Industry Study: Seizing

Opportunities to Maximize Growth

in Batangas City

Investment Enabling Environment (INVEST)

Project

Output No. 2.1, Deliverable 2, Program Area 2.3, Component 2

Submitted to:

U.S. Agency for International Development

Office of Economic Development and Governance
under Contract No. AID-492-C-11-00005

September 28, 2013

By Orient Integrated Development Consultants, Inc. (OIDCI)

FSS Building, 89 Scout Castor Street, Quezon City, Philippines
Tel. No.: 374.0757; Fax. No.: 413.232
 TABLE OF CONTENTS

List of Acronyms…………………………………………………………………………….... iii

I. Introduction .……………………………………………………………………………...… 1
A. Context of the Study …………….…………………………................................... 1
B. Objectives .…………………………………………………………….…………...... 1
C. Sources of Information and Methods of Analysis.............................................. 2

II. Context of Batangas City’s Growth Potential …………......………………………….. 3

A. Batangas City: A Brief Profile …………………………..…………………..…….. 3
B. Batangas City in National and Regional Development Goals
and Strategies ……………………..………………………………………………… 5
C. Batangas City’s Plan and Strategy for Economic Development …….…………. 6
D. City’s Competitive Ranking ….…………………………………………………….. 7

III. City Industry and Enterprise Structure ……..………………………………………… 8

A. Magnitude of Enterprises and Structure of Industry ……………………………. 8
B. Positive Factors for Industry Growth ……. ……………………………………….. 10

IV. The Potential for Industry Growth in Batangas City ……………………………… 12

A. Opportunities for Industry Growth in Batangas City …………………………….. 12
B. Potential Industry Drivers in the City: A Story for Consideration ...…………… 13
C. Other Prerequisite Conditions for Promoting the Industry Drivers ….………… 14

References……………………………………………………………………………….. 21

List of Tables
Table 1. Number of Enterprises by Major Sub- sectors, 2011- 2012 …………………….. 8

List of Figures
Figure 1. Breakdown of Industry, by Sub-sector, 2012 …………………………………….. 9
Figure 2. Breakdown of Registered Businesses in the Services Sector, 2012 ………..… 9

Annexes
Annex 1. Map of Batangas Province ..……………………………………………………..… 17
Annex 2. Map of Batangas City……………………………………………………………..… 19
Annex 3. Philippine Standard Industry Classification (PSIC)………………………………. 20

ii  
 
 LIST OF ACRONYMS

BPLD Business Permits and Licensing Division

CALABARZON Cavite, Laguna, Batangas, Rizal and Quezon
CLUP Comprehensive Land Use Plan
CPDO City Planning and Development Office
CTO City Treasurer’s Office
DOT Department of Tourism
DOTC Department of Transportation and Communication
DTI Department of Trade and Industry
ha hectare
INVEST Investment Enabling Environment Project
IRA Internal Revenue Allotment
LGU Local Government Unit
MSME Micro, Small, and Medium Enterprises
NCC National Competitiveness Council
NSCB National Statistical Coordination Board
OFW Overseas Filipino Worker
PPA Philippine Port Authority
PDP Philippine Development Plan
PEZA Philippine Economic Zone Authority
PSIC Philippine Standard Industry Classification
RDP Regional Development Plan
REID Research, Education, and Institutionalization Development
Ro-Ro Roll-on Roll-off (system)
SLEX South Luzon Expressway
STAR Southern Tagalog Arterial Road
TESDA Technical Education and Skills Development Authority
TEU Twenty-foot Equivalent
USAID United States Agency for International Development

iii  
 
 I.
INTRODUCTION

A. Context of the Study

Robust and stable industries play an important role in the development and growth of cities. As
engines of growth, they attract investments and provide impetus to the growth of the local
economy. The viability and strength of local industries dictate the rate and sustainability of local
economic growth.

The impact of sustainable industries encompasses their forward and backward linkages and
thus the areas where these linkages are located. They create opportunities for both upstream
and downstream economic activities to happen which, in turn, lead to further growth and
development – from the household to the firm, to the city, to the province, to the region, and to
the nation.

Cities vary in terms of the types of industries that had been developed and how these industries
contribute to the overall growth and development of the city. The Investment Enabling
Environment (INVEST) Project, which is a two-year undertaking of the United States Agency for
International Development (USAID), commissioned the conduct of studies that would examine
the leading industries that would propel the growth of the three partner cities of the Project. The
studies were triggered by consultations with city officials and officers of local business
chambers, which indicated that they were unaware of the potentials of the cities for industrial
growth and where these potentials lie. Information from the studies are therefore envisioned to
contribute in accelerating economic growth in the partner cities by directing potential or
prospective investors to sectors where their investments can yield better, if not best, returns,
and to guide where government, both local and national, can focus incentives and other
interventions to support and encourage such investment inflows.

