orts
1976
$2,573,675,684
$6,325,137
0.25%
1977
3,150,886,989
13,266,247
0.42
22,883,437
0.73
]978
3,.424,876,025
16,500,050
0.48
29,806,314
0.87
]979
4,601,189,916
33,343,792
O. 72
52,808_ 160
i. 15
]980
5,487,787_554
46_ 856,143
0.85
61,217,616
1.12
_otal (1976-1980)
1/Source:
$1_9_,238,416,168
National
Census
$116,291
and Statistics
3.69
Office
0.60%
$183_ 139 _734
0.64%
0.95%
II-6 TABLE II.3 PERCENTAGE DISTRIBUTION OF PHILIPPINE EXPORTS OF WOOD-BASED FURNITURE AND.FIXTURES ACCORDING TO PRINCIPAL RAW MATERIAL II (1970-1979,
Percentage Year
IN FOB $ VALUES)
Distribution
Wood
by Principal
Raw Material
Buri, Bsmb o9/ and Others 2_
Rattan
Total
1970
5.3%
87.5%
7.1%
1971
6.6
91.1
2.3
i00.0
1972
16.6
81.9
.i, 4
99._
1973
28.2
71,6
0,1
1974
37.6
60,4
2.1
i00. i_/
1975
21.6
75.6
2.8
i00,0
1976
15,9
83, 7
0.3
99._
85.6
2.2
i00.0
1977
12.2
99.9% 3/
/
99,9 _3/
/
1978
O. 8
90.8
8,4
100.0â&#x20AC;˘
19 79
I. 1
92.4
6.6
100.13-/
8.4%
86.7%
4.9%
w
,
-
1970-19 79 (Aggregate)
Based
------on data of the National
2--/Excluding furniture 3--/Withroundoff
error_
Cansus
and Statistics
and fixtures prineqrily of metal. should
equal
100.0%.
Office.
i00.0%
II-7
and wood), o."
So much
the traditional, plywood
primary
and rattan
wood-based
has been said exports
poles)
furniture
the low DRC, it appears rage further Whether
exports
program
a program
should
is imperative with
should
effi-
as exhibited
by
ought
to encou-
should
at all develop
an export
remain
and what
to be seen,
components however.
in the industry,
would
be the expected
be given
special
and potentials
with so
doiug o
fail to attain
It
beneficiaries
attention,
for addressing
Many
such
who, along
but also in terms of the expected
will probably
this is done.
the relative
that the government
involve,
and costs associated program
sawn lumber,
E_oods (e.g.,
industz7
for the industry,
terms of capabilities market,
With
furniture
that the firms
of such aprogram,
processed
away from
in that sector.
the e,:tire economy,
export
towards
the government
promotion
(e.g., logs,
and fixtures).
ciency of the wood-based
for shifting
not only in the
benefits
an export promotion
its objectives
un%ess
II-8
B.
General
Characteristics
of
the Sample
The sample population 1,531 establishments Pa_panga,
Rizal,
used in this study
spread
Lagune
over Metro
and Cebu.
consisted
Manila,
A final
of
Bulacan,
sample
.'.._" ..... 17:
size of 115 ./i-.=2_, •
(compared
to a derived
sample
of a total of 342 firms
size of i17) was
sought
and/or visited.
and Io7 present
suramaries of the sample
derived
respectively_
sample,
size of labor force. distribution 60% of
(Tables Io2
population
hand,
are located
at, out
and the
down by area and by
of the 115 respondents
in Cebu, 13% in Pampanga, Bulaean
broken
On the other
the respondents
arrived
the geographic
is presented in Metro
in Table
Manila_
and the remaining
13.9%
13.1% in Rizal,
and Laguna.
The success
rate_'in the field survey
suggests
that only
••some 56_-of our samp._e -po_ulation._actually represents based
furniture
and fixtures
tion (assuming •.
....
1.0
•
the survey mostly
Size Distribution Of
=anufacturers
that =ha firms which
,
during
IL
me
_I15
, ,
represent firms
firms Successfully
...
h_ve
closed
interview&d,
•
.
- -
are small
"
gives a distri_butioh of respondents
from
[ "
Tabie ii.5)
by size' of
distributioii differs the expected
........
:(5 to 19 _,orkers),
(20 or more workers).
labor' foreeo '/_his
14%
sector (with a labor force . i
of from i t-o 4), 40.4%
Significantly
.
which
of Establishmenhs ....
.
and 45°6% large
in 'actual opera-
_could not be located .,
are in the unorganized •
wood-
highly
distribution
as
4).
.... .i.
II-9 TitLE !I째4
LOCATION
Location
OF
RESPONDENTS
Frequency
l/
%___
ist district
18
15.65%
2nd district
29
25.22
3rd district
I0
8.70
4th district
12
i0.43
Pampanga
15
13.04
C_b u
16
13.91
Eizal
7
6.09
B ulacan
6
5.22
Laguna
2
I. 74
Tot al
i15
i00.00%
_. m,
lJ.= _.
1/Based on address of mai_ office. Of the 115 firms surveyed, 16 have their manufacturing facilities in locations different from the main offices. Only 6 of 115 respondents have more than one malufacturing facility.
2--/FirstDistrict-" Second District_ Third District: Fourth District:
City of _Manila Quezon City, San Juan, Mandaluyong, Pasig, Caloocan City, Malabon, Navotas, Valenzuela Pasay City, Makati_ Las Pifias, Para_aque_ Muntinlupaj Tagui_, Pa_eros
Marikina
II-i0
TABLE II.5
DISTRIBUTION OF RESPOi_I;EI_TS , -i/ BY SIZE OF LABOR FORCEr-
Employees
Size Force of Labor
%4 ! --j
_
None
0nl 2/
2
Including
Cumulative %
i, 8%
_4/ --
_
i. 8%
Household
-
-
Labo 3/
Cumulative %
-
i -
4
23
20.2
21.9
16
14.0%
14.,0%
5 -
9
17
14,9
36.8
25
21.9
36.0
lO -
14
Ii
9.6
46.5
ii
9.6
45.6
15 -
19
9
7.9
54.4
i0
8.8
54.4
20 -
29
19
16.7
71.1
19
16.7
71.1
30 -
49
i_
13.2
84.2
13
11.4
82.5
50 -
99
6
5.3
89.5
7
6.1
88.6
i00 - 199
6
5.3
94.7
7
6.1
94o7
200 or more
6
5o3
i00o0
6
5.3
i00.0
Total
i/Based
n4
On headcount
100.5J
n4
only.
2/lhe term "employee", helpers.
_s used in the study_
--3/Labor force is defined to include_ household members/helpers directly
excludes
roundoff
error,
household
members/
other than employees_ only those participating in production.
4/Percentages are based on i14 of 115 respondents_ labor only by contract. 5/With
99째97Y
One responden=
employs
II-ll
shown in Table respondents persons째
1.7, in which
have a labor
at least
force of less
The sam4_le, however,
resl_'ondents as falling within result,
as discussed
likely
reported
data in order
Accordingly, of stratified
of the basis
standing
this problem,
to be representative virtue
however,
being
it is highly (63.5%
registered
with
(and
as cottage
industries.
data,
the idea
owing
for stratification. the sample
procedure째
to the
Notwith-
is still
of the sample
had tr_proceed
This
employment
of survey
of the sampling
36% of
of firms, which
team had to abandon
analysis
collapse
only
with NACIDA
to qualify
the study
than I0
I.B.2_ may have been
hand,
tend to understate
of
category.
registry
that firms registering
this agency) other)
this
On the other
of the respondents
yielded
in Section
due to the use of NACIDA's is not updated.
56.4%
believed
population Data
on the basis
of
by
analysis, the entire
sample ._7 Th+e 1977 NCSO Survey
of Manufacturing
Establishments,
on the other
the s_=ae area)
a distribution
the unorganized 20.7% large.
sector, Possible
ence in findings are discussed
66o1%
hand,
(for
in 1977 of 13o2% small
implications
between
indicated
firm_, and of this differ-
the NCSO survey
in the immediately
in
and ours
succeeding
section.
II-12
Our sample labor force
of 115 fir_s yielded
of 5,294
labor exclusively of 46.4, with
by
smallest
(excluding
one firm employing
contract)_
yielding
standard
larg___streported
deviation
size of labor
that our sample
of the sample population, a total
areas covered "legitimacy
of 103,5,
force was
employment
of close
by our survey
rate"
Table II .6
alone
to the sample
indicates
members/helpÂŁ:rs process9
is indeed
the above
Some 43% of our sample
The
800_ while
according
figures would to 40_000 in the
(applying
population
the extent
a 56% size).
to which
household
in the production
to size of labor is
repres_'.ntative
employ house/%old labor.
ar,a employed
that the practice sized
a mean size
was 2.
Assuming
suggest
a total estimated
more prevalent
firms, as is to be expected_
two firms in our sarapie which
force,
It shows
among the smallerThere are even
use household
labor
only. Gross sales
estimates
only by 96 firms estimated
sales
respondents Only 6.3%
(83.5% of the sample)° at PI00,000
reported reported
sales
Sonle respondents,
sales
sales
(Refer to Table lI.7 these gross
for 1980 were
)
provided A full third
or less_ while at no more
82.3% of
than _i million.
in excess of _5 million. It is not clear whether
estimates
are meaningful_
for instance,
read off
however.
their sales
11-13
TABLE 11,6
• ___ .F.,r.e_c_ .. Using_-H_-use_Ido_:'_Not Us{__ _' .... _-
Size of Labor
USE OF HOUSEHOLDLABOR, BY SIZE OF LABOR FORCE
Force
\' Labbr_ ,: . Househeld
% Using
Lab_ri,_otal
Household
Labor
Not Using Household• Labor
Total
i -
5
Ii
9
20
55,0%
45.0%
100.C
6 -
i0
19
3
22
86.4
13.6
IO0. C
ii -
15
5
ii
16
31.2
68.8
IO0.C
16 -
20
1
13
14
7.1
92.9
IO0.C
21 -
30
3
9
12
25.0
75.0
IO0.C
31 -
50
5
5
i0
50°0
50.0
100.6
51 - i00
2
6
8
25.0
75.0
i00.(
3
9
12
25.0
75.0
100.(
49
65
114
43.0%
57.0%
i00.£
2t
lOl - 800 Total
II-14
TABLE 11.7
DISTRIBUTION OF RES_gNDENTS BY GROSS _IALES_'
Estimated 1980 Gross Sales
. _<_ooo)
Cumulative
Frequency_
25 and below
_
Cumulative
_
ii
11o5
Ii
11.5%
26-
50
6
6,2
17
17.7
51-
i00
15
15째6
32
33.3
i01-
200
13
13.5
45
46.8
201-
500
25
26째0
70
72.9
501- i000
8
8.3
7_
81 o2
I001- 2000
5
5.2
83
86.5
2001-
6
6.2
89
92.7
5001-10000
4
4_2
93
96.9
10000-15000
2
2.1
._
99.0
15001-'20000
C
_
95
99.0
20001-25000
. ,,,
1
1.0
96
I00.0
5000
Tot l
99.8 Y
_l--JPerrespondents _ estimstes_ 2--/19respondents answer.
_/With
either
roundoff error.
could not make an estimate
or refused
to
If-15
figures
from
large,
be
income
96
with
I_U_ion
would_
right_
with
sales
yielded
deviation
however_
In
gross
respondents
ia
only
sales
of
appear
difficulty from
of
force
been
chosen
the
Product
fimr_ in
major
used
in
wood-based
product
this
builder's and
rieso
further
Any
made
the
even
unwieldy.
furniture
every
to
the
the
few
fairly size
a substitute of
in of
the
have
for
data.
of
and
wood-based
buri of
that
identified
home
furniture,_ fixtures and
buri
fixtures
and
acc_sso-
disaBgregation
would
less
manageable,
respondent
is
a wood-based
our
took
survey
a respondent
subeon£raeting furniture
and
rattan
establishments
single
wood-based
been
wood-_ased
level
manufaeturer_
possibility
resale
distri-
respondents,
as
woodwork_
rattan
survey
_,_ile
types
furniture_
furniture_
ent_aged
_T_e
skewed
getting
the
analysis
study=
office
aecessories_
the
the
million
sales
by
by
Lines
Six and
and
estimates.)
in
data
has
Yhe
to _e
sales
_1.2
million°
upward
financial
of
by
provided
of
_240_000o
high
the
23.1
accurate
size
may,
estimates
pushed
relatively
view
labor
which
a mean
of
therefore_ m_an
firlns with
2.0
rate_
a standard
_median,
re.turns,
questionable°
(At any these
tax
may
and/or and
into
as well purchase
fixtures°
have
account be for
11-16
Accordingly_ engaged
Table
11.8
in manufacture_
tl_e above-mentioiLed survey
shows
reveals
sample_
subcontracting
that 25 respondents_
to other
?roducts
/Our
or 21.7% of the of certain
On the other
16 respondent s) purchase
resale in
types.
on production
firth.
of respondents
and/or
six _'ajor product
subcontract/pass
products
the number
hand,
from other
13.9%
(or
manufac-
turers for resa!ao/ The distribution principal
of respondents
raw material
82.6% of respondents material_
14.8%
by location
used is given
in Table II.9.
use w,_od as princi_)al rnw
rattan
(as well
as buri,
similar
nlaterial) _ and 2o 6% undetermined
of wood
and rattan째
The ratta_
are located
principally
the latter
area includes
respondents
using wood
Only reported
smnp!e)
1976-1980_ actually
period_
finns.
/_-o of these Pampange_
latter
raw _:aterial.
However,
had any exports.
but presumably
firms
during
the
(21.7% of
The four other
as principal
had no exports
raw material during
did ex:nort Drier
the
to 1976.
four fir_,s are located
one in the fourth district
and one in Rizal./
of
any of their producas
only 25 of these
rattan)
manufacturers
of tl:e 115 respondents
expo_ted
fit%as (thr_%e using wood and one using
and
combinations
_ largar proportion
as principal
or se!lin[, to exporting period
furniture
bar_oo
in Pam_panga and Cebu, although
29 (or 25.2%) ever having
and
in
of Manila,
TABLE II. 8
NUMBER
OF RESPONDENTS
ENGAGED
IN T'rlE
M__qUFACTURE, SUBCONTRACTING AND/OR RESALE OF WOOD-BASED FURNITURE, BY MAJOR PRODUCT TYPE
Product Hon_
.Frequency ManuSubRefac____ture c_ract sale
T_pe Furniture
Office
(Wood)
Furniture
Fixtures Builder's
(Wood.)
a_id Accessories
(Wood)
W_o_ork
Rattan
and Buri
Furnitur_
Rattal
and Buri
Fixtures
Any M_ede
__ to Total RespDndents ManuSubReAny facture contract sale Diode
83
14
I0
85
72째2%
12.2%
8.8%
74째6%
43
5
2
44
37, 7
4,4
i,8
38, 6
55
7
2
56
48.2
6.1
1.8
49.1
25
3
1
26
21.9
2,6
0.9
22.8
22
5
3
24
19.3
4.4
2.6
21.I
15
2
1
15
13,2
1.8
0.9
13.2
-
and
Accessories
+4 e4 ba
Valid
cases = i15 respondents
II-18
TABLE 11o9 DISTRIBUTION OF RESPONDENTS ACCORDING TO LOCATION AND PRINCIPAL P_W MATERIAL
Principal
Raw Material
%
Wood
Ratta I/
Wood and Rattan
Ist District
17
1
0
18
94.4%
5,6%
0%
2nd District
27
i
1
29
93.1
3.4
3.4
3rd District
10
0
0
I0
i00.0
0
0
i00.(
4th District
9
2
i
12
75.0
16.7
8.3
i00.(
12
4
0
16
75.0
25.0
0
i00.(
P ampanga
6
9
0
15
40 o0
60.0
0
i00. (
Rizal
7
0
0
7
i00.0
0
0
i00. (
Bulacan
6
0
0
6
i00 o0
0
0
i00. (
2
50.0
0
115
82째6%
Location
of Firm
Total
Wood
11attan
Wood and Rattan
Tota2
Metro Manila
Cebu
Laguna
Total
1/Includes _/With
1
O
95
17
buri_ bamboo
round-off
error째
and other
1
3
such material.
14.8%
50.0
2.6%
i00.( 99째 c
!00._
i00.(
II-19
Of the 25 firms which (Table II.lO'givcs according ).0were while
a distribution
to loca_ion
able
of these
and principal
to do so throughout
the remaining
4 years.
did export within
15 exported
/See Table
25 respondents
ll.ll
within
they actually
exported,
the fly6 years in anywhere
the period
II.12 and II.13
e,_,port ....end years
1976-1980
(if the (I, 2, 3_
raw material oJ
ex-ported in 1980_
22 in
and 12 in 1976o
Tables
the major
of first
covereds
in which
and te principal
15 in 1977,
indicate
of years
only
from 1 to
for a distribution
in fact, only 21 respondents 1979, 20 in i978,
respondents
raw material),
according• to number
4 or 5 years)
1976-1980
product
export_
types
respeetively_
of
the 29 firms who ever exported_ _ne date• is indicative made of rattan similar
material),
of wood.
over
observetion, exported
furnish
exclusive
while
_.Thileonly
estimates
to exporting of exporting
$6°38 million
exports
and other
made primarily
of exports
1976-1980
of the 25
supports
such
of the 21 respondents
ii are rattem
primarily_
and rattan.
plus sales
the period
towards
bamboo
away from exports
For instance_
in 1980_
9 use wood
hould
as buri,
Even the FOB $ values
respondents
wood
(as well
of a shift
furniture
who
manufacturers_
one uses a combination 8 of the first
of expore firms)_
sales
(with _ mean of $797,8
category
(direct exports
equivalent
firms _ m6rkuos,
of
FOB $ value_
aggregated
thous_ud) o
On
11-20
!_BLE II.i0 DIS27RIBUTION OF RESPONDENTS W}iO EY_ORTED DURING THE PERIOD 1976-1980_ I;Y LOCATION AND PRINCIPAL P_AW MATERIAL
Principal
Raw Material Wood
Lo ca tion
Woo d
and
Rat tanI/
Rat tan
a____! To t
Metro Manila ist District
1
1
0
2
2nd District
4
0
i
5
3rd District
0
0
0
0
4th District
2
2
i
5
Pampanga
2
5
0
7
Cebu
2
4
0
6:
Rizal
0
0
0
0
Bu!acan
0
0
0
0
_O0
___0
,,.0
__0
iI
Iz
_/2
2__5
Laguna
Total
1/Includes
buri, bamboo
and other
similar
material.
11-21
TABLE
II.ll DISTRIBUTION WRO EXPOKTED DURING ACCORDING TO NUI,[BEROF IN THE PERIOD, #d._DTO
OF RESPONDENTS I_{E PERIOD 1976-1980, YEA_S ACTUALLY EXPORTING PRINCIPAL RAW MATERIAL
Princip_l NumSer of Years i! Actually Exporting,-" in 19 76-19 80
Wood
Raw Material
Rattan 2/
Wood and Rattan
To tal
1
2
i
0
3
2
1
0
1
2
3
3
3
i
7
4
3
0
0
3
5
2
8
0
i0
ii
12
2
25
Total
i/"Actually exporting" may refer to exporting firms_ or botho, 2/Inc!udes
buri_ bamboo
and other
to either
similar
direct exports
material째
or sales
II-22
TABLE II.IL
Product
NUMBER OF RESPONDENTS WHO HA_E _ND/O!( i/ ARE ENGAGED IN EXPORT OF WOOD-BASED FUPd_ITURE,--_' BY _JOR PROBUCT TYPE
T_
R_ttan
Frequency_
and Buri
Rattan and Buri Accessories
Furniture FixturEs
% to Total
14
48.3%
and 9
31.0
8
27.6
Fixtures and Accessories (WooL)
7
24. !
Builder _s Woodwork
5
17.2
i
3.4
Home
Furni_ur_
Office
(Wood)
Furniture
(Wood)
l-_ly 29 (or 25.2%) of 115 respondents sold _o exp_rt.ing firms.
TABLE 11.13
Year
Expor_ers
-_._-_or_-d,+ . . ever having
exported/
DISTP_BUTION OF YEARS I / IN _THICH N_,SPONDENTS FIRST EXPORTED _!
of First E. ox_._
F_
%
1976-80
16
1971-75
7
24.1
1966-70
2
6.9
1961-65
2
_.9
1948
1
3.4
1
3.4
29
99.9%
Cmnnot
recall Total
i/Only sold
29 (or 25.2%) of 115 respondents to exporting firms.
reported
55.2%
ever
havin_
_,xported/
II-23
the other h_qd,
8 exporters
provided
an aggregate
million,
or a mean value
(See Tab%_ exports
II 44°)
of rattan
FOB $ value
of only
furniture
furniture rattan
$161[.3 thousand,
_nanufacturers
of
have substant-
tha_ exports
have
total Philippine grown heavily
of
ships_ /--5 Z
of
in a latter
Gharaeteristiss
and nhe remaining reports
turers over follows; 16.5%_
wood-based
in favor
as will be discussed
$1o7% of the 115 respondents
that newly
the _eried
singie
of single
furniture
sing trend
over
five years
predominance 15o7%
registered
7°5%°
furniture
were
proprietor-
manufacas
corporations,
It noted_
manufacturers
(PDCP
distributed
76.0%;
proprietorships
however,
that
to total newly
had shown
an increa-
that period,)
of respondents or lasso
operating
are single
are corporations.
proprietorships_
registered
30°4%
18o3%
1970-1976
stud partnerships,
registrations
age o
that values
of [his _port.
Organizational
Only
then_
on the fil_n level_
time,
exp_rts
furniture_
section
been
of $1o29
furniture. At the same
3.0
estimated
furniture
It _,:ouldseem,
ially heee_ _reater, wood
of wood
have
Moreover,
for no more
been
in operation
60% of the firms have
than i0 years,
in the industry of the respondents
for
of relatively are more
indicating young
a
firms°
then 20 years
of
11-24
12.2%
of the fi1_s sampled
by other •than continue
the original
are being
owners,
to be under original
operated
while
_37o8%
ownership°
(Refer to
•.Table !I.14 .)
size
A cross-tabulation
of age- of the firm versus
(in terms of labor
force) yields
ficant
chi-square
result
are not indepeL,dent. size and ag_
linearly).
tendency
few years
as 35°4%
ceased operations.) to prevail_ pondence
finns
to close
down after
(The survey of registered
sample
and IIoB.I.
It would
may increase
over
_-Tere
the lack of corresof size of labor
(Table !. 7) and the
) noted
seem
a
:ilms im our sample may have
explain
the distributions
(Table Ii.5
a
data suggests
If the former possibility
force of the d_rived actual sample
either
to grow in size over
it may somehow
between
(though not
This ,nay indicate
in operation.
that as much
two variables
correlated
for firms
time, or for smaller
signi-
The data_ in fact_ suggests• that
are positively
necessarily general
that these
a highly
in Sections
I.Bo2
that size of labor
force
the years_
whileaS
data in NACIDAVs
,5
registry
indicate,
employees
othersinformation_
at the time of registration
where between earlier
among
1963 and 1979).
mentioned,
of the possible among other
understatement
data_
to qualify
and avail of the privileges
of
(which is any-
Of course_
it may simply
number
as was
have been an offshoot
:_f=mployment for registration
that go with
figures, with NACIDA
such registration°
II-25
TABLE Ii,14 DISTRIBUTION OF RESPONDENTS .. BY NIYMBER OF YE#diS IN OPE£_TION _!
Fre_snAy
,o
No. of Years
Original
i_. Operation
Ownership
Acquired
Total
1-5
29
6
35
28.7%
42.9%
30.4%
6-10
31
3
34
30.7
21.4
29.6
11-15
14
3
17
13o9
21.4
14.8
16-20
9
1
I0
8° 9
7° 1
8.7
21-25
3
I
4
3.0
7.1
3.5
14
0
14
13.9
More than 25
_k=ow_ 2/
1
Total
101
Original
o 14
_ 115
IJL_ of yearend 1960. 2JRespondent 3/With
cannot
roundoff
recall year established.
error
Ownershi__
i.o 100o1% !/
_ed
0
o ....9.9- 9_-3/
Total
12.2
0.9 100o1% 3/
II-26
C.
Production i.0
Inputs
and Practices
Production
Facilities
ioi
and Equipment
Plant
and Major
Practices
C_ody /--3 7 had observed workshops
in both solid wood
of the industry production°
that most
factories
and
and rattan sub-sectors
are p_:,oriyequipped for
_ _th plant Fur• their_.'._re _ ,,.
mechanized.
and equipment
are _,c_enerallydilapidated° 6_.i,r sureey have
showed
,..,i ......... s housed
or located
immed._,t,_ly adjoining "backyard
that 51.3%
areas.
type t_ operations,
only to limited
expansion.
ents are renting Cody further
of all respondents
in residences
or the
This suggo.sts somewhat which Some
may be _,_.sceptible 2_'_.7%of respond-
their _].._,:::c _-_tructureo notes:
"Although any seneral i_-_.,ric:_e factory would be suitable fer _he manufacture of furniture_ the bulky nature of the p-i,c-duct and its susceptibility to damage in handling require t_at factory premises should be relatively spacious_ free from ohstructions and should have flat floors, xxx Because the quality of the finish ofthn greatly affects the saleability of the product, separate enclosed :finishing areas with extractor fans are of considerable import_:nce. Only a small minority of Fiii__,inofactories have any of those desiderata." Out of 115 respondents, plants
in different
locations
Six of these 22 act_ai!y
!/The
remaining
i09 respondents
22 (or 19.1%) have than
the main
office.
have two plants, 3-/ while
(94.8% of sample)
have
only one.
II -
the sixteen
others
simply
and plants separately Seven having hand
tools
have
Tables
II.15
pondents
type/category
and II째16
a median
of 4,
_ .'_' pieces
Table maj_r
across
ty::,._/_egorv,
en_s.
The most
additional to 7) have
of equipment.
(See
of type_
and number
respectively.)
_Fne mean
is
the sample
4.6, compared
On the other hand,
lists
the mean
a median
equipment/machinery,
in common use among
common
type of
of 8. by
the respond-
equipment
are the
spec ...._zed saw and cutters,
which
very basic
Only a little more
to the industry.
half of the respondents_ planers
or compressors,
machinery Fewer
in milling
however, which
ar_ understandbly,
have
ought
and finishi[g_
routers
than and
to be standard respectively.
than 30% have any _.q_ip_:_.._c,.r.<t for shaping/moulding,
jointing, would
four
the total
is 9o9_ as against
17o17
while
for
for distributi_,ns of res-
o[ equipment,
number of types
number
(thi_ brings
_
report
possibly
implements,
ac_.ording to number
of _ieces
with
similar
except
only one piece째
three respondents oniy cn_e major
(6o1% of the sample)
whatsoever9
and other
respondents
their main offices
located.
respondents
no equipment
have
27
lathing
require
desirably, industry
and o_her [_erations
a fairly high
mechanization, is9 by and large,
degree
which
Ordinarily
of precision,
_ais suggests
that the
labor-intensive.
and_
,
_-,
_ABLE II.15 DISTRIBUTION OF RESPONDENTS ACCORDING TO NL_BER OF TYPES OF EQUIP_n_NT_ BY PRINCIPAL RAW MATERIAL USED
Principal NumBer
ef
T_pes oi E_ment
Wood Exp0rti_K
Ra_
Material
Ratt I/
lyonExportinE
Sub Tgtal
Wood
NonSub Ex_t___ _ Total
_in_
ExportinE
and Rattan
All_w Types of Principal Material (Total) Non,'_uh Total Total Non- Grand Ex._rtln_nE Total _ E__ Total
0
-
3
3
-
3
3
-
1
-
5
5
-
1
1
....
-
ii
ll
2
-
2
-
-
11
11
2
-
2
-
i
13
14
-
i
1
-
6
9
_
......
14
1
-
i
-
-
2 3
14
1
-
-
!
-
7
7
6
6
-
Z
ii
13
-
2
ii
13
-
1
14
6
9
-
I
14
•
6
-
15
7
-
7
7
i
-
l
1
-
i
2
7
9
8
1
2
3
2
-
2
-
-
-
3
2
5
9-Ii
-
2
2
1
-
1
-
-
-
i
2
3 I
All Type s22/
_otaJ
3
3
11
lJlncludes
6
aOe-'
buri_
bamboo
and
_ 1.1
91 other
9:-'
similar
-
-
1
-
1
4
5
14
2
1
3
Z_
3
_
7
10_
material.•
.%
i/Pe&pondent claims go into any detail. --3--IFonr wood
furniture
#-/Three exporters
that firm has "all
manufacturers
of rattan
types" of machinery/equip_snt
refused
furniture
to provide_information.
_efused
to provide
information.
"necessary
for the business,"
but refuses
to
_,
i
TABLE
II.16 DISTRIBUTION OF RESPONDENTS ACCORDING TO NIR_ER OF PIECES OF EQUIPMENT, BY PRINCIPAL RAW MATERIAL USF_D
Principal _,_her Pieces
oI of
Wood Non-
_ment
•
E_
Ex_i_
Raw Material
. I Total
Used
All Types
Rattan _II/ Non-
IE/xp_q_
Exporting
Wood
Total
_
and Rattan NonSub-
Material Total
Ex:?:_rtin_Total i i
_Zk_ -
7 4
4
i
5
6
i
15
I_
6
28
34
1
4
20
24
-
-
3
4
7
-
i
3
6
2
4
-
3
3
-
3
__.
-
1
-
3
3
-
1
1
......
2
-
5
5
I
-
1
-
3-5
i
15
16
....
6-9
3
27
30
3
1
4
....
10-14
_
•20
22
1
-
_I
1
-
15 -19
i
4
5
2
-
2
-
20-29
i
3
4
1
-
i
i
1
Z
3
1
-
1
....
9 !/
5
14
Tot_1
9 2/
S2 2._/ 91
_
2
Used _(Total) Total Non- Gr_nd Total ?
)
_0 o_ moze
of Raw
-
-
3 2
1
3
20
_
.89_
loo I..'4 t,-4
i/Incltdes 2/Thre_
buri,
wood
bamboo
fuN_iture
-3/Thre_ rattan
and similar manufacturers
furniture
exporters
material
_
(two of them exporting) refused
to provide
refused
information.
to provide
information.
TABLE
II.17
Average _f PiecesNumber per
No. of Respondents Type
of Equipment _achinery
Specialize cuuter
_4uorting as2/ Using-This Type _-
COitiON TYPES OF EQUIP_I_X_T/IIACBINERY IN ]TSB-I/
% to Total,, Respondent Using Respondents -_jl This Type
Average Age P_zng¢ (Years)
Across Usin_
_.%ge(Years) -4/
R_spondents This Type
AgeMedian (Years )4/ --
Weighted
Across Respondents
_ saw/ i01
90.2%
2_9
2-30
7.5
7°5
6
Pla:_er
65
58.0
Io 4
!-20
7 °4
7.1_
5
P,outer
58
51.8
I, 8
1-15
4.5
_,6
4
Compre_ _._:-.
57
50 o9
2 °_
1-20
5.2
6.5
4.5
Drill
39
34,8
i. 9
1-30
8°9
9.6
7
_4
30.4
2.1
. 1-25
8.!
7°9
4
33
29°5
i° 7
1-20
5°6
5.7
4
Jointer/joi'__t planer
30
26° _
i° 2
2-30
6o 8
6.8
5
Press
machine
28
25° _
Io2
2-2!_
5°6
5,2
5
Moulder/shaper
24
?i. 4
2°i
1-20
7. ]
6.9
5.5
L_the
17
15.2
1o2
3-50
iI_ 8
7_5
Sewing
machine
Sanding
machine
machine
13.4
;aa
--_/Seven (or 6.1%) of respondents reported not having any equip'nent/machinery piece, while an additional three hav_ only on_-_type° --2/l_cludes 7 respo_,dents reporting 3/Percentagesare
based
having
on 112 respondents
4/Taken over set of respondents estimated by resgondent.
using
"all
types of equipment/machinery
_:_horeplied
the _iven
other
in
to the question• regarding
type of equipment/machinery_
_han hand
the business",
tools°
Four
and refusing
respondents
to go into
have
one
any detail.
equipment/machinery.
excluding
only
eases _.,,_here age is unknown/cannot
be
o
Some pieces years),
<;f machinery
but the mean
or, the ]._,wside_ shift
and median
ages are relatively
This may indicate
from tra_:xt._. 7" *()nelly . , manual
mechanization_ slow pace,
_ithough
•Even among
to mechanize_
only
who h_v._ decided
would
claim
or pieces
t.i_:: p,"riod 1976-]380o
Sources
of equipment of financing
e_i_ao_ed wer_:_:,_.:_nc.apital (52 out of
private
moneylesd<_r
:,financing
indicated
resale value
such estimates
z_f fixed
doub_ful_
as_ats_
17.5%
PIO0_OOO
however_
may be meaningful
or
whatever
at all_ as these
s,_.:_:_ to be far from reason_fbly a_:proxi-
• matin_, the value nhe usual
who pr<•vid,_d estimates
o_: f)<_as_and 60.3%_
It is hiBhly
e_timates
eompeaiy and
an aggreg<:_'::,,_ _:_,.c>_ant of ,_i0:,_)00 or less_
42.9%, _50_000 less.
(6.9%) _
(I_4% eae_)o
Out of 63 respondents of current
72_ or
(23o (/,%) _i_pplier' s credit (4.,_
to bav_
(72 out of 1.15) i::port
ac'auiring some m_jo_: _iece
r_latives/fri(mds
towards
line of equipment/_,:_e_chinery_
62.6% =,f respondents
*:_, ,.,.,' ...... :_), banks
recent
at a painfully
respondents
a handful
a fairly
operations
perhaps
an esse,_tiaily complete
ev_r
are old (20 to 50
of fixed
capital-labor
Instead,
assets_
ratio
an alternative
exten_
of mechanization
numb_-
_f pieces
Accordingly,
approach measure
for relative
was dev.elo_ed:
of equipment
fails.
ratio
tc size of ichor
of
II-32
force.
(See Table
have machine _hile
11.18,)
1.5.2% of respondents
to _w<_rkerratios
2.8,3% haw
1;4 or less.
resF_ndent:?, fall within
A large
1:2 or l_SSo
ha_ bet._'_rth:,,_. ,:i__! ratio.
f:._n_'_ture _ufaeturers, s,.-., :. __-;_ ,._;a_, mcr_
of i:10 or worse, 56,6%
of
Only 14.2%
_':_. _,_i_::nera!ly l_w
_uggesting
that
!_tter
iabor-int_7;nsiv.?., th,::.n _._ood
,..._:;_._:.:,: ..:.: __mvJufacturingo
;,his ._-.._; ,. 3 ,:_ :=a.'..__ected ,_
:,wii_,' tO the :,:_±?.tiv_i applicabilii,: ..
,--r .;_._-
f, -
of _,_a,t-hines in
compare(_._,,_ith the
C._e - ..:_berof _:2P_:_ ,<._.':._.:.i of pie_e_ b'._t) _'•< :Y'.,.._] t a _.j.a_."_._ _,-."t_dency
• <;nt-4/ of equipm
to ±ncr_a_
_¢ith
t_>_'_':_ _._.i :i:,:e,-_"l.ii_orfor_._¢: or via estimated
in f:-'.c_', _o 4_:..'-<:.,..-.'..._ c,..:_. _:,e e:st_.}>lishedf_gr machine to worker
ratic_: .... /
such retio,_;d_ =:, " size of labor would
forc_
'_:::tion _o size c;f fir_; '....
,..,,r gr<-ss sai_
im_# ' [.kat relative
No_ even
amon_
increases,
T_is
_zr.erttof mechanization
d:.;esno& neces,_arily improve _izeo
ioe,_
as the firm grows
the firms exvortinR
_oed
in fur-
n.iSure is such a trend percepti_l_,) when. that would
--;'._iesame _ay be s_id equip;'nen_o
:;.._ aggr_4_at_ astim_ted
resale
',._,._,ue of
TABLE 11.18 DISTRIBUTION
[_tio of Number of Pieces of Equipment to Si_e of Labor Force
OF RESPONDENTS ACCORDING TO RATIO OF NbR_BER OF PIE_S OF EQUIPMENT TO SiZE OF LABOR FORCE, B_ PRINCIPAL RAW _£TERIAL USED
Frequency according Raw Material Used
Wood
Rattan
to Principal %
Wood and E_ ttan
Total
Wood.
Ratt_
Wood and Rattnn
Total
6, 7%
42.9%
66.7_
13, 2%
0 _[0 - O. I0
6
6
2
14
('J;]i- 0°25
12
4
-
16
13.5
28,6
-
15.1
_ _:_
0°50
27
3
_,
30
30,3
2i_!_
-
28,3
0,__.i- O, 75
14
1
i
16
i5.7
7,3.
33,3!
15, i
(,.76-- 1.O0
15
-
-
!5
16_9
--
-
14,2
i_50
8
-
-
g
9°0
-
-
7.5
i,:51 - 2.00
5
-
-
5
5.6
-
-
4.7
2o61 or more
2
.....
2
2,2
-
-
io9
I.CI-
Total
89 l/
l--/Katios could not be derived missing
data_
_/With
roundoff
14 !/
for 6 wood
3
i06
and 3 rattan
99.9% -2/ i00,0%
furniture
and fixtures
100.0%
-u_nufacturers
100.0%
due to t_ L_
error.
