Page 1

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

-

/pidswp8301  

STUDIFS ON THE WOOD BASED FURNITURE, LEATHER PRODUGTS A_D FOOTWEAR MANUFACTURING INDUBTRIES Ok THE PHILIPPINES