The city of Batangas is considered one of the key cities with a huge potential for growth in the
Cavite, Laguna, Batangas, Rizal and Quezon (CALABARZON) Region. An examination of the
structure of its various industries and enterprises, the resources available in it, as well as the
opportunities it could tap is necessary and important to help its various stakeholders (i.e., the
local government unit or LGU, business community, civil society, and academe) to identify
specific industry clusters that would maximize its growth potential and on which it ought to focus
its efforts and resources to achieve its growth targets.

The industry for Batangas City was conducted by Dr. Piedad Geron and was undertaken as part
of the Project’s Program Area 2.3: “Managing Performance to Enhance City Competitiveness,”
specifically Deliverable No. 3: “Enhanced Positioning of Industries in Partner Cities.”

B. Objectives

The industry study for Batangas City is primarily intended to: (1) assess the industry mix and
potentials of Batangas City; (2) Identify industries that Batangas City could develop as
spearheads of local economic growth; and (3) draw up strategies to promote the development of
these industries.

1  
 
C. Sources of Information and Methods of Analysis

1. Sources of Information. This study examined the types and structure of industries and
enterprises in the City. Information on the registered business establishments was
gathered from the City Treasurer’s Office (CTO) and the Business Permits and Licensing
Division (BPLD) of the City of Batangas, which were able to provide data only for 2011-
2012. 1 The study followed the sector classification used by the National Statistical
Coordination Board in aggregating sectors into agriculture, industry, and services. The
classification of industries or enterprises under the Philippine Standard Industry
Classification (PSIC), on the other hand, was used in categorizing enterprises and
industries (refer to Annex 1). This categorization is, however, different from that followed
by the city government, which is tied to the Local Revenue Code and is the basis for tax
collection.2

The study further disaggregated the PSIC classification under the category “private
services” into: (a) hotels and restaurants (to include boarding houses, pension houses
and inns); (b) education (to include review centers, computer schools, tutorials and
learning centers); and (c) health and medical (to include clinics, laboratories and
diagnostics centers). All other enterprises in the sector, including entertainment,
professional services, photography services, photocopying services and others, were
lumped under the classification “community, personal, and social services.” In contrast,
the PSIC lumps the education, medical and health, personal recreation, hotels and
restaurants, and other private services into the category “private services.” The change
in classification done in the study provides a better picture of the industry landscape of
the city.

Focus group discussions as well as key informant interviews were conducted to gather
information and insights on the current business environment as well as the direction
being taken by the private sector with respect to its own business interests. Key officials
from the local government were interviewed to gather information on the current plans of
the city in improving its business environment and promoting investments. Secondary
data regarding the city’s socio-economic profile and development plan were also
gathered from the City Planning and Development Office (CPDO).

2. Methods of Analysis. The current enterprise landscape in the City was determined
using growth performance of the different industries using the data provided by the city
government. The possible industrial growth centers for the City were initially identified
using information on the current landscape of enterprises in it as well as its resources
and various opportunities. Based on this and after considering the problems and risks
faced by the City that may hamper its growth, possible industry clusters that could be
promoted were identified.

                                                                                                                       
1
 An initial attempt was made to gather information on the number, average initial capital, and average sales over a
five-year period to determine industry structure and industry shifts over time. Time series information from the city
government, however, was lacking due to a change in its data and information systems that made it difficult to
retrieve past information.
2
 The City Government classifies enterprises as follows: (a) manufacturers of any article of commerce including
assemblers, re-packers, processors; (b) brewers, distillers, rectifiers, and compounders of liquors, distilled spirits; (c)
wholesalers, distributors or dealers of any article of commerce; (d) exporters and manufacturers of essential
commodities including millers, producers; (e) distributors, dealers, and retailers of essential commodities; (f) retailers;
(g) contractors; (h) banks and other financial institutions; (i) other businesses not classified; and (j) new businesses.  

2  
 
 II.
CONTEXT OF BATANGAS CITY’S GROWTH POTENTIAL

A. Batangas City: A Brief Profile

1. Geographical Location

Batangas City is a coastal city in the province of Batangas with a total land area of 28,541
hectares (ha) (refer to Annex 2 for the provincial map). It is located at coordinates 13
degrees, 45 minutes and 25.96 seconds north latitude and 121 degrees, 3 minutes and
29.2 seconds east longitude. It is bounded in the northwest by the municipality of San
Pascual; in the north by the municipality of San Jose; in the east by the municipalities of
Ibaan, Taysan, and Lobo; and in the south by the Batangas Bay (Annex 3). It is about 112
kilometers and a travel time of about 2 hours away from Manila through the Southern
Tagalog Arterial Road (STAR).