II-34
â&#x20AC;˘
s/
seem to be the expectation.-1.2
_umber
of Workshifts
Presumably
and Working
owing
Hours
to demand factors,
(I12 out of I15) of our respondents workshift
daily.
Only
two workshifts. ("workdays" that there
is generally 17.4%
5 to 13 hours
range.
Mos_: respondents working
week,
5.4Z five,
appropriate
workshifts considering
only one workshift),
are spread Mean
(88.4%>_
while
(2.6_) have
use eight-hour
may be more
the remaining
use only one
3 respondents
82.6%
97,4%
over
length
while
the rest of a
is 8.09 hours,
however,
apply
a six-day
2.7% use seven workin_
and 3.6X less than five,
days_
avera_i_4_ at
5.87 days. i. 3
Subcontracting Subcontracting common practice respondents). of certain (21.7%) major
a_nong firms 44 firms
components
subcontract
reasons
certain
epl_Jearsto be a relatively
given
operations
(51, or 44.3% of all
(38,2%)
to other
entire
pass on produc$.ton firms, while
products.
for subcohtracting are not within
Among
25 the
are that
the capability
5/It_is only in the mean number of pieces of equipment (19.3) that firms exporting wood furniture would seem t_ have an edge over the entire sample (9.9), But such is likewise the case with all exporting firms (16.4), whether using wood or rattan as principal raw material. This situation may simply be a result of the fact that exporting firm_ are generally larger (mean gross sales of _3.7 million_ mean labor force of 147.2_)',compared with the entire sample (mean gross sales of _1.2 miilion_ mean labor force of 46.4). _,e edga in n,,mber of pieces of equipment, therefore, seems to aris_ me:_ly out of the stated general tendency to own more equipment as _ize of the firm increases.
II-35
of the
firm,
and the insufficiency
1
equipment.
In addition,
respondents
passing
out cheaper
to do so.
to suggest certain
a significant
on production
that firms
may not be sufficient
to
have
22 of the 51 firms
II.19.)
to purchase volumes
such decision.
justify
certain
tradeoffs
in deciding
(43.1_ complain
output
is not as specified/e_ected,
report
that the output
time.
Moreover,
ing/passing
This seems
as production
to consider
of
that it turns
do not feel a need
are, of course,
fizm would
number
claim
(See Table
machinery/equipment,
There
of machinery/
that
tc subcontract.
_hat quality while
of
]9 (37.37_)
is usually not delivered on
2 firms
on production
(3.9_state
that subcontract-
turns out to be even more
expensive. At any rate, effect a)
solves,
the practice
at least
lack of resources
of subcontracting
to s_me extent,
in
two _roblems"
on the part of the firm passing
the par_ of the fiZm :tsk/ng on
;_e
capa_it_
on
)
"5
,
d,l
_
-
'
r_
WO
e
_
on
6/ m_darutilized
_c_m_racted
pro ductionb 1.4
Job Order
Versus
Standard Pzoduction
As will be discussed in the custom-made,
6JThis matter
is discussed
later, production
Job order area.
i_ She immediately
is generally
In fact, 48.7%
succeeding
section.
II-36
TABLE
II.19
REASONS GIVEN FOR SUBCONTRACTING/PASSING ON PRODUCTION OF CERTAIN PRODUCTS/COMPONENTS
Entire Product _s)
Reason
Given
Componen.t (s)
% to
% to
Respondents
Respondents
Passing onll Production _-
_
Frequency
Passing on.. Production _/
Turns out cheaper
19
43.2%
4
16.0%
Certain operations not within capability of the firm
19
43.2
1
4.0
Insufficient quantity of labor force
i0
22.7
6
24.0
Insufficient quality of labor force
Ii
25.0
3
12.0
Znsuf ficient machinery/ equipment
ii
25.0
2
8.0
4
9.1
3
12.0
2
4.5
-
Rush jobs/limited tO produce
time
Lack of space
-
1--/44respondents
subcontract/pass
on production
of certain
components.
2/25 respondents products.
subcontract/pass
on production
of certain
(entire)
i
II-37
of respondents produce orders.
_he mean
to total
production
Table
11.20
according
entirely
sample
according
proportion
is in excess
for a distribution
to proportion
to job
of job orders
of 70%.
(See
of respondents
of job orders
to total
produ_tion. ) 2.0
Production
Capacity
The study capacity
team found
in the industry
to handle.
Considering
labor-intensive number
two estimates inputs
consider soldo
a situation
_ile
perception working mate
relative
is based
wi_h
largely
are based
dependent
being
to provide
asked
output would
use of plant
be
(including
(as of 1980) p the first complement
s and volume
esti-
in 1980, while
on an "ideal"
on size of labor
to
on the respondent's
to be relevant,
labor-intenslve
capacity. 7/
(either in terms of
all possible
to maximizing
wa_ felt
was asked
capacity
is based
are a far cry
assembly-type
the respondent
where
a large
to speak of rated
respondent
on actual labor
estimate
firms have
operations
and equipment
This distinction
therefore_
each
one
are generally
fully-mechanized,
both estimates
sp_ce)
the second
being
even where
of production
or outputs),
difficult
that the firms
inappropriate
in the survey,
of production
a particularly
of equipment/machinery,
it becomes
Utilization
the notion
and that,
from the essentially sort,
and Capacity
labor
complement.
the industry of outputs
force.
--7/Mr.de LaDge_ president of the CFIP for 1983, cites this difficulty inj for instance_ CFIPWs coming up with actual raw material requirements of th,z industry to support the association"s requests for cutbacks in log and lumber exports.
11-38
TABLE II.20
DISTRIBUTION OF REsPoNDENTS ACCORDING TO PROPORTION OF .. JOB ORDERS TO TOTAL PRODUCTIO_ !
Orders to (_) T,gtalJob Product,,ipn
,.Frequency
o z
721• ___
s.3
1-20
7
6.1
21-40
13
11.4
41-60
14
12.3
61-_80
ii
9.6
7
6. i
56
49.1
81-99 i00 Total
114
2-/Based on 114 valid 3/With
roundoff
_esponses
error.
°
99.9_ 3/
II-39
Measures
for capacity
(board feet of lumber_ pieces
of plywood)
sales, peso v_lue of cabinets).
meters
based
or pieces
on total
The respondent
The most
of sales
was given
one of a sprinkling
deviation interval sample
to provide
compleme:_t averaged
2,000.
On
deviation of 5,286 median
to 10,074
complement
of 12,0!0_ to i1,814
capacity
or used any
board
estimates
6,838_ with
feet of based
on
a standard
a 95% confidence
for the true mean of the
capacity
averaged
yielding
however_
estimates
8_550, with
for the sample
8/While the metric system is being prevails in the industry°
pushed,
is
based
on
a standard
a 95_ confidence
for the true population
estim_te
feet_8/
measures.
The sample median,
the other hand_
ideal labor
estimates
using
This yields
populationo 9/
in
The rest of the respond-
per m_;nth, capacity
of 3,602
much latitude
weze: (i) board
of various â&#x20AC;˘capacity
of ii,789.
number
(n--51)_ and (ii) peso
For the 50 c r so respondents lumber processed
on
to apply.
per month
unable
of rattan poles,
cost of goods,
per mor_th (n=22).
ents either were
"input-based"
(peso value based
commonly used measures
of lumber processed
1980 labor
either
or '_output-based"
the choice a_fwhat measure (
value
used were
interval
mean.
The
is 4,000_
this measure
still
9/Assuming -that g3% of all firms in the sample population use wood as principal raw material and 81% are legitimate and existing firms in the industry as of 1980, this would translate into between 3.7 and 10.4 million board feet of lumber aggregate monthly caDacity within the area covered.
11-40
Using the above-cited zation was output
computed by dividing
by estimated
capacity
(unweighted) I0/ capacity on
1980
(see Table
capacity
of
a standard
interval
median
Mean
the •sample based devia-
for capacity
se_nple population
Sample
utili-
actual 1980
17.21).
is 63.6%, with
the entire
from 57.7% to 69°5%°
would
be
is at 50%°
complement_
capacity
is much lower_> at 44°6%, with
utilization
deviation
of 25.2%{ median
The corresponding
population
capacity
(A comparison utilizations of larger
utilization
interval
is 38°8%
of weighted
that isrger firms, better
for
to 50.4%°
end unweighted
tend to have
unweightee---
for the sample is
95% confidence
wc._i_ suggest
outputs,
s_mple
.11/
Based on ideal labor
a standard 48%.
estimated
A 95% confidence
utilizati,.n o_er
Cases,
utilization
lab,_r complement
tion of 25o6%.
mean
73 valid
mean
capacity
in terms
capacity
utilization
rates, ) Admittedly, city and capacity Nonetheless,
estimates
developed
utilization
are nowhere
the7 _re indicative
firms in the _ood-.based furniruze
10/_ weighted
mean ut111,.._on
industry
67.7%.
capa-
far from rough.
of a situation
rate based
pr.l, cessed (n=51) is a proximate sales (n=22), it is at 73_9%.
for production
where
in general
on board
feet of lumber
Based on P w11ue
of
I-_I/Aweighted ,_ean _tilization rate based :.rnboard feet of lumber processe@ 0:_=52) is somewhat higher, a_ 5!. 7%. Based on P value of sales (n=20)_ it is at an eveu higher 62.4%.
11-41
TABLE I!.21
ESTIMATED1980 CAPACITYUTiLI • ZATION= i/
Capacity Based •,on _ 1980 Labor Complement ±" Cap a city Utilization
I-
Frequenc_
9%
/
%
Capacity Based on i/ ideal Labor Complement--
Cumul a tiv_ %
3/ Frequency_--
%
Cumula tire %
1
1.4%
i.4%
3
4.2%
4.2%
i0 - 19
i
1.4
2.7
4
5°6
9.7
20 - 29
3
4._!
6.9
15
20.8
30.6
30 - 39
9
12o[_
19.2
7,!
15.3
45.8
40-
49
4
5.5
24.7
5
6,9
52.8
50 - 59
14
19.2
43_8
16
22°2
75°0
60 - 69
12
16.4
60.3
6
8.3
83.3
70-
79
6
_2
68.5
2
2.8
86.1
80-
89
8
IIo0
79.5
5
6.9
93,1
90-
99
1
1.4
80°8
1
1.4
94.4
14
19.2
i00o0
i00
To ta!
1 /Capacity
73
Utilization
4
i00_ 1%4/
5.6
72
= Estlmat_'_ ' __ A,ntual _:_:_" "" _" Out u_ Es t:i._nn i_._d..... ? " 'y
!00.0
i00.0%
.
TM
Kespondents _ere _ke,l to pro,vide t_c astimatas of "capacity" (both based on 1980 plant and equip-_,ent)_' one using 1980 labor complement_ and the other using an "ideal" labor complement that the-_ perceive would maximize use of pla_t and equipment. 2/Out of ii5 re spondents_ a total of 73 yielded valid responses for both estimated output and estimated capacity b_sed on labor complement, in terms of board feet of lumber processed (51 respondents) oz pedro value of sales (22 respondents). --3/Atotal of 72 responder_ts yielded valid responses for both estimated output and estimated capacity based on -':n "ideal" labor complement_ 52 in terms of beard feet of lumber processed and 20 in terms of peso value of sales. 4/With
roundoff
error.
II-42
produce
below maximw_
The majority their labor differ
possible
levels
of respondents
(80%) believe
force is sufficient.
significantly
when
Yet,
expressed
1980 labor co1_;lememt as against complement째
It would
seem,
therefore,
perceived
"ideal"
(_:,r maximum)
du_ to one or a number
possible
complement
possible
factors.
appear
AmonB
raw material)
(in turn owing
factors)
l_is may be
or
to one or some
to be ec.me of the
cx!:lan_,tlons.
Not_ithstandin labor
it:war than the
(primarily
low sales volumes
more plausible
that firms have
compl_ment,
of possiLLa
a dearth in inputs
of several
labor
,
maintainei: a labor complement
generally
estimates
in terms of actual
generally
others,
that
capacity
some "ideal"
%
g the observation
is, in many cases,
cor_>lement, capacity
use of th6 labc,r force,
Thi_
though_, _:-;:-ing to s_a_>nality of fluctuating
production
that actual lower
Utilization
on the former woul,] _:.tillpoiut
3.0
of production.
than the m'_ximum estimates
t.,i> ..;relatively
_ituation of s_les
19_0
based
inefficient
may be inevitable,
and, coDsequently,
levels째
Labor Force 3.1
Size of Labor _, was
Force
discussed
in Section
respo-_,.!entsare distributed labor force sectoY
as follows=
and 45,6%
according
above,
to size
the of
14% in the unbrBanized
(i to 4 employees),
employee@)
II,B.!
large
40.4%
small
(5 to 19
(20 or more workers).
II-43
Compared products
with
the footwear
manufacturing
furniture of labor
industry force
industri_
at the firm level.
with
(Two respondents_ exclusively.) firms
apparently
in fact,
This practice (see TaSle
becomes /_ly
any _alary_
in the production
process
(Refer to Table
feel
firms
the extent
as firms increase household
Payment
c_f sale -_
for partiei_e_ion to be practiced
more_
than in _he smaller
II_22_)._
o_ .of L,_,_.,u_
Eighty number
tends
labor
even to fairly
55.1% of f_rms using
in the larger
process.
II.6 )_ although
members/helpers
Sup?ly
eml:loying house-
extends
less pronounced
Never-
relatively
u_e household
ties to household
ones.
is still
in the production
labor pay the latter
3.2
labor
deviation
15-19o
42째6% of our sample
hold members/helpers
however_
Our sample yielded
(with a standard
use of householJ
prevalent,
in size.
larger size
and a L_edian in the range
theless_
large
_ the wood-based
has a relatively
a mean of 46.4 employees of 103.5)
and leather
per cent of respondents
of empl0?-,_:sis suffieiento_
that they need mere workers_
labor was _,,r.,,nclpally -" " mentioned
state 12/
that total
Of those who
skilled
manual
(18 of 22 respondents)_
1--2/Aplausible interpretation of such sufficiency_ relating to utilization of a firm's labor complement, was discussed in the immediately preceding section째
II-44
TABLE II022
COMPENSATION FOR HOUSEHOLD LABOR, BY SIZE OF LABOR FORCE
=.Fr_5u_ncy,, Size of Labor Force
Firms Usin_ Household Labor
Payiu_ Salaries . - ,
....
Not Paying Salaries
Paying Salaries
Not Paying Salaries
i -
5
11
3
8
6 -
i0
19
8
ii
ll -
15
5
4
i
16 -
20
i
i
0
i00.0
21 -
30
3
2
1
66.7
31 ~
50
5
5
0
i00.0
0
51 - I00
2
2
0
i00.0
0
lOl - _00
3
2
i
66.7
33.3
49
27
22
55.1
44.9
Total
!/ .... Based on row totals.
27.3%
72.7%
42.1
57.9
80,.0
20.0
0
33.3
11-45
and, only skilled
to a certain
_chine
%_ile
most
more
respondents
to be consistent _he respondents force,
in-house
in the
the declaration
and an
This seems of 80% of
.<.._pear that priorâ&#x20AC;˘ experience/skill
though nor_ _,bsolutely necessary
(Only an.insignificant
3.3
choice,
chcice o
cable from the manufacturers
schools,
to employ
or skill
as a first
training/appzenticeship
on training
prefer
opt for in-house
as a second with
for.
,_.nsuf:ficiency of their labor
It would
is desirable_
would
than 20% would
42.6%
called
experience
training/apprenticeship addi=ional
(5 respondents),
operat(_rs were
w_,rkers who h._ve prior industry,
extent
progrmns
or by _-_C
is easily
_ point
number
practi-
of view°
of rc_.:_pondentsrely
conducted or other
since
by trade/vocational
government
agencies.)
Specialization 75.7%
of respondents
specialization:, performs making same
reyort some
in the sense
one or some_
product.
level of specialization
not prac_ice
t_e small
is only
_;,anufacturers.
in the
by manufac-
Of the 24.3% who do
speei-Jiz._tion,
that such practice
(Almost
is reported
furniture,)
of
that one worker
but not all_> operations
one unit of finished
turers of rattan
degree
it is often
for the; big_
declared and not
11-46
Specialization independent
at a 5% level
data suggests it; larger 3.4
and Size ?_f labor
are not
.of significance.
that specialization
than smaller
force
â&#x20AC;˘
The
is more practiced
firms_ as expected.
Modes of Payment Table 11,23 _below shows using
(whether exclusively
the number
or in combination
other mc,_es) each of the modes of their employees_ a daily wage closely
_e
purely
Mozeover_
50% of total payroll 35.7_ say the same
Table
Mode
II.23
of
However_
as against
report
thing
about
of the
18.3%
rates.
that more
goes to piecerate
is
followed
21.7%
of daily wage
36.5% of the firms
for services
the firms),
exclusively_
on the basis
with
c,gmmonly used modes
(47o8_)o
firms use piecerate paying
most
of payment
(used by 50.4% of
by piecerate
of firms
than
workers,
daily wage
while
earners.
_PJMBER OF FIRMS USING VARIOUS MODES OF PAYMENT FOR SERVICE S OF E_4PLOYEES Number
of Firms
Using
this Mode _
% to
Total Resl_:_r_._ents
Daily
58
50.4%
Piecerate
55
47.8
Monthly
31
27 o0
Batchwork
25
2i. 7
Weekly
20
! 7o4
Hourly
i
0.9
* W_.ether exclusively
or in
cor_Joinationwith
Other
modes.
II-4 7
A total of 78 firms the piecerate (Table Iio24
and/or
(67.8% of sample)
batchwork
modes
surmmarizes the major
use
of payment째
reasons
given
for the use of either or "both of these modes payme_nto)
This
situation
in light of seasonality production) 4.0
might
be better
of sales
as discussed
of
appreciated
(and, accordingly,
in Section
II,D.2 below.
Raw Material Except and similar r_w material
for a few items_ hardware,
requirements
based furniture Lumber
which
such
as fittings,
may be imported_
available
of wood-
(PDCP /--5L7),
can accelmt
for 41-50%
of total raw material
cost
furniture,
and rattan
poles
raw
of wood material
cost of rattan
of total production Narra seems furniture
convinced exports
costs (Cody
of total
On the other
'for as much
made
of narra
as 50-60%
material, for
(Cody /--3 7) 9 and manufacturers
that only narra
hand,
/--3Z),
to be the most preferred
is suitable
(World Bank.-_/_ /),
furniture
6_-70%
furnitureo 13/
total raw materieJ1 cost can account
wood
most of the
for the manufacture
are locally
accessories
E_ile
has found
for wood
are furniture
it is believed substantial
that
acceptance
and demt._mdin the _-xport m-_rket due to its special
quali-
ties (PD(_ Fsj),
in
Cody IZ3j
notes
that, at least
l--3/Based on the 1978 PDCP Survey on the Furniture Industry, covering the w_od furniture and four rattan furniture manufacturers째
(PDCP ./_
).
11-48
TABLE 11.24
REASONS AS MODE
FOP, USE OF PIECERATE/BATCHWORK OF COMPENSATION
Reason for _sing Piecerate/Batchwork
Irregular/fluctuating
% to 11 Users---"
Total
% t_ ResPondents
32
41.0%
27.8%
26
33.3
22.6
Better quality of work/easier quality control
19
24.4
16.5
Preferred
15
19.2
13.0
7
9.0
6.1
6
7.7
5.2
6
7_ 7
5.2
Greater
demand
Frequency!
OF WORKERS _I/
productivity
by workers
Easier to determine tion of workers Less supervision Cotm_on practice
compensa-
n_eded
i--/78(or 67.8%) of the 115 respondents reported using either pieeerate orbatchwork as a mode of compensation, 55 (or 47.8%) use piecerate, while 25 (or 21.7%) use 5atehwork.
II-49
Europe,
narra
as a furniture
The Forest
Products
Commission
(FORPRIDECOM)
for adequate success
Kesearch
s_)stitutes
wood
fearin_
that forest
has for some for narra,
ultimately
had banned
_lisappearo
restrictions
to i_s grain,, texture_ coefficients
Luzon
vhioh
.domestic market) almon, mayapis,
is prefe[red
due
and expansion
difficult
expensive
to obtain
as well. (for the
inc].ud_ red and _h.ite lauan,
=anguile,
bastikan_
but this ban is baing
and y__/_al (PDCP / 5 /).
cf _._ttan poles circumvented
has be_._nbanned,
(World Bmnk/-6J).
i$ e l'_-,.ck of reliabi__ information
qu_Ltiti_,
tha_ supplies
pa_"ticularly
that are loc._lly used
Even _he expor_
A major problem
severe
Cody./--3__, PDCP _/--5_7).
and more
more
.'_:7-+'_r wood species
are exerted
it has imposed
and low contraction
i_ more
narra_i <and made narra
available
of this har_%vood migh_
(World Bank F67,
,These have made
of narra,
that can be felled_
the species from Northern
looking
Bank /--6 7).
the export
Moreover,
on amounts
time been
but has met little
World
reserves
unknown.
and Industrious Development
if at all (00<]37"F3_,
The government
is virtually
although
some quarters
will not lest unle_s
greater
to regul:._'[,.._ and regenerate
on
feel
efforts
the same
!-3,_7). 59.1% of our sampi_,_ fe_! that raw material is a major problem. for domestic
Whiia
o_her
.furniture, narra
species
supply
are available
is apparently
still much
sought-
II-50
after.
34 respondents
which
(or 34.7%
,_',_x_ufacture wood
specifically, lumber
furniture)
as against
in Beneral.
On the othec
rattan furniture
Hajor
specified
suppliers
sonably
problem);
are:
(23.5%).
the dwindling
supply
with
raw material
of prices
with
pol_s,
of delivery
quality
by
supply
to iD.cr " _=..:_Cu_rea-
r,:,.sxrictio_s(22.1%)_
conformance
All these
narra
h_i__d,16 c.f 20 respondents
unreliability
tendency
(50%)_ government
unsatisfacCcry
identifieJ
cite rattan/rattan
(61.8% of respondents
as a major
have
23 (23°5%) pointin_-_ to wnod/
manufacturing factors
of 98 firms in our sample
and
specifications
fact¢..:c_ me}" _:2mehow _e tied i_to of these
raw materials.
Perh,- _ .::t_ing to, _ha unrcli,:_bility of ,.L--,livery of raw materi_-i by suppliers_ than
three _:_:jorsources
while
16. .),_ _J have
and one,
71.3% of responclents have more of
their principal
raw materiai_
three._ c_._.i_.J, only 9,6% .'._nd 2,6% have
restec_ively,
91o,']% ,of _,_ooifurniture
in o-,_ sa-__G•e_,_2--,liy buy
_m_e_.
two
manufacturers
fro_.'_ . er yards
or s'aw
mills, 47.8_
:,f _'espondents usually
their usual canvass
:..:.a?i2li.ers cf raw ._at:_:rial., while
prices
The need facilities
accept prizes
and :)_y from for adequate
is mentioned
set by
46.1% usually
the lowest-priced
source.
and apT_r:i,ri,_celumber
drying
ss a critical
factor,
particularly
for exp_rts_
due to the _=_-h ._:_, moisture
content
of Philippine
lumber which
is hardly
suit_,b!_ .... ="r furniture,
especially
II-51
5,0
Product
DesignTechnology
Table II.25 presents in four areas process, nery,
of technology
product
It shows
design,
competent _e
quality,
to exercise
and technology_
of information
applieation_
•production
and choice of mac/li-
a _-_eneraltendency
as entrepreneurs, design
usu,_l sources
much
fcr owners, influence
even if he may
mainly
in pro<luct
not 9e technic@fly
to do so, Bureau
Philippine
of Standards
Standard
(PS No. 821-01-09)_ and procedures
in 1976 the
Spe.sificat-icn for _!oodc._i_,_miture which
_._e.<_ifies minimum
f3r-__.;,Ddenfum_iture
require_ents _ structure! samplin_.!_performance
standards
relative
to material
pa;fts construction = finish
tests_ and marking.
to be la_'_f-_e3.7 unfamiliar and those who
issued
with
Firms
seem
t?tis _e[ of standards,
are do uDu s£_m to fully
comply with
these standards It i.s little wond__r that the Philip'_._i.nes cannot make much hq:adway in._¢ood fa_:niture exl_orts, considerin}_ that the export m_zrket calls quality
products,
according
l_s Co_
and
out essentially
(not only in appearance,
but
make of che product). /-3 _ would
ac_cunt
firm, the skills the nature
desi[.,.ns carried
to specifications
in the entire
take into
with
for well-designed
have it_ product
design must
"the produc.tio_ facilities
of the
of its _,;orkforce_ a_ understanding
and characteristics
of the materials
of
used_
11-52
TABLE
II.25
SOURCES
OF INFOR}_TION
ON TECHNOLOGY
Area. o f Technolo gy_ Applica.tion. Source
of
Product
Information
Production
Design ._
Choice _
Ow_.er's l_as
102
75
92
99
Customers'
13
74
26
l
30
69
9
6
30
16
28
9
22
5
1
Cons ultants
7
3
4
7
industry
association
5
3
2
2
Other manuf_c ture+rs
4
6
4
1
Relatives /ffiends
3
4
2
0
Professional
I
7
0
0
4
1
0
0
Ideas
J0 urn al s/o ther publicatious Foreman' s/other workers' In-house
Design
i_eas
design staff
designers
2].
Center of the
Philippines
of
Mack!nery,
ii-53
the forms m_d colors of the article_
its tactile
beauty,
its decoration
its fitness
for the purpose,
and its acceptability regrets
more
Accordingly,
thaI_ passing "the industry
understanding relation
of the place
attention
to have
He ever
in the industry."
as a whole
lacks
and function
any
of design in
to its pDoductso"
Production 6.1
public."
that "er_iy the last two appear
received
6째0
to the consuming
Support
Quaiity
Facilities
and Prsctices
Control
83.5% of our sample
do no_ maintain
staff
to check on the quality
ion_
In 87.5% of
these
chef,ks on quality. foreman
production (4째2%)9
workers
cr a member
Quality in between one firms)_
themselves
(37.4%).
himself
the
(ii.5%)_ buyers
of the family 8io1%), sre usually
stations
(in 40.9%
afte__ each operation
each major _p_r_%_21o7%)_ very/after
product-
it is the production
(22.9% of cases)_
inspections
work
of in-house
=ases, the owner
In some,
_r supervisor
a separate
undertaken
of all respond-
(28.7%)_ after
and/or before
all operations
have been
completed
In only 12,2% of respondents
are cali-
bration
tools used for quality
control
quality
inspection
are available
only
7% of firms
instruments
in the sar_,ie_
ent app%i<_:slaboratory
purposes$
One lone
tests, while
deli-
in
respond-
the rest
(at
11'54
least
80%) rely solely It is, therefore_
which
would
Specification
Equipment
respondents
with
follow a regular
considering
to quality
the above
control
that have been
half
proce-
established.
(55 out of 108) of the
at least one piece
respondents
since mor_
have eight
may be fairly Nonetheless_
some 35.2%
one reason or other,
in Table
constituting II.26 below.
state
that breakdowns
while
14 report
undertake.
pieces
This need
than half of the
of equipment
or less
simple to maintain.
of machinery
breakdown
of equipment
maintenanc e schedule.
not be bad, however,
complain
Furnitures,
Maintenance
Only about
which
that firms
the Philippine
for Wooden
in relation
dures/requirements
inspection.
unlikely
of, say_
be able to comply,
statistics
6o2
highly
are at all aware
Standard
on visual
(38 out of 108) still
breakdown
as a problem
l_e reasons _ problem
given
that repairs
behind
are summarized
30 of these often
for
disrupt
38 respondents production
take time to
11-55
Table 11.26
REASONS GIVEN AS TO WHY MACHINERY BI_AKDOWN CONSTITUTES A PROBLEM
% to Respondents Reporting Breakdown Reason
Frequeqc_
Often disrupts duction
to be Problem*
Total
% to Respondents
with_Equipment**
pro30
78.9%
27.8%
Repai_ take long to undertake
14
36.8
34oi
Spare parts difficult to find
i0
26째3
9.3
8
21ol
7.4
Qualified repairmen difficult to find
7
18.4
6.5
Equipment quality
1
2.6
0.9
Repairs sive
are expen-
of low
* 38 respondents. ** 108 respondents째
6.3
Inventory
Management
62.6%
of respondents
stock up on raw material, accessories, finished inve=to_y when
37.4% of total
in process,
Of those who maintain
or other_
inventory
that they generally
_% on spare 24o_=
20.9% on work
goods째
respondents
report
stocks
reaches
are commonly
a minimum
respondents).
(26o1% of total
level
parts
and
and 47,8%
one type of replenished (43 cases, or
On the other hand, respondents)
on
report
30 that
I!-56
th_yacquire
and maintain
stocks
only
if there
are
_ob orders. Bowever, adequate
storage
inventory, work
14 out of 72 (19.4%) do not have facilities
for their raw material
4 out of 24 (16.7%)
in process
inventory,
do not have
(29o1%) for finished
This inadequacy
in storage
material
nature
space
of furniture,
goods
is easily
inventory. attributable
both in terms of raw
and product.
47.8% of respondents to maintain
inventories.
cing are summarized
Table 11o27
Source
for
and the same can be said
of 16 out of 55
to the bulky
space
(55 cases) Sources
of inventory
finan-
in the table below.
SOURCES
OF FINANCING TO MAINTAIN INVENTORIES, OT_ER THAN OWN CAPITAL
of
g_m_c_g
are able to borrow
Frequency
% to Respondents _ Who Borrow to
, ._ , .. % to Total
Acquire
Respondents
Inventories
Supplierv s credit
25
45.5%
21.7%
Banks
19
34 o5
16.5
Relatives/fr+ends
9
16.4
7.8
Private moneylenders
2
3o6
i. 7
55 cases째
The role of supplier_s pronounced
as financing
credit becomes
sources
more
are expanded
to include
II-57
aequlsition
of raw material
for maintaining discussed,
adequate
raw material
however,
Several
in general
in the section
problems
inventocy
stock).
are lack of financing
of respondents inventory 6.4
Other
ties.
Inspit¢
lities,
irregularity having
have,
disposal.
Only
mean that certain be at a complete
in keeping
firms require
claim 11.3%
facilifaci-
co have no p_Ims
cite problems collection,
to collectors
with
or with
to ensure
regular
wastes.
of respondents
in addition,
13.9%
lack of the latter
or lack of garbage
(the electric
Only
as _ust extraction
of the general
of raw material
97.4% energy
that most
as well
to pay "tong"
removal
no problem
88°7% of respondents
with waste
(32.2%).
(33.0%)
and Practifes
observes
plant relayouting,
of total
level.
Facilities
Cody /j3J
common of which
of raw material
of orders
a_ an adequate
Support
in maintaining
(76 cases, or 66.1%
seem to have
be
o4 financing.
the more
respondents) _ non-availability and unpredictability
This will
are encountered
levels,
(not necessarily
have
only one source of
company).
The remaining
their own generstor. mechanized
standstill
operations when
power
2.6%
This would would
generally
disruptions
occur°
II-58
Only 5.2% of respondents not experience those who to zework째
rejects
A further
the order),
that they do
of their products.
do, 89% (97 out of 109)
s_ll tc_ other parties placed
claim
22% would
Of
generally
at times be able to
(other than the person
oftentimes
resort
on bargain
who
terms.
II-59
D.
Marketin$1 Practices 1.0
Channels
3 _/ had observed
sell directly
to the public
few exceptions.
retail-selling
accounting
may be gleaned
of job orders,
there is lhardly any
stocks_
the respondents
(49o1%) have
for 100% of total production,
from Table I!.20, while,
only
standard
stocks.
directly
to end-users,
5.3% produce
entirely
Moreover_
respondents
their
use this
53% have
percentage
on the other
according
to
72,2% of respondents
el=her by way of their
front
olficeo
outlet
to any single
is to own retailend-users). for a summary
own show-
eontrast_
only
their products another
14o8%
middle_eno
to importers_
Table outlet
indicates
percentages
of outlet _
are used
refer
outlet
14.8%
of sales
to T,_hle ii,28, In
sell some or all of to wholesalers,
to what
as main
outlet
usedo7
7% to exporterand
II.29 shows
of market
exclusively,
type of market
24.3% of respondents to retailers,
or
(i.eo, the highest
/Please
of types of market
sell
In fact 37.4% of
type of distribution
this as main
of sales
job as
(in the case of the larger ma_ufacturers)
simply through
while
on the basis
In effect_
extreme,
rooms
that most manufacturers
from standard
Close to half orders
Prospects
of Distribution
Cody /
with
and Export Market
extent
outlet,
6oi% these
to types
while
Table
to these various
types
II 03C
TABLE II.28
TYPES
OF MARKET
OUTLET
USED
% to _espondents _lis Type
!
Respondents Type
of Outlet
j
Using This Type % to Total Frequency Respondents
No. of Respondents
J
Using This With Type i/_,pe Exclusively :-- Main
This as Outlet
Ranking Using This This Type Type First Exclusively
Using '
With "l_.is Type as Main Outlet
Ranking Type First
Own Retail/ End-users
83
72.2%
43
61
62
51.8%
73.5%
74.7%
Retailers
28
24.3
5
17
17
17.9
60.7
6u'.7
Wholesalers
17
14.8
5
i0
12
29.4
58.8
70.6
Importers
17
14.8
4
ii
ii
23.5
64.7
64.7
Exporters
b
7.0
i
3
3
12 째5
37.5
37.5
7
6 oi
0
3
3
42 o9
42.9
Middlemen / Agents
i/While 5F5 resp_ndents reported using typ6s of outlet respectively,
one type of outlet
exclusively_
0
48 and 0 reported
usfng
two and three
H 0% i O
II-61
TABLE 11.29
TYPES OF MARKET OUTL_ USED AS MAIN OUTL
!
Mean Percentage of Salas to this type
Type of O.utlet
No. of Respondents With This Type as Main Outlet
% to Total Re_sponden_s
,_f O_t_et, t_ E_sp_nd_nt's To_l Sale.a_ 2/ ....
Own Retail/ End-users
61
53.0%
9 !. 4%
Retailers
17
14.8
76.7
Importers
ii
9.6
81.0
Wholesalers
i0
8.7
93.8
3
2 _6
80.3
5
2.6
68o 8
Exporters Middlemen/ Agents
_/Main outlet is defined to be the type of market respond_nt_s high_st percentage of sales.
_/Only
for respondents
outlet with
using this type as main outlet.
the
TABLE II.30
Typ_
uf Outlet
TYPES
OF MARKET OUTLET
USED_
BY PERCENTAGE
OF SALES
â&#x20AC;˘ Frequency According to Percentage of Sales 0'_ii-20% 21-30% 31-50% 51-80% 81-99% 100% Total l-le_
Own R_tail/End_users
7
6
5
6
9
7
43
&_3
Retailers
5
i
1.
6
7
2
5
27
i'iiddl( men/Agents
2
1
1
0
i
2
0
7
%_holesalers
i
2
3
i
0
5
5
E _porters
2
0
i
I
1
i
l_porters
0
i
2
3
5
1
1-10% 8, 4%
on row totals
2--/Shouldbe equal to I001, except
for round
off errors.
31-50%
%1__/ 51-80%
81-99%
7.2%
I0, 8%
_, 4%
51.8%
99.8_
22,2
25.9
7.4
ID, 5
99 on
14.3
28.6
7,2%
6.0%
3.7
3.7
28.6
14.3
14.3
0
17
5,9
ll.S
17.6
5,9
1
7
28.6
0
14.3
4
16
6.2
12.5
18, 5%
0 I
1/Based
11-20% 21-30%
100% Total "_/
0
i00.
0
29.4
29.4 I00.
14.3
14.3
14.3
14, 3 i00.
i$. 8
31.2
6,2
25 o0
99.
II-63
Out of 115 r_spond_nts, using on,e ty_e of m_rket
58 (or 50째4%)
outlet
use two types and 7Y,_ three째 only one type of outiet_ pondents
ar_ varied;
given in Table volume
of sales
d_cision
exclusi_
While
more
the reasons
41o7%
than half
responses
It would
is not a major
while
use
give by such res-
The predominant
II.31 b_low_
reported
appear
consideration
are
that in _he
to use only one type of outlet.
.. '
t__
T_ble II .31 _._JOR Y_EASONB GIVEN FOR USING ONE .... TYPE OF MAF_KET Ok i_,ET=EXCLUSIVELY
6__ly One Type of Outlet Limited
capital
19
32. _
9
15. _5
6
10o3
Convenience Dwn outlet
expensive
A cross-tabulation the respondent
versus
of type of outlet type of main outlet
an _imost one-to-one
correspondence
variables.
in only
In fact,
suggest with
outlet
in use째
that the manufacturers
the channels Respondents
between
preference
_ere asked to state
This would
reasons
two
eases was it
seem
are essentially
two or more
their
these
differed
of dist_:.bution in current using
by
in use shows
3 of 105 valid
the case that the respondent_s the type of main
preferred
from
to
satisfied use.
types of market corresponding
outlet
_:: the
ii-64
most preferred
and least
Tables 11.32 and 11,33
Table Ii. 32
preferred
indicate
types of outlet.
these
reasons.
MAJOR REASONS GIVEN FOR MOST PREFERRED TYPE 0F MARKET OUTLET % to Total Respondents
Reason
Frequency
Us_in_ Mute Than One Type of Outlel
Big sales volume
19
33°9%
Bigger profits
i0
17.9
Sales certain
8
14.3
Con_enien t.
8
14 o3
Table !i,33
Reasons
MAJOR REASONS GIVEN FOR LEAST PREFERRED TYPE- OF.MAKKET OUTLET % to..To.t_]. Respondents Using No,re Th_n On9 T[p.e of Outlet
_
LoV sales volt,me
16
28.6%
Lower price/markup/profit .
14
25,0
Risky _ irregular sales _
ii
].9,6
Less
convenient :
ll
19o6
;_ong respondents
using
market
out£et,
preferred However_
direct
due to
more
tha_. one •type of ....
sales to'.end-_users appears
hig1_ez"<_'."_fits and,more
respondents
stable
who pre_er wholesaler_
to,be saieso
_ i._,_pc_ters.
and ire_ailers .ci£e big _,,_:!es .volume.-ior their prafereneeo On the oDher,hand,
r,e_pon_
who-;leaBt:prefer
S_lling
I!-65
direct
to emd-users
point
to low sale_
sales and less convenience° therefore,
where
to end-user_, Further_
some
while
respondents
relation
2.0
to retailers
sales
sales.)
is attributed
to
_re mentioned
in
and middlemen. the modes
of transport/delivery
the respolidents.
Seasona!ity
of Sales
A total of 93 respondents pointed
to a seesonality
to be highest Oexober
(80°9% of sample)
of sales.
in December_
to the Christmas
"L_onthof May is also cited of sales_
such occasions_ construction
presumably as well
projectso
sales_
and other
sales was
owing
though_
sales°
up in
Likewise,
a relatively
the high
to _fiestas_ and other of housing
56 respondents
seasonality
co_i_only cited
reason
period_
for i0 respondents
(or
in sales)
as accounting
the construction/housing
accounted, seasonal
season°
In all9
seem
_%is is attributed
as having
occasions
The next most
_o build
_s the co_pletion
60°2% of those recognizing Christmas
6_les would
starting
(see Tab T= II.35 below).
by respondents
volume
unstable
bad debtE
Table Iio34 presents used by
talk of stable
others memtion
while
unstable
(Here is a situation_
lower price/markup/profit
sales to retailers_
v_lume,
cite
for peak for peak which
reporting
only
II-66
TABLE
II, 3_
MODES OF '_,RA..]SPO...I,_ . _,,IDELIVERY TO MARKET OUILETS
Mode of TransportS/ D_live r_E_ loy_ed_'
% to Total _ p_0n. den ts
_
Own vehicle
81
70.4%
Pick up by customer
26
22,6
Hire
25
21,7
16
13,9
6
5,2
i
O. 9
vehicle
Shipping Pay
for pick up service
Public
transport
11 c-'79 respondents more modes.
reported
using
only ] mode,
while
35 use 2 or
II-67
Table_ II,35
MONTHS WITH PEAK SALES, AS CITED BY RESPONDS_TS % to Respondents
No. of _'_ponden%s _------
C._,.in_Month
as Having
Reporting
Peak
Sagas
Seasonal
Sales*
De_mb er
56
60 _2%
November
49
52° 7
October
38
40.9
May
35
37.6
* 93 ofl15 respondents.
The above
findings would
held view,.__ Lhat furniture with
the level
the study
exhibiting
such
reporting
of sales. respondents
a relatively
during
the period
whether
the months
fre_uent!y
seasonal
higher. October
to
to surmise flair
for
resl or not,
of June_
cited
July and
(34.4% of respond-.
_:a!es) as lean months
Yha ol,_eningof school was pointed as the pri.r:_cipalfactor behind
followed
that such
season.
handp
the most
correlated
anÂŁ_ also
homeowr_er has a natural
the Christmas
August were
volume,
income
the widely-
in construc_.ic, n activity.
established
a Situati0n_
On the other
ents
are highly
it is not all too unreasonable
that the Filipino
during
an upsurge
never
le,;el of disposable Decen_er,
sales
of disposz#._ieincome,
sales increase with While
!:and to support
by bad weather
in terms to by 25
low sales
(18 respondents)
and
!I-68
"no m__ney" (17 respondents), strongly income_
These. factors
sugge.st drops in the level even if only
of the second It would
of disposable
[_ussi.hiyremotely
appear:, therefore,
that the
i_._c':_me:.-;ghieh may
pronounced
periods
of high
tend
__nis may have
the level
of ._:q?_rationsof firms
to have
far-reaching
implica,tions <>n
little
prcduc+_:i...:_ " (Cody .../--3 -,F)_ It would_ n_._.ar: re_:_onable to assume
eisner
standard
accordingly_
a possible
=rc_uct-:..cn_n_d_ cc_.Âą.ia'eily_ a more utilizstio._, o_ f:a_acityo
relatively
in the industrT _
_b.:_tthe_'_ is generally
an inefficient
use of
numbers
0nly 12_9%
adjust prices
(generally
an increa.s_.e in vrices
go to as high
_he labor force of v:.d_ers.; or
sugges_
reporting
durin_ peak
a prevailing
du_'ing peak periods
of low sales).
cases,,
Such
20%, but may
That the other
seasonal
sales
and low periods
sentiment
sales;
p,a;.,k and low periods
do not go beyond
as 50% in some
8;2,[t%of raspon4ents adjust prices
during
during pcziods
generally
levelling
or less unii:_m
Of the 93 _:'e_:_i_c;nd,_i_,:_i _eDor"t'i_gseasonal
adjustments
be
._easonal ;',,roduetienvolume8
or a n<..._.._d to 1_ni...o¢ain varying
and a decrease
of
and low in the Philippine
setting,
may imply
volume
is _-5_,-j _":'; "- .._6men/,_._nt " â&#x20AC;˘ on t!'_clevel of
disposable
nowhere
in the. case
one.
f"._r_._uresales
consideTing
would
do not
may simply
that such adjustments
II-69
do not z:cnieve the expected u_ay be relatively expected
price
low saleS_
resn!.ts°
In effect,
demand
.inel,_.sticduring periods
a?.d rela.tive/.y price
of
_lastic
during
peak periods. 3,0
Pricing
Practice_
Table iI ,36 belo_,__h_w_
tL.<_-_r:_,:J.ng i_r:__cti.ces ,._f
=he 1i5 respon_._ents.
Tabie
_,I ....... L,:: PC,_'.:.,-,_,L_,.':.:,._
,._..
. _ ..... z__.ac e,j,......_,._
Pri_in_ V_riable
1 r .,:.<;
.....
i:,rici'_g ,°
'iFixe$."
,_a.-.,,._. i::_,-,_revai!ing,. P.r'; ,.;,_.., ._..at: by
72c_ ,:; ,_ I
ghat to
c_e
type
:'_c, with
_herefore_
except
56.5%
46
40.0
3
2, 6
___J:
O. 9
I15
100.0%
:............ ,.:_..........,_:_.,, 't'_.o reason
_aain
pravaili_':i_, _hat
exercise
of
65
I..';,......... _........ ',__;
i:uy'.:_r
......... ,.o,,.._..,..,'_,"J.sj ,, c,f! the;
_,_
_ll_r_c._,_ -
cutl,._t
.(-a c.:_¢rre:nc
lrrici.n::<
furni_.:_.::cc:
>:,iicyo
_.anufa,ctur,_z's
use
to
believe
t:',.._s anythax;_ 5
i_: ,:<:.u].d seem. are
able
.t-:::
some fre.edo_ in _:,,t_,,;._ _;h:_ieecf pric.i_g i_ractice,
in a.3me cases, 'without reg:_r:it_> the t:yp+.' of
outlet use,J, Lik_._ise, pricing dependent squar_
policy
on size of lo_or
test fails
does nor seem t.'._ be
force_
e_._the usual
to sho_ any such d_pendenee°
chiIt
11-70
appears,
therefore,
that choice of pricing
is not significantly (as measured Of
affected
34 reported
that markups
market outlet.
Credit
on design,
pricing,
types
of
that markups
as well
as
and the purchasing
buyers째
Sales
Credit sales a mean
range
(67.8%) sell on credit f_-m 5% to 100%
of 48.6% and a standard
(across
73 respondents
estimates
_-Refer =o Table
of respondents
according
to total sal_o/
With
the average
sales on credit it would capital
in particular
shows
close
and a credit period
credit
credit
to 50% of
of 31-45 ameunt
sales째
days,
of working
60 respondents
that receivables,
checks of buyers
to borrow
of credit
type.
(52째2% of the samF_i,_)report
are used
11.38
applier that a significant
and/or
of total
for a distribution
firm having
is tied ui_with
7.0%
able to provide
to percentage Table
terms on sales, by buyer
of
as a percentage II.37
terms.
t,_tLl sales with
deviation
who were
of credit sales
sales).
orders
across
to type of raw material
78 respondents
sales
use variable
45 mentioned
based
power of the intended 4,0
force)o
who
vary
Moreover,
vary predominantly according
by size of the firm
in terms of labor
the 65 respondents
practice
for working
from raw material
(refer to Table capital
purchase Iio39)
requirements,
suppliers
(44 out of
11-71
TABLE II. 37 DIStRiBUTION OF RESPONDENTS ACCORDING TO PERCENTAGE OF CREDIT TO TOTAL SALES
Credit Sales to
% to Total
otazs.s
Bponde. s
None Less
SALES
37 than 10%
32,2%
3
2.6
3
2.6
20-29
15
13.0
30- 39
6
5.2
40-49
7
6.1
50-59
17
14.8
lO- 19%:
60-69
1 •
O. 9
70- 79
5
4.3
30- 89
3
2.6
90-99
i0
8.7
3
2.6
5
4.3
100 •Unknown
=-'---115
Total
_/Wi_h
roundoff
error.
99. 9%1 --/
II-72
TABLE II.38
CREDIT
Fr_equency Direct
Users
TERMS ON SALES, BY BUYER TYPE
% to Respondents
% to
$ellimglgn Creditc-"
Total Respondents
Average Credit Pe;io d (Days)o
44
56.4%
38.3%
31-45 2/
Retailers
27
34.6
23.5
31-45 3/
Wholesalers
13
16.7
ii. 3
31-4_
3
3.8
2.6
16-30
2
2.6
i. 7
91-180
.Exporters C_vernment
Offices
12Out of 115 respondents_ 78 (or 67_8%) sell on credit while 37 (or 32.2%) do not. 2--/39of 44 ciÂŁed
this credit period.
3--/All27 cited this credit period. 4--/10of 13 cited
this czedit
period.
terms,
/
II-73
60 cases).
While
collateral-free_ based
imputed
is generally
interest
rates
rate and credit period
(see Table
rates
credit
equivalent
on discount
tively high
supplier's
II.56) o
costs associated
with higher
prices
when materials
It is, accordingly,
distinct
that firns
on unavoidably
hi[_h financing
credit has to be extended extent
_his situation
lity of the business
quite
are forced
costs,
to increase
affects
such
implicit
are sold on credit째 possibility
are rela-
Moreover,
do not take into account
a
to take
simply "because sales.
the overall
i_ subject
imputed
To what
profits.hi-
to further
study,
though.
Tnble II.39
APPLICATION OF RECEIVABLES, PUECIIASE ORDEP_ AND/OR POSTDATED CHECKS TO SUPPL!ER'S CREDIT OR OTHER FINANCING ,o to Total Respondents Using Receivables, Purchase Ordcrs_, P6stdated Checks
Source
of Financing
Supplier's
credi_
Banks
_
for lh_-financing* 44
73.3%
9
15.0
Packing
credit.
4
6.7
Private
moneylenders
3
5 o0
2
3.3
0 th ers
*Based on 60 of i15 respondents째
11-74
5째0
i_)wnpayment on Sales Of 115 respondents, downpayment/advances sales,
generally
!I .40.)
While
downpayment, the firm's
between
50,% was a clear
financial
6.0 _ The Export Market:
to which
exports
have
grown
exhibited
the latter. the period
1976-1980_
Inspite
have
continued
in 1980_
1976-1980). exports
The
annual
pales
rate
than
former
growth
compared with
and 21%, growth
furniture
to coustitute exports
aggregating
rate of
14% for
figures
as discussed
_his share
furniture
from !965 through
of the faster
of total Philippine 0.85%
at a faster
at 65%
of wood-based
and Prospects
of wood-based
(l_e corresponding
are higher,
exports
for which
Issues
11,4i).
an equivalent
37% over the period,
affects
Exports
exports
(refer to Table
of
could not be deter-
Some Problems,
total Philippine
II.A,
value
_as not investigated.
of Philippine
and fixtures
(See Table
downpaymen_
operations
Philippine
1980
modal
the prof_ortion of sales
Magnitudes
require
25% and 50%.
downpay_,ents are required
6ol
(or 78.3%)
on at least soz_m of their
the extent
r_ined, since
90
for
in section respectively,) rate,
however,
and fixtures
a minuscule
portion
(0.25% in 1976 and 0째60%
ow_.r the period
in total Philippine
in comparison
with
that of log
11-75
TABLE 11.40 DISTRIBUTION OF RESPONDENTS ACCORDING TO USU#_ DOWIIPAYMENT ON SALES
Usual Dowap,ayment
None
25
21.9%
I - i0
4
3.5
ii - 20
9
7,9
30
21
18.4
31 - 4O
i0
8.8
41 - 50
44
38.6
i
0.9
21-
_bre
than 50
T o t a 1
114
100.0%
!/Usual downpayment percentage applies only to some (ioe., not necessarily all) customers, for whom downpayments/advances on sales are required. Z/Based
on i14 valid
cases
(out of 115 respondents)째
TABLE II.41
GROWTH IN PHILIPPINE EXPORTS OF WOOD-BASED FURNITURE AND FIXTURES I_ COMPARISON WITH GRC_ OF TOTAL PHILIPPINE EXPORTS (1965-1980,
IN FOB $ VALUES)
(A) Exports of Furniture
_ncrease Over
(B) Exports
Yea_z
and i/ Fixtures--
Previous Year _
Builder' s.. Woodwork -_!
1965
$ 450,952
196t
511,893
13.5
68, i19
1967
643, 780
25.8
196_8
842,182
196_
(0.3)
of
$ 338,492
Increase Over Previous Year (%)
Total
Increase Over
Previous Year (%)
Philippine E_
Previous Y_ar (%)
$789,444
54.5%
$795_734,890
("19.9)
580,O12
(26.5)
877,405,702
10.3
141, 700
108.0
785,488
35.4
891,502,116
1.6
30.8
341,708
141.1
1,183,890
50.7
962,114,110
984,544
16.9
1,064,489
211.5
2,049,033
73.1
983,172,917
2.2
1970
1;190,954
21.0
I, 055_ 689
(0.8)
2,246,643
9.6
1,142,191;237
16.2
1971
1,211,382
i. 7
1,865,110
76.7
3,076,492
36.9
1,189,247,194
4.1
1972
3,189,956
163o3
2,859,658
53.3
6,049,616
96.9
i, 168_ 433,138
(1.8)
1973
3,365,469
5.5
5,728,394
100.3
9_093,863
50.3
1,837,198,097
57,2
1974
5,774,001
71.6
8,379,663
46.3
14; 153,664
55.6
2,724,986_237
48.3
1975
4;520,229
(21.7)
8,!38,716
(2.9)
12,658,945
(10.6)
2,294,470,333
(15.8)
197_
6,325,137
39.9
10,09.9,070
24.1
16_426,207
29.7
2,573,675,684
12.2
1977
13,266,247
109.7
9,617,190
(4.8)
22,883,437
39.3
3,150,886,989
22,4
1978
16,500,050
24.4
13,306,264
38.4
29,806,314
30.3
3,424,876_025
8.7
1979
33,343; 792
102 •I
19,464,368
46.3
52,808,160
77.2
4,601_ 189,916
34.3
19_/D
46,856,143
40.5
14,361,473
(26.2)
61,217,616
15.9
5,487,787,554
19.3
.
478.0%
Total _ _
Increase Over
.
2.1%
7.9
! ,
O_
j
i/Source:
National
Census
and Statistics
Office
ii-77
exports
_/,_i _o,'_ in 1977), or the totality
saw..-_ lumber
and pl_adood exports
The bulk of wood-based exports,
however,
has been
(see Table
1979.
iio3).
in rattan which
period
_xports
aggregating
exports
has dropped
of wood-based
including
buiider_s
and fixtures
from a high
8.4% over
the
wood-based
wood_-ork, w,,Ich often
States_
importinK
furniture
llo2%,a_d
on exports
As man be
Australia
countries
wood-based
and Japan
(The United
Japan
are
of Philippine
and fixtures,
accounted, for 45.8% over
accounts
of expc.rts of furniture
accounting
furniture
export s <_f the Philippines
1976-!.980.
are
(with the latter
manufacturer-exporters).
O_oL_/=of aggregate fixtures
of Philippine
and fixtures
and 11.43
portion
the United
the principal
in ss&_n lumber,
only
furniture
II_42
for a significant
14/Based
furni-
0_8% in 1978 and
(_ountries of destination
listed in Tables
period
of wood
1970-1979o
Major
noted_
account-
for 1970 through
the shaze
of 37o6% in 1974 to a meaaly 1.1% in 1979,
and fixtures
This share was 92.4% in
On the other hand,
ture and fixtures
(7..6% in.1977).I-_4/
furniture
ed for 86_7Z oi the aggregate 1979
of log,
over
States
the period,
for
and the "
alone Australia
i0.2%.)
of $133 million and $40 million
in lobs, in pil, wood
$66째6 million (World Bank /--6j)o
TABLE 11.42 MAJOR COUNTRIES OF DESTINATION OF PHILIPPINE EXPORTS OF WOOD-B_ED FURNITURE (1976_1980, _jor
Country of Destination
1976 - 1980 A___ate) Rank % to Total
AND FIXTUF_S i/
IN FOB $ VALUES) 2_'
1950 _ to Rank Total
197_8 % to Rank Total
_ 197_ Rank
1977 % to Total
F_ank
1976 7_ to Total
Rank
% to Total
U. S .A.l/
1
45.8%
I
44.0%
i
44.8%
]
50.9%
i
48.6%
I
44.7%
Australia
2
11.2
4
7.5
]
11.2
2
15.4
2
15.0
2
19.8
Japan
3
10.2
2
12.8
2
12.8
4
5. !
4
5.0
3
6.6
4
7.7
3
7.7
4
9.5
3
6째5
3
7.2
6
2.8
Netherlands
5
3=6
6
4.3
5
4.5
7
2.6
Sweden
6
3.2
5
4.4
7
2.8
8
2 o4
I0
I.5
5
3.1
Canada
7
2.9
7
2.6
6
3.6
6
3.0
9
2.0
g
2.6
Belgie
8
2.2
8
1.7
5
3.2
5
4.7
7
2.7
Italy
9
1.6
10
1.5
]0
1.2
,_
2.6
4
5.1
Fra__ce
I0
1,3
9
1.8
Denmark
II
1.3
9
1.5
7
2.8
9
2.5
I_
I.I
Hongkong
13
0.9
10
I. i
Lebanon
14
O. 8
15
0.8
16
0.6
West
Germany
United
Puerto
Kingdom
Rico
Bahamas
I0
9
B
[_I
1.3
2.0
6
3.3
Total FOB $ Value
$116,291,369
$46,856_143
$33,343,792
$16,500,050
$13,266,247
$6,325137 Go
1/Excluding
builder's
woodwork
2--/Source: National Census and Statistics Office 3/T_,,,_.n_Z Hawaii_ wh!n_ eo:_nted for 2.3% of exports
,,
over
the period
1976-1980
(1.7% i_ 1980, 2._
in 1979,
I
TABLE II.43 _AJOR COUNTRIES O_STINI_TION f_ _ _ PHILIPPINE EXPORTS OF W_B/_SED:FU_N_ITLrRE:A_D|_FI__ INCLUDING BUILDER'S Wf_l_O_ '. ' .... (1976-1980, IN PDB $ VALUES)_I/ Major Country of Destination
U.S.A.
1980 Rank
% to Total
1979 Z to Rank Total
. 17_978 % to Rank Total
1977 % to Rank Total
1976 % to Rank Total
I
43.4%
1
38.9%
I
45.0%
l
49.0%
i
45.8%
1
42.2%
Australia
2
13.1
2
8.9
2
II .6
2
15.6
2
17.9
2
22.7
Japan
3
7.5
5
3°7
3
8.6
3
6.6
3
I0.I
3
12.4
4
5.0
4
6.0
5
5
3.7
4
4.4
I0
1.2
Canada
5
4.3
8
3.3
4
6.4
4
4.8
7
2.0
5
3.6
France
6
2.8
3
6.4
9
1.3
7
2.7
9
3.2
6
3.2
6
3.2
8
] o6
Netherlands
8
2.4
6
3.3
7
3.1
9
1.6
Sweden
9
2. I
7
3.3
8
1.8
9
1.2
Guam
I0
2.0
i0
I .I
4
5.2
Belgium
ii
Denmark
7
1.8
6
2.0
West
2/
1976-19BO (A_reKate) Rank % to Total
?:
Germany
United
.Kingdom
6.0
7
2.5
5
3.7
I._
8
I .8
6
2 o8
12
I .2
I0
1.5
g
2.0
Hon_kong
13
I. I
9
1.5
Italy
14
1.0
I0
1.5
Spain
15
0_9
10
2.3
Total FOB $ Value
$183,139,734
l--/Source: National
$61,217,616
Census and Statistics
$52,808." 160
$29,806,314
$22,883,437
$16,424,207
Office
........ 2_/l_cluding Hawaii, which accounted. .. for 1.6% of exports over tile perlod-1976--1980 (t3o".• " . in 1979, 1.7_ in 197g, 1,4_ Im 1977, _ad 1.3% in 1976.
% in 1980, 1.8%..
-a %0
II-80
6.2
Magnitudes
of the Export Market
Total
furniture
of the Organization Development of world between
imports
for Economic
(OECD)_ which
1965 and 1974,
which affected countries
the world
Since wood
to t%present,
on
household
OECD imports
Inspite
in 1975 still
forecast Philippine
exports
total
between
rates
wood-based
annual
1965-197_,
presumably
as a result
$2.08
and
80% of this is in of the recession,
ranging
furniture annual
average
dropped
gr_w a_ain, at a higher
furniture
the
from 4% to 8%
(ITC-UNCTAD/GATT
grew at an equivalent
the period
at
imports
grew by 9% over
for 1976-1980.
of 33_ (or a simple
imports
two-thirds
of wood
be between
Approximately
1974 level, and growth were
in many
was estimated
imports
would
furniture.
recession
fram 48% in the United
to 81% in Ja_n)_
$2.33 hillien.
economic
of total furniture
ranges
the_e countries
at a high
f_irniture is estimated
ths averege_
and three-quarters (the proportion
of 25% annually
production
countries
and
for the bulk
In 1974 alone_
by OECD
$3,1 billion.
by
account
and remained
furniture
severely.
of furniture
:
Cooperation
trade, gr_w by an average
level in 1975 despite
Stat_s
of member-countries
and fixtures growth
rate
of 39_) over
by 22% in 1975,
of the recession, equivalent
/--4.7).
annual
then rate
II-81
of 65% over the period therefore,
_hat Philippine
faster rate than OECD able
to account
However,
1976-1980.
far a larger
based niture were
rattan,
exports
Philippine
furniture
Factors
countries total
accounted
furniture
countries
for only
market
from socialist
developing
countries
but dropped /_he _ongkons,
aF_in
OECD imports developin_
of furniture
of such total,
GATTit/)"
compared
exports.
of
of OECD
and 6% ($186 _ This share of from 5% in 1972,
(ITC-UNCTAD/GATT
fifth, behind
Korea,
/4/).
Taiwan,
in terms of total
of al__lcategories
in 1975.
in
87% ($2.715 billion)
to 6% in !976.
countries
fumltu_e
7[_ ($226 million)
economics
ranked
in view
that developing
countries.
China and South
material)
Market
had increased
Philippines
fur_
share would
($3.126 billion)
as against
from industrialized
wood
and fixture
mentioning
imports
in 1974,
million)
of wood
in the Export
It is worthwhile
of wood-
particularly
share
and
is
buri and similar
of the fast deck.ining
Critical
0.25%
if strictly
any attention,
wood-based
at a
imports
considers.d, then the Philippines'
hardly warrant
6.3
of 5e_ween
furnitur_
Moreover,
(excluding
8rowiD8
should have been
for total Philippine
furniture.
seem,
share of the latter.
a share
0.28% of total OECD wood indicated
e_orts,
imports,
as of 1974,
It would
It accounted
to Taiwanls
43%.
from for 6% (ITC-UNCTAD/
II-82
Transport handicaps
cost is cited as one of
to growth
developing
of furniture
coumtries.
consists of bulky by freight
items
considerable
at a competitive to exporters
in developed
(
to imports
or weight.
from the
pric_-wise
countries.
States
at
compared
This competiin the ease of
and Japan,
two are the OECD
from developing
and
countries
countries.
C-U CTAD/0ATr /--4 7). Imports
OECD
affected
they are generally
is less important
these
usually
are located
distances
disadvantage
this explains why
from
their volume
countries
to the United
most open
furniture
in particular,
tive disadvantage deliveries
of
geographical
markets,
exports
that are heavily
rates because
Since most developing
European
Wooden
the major
of wood
countries
include
are fairly
sizable
room furniture,
from developing and now
quantities
of living
and dining
including
upholstered
of rattan.
in demand in OECD
the high
income
incidence
discussed,
materials,
especially
groups.
is also
because
as earlier
low-margin,
of these markets,
countries
cost,
cheap
by the
However,
of transport
and the low-price_
%_l_me na_uz_ developing
countries
furniture,
Mass-produced
in cheap wood-based
low and medium
to
diversified
and also furniture furniture,
furniture
high-
manufacturers
like the Philippines
will
in
of
II-83
most
likely not
be able
in such markets. for wood
It would
furniture
countries
transport
thereby
Cody
/j3J agrees with
that "the future
common
but rather of above
States
production
and Europe,
of classical
/--47, however,
approach
hold
exports
and design,
emphasis
o_l product
tion".
Cody
required must
furniture
process
of planning
product
to its ultimate
take account
focus
planning
design
used,
as "the of each new
facilities
of its workforce_
its tactile
the purpose,
its decoration
an
and characteristics
the forms
the article,
adapta-
and usefulness", _and
of the production
of the nature
on
particular
and product
shape
that
house-
attention
the development
the skills
cautions
for wooden
and thus place
/-3 7 defines
of the materials
series
industry
quality."
"the marketing
understanding
to the consumer.
of the Philippine
in the United
average
of the firm,
of
this view when he con-
to lie in large
ITC-UNCTAD/GATT
quality
the incidence
in the production
furniture
of more expen-
/-47)
does not appear
"must
on exports
reducing
advisable
in developing
costs on the final price
(ITO-UNCTAD/GATT
methods
price-wise
then seem more
manufacturers
to concentrate
sive items,
cluded
to compete
beauty,
and colour of its fitness
for
and its acceptability
,
II-84
to the consuming the Philippine
6.4
public".
Be laments
experience,
only
mentioned
seem to have received
attention
_n the industry".
Manufacturer-Exporters
Only 25 of
exported
and/or
from 1976
15 in 1977,
years
to 1980.
We were
estimates
sales
firms)
for 7 of 12 exporter-respondents
inspire sales
million
in 1976, million in 1979,
$4.913 million
This would period,
furniture
million
seem to suggest
total number
th_ export market
that,
cases of export
Philippine
and builder's
(or 21.5%)
in 1978,
and $7.672
in 1976,
for, respectively_
(or 21.1%) of total
(or 17.0%)
to exporting
17 of 22 in 1979,
cf valid
they account
ports of wood-based
of total
It may be noteworthy
of these low numbers
estimates,
$3.464
and sales
14 of 20 in 1978,
and 16 of 21 in 1980.
respon-
for each of the
export
13 of 15 in 1977,
exports
and 21 in 1980.
of these
sales
able to generate (direct
one of
12 of them in 1976,
a distribution
to export
firms.
did so in at least
22 in 1979,
dents according from 1976
than passing
sold to exporting
to 1980:
20 in 1978,
Table 11.44 shows
"more
two items
(29 out of 115) reported
them, however,
the years
the last
in our Sample
25.2% of our sample ever having
that, in
in 1977,
$7.333 million (or 12.5%) that, over
of menufacturers
has increased.
ex-
woodwork $5.059 (or 13.9%)
in 1980. the five year selling
in
TABLE
Direct _DB Value
($000)2/
1976
1977
Exports 1978
I_ or less
2
Ii - 25
....
26 - 50
-
1
-
51 - 100
-
1
iCl - 250
2
251-
500
_I--
I000
1001-
5000
1
DISTRIBUTION OF RESPONDENTS !I/ ACCORDING TO EXPORT SALES (1976-1980)
II.44
Sales
1979
2
1980
3
to Exporting
197____6 19.77
1978
Fir_ 3/ 1979
2
-
-
-
1
2
-
-
1
....
-
1
-
-
1
3
1
2
1
....
3
3
3
3
1
-
2
2
.....
2
3
3
1
2
.....
1
1
1
4
2
-
2.
3
2
.2,
1
_14
15
15
15
2
1
2
Total Export
1980
1976
-
1977
2
1978
1
Sales 1979
19_
2
4
2
1
-
2
2
-
1
1
3
3
1
-
1
1
2
2
-
1
1
3
2
2
2
1
-
1
3
3
-
1
2
3
3
2
2
1
1
1
4
2
....
Don' t know/ _'l't recall Total
1/Based
Firms
__4 ii
on 12 respondents
"--_/Pesc estimates
were 1976 1977 1978
who exported
converted
in 1976,
â&#x20AC;˘3-/Based only on manufacturer's
selling
price
3 2
__4 7
15 in 1977,
to $ ,_alues using
$I.00 = _7.4550 $!.00 = _7.3978 $1.00 = _7.3710
i
to exporting
8
__5 12
.2
__6 15
20
__5 22
21
20 in 1978, 22 in 1979 and 21 in 1980.
the following 1979 1980
9
4
s-nual.average
$I.00 _ _7.3711 $i.00 - _7.4852
firm. _
conversion
rates: OO
7
II-86
Nonetheless9 of exporters
a relatively
is indicated.
(PDCP /_--5_.7) notes of CFIP in Metro which
small
total number
In fact,
a 1978 study
the existence
Manila
Our survey
bution:
48% in Metro
yielded
towards
Manila,
based in Cebu are
by any standard
small.
According
use wood, rattan
to principal
(in undetermined
Table If.10./ significantly
Pampanga
much larger
sales
combinations).
/Refer to
does not differ
46.9%
use rattan, even with
and 15.6%
among
but the larger
sales
and exports
were
The manufacturer-exporters than the manufacturers may be gleaned
Table
fact, in 1980, exporting
sample have
ones in terms
_-ere generally sample,
II.45 below.
respondents
of equipment9
as corporations
the corporations.
in the entire
from
of
There were
proprietorships
the exporters,
use
our addition
in the area of coverage.
the entire
and
from that in the 1978 study, where
and rattan,
of 6 pieces
44%
and 8% use both wood
about as many single
of gross
than
are fairly
raw material,
This distribution
37.5% use wood, both wood
distri-
the manufacturer-exportezs
export
48% use rattan,
the export
24% in Cebu, and
However,
whose
(31.2%)
the following
28% in Pampangau
those in Pampanga,
64 members
(68.8%) and Cebu
are in some way oriented
market.
of only
whileas
larger
as In
had a minimum
some
30.6% of
less than 6 pieces.
In
II-87
addition, worth
firms exporting
of their products
of equipment. pattern
more
have
firms
mechaniza=ion
(measured
worker
is concerned.
seems
to get smaller
hinting
that certain
industry
insofar
16 pieces
in terms
as relative
of a machine
This ratio_
for rattan
(which constitute
to
in fact,
as the firm gets larger, types of workers
are not machine-substitutible,
cularly
firms
at least
/_However, there is no clear
for exporting
ratio)
than _I million
furniture among
in the parti-
manufacturers
the larger
exporting
in our sample).__/
Table
II.45
_aracteris
GENERAL CHAgACTERISTICS OF EXPORTER-RESPONDENTS COMPARED TO ENTIRE SAMPLE
tic
Entire
Exporter-
Sample
Re___ondents
46.4 15
147.2 85
1,211o 2 240
3,720.5 700
4.6 4
5.5 5
9.9 8
16.4_ ii
Size of labor force Mean Median Estimated
gross
sales
(_000)
Mean Median Eq uipmen t/roachine ry Number of types/categories Mean Median Number
of pieces
Mean Median
11-88
While furniture sample,
there are almost
as wood
furniture
exporting
FOB $ values of rattan
are much
greater
than
for wood
This can be explained 1980 export firms were while
the same rattan
sales
exporting than 50%),
exports
furniture
exports.
furniture
from 90% to 100% of
exportin_
for wood
generally
notwithstanding
in general,
Sross ,_llee estimstes,
percentages
firms were
furniture
by the fact that,
of rattan
correspondinE
firms in our
much
furniture
lower
inclusion
(often less
of builder's
woodwork. Among having
our 29 respondents
exported,
_1.4_
do not meet ex_ort
quality
color and moisture
factors);
24.1Z
20.7%
limited; shipping. problems,
and 20.7%
(presumably content,
and establish
only
in terms among other
to obtain
contact
that they often
Suprisingly,
ever
that raw material
that their production
while
reported
that it is difficult
information
buyers;
6.5
complain
of grain,
market
who
13.8%
with
capacity encounter
is p_oblems
report financim_
48.7% of all respondents
do so.
Prospects As has been seems to hold Philippine while
discussed,
tremendous
wood-based
Philippine
have continued
the export market
prospects
furniture
exports
for the
industry.
of rattan
But
furniture
to _row at a fairly hiFh rate,
m
!I-89
_xports
of wood
furniture
have substantially
(
declined,
not only in percentage
Philippine exports,
wood-based
share
furniture
and fixtures
but even in FOB $ values,
in 1978 and 1979 when wood
to total
particularly
furniture
accounted
for only 0.8% and ioi% of total, respectively (refer to Table Transport major wood
11.3). cost would
competitive furniture,
markets
where
particularly
_aemarketing quality
However,
of Philippine
has been
must
and design, which
to
ef our meager wood
It was already
approach
unable
it is not the only
to expansion
exports.
the
in the European
the Philippines
barrier
furniture
to be one of
disadvantages
gai_ much headway. apparent
seem
focus
pointed
attention
a_._ of paramount
out that on signifi-
cance in the -export market. l_'orinstance_ _e
United
cularly
States market,
concen_ed
of the finishing finishing special
Thi_ kind America, with
with
features.
learn and be
an expert
are partidepth
hiF_hlighting and many
other
is w_li
markup,
in
of the finish_
all these
in terms
etc. have been
and to market
importanK
Consumers
_'To achieve
distressing_
the PrOPer
where
techniques
of styling
is very
clarity
style,
finishing
padding,
finishing
of glazing, introduced
developed
furniture there m these
effects,
xxx
in North
in these
areas
is no way out but to stylings."
(Zung, /--7_)
II-90
It is far from easy, manufacturer-exporters the recommendations
of wood
disadvantage
for Philippine
furniture
of ITC-UNCTAD/GATT
Cody f'3_7 that exports more expensive
therefore_
items,
brought
should
to heed
/-47 and
be concentrated
to offset
the competitive
about by relatively
higher
transport
costs, in particularS, on claae_leal
furniture
of above-everage
Certainly,
should meet with
comprehensive any success
markets
will have
strong
product-market
nitudes
determined.
both
necessary_
cap abili ties manpower,
ment st_pping Oftentimes, taken
and potential. and extent
skilled
And then, of
arises.
investment
governfinancing.
of the individual
in export promotion
upon projected
foreign
and other macroeconomic
of
to be determined,
not end with
in and providing
capa-
of upgrading
need
it just should
for granted
will
Where
technology,
of financing
the well-being
that are built earnings
and their mag-
the co_iresponding costs.
However,
within
local manufacturing
others) will
the matter
For one_
so identified
_ <e.g., production
among
along with course,
current
if it
identified_
orientation,
with
the
whatsoever.
Products
_he nature
entail
studies
to be properly
have to be matched bilities_
quality.
such a move would
co_duct of fairly
on
firm is
schemes
exchange
considerations.
a
I.I-91 An honest-to-_oodness to be undertaken
benefit-cost
for evez_
to par_.icipate, based and o_.her technical
to be gainedj
and by
the firms
industry, market
probably
in-depth above_
market
further
ment serve
schemes
current
of which
great
for that matter.
furniture exports
that it can
Export
develop-
which
can
to interested
the experts _
recommendations
to the firms
with
then, the
will
in the
any appreciatio n for the imperatives
and the potential
associated
Philippines
However,
while
shall have
for rattan
_o increase
furniture
"there
for
return an
the same,
to rely upon markets
at all.
in
exporters째
little sense
if it hopes
.
as outlined
formulated,
ar,d Cody)
such markets_
to continue
potential),
investing
suggests
the [,.koveis done_
Perhaps&
as a whole
the export
export markets _ the technological
investments
truly is
by. the CF!P, or individual
industry, who have bazely
tapping
market
furniture
tapping
for assistance
([TC-UNCTAD/GATT likely make
the economy
to consider
and potential
Unless
that there
to hold
can then be
as basis
reliable
and _echnical studies
h_,rdly be undertaken firms
feels
both by
need
_he nature
furniture
firm that wishes
in the wood-based
through
ought
information.