Batangas City has a rolling terrain with slopes ranging from 0-30%. Its highest point is
Mount Banoy in Barangay Talumpok Silangan, which is 968 meters above sea level. The
coastal barangays, on the other hand, have slopes ranging from 0-3%.

2. Demography

Batangas City had a population of 312,109 in 2010, with an average annual population
growth rate 2.1%. It had a male-to-female ratio of 0.99:1.00 and a population density of
10.94 persons/ha or 1,094 persons per square kilometer.

About 55% of the City’s population resides in urban areas. Population density is 62/ha in
urban areas and 5/ha in the rural areas. Of the 105 barangays in the City, 41 are classified
as urban barangays with a total land area of 3,510.3 ha while 64 are considered rural
barangays occupying a total of 25,031 ha. Of the 41 urban barangays, 17 are in the
poblacion area while the rest are considered urbanizing barangays.

Households in the City totaled 63,311 in 2011 with an average household size of five. Only
about 8% of the number of households resides in the poblacion area. The large majority
lives in the peripheral barangays.

3. Economic Growth

Agriculture. Only about 30% (8,629 ha) of the City’s land area is classified as agricultural,
with livestock and poultry raising being the main agricultural activity in the City. In 2011, the
City produced 443,350 heads of poultry, about 43% of which were broiler produced under
contract-growing schemes and 31% is native poultry raised in backyards. With pig fattening
and breeding as its main livestock industries, the City also produced 143,629 heads of pig,
of which about 38% is backyard piggery (64,577 heads)3 and about 26% was raised under
contract growing arrangements (www.bas.gov.ph).

                                                                                                                       
3
 Backyard (small scale) pig raisers are defined as those having less than 100 heads of sows.  
3  
 
 Of the total land area classified for agricultural use in the City, only 6,309 has. were planted
to crops in 2010 and produced mainly mango and tamarind. The City produces a very
limited amount of rice from as much as only 7 hectares, mostly upland areas. In 2011, it
harvested only 21 metric tons of rice. The City is thus a perennial importer of rice, mostly
from the nearby Mindoro provinces and Central Luzon.

Trade and Industry. As of 2011, there were 20 major industrial establishments, of which 15
were considered large 4 with capitalization of more than Php60 million. There were two
medium scale industries with capitalization of more than Php15 million but less than Php60
million. The remaining three industries were small, with capitalization of less than Php15
million but more than Php5 million. These industries were mostly engaged in manufacturing
(of petroleum based products, refined oil, and chemicals), power generation, flour milling,
feed milling, and meat processing.

Aside from these establishments, there were also numerous other business enterprises in
the City with capitalization of less than Php5 million. These enterprises comprise more than
90% of the total number of business enterprises in the area. They are mostly engaged in
retail, trading, and services (e.g., food, health and wellness, pension, and lodging
enterprises).

4. Infrastructure

Road Network. Batangas City boasts of a good road system, having a total road length of
473 km, of which 373.6 km or 80% are barangay roads. About 78% of the barangay roads
are either cemented or asphalted. Of the total city road network, 297.5 km are cemented
roads and 89.9 km are asphalted ones.

Port. The City hosts the second largest port in the country, the Batangas International Port,
making it both an international and a domestic gateway. At present, the port serves mostly
as a passenger gateway to Palawan, the islands of Mindoro and Marinduque, and the
whole of the Visayas. With a road network that connects it to the Southern Luzon
Expressway (SLEX) through the STAR Tollway, the City has a huge potential to become a
destination and logistics hub of the South. Given the port and the road network, the City is
also considered a major player in the national nautical highway network through the
Batangas-Calapan link.

Telecommunication. Aside from the port and a good road network, the City also boasts of
65 telecommunication facilities as well as six internet service providers and five telephone
systems.

Power. The Manila Electric Company provides electricity to 99 of the 105 barangays of the
City. There are still six barangays in Verde Island that depend on diesel-fired power
generators and solar energy devices for their electricity requirements. The Batangas
Electric Cooperative II still provides electricity to a portion of one of the barangays (i.e.,
Barangay San Jose).

                                                                                                                       
4
Classification based on the City’s Socio-Economic Profile.  

4  
 
 5. Social Sector

Labor, Employment and Poverty. The labor force of Batangas City was estimated at
104,520 in 2003, 13.1% of which was unemployed. Meanwhile, latest statistics on poverty
(2009) showed that only 7.1% of the City’s population lives below the poverty line. These
statistics seemingly indicate that the unemployment indicator might have improved from
2003 to 2009.