(which appears
it will
single
on fairly
If the government much
analysis
is no
II-92
shortage, o_ orders Bank / 6/), furniture _athered
for rattan
difficulties
While
being
in obtaining
in our survey
and mentioned
World
that supplies
somehow
until
lem is a basic
general
consensus
sumption
supply will not last
niture
can only
for that:
would permit. furniture
would
appear
been
thriving
of orders."
seems
production
to the extent
Moreover,
of demand
To what
efforts,
of rattan
(or simply
fur-
continue,
that rattan supply
the mar]-ets for rattan clearly
effectively
that the rattan Imtil
to be a
L3-_7,World
Cody
to grow
prob-
rates of con--
reafforestation
do not seem to have been
nor magnitudes
it se_ms,
continue
matter)
There
(Amio ,/_j,
Apparently,
(PDCP /5/),
on quantities
that unless current by
which
a more critical
/__3/).
are parallelled
Bank /6/).
part of 1977
problems,
(Cody
as
in earlier
of rattan poles,
lack of information
still available
rattan poles
of rattan are not unlimited.
the early
eases supply
by rattan
If%j) point tothe
the ban on exportation
was heavy
(World
experienced
manufacturers
studies (Cody reality
furniture"
extent
determined.
furniture
now since
"there
delineated
sector
has
is no shortage
there will be orders,
has yet to be kno_.
It
so
II-93
E,
General 1.0
Management
Major Managerial
?unctions
The distribution proprietorshil_s to suggest within
of respondents
(81.7%)and
a high level
the wood-based
is substantiated
furniture
functions:
general
production_
purchasing
administration/personnel,
the owner
is credited
administrationpersonnel).
in from
shares responsibility {Refer to Table
with
(66.1%)o
tive of a dearth i_i middle as well rity째
as_ corollarily, (Refer to Table
Attempts between for each
%Tere made
t_e number area
the owner
55.7 to 61.7% (39.1%) where
an accountant
is primarily
responsible
of the cases, except
This situation
to top management
a lack of delegation
is indica-
positions, of autho-
Ii_47o) to establish
of persons
(per the last
or
II.46._[
in each area in from 79_i to 89.6% in finance/accounting
73.9%
Moreover_
except in finance/accounting
only one person
Of the
from a low
to a high of
alone has prilnary respon_ibility
Likewise_
marketing_
with primary
five areas
(general
person.
and res-
and finance/accounting.
(finance/accounting)
similaz
This hypothesis
in five major managerial
of 64째3%
he generally
tends
activity
of participation
in each of these
of the cases,
to single
(18.3%)
industry.
by the extent
of the owner
responsibility
corporations
of entrepreneurial
ponsibiiity
115 respondents,
according
relationships
primarily table
cited)
responsible and the size
I!-95
of the fir_J.(in terms of labor _rea of finance/accounting to be significantly square
test).
movement
towards
n_t independent
more
the chi-
the dat.a suggests. _ome being
as _ize of the firm increases. purcha_ing,
general
adn_inistration/personnel
did not
lead to any rejection
of these areas
(nming
than just one perso_
tests on produation_
that the number
Only in the
we._e the two variables .shown
I;_ this instenee,
rily responsible square
force).
_:f persons is probably
and
size of finn
of independence_
primarily
Chi-
marketing
w_rsu_
prima-_
suggesting
responsib].e in each
independent
o_ size of the
firm, As was mentioned tend _o exercise technical
areas
it,,$c._c_ionIf째C,5
much
Wo_'l,.J not possess
design
to imply
and technology.
that owners
d_,e r_=quisite _echnical
of uh_n. r._ayno;" hav_Z the necessary
knowhow
and merely
th_._products a_cemp_s would
knowledge_
b_
,q_on their
feel
for the market
n.nd hhe productio_l Dro_esses_
to face u[; to the sensitivity produ&t
design
dealt with. using
and quaiity_
"gut feel"
aiOneo
if not
technical.
In particular_
to tap the e:xport marke[l for wood
need
_o proper
rely
While
in general
_-here is nc'ael:h_le_sa pc_sJ,.bil_ty the5 some_ many,
owner_
i'_fluence even in such highly
as product
there is no intention
above_
furniture
of such market
which
can haxdly
II-98
for =a_n/tud_s performance,
lairddire.ctions of the firm_ cost efficiency,
financial
profitability
and
,;..
return_
on investments,
among other
relevant
associated
with
monitoring
of actual result of opleratiens on such basis.
More
[;reparation of profit plans/budgets
often than not,
prof_tsbility
this bears
significantly
is often not much
study
assistance.
analysis
relative
ever conducted, This is mainly
the trade, whiuh
encourages
to set up on their
own"
It is, in. fact,
some reason or Institutional Cody /_j national
employees
with
little
to
capital
(Cody /--37).
As suggested
already
that probably by our
35% of the sample
ceased operations,
for
other. Linkages mentions
Philippine
furniture
furniture,
joinery
TL
outside
due t,'_ _qthe ease of entry
sc_n_ewherenear
organization
and by virtue
In
was, a feasi-
this same ease of entry
populatio in 155/ may have
there
to feasibility.
and LIsualIy without
also leads to an ease of exit. survey operations,
performance.
of entry iDto the business,
less than one out of every five respondents bility
and â&#x20AC;˘
on overall
and od_er measurel_ of financial
Even in the matter
3.0
information
that the CFIP "is the only
to represent industries.
and other
the interests It is composed
secondary
of its membership
claims
wood
of the of
processors
to account
for
:
"ÂŁ5/A 95% confidence population would
interval for the true mean be from 30.5% to 40.6%.
of the sample
11-99
about 85% of the industry's edds_
"In a6_'tion
_ts-_ production".
to its major
activity
ing the interests
of the industry,
government
the CFIP actively
level,
rages the u_grading in order
of qualiry_
He
of represent-
particularly supports
design
to fuiiy ex_,ioit the export
at
and encou-
and productivity%
potential
of its
memb era." Of the 115 respondents
in th_ sample,
o_iy
30.4% repor_ membership
seem
to be all too clear to the firms
what
distinct
advant_,_
in CFIP. I_6/
membership
however, It does not
in the industry
in the CFIP would
provi de. On
the other
hand_
appreciat<_ benefits NACIDA,
a_
picture
of registration
agencies
reported
made
is given
to the extent (though in order cottage
63.5%
available
their being with
in Table
only simulated)
industry
sc registered°
NACIPA
to
and other
(A government
Some firms even
go
title of ownership
to a ÂŁlose
relative
to be registered
and enjoy
appear
by r.agistration with
II.50.)
of transferring
to continue
of respondents
with
the benefits
or friend NACiDA
attendant
as a to
being s_ registered. 17/
16/Other than the CFIP_ a measly 3.5% of the sample are _hers of a Cl_i_se association_ and 1.7% of each of some "local" association and the Confederation of Philippine Exporters (COPE). 17Registration with NACIDA is good for five years, and is non-renewable. Firms are able to circumvent this regulation through the change in name of owner, which afford_ them the chance to register as a tot_lly "new" cottage industry.
II-lO0
TABLE 11o50 REGISTRATION
CovenL_en=
WI_I
GOVEP_NMENT AGENCIES
NO o of I/ Respondents Resistered-
Agency
NACIDA
% to Total Respondents
73
63,5%
24
20.9
Municipal i ty
20
17.4
BOI
!5
13.0
SEC
8
7.0
Bureau
of Domestic Trade/ Ministry of Trade
registered
with
any _overnment
_gency.
II--i01
F.
Sources 1.0
of and Problems
Sources
in Financing
of Financing
84 of 115 respondents in 1980
from some source
Average
of financing
total borrowings
P5 millionwith borrowing Tables
close
_i0,000
I!.51
according
SupplierVs so _r,'wient_
ranged between
to average
to sources
credit
however_
borrowings
left out.
respondents
other
credit_
(See of in
financing째) ;)f financing
than supplier's have
is
in fact.
credit.
have no credit
only 22 of the 84
borrowings
did not avail
(Table !1.53 presents
showing
credit.
Accordinglyp
,_Thatsoevc_rif supplier's hand_
(42.6%
no borrowings
(66 cases) would
any reported
tion of respondents centage
time.
that on]}" 49 respondents
On the other
with
of supplier's
of
(30.4% of sample)
for supplierVs
and
total borrowings
as a source
a full 57.4% of respondents
were
_i_000
t<,50% of the re_u_ondents
of total) ha\,e borrowings 35 respondents
borrowed
or other.
or less at any single
1980_ and according
reported
ha_4ng
and II.'52 for the distributions
respondents
except
(73%) report
supplier's
a distribu-
credit
as a per-
of total borrowings.)
Other financing
than supplierVs
credit,
to 34 respondents
and 40째5% of respondents Other sources moneylenders째
were
provided
(29.6% of total
with
relatives
banks
reported
respondents
borrowings)째
_nd friends_
and private
.....
II-102
TABLE
11051 AVFRAGE
TOTAL
Frequency
BORROWINGS
.-
IN 1980
% to Total
Respondents
Amount (_000)
Excluding ,qupplier's C_edit
Including Supplier' s Cre dit
Excluding Suppli_r' s Credit
Including Supplier' s Cre di t
None
66
31
5 7.4%
27.0%
i-
5
8
13
7.0
11.3
6-
i0
6
9
5.2
7.8
ii-
20
2
l0
!.7
8.7
21-
30
2
5
i. 7
4 o4
31-
50
?
7
6.1
6. i
51- i00
4
i0
3o5
8_7
2
4
i. 7
3.5
201-1000
i0
12
8,7
i0.4
!001-5000
4
3
Z. 5
2.6
Unknown
4
ii
3.5
9o 6
115
115
i01-
200
Total
1With
roundoff
error.
i00,0%
i00o i%1/
II-103
TABLE 11.52
SOURCES
OF FINANCING
% to Resp0n dents
% to Respondents With Borrowings Other Than
With
$upplier's
Source of
i/
supplier' s Credit
62
73.8%
Banks
34
40,5
69,4%
ii
13,1
22.4
9.6
7
8.3
14.3
6.1
Relatives Private
and Friends
Nnneylenders
Others
----'Based on 84 r_spondents (including supplier's
2
(73% of credit).
NA
% to Total
2.4
115)
with
4. i
reported
borrowings
2/Based on 49 respondents (42.6% of i15) ,vith reported other than supplier's credit,
borrowings
53.9% 29,6
i. 7
11-104
TABLE 11.53 SUPPLIER'S CREDIT AS A PERCENTAGE OF TOTAL BORROWINGS
Fre_ue=cy. None 1-15%
22
26.2%
8
9.5
16-45
6
7.i
46-75
4
4.8
76-99
3
3.6
35
41.7
lO0 Unknown Tot _
_l--/Based on 84 respondents in 1980.
84 ._
(out of 115) with
i00.0%
reported
borrowings
II'i05
A chi-square borrowings
of our data on average
versus percentage
total borrowings independeet
at a 5% level
of borrowings,
of supplier_s
that
of significance.
the smaller
the higher
to _otal borrowings.
average
total borrowings
measured
At
the same
force)
at a 1% level of significance.
suggest
that these
correlated_
small firms_ are forced
seem
unable
time,
to suggest
to tap other
into relatively
(as
Data likewise
tend to be positively
though not necessarily
two results would
amount
are also no___t inde-
pendent
two variables
are no__t
of supplier's
and size of firm
by size of labor
to
In fact_
the total
the percentage
total
credit
sho_;_ that the two variables
the data _uggest
credit
analysis
linearly.
These
a situation
where
sources
greater
of financing,
dependence
on
supplier _s credit. Moreover_ supplier's
aver_ge
credit_
size of labor
total borrowings,
and size of firm
force)
are as well
1% level of significance. that non-supplier_s increase size. on
disproportionately
This would
uther
the smaller
(as measured
not independent
appear
firms
than supplier's
firms, which
tends
by at a
to
as the firm is lair
to imply
of
the data suggest
credit borrowings
the part of larger
sources
Again9
exclusive
a greater
to borrow
in
ability
from banks
credit in relation
and to
is not all too â&#x20AC;˘surprising.
II-106
2.0
Major ProbJems
i_ Financing
The s_udy generating
team found particular
fairly
reliable
data, either because sible financial income
firms
out)°
(except primarily for income
responses_
upon disclo-
and probably
as our consistency
We have had to decide
information
tax purposes
(and, oftentimes,
doubtful
ends due to the pitiful
the
not provide • a true picture
information
choose t_ _ive L_ghly erroneous
financial
or do not look favorably
sing such financial
in
do not l_ave easily • acces-
submitted
which may, by and large_ of performm%ce)
(and usable)
information
sta$ements
difficulty
checks bore
on dropping
some respond-
lack of financial
(refer to Table
highly
and other
Iiii),
and, in
the course
of our analysis of the basic
data_
totally
rejecting
some variables
reasonably
surro_ateSo sufficient
or developing
By and large, we failed financial
to establish
_,erfornance indicato_
had to rely upon essentially approaches
acceptable
to identify
non-quantitative
certain problems
and prospects.
(This is not to say that Beueration meaningful
financial
all possible°
of reasonably
data at the firm level
On the contrary,
very much possible,
and have
but would
effort
and resources
devote
in our conduct
is not at
the seine should
require
special
of the sort that we of the field
be
attention,
could not
survey°)
II-i07
Table
ll,5&
summarizes
as cited by respondents. is collateral shows
general
the absence
measured
in financing according rates
i_ dependent
problems
(Table 11.55
snd by the ,af the business. finding
on the size of the firm (again
by si_;e e:f !abor
force),
in a manner
problems
(23.5% of 115) reported having
in financing.
At least
to borrow,
while
<!onoK like to borrow.
of the respondents report
acquiring
the desired
5 others
to have
that such problems
Only
45 of these 63
meet
their requirements
no
have
state that
they
81 l?espondents
63 (54째8% of sample and 77.8%
reporting
problems)
2 respondents
Of the remaining
(70.4% of the sample)9
financing pre_et%_ them from
levels of borrowing/financing.
(71.4%) are able _._itherfrom
or, to a lesser extent,
from other
relatives
while
and friends)_
of 63) are unable
that the
ones
27 respondents
tried
that
(as stated hy res-
firms wo_i_iiless likely have borrowing
problems
area
to source of
at a significant
of borrowing
in financin_
cited problem
condition/performance
to arrive
than the smaller
never
problems
most
followed by interest
We failed
larger
requirements
financing
pondents)
_e
as a requirement
collateral
financing),
major
to do so.
to adequate]7 their own capital
sources
the remaining
(e.g., 18 (28.6%
11-108
TABLE 1.1.54
Problem
MAJOR
PROBLEMS
Area Rank 1
Collateral
-!-/
Frequency[...... Rank Ra_k 2
% to Total Rank Rank
$
Total
1
31
5
_
3_3
27.0%
16
!6
5
37
13.9
15
ll
4
30
9
2
4
7
2
Maturity
2
Don _t Like Borrowing
4
Interest
.
IN FINANCING
Rates
Fin &atcing Condition/ Performance of Business/Loan Repayment Documents Processing
Required Costs/Time
2 4.3%
Respondents Rank 3
Total
!. 7%
33.0%
13.9
4.3
32.2
13.0
9.6
3.5
26.1
15
7.8
I. 7
3.5
13.0
7
16
6.1
I. 7
6.1
13.9
5
!
12
i. 7
4.3
4.3
i0.4
1
t
5
3o5
O. 9
0
4.3
1--/27respond_n_s <23.5% of 115) reported having no problem,s in financing. .... At least 2 respcnd_n_s have never tried to borrow.
!I-i09
TABLE
Source
of
II.55 COLLATERAL P_EQUIREMENTS ACCORDING TO SOURCE OF FIN_i_CiNG
Require
Financin_
Collateral
Supp lier 's Credit
No Collateral
Require Tota____l Collateral
i
49
50
28
4
32
i
9
Private Moneylenders
i
Others
I
Banks Relatives Friends
2.0%
No Collateral
Tota___._l
98,0%
i00.0%
87.5
12.5
I00.0
I0
!0_ 0
90.0
i00.0
6
7
14.3
gS. 7
i00.0
i
2
50.0
50.0
i00.0
and
:[-/sasedor, valid
responses
only.
II-llO
Some of the prr_blems cited would procedural
in nature
Collateral
requirements_
financing appear
an,!_, can easily interest
condition/pevfori_ance
to deserve
some
assistance
contemplated
by the governnanto
Earlier shortage
studies
of capital
(Cody. /--37)
finc_ solution. 18/
of the business
have pointed
were
working
eapital_
to be
and expansion"
and export promotion"
Cody exqplains thst the financial
of most firms
has two pri.z'_._:_ipal causes - the
ease of entry
into the business
e__ab!ishment
and operation
_'aFital_ and the intensive
which
:z_.llows the
of firm_ _,-ithvery competition_
io_ levels
of profitability
vez-y little
iunds
limited
in part
br_J.i_ght about by such ease of entry_ which
and provides
form
to "a chronic
for development
(Worl6 .gank /--67).
about very
would
tho_.gh_ if some
tO the industry
and
in the industr$,_ calli._ci_ for _'more finance
for equipment_
weakness
to be
rates, maturity
attention_
:)f financial
seem
brings
(if at all)
for reinvestment
in
the business. It may be important indicated
_ne following
financing
were
acquisition
to point
out that our sample
sat of pr_oritie:4 if additional
to be r:_adeavailable
of equipment/machinery
to the business= (53 respondents
1--8/14respo_dents report ohtaining adequate assistance from banks and ii .[r.*mgovernment, a.Z._.nc.._es * _ _ in_ among others, the pr_.pa_eion of document:atien requirements facilitation of processing째
and/or
the
II-lll
or 46.1% of sample),
acquisition/stozking
material
(50 respondenÂŁ:_) ; construction
of plane
(28), opening
of own retail
hi,ing of more workers
of the business
unlikely,
however_
find fulfillment
would
to achieve
(17),
(unspecified)
It is highly
aspirations
would ever
find almost
close
Such relative avail of financing
them_
number
considering
that the smaller to impossible
inability
firms
to hurdle°
of the smaller
that would
otherwise
firms
tend to show,
rely on supplier's
credit
force
financing
to
be accessi',i,. â&#x20AC;˘
firms, as some of the analysis
discua_:_ed)would
the
"i:,arriersto financing
collateral)
_o ti_elarger
(II_.
that such
restricti_
(principally,
outlet
for at least a significant
of those who seek necessarily
or. expansion
(16), and g6neral
expansion
up of raw
(earlier
the former
to
an_;.private
moneylenJ._.:_.'s, It is c, o1-_lonknowledge
that inter,:_st
rates che_,::_,, by private
moneylenders
are atrociously
high.
imputed
Table
ii .56 shows
suppl.ier's =redit based which
on the 62 firms
avail of supplier_s
glance_
already
relativel_ =ake into associated
a large
intere;_t rates
credit number
high financing
financing.
raw material
manuf_,6Tmrers,
costs
the likely overstatement
b_ suppliers who would
At fir3t
preying
suggest
This does not yet
cor_sideration the further with
in our sample
of cases would
costs,
on
upon
not have much
(implicit) of prices
the hapless choice but
of
II-i12
TABLE II.56 IMPUTED
INTEREST
RATEE
ON SUPPLi_R'S
CREDII_/
imputed I_t eras t
Ra_j__£____
_.=r_£n=_
%
0%
5
,_. i_
1-6
20
32.3
7-!,2
6
9.7
13-24
2
3.2
25-36 :
3
4.8
37-48
4
6.5
49-72
6
9.7
73-150
i_,0
16. i
151-350
0
e.
351-400
4
6° 5
Uaknowa
2
3,2
62
Total
/_i--' Interest
rates wa_,a,imputed
interest
ro_%doff
using
the. conversion:
Dis count rata .__._ = -100 - Discount rate
he_ca, th_se would credit financing.
2/With
i00. i?_ _-!
represent
error.
X
365 --Credit per_iod
X
100%
only the e_q_]ic:it cost of supplier's
iI-ll3
accept
such price,-_zn t_a face of cert$in
Regrettab!y_
the _iigher _q_sts of financing
would seem
to be _orxle by the very
i]l afford
the same,
less financially to survive.
extinction.
forcing
efficient
firr_s who
could
the_r_to be all the
and profitab]_'_ if only
II-ll4
Go
Maljor Conclusions i째0
Financing
an_i!?,eze_nT_erldations
for the Sm_ii Manufacturers
The Philip[_i_._e wood-based
fur1_iture industry
characterized
by a relative
manufacturers
tc_ operate with
investments째
This has led to a p r_iller_tion
"backyard-_ype"
firms.
standard _ highly recent
ease of entry little_
The industry
that more
ducing equipment/machinery
if _ny_ capital
fJ._,msare intro-
in a E least some operations째 inadequate
raw mar.erial_ and _luctuat_[ng domestic which
are the major
cited by our respondents
Cody _3 2,
identified PDCP
in earlier
_ank_F67},
has allowed
with
degree
is primarily
(Amio
firms little
small formal
techno-
to a sig-
of capacity
than the larger
firms 8enerally sources
me} lead
and_ eccordingly_
operations
/ZIj_
of products.
demand_
of underutilization
labor-based)
inefficient
the more
have been
if at all, in the areas of Droduction
fluctuating
Moreover,
commonly
In particular_
the sm_l!er
This, along
of
for
most
studies
as well as marketing
more
demand
problems
logy and design_
nifleant
supply
(see Table II.57)_
:flli_,,2_ World
the first problem progress_
of small_
is, by any
and more
Lack of capitai/fina_cin_:_
consistently
that allows
labor-intens ire, no twiths tending
indications
furniture_
is
do not have
of financing_
owing
(which
relatively 19 / firms째-access
to
to their
1/V9.Firmswith larger production capacities9 based on our survey_ tended to have Better utilization rates.
II-ll5
TABLE
17 57
....... " C!I;:,D7671RESPONDENTS _/
.___or Probl,_m Area - --
Lack of
s
•
F re_ouency
% to Total
[:esrL-ondents
•
capmn alt fznaac L;_g
56
48_ -7,,,.
Lack of supply-"_; material
30
26.1
Uns table/iluc tL_.=_ t._.n g/ seasonal dcv:_,_ d
26
2,..6 "_
Inar.casinH c_. Lr3
18
15,7
Lack of werk._z_
li!i
11.3
---/Only3 of 115 respoua_nt_ l ..... major problenl.
raentioned th, et
they did not haw_
any
II-ll6
inability
to _eet
collater_i
requirements.
they would
tend to be n_¢Jrasusceptible
supplierVs
credit or private
oft:_n carry high effective inadequate
unfavorable seem_
firms.
to alleviate The World
_'more finance
Inspi=e success
than the larger
the small firms measure
for instance,
calls
rations_
thee
have
l_is probably
notwithstanding informal
primarily
for
capital ''20/
barriers
to
the smali_-r fir>ms (at least, much more c:ontinued to exist, indicates
are able to provide
_th
is approfrom their
that,
gainful
their
financing
families,
..... •_O/As well as for export promotion°
for
costs
and inefficient
due to the lo,_.7-overheadnature
their operations.
some
employment
the opportunity
and
somehow_
the _ownezs with
to support
at the sable time providing
associated
that arises is
manufacturers
formidable
of returr.1_sufficient
their workete_
radiative
of the furnit,,re industry.
ones),
in large numbers,
question
taken
"be at a
position
(and) working
of the see_ingly
thac plague
manufacturer°
cf fir_ancing scheme
for equip_en=
for the development
while
An obvious
Bank /6/,
the
all factors
firr_s w_uld
competitive
the small
more
the finan-
the hapless
than_
the smaller
c.r not so_._efo_
plight°
in addition_
via
as le%_erage in impo-
terms upon
disadvan_ageoua
to the larger
priate
costs°
ther fore,
into consideration,
whether
_c_r_eylenders, which
if used by suppliers
It would
grossly
to financing
supply of raw _naterial compounds
cing problem sing more
Consequently_
opeof
11-1].7
At any rate_ our ,i_ta_ a_ was earliez suggests
a direct
the firm.
relationship
Mo;eov_r_
time or other° _'_/ a situation
where
time, with
firms
at once appear institution.
fro_
(as would
at some of
alose
some
down after
ma_la%a to grow. m_ke
Ehe firms
even more
risky
the point
of view of a
To infuse
low-interest
of
to be indicative
of a few which
of the industry
collateral-free_ financing
many small
seem
a high rate of _xit would
in this sector they would
high percentage
_easel oper£tions
This would
_he exception
By and large,
financing
have
out_
bet:wean size and age of
a somewh_t
firms in the population
pointe4
these
medium
than
fiz_ns with
to long-term
seem to be indicated)
in the expect-
22/ ation that they would repay their
lo_ns_
perform
and make
prove not to be viable
over
substantial
may
the long run_ unless
the
would
eventually
as a subsidy. ?--3/
moment
small manufacturers
2l/#m--discussed
to treat _:uch a scheme
then_ that it would
to _leav_ _e!l
enough
be able to
profits_
goven_ment
It appears_
be _illing
creditablyp--
be best for the
alone '_ insofar
as the
are concerned.
in sections
II.Bo3
and llom.2°
2_/In the first place_ there are no indications that there existing capabilities for managing expanded operations, the contrary, Cody / 3--_7 observed othel_ise. 2-_/The possible implications investigate d.
of a subsidy
scheme were
not
are On
II-ll8
Undoubtedl.'y::recommendations as Cody /--3j, relative workshop
buildings
larger
should
and of bad working
equipment"
firms which
ndequately
to "improvement
of "basle " wood-working
the provisinn ancillary
made by experts,such
would
condit-_,ns
and
machinery
as well
such facilities°
need some looking
,znd
and
o_ly he relev_-,.nt for the
could afford,
utilize,
of factory
into
a=_p.roperly _d
Nevertheiess_:
first
Jr_ terms
these
_,":] costs
and benefits. 2.0
Export
Promotion
The domestic f6J).
demand
for furniture
7.tmay have begun
in housin_
to i:_ickup with
construction,, but to what
has affected
domestic
is [low (World Ba,ak
furniture
th_ current
extent
sales
rise
_he latter
is, on the whole,
still to b_ determined. The export market would gro_,:thof the i_dustry
see,_ to hold. the key to
by virtue
o_._its sheer
H.o%_ever;over th_ !past sever zl yeazs_ principally
in rattan
furniture,
exports
ful_iture,
on the other
have â&#x20AC;˘been
th_ magnitudes
_:ill ulti_._.atelydepend on the availabi!i_y Wood
size.
hand,
of which
of raLtan°
deserves
some
consider-
ation. Since tage owing
the Philippines to the high
the principal
markets
had to rely primarily and Japan
is at a eompetiti_e
transport
costs
for f_rniture
(Europe, particular!y), on the United
for its exports.
disadvan-
States,
Mass-produced
in
it has Australia
furniture
and
II-il9
fixtures_
charaaterize,_ By high. volume,
margins, higher
have been
value,
es_entially
classical
the export markats the type indicated_ and design which
ruled out in favor of the
ty_e of wood
for wood
furniture째
furniture,
call for a high
has been
low costs and low
achieved
However,
particularly
level
for
of quality
by few, if any, local
manufacturers. Th_ necessary =nd technical
upgrading
eap_bilities
capital
investments_
_bsence
of sound
facilities
may call for significant
which
market
of production
ought
not be made
information
in the
and technical
assistance, Market
research
a must in pushing Identification as well ments
and development
for exports
of products
of wood
single
venture
investments,
expected
requirements reliable
require
of which
may decide
Otherwise,
subs-
can not be
of _individual firms_ or even industry
government
of every
accordingly.
however._ would
the magnitudes
tions such as the CFIP.
technical
of fairly
require-
and profitability
evaluated
l%_is kind of effort_ tantial
Investment
on the bssis
and tha viability
proposed
is critical,
of technological
for tap;_ing such markctS o
information,
to be
furniture.
and mar_ets
as the dete_mination
can th_n be assessed
appears
associa-
It is in this area where
the
to step in째
in the absence
assistanc<_ programs,
of strong it would
marketing
and
be dangerous
to
II-120 promote
exports
lities,
technolo_y
6inancing
siup!y by calling
program
and design_
export ment
this objective
development
counci]
pro_r;_m_will
In the f_na!
program,
appropriati_.
of coming up with establishment
Corpcration
of such a direction
and
of a Furr,iture
Trade
(World Bank _--_6__) _sy be premature
as with
the idea of en industrial
working
project s, arke t.
by
of res>urces.
in the absentee of such an export
export
suggested
effective
Tha call for the establisl_ent Exporters
a rational
of a develop-
Formulation
_Jppar_nt y require
proper mobiliza_io_
analysis,
end.
of more or less the nature
Cody _/--3_7 seems
an attractive
fu_-niture ex{_orters and the govern-
ment may end up on the losing Towards
and providing
for the same.
both l-ros_,eeei_ woo4
for Up_;rading of faci-
if such
dev_lopm_nt
program,
estate-type
is intended
to address
wood_h_
II-121
Bibliography
io
Amio,
Enrique C., _Furnituze Manufacturing': (paper presented during the National Science and Technology Week, San Fernando, Pampanga and Baguio City), July_ 1979o
2.
Bautista, Romeo M_ John Ho Power and Associa_es_ Industrial Promotion Policies in the Philippines, Philippine Institute for Development Studies, 1979.
3.
Cody, Desmond Po, "Strengthening and Modernization of the Technological Performances of Small and Medium Scale Industries. â&#x20AC;˘ Technical Assistance to Small and Medium Scale Wood and Rattan Furniture Ind:ustries_" UNIDO-CSMI _ October, 19 79_
4°
International Trade Centre UNCTAD/GATT, Major Import Markets for Wooden Household Furniture, Genev_ 1975o
5o
Private Development Corporation of the Philippines, Studies on PhiliPpine !ndustries_ Number 21: Wooden and Ra._tan Furniture Export Industry, Makati, 1978.
6.
_le World Bank, "Philippines_ Industrial St,rategy and Policies_ v_ 1980o
7.
Zung, Lawrence, "Critical Factors for Successful Furniture Exports" (paper presented at the 5th AFIA Conference, Singapors), November, 1979_ reprinted in The Furniturem_ 1980 Annual.
Development
llI-i
III.
FOOTWEAR A.
INDUSTRY
An Overview
of the Industry .
The footwe._r manufacturing following
product
PSIC
indu_t_f
categories:
Code 32410
Leather
shoes
32491
Slippers
and sandals
32492
Footwear
parts
312499
Other
footracer, except
or wood 35520
Rubber
35602
Plastic
33193
_ooden
Guevarra) Spanish
by" the now-famous
the Chinese
artissns
sector
footwear
im the 1930's,
hold, led by Elpo, or The 1977 Annual
the E1 Porvenir
est._blished a foot-
Rubber
Survey of Esta%_lishments
so-called"unorgs_ized"
the
then was in the hands of
shoe manufacturinB
force of 5 or more.
total
Products. reported
employing, some 9,600 sector,
i.e.,
l%Lere was no
sector,
However,
19% of
i_i the latter part of
and An B TiSay.
all in the organized
accounts for
(Don Laureano
the Eseo Shi_e ComPany
â&#x20AC;˘curiously
force.
l_y
in the leather
firms in the cou_try,
5 labor
and accessories
Pioneers
footwear
labor
Kapit6_
in the Parian.
rubber
n.e.c.
shoe shop. is said to have been
ICk_eindustry
include
plastic
footwear,
i_ the town of Marikina
era (P_CP, 5),
footwear
footwear,
rubber,
foot.wear
The first Filip'_no leather established
is composed of the
i.e.,
our surveY footwear
people,
firms with
firm reported
firms wi_h less
shows firms.
1-.,294
a
in the than
that this sector
III-2
Estimates
of
the size of the industry
(REDC, 6) cites that in 1974, with
a total labor
publication estimated
force of 20,000.
reports
that in 1975,
50,000 coblers
Marikina
alone
try are Marikina
for leather
The Marikina
the industry
firns
hand,
one
employed
workers,
with
that the centers
footwear
Shoe Trade with
industry
is concentrated
Southern
Tagalog, account
footwear
On the other
and !actory
acknowledged
759 firms in Marikina,
regions
1,991
an
35,000
in
(JPS, 7).
It is however
footwear.
there were
vary, one report
and Lagune
Commission
a labor
in three
of the indusfor wooden
reports
force of 6,289.
regions_
and Central Luzon
Metro
The
Manila_
(Table III.I).
for 91% of the country's
some
The three
footwear establish-
me%1ts, The industry typically history
is predominantly
family businesses,
of the industry.
nificant
mmjority
industrial secEion
still
promotion
smell establishments, cottage
Production
industry
firms where
production
workers
to touch the cross-
must necessarily
market_
with
deal with
concerns
of the
sector.
a fair
of
degree of mechanization
Many such large
to the export
Thus,
has a significa_:t proportion
for some,
developed.
for the sig-
lines.
and Khe corresponding
and small-scal_ ,_-, industry
has been selves
that seek
and are
the fa/rly long
technology
follo%; traditional
The industry, however large
notwithstanding
programs
of the footwear
small-scale,
firms have
the largest
60% of production
Beefed
e_ploying
some
for exports.
them7,000
Ill-3
TABLE
IIi i
REGIONAL
DISTRIBUTION
Number
I.
llocos
II.
Cagayan
Valley
III.
Central
Luzon
OF FOOI'JEAR M_/qUFACTURERS_
of Firms
£abor
1977
Force
4
0.3%
32
0.3%
5
0 °4
20
124
9.6
_
268
0.2%
0.2
169
0.1
4i9
4°4
2,197
1.8
IV.
Metro Manila
614
47.4
5,951
62.0
74,596
60.2
IV-A.
Southern
440
34.0
2,671
27, 8
42_050
33.9
2
0 o2
2
V.
Tagalog
Bicol
-
7
-
V!o
Westen_
Visayas
22
i. 7
94
1.0
363
0.3
Vll.
Central
Visayas
52
4.0
263
2.7
3,364
2.7
VIII.
Eastern
Visayas
4
0.3
21
0.2
121
0.i
Wes tern Miudan_o
7
O. 5
31
0.3
205
0.2
No rthern Mindanao
8
0 °6
56
O. 6
293
0.2
Southern
6
0.5
30
0.3
240
0.2
6
0.5
15
0.2
35
IX. X. XI. XII.
Central
Mindanao Miudanao
Total Philippinas
Source=
Annual NCSO
Su_ey
1:294
i00o0%
of Manufacturers,
1977
9_605
100.0%
_123,908
-
i00°0%
III-4
The industry's constant
value added
1972 prices).
resched
This constituted
the country's
manufacturing
entire
of the 1970's_
decade
the footwear
industry
the maufacturin_
sector
sector.
established
in 197_,
cule component
couraging_
the Philippines export
sector_
involves
footwear
footwear
maintained; the rest of annual
gains were
exports
exporzs
first
remain a minisexports.
are nonetheless
on a small
some 25 million
for over half of
a discernible
of total Philippine
as it is premised exported
Over the
an average
significant
value of $67 million.
accounting
III.2).
kept pace with
however
(1.2% in 1980)
even
(Table
in
this period.
though
Growth of Philippine
(at
3.9% of output
'l_is has meant
Such a growth pattern in the export
in 1980
this share has been
has simply
growth rate of 7.7% during
uptrend
_903 million
base.
In 1980_
pairs with
The country's
major
footwear exports_
en-
a total
marketj
is the United
States. A previous
study of the industry
that the leather cost_
(while
footwear
rubber
industry
footwear
fore has a definite
export
a potential
needs
facturing
however sectors_
substitution
stage,
its impetus
for growth.
identify
potential.
the barriers
domestic
industry
therefore
expansion In either
to growth.
Unlike
other manu-
towards
of the domestic
There
of such
is past the import
look
case_
resource
and there-
The realization
to be explored.
and must
and further
has a low
i) has shown
is on the high side)
the footwear
port market
(Bautistap
the ex-
market
it is necessary are no published
for to
III-5
TABLE 111,2
GPJDSS V ALL_ _DOED OF THE FOO_%_EAR INDUSTRY_ 1970-1980 (In _million a_ constant 1972 prices)
Y_ar
Gross V_ue Added_ '
_'mnual Growth Rate
1970
_447
1971
491
9. _%
1972
431
(12.2 )
1973
533
19 74
GDP Manufacturing AnnUa ! Growth Rate
-
GVA as % of GDP Manufacturing
-
3.8%
6 o7%
3.9
6,2
3.2
23.7
13o9
3,5
544
2.1
4.8
3.4
19 75
591
8.6
3, 5
3.6
1976
628
6.3
5,7
3°6
1977
682
8.6
ii. 7
3.5
1978
787
15.4
7.3
3.8
1979
845
7_4
5•7
3.8
1980 P
903
6.9
5.1
3.9
i/ --Survey p
covers only establ_Zshments
• Preliminary
Sourc6
employing
,estimates as of December
of Basic Data_
5 or more workers.
1980.
National Accounts Staff Statistical Coordination
Office,
NZDA
111-6
B.
statistics
on footwear
production
in 1976 reached
million
pairs were
General
Characteristics
production
32 million
of leather
The original
that total
of which
6.7
8).
of the Samp!e 1 firms compose
target was for 181
of 1,351 firms prelisted About
pairs,
(World Bank,
A total of 179 footwear study.
but it is believed
in the study_s
332 firms were eventually
visited
the sample
for this
firms, or some 13.4% geographic
scope.
or sought
out for the
study. io0
Location AS previously manufacturing
discussed,
firms covered
and the adjoining (excluding
firms
of respondents
shown on Table are in Laguna and 51.4%
III.3.
respectively_
District
or a combined
leather
the colmtry_s footwear.
center _ primarily footwear
known
A is
the great majority of Manila, share
footwear
38.6%
of 90% of the acknowledged
industry,
is the other
parti-
major of
firms.
industry.
geographic
areas.
for its high concentration
There are really no other footwear
for
of main office
Marikina,
Laguna
and Laguna
firms account
As is expected,
The latter area includes
cularly
Kizal
in these
by location
and the Second
as the center of
wooden
The 179
prelisted
footwear
of 14etro Manila,
of Bulacan,
Cavite however).
breakdown
sample.
the areas
provinces
1.3.2% of the 1,351
the survey of
As is shown
distribution
major
centers
in NCSO_
of the i_dustry
for the
statistics_ is hi?_hly
the
111-7
TABLE III, 3
Location
LOCATION
OF RESPONDENTS,
FOOTWEAR
INDUSTRY
of Main Office
i.
First District,
2.
Second
3.
Frequency
Metro
Manila _I/
4
Metro Manila I/
92
_1.4
Laguna
69
38.6
4.
Rizal
i0
5.6
5.
Bulacan
4
2.2
Distric=,
T o t a 1
_First
2.2%
179
100.0%
District is the City of Manila. Second District is composed of Marikina, Pasig, Quezon City_ Mandaluyong, San Juan.
TABLE 111.4
DISTRIBUTION
OF P, ESPONDENTS
OPE[_ATION, FOOTWEAR
Fre_ncy Years of Operation
Original Ownership
.....
Acquired
BY YEARS INDUSTRY
.-_--
Total
OF
.
Origiual Ownership
%
__
......
Acquired
Total
i- 5
53
4
57
31.9%
36.4%
32.2%
6-10
52
4
56
31.3
36.4
31.6
i
30
17.5
9.1
16,9
2
18
9.6
18.2
10.2
6.0
5.6
3_4
11-15
29
16-20
16
21-25
_0
l0
6
6
3.6"
177
100o0%
25 and over Total
166
ii
100.0%
100.0%
111-8
concentrated Southern
in the three
Tagalog,
is the location region,
regions
and Central
Luzon.
of the leather
and the presence
of Metro
A likely
tanning
of a large
Manila_
industry
pool of
explanation in the
experienced
labor. 2.0
Years of Operation
e
Table III. 4 shows according
to the number
the distribution of years
(as of 1980). _Th_s is further had been
acquired
being operated
they have been operating
broken
from previous
by the original
number
_ne presence
of so many young is capable
Type of Business
known
operate 4.0
one third
or less,
and
from 6 to I0 years.
firms provide of attracting
(Table III. 5 ), a findin_ Only
1.7% partnerships_
manufacturers
Almost
for 5 years
firms are almost
industry, patterns.
another
that
some evidence new firms.
Organization
The respondent torships
firms
and firms still
owners.
have been operating
that the industry 3.0
down into
owners,
of eli firms have been operating a similar
of respondents
(including
all single proprie-
quite
consistent
with
2.2% are corporations
suggesting exporting
that many
and
large
firms) continue
to
as single proprietorships.
Size Distribution
of Respondents:
Labor
Force
and Output
Levels The single
distribution
that 19% of respondents (including
unpaid
of firms
have less
family labor)
(Table 111..6) shows
than five employees
- the "unorganized"
111-9
TABLE 111.5
TYPE OF BUSINESS
ORGANIZATION,
Typ_ of Org_ization
FOOTWEAR
INDUSTRY
Frequency
Proprietorship
%
i.
Single
172
2.
Partnership
3
i. 7
3.
Corporatior_
4
_ 2.2
Total
TABLE III.6
DISTRIBUTION
Size of Labor
96. i%
179
I00.0%
OF RESPONDENTS BY SIZE OF LABOR FOOTWF_R INDUSTRY
Force
Frequency
%
I/ FORCE,=
-- _Cumulative
%
i-
4
34
19.0%
19.0%
100.0.Z
5-
9
81
45.2
64.2
81.0
I0- 19
32
37.9
82.1
35. S
20- 49
24
13.4
95.5
17.9
50- 99
5
2.8
98.3
4.5
100-SO0
3
i.7
To _al
TABLE !II. 7
Capacity
DISTRIBUTION
179
1.7%
!00. OZ
OF FIP/4S BY OUTPUT INDUSTRY
(Pairs _e!_w_ek)
100.0%
Frequenc_
CAPACITY,
%
Cumulative %
1- 75
15
76-180
38
22.1
30.8
181-480
58
33.7
64.5
481-960
41
23.8
88.3
961 and over
20
11.6
99.9%
Total
172
8.7%
FOOI_4EAR
99.9%
8.7%
III-I0
secrmr under
NCSO definitions.
The footwear
predominantly
"small"
(5-19 employees),
the 63% share
of this size category
about 18% may be considered The largest
Noteworthy actually
than ten (i0).
Another agency.
There
force of 500.
is 2,864.
have a labor
labor,
including
more than a husband-wife
placing
Thus,
(n -- 6) of
businesses
operation.
3.9% are not registered 3 respondents
in the cottage
with
which
Actually,
firms are NACIDA-registered
this sub-group
are
force of less
are even a few cases
any hired
Only
20 employees)
end of the size category.
at least 81% of sample officially
Only
too is that most of the "small" firms
fully 64% of all respondents
are nothing
is by
in our sample.
has a labor
force of the sample
at the lower
firms without
as reflected
"large _ (at least
firm in the sample
The total labor
industry
firms_ industry.
any government
(I. 7%) are BOl-registered
firms. The preponderance ted in th_ size (Table Ill.
7).
of small
distribution Industry
gested that a footwear
according
leaders
interviewed
Our survey shows
to be able
that only
reflec-
to capacity
firm must be capable
1,000 pairs per week or more market.
firms is likewise
have
levels _I/ Sug-
of producing
to tap the export
11.6%
of
footwear
firms fall in this size category째
_/As reported by _espondents, labor force.
based
on existing
equipmemt
and
III-ii
5.0
Product
Type
Table
Distribution
ili. 8 shows
by the respondent ing operations, wear products products
firms.
While
for resale;
of product
all undertake
a few respondents
to other
however
the profile
also buy
finished
The latter
sold
manufactur-
and some subcontract
manufacturers.
types
foot-
certain activities
are not very extensive.
The msot
frequently
cited product
types
ported by abou_ 25% of all respondents) or boots primarily primarily
of leather,
are men's
and ladies'
of synthetic/rubberized
leather.
it appears
that most respondent
firms
footwear.
About 6% of respondents
(each reshoes
sandals In general,
are into ladies'
reported
manufacturing
children' s shoes. In all, about 41% of respondents
are in leather
footwear. C.
Production 1.0
Inputs
Sectoral
Distribution
While large
footwear
firms already
that large
in the industry.
unorganized
sector
employment
shows
in operation,
On the other
hand,
significant
firms
and fairly the survey
The dominant
while
less in terms of sector
appears
(i.e., 5-19 employees).
that this sector
the
in terms of number
is substantially
and output.
be the small-scale
mechanized
firms are not as yet the dominant
appears
of firms, its impact
111.9
of Output
there are many highly
data suggest sector
and Practices
accounts
to
Table
for slightly
over
III-12
TABLE III.8
NUMBER
OF RESPONDENTS
ENGAGED
SUBCONTRACTING, AND RESALE BY PRODUCT TYPE
Number
Product
i.
2.
Type _
Mauufacture
Men's shoes/ boots, leather
4.
5.
6.
7.
8.
9.
i0.
Subcontract
Resale
2
OF FOOTWEAR,
% to Total
Any
Mannfacture
contract
Respondents
Re-. sale
i. 1%
â&#x20AC;˘ Any
45
25.1%
25.17
12
12
6.7
6.7
Men's footwear, rubber/canvass
5
5
2.8
2.8
Ladies ' shoes, leather/snakeskin
15
1
1
16
8.4
0.6
0.6
8.9
Ladies' shoes, synthetic
33
1
1
34
18.4
0.6
0.6
19.0
Ladies ' stepin, leatherett_ /synthetic
33
1
1
33
18.4
0.6
0.6
18.
Ladies' sandals_ synthetic/ rubberized leather
45
3
45
25.i
i. 7
i. 7
25.1
Ladies' sli_ pets, leatherette/synthetic
13
1
13
7.3
0.6
7.3
Ladies' shoes, wood/synthetic
ii
1
ii
6.1
0.6
6. I
Children' s shoes, syntheti c
I0
i0
5.6
Men's slippers, leatherette/ synthetic
3.
45
of Firms 2/
IN MANUFACTURE,
3
!/Other footwear products mentioned (but of minimal frequency) include men's slippers (leether, rubber, canvass), ladies' sandals/slippers/ step-in leather, children's shoes leather.
-_/A firm can be in_r_
than one product type.
5.
111-13
TABLE IIL9
Size of Labor
OUTPUT SHARE OF RESPONDENTS BY SIZE OF LABOR FORCE FOOTWEAR INDUSTRY
Force
Number of Firms
To tal Output (Pairs/Week)_
%
Cumulative %
6.8%
6.8%
"
1 - 4
32
4,403
5 - 9
76
19_266
29.8
36.6
93.3
I0 - 19
33
14,120
21.8
58.4
63.5
20 - 49
23
13,415
20.7
79.1
41.7
50 - 99
5
5,350
8,3
87._
21.0
zoo - 500
.... .!_ To tal
172
Average Output Per Firm Estimated Total Annual Output-
_.3L2oo 64,754
12.7 i00.1%
376 palrs/week 3.23 million pairs
1oo.zz
100.1%
12.7z
III.-14
50% of total output. bulk
of their
Note
that in the large
share in total output
the fir_m in the lower
end of the size
this may not be true of at least footwear.
Our survey
believed large, 2.0
Production
mechanized
by respondent basic
including
report owning
shows
firms.
equipment
manufacturing
However, rubber
it, but it i_
is dominated
by
establishments.
the profile
About
r_port
mentioned
industry,
83% of respondents
Overall,
of equipment.
that
17.6%
of
report
The second most
type of equipment
is a finishing
Nonetheless,
feel their equipmant
is
not
that their only piece
(40.2% of respondeDÂŁs).
respondents
owned
the sewing machine
It is noteworthy
is a sewing _chine.
frequently
of equipment
of the footwear
this equipment.
only one piece
machine
sector
As expected,
15.6% of all respondents
owning
by
one sub-sector:
footwear
simple handtoolso
equipment
explained
Equipment
Table llI.lO
the most
the
category.
data does not reveal
that the rubber
hig_dy
is also
sector,
71.5.% of
are sufficient
to meet
their sales potential. Clearly,
the footwear industry
low level of mechanization. traditionally to large
manual operation
firms
ted process
The shift it would
(_8% of our sample).
(ISSI, 3) has estimated
has by and large,, a to mechanizing seem is limited
A previous
that the traditional
study
hand-opera-
" 21 has a degree of mecl-anization--. Zanging
from
.... measured as the percentage of total number 2 IMechaniza tion was .......... echanizedo The total number was 24 processes.
of
III-15
T;_BLE III.i0 MACHINERY/EQUIPMENT
Type
of Machiuer_ I/
OF FOOTWEAR
No. of Respondents with _Lachin_ry
i.
Sewing
2.
Finishing
3.
FIRMS
Machine
148
Machine
% to Total i 82.7%
72
40.2
Sander _2/
41
22.9
4.
Skiving
34
19.0
5.
Splitting
Machine
27
15.1
6.
Stitching
Machi:_e_4/
18
i0.1
7.
Specialized
16
8.9
8.
Heavy Duty Sewing
13
7.3
9â&#x20AC;˘
Trimming
i0
5.6
Machine _3/
Saw Machine
Machina
1/Other types mentioned but not tabulated (n less than i0) include uppe r sewing machine, press machine, folding machine, die-cutting machine, eyeletting machine, upper leather splitter, sole spiitti_g machine. 2/ Gas gasan , bulihan,
iihaan
3/Dasdasan 4/Alamodahan,
side/sol_._ _titching
machine
111-16
4% to 12.5%. driven
The peak
stitching
machines째
is achieved
machine
and hand
The motivation
by the use of pedal cranked
for increasim_
the study points out, is to reduce greater
uniformity
in products,
splitting mechanization,
labor
cost,
achieve
and meet large
volume
orders. Semi-mechanized machioes clickeT
operations
would
in most of the cutting press).
The other
skiving, bottom
scouring,
It was also estimated above would
then involve
operations
principal
(using a
targets
and various
are the
finishing
that semi-mechanization
processes째
described
reach a _58% degree of mechanization.
ing technolog_y allows
the use of machines
using
Exist-
in all major
processes. The age of the equipment the degree of mechanization, pace of technological machines
especially
developments.
are at least l0 years
significant recent
is also one indicator
proportion
(42.3%)
old
the pattern
of the major
tion of machines
category
range
followed splittin8
by finishing machines
(Table III. ii).
are generally
to be
The propr-
age category
range
years
age
to a high of 50%.
the heavy
machines.
A
of fairly
This appears
that of the over-10
type are
the
26% of sewing
types of equipment.
from a low of 6.3%
The "oldest"
About
old.
in the 1-5 years
from 30% to 54%, while
considering
are however
vinta_.e_ i.e. _ I-5 years
of
duty sewing
On the other of recent
machines,
hand,
vintage,
the with
TABLE III.11
AGE DISTRIBUTION
OF PRINCIPAL
MACHINERY,
FOOTWEAR INDUSTRY1/
AGE (in Years) Frequency Ty_e of Machine_,
i-__5 6-10
11-15
%
16-20
Over 20 .Total
1-5
6-10
11-15
16-20
Over
20
Tota_
i.
Sewing machi,_e
60
45
17
7
13
142
42.3
31.7
12,0
4.9
9.2
i00.1%
2.
Finishing
29
21
i0
3
8
71
40.8
29.6
14_.i
4.2
11.3
I00.0_
3.
Sander
12
16
4
3
38
31.6
42. i
i0.5
7.9
7.9
i00. O_ v
4.
Skiving
15
12
5
0
1
33
45.5
36.4
15.2
0.O
3.0
100.1%
machine
machine
3
•5.
Splitting
mac/_ine
14
5
3
2
2
26
5 3.8
19.2
Ii. 5
7.7
7.7
99.9%
6.
Stitching
machine
5
8
i
1
2
17
29.4
47.1
5.9
5° 9
ii. 8
100.1%
7.
Specialized
Saw
i0
5
0
1
0
16
62.5
31.3
0.0
6.3
O. 0
I00. i%
8.
Heavy duty sewing machine
4
2
4
1
1
12
33.3
16.7
33.3
8.3
$.3
99,9%
Trimming
5
3
i
O
I
I0
50. O
30.0
i0.0
O. 0
i0.0
i00.0%
9.
machine
-i'/For firms with See Table
more than one machine
111.12
for a_
(]liStt"].'_-lOn
for any particular Of
type lcnly- the yeungest
machine
/
was tabulated.
all _Ine_. _4
2/Due
to round off error
i
111-18
over half
(53.8%)
Overall, years old
5 years
or below
43.4% of all equipment
(Table 111.1.2), About
years old however, least 10 years The above
and almost
findings
one-fourth
point
portion
report
is a m,_jor problem age in a primary
_qchines
are
old equipment.
that machinery Ob-
factor here.
report
maintenance
of their equipment.
maintenance,
71.5% of
that they do not undertake
regular
Facilities A typical
footwear
firm is a "backyard _' oper_tlo_".
About 91% of respondents the owner's
residence.
ficant cost advantage suggests
the limited
take expansion 4.0
low level
in their operations.
respondents
Other
Where
are fairly
On the matter of equipment
3.0
20
(22.7%) are at
to a generally
About 39% of respondents
viously,
7-8% are _t l_st
in the industry.
a significant
breakdown
are from i to 5
old.
of mechanization utilized,
in age.
operate
within
the premises
This of course permits to footwear
a signi-
firms but it also
â&#x20AC;˘capacity sf the industry
or mod_rnization
of
to u_der-
of operations,
Labor Force Labor
is no_ g_nerally
perceived
the respondents.
About
sufficient
of manpower
ciencies
number
are reported,
though "skilled"
86% expressed
these
workers.
as a problem
by
that they had a
complement. are generally
Not surprisingly
Where
defi-
for manual, , a very
III-20
minimal
number
reports
a lack of skilled
machine
opera-
tors, The predominant piec_ rate basis work
Labor
fairly !ar_e
Very
Thus,
household
for the large
Agai_ fir_
any formalize_
may be dua to the
labor
available.
is a widespread
There is a definite labor
Thus,
previous
labor,
sector,
practice.
pattern
labor of declin-
as the size of th; firm
70% of firms
in the unorganized
the ratio
declining
sector
to 43.8%
sector.
Of those who utilize about half
on the
labor.
labor
ing use of household
utilize
through
64% of all firms use household
ill. 13 ).
resort
of the small, and medium-scale
the use of household
increases.
undertake
say that they require
in employin_
As is typical
(Table
few firms
pool of experienced
about
use the batch
acquired
In part_ this
85.5% of respondents experience
12.3%
is on a
arrangement.
skills are apparently
of training.
Overall,
About
labor
Less than 10% of respondents
or time-based
job experience. system
of contrmcting
(83.8%).
arrangement.
co regular
mode
household
(53%) pay these labor
the practice
varies
or family
labors
on a regular
basis.
aceordimg
to the size of the
with 46% of firms in the unorg_ized
sector
regu-
larly paying wages. It is frequently medium-scale
industry
mentioned sector
that
only
the small and
(SMI) plays
an important
!II-21
TL_L£ II!.13
USE OF HOUSEHOLD LABOR
LABOR
FORCE, FOOTWEAR
BY SIZE OF INDUSTRY
Use of Hous_!d
Labor % to Firms in Size Category
Frequeucy Not Size of Labor
Force
_
Using
Not Total
_
Total
70.6_%
29.4%
100.0%
27.2
I00.0
I-
4
24
i0
5-
9
59
22
81
72.8
i0- 19
18
14
32
56°2
20- 49
ii
13
24
45.8
54.2
i00.0
50- 99
= "
3
5
40.0
60.0
i00.0
1
2
3
33.3
66.7
i00.0
i15
64
179
64.2%
35.8%
i00.0%
100-500 Total
T;_BLE III.14
34
Using
43.8
100.0
COI_ENSATION FOR USE OF IIOUSEHOLD LABOR BY SIZE OF LABOR FORCE, FOOTWEAR INDUSTRY
C<_:_pensation for Household
Labor % to Fi_r_
_. _
Frequency Don' t Pay
Size of _ Labor
UsinP, Household Labor Don' t Pay
Force
Pay Salary
Ssla_l
i-
4
Ii
13
24
45.8%
54.2%
100.0%
5-
9
31
28
59
52.9
47.5
i00.0
i0- 19
9
9
18
50.0
50.0
i00.0
20- 49
7
4
ii
6 3.6
36 .4
I00.0
50- 99
2
0
2
i0.0.0
0
100.0
!
0
1
i00.0
0
i00.0
61
54
i15
i00-500 Total
Total
_
Salary
53.0%
47.0% •
Total
I00.0_
III-22
role "in tsppin_
otherwise
__T_eu_ilization
of household
prise is clearly hold
and small
for 10.4%
household
labor
out earlier
However,
(20%) in the unor_nized
is household
labor.
instrument
footwear
35.6% indicate complaints
that leather
unreasonable
sector
among
is an im-
labor
in the
price
industry,
At the same
and/or
in the report
these problems
rawhide
time, there
have
of the livestock to the leather is evidence
cost comp_tir/veness.
much pro,_ct
of an immediate
unless
policies
import
The principal
of supply,
color_
about
poor quality texture_
and
increases.
in the inability quality
_]nufacturers,
is _ problem.
as thickness_
As will be discussed
lacks
sectore
proportion
household
footwear
are the unreliability
in such %spects
deliver
and small
1 out
Inputs
In the case of leather
part,
about
industry.
Raw Material
tanning
that the un-
Thus,
the s_mll
for _bsorbing
force in our
76.6% of total
The corresponding Indeed,
house-
for 39% of the total
of 5 workers
portant
Overall,
are in these sectors.
large firms is 4%.
labor.
in the family enter-
of total labor
firms account
labor force in our sample.
unemployed
mechanism.
It has Been pointed
organized
5.0
labor
one natural
labor accounts
sample.
potentially
There
on
their
the leather roots in
industry tanning
to
industry.
that the industry does not seem to be
solution
for leather are
to this
problem
liberalized.
III-231
Other,Tise, the footwear of the
rationalization been pointed structure
out
industry leather
(Bautista,
imposes
can only wait
t&nnin_
for a
industry.
i)= the existing
As has
protection
these penalti6_s on the leather
footwear
industry. Overall, materials
about 45% of the sample
supply is a major
cern is the unreliability by complaints Storage problem
of raw materials
the types of raw material
ments, 6.0
etc.) do not
or consume
Production
exclusively
not unexpected
(e.g., leather, special
amounts
practice
half
storage
since
nails, require-
of storage
(34%) combine
job-order
schemes.
of designs,
of financingwhich
footwear manufacturers
space.
production_ working
however
basis.
In an industry
such as
and rapid changes This is likely limits
of standard
due to
in fashion
coupled
the capability
uncommitted
oper-
The rest
is to be exPeCted
to carry
in a system
16.2%
product
production
types of footwear.
that is implied
Another
on a standard
both
the variability
is job-order
(49.7%) of respondents
on this basis.
ate exclusively
problem
to pose a
Practices
withpractically
for many
require
significant
The predominant
footwear,
increases.
This is
inputs
con-
This is followed
does not appear
firms.
that raw
The principal
of supply.
of unreasonable _price
for footwear
adhesives,
problem,.
indicate
by a
of
inventory
production.
III-24
Thirdly,
it does not seem likely
significant. production
H0wever _ the potential
-ill (99%) of
shift operation.
distribution
respondents
On the average,
]_east one full 8-hour
shift.
from continous
shows
are on a one-
this appears
Table
of firms according
Table II!.16
III.15
to be at
shows
the
to length of workshift.
the distribution
according
to
days.
TABLE III. 15 LENGTH
Length
gains
are
are also lost.
Practically
Working
that set-up costs
DISTRIBUTION
OF WORKSHIFT,
OF PESPONDENTS
FOOTWEAR
BY
INDUSTRY
of Worksh_ft
(Hours)
_
%'
Velow 8 hours
Ii
8
65
38.5
45.0
9
i0
5.9
50.9
i0
50
29.6
80.5
ii
4
2_ 4
82.5
12
25
14.8
97.7
4
2.4
Over
12 hours To tal
169
6.5%
Cumulative
i00.1%
6.5%
100.1%
%
III-26
TABLE 111o17
A%_RAGE
CAPACITY
UTILIZATION
OF RESPONDENTS
BY SIZE OF LABOr_ FORCE, FOO_=EAR
Size of Labor Force
Number of Firms
INDUSTRY
Average Capacity Utilization (Weighted AveraKe in %)
I -
4
32
59.0%
5 -
i0
76
68째5
ii -
19
33
68.3
20 -
9
23
69.5
50 -
99
5
67.3
i00 - 500
3
66,7
Total
172
67.6%
III-2 7
On the matter of specialization_ that they undertake The more popular
some= specialization
to warrant
factor
cited was that labor
basis,
i.e., of the complete
Quality
45% report
in operations.
reason for not specializing
firm is too small
7.0
about
is that the
specialization. is hired
Another
on a piece-rate
product.
Control
Among th_ quality the footwear
industry
and for leather _nd texture
features
which
are uniformity
footwear
are of concern
in
of size and style,
in particular_
the color,
size,
of the leather.
About 47% of respondents sp,_cific quality
standards
say
they are not aware of
for the;Jr products_
and in
fact only /.,,% of all firms n%_intain a separate
quality
control
the owner
staff째
who oversees
In 92% of cases, it is simply
the quality
that production
of the worker.
work,_rs themselves
The system of quality instances. made only Quality tion.
At least
28% report
itself simply
There are virtually
among footwear
in many
tb,-_tquality
checks are
have be_>n completed. consist
of visual
no quality
control
inspec-
instruments
firms.
This low degree of quality a low level of technological sector.
check on the quality.
ci_ecks are spotty
after all operations
control
Some 6% report
However,
we cannot
the firm deliverately
avoiJs
control
capability discount
is indicative
of
in the footwear
the possibility
the additional
costs
of
that
111-28
higher
quality
footwear
standards.
Apparently,
do not necessarily
54% of respondents
report
least 47% of respondents footwear_
albeit
significant rejects
result
24[_, report
not used to the industrial
8.0
and in _enaral,
for quality
Sources
of Information
oriented
aspects
alon_
is evidenced
of influence
su_ges_
is exerted
firms
of rigorous
visual
are
quality
the techno-
insepction.
that footwear traditional
product
firms are still practices.
This
of firms on the owner's
(Table If!. 18). onlyin
are not quantified.
of inform._tion on various
by t}_a dependence
are significant
of
on Technology
established,
experience/ideas
a
for own consumption.
that a footwear
beyond
worked
tb_%t they dispose
discipline
Data on prime ry sources production
'Vrejects_'. At
do not as yet possess
control
About
Nevertheless,
the extent of _rejects" it is clear
loss.
to sell poorly
as gifts_ or are put aside
Nonetheless,
logy
rework
at "bare,sin t'prices.
portion_
Unfortunately,
control
in a total
that they ar_ able
F_orly manufactured
Other
deslgn_
by customers
external where
sources
some amount
and journals/other
publications. Noteworthy been
tapping
of government
is the fact that footwear
the services agencies.
no institutional
of industry In
_eneral,
help being availed
firms in the area of sourcing note
however,
firms have not
associations, there
or
is virtually
of by respondent
of technology.
that in the case of industry
We should affiliations,
III-29
TABLE III,18
SOURCES
OF INFORMATION ON TECHNOLOGY_ FOOTWF_R INDUSTRY
Area of T_..,.chx3olo_j Application Frequency I/
Produc-
% to Total Choice of Ms-
Product
rion
D_sign
experience
160
2, Journals/_ Publications
.....
Qualit__
chinery
141
160
161
20
76
5
3, Customers
8
32
4. Industry Association
0
Production
Respondents Choice of Ma-
Product _
Quality
chine ry
i. O%_ner's ideas / 89째4%
78,8
89,4
89.9
3
I!.2
42.5
2.8
i. 7
12
0
4.5
17.9
6,7
0
6
2
0
0
3.4
i.i
0
II
36
7
2
6.1
20ol
3.9
i.i
6. Foreman's/ other work-er's ideas
8
i
8
3
4.5
0.6
4째5
1.7
7. Design Center Phils.
0
i
0
0
0
0째6
0
0
5. Observations of display, shows exhibits
_/A firm may report more
than on_ source.
111-30
over
84% of the sample
association,
whether
do not belong to any industry
local
are mc_mbers Of a natio_l 10.6%belong Marikina 9.0
or national. industry
to some local
association,
industry
Shoe Manufacturer's
Only 1.7%
(n = 3)
while
assocaition,
e._o,
Association.
Summary The principal of the footwear !.
bottlenecks
industry
unreliability
in the production
appear
to be:
of raw materials
the case of leather,
aspects
supply and in
the poor
quality
of
laather_ 2.
low degree of mechanizationl number
of equipment
and quality
by th_ sge of equipment)_ maintenance 3.
limited
4.
inadeqlmte
On the other
both
in terms of
(as indicated
coupled
by inadequate
of equipment_
capacity_ system
hand,
and of quality
tl_ industry
control offers
Certain
advantages: i.
A pool of craftsmen least
the domestic
which
is able
market with
to supply
limited
at
capital
requirements_ 2.
Sienificant
capacity
to absorb
house_ld
labor_
and 3.
In general,
the industry
tion of the country's
is geared
natural
endowments
terms of labor and raw materials, fibers_
etc.
to utilizain
e.g. wood,
111-31
D.
_rketing 1.0
Practices
Channels of Distribution Footwear various
m_nufacturers
points
of the distribution
those who directly
sell retail,
ments who undertake stores,
including
boutiques, salers.
etc.
The most
others
at
There are
sell to establish-
e.B.,
retail
shoe
outlets, department
frequently
report
firms, and sales
products
stream.
the retailing_
"palengke"
A few firms
exporting
sell their
direct
stores,
used were wholeexport
to agents
and sales to
and other
middlemen
buyers. About 607_ of respondent
firms
with only one type of outlet categories dependent
listed).
report
(see Table
In general_
respondent
report at l_ast
and 98% of firms
of sales _oing
to just one type.
Own retail for footwear
sales constitute
manufacturers,
valent
distribution
retail
(Table 111.19
This
account
as for other
types of outlets,
only
50%
sales base
small
pre-
base is evidenced 34% claim
for at most 10% of total a much
smaller
ales bracket.
(Table
8.4% of respondent
sively on a retail basis ._
to one
i.e., 42% of respondents
transactions
(3%) fall in the lowest
73% of
at least
a smaller
the fact that of those who sell retail,
Furthermore,
going
are
even as it is a fairly
channel, ).
report
and
firms
About
90% of sales
type of outlet,
III. 19
footwear
on only one type of outlet.
transacting
firms
by
retail
sales
where-
percentage 111.20)
sell exclu-
III-32
TABLE III.19
TYPES
OF MARKET OUTLETS,
FOOTWEAR
Number
INDUSTRY
of Firms
Us ing this
ofType
io
1/
3.
Rank-
2/ Frequency--
°_ to ,o
Exclu-
ing " " thls
Using
Total
sive-
Type --_
this
With th is Type as
% to
l_[ain4/ _
Respondents A-B
C
Own Retail
2,
Type
75
41,9%
15
31
ers--
64
35.8
38
55
Wholesaler
91
50.8
48
77
31
20.0_ " 4!. 3%
41.3_
54
59.4
85.9
84.4
79
52.7
84.6
86.8
Other
i/OLher types of outlets reported (but not tabulated, n less _/_an 5) were exporting fi,__ j importers, government agencies j agents_ middlemen. 2/A
firm may be using more
than one type of outlet,
3/Other retailers r_fer to buyers who resell ou a retail basis. These include department stomes, retail shoe stores, supermarkets_ boutiques. 4/By definition, resp on dent.
main outlet
TABLE 111.20
is that type with
Own Retail
2.
3.
for each
of Sales
......Frequ¢mcy 1-10% 11-40 41-70
i.
sales
DISTRIBUTION OF FiP_S BY PERCENTAGE OF SALES-, BY TYPE OF _i_RKET OUTLET USED_ FOOTWEAR INDUSTRY Percentage
Type of Outlgc
the largest
%
71-9_9 100___% To=a_____l 1-10,% il.-40 41-70
25
15
12
6
15
73
34,2
20.5
Other Retailers
2
6
9
8
38
63
3.2
9.5
Wholesalers
3
7
5
27
48
90
3.3
7.8
16,4
71-99 8.2
1.4.3 12.7
5.6
30.0
10Q.To_Q2k__.a 20.5 100.0%
60.3 100.0%
53.3 100.0%
iii-33
The survey wholesalers. sively
suggests
Almost
27% of total
to wholesal_rs.
with wholesalers, wholesale
that the predominant respondents
Of the footwe_r
almost
transactions
sell exclu-
report
for at least
(versus 29% of firms with own retail
are
firms who transact
84% of such firms
account
outlets
that
70% of sales
reporting
this
sales range), Though not captured ally acknowied_ed controlling
results
the buying
It is clear
that the footwear
manufacturers
the various
indicated
types of cutlets_
of respondents)
the entire
capital"
the biggest
outlet
ference,
(59% _
as the leading
This was followed
by
reveal
that in 95% of
was actually
the outlet
with
share of s_les.
It is interesting
to note however_
was rsnk_:d first in preference
respondents_
firms
volume '_. Crosstsbulations
sample however
the preferred
across
firms who uti--
Single-outlet
for use of only one outlet.
retail"
are heavily
including
cite _limited
'_bigger mark-up '_and "bigger
cases,
end
from th_ survey
their preferences
lized only o_e type of outlet.
over
traders
on this sector.
I{espondent firms
reason
it is gener-
but also retailing
industry.
dependant
datap
t[h%t _'wholesalers" are large
not only
of the footwear
by the survey
among
the outlets
it obtained
that while
by only 17.3%
indicated
the highest
_/In th_ respectiv e subv_oup of the outlet the outlet as first preference.
_'own of
as second pre-
relativeS3/ prefernece
which
did not indicate
III-34
of 27.7?,..,
as compared
to 6.5% for "other
10% for '_whoiesalers _. h;.:_re.nt
eesire of foo_Tear
distribution 2,0
This-may
simply
manufacturers
retailers" suggest
and
_
to manage
inretail
thc_.mselves.
Seasonality There are seasonal facturers
(Table !II,
start in June, reach September.
swings
21).
all respondents
of footwear
The peak period
its peak
The seasonal
in sales
in August
to the Christr_0.sseason
appears
and extend
peak is attributed
manuto to
by almost
and si.milar
holidays/occasions.
It is noteworthy
i_a:cemberis reported
as a se___.sona! low by respondents.
This is of course not surprising, _'ondents are footwear
section_
be for inventory
of the subsequent
stream.
peak period parison
of reported
January-February
seem
our res-
As is suggested
the bulk of their
Thus it would
precede
considering
manufacturers.
by the preceding
bution
that the October-
layers
sales will
in the distri-
that the man_,facturers'
the retail peak by 2.-3 months, peak and low months
period
suggests
is not considered
Com-
that the
either a peak
or low period. One significan¢ the seasonal
factor mentioned
low is the rainy season,
l._%ther footwear.
Many respondents
sales fall off during Footwear
particularly
noted
=o
for
that retail
this period.
manufacturers
ally no significant
as contributing
price
report
that there
adjustments
are gemer-
in response
to
III-35 TABLE Iii.21
Month
SEASONAL!TY
OF SALES
OF FOOTWEAR
Report.=d as S_asonal P_ak Frequency % to Total
MANUFACTURERS
_orted _
January
23
12. g%
February
19
i0,6
ii
6.1
March
9
5,0
35
19, 6
April
7
3.9
40
22.3
15
8, 4
33
18, 4
June
36
20.1
39
21.8
July
68
38,0
9
5.0
August
83
46,4
3
i, 7
September
45
25° 1
20
ii, 2
•October
12
6.7
77
43.0
3
I. 7
145
81,0
2.2
149
83o2
. May
November December
4
8
as Seasonal Low % to Total
4.5%
Iii-36
seasonal
swings째
generally
This would
able to adjust
imbalances
mean
that the industry
and smooth
due to seasonal
out supply-demand
factors_
The likely
for these are the fairly long shelf
3.0
reasons
life of the product,
the short production
cycle', _.nd also a high degree
predictability
the tir_ing of the seasonal
about
is
of
swings.
Credit Sales It is a predominant turers
to sell on credit
report sellimg all buyers ment
practice
stores,
terms.
on credit.
classified
as "other
manufac-
84% of respondents practically
retailers'", e.B.,
and 85% of wholesalers
depart-
buy on credit.
on a retail basis
Only
sell on
to such types of buyers.
The maximum 3-6 months_
credit
period
and this occurred
_other
retailer"
credit
period
had no definite
for the above
type of buyers.
buyers.
The distribution
formation for each
type of buyer.
credit
1-15
terms.
is
91-180 days,
i.e.
in both 9_wholesale째' and
However_
in 5.6% of cases,
limit and again,
periods
of credit
can be summarized
types are extended
cited
of credit
gauge in terms of volume
30-day
About
footwear
As is expected,
16% of those who sell directly credit
among
sales.
about
days, and about
these are
is difficult However,
in terms of credit
Overall_
the
to inn
period
13% of buyer 27% get up to
Up to 57% get credit
of up to 60
days, and up to 84% get credit of up to 90 days.
111-37
Again:, these practices vantage
of manufacturers
are able
to extract
generally
vis-a._vis their
fairly long
credit
of the disadbuyers.
Buyers
terms from
these
small manufacturers.
As expeetad, credit period_ In addition,
own retail sales
with
the maximum
it may be pointed
credit
sales is likely
retail
sales.
"wholesalers".
have
magnitude
are slower
the longest
days.
retailers",
in payments
credit
of
for own
that "other
The two types of buyers
sales with
at 61-75
out that the volume
of a lesser
stores,
the shortest
reported
The data indicate
e.g., department
credit
are indicative
account
period_
than for all
i.e.,
over
75 days. One positive manufacturers customers. However
aspect
are able _is
is the fact
to request
is reported
it appears
by
rivet some footwear
a down payment
31,,8% of the sample.
these are mostly
on retail
Ah_out 85% of those who get a down payment centage
down payment
A manufacturer post
d_ted check.
to use such checks or suppliers. form of
financing
be discussed charge very
sales.
report
a per-
of 26--50%. who extends
The footwear
credit may
it with
the firm is able
of the spontaneous
in the following high rates.
receive
firm is frequently
by discounting
Thus,
from
sections,
able
moneylenders
to generate type,
a
some
hut as will
these
credits
III-38
4.0
Pricing
Practices
Some 54% of respondents tiated
with buyers
mark-ups
and/or
based
(Table III. 22).
group also concede
report
that prices
on. generally
Almost
half
that variations
are nego-
variable
(45.6%) of the
are in part dependent
on the tpye of buyers. On the other hand, that they basically
about
36% of the sample
apply a fixed mark-up
indicate
over product
costs. Another
2.8% report
A principal tage by buyers footwear
issue
5,0
there
accepted
exist undue advan-
The dependence
on middlemen
suEgests
or negate
however
this preposition.
though is the wide
and ex-plant
of
this is a
The type of data available
to confirm
retail prices
are set by the buyer.
in Germs of pricing.
strong possibility.
is widely
is whether
manufacturers
are unable
that prices
spread
What
between
prices,
Modes of Transport Table III. 23 port for delivery 18% of respondents the customer;
indicates of final indicate
this will
â&#x20AC;˘fairly high percentage transport
the various
goods
of trans-
to the buyer.
About
that goods are picked
include (43.6_)
_
up by
sales.
report owning
A
their own
vehicle.
The low volume of some orders report
modes
are reflects
that a'Dout 7_8% of respondents
usinE public
_ransport.
in the
have resorted
In the town of Marikina,
to
where
Iii-39
TABLE 111.22
PRICING
PRACTICES 9 FOOTWE;_
INDUSTRY
P ricing Practice
i.
2.
Variable mark-up over production costs/negotiated prices
Mad_ equal to prevailing price
3.
Price
4.
Fixed mark-up costs
5.
Frequency
97
54.2%
market
set by Buyer
9
5.0
5
2.8
65
36.3
3
1.7
over production
Others
Total
TABLE 111o23
%
179
i00.0%
MDDF.S OF TRANSPORT/DELIVERY TO MARKET OUTLET, FOOTWEAR INDUSTRY % to Total
_bde o f Transport
_
Respondents
i.
Own truck/vehicle
78
43.6%
2.
Hira
76
42.5
3.
Picked
32
17.9
4.
Use public
14
7.8
5.
Pay for pick-up
i0
5.6
truck/vehicle up by customer transport service
111-40
density of footwear services
can some=imes
truck simply 6o0
manufacturers
is highest_
be arranged.
_o_:s around
pick-up
In this scheme,
collecting
a
orders.
Export Narket 6.1
Volume
more
and Composition
of Exports
In 1960,
the Philippines
footwear
than she was exporting.
of imports footwear
wss still
ceeded
imports
dollar
mark
in 1967,
production
materials
However_ reached
primarily
in 1980,
imports
at least
In contrast_
first
to
ex-
24).
was a mere 108,000
$186,O00.
Exports
is dependent
of footwear;
compared
and in 1970 hit the million
(Tabl_ IIio
The country
footwear
The value
for ?_ha_ year was $76,000
e.xports of $15,000.
importing
exports
total
pairs with
on local imports
of
a value of
of equipment
and raw
$8.3 million, i/ in 1980 totalled
some 25
...\
million volume
pairs
valued
of Philippine
very modest
level,
at $67 million.
The absolute
footwear
is still a
exports
¢ons=ituting
a mere •1.2% of
total Philippine
exports.
However,
growth has been
very encouraging
in recent
periods,
•albeit from a
very
small base.
wear exports
Over
the period
grew at an average
of 78% in volume,
1976-1980,
annual
foot-
growth rate
and 100% in value•.
!/This is a minimum estimate since it is not possible to quantify the share of footwear in other imported inputs such as leather, adhesives_ etc.
TABLE III. 24
EXPORTS
AND
IMPORTS
OF THE PHILIPPINE
EXPORTS Quantity
(i_000 pairs)
1960 1961
FOB Value
Other i/ Footweaz _-
Shoes 2 -
INDUSTRY
IMPORTS
Quantity
Year
FOOTWEAR
17
Other Footwear
Shoes $
($i_000) Total
5
$
i0
(i,000. pairs)
($i_000) Total
Export Value $
FOB Value
Shoes
Other Footwear
15
8
22 _
Shoes
Other• Footwear
$28
$ 48
Corn- 2/ pon_nts-$
527
Import Value
Trade Balance
$
$ (588)
603
5
1
7
8
1
74
1
245
181
427
(419)
1962
0
333
0
69
69
0
50
0
170
251
421
(352)
1963
5
37
5
32
38
20
_24
48
39
340
427
(389)
1964
20
615
29
51
80
42
23
102
43
254
398
(318)
2
39
5
4.7
52
22
20
36
38
301
375
(323)
1966
18
30
16
35
51
19
17
33
48
374
455
(404)
19_7
82
157
71
146
217
20
ii
47
28
240
315
(98)
1968 1969
212 500
204 385
171 202
375 587
21 19
107 59
30 27
38 53
323 155
391 235
( 16_ i352
1970
1,227
1,019
658
i,085
4
14
32
39
307
378
707
19 71
831
209
3
9
8
33
151
192
671
1972
99.2
126
1,083
169
1,253
I
6
8
•26
2,622
2,656
/_965
234 314 . 136 •
74 7
116
86 3
(1,403)
1973
1,232
583
1,814
316
2,130
1 '
4
4
30
368
402
1,728
1974
i, 769
1,148
3,008
715
3,723
2
3
14
20
44
78
3,645
1975 19 76
1,418 2,720
523 251
2,483 4_ 812
522 342
0,005 5,154
i 2
1 3
4 12
12 34
3 790
19 836
2,986 _4,318
19."7_7 4,518
791
9,469
781
10,250
6
3
48
34
6,064
6,146
4,104
5,553
25,326
7,946
32,356
3
28
18
49
3,046
3,113
29,243
1978
8,533
1979
9,714
10,575
35,121
15,476
50,500
44
65
32
107
4,548
4,687
1900
10,398
14,675
$39,720
$27,356
$67r077
14
94
$ 31
$155
$8,338
$8_524
_/Othvr
footwear
include
rubber shoes,
slippers
and house
footwear,
gaiters,
spats,
leggings,
2--/Componeats includ_ footwear machine, rubber sheeting and soling, heels, soles, shoe lasts, straps, cork fillers, etc., or materials exc!usively traceable to footwear manufacturing, includes imports of such materials as leather, canvass, adh_s_ves, nails, etc.
Sources:
Joumlal
of Philippiue
Statistics,
January-March
45,813 $58e553
and puttees.
shoe laces, Hence,
1978.
_4
111-43
The greater
bulk of total
tinue to be rubber, wesr. more
This
plastics
_roup accounted
than 20 million
pairs
footwear
for at least exported
wear
accounted
exported_ another
and 14.8% of export
_roup which
of leather,
i.e.,
Leather
There
may also be classified
10.1%
foot-
is however as primarily
uppers of leather
outer soles of rubber or plastic. ted fOr another
and 56%
for 4.6% of pairs
value.
footwear with
foot-
72.4% of the
in 1979,
(Table III. 25).
hand,
con-
and rubber/textile
of the value of exports on the other
exports
of volume
This sector
and
accoun-
an4 19.6% of value of
exports. Wooden
footwear_
such as straw,
rushes
and footwear with outer
soles
and palm
for
leaf accounted
8.3% o_ volume and 6.5% of value TABLE
III. 25
COMPOSITION
EXPORTS,
of exports. OF FOOTWEAR
1979 % Distribution
Product
Group
Quantity (in l_0Opairs)($1
Value Quantity 000 FOB)
Value
I. Footwear with uppers of textilerubber and outer soles of rubber/plastic
15,006
$28,271
72.4%
56.0%
948
7,469
4.6
14.8
2jlOl
9,915
I0.i
19_6
1,711
3,287
8.3
6.5
970
1,558
4.7
20,736
$50,500
2. Footwear wholly or mainly of leathez/ composition
leather
3. Footwear with uppers of leather and outer soles of rubber/plastic 4. Footwear with soles of wood palm, etc. 5. Other
footwear Total
outer or cork,
100.1%
3.1 100.0%
] III-44
6.2
Rubber
Footwear
Sector
It is important industry,
to consider
particularly
As Eas been pointed
when
out,
has been the principal r1_bber footwear sample
firms
respondents
verify
speakinB
export
footwear
product.
are relatively
sector
However,
few (2°8% of
and only one out of 12 responFurther_wre,
(neither our primary
this)
in the
of exports.
tlbe rubber
dents who have exported). believed
subsectors
that the sector
it is
or published is dominated
data can by one
large firm, and its subsidiaries/affiliates. previously of more
Pointed
out,
than 7,000.
As
the firm has a labor
The dominance
force
of the firm is
not only
felt in the export market,
but in the
domestic
market
as well.
It would wear
for rubber
seem
as a separate
previous
area
protected.
study of 36%.
a_erage
The domestic
to be high at 20.36,
rate to the footwear
of the sectors resource
average
of 8.88 for all sectors
leather
footwear
cost inefficiency_
As a
1), this sector
to leather
as compared
industry.
foot-
1974 data'_ the study
protection
is 454%_ as compared
18%, and an overall
rubber
for investigation.
Using
that the effective
sector
to classify
study has s.hown (Bautista,
is heavily notes
useful
footwear
This
and potential
of
underâ&#x20AC;˘
cost tended
to a weighted and 6.47 for the suggests
some
difficulties
in
111-45
competing
in the world
However,
Ymrket.
it is quits
footwear sector
clear
does compete
and in fact is performing sectors
in the footwear
better
efficient
the last period
that other
BOI incentives, the sector. exerting
The above
attention
unable
particularly utilized
by
m_y in fact be
so dominated
the sector
which
It is
particularly by just one
should
unfortunately,
perhaps
merit
our data is
to support.
Problems
in Non-Rubber
Footwear
In the case of leather data gathered by the survey been pointed
out,
fore offer
ported within
small firms_ exported in very limited exporting
firms.
It should
period
firms
only once
volume,
have ex"
1976-1980.
(3 out of 12) are in the past
and only indirectly
The consistent
there-
Excluding
some 6.3% of respondents
Of these
As has
is a low protection,
for exports.
the five-year
One-fourth
mcuh of the
are relevant.
cost sector.
much potential
footwear,
Sector
footwear,
this sector
low domestic resource
rubber
of study.
influences,
seems
the other
has grown more
policies,
factors
Simulataneous
At any rated
special
sector
market,
It is possible
have, been effectively
since the sector firm.
than
industry.
footwear
also possible
6.3
in the world
that the rubber since
that the rubber
exporters
5 years through are all
111-46
large firms. volumes
In the footwear
per order
necessarily
of the labor "small"
tend to be large,
a stumbling
one understands
_lock
force.
export
this is not
for small
"small _' primarily
firms, if
in terms of size
The key elements
for the
firms are the degree of mechanization
the productivity
of labor.
its own, penetrate head is high.
industry.
Thus,
ing firms
A small
if output per
suggests
to be the case
and
firm can, on
th_ export market
As our survey
does not appear
achieved
industry,
however,
this
for the footwear
it is not surprisin_; that export-
tend to be large by sheer number
firms.
Volume
of the labor
is
force and/or
some fair degree of mechanization. It is noteworthy cited suggestions is through resources
premise
in generating complemented
of the Marikina
is "cooperative
the necessary
It is acknowledged_
in 1968.
Shoe A re-
may prove effective volume,
to resolve
sector:
it must be another major
that of quality.
and this is shown
that a major
This
production".
such suggestions
factor in the export
i.e., pooling
manufacturers째
established
by efforts
the export market
efforts",
footwear
Corporation
Though
the frequently
for penetrating
of several
lated concept
results,
among
_'joint marketing
in fact is a major Marketing
that
problem
of lecal
it, survey firm is
III-47
meeting
quality
requirements
In the case of leather principal
import,
poor quality. industry
_my be able
it has been noted renders
is often
of the
considered
of
the local
leather
tanning
to produce
quality
leather,
exporter
uncompetitive
Seven of the nine
in our sample
export
Of the seven,
five or
biggest
quality
that the high cost of such leather
the footwear
foreign market.
footwear,
leather
Though
of the export market.
leather
large exporters
footwear,
71% cited
in the
among others.
qualit>
as their
problem.
The problem
of quality
of raw materials
of
course affect
all size
groups
wear
However,
in the case of small firms
sector.
pursuing
a cooperative
tional dimension
a major stumbling
quality block
ing firms who are able have become
of other firms
exports gating
Meeting
the output
This is
of such efforts. to produce
the volume
oft-mentioned
Cooperat-
quality
products
since
they take
because
of failure
to conform
to quaiity
requirements
nc_ a simple
of a n_ber
ing is the presence
of quality
in workmanship_
in the venture
is obviously
Another
to the problem
rejected
problem
for
matter of aggre-
of small
of middlemen.
foot-
effort, an addi-
wary of this mez_amism
the risk of a shipment
standards.
production
is added
that of consistent
in the leather
firms.
in export market. Most of
the
I!I-48
consistent
exports
_exporting
firms'_. No doubt
useful purpose
in the sample
in relieviDg
of the burden and costs costs are probably promotion,
high,
lities 6.4
is whether
sector
Markets
Philippine the principal 1980_
e.g.,
exports.
period
footwear
The second
to these
Philippine and North
Over
the footwear
Exports have the U.So as
accounted
1976-
for 62.7% of total
market is
Australia,
over
two countries
the same
Other
have been
countries
and the European
region,
only
haw_: recently
coun-
Japan and
shares.
expanded
foot, ear exports
grow-
that have
of _ha U_$. and Australia,
Ireland,
capabi-
th_ 5-year period
have had significant
tries which
exercise
sufficient
exoorts
Canada
In the Asian
Outside
An
26).
been tapped include
Hongkong
etc.
such influences.
largest
ing at a steady rate,
tries.
where
information,
these agents
for 8.5% of exports
(Table III.
Exports
shipment,
for Footwear
market.
which accounted
in =erket
can develop
the U.So market
serve as
manufacturers
and whether
to compete against
Principal
footwear
cost,
monolysonistictendencies manufacturin_
these agents
through
of export marketing
transactions
issue to resolve
transacted
their
are West
and Canada.
the counshare of
Germany_
UK
III-49
TABLE III.26
TOP TEN COUNTRIES FOOTWEAR
19 80 Country
Rank
OF DESTINATION
EAqPORTS_ 19 76-19 80
]979
Share
Rank
FOR PHILIPPINE
19 78
Share
Rank
19 77
Share
19 76
Ra.nk Share
Rank
Share
i. United States
1
56.5%
]
b6,9%
1
78.5%
1
48.9%
2
8.0
5
5.1
S
0.6
5
3,4
3
7.2
3
6.2
4
2,0
6
4. Canada
4
6.9
4
5.5
3
4.9
5. Australia
5
6,5
2
7.0
2
6. Hong Kong
6
3.q
6
1.8
7. Japml
7
3.6
7
1,4
8. Netherlands
8
2.9
8
i_2
9. Ireland (EIRE)
9
1.2
i0
0.6
10
0°4
2. West
Germany
1
34.0%
2.8
6
6.0
9
2.0
8
2.9
8.1
2
22.9
2
22.5
5
2.0
3
6.6
5
7.4
7
0.6
i0
1.3
7
3.2
6
0.6
7
2.1 9
1.8
4
7.4
3
8.4
3, United Kingdom North Ireland
and
10. Austria Ii. Guam 12. Thailand 13. Puerto
Rico
14. Belgium
9
9
0. §
I0
0.4
3.6
0.7
15. France
Total
4
8
2.0
Footwear
Exports
FO_ ($i_ooo)
$67 gO 77
$50,500
$32,356
$i0,250
$5,154
III-50
7.0
Summary _11e primary area
proble_
of
the industry
in the marketing
_re i.
P_pendence
of footwear
_._f_ erR" /middlemen Survey
prices
a wide
and ex-plant
firm that non-retail able credit terms 2,
Previous
studies
representatives
materials
problems
marketing
process.
present
Outside
in the
of this product
the. _=oo_:ear indusr_ry is saddled
of ii_ited
aapacity,
low quality
and _mreliahil:'_ÂŁy of supply_
in many non-tr_dition_l proSlems
manufacturers.
that similar
fooL_ear
by problems
favor-
industry
rubber
howe_er_
very
with
ca!_abili_y is clearly
group
extract
footwear
Export
sector.
retail
The data does con-
and interviews
are faced in the export 3.
spread between
buyers
confirm
monopso-
but it seems accepted
prices.
from
process.
in verifying
tendencies,
there exists
on "whole-
in the distribution
data is inadequate
nistic pricing that
manufacturers
and as
e.xpc.r.t pr<>ducts_ by
of li=i_:e_ _,erket infor_[_ation about
the export markeZ.
III-5i
E.
General
Management
Practices
As previously
mentioned,
sinBle proprietorship_ One would
expect
and most
Ill. 28. The owner
in general
of
finance,
followed
tinct competence
area of _roduction. responsibilities,
business. financial
Over
While various prepared, makinB.
studies
85% of firms
or production
80% prepare
such as th_ income statement who do preFare, the reports
that the dis-
are prepared
application째
by individual
do nct undertake
firms.
their
any form of
(Tab_!es 111.29 and firmncial
and 111.30). reports
are
not for evaluation
and decision-
standard
statements
financial
and balance
and of those utilize
.More than 90_ say
for submission to apply
sheet_
respectively,
performance.
About 9% use these
is in the
of the firm on
to establishing
7.7% and 6째9%,
for evaluating
these reports agencies.
a mere
dependence
prior
planning
there are typically
in the area
by his managerial
undertaken
forms of operating
At most,
likely
areas of technological
There is little planning Only i0.7% conducted
by administra-
of the owner/manager
and the primary
the owner in the various
of the busi-
It appears
This is indicated
and
cited in the
followed
is l_ast
by marketing째
or exp_rience
in Table 111.27
frequently
operations,
His presence
is primarily
all aspects
role is most
of production
tion of personnel.
runs
firms are
establishments.
responsibility
This is verified
His managerial
management
96% of footwear
firms are small
that managerial
lodged in the owner째
ness.
about
to _[overnment
for loans.
III-52
TABLE III.27
NUMBER OF PEOPLE MANAGERIAL
PRIMARILY
FUNCTIONS _ FOOTWEAR
Number of_People _
Functional
Area
RESPONSIBLE
FOR MAJOR
INDUSTRY
with Primary
Responsibility
Frequeucy
1 Person
%
2 Of' _,*_,c-il,., Pe_-sc_s Total
1 Person
2 or more Persons
Total
I.
Production
141
38
179
78.8%
21.2%
100.0%
2.
Finance
115
64
179
64.2
35.8
i00.0
3.
Purchasing
139
40
179
77.7
22.3
i00.0
4.
Marketing
135
44
179
75.4
24.6
I00.0
5.
Administ ra_iou/ Personnel
131
48
179
73.2
26.8
100.0
â&#x20AC;˘
TABLE III. 28
.... "...... OF OW_,ER RESPONSIBILITY _XTE_I
IN MAJOR
FUNCTIONS _ FOOTWEAR
MANAGERIAL
INDUSTRY
Ext,e;_tof Ownsr,,.,_ Responsibiliby ..
FrEquency
..
% to Total
Not Functional
Sole Respon-
Co-P_es-
Direc fly Res-
Araa
sibility ....
_
ponsible
I. Production
Responsibility Not
Sole Respc_,Total
Co-Res-
s_b_i_ " i,:_ ....... _i _
Directly Responsible
Total
125
36
iS
179
69: _%
20.1
10.1
100.C
85
56
38
Z79
47.5
31.3
21.2
IO0.C
3. Purchasing
112
38
29
179
62.6
21.2
16.2
IO0.C
4. Marketing
106
:i!!_
34
179
59.2
21.8
19.0
100.C
5. Adminis tration/Personnel
118
42
19
179
65.9
23.5
10.6
IO0.C
2. Finance
III-53
TABLE III,29
EXTENT OF PREPARATION OF BUSINESS FOOTWEAR INDUSTRY
Extent
Fr_i_cY
REPORTS,
of Preparation
....
%
Don __ Typ@ cf Re_ort
_r_
Prepare
Total
Prepare
Prepare
Total
73
106
179
40.8%
59.2
100.0%
i.
Production
2.
Sales & Collections
94
_5
179
52.5
47.5
i00.0
3.
Purchases
74
105
!79
41.3
58.7
iOO.O
4o
Statement of Incom_ and Expertsas
143
36
179
79.9
20.1
i00.0
Statement of Assets and Liabilities
131
48
179
73.2
26.8
i00.0
5.
& Inventory
Don' t
TABLE lll.JO
REASCD_
FOR PREPAI_ATION OF BUSINESS FOOTWEAR INDUSTRY
REPORTS,
Reasons ,.
, ,|
Frequency I/
Type of
_
For
Eva-. luation/
Submission
Record-
Decision
to GovVt.
_
_Makin$
_
S_cure Loans
% to Firn_ preparing
Report
For
Evaluation/
Submission
R_cord-
Decision
to Gov_t.
Secure
Agencies
Loans
6.8%
5.5%
â&#x20AC;˘._ __ i n
r ..... " _
MakinK
!. Producticn& Inventory
57
18
5
4
78.1%
25.2%
2. Sales and Collectio_s
80
14
ii
3
85.1
i4,9
11.7
3. Purchases
66
12
_
0
89 o2
16.2
9.5
-
49
ii
131
13
34.3
7.7
91.6
9. i
5. Statement of Assets & Liabilities 54
9
iI_
12
41.2
6.9
90.1
9.2
3.2
4. Statement of Income & Expenses
I/A firm may have more
than one reason for preparing
report.
II!-54
Preparation and collection, respondent
of reports on production and purchases,
firms.
and inventory,
_re undertaken
sales
by 41%-53%
Of those who prospero, at most
of
25% utilize
these for decision-making. The absence
of pla;,ning and evaluation
a low level of managerial small firms have lesser Secondly,
c_
!_i_y째
demands
reasonable
in terms of such
sector
reflect
be argued
that
capabilities.
particularly
is so unpredictable
of the
as to forestall
any
attempt at planning.
These may be valid ar_uments_ realized practices sample
It might
it may be that the environment
small industry
activities
firms.
but it is
are _crc often
Managerial
clear
that for-
than nc_t, absent among
guidance
re_};csprimarily
on the
owner. It is therefore not clear whether will be in a position bilities F.
Sources 1.0
to respond
footwear
manufacturers
in terms of managerial
capa-
as the firms grow in size. of and Needs
Sources
for Financing
of Financing
and Working
Table III. 31 shows of footwear
firms.
Capital
the sources
of external
Only 23% of total
from formal sources
of credit,
financing
respondents
almost all of which
borrowed were
banks. About 19% of respondents credit,
depending
exclusively
did not have any source on owners'
it is possiL,le that some footwear able to operate
on an all-equity
capital.
firms prefer, base,
of
While
and are
the extent of
111-55
TABLE III. 31
SOURCES
OF FINANCING,
Source
FOOTWEAR
INDUSTRY
Frequenney
i.
SupplierS/trade
credit
2.
Banks
3.
Private
4.
Relatives /Friends
5.
Others _2/
6.
No borrowings
% to Total
iii
moneylender
63,.8%-I/
39
21. g
20
ii.2
12
6.7
3
i. 1
34
19.33/
1/Number of valid cases is 174_ due to 5 respondents "Do_ _t K_ow _' response o 2--/NACIDA, local credit union, 3/Total
valid cases
(borrowers
TABLE !II. 32 SIZE DISTRIBUTION
Amount
(in _!,O0J)_
who gave a
customer _nd _ion-borrowers)
OF BORROWINGS,
Sups!ictUs Frequ_ncK
P_spondents
Credit %
is 176.
= ..... ,_ull _ ....... __R INDUSTRY
Fo_al Sources Frequency_ %
74
69.8%
17
ll-20
12
ii. 3
4
i0.5
2
21-30
6
5.7
6
15, 8
0
31-40
3
2.8
2
5.3
1
3.4
4i-50
2
1.9
5
7.9
1
3.4
Over _50
9
8,5
6
15.8
2
6.9
38
I00.0%
29
99.9_
Average
Borrowings;
106 _19,200
l-JDue to rou_nding-off error.
i00.0%
_45_500
23
%
i-i0
Total
44.7%
Other Informal Frequency
_21,200
79.3% 6.9
111-56
non-borrowers debt
_uggest
a significant
inability,
to acquire
financing, Footwear
credit,
firms are primarily
as may be expected째
use this spontaneous the borrowers borrowers supplement
About
64% of all respondents
It is noteworthy
group depend
solely on supplier's
that supplier's
source of credit,
loan values.
The average
ings are approximately though 45% _f bank
twice
bank borrowings
and long-term
supplier_s
less than one year).
between
short-term
using supplier's
loans credit
credit
of up to 30 days, and 88% report
_i0,000. as well. are
67.6% of
2-10 years,
with
or more.
sources,
is 100% short-te:._l. (Table III. 33). respondents
About
of 5 years
Supplier's
credit,
that bank loans
80% of financing
credit, were
below
maturities
credits.
have maturities
In contrast,
for relatively
level of bank borrow-
are still
results show
at least 35_ with maturities
while
that of supplier's
borrowings
In fact, the survey medium-
to
and mean
credit,
allow
Ban_ l_:_ns tend to have longer
largely
credit
capital.
levels _5/ of borrowings,
smaller
78% of
t_mt 52% of the
It is clear from the size distribution
the most popular
on suppliers'
source of c_redit, or about
group.
owner's
dependent
not counting
(maturity
of
in particular,
About report
half
(52% of
credit periods
credit of up to 90 days.
5/Mean levels tended tO be bro_.'i_ht up by several relative to the si ze distribution.
very high amounts,
111-57
TABLE III. 33
MATURITY
Credit Period/Maturity (in Days)
OF SUPPLIERgS
Frequency
%
CREDIT
Cumulative %
I -
30
48
52.2%
52.2%
31 -
60
17
18.5
70.7
61 -
90
16
17.4
88.1
91 - 180
4
4.3
92.4
180 - 365
7
7.6
i00.0%
Over one
year
0
0.0
Total
92
100.0%
As a source of working reasonable?
Since
directly linked
to ghe acquisition
'_ __'____ed,
financing,
i.e.,
it is 100%
financing
However,
i.e.,
caDnot there
the value
cannot be "excess"
the possibility
but
then in fact supplier's
finance
receivables
cycle°
The turno¢_er of
that if the
inventory
are concerned_
6/Interviews with industry members cycle is fairly short, generally
27%
the credit
ere._litcan he made
and even perhaps
production
then again
thus obtained.
and sold well within
period_
ceivables
exceed
of the r_w materials
stocks can be produced
case is
of raw materials9
for labor and overhead,
we must consider
given the typical
are such terms
credit in this particular
the value of c_-edit received of inventory
capital,
another
should
cycle'/but
to
production
be quite insofar
of those who extend
fast
as recredit
suggest that the production _. _aximum of one week.
II!-58
terms on sales
report
report
sellimg
up to 90-day
likely
that supplier's
of receivables,
up to 30-day
terms, and 84.4%
tern_
Thus_
credit allow
in addition
it seems
for some financing
to inventory_
but perhaps
not as much as manufacturers
would
it seems reasonable
tha_: i_ventories
within
the control
therefere limited
to expect
able suggest
will
capital.
and of these, more
tend to be
all respondents
reply
to the point,
generally
stock
with
avail-
(55%) stock
asked
additional
financing
about 84% of
report lack of
_ublem _7/ in maintaining
quate levels of inventories.
dents were
up only if
that they ::ell on credit terms.
63Z of respondents
out that inventorie_
Only
up cn inventories,
On the other hand,
as the primary
the evidence
and
sacrificed
The li_:ited evidence
than half
there are job orders.
financing
are more
that this =_y in fact be the casE.
43% of all respondents
D_re
Note that
of th_ firm that receivaSles,
inventories
working
_,_r.tto.
topped
Finally, the list
to rank the possible
it may be pointed
(34%) when
respon-
uses of any
that may be made available.
r-_:ggescsthat financing
are among the s_ 7_ificant problems t_,rers in bo_::hreceivables
ade-
Thus,
for working
of footwear
and in_yt<:ry
capital
_nufac-
financing.
751Another 26._% _ report unpredictability of orders, while complain about non-availability c f raw materials.
7.3%
III-59
2.0
Financing
of Equipment
As pointed portion
(28.5%) of respondents
inadequate. inadequate of
out in a precedin_{ section_
To some extent, financing.
equipment,
additional
feel their machineries
Of those who e:_ressed
acquisitions.
they would
In response
they wo<_id use any additional chases was the second most
insufficiency
be unable
to finance
to a question
firmncing,
frequently
with
are
this again may be traced to
72.5% believe
(next to inventory),
a significant
equipment
on how pur-
cited priority
23,5% of respondents
citing
this use. As
previously
discussed,
dents acquired additional Of these, only 12.6% Another
9.5% borrowed
about
54% of uotal respon-
equipment
in the last 5 years.
reported
from relatives
67.4% had to depend sol_iy ings generated combination Lease industz_ 3.0
having
and friends.
_:hair own saving_
by the business.
About
of internal and external financing
with
only
used bank financing.
is apparently
3Z reporting
Fully
and/or earn_
7,4% used
some
sources.
minimally
having
used
leased
in the
equipment.
Other ProbieJn_ in _inancin_ KespondenLs
_::_reasked
in 0brainiest credit, problem
to identify
in the order
o { c_:_llateral requirements
rates emerged
as the dominsnt
23.6% of respondents
citing
their Droblems
of _riority. and _he high
problems,
_h_SBfactors,
The interest
with 28.2%
and
respectively.
111-60
(Table IIi.34) _! . Table IiI.35
shovs
the extent
of collateral
ments for each source of financins. banks in _eneral quirements.
have
About
later'alized. co!lateral_
the most
stringent
In contrast,
credit
At most,
Among others,
the uncollateralized
require
suppliers
the pervasive
collat__ral.
informal
Table rowings
required
of respondents,
of -_6%0
affecting credits
are largely reported
sources
of credit
do not
as may be expected,
friends,
wherein
the annual
interest
none of
rate of Bor-
for ,,_aehtype of financing proportion
source.
(43.4%) of all rates
37_ of loans
carry
of the industry.
in excess rates
ba::_ ioans, and practically
of
in
high rates Only 22% of
i:_t_rest rates of 12% and below,
as coming
checks.
cf _upplierVs
These are u_.d_,ubtedlyvery
a i.er[:_sector
carry
postdated
nature
c_Irried interest
24% p.a., an_ tha_ about excess
require
uncol-
co!l_i!_t%_,zaio
III. 36 shows
transactions
is generally
use of this source of finan-
and/or
It shows that a significant credit
col-
cases_ chattel
The most liberal,
are loans from relatives the creditors
were
to.
supplier's
In general,
re-
real estate was the
14% of these
lateralized,
credit explain
collateral
reported
In 81% of such cases_
mortga_,e was resorted
cing.
As may be expected_
95% of bank loans
In another
require-
and these
all of the loans
from rÂŁ1ative/friends.
8/41.4% and 31"._%%respectively_ cited these two aspects lems either ra__ked first_ second_ or third.
as prob-
111-61
TABLB
[11.34
PROBLF_S
IN BORROWING,
FOOTWEAR
Frequency
Proble_Jm !I
i.
Ranked First
Inadequate/lack collateral
%
to Total Respondents -_/_
Ranked Second
Ranked %_ird
Ranked First
Ranked Second
Ranked _ird
49
14
9
28.2%
8.0%
5.2%
2.
High
r_tE_;
41
21
6
2?,6
12.1
3.4
3.
Financial condition/ performance of business
12
9
2
6.9
5.2
i.I
Documents required for loan
6
i0
5
3.4
5.7
2.9
5.
Maturity
2
4
4
I.i
2_3
2.3
6.
Delay
3
i
I
1.7
0.6
0째6
4.
interest
INDUSTRY
in processing
i/Other problems mentioned include perceived problem in rep_ying debt, need for guarantors and/or personal trust in the cases of moneylenders. 2/Numbers
of valid
cases
for this table is 174.
TABLE III,
35
USE OF CQLLATEKAL BY SOURCE OF FINANCING FOO_EA_
INDUSTRY
Freque_tcy • . . ; Wi th Source
wi tho ut
Collateral
I.
Supplier_s/trade
2.
Panks
3.
Fri rate Moneylenders
4. 5,
C_ llat_ra__!
With
Without
Collateral
Collateral
To£al
91
6.6
93.4
100%
2
38
94.7
5.3
lO0Z
3
17
20
15.0
85.0
100%
Relatives/Friends
0
12
12
0
i00
100%
Oth_rs
3
O
3
i00
0
100%
2/Colisteral
6_2-/
Total
,.---
85
1/% applies
credit
•""
.
36_3/
to row total,
used were
i.e.,
total
in _ ceses
respondents
post-dated
using
cheeks,
_/In 80.6% of cases, rea_ es_ete was used; in another Others mentioned include one case of hank deposit,
each _uxce,
and in one case_
13.9%
chattel
the purchase
mortgage
order.
was used.
H4
hJ
TABLE Ill. 36 INTEREST
Iii-63 RATES ON BORROWINGS, BY SOURCE OF FINANCING FOOTWEAR INDUSTRY
Source
0%
F r e q u e n c y 1-6 7--12 13--18 19-24 ?.5-30 31-36
37 & over
Total
i. Supplier's/trade _I/ credit
1
2. Banks
i
2
5
i0
13
I0
i
1
7
4 1
29
42
6
40
7
20
3. Private moneylender
2
2
4. Relatives/ friends
I0 12
Source
0%
1 1
12
16
1-6 7-12 13-18
ii
23
1
6
42
113
19-24
25-30
31-36
37 & over
Total
i. Supplier' s/trade credit
0
2.
Banks
0
3.
Private moneylender
4.
2.4
4.8
11.9
0
9.5
69.0
100.0Z
0 25.0 32.5
25.0
2.5
0
15.0
i00.0%
10.0%
0
5.0
5.0
35.0
0
i0.0
35,0
100.0%
90.9
0
0
0
9.1
0
0
0
i00.0%
0.9 10.6 14.2
20째4
0.9
5.3
37.2
100.1%
37 & over
Total
Relatives / friends
10.6
Cumu Source
.0%
1-6
i. Supplier' s/trade credit
0
2.
Banks
0
3.
Private moneylender
4.
7-1.2 13-18
2.4
fat
ive%
19-24
25-30
31-36
4.8
9.6
21.5
21.5
31.0
100.0%
0 25.0
57.5
S2.5
85.0
85.0
100.0%
_<o0
_5.0
65.0
100.0%
57.6
62.9
100.1%
i0.0
i0.0 i=,.0
20.0
90.9
90.9 90.9
90.9 i00. _/_
]9.6
I!.5 22.1
36.3
Relatives/ friends
56_7
1--/In41 cases, the explicit cost could not be computed cash discount rate and/or specific credit period.
due to lack of
m-64 It is noteworthy 69% of borrowing
which
36% p.a., with banks in roughly
that supplier's carry
credit
interest
and private
equal prop0rtions_
rate data) no explicit 4.0
for
rates in excess of
moneylenders
accounting,
for the balance.
suppliers _ credit may in fact account tion, since in 41 cases
account
Note that
for a high p_opor-
(36% of loan
sample with interest
cost could be computed. 9/
Summary The principal io
Limited
problems
access
apparently
in financing
to sources
stems
of
are:
financing.
from the small-scale
of footwear operations
and collateral
This
nature require-
meuts. 2.
The high cost of available
financing,
e.g.,
supplier' s credit_ 3.
Significant as evidenced financing. levels
operating breakdown9 _potty
It is
quite
likely
capital_
for receivables that desired
are not maintained
because
financing.
solicited
performance
for wor_ing
by the requirements
of inventory
of inadequate Th_ survey
requirement_
information
(sales_ profit
etc.) but the data
on indicators margins,
generated
tended
of
cost to he
and was subsequz_n_ly _6_t aside.
9--/Explicit interest cost on suppliers' credit is the equivalent cost of cash discounts foregone on delayed payments. Where no cash discount is offered, it may be presumed that the supplier has _acked on the selling price the cost of financing.
III-65
G.
Conclusion
and Recommandations
The study has relied view
of the indt_try.
footwear
indus=ry_
prinmrily
an industry
most part on a cross-sectional
Notwithstanding
as revealed
a small-scale
characterized
for the
its long b/storyj
in the survey,
â&#x20AC;˘sector.
continues
It is _abor-intensive
by a low degree of mechanization,
which
exploits
the indigenous
the to be
and
It is also
resources
of the
country. As such, the industry of small-scale using
.reflects _ny
industries:
backyard
for the most part traditional
financing,
limited
capabilitie_ developed
On the other of large
infrastructure
hand,
the export market.
is the rubber
cular,
approach,
for consumer
so1_e of which A very notable
products. number
have successfully example
of this
by rubber
flnar sub-zlassiflcations.
footwear
by large
will
The former
fi1_ms_ and footwear
continue
sector in the immediate
separately
sectorB.
footwear Froductso
exports
that it would
to vi_w it, in terms of specific
using
and leather
that footwear
is such
for one, is to consider
is dominated
dominated
wear
meaningful
and policies,
wood-based,
and limited
footwear sector.
appear much more
useful
management,
inadequate
in the face of s well-
The heterogeneit-y of the industry
problems
methods_
there are now a significant
firms in the indus=ry,
penetrated
manual
to market its products
attributes
type of operations
and owner-dependant
marketing
typical
future.
It would
A more
the rubber, in parti-
exports appear
is in fact,
to depend on the rubber The survey
results
foot-
suggest'
111-66
that the number
of footwear
of total footwear gate in greater Survey wear
firms.
detail
firms is a fairly small proportion
Thus,
the rubber
data is mostly
sector.
de ta is very limited footwear
descriptive
Our subsequent
to investi-
sector.
of the non-rubber
discussion
primarily
foot-
applies
to
this sector. Major issues by which
that need
the industry
to be addressed
(in _he limited
develop, and how the constraints
will
It is clear that the constraints In the past, many manufacturing in the consumer of import
industries,
substitution.
to the footwear has been therefore
1.0
The Domestic
shelter
a distinct
to small
is not relevant
time now,
the country
The industry elsewhere
desi_l,
the nature
firms.
This aspect
obsolescence.
must
- in the
products
to differentiation encourages
fast moving,
orders
of small
must be prepared
to receive
relatively
little
risk
in such product small order
evolv-
lot sizes:
but design conscious
footwear manufacturers
change at
and constantly
and posing
In a limited
ÂŁeatures which
of the product
Footwear
domestic market,
and product
the policy
Market
fashions.
of market
those
and _o the export market.
trace much of their appeal ing
particular!y
through
for growth
In the domestic market, provides
are s_;_ewhst difficult.
on local producticr_o
demand,
will
be met.
grew rapid!v
For a long
the manner
suggested)
industries,
li_ok for the impetus
growth of domestic
sense
Such a grox_th process
industry°
dependent
are:
lines
quantities,
frequent intervals.
111-67
With intensive
their long tradition
of craftmanship
operations
a minimum
that have
(through hiring on a piece-rate nization),
small
requirements. workers
La_-ge orders
practice).
in part because
of overhead
and limited
firms are well-positioned are tackled
and/or subcontractin_
dominant
basis
quality
mecha-
to meet domestic
being a less
of operations
requirements
costs
by hiring more
(the latter
Manual-type
and labor
are viable
are less demanding
in the domestic market. A principal marketp
problam
particularly
nant p_sition
of firms
small
establishments,
a need
to examine
bution
systems
closely
should
studies
on a product
location
of consumer
tribution. marketin_
is the domi-
more
markets,
and practices_
ievel_
practice
replication
in
detailed
of the size and
the various
distribution
an_ _he cost structure
The key objectives
distri-
to evaluate
Thi_ _;i!l _ecessitate by produc_
appears
efficient
The current
and further
and
There
be studie,_ closely
of expansion
major urban centers.
stores.
whether
can be developed.
of _'shoe houses"
processes
the domestic
of "wholesalers '_ (i.e. middlemen)
large <'etailers_ e.g. department
possibilities
servicin_
of developing
of dis-
a domestic
pro_iram should be to_
i.
reduce distribution
2.
substantially nistic profits
costs_
reduce if not eli_i1_ate any monopsothat current
may be enjoying_
'x_holesale/trading operations
III-68
3.
provide
a more
facturers market; 4.
obtain
market
mechanism
by which
information
manu-
on the domestic
and
bring efficient umbrella
2.0
efficient
footwear
u_anufacturere under
of such a distribution
the
system.
Export Market As previous
studies
have s!_o_m, the leather
sector is cosL competitive potential
and therefore
as an export industry.
by leather
footwear
cost of locally
exports
produced
lea_h_r.
industry
Suffice
it to say at this point
addresses
it3alf
can take _iace in expor_in_ rationalization Apart
footwear
of limited
requirements
addressed
and
on the
to this problem.
leather
fo,_twear unless a takes place.
there
capacities â&#x20AC;˘04[ individual efforts
is one scheme
is the
end achieving major
pr<_hlems of tapping
considerations
of cost
has a long history
on
the
firms. the
But if simply
such efforts
r_ust be capable
first
is also
to meet
of the e_q, ort sector.
type of operations,
The practical
Philippines
The chapter
are considered,
_uch ventures
design and quality
go beyond
faced
that not much progress
to the capacity problem9
short-lived. consortia
problem
is the quality
of the supply sector
WJoint production" volume
much
from this prQblem however:_ and if exports
â&#x20AC;˘non-leather problem
A major
however
leather
offers
footwear
tend to be
of managing uniformity
stumbling
in
block.
the export market
effectiveness.
of ex_orts,
While
these Were
the pri-
111-69
mary products.
Export mark_ting
pose more difficulties ~ something ning
and in a sense
that even large
to develop.
Marketing
ing and evaluating
of manufactured
market
firms
information,
setting
up channels of di_tribution
Clearly,
only begin-
skills are required
quality
control, p_aletrating
providing
demand more skills
are probably
zation,
organization_
products
in obtain-
design,
standardi-
the foreign market, and a foreign
cr_'dit arrangements,
some form of government
sales
etc.
assistance
is needed
here I.
Perhaps
under
the ,_brel!a
promotions
program,
further
undertaken
to d;_%e_lopexport
in the eforementioned proceed
on a country
product
analysis.
be to degel_, product 2.
of existing
a.
b.
market
areas,
should
information
q,_._eh studies
by country,
be
should
and product
by
Part of this investigation
should
sn "information _z_:_itoring system
promotions
The tasks
studies
exports
scheme.
that will need
Identification
to be undertaken
of _pecific
export
po tential;
Market
studies
by product
are:
products with
and by potential
of destination,
with
above
areas of export
mentioned
and
p_rticulsr
emphasis marketing;
country
of the
Iili-70
c.
Development
of institutional
such information evaluated_ d. 3.0
is periodically
monitored
of specific
Considerations
promotions
grow
Individual
firms) but what needs
what
firms to
to export-oriented
to be :_mphasized is that the growth
should not lead to _.%c_.;_9 of efficiency.
The following i.
markets,
firms must be permitted
(and this is particui_:,rly crucial
process
programs.
i_ an environm,:rt _,Th_ÂŁebyefficient
are rewarded.
and
for Growth
[_qle_h_rfor the domesti,_ or foreign is desired
by wS/ch
an4 dissem_li_ted to tbe industry;
Development
Additional
mechanis_
Small-scale
approaches
labor
are suggested_
int_;eive
firms play a useful
Nonetheless_
they should also be encouraged
productivity
through
ing.
teclmical
assistance,
to increase e.g. train-
_!_%efact theft money wa}_es are low is no assurance
of low costs if outpui: pe_" labor Mechanization
is correspondingly
is perh_%_<_necessary
to increase
vity but in the form _f manually
operated
hand cranked
Apart
splittin_
domestic requirements potential
for Io_ cost
intensive>,
footwear
before
(REDC, 7>.
is a more concrete
producti-
machines,
footwear,
hand-crafted
particularly
strategy
Perhaps
acticn plan,,
e.g.
the
hich _quality and premium
'_e latter
low.
from servicing
firms to produce
should be pursued,
the export market, suggested
maehine_
of small-scale
(highly labor priced
role.
for
has been
what
is needed
III-71
2.
The expansion
of firms will
the labor pool
in t:heunorganized
sectors.
the current wag_
With
in the organized tributions,
firms
in order
This is no doubt training
sector,
iarBe
productivity
to maintain
and large-scale
operations°
It is noteworthy in training
that training management
Mechanization
benefits
than displace_ should
be chosen
Technical area.
appropriate operation
control,
Firms
process
-
on-going
Such efforts
production
is likewise
should
essential.
be encouraged that complement, and process
_:hat tend to increase
should
and
in terms of economic
Equipment
should
and
as one alternative,
combinations
assistance
Studies
are already
particularly
to evaluation
labor.
factors:
also be emphasized
should be viewed
adopt machine_!abor
labor
cost efficiency.
workers.
it should
and :.osts.
increased
of _:echnology for medium
in management_
to be subjected
con-
capabilities,
of footwear
and quality
security
work attitudes
that there
should be sustained,
and structure
of various
managerial
choice
efforts
social
r_ust realize
the appropriate
tapping
and small-scale
appropriate
improved
require
policies
e.g.
the product
of workers,
discipline,
3.
likely
output
to rather
technology per head.
perhaps
be extended
in this
he undertaken
to identify
the
technol¢_y
and the corresponding
at various machine
scales of
requirements.
III-72
Such studie_
should
already
begin
to consider
the p_:_ssibilities of _.arge-s_:ale specialization the _evalo_ment
of footwear
manufacturers.
It is _ot just foot, ear
firms who stand
from such information.
_'inar, clal institutions
doubt will
find some
and correspor,dingly, proposed 4.
components
for
reassurance market
wear industry,,
feasibility
reforms
cost of de_l[in_!with Me_su:_:_smay _ risks.
feasibility
proble_is cited risk,
explored
financial appear
high transaction
to reduce actual or
of appropriate
This should perhaps
industry
associatlons_
be undertaken
for access
by
by lending
and foot_:esr firms_
institutions,
with
such data as industry
of industry
credit information an4 buyers.
may include:
levels of
forms of inforn_atioT_ sharing
evaluation
tc
susgested, studies
institutions
relatiw_:
smzll,-scale establishments.
output.
Other
for the in-
Some of these measures
As previously
b.
to the foot-
context
in the Philippine
__tem in part fro_ the high
a.
of projects
is net unique
Any fi_%ancing program
The financial
perceived
no
in the technical
dustry must be vie_,a:_in a wider
system.
to benefit
_inancing.
The p'roblem of financing
to on-going
and
prospects,
on bcth
lending
performance,
some form of
footwear
manufacturers
III-73
=.
ni_.,lo_uewith
],_mdi_g institutions
to ex_lore_
su_zh pus._ibilities as use of purchase in l_,eu of traditional
orders
types of collateral;
and d.
Studies of possible especially schem =..s.
export
for budding
financing
exporters
sche_zs,
such as guarantee
111-74
BIBL!OGP_P_
i.
Bautista_ Romeoj 'UDom_tic Resource Costs in the Leather and Leather Goods Industries ?_, in Romeo M. Ba_tista, Jo]H_ H. Power and Associates, Industrial Pro_tion Policies in the Philippines. Manila: Philippine Institute for Development Studies, 1979.
2.
de Guzman, Osmundo, "The Thrusts thl 80's Towards Modernization",
3.
ISSI, "StatE-of-the-Art / National
4. 5.
Census(and
_eview '_ The Shoe Ind_strx_
Statistics
ments,
1977, 19_, 1979o \ PDCP. Studies on Philippine Makati, 1973_
A
of the Marikina Shoe Industry Mimeo, no da_e.
_u_l
n.d.
Surve_ of Establish-
Office,
_
Industries,
Commission Mimeo.
in
Th,_ Footwear
Industry.
'
6.
Rizal Eco c Development Footwear InduStry , 19_..
(REDC), _'Agenda for the
7.
_The Shoemaking Industry"_ Journal of Philippine Vol 29, No. i_ First Quarter, 1978.
8.
World Bank, Industrial !_evelopmentStr_tegy Philippines, Washington, D.C., 1980.
Statistics
and Policyin
iJPS),
the
IV-i
IV.
THE LEATHER A.
INDUSTRY
Overview
of _he Industry
This study is directed business
for the
leath_-_rtanning
The industry has been Philippine effective
industries, protection
materials, imports.
criticized
(Bautista !. l J,
criticized
supply 1.0
of
of poor
Jamaluddin
(footwear
of high rates
and inadequat_ and dependence
_/ [!./,World
_:_,ii_ather
raw on
Bank/
products
of
8 /
industry)
and unreliable
tanneries.
and Structure
l_le leather
tan,ling industry
in 1903 in _ycauayan, started
only because
of capacity
from domestic
state
in the Fhilippines.
the high cost, poor quality
of leather
Origins
industry
and in quite
under utilization
the current
as one of the more inefficient
surviving
Im fact, user industries have
at presenting
when
Chinese
began
craftsmen
low quality
leather,
By 1918 there were
about 50 such units making
leather.
The industry
rished
making
Bulacan
in the Philippine
so thaz at o_e time there were nearly
flou-
150 small
manufacturer.
But gradually
these
gave way
establishments
and presently
there
are only 13 or so big,
organized backyard
tanneries a:_.,_" an maccounted, type ta_m_ries
vernacular relationship
number
k_,,_:own "'" in the industry
term _sipa-sipa"). bet_een
to bigger
the larÂŁe
s_aall ones is _ne ef __h_issues
(Jamaluddin scale
of small by the
/ 3__/)
operaÂŁors
in the leather
The
and the industry.
IV-2
2.0
Economic
Significance-
Value
Table Iv.il/skows and leather increase
products
in gro_s
tremendous, compared
th_ gross industry.
value
value
terms
the
1981 and 1970 is
it has increased
in value
sector of ili%.
and Imports
added in the leather
In nominal
but in r_al t_rms
gross value
Exports
added between
to the increased
facturin_
Added,
_dded
As a result
by only 80%
for the whole
manu-
its share in the
added by th_ ma_mfacturing
sector has dropped
over the decade. Table IV.2 shows exports products. tinuous
Export
of leather
and are clearly
leather
structure
had a duty leather
increasing
hide_
with
of 100%.
imports
products. be_use
Bautista
Export imports Imports
att_ibutes
of hider of hides
the shortage
Hides
and skins
a dL_ty of only 10% whereas shows
of leather
effect of the tariff
and ski_Ls.
The table
con-
of the domestic
to the disincentive
on domestic
could be imported
have been more
Table IV o_ shows
of the material.
of hides _':_,_i skins
and leather
significant.
and leather
an%d skins have been shortage
products
more
have been very erotic. and skins,
of leather
a marked
leather
decrease
in
over time.
_/Some caution should be exercised in interpreting the published statistics as they lump together the leather and leather products industry. But if there is o_._ conclusion to be drawn from this study it is that the characteristics of the ie_:ther tanning firm are very different from that of the leather _,roducts fir_: whether this be in size, production process, or problems.
IV-3
TABLE
IV. I
GROSS VALUE ADDED IN THE LEATHER AND LEATHER PRODUCTS INDUSTRY_ 1970-1981 (in million pesos) Constant Prices Year
Current
Prices
in 1972
19 70
17
30
1971
20
24
1972
22
22
1973
26
25
1974
36
26
19 75
42
30
1976
50
31
1977
61
34
1978
51
26
1979
108
48
1980
130
51
1981 P
157
54
P Preliminary
SOURCE:
estimates
Philippine
Yearbook
as of January
1983
1982 and 1974, NEDA
IV-4 TABLE FOB $ VALUES
OF PHILIPPINE
I_o 2
EXPORTATION
OF LEATHER
Total Philippines Exports
AND LEATfIER
PRODUCTS
Leather Leather Exports _
Products Exports (C)
1960
_535,437,477
-
,280,946
1961
540,748,369
-
214,267
1962
582_ 933,024
1963
770_570,492
-
803
1964
779,375,569
-
3,998
1965
795,734,890
"
5,608
1966
877,405,702
196,7
891,502,116
-
-
i968
962,114, ii0
-
-
1969
983,172,917
-
2,199
1970
1,142,191,237
-
6,819
1971
i, 189,247,194
-
5,931
1972
i,168,,A33,138
22,184
15,515
1973
i, 837,188,097
136,156
38,654
1974
2_ 724_989,237
31,2_2
219,0_i
1975
2,294,470, 1333
600
157,073
1976
2,573,675,684
38_685
436,277
1977
3,150,886,989
-
624,587
19 78
3,424,876,025
7,378
i,698, 418
1979
4,601,189,916
235,683
l, 862,693
1980
5 _4B7, 787,554
304,883
2,967,757
SOURCE:
Foreign
Trade Statistics,
i ._ 261
3,685
NGSO
154,860
i, 500
"
IV-5 TABLE IV.3 PHILIPPINE IMPORTS OF LEATHER AND LEATHER GOODS 1950-1976 (f.o.bo value in thousand UoSo dollars)
Year
Hider and Skins
Leather
Leather Footwear
1950
n.a.
4070.7
721.7
1951
n.a.
4530.7
433.
1952
35
2670, i
524.9
120.6
1953
22
5140.0
268.5
80.0
1954
113
5049_ 1
297.7
56,1
1955
398
4142. %
301.5
44,0
1956
357
3428.6
156.2
17.4
1957
576
3534.5
137.5
12.8
1958
206
2933.0
242.6
53.6
1959
526
2620, 8
33,6
48.6
1960
334
2190.3
25.2
16.4
1961
1B6
1664.3
39.7
23.9
1962
104
659,9
71,8
14.3
1963
135
422_>
34.3
i01.i
1964
463
485.5
73.0
84.8
1965
436
298.8
24.8
12_i
1966
610
282.0
27.8
10.7
1967
652
3!2_3
32.3
6.9
1968
663
306.7
21.1
16.7
1969
634
2_6.I
22.1
6.2
1970
600
137.9
30.8
5 •0
1971
371
177.9
29
1.9
1972
123
Iiio2
4.8
2.8
1973
426
191.1
4.2
5.7
1974
938
276.0
8.9
i0.3
1975
2001
261.0
•5
69.8
1976
2049
96.6
3.6
128.4
SOURCE:
Bautis _a /]__J
Leather Products 60.4 1114.7
IV-6
3.0
Some Industry
Statistics
Table IVo4 shows some s_l_.cted characteristics and leather
products
more workers.
manufacturing
Over the period
clear trend in =he increase merits. tended
to drop and wi=h
in the number
of sm_il
there were
there were
i_the
firms
of the 1960's
level
of employment.
20 or more°
by the NEDA
and leather
products
levels
compe_s,ation velue
of employment, is reproduced
to rather
sharp
INDUSTRY STATISTICS, LEATHER PRODUCTS INDUSTRY
of Establishments
Total Employment the year
(Average
Total Gompensation Torsi Receipts Capital
SOURCE:
Philippine
(000)
(000)
Yearbook_
/5-_/) Yearbook
1983
for 1978 is
increases
in
of output , etc.
AND LEATHER
19 7____7 19 7â&#x20AC;˘8
240
219
284
2979
2939
8744
_ 9392
_i1794
_37175
_!_5334
_91778
_455485
_ 1602
_ 2294
_ 46.045
for
,'n_n_.._,
Expenditures
in 1977,_
below_
19 75 Number
(NEDA
industry
owing
The
by the fact that
Philippine
a little questionable
SELE6TED
the number
219 firms ,ith 5 or more workers
Th_ data presented
l_le data
of establish-
is highlighted
only 29 employing
for the leather
with 5 or
1956 to 1971 there is no
In fact in the latter part
large number while
establishments
of leather
NEDA
IV-7 TABLE IV. 4 SELECTED CHARACTERISTICS OF LEATHER AND LEATHER PRODUCTS ESTABLISHMENTS WITH FI_/E OR I_3_REWORKERS (Selected years for which data is available)
NumSer Year
of
Value
Establlshmen_S..Employment
of
,. Shi__000'
Expenditure s)
New Fixed
1956
29
714
195 7
48
1061
8,0'14
421
1958
40
1006
8,924
403
1959
35
1069
10,189
720
1960
48
1512
18,511
774
1961-
P 7_ 199
Assets
2609
....
1962
59
1559
15,853
476
1963
67
1740
17_213
584
1964
101
2343
21, 905
553
1965
71
2206
21,594
797
1966
70
2214
21,663
283
1968
56
2274
26,161
473
1969
65
2523
28,65 3
324
1970
68
1760
32,813
418
1971
85
1300
30,169
970
2262
57# 788
539
1967 .....
1972
....
1973
i01
1974
-
-
-
1975
-
-
-
1976
-
-
1977
219
2939
90,304
1978
284
8744
37,175
/ ./SOURCE:
Philippine
Yearbook,
NEDA
2.27q 4
on _000 ts
IV-8
4.0
Investments
in the Industry
Expend/tures insignificant tries.
on new fixed
when
compared
The aggregate
(excluding
year.
Data subsequent
to be evidence
explanation
General 1.0
of p558,000
in the number
The study
is taking place
rather then the leather
B.
1956-71
data is not available
cannot
per
in the leather tanning
of establish-
offer
for these but one possibility
ries mentioned
indus-
the period
or an average
of an increase
is an increase
are
to 1971 is spotty but there seems
ments and employment.
bility
over
1961 and 1967 for which
to only P7.8 million
in the industry
to other manufacturing
expenditure
amount
increa=e
assets
is that the products
industry.
in the number
a firm
industry
Another
of small
possi-
scale
tanne-
previously.
Characteristics
of the Sample
Capacity To gain a better industry,
understanding
particularly
of the leather
from the perspective
ten tanneries
of the indi-
vidual
firm_
output
of the ten firms in 1980 was around
5,5 million
square
feet per year.
total
output
of 30 million
Given square
utilization
of 40% =o 60%,
firms would
represent
output째 capable year
Given
feet p_r year
or half
of capacity_
of 16.2 million
of total
industry
for ]980,
industry
and capacity
30% and 46% of
sales _s repo_ted b_ the ten firms _illion
The total
the output of these
between
output
interviewed,
the estimated
full utilization
of potential
of leather
were
tanning
respondent
total
the firms are square
capacity.
amounted
industry
feet per Gross
to around _26
IV-9
2.0
Years
in Operation Half of the respondents
least 16 years
and nine
old.
seem that the industry
It would
new entrsntso
One study
capital
requ/rem"_nts to finance
and imported
to entry.
and equipment.
are-
heavy working
and high
required
is beset
and receivables,
cost of chemicals
investments confirm
in machinery
the impression
by problems
that deter entry.
from the industz_;â&#x20AC;˘ may also be difficult
for _the large firms in fixed assets. be reluctant been
is not attracting
inventories
The interviews
that the industry Exit
These
of raw hide
raw hide,
for at
(Ma!iais /4;_./) has mentioned
barriers
shortage
in iperation
out of ten ar_ at least six years
several
domestic
3.0
have been
that have
Families
substantial
operating
especially
investments
tanneries
to move away from the business
may also
they have
in for a long time.
Organization
and Location
Seven of the firms are s/ngle proprietorships the rest are corporations. and controlled example
by a fam/iy
of the dominance
firms in Philippine in Meycauayan, the tanning
Most Broup
of the firms are owned and could
of family
industries.
Bula¢an which
and
owned
serve
as an
or controlled
All the firms
are located
is the acknowledged
industry in the Philippines.
seat of
The town is close '7
enough
to its source of raw materials
slaughterhouses
and abbatoirs
and to the market
in the Metro
(the footwear
tri_s in Metro Manila,
(hides and skins
especially
and leather Marikina.)
Manila
from
area)
products
indus-
!V-lO
4.0
Employment The ten firms employed
Three
(but all had l0 or more)_ while
the seven other
than 20,
firms had more
quantitatively Fmrketing
but in most
Supply and Demand
skins.
Leather
In_e
are _f the kind
d,om_stic market,
more expensive, materials,
is facing
Relatively
the shift to substitute of Investments
demand for leather square
feet which
Practices
by local
and leather products
from cattle and carabao
to b_ exported.
The Board
and Pricin_
for leather produced
are the footwear
that is exported
heighten
Distribution
market
Leather
synthetic
of them this was not
for Leather
The principal
relatively
house-
significant.
- Supply and Demand,
tanneries
Only ! firm employed
Five of the ten firms employed
hold labor in production
1.0
of 512 employees.
firms had less than 20 workers
more than 100 workers,
C.
a total
made
industries.
of reptile
are poor in quality leather_ which
competition
poor economic
is
from conditions
materials째
projected
an apparent
in 1980 of approximately is roughly equivalent
32.6 million
to its own estimate
/
of total industry would
seem to overstate
estimate shoes. that
output.l / /...2-/
it assumed
The BOI projection
the size of the market_
that each person would
(A related point_
The World
the only 20% of the population
In one
have a pair
Bank study had leather
of
estimated sho_s.)
/ /
/ 2/jamaluddin 87.7 million
m_ntions
square
an estimated
leather
feet but do_s not mention
re quirem_ent of
his source.
In
IV-ll
another
estimate
past consumption condition lea=her growth
have
trends. chamged,
substitutes.
material,
inadequacy
This may be invalid e.g.
the presence
industry
is based
as market
of cheaper appear
that
These
supply,
ef raw
inefficiency
on the industry
products.
of inadequate
of
will not be constrained
of fin_cing,
and leather
complained
on the basis
or by demand but rather by shortage
This statement
footwear
demand
In any case, it would
in the leather
by capacity
cost.
it extrapolated
and high studies
industries
poor quality
are
often
and high
cost of leather. 2.0
Dis trib ution The leather high
s_ller
market
concentration
(Malinis /4--/). total output
of 5째509
to the users
million
while
or leather
a small portion
is concentrated
concentration.
feet was coursed
the balance
was sold directly
One firm was apparently
products
of its output.
any major bottleneck
as one with a
59% of =he ten firm's square
(manufacturers)o
into footwear
described
and a low buyer
Approximately
through wholesalers
market
has been
manufacture
These
in marketing
and utilized
does not seem to be
or distribution
in the Metro
Manila
as the
area, especially
Marik/_a. 3.0
Pricing
and Credit Practices
S_.vcm of the ten firms price a variable
mark up on cost while
mark
Gross
ups.
15%-25%
except
profits
for most
for two firms
their
products
the three firms
reporting
with
others have
fixed
are in the range a gross margin
of
of 6%
IV-12
and 8%.
These
published
figures
statistics
industry.
compare
well with
for the leather
The table below TABLE
shows
cost per Gross
Census Value Adde_
statistics.
iV,. 5
/ per Gross
LEATHER 1974
1975
1976
70°27_
86.6%
81.4%
Output
10o5%
1503%
10.2%
Output
29.8%
24.9%
18.6%
Total Cost per Gross Output (labor)
and leather products
some of these
SELECTED •RATIOS FO_ TiE LEATHERI_D PRODUCTS INDUSTRIES --
Payroll
some of the
1/1974 and 1975 ratios are for establishments workers_ 1977 are f_nm all establishments.
with 5 or more
2--/Census value added is a measure representing the difference between the value of gross output and the total cost of materials,• containers and fuel consumed, purchased electricity, contract work done by others and cost of resales.
SOURCE:
Philippine
Yearbook
1983, NEDA
It has been pointed tration
coupled with
imply that prices
a low buyer
nine
of sales
receivables
firms that reported
that at least
credit.
This,
as well
to many
firms.
concen-
would
(Malinis / 4J)
are done on credit resulting
for most
the figures.
firms reported
seller
concentration
ar_ :i:_tby sellers.
A large proportion in high average
out that a higher
firms - _148,000 Eight
of the ten
half of their sales were
be noted
later
over
on poses
on
a problem
IV-14
towards
producing
tutes
ordinary
the bulk of local
be obtained
only
of
demand.
from quality
in the manufacturing
2.0
types
leather
High
hider
process.
as
it
quality
and thru specialization
Specialization
and efficiency
for capacity
which
of raw materials.
Capacity
an adequate
at between
capacity
of the larger
22 and 25 million
the small scale
tanneries,
mated at between Most
tanneries
square
total
30 to 33 million
feet.
(Jamaluddin
industry squsre
hours, six days a week.
output feet.
40% and 60%,
of ten firms where
capacities
range
zation is estimated
a low of 40% to a high of 80%.-/ existing
facilities
these assumptions square
facilities
feet.
With
the reported
feet in 1980o
Based
ranging
This estimate
capacity
on
Under
is 9.08
labor but the same
would
on this measurej
from
is based
complement.
of the ten firms
additional
square
capacity utili-
utilization
and the i980 labor the capacity
on one
In our sample
from 100_000
feet the weighted
at 60%, with
(Jamaluddin
Capacity utilization
at between
square
is esti-
operate
has been estimatad
feet to 5 million
is estimated
Together with
of the tanr,_ries interviewed
shift of eight
million
utilization
and Utilization
Annual
/3_./)
supply
can
leather
go hand in hand but this calls imply
consti-
be 16.2 million capacity
square
utilization
for the ten firms is 34%. It seems were
able
lization
tha_ firm having
lower
to utilize more fully with as against 57.2%
for larger
level of capacity a 69.5%
capacity
uti-
firms.
(Small firms
iV-15
are those with
capacities
per annum.
_%ere were
four others
comprised
The above
six firms the large
findings
According
Ki,lgdom economies the leather there result (Jamaluddin
of scale
small uneconomical into bigger
often complained
the issu_
to the large
substantial
investments
marco
generally
tanning
the processes Inspire
ries with
than size. true that
or have
units
to merge
in the small
of the "sipa-sipa _' operators tanneries.
tanneries in fixed
employ
operations
operation),
do.
in
there are economies,
it is generally
organized
is largely
competition
(i_ather
importance
runs rather
while
of by the large
(whose number
for tanning
in the United
and the "Sipa-Sipa _
This raises
l_y
in leather
do not survive
units,
The
do thrive째
Large Tanneries
operators
holdings
economic
scale sector 3.0
undertaken
and where
Therefore
feet
in the light of
or scale
from long production / 3/)
as such.
are not of major
industry9
square
firms)
capacity
to a study
tanning
classified
are interesting
what has been said about tanning.
of less than i million
is still
a small
need equipment
of the competition
substantial
but to accept them.
_
floating
a labor
force
of doing.
tanneries
and which
they pose,
labor
intensive
to large
capacities
making
that the tanneries
are capable
lq_ey then subcontract which
but without
largely
small
_alknown) provide
assets
that they
These
they
cannot
large tanne-
have no
choice
IV-I 6 •
Large compete
tanneries
feel that
effectively
heavy investments
because
determiae)
their
labor
flexibility
tanners
are able to
costs
have
set their prices
given
with
the u_certain
the
to make,
fairly accurately
and subcc_tracting
and therefore
have more
operators
they are not burdened
tha£ the large
ar_ able £o d_termine the raw material,
th_s_
they
(since
fee are easy to accordingly. supply
They
situation
of hides and skins. Large
tanners
however
rat#rs do not maintain
complain
quality
and they even use good hides nishing
the good name
that "sipa-sipa"
standards,
color uniformity
indiscriminately
of the entire
ope-
- thus tar-
industry.
(Jamaluddin
I U) 4.0
Expansion
Possibilities
The production
capacity
labor intezlsive-_/ could in the labor
complement
and use of machines.
easily and/or
(3)
to be computed
is the maximum
output with
with
be increased adjustment
using what
an ideal
the 1980 labor
substantial
This capacity
on the basis
complement).
capacity
with
being
an increase
in working
to increase
to _xpand
the owners
hours uti-
think
level of labor the rate
go down to only 34% utilization,
than th% 60% computed
process
(In fact if the capacity
lization were
would
of the tanning
of
1_is is much lower attainable
This points
output
to a
production°
production
by the employment
_/It would appear from Table that labor costs account for oniy 10-15% of the f_ross valu_ of output but if one relates this to the census valU_ added p_r gross output the labor intensity of leather and leather prcducts manufacture can be discerned.
IV-17
of more labor and fuller utilization
of equipment
_ffect of raising
of the ten firms
9.08 million
potential
square
capacity
feet per year
to 16.2 million
feet per year without
substantial
Nine
are presently
of the ten firms
of eight hours, working
firm reported
C_ly
employment
technical supplies
increased
of local
materials
such as tanning
productiotl of hides populatio_ 5째0
six days a week.
Supply
Quality
chemicals
thin.
of imported
a small
Local
livestock
and Quality produced
of hides
to a large extent
and skins
The problem
is compounded
domestically
of low availability
by improper maintenance
fencing,
ticks
impossible
colo=
A skin which
are rela-
of hider
of livestock
herds,
thorny bushes,
and flies scar their hide_ _. It
to dye the affected
area the same
res=ofthehido
Improper slaughtered
depends
used as raw material.
are kept out in the open air where
wire
is almost
not by
and raw hides. of
The type of hides_ that are produced
barbed
force
but by insufficient
and high costs
is low !_euse
of leather
on the quality
Livestock
One
and a l_w rate of slaughter째
P_w Material
tively
its labor
is impeded
or equipment
raw hides
on one shift
simultaneously.
production
lulowzhow_ labor
square
one firm reported
among
as they could not all be employed However
operating
of eight hours,
rotating
from
i_ivestments in equipment.
six days a week째
two shifts
has the
flayin_
animals
(taking
of the hide or sk_%)
also result
through bad
flaying
in substantial
of
losses.
has one or Kwo cut or
IV-18
flay marks damage.
loses value
The improvement
the modernization _he number
chemicals
would
even
will
not produced
improve
(UNC_,
if raw hides
still have
locally.
the quality
on in
of
6/)
available,
tanninB
as these are
used for tanning
leather
for a_. at least 20% of th_ total manufacturing types
luddin /3-_/).
Tanners
of leather,
raw hider
this :to the high
tariff _mposed
Using
Since
th_ development it may mean
importing
and that leather
on these
of the high
goods째
that tanners
domestic
will have
resource
cost at 9.55
exchange
rate of 9.21)
Given
the tradi-
a burden
primarily
%_Le effective
of
and to rate of
estimated
at 145% and in
(compared
to a shadow
(World Bank / _8,/). Bautista
the DRC of the tanning output data% and 11.27
for two firms, using
importing
this imposes footwear
to
hider and skins
supplier.
leather products.
on leather has been
industry will
to continue
of protection
domestic
1974 input
(Jama-
and attributed
of the livestock
using industries_
a lesser extent
estimates
and chemicals
users may have
tional structures
protection
complained
raw or semi-processed
_o supplement
the leather
as 80%.
cost
Industries
take many years continue
as much
interviewed
cost of imported
leather
depends
An increase
to be imported
Chemicals
and for certain
Leather
_
were
to actual
techniques
of the slaughterhouse.
and fiayin_,
Finally
6.0
of flaying
of abbatoirs
slaughtering
account
out of proportion
industry
at 9.79 using
and 12.13 respectively,
1977 establishment
data.
/!
/
IV-19
The strict that it would rather
implication
be more
than produce
This burden been
ew_!uated
forei_l
it at _9.55.
industry output
products
products
at 6.43
data.
firms were
at 9.88
footwear
firms
clamored
(at F9.21)
have
or saving (EPR is 18%)
estimates
using
and 5.7_while
industry
therefore
(EPR is the Dr_C for
footwear 1974 input
for two firms
it was 5.75 and 4.18 /IL/ must be r_lieved
ta1%ning industry.
of the A World
of recommending
should be pormitted
for the
to import
that
raw materials
pro<lucers interviewed
have
same.
and Alternatives of the rather bleak
tanxling industry industry
it doesn't seem
collapse with
Bank recommends a high-quality
industry.
the entry
a long term leather
the governments
tanning
which
and the leather
Some of the leather
Inspire
with
Bautista
has gone to the extent
duty free°"
Prospects
by industries
it is even lower _6.25
of an inefficient
Bank mission
7.0
leather
(World Bank_ / __/)
in generating
industry
These industries
also
is to suggest
At the firm leve]_ DRC for two leather products
in the leather
_xport
=o impor_
and 6.53 respectively_
computed
deadweight
figures
DRC for foot,;ear is _6o47
(World Ba_nk /___/)
the leather
•"all
borne
as efficient
and for leather 27%).
economical
is being
_xchange.
of these
Bautista
industry
picture
realistic
program
r.anning industry to develop
/ l_ / says that
must improve
to just let the
of imports°
(lO year)
efforts
in the leather
which
The World for developing could
tie in
the livestock
in the long run the
its productivity°
Although
IV-20
there has been industry,
very little
investments
only 325 million
_n individual stantial.
between
firm standpoint
The ten firms
ledged
the difficult
An UNCTAD
labor
stage.
of
the industry.
Beyond
leather
the state of the material the tanner limited he is to produce).
and skins only the process-
the wet blue stage,
while
chromium
to be imported,
the competitive
internationally
is not so for semi-processed
coun-
and does not require
and may have
Fuzther_re_
for finished
of hides
Up to this stage
intensive
are expensive
are required. tion
an intention
even if all of them acknow-
processing
machinery.
salts, which
expressed
study has suggcested that developing
up to the "wet blue"
expensive
from
these mey still be sub-
problems
tries should undertake
ing is highly
1960 and 1975,
interviewed
to move out of the industry
on the leather
situa-
is very keen it
skin and hides.
(The nearer
is to the raw skin_
the less is
in his choice of the kind of leather This
presu_es
hides is not as bad to exclude
t_t
the quality
it from the export
of market.
(UNCT A possible
future
scenario
may hays the followin_
elements : i.
Export
grade hides
the wet blue stage
and skin may be processed by both
large
until such a time that sufficient hides is available that
and the level
the finished product
indicated
earlier
hein? produced
but
and small quantity
up to tanners
of quality
of skill is such
is of high quality.
hitch quality this implies
leather
As
is capable
speciali_ation
and
of
IV-21
2.
adeq,,ate supply
of raw materials.
Low grade hid_
and skins
for domestic especially
consumption째
semi processed of iea_her.
efficiency째 products
market,
trial uses
Liberalized
they improve
their
This will benefit
and
of leather
down the price
producers
out of
productivity
the footwear
and ultimately
of leather,
imports
should bring
This may force marginal
industry
a market
end of the footwear
and raw hide_
unless
into leather
l_ey may still have
in the low price
leather products
business
may be processed
and
and leather
the consumer.
cog. gaskets,
Indus-
may also be inves-
tigated. 3o
Imports export
_.
General i.0
of leather will oriented
be liberalized
footwear
and leather
especially
products
for
firms.
llsna_ement Practices
Ownership Most
and Management of _he respondent
s_ven out of the ten firms respm_sible the critical process_
for the various aspects
product
firms
the owner
of production,
quality
and choice
of information
Ther_ is little
to indicate
government
professional
sources
consultants,
(mostly
to as source
on
tamping.
of information
of machinery or eight
or three are the suppliers
Even in
such as the production
in seven
agencies,
In
is s01aly or jointly
raanagerial functions.
is the "source"
cations,
are family owned.
firms째 as publi-
in only two
of chemicals)
the technical
=he owner
pointed
aspects
of
IV-22
2.0
Planning In most of the respondents budgeting fairly
is d_Le.
Considerin_
large one would
controls. ability
of small
could easily
tanners
overcou_
accouz%ting system. variance
analysis
large
expect
tanners
more planning complain
to price more
The use of sta_dard
It is disappointing
to note
and balance
with reportorial
requirements
production
Costing
while
generally
prepared
cash
one said it was {
of governmen_ t_,_re other
inadequacy
that need However,
probl_ms. mmended
is very
and
Again low.
only four firms
shells
there
to be overcome,
productivity. may also have
are so many
it from other
e og. raw materials
are a cause
technical
technical
may not be worth
it is also probably
Subsidized
may be the result
Upgrading
competence
inadequacies
to improve
Managerials
making
practices
facing the firms째
or managerial
and managerial
on sales
and purchases.
of capital;
_he [Joint of view of the firm when
shortage.
reports
In
flc_; forecast.
of the problems
constraints
agencies째
firm said it had some financial
Some of the poor managerial
competence
industry째
firms prepared
sheets_only
in decision
ale_ost every
prohlem_
They
and
to the tanning
and inventory
th_ use of this r_ports Finally, whil_
the
n_%king%the rest were si_7,1y complying
only six to save1% firm wer_ col!ections_
about
and
the cost
.
used for decision
and
competitively.
this if they improved
may be applicable
income statements
little planning
that some of the firm are
probably
For example,
very
true that technical for some of the firms
assistance (Bautista
has been reco! l_/)
to be upgraded째
IV-23
â&#x20AC;˘,
Financing 1.0
- Sources
Sources
and Probl_m
of Financing
Inadeqdate respondents. financing
Although
is a problem
to 90
Supplier_s
of average
credit
cases extended
For the five respondents cited
borrowing
ranged
cases the borrowing estate
zates
charged
from other sources 2.0
from 350000
Problems
one said
The amount
to _390000°
receipt
out of ten respondents
in borrowing.
were
Fifty
by real
on imported
12% to 21%.
of
In all
chemicals.
Borrowing
their poor
who said they encountered
percent
financial
mentioned Other
problems while
some
high interest
difficulties
condition,
documentation
Six out of the nine
them from borrowing
it did not,
said they encountered
requirements,
and the cost of processing.
prevented
of 3 yearsp
was not significant.
rates and collateral mentioned
able to borrow
in four instances
from
and
in Financing
Nine problem
ranged
_o 120 days.
rang_.d from _i0,000
response,
was secured_
30
(10%) cited.
who were
and in one case by trust
Interest
rate
had no
typically
was not required
credit terms
seven years and the other average
credit
Collateral
in only one case was a discount
three
able to borrow
terms were
suppliers
to as high as FI20,O00.
from banks,
able to secure
only half were
days but in some
The amount
cited by most
all of them were
from suppliers,
from banks. days
financing
respondents
also said that this the three others
said
IV-24
The charac=er as to require
of the production
a sizeable
and receivables.
sable
three
to keep at least
therefore tional
Summary
(jamaluddinp
funds made
available
capital
to be
indispen-
stock
of chemicals
It is not surprising
they would
use addi-
machinery
of raw
was also cited.
and Recommendations
Findings It is apparent
in the leather likely
from
industry
continue
the foregoing are facing
to do so.
leather
products
problems
analysis
industry,
and will
these problems
as the leather
More
that firms
difficulties
Furthermore
over into tile using industries
i.i
is such
to them for the purchase
Put.chase of additional
of Findings
Major
!. __ /) said
itself
It is
to six months
that most respondents
materials.
io0
of w6rking
tied up in invan_ories
and raw materials.
G.
amount
process
specifically
spill
footwear
and
the major
are:
Inadequate
supply
and skins. capacity
and poor quality
This is th_
utilization
of domestic
principal
and output
constraint
hider
on .higher
and possibly
producti-
vity and efficiency. 1o2
High
import
chemicals.
cost of imported Leather
hides
tealners have
and skins
and tanning
augmented
domestic
imports.
Already
ÂŁ
supplier
of hide_
expensive_
the cost is pushed
Nevertheless because
and skins with
the industry
of the even higher
This shelters competition
the demestic
and encourages
higher
remains tariff tanning
by tariffs.
heavily
protected
on finished industry
inefficiency.
leather.
from foreign
IV-25
i. 3
Inadequacy
of capital
this is a problem more
acute
common
financing.
to many industries
for the tanning
that the industry one with
and available
industry.
problem
it may be
It would
is not a particularly
its raw materials
While
seem
"bankable _'
and low capacity
utilization. 1.4
Inadequate efficient precise
technical operation
chemical
experience. operating 2.0
and managerial and quality
operation
Given
skills
output.
that requires
the circumstance
inp managerial
skills
to achieve
Ta_min_
is a
know-how
and
in which
e
it is
are also required.
Sons Recommendations 2.1
The problem
of the leather
long term solutions째 may be solved with While
livestock
government
tanninK
The problem increased
production
support_
i_dustry
of raw hide supply
livestock
is already
ti will
require
production. receiving
take time before
its
,
impact would coordinated
be f,_It. system
slaughtered
for gathering
livestock
who slaughter value of hides
In the meantime
livestock
hides
are unaware
and skins.
proper
and value째 preservation
to boosting and skius.
Many
of
people
of the economic
Much less are they informed
Maintenance of hides
and improving
a
and skins
must be devised.
on the proper way of flayi_Ls the hide quality
however
to preserve
of livestock
and skins
quantity
its
and the
are also essential
a=id quality
of hides
IV-26
2.2
It may still be necessary processed
hides
or even
allevia_e
problems
using industries, product. tariffs
Entry being
to improve quality
to import finished
on supply
the efficiency
for those who will be considered. is
also
Duty
2.3
The problem leather
some marginal
of inadequate
tmlning
industry would It would
probably
facilities
it appear investments capacity.
given
of imported itself
inputs
arrangements earnings
could
of _he footwear
are recycled
back
will
earn
special
financing
industry. should
require
Improverelieve
Neither
_xchauge
does
of
requirements
as the industry
foreign
exchange.
foreign
and leather
to the tanniDg
some
substantial
underutilization
so that
to the
=lore capital.
may be a problem
be made
This
Philippine
in the long run.
the foreign
does not directly
even
of producti-
every
tanning
its pres_%t
Financing
might
is not unique
say it needs
that the industry
especially
a long term.
and efficiency
problem
and the
producers.
fair to develop
ments in productivity of the financial
over
Almost
for th_ leather
tanners
to the raw materials
capital
business.
not seem
products
the improvement
vity may also only be achieved may eliminate
domestic
free import
their
their
substantial
of their operations
reexport
term,
for leather
without force
As the solution
lung
This will
if they are to export
of such materials
of their product.
problem
l_ather.
and quality
especially
imposed will
raw or semi-
exchange
products
industry.
However,
industries
IV-2 7
2.4
Technical
assistance
to improve
efficiency
and quality
can helpo
There
less assist,
have
ti%eir associations
part
in government.
the technology
is an area where
is no known
much
productivity,
aBency
the ta_lers.
As noted
of livestock
the tanning
process
associations
with
Managerial improve
and again
vanue for this.
owner,
is a very precise developir_g.
beginning
with
Dissethe
till the final stages of
itself
can be done through
the assistance
practices
counter-
by one tannery
leather
practices
maintenance
the tanners may
they have no clear
in tanning
of proper
that regulates,
While
one and one that is continuously mination
government
of government.
in the tanning
_he association
the
firm may have
may provide
th_
to
V-i
V.
LEATHER A.
PRODUCTS
Oyerview
ZNDU_TRY
of the Industry.
This study
covers the manufacture
rily of _enuine leather discussed
in Chapter
but excludes
Ill.
of products
made prima-
fbotwear which
This study would
is
cover only a s_ub/
set of PSIC 32321 and 32329 which products covered purses
made of leather
and leather
by this study include and similar
Leather industry organized
bags,
the manufacture
substitutes. luggages,
of
Products
belts, wallets,
products.
products
with
cowers
manufacturing
is a labor
good export potential _.
as a small
scale
industry
intensive
Moreover_ (UNCTAD
it can be ). For these J
leather
products
for developing
manufacturing
countries.
if the problems if the correct
Its development
that beset incentives
_he industry and policies
study is aimed at identifyin_ and suggesting
measures
While many studies and the leather
.... B.
leather
goods apart
General
Characteristics
io 0
industry
can be enhanced
can be understood are adopted.
such _roblems
for overcoming
have been
tannin_
may be an apprpriate
-reasons
and
This
and constraints
these
difficulties.
done on the footwear industry
industry
there
is not. much for
from footwear. of the Sample
Scope For the study turers were
interviewed.
fied as leather leather
twenty nine
products
substitutes
Most
leather
_enufac-
of those who are classi-
manufacturers
(vinyl,
products
plastic_
actually
use
etc.) and di_ not
V-2
fall within
the scope of the study.
number of respondents types of iea_her
engaged
products.
able to give reliable costs and other
information.
while
firms
industry
practices
firms
of record keeping reluctance
Nevertheless
gathered
in
enough inform-
to form some impression
of
and problems.
Organization
and Ownership
Twenty
six, or ninety
respondent_
quantities, For small
it was their
such information,
ation may have been
are orgoni_ed
percent as single
of the twenty nine proprietorships
and
the rest are corporations.
All of the firms are being
operating
owners째
by their original
firms, the person 3.0
on prices,
to the inadequacy
for the larger
of some
Most of the firms were not
this could be traced
divulging
2.0
in the production
figures
financial
Table 4.1 shows the
interviewed
In twenty five
was the owner
himself.
Years in Operation Table V_shows the number one-half
of years
the distribution they have been
have been in business
and most have been ir_ operation There are two f_rms
of respondents in operation.
for five years for lO years
that have been
by
Over
or less or less.
in business
for over
25 years. 4.0
Location Most of the firms inter_viewed were Metro Manila
area, particularly
located
in Bulacan.
Leather
Products
See Table
Industry.
located
Marikina, V.3Location
with
in the some
of Respondents,
V-3
TABLE V.1
NUMBER OF RESPONDENTS ENGAGED IN MANUFACTURING AND SUBCONTRACTING OF LEATHER PRODUCTS, BY PRODUCT TYPE
Number
Product
T_
of Firm I/
% to Total Respondents
Manufacture
Sub-Contract
Manufacture
Sub-Contract
io
Bags
18
I
18%
3%
2.
Wallets/ Purses
17
i
59
3
3.
Belts
20
4.
Footwear !/
8
i
28
3
5.
0 thers 3/
9
i
31
3
I/A
firm can be in more
69
than one product
type.
2/In most cases where footwear is reported small percentage of production.
3/Other leather products mentioned volume) include holster, gloves,
it constitutes
only a
(but relatively insignificant industrial bags, jackets.
in
V-4
TABLE _.2 DISTRIBUTION
OF RESPONDENTS
BY YEARS ...... _,._OPERATION_ LEATHER PRCDUCTS INDUSTRY
Years of Operation
i -
Frequency _I/
5
16
6 - lO
8
27.5
ii - 15
3
10.5
16 - 20
-
-
21-
-
-
25
25 and over
2
T o t a i
!/All
%
respondents
are original
29
owners.
55%
7
100%
V-5
TABLE
Locationof
Main Office
First District,
Second
V.3 LOCATION OF RESPONDENTS LEATHER PRODUCTS INDUSTRY
District,
Metro
Metro
Frequency
Manila
_anila
Third Dis trier, M_ t_,_ â&#x20AC;˘ ik_,_ila Bula can
"!_ .'_t a I
5
i7
%
17.3%
58_6
.3
i0.3
4
13.8
29
100.0%
V-6
5.0
Size by Labor
Force
Fifty percent workers labor
and Sales of the firms
or less and only
the two largest
force in excess of I00.
of Respondents
T_ble V.5 shows
household
members
Force,
the extent
in the production
members
i.e._ management
firms had a
perform
Leather
Products
of employment process.
to be low but the figures
where household
force of i0
See Table V.4 Di_tr_bu_i_m
by Size of Labor
Industry.
may appear
of
The figures
do not include
proprietorship
cases
functions_
and administration.
Table #.6 shows
a rough idea of the distribution
firms by their level
of gross
ly, seven respondents C.
had a labor
were
_ales
unable
in 1980.
of
Unfortunate-
to give their sales.
Production 1.0
Raw Material Quality The production activity
and Supply of leather
that can be operated
_s shch_ it isan industry that want activity
goods is a labor even on a small
that is appropriate
to _:enerate employment and foreign exchange
to become
competitive,
conscious
export market_
scale._l_._CTAD/__,')
for countries
and entrepreneurial
earnings.
especially several
intensive
For the industry
in the highly conditions
have
qualityto be
met. As discussed quality delivery leather
in the following
of both material is critical. products
section
and workmanship
These
manufacturer
might
on marketing,
and on-time
be difficulty
to atttain
because
for our of the
V-7
TABLE V.4
S,i,ze_ o f Labor i -
DISTRIBUTION OF _ESPONDENTS BY _IZE OF LABOR FORCE, LEATHER PRODUCTS !NDUSTI_f
Force
Frequ_ey
%_._
5
5
6 - i0
i0
35
ii - 20
5
17
21 - 50
5
17
51 - I00
2
7
2
_2_7
lol - _ T o t a i
29
17%
100%
V-8
TABLE V.5 EMPLOYMENTgOF HOUSEHOLD _EMREP_S IN PIIODUCTION •PROCESS
Number of Household Members Employed in Production
_
0
13
45%
ii
38
3-4
2
7
5 - 6
3
i0
i-
2
T o t a i
29
i00%
V-9
TABLE V.6
DISTRIBUTION OF ?IP_S BY LEVEL OF 19S0 G_OS_ SALES, LEATHER PRODUCTS I!.>_U.STRY
0
-
20,000
i
3%
20,000
-
50,000
2
7
50,000+ -
100,000
6
21
100,000+ -
500_000
6
21
i,000,000
2
7
1,000,000+ - 2,000_000
2
7
2,000,000+-
1
3
2
7
7
24
500,000+-
3,000,000
3,000,000+
No answer
To t_ i
29
loo___i_,
V-lO
inadequate
supply
Inadequacy
of supplies
met.
and poor quality
(In a market
season,
may mean
where
of domestic
leather.
that deadlines
can't be
fashion
and style
delays may be critical.)
or inconsistency
in quality
change by the
Poor quality
leather
may lead to a rejection
of
the product. The problem leather
tanning
livestock
industry
industry
Inadequate
where
quality.
supplies
they said that with the cost of their
time,
have
etc.)
goes back to the back to the
and skins originate. and skins
result in
of adequate
:i_ _l.d_,.B_.._-_ leather
tariff on finished
becomes
the accessories produced
but
leather
incompetitive.
that the manufacturer
as the locally
and quality
_(.Jareal Ud_i_/3_.,
turned to imported
the heavy
They also have to import frames,
hides
Development
products
not only in leather
further
the hides
may take
Some respondents
quality
and even
and poor quality
poor leather 1 ea ther
of poor leather
It is
have a problem_ (buckles,
locks,
ones are not of
good quality. 2.0
Craftsmanship
and Quality
The craftsmanship another requires
crucial
training
ing process
firms interviewed skilled
that goes into
the product
and so is quality
of workers
itself
labor may result
already
element
Control
control.
This
not only in the manufactur-
but also in management.
in inconsistent preferred
is
quality.
Unskilled Most of the
to accept workers
but they also accepted
that were
trainees
and
V-ll
apprentices.
(This may be due to the rapid
turnover
workers
is another
2 firms was
which
the training
problem.)
done through
trade or vocational
and only one firm dealt with In only
firms quality
on product
control
well be no control
standards
rously 3.0
Product
(Most statements
enough
on product
and in
(which could
very
are paid on a
but there was little
aware of
evidence
or applied standards
that it rigo-
were
vague.)
_esign
It has been pointed is not important
out that originality
even in the international
It is co_pTacticm â&#x20AC;˘
themselves
well
there a sepa-
In most other
Onl,y 15 said they were
the standards
agencies.
by the owner
since most workers
piece rate basis.)
schools
training
quality.
was exercised
a few cases by the workers
they knew
government
seven out of the 29 firms was
rate staff to check
product
In only
of
that the styles
_copy
products,
and design
of design
market.
_(uNCTAD/_.
What is important
are current
and up-to-date.
.7"
This meams_ th_Z, trends
producer
in the major
establishing something can do.
sensitive
a presence
that only It has been
ing countries
leather
stick
to changes
must be very goods
sensitive
market.
in these markets
the large therefore
producers
This may mean and this is
or government
recommended
to traditional in fashion.
to
designs
!(VNCTAD
that developthat are not /_>.i
V-12
4.0
Mechanization Finally intensive
even if leather
certain
requires
investments
for example, product
aspects
must
must be mechanized
bad sewing machines
and equipment.
virtually
and half had skivÂŁng range
more, it was not surprising
is labor
and this
particularly
While
very large firms had wider
D.
manufacture
be modernized
in facilities
is man produced.
to 20 years
product
Sewing,
where
the
all respondents
machines
only
of equipment.
the
Further-
that some equipment
were 15
o_d.
Marketin_ 1.0
Channels
of Distribution
Although or another iesther
13 of the 29 respondents
exported
products
their
products,
the market
for
is still
primarily
domestic.
Only
eight firms exported firms
in 1980.
(in terms of labor
of its output
and there were
the bulk of the output
other
firms
exports
V.7. try).
proportion
Types of Market
put directly middleman
to export 80%
two or three other was exported.
outlet
scale Outlet,
firms coursed
to the department
in the case of small
companies
But for the
or non existent.
are domestic
of the output
by small
The larger
was able
were marginal
The most preferred
them especially
One of the two largest
force)
where
and a large
have at one time
wholesalers
is coursed
manufacturers. Leather
thru (See Table
Products
Indus-
the bulk of their outstores. producers
The need my
for a
stem from
TABLE V. 7
Column
(l)
TYPES OF MARKET OUTLET,
(2)
LEATHER PRODUCTS INDUSTRY
(3)
(4) Number
Type of Outlet
Frequency Using this Type
% to Total Respondents
Using this Type Exclusively
(5)
(6)
of Firms
Ranking This Type First
(7) % to Column
Using t_s as Mmin-Outlet
Column 3
Column 4
(S) I Column 5
i.
0w_a Retail
16
55%
3
5
7
19%
31Z
44%
2.
Other Retail 2/
12
41
4
5
8
33
42
67
3.
Wholesaler _3/
13
45
i
ii
8
8
85
62
4.
Exporting Firms
8
28
-
5
4
-
63
50
I/A
firm may use more
than one type of outlet.
2--/Otherretail includes
3/Wholesaler
includes
department
agents,
steres,
middlemen,
tourist
shops,
etc.
etc. L_
4/}lain outlet
refers
to outlet
handling
the largest
percentage
of sales.
V-14
an inability
to market
are better organized important sreater
the product
larger
to do their marketing.
reasons
for preferring
convenience
of dealing
and the faster
whereas
The most
wholesalers
with
were
were
the
only a few customers
turnover of the merchandise.
ever felt that wholesalers
firms
able
Most how-
to bargain for
lower prices. Another
principal
outlet
they are also able tO buyin however_
respondents
goods on consignment turnover.
are department
bulk.
and this resulted
tail selling
bM themselves.
tuznover_vas
_DSlOw
outlet
their
in a rather seemed
slow
to be re-
Respondents
felt that
to effort
and capital
relative
in maintaining
though many still
In a few instances
said they just had to leave
The least preferred
involved
stores as
their own retail
sold on a retail
outlet.
basis
Al-
the quantities
are marginal. A_ important promptness
by which
able considering capitaliMed. outlets
were
relative 2.0
Pricing
facto[
in preferring
the buyer
paid.
that most of these
However, quicker
an outlet
This is understandfirms
it does not appear
or slower
was the
in paying
are under that certain its purchases
to others. and Selling
Terms
Forty five percent able mark
up over
equal number
of the respondents
cost in pricing
their
tacked on a fixed mark
added
product.
up while
a variAn
the rest
V-15
adjusted
their prices
set by the buyer. Products
_e
Industry.
this is usually
In â&#x20AC;˘firms where
mark
on
and expensive
Practices,
the mark
the market
used
materials
outlet
Leather-
(retail
and on the
(complicated would
or were
up is variable,
ups than wholesale)
design and materials
designs
market prices
Tabl_ V._ Pricing
dependent
sales having higher style,
to prevailing
styles
have higher
and
mark
ups.) A large number
of firms
and for most of these
firms
See Table _ Distribution Sales to Total just leave lets.
Sales.
on the finances capital
aggravatedby responded demand
access
that sales were capital
demand during
cing purchases December
and financing
extended
a few months
be discussed cing.
by Percentage earlier
sales
put a heavy
strain
(27 of the 29
which
at different
Christmas
This may be
pattern
seasonal)
create uneven
times
of the year.
time may require
costs
finan-
a few months before require
after December. detail
retail out-
most of whom have limited
receivables
in greater
with
practices
of Credit
some manufacturers
to financing.
and production
on credit
were substantial.
on consignment
that these
the seasonal
for working
The heavy
As stated
of these firs,
and limited
selling
credit sales
of Firms
their products
It is clear
reported
that t!_ese be
These
in the section
issues will on finan-
V-16
T#BLE V. 8 PRICING
PP.ACTICES _ LEATHER
PRODUCTS
Frequenc_
i.
Variable
markup
2.
Fixed markup
3.
Adjusted
4.
Buyer
on cost
on cost
to prevailing
..
13
45%
13
45
2
7
prices
determined
INDUSTRY
1
T o t a 1
29
100%
V-17
TABLE
V.9
DISTRIBUTION OF FIP_4S BY PERCENTAGE OF CREDIT SALES TO TOTAL SALES_ LEATHER PRODUCTS INDUSTRY
to Total Percentage
of Credit
Sales
No Credit
_
__s2ondents
3
10%
-
i -
10%
-
ii -
25%
2
7
26 -
5O%
5
17
51 -
75%
8
28
75 - 100%
ii
38
29
100%
T o t a i
V-18
3.0
Prospects
in the Export
The market
Market
for genuine
Philippines
is threatened
tutes which
are often
facturers sustain
,my have
them°
requires
leather
articles
in the
by the use of leather
cheaper.
Leather
products
to turn to the export market
However
that certain
penetrating conditions
substimanuto
the export market be met.
These condi-
tions are: i.
Workmanship
2.
Quality
3.
Delivery
4.
Price
The details
- high quality
and consistency
of raw materials - on time delivery
- competitive
is a must
and reasonable
of these have been
discussed
(_G_kD_)_
_
/_ iJ
in the preced-
ing section.
loO
Extent of Owner
Participation
Small scale
operation
turer should not preclude product ment.
quality These
only locally
in Management
of leather
the improvement
and competitiveness
are essential but more
products
of productivity,
through
if the industry
importantly
the managerial
that obtain
firms.
Table V.10shows =mnag_rial
the extent
functions.
owner participates again somewhat
better manageis to grow not
in the expbrt market.
â&#x20AC;˘ .I0 tO V,I_ _'_ give an idea of in the respondent
manufac-
of owner
practices
participation
In over one half of the firms
in various
understates
managerial
the picture
Table
functions. because
in the This
typically
V-19
TABLE V. 10 EXTENT OF OWNER PARTICIPATION IN MAJOR IiANAGERIAL H/NCTIONS, LEATIIER PRODUCTS INDUSTRY
Where Functional
Area
Owner
Participates
in Managerial
% to Total
Function
Production
18
62%
Finance/Accounting
20
69
Marketing
17
59
Purchasing
14
48
Administration/ Personnel
18
62
V-20
the wife or the children functions. functions
Only
are also
responsible
in the fairly large
exercised
by persons
for some
firms were
other
these
t_mn the owner
or
his family. Table V.ll cular
aspects
,shows
of production
of the owner especially process
and product
the owner
th_ role of the owner indicate
in choice
quality.
turn to oth._
the domirmnt
of machinery,
Only
sources
in parti-
in product
role
production design
of information
does
such as
trade journals and customers. 2.0
Extent
of Preparation
TableV,12mmd use of business firms
percent
reports.
submission
Almost sheets
but Zhese
most respondents, financial
prepared
were
agencies.
Only
of the financial
preparation
and business
reports
statements
mainly
for
20% of those making.
cash flow state-
problems
cited
and more important becomes
60
this for deci-
used it for decision prepared
and in-
Only
income
prepared
and
of the
on production
they utilized
the 29 firms
Iu the light
fourths
and purchases.
all firms
this report
Only eleven out of
three
reports
said
to government
wl_ prepared
3.0
prepared
of them however
and balance
ments.
Around
salss and collection_
sion making.
Reports
.V._ show the extent of preparation
interviewed
ventory,
and Use of Business/Financial
by
use of
inoperative.
Plarming It should be noted being done by most
that very
firms째
little planning
Only eight
is
of the twenty nine
V-21
TT_LE
V.IISOURCES
OF INFOP_iATION ON DESIGN
#J']DTEC|LNOLOGY, LEATHER INDUS TRY
Area
Sour qe
PRODUCTS
of _p!icaCion
Production
ProduCt
Product
Choice
Process
Design
Quality
Machinery
21
16
20
27
i.
Owner
2.
3ouznals/ Publications
5
17
i
3.
Customers
2
14
4.
Designers
2
5.
Workers
3
of
% to Total Respondents
72%
55%
69%
93%
i
17
59
3
3
5
-
7
48
17
-
6
2
-
7
21
7
-
4
4
2
lO
14
14
7
Frequency of Firms l'reparing F_port
Type of F_port
i.
Production
2.
Sales
3.
Purchases
4.
Statement
and Inventory
and Collection
6.
Statement of Assots Liabilities
Cash Flo_;
21
72%
22
76
22
76
27
93
25
86
ii
38
of Income and
Expense
5.
% to Total KesRondents
and
_ea_o_s
i_ecord_Type of R_port
lo
Production
_
Decision
Sub_ission to Government
makin_
Agencies
Borrowi_
% to Fi_ms PreparingReport
and
Inventory
i3
3
1
62%
62%
14%
5%
Sal_s and O011ection
13
14
5
I
59
64
23
5
5o
Purchases
15
12
3
i
68
55
14
5
4.
Statement of Income and 5
6
26
4
19
22
96
15
5_ Statement of _sse=s and Liabilities
6
5
24
4
24
20
96
16
6.
3
g
1
2
27
73
9
18
2.
Expenses
Cash
Flow
13
V-24
firms prepared
soma study
and only nine currently planning
so much
example,
they might F.
shape
into the business
budgets.
a result
(in supply
i.e.,
than the
are in.
Faced
of raw material
they can't
th_-k it is futile
But lack of
of rather
the businesses
uncertainty
or capital,
going
prepare
may really be more
cause of the poor with
before
to plan
collect
for
on time)
at all.
Fimance 1.0
Financing
Problems
Inadequacy lems
of capital
is one of the prevalent
cited by the respondents.
sm_11-scale
entrepreneurs
own also have limited credit, worsen
increasing
The data suggests
with limited
access
to borrowing.
cost of materials,
their financial
capital
problems.
lems that have been mentioned
probthat
of their
Se_ling
slackening
demand
Table V._14present
in securing
on
prob-
additional
financing. Collateral problem assets
requirement
specially
that can qualify
is often required banks
by small
would
as collateral.
it could
financial
Since collateral institutions,
be that such small
have very limited
Table _._I$ Source
as a significant
firms who have very little
by organized
for example9
operators
is mentioned
of Financing,
access
Leather
scale
to such sources. P_oducts
Industry,
seems to bear this out. Other
problems
reuqirements,
that were
mentioned
cost of application
were
and poor
documentary
financial
V-25
TABLE _V.14
PR(_DLL_S IN $E_qT_,_i__ FINA_CINC, LEA_EI_ riLODUCTS I_,_USTRY
% to Total Prob l_m
i.
Collateral
2.
Documentary
3.
4.
Freq uen cy
requirements
requirements
ii
Respondents
38%
B
28
Cost of Application/ processing
5
17
Poor financial performance
5
17
5
17
int_rest
condition/
5.
High
rates
6.
Maturity
5
17
7.
No problem
8
26
V-26
TA__LE _._5 SOURCES OF FINANCING, LEATHER P_ODUCTS INDUSTRY
With
Collateral
Without
% to Total Sour ce
_
Responden ts
Supplier
7
7%
Bank
7
24
2
Collateral
T o t a 1
% to Total Fr_
Respondents
16
% to Total _
Ras]>onden ts
55%
iS
62%
3
i0
10
34
7
5
17
7
24
-
-
3
i0
3
i0
1
3
-
-
1
3
Private DDney lender
Relatives Friends
Finance Companies
V-27
condition.
However
it must be pointed
out that eight
firms said they did not have _._y problems and that three companies on a clean basis.
_Tere able
to borrow
This is indicative
that exists between
small
firms
in financing from banks
of the wide
in the sample
gap
and large
on_.
Sources
and Terms
of Financing
The principal Eighteen pliers'
source
of •credit were
suppliers.
of the twenty nine respondents credit.
The amount
ranged from a low of _i,000
firmnced
availed
of sup-
by suppliers
to,:as much
credit
as 3500,000.
The
,'-.7'
•typical amo_mt
is in @_erange
of/_3,000
Around half of those w_':availed that suppliers
granted
discounts.
3% to 10% and were ty_ically ,
is 30 to 6Q;days
with 52Z Of
f_
said
::_scoimtS
ranged
from
The typical
credit
the tel--iS lponses falling however
•-bel,_oted
_ _
was a post
_
in"_
dated
Private
_II
'I'
that
term
in
the term
•some
I
I
rare
check
case_
moneylenders
not require collateral. _h_l_liicit
(O_ell?fil_l reported
small operators
o
n_
t_
It is well
,
_
source
in supplier
funds
_
I
a_
that did
credit
that is very
is also excessive.
31 million
raise
h_l_
know however
at 3% per month.)
can only
_
I
S_iier .
moneylenders
borrowing
3200,000
In
were another
rate of interest
hig_illahd that for private ;. , ,
and another
_
_y
i
IiI_
_l
in
_
Ui_
f
_
_eq
_
credit
i[ 1
l I
l_ n
of _supplier
••
this range!:.••It should _i
5%.
to _7,000.
,
l'
.0
at 30% per year This means
that
at very high cost.
V-28
Furthermore component ancing
since
only
the entrepreneur
will
finance
the materials
still be press_for
fin-
of labor and overhead.
Close
to one thir_ of the firms
from banks with million.
amounts
Interest
but most were were
suppliers
ranging
rates
below
ranged
20%.
Arom%d
for 1 year o_ less while
ties from 2 to 5 years.
reported
from 25,000
borrowings
to one
from 14% to 36% per year; half of the borrowing
the other
Virtually
half had maturi-
all were
collateral-
ized by real estate. It has been mentioned credit
sales and lengthy
fact) have contributed respondents. granted a r_ason 3.0
that the large proportion credit
price
for prompt payment.
Uses for Available
concessions
Promptness
cited
of the
have to be
of payment
for preferring
use for additional
be made available
to the firm were
and of raw materials. of the small firms
was
one outlet
funds
to another.
had only
purchase
the most basic
and most of these were
incresse
production
material
supply.
that could of machinery
T_lis is not surprising
chase of raw materials
is a problem
problems
in
Funds
The principal
(sewing machines)
(consignments,
to the financial
Substantial
frequenctly
terms
of
could
be motivated
or at least Erratic
stabilize
availability
of the industry.
since most
equipment
very old.
Pur-
by a desire their
to
raw
of raw materiels
V-29
C. ¢onclusi,.sand _co_datlous It is recognized ficant potential earnings
that leather
insofar
are concerned.
some of the problems their potential. industry 1.0
poor.
future
product
imported
leather
afforded
the leather
especially
are inadequate
and when
is slapped
leather
and quality
is
eBpecially
in foreign
with
high cost_
poor qtm-
they
do import,
the
a'high
industry
to the
and competitiveness
manufacturer_
leather
request
issues
Raw Materials
to contend
exchange
that may limit
policy with
the efficiency
They have
domestic
the industry
- Supplies
of the leather
lity
study has indicated
the following
This affects
markets.
The foregoing
of Quality
and accessories
has signi-
and foreign
Therefore
Availability
industry
as employment
besetting
must address
products
tariff.
is a burden
The protection on the leather
produc_industry. 2°0
Penetration
of markets
manufacturer.
cannot be
The market_
USA_ is too sophisticated A credible
presence
by Philippine
located
producers
the Philippines
for small
either
is an adequaCe
leather
products.
tribution_
quality
control
in Europe and
must be established an association
have
or
to be created
and reliable
Assistance
will have
scale
scale manufacturers.
through
The image will
of quality
small manufacturers.
mainly
in _heir market
thru the government. that
done by small
supplier
in designs
dis-
to be lent to the
V-30
3.0
Assistance
in training
rial skills째
Craftsmanship
target markets product
is very
by good quality
labor and competent
Assistance
in financing
and original
Most
and have
and if they do it is at a high equipment
as managein the The
good value.
raw materials,
management.
to carry
fixed assets.
are under capitalized
sary.
important
need not be cheap but must provide
superior
better
as well
and so is cost competitiveness.
This can be answered
4.0
for technical
and adequate
receivable,
inventories
small
producers
scale
limited cost.
access
to credit
Investments
inventory
in
are also neces-
VI..2.
• ,Ma_o.r ,' .' ....Fin.din_s . . . ' ,, .', ,
:..... ...... .
•
.
:.: , ...... :
. The analysis..O..f.bo.th. 8e_onda.ry .and prima.z-]data-..revealed ,. , ,, , .[,,., .: .. • . '...,.... :,...' . , • , . : ..... .: - , ..
• .:
.......
a .number of major .!s.sues.an.d.areas of concern
among
the fo.ur :
in:dqst=ies covered hy the studies..._i
appreciation
.of these..
p._bl..ems,along with. their
antecedents
and pznbaDle
consequences,
is an essential
ingredient
of the critical choices
be made at both
the enterprise
findings
are common
among
and policy
that have
levels.
the four industries
•
to
Many of these
under study,
such
,<
as insufficient
financing_
adequate managerial Among
and technical
the other
industry
are:
and low,
fluctuating
associated
particular,
_jor
inadequate
The footwear usually
lack ofmarket
producers
of the wood-based
or unreliable
and uncertain
with
and in-
skills.
problems
industry
information,
furniture
supply of raw materials_
demand.
suffers
from many of the problems
small-scale,
backyard
in this industry
were
operations.
found
In
to b_ disad-
"V
vantaged
by the dominant
ratailers; leather;
inadequate
limited
establishments; skills,
supply
production
especially
capacities
by unavailability
cially leather); to _he small-scale
of the larger
especially number
information
of
and
to exports.
manufacturing of quality
and inability character
and larse
raw materials_
of marketin_
in regard products
of middlemen
of quality
and inadequacy
The leather troubled
position
industry
was found
raw materials
to penetrate
of production.
foreign
to be
(again,
espe-
marke_s
owing
t _u
.. •
,.,.''.'"..:'" •
, ,.... •
, _ .,..
.
,
•
.
•
Finaliy,.,in_atioifisi,i.are.
'.that •
is
beset
by
quality
.
, ;
the
• •,
suC_ma::j:,o,r:,"problewS
utiliza=ion
leather.itanni.ng
••
as"inad_o.uate
of d_mesti_e hides"ahd,.s_inS,
capacity
..:""
•
.... '
..
._industry •••,
•
suppiy..and!"poOr
thereby
adversely;'a£feCting,
and: producti)ity.;:"and •high cost: of..i._rted
hides and skins, "a_d" of"._an_ing .Chemicals .. ....
Policy
Directions Possible
policy
A few of these.broad small-scale
directions
industries
as a whole.
and the high
for the government assistance ancing.
transaction
to enable
these
A good number to specific
marized
below.
are applicable
with
industries.
it was noted
costs, it might
establishments
to
small enterprises,
associations
of policy
in the studies.
For example,
associated
and industry
pertain
explored
policy recommemdations
that, due to risk factors general,
we_
in
be worthwhile
to provide
some
to find suitable fin'. ' ..' L
recommendations,
however,
The more salient.ones
wo.uld_
are Sum-
Fo r, .the_ _wood-has ed furniture industry: . . ,. ...... , • . ..... . o
Provide .......
assistance
in the export promotion . - ...........
through
an adequate
market
research
export
development
effort .
and information
service ; o
E_olve
a "rational"
on prior
market
and supported sistance other
research
and .development effortS,
by adequate
relative
technical
advice
to technological,
_e.s_urce requi_ments initially
and .aS-
financial
associated • '
what would
pro.gram be,sod
appear as viable
with .
•
and
tapping .i.
export
[:
"
markets.
BIBLIOGRAPHY
i.
Bautista, Romeo Mo, and John H. Power and Associates, Industrial Promotion Policies in the Philippines, Philippine Institut-'---_fo---_ Development Studies, 1979.
2.
Board of Investment, BOI _nograph, 1972
3.
Jamaluddin, H.H., "The Philippine An Analysis", unpublished paper.
4.
_linis, Ma. Celia E., "The Leather Tanning Industry of Meycawayan Bulacan", unpublished thesis, University of the Philippines 1970.
5.
NEDA-NCSO,
6.
UNCTAD/GATT - International Trade Canter, Major Markets in Western Europe, 1971
Hi'des_,SAins and Leather
7.
UNC_AD/GATT - International Goods, 1969
The Market
8.
World Bank, .Philipj_ines: Policies, 1980
Philippine
"Industry
Profile:
Yearbook:
Trade
Leather
Leather
1983,
Industry
-
1982 and 1974
Center,
Ind_mtrial
Tanning
Tanning",
for Leather
DevelopmentStrateL_y
and
-