Education. Batangas City is one of the educational centers, not only in the province of
Batangas, but also in the whole CALABARZON area. In 2011, there were 127 institutions
offering pre-school education, 118 offering elementary education, 35 offering secondary
education, and eight offering tertiary education. There were, however, only nine institutions
providing vocational and technical education, including the Technical Education and Skills
Development Authority. There were also 23 private tutorial centers and nine review and
training centers within the city. Enrolment in 2011 reached 115,124 students, of which
78,358 or 68.1% were in public schools.

Health. Four big hospitals and nine major clinics located within the city proper provide
health services in the City. The services being offered by these establishments include out-
patients treatment; child delivery; eye-ear-nose-throat treatment; surgery; internal medicine,
pediatric, obstetrics and gynecological treatment; computerized tomography scan, intensive
care unit facilities and services; rehabilitation, ultrasound diagnosis, and diagnosis of social
diseases.

6. Financial Sector

There are 35 banks operating mostly in the poblacion and in the urbanizing barangays of
the City. Aside from banks, there are also 10 credit cooperatives and 21 non-agriculture-
based multi-purpose cooperatives that provide savings and credit services to its members.
The City also has several lending investors, pawnshops, and remittance centers in the City.

B. Batangas City in National and Regional Development Goals and Strategies

The Philippine Development Plan, 2011-2016 (PDP) envisions and pursues inclusive growth for
the country by addressing poverty and creating massive employment opportunities through a
set of strategies, policies, and programs. The following are the key strategies that shall be
pursued:

1. Boosting competitiveness in the productive sectors to generate massive employment;

2. Improving access to financing to address the evolving needs of the diverse public;
3. Investing in infrastructure;
4. Promoting transparent and responsive governance; and
5. Developing human resources through improved social services and social protection.

In line with these strategies and to attain inclusive growth, the PDP recognizes, among other
factors, the key role played by industries in contributing to economic growth and employment
generation. Along this line, the Plan adopts strategies that will improve the business
environment, increase the competitiveness of industries, raise productivity, and improve
efficiency in key priority sectors. The PDP specifically states: “To increase productivity and
efficiency, government shall focus interventions on key priority areas, provide firm level support

5  
 
to MSMEs, increase market access, expand industry cluster development and intensify the
culture of competitiveness” (PDP 2011-2016).

In support of the PDP’s development agenda, the Regional Development Plan (RDP) for
CALABARZON also adopts a spatial development strategy that employs the center-cluster-
corridors-wedge planning approach. Using the approach, the RDP envisions the development of
centers of clusters that are currently heavily populated and the enhancement of their roles as
hubs of economic activities for industries, commerce, finance, and services. Corridor areas, on
the other hand, shall be developed among major transport routes within the region. Wedges,
meanwhile, shall form smaller functional sub-clusters with focus on agri-modernization and
settlements development.

Guided by this planning approach, the RDP recognizes Batangas City as one of the existing
growth centers in the region whose growth and development shall be reinforced. Recognizing
that the development in CALABARZON has been mostly concentrated in the western part of the
region, the RDP envisions the establishment of an east-west connection to spur growth and
development in the eastern part of the region towards the Pacific. In this regard, the RDP
identifies the following non-urban growth sub-centers with potentials for growth and
development: Batangas lakeshore, Upland Cavite-Batangas Agri-Tourism Cluster and the
Batangas-Quezon Agri-industrial Cluster. Likewise, under the RDP for CALABARZON and with
the construction of the Southern Tagalog Arterial Road (STAR) Tollway, the Manila-Batangas
Economic and Industrial Corridor shall also be strengthened.      
 
It is within this development context that Batangas City is seen as a growth center with huge
potential that needs to be reinforced. This study is considered timely and relevant to help the
city identify key industries that will further spur the growth of the City’s economy, increase
employment and create increased productive capacity.

C. Batangas City’s Plan and Strategy for Economic Development

Batangas City envisions itself to be, “a well diversified agro-industrial center and international
gateway, with tourist-friendly and safe environment and quality infrastructure, powered by a
globally-competitive citizenry, inspired by transparent, firm, and fair leadership” (Batangas City
Comprehensive Land Use Plan or CLUP 2010).

In accordance with this vision, the City’s development plan aims to increase employment and
household income and reduce poverty incidence among the population (Batangas City CLUP
2010). To achieve this, the City shall implement the following key strategies:

1. agricultural productivity and income enhancement;

2. manpower development;
3. tourism promotion and development;
4. livelihood development initiatives for fisherfolk;
5. support to small and medium enterprises; and
6. cooperatives enhancement.

6  
 
D. City’s Competitiveness Ranking

Batangas City was ninth among the growth centers5 in the country in the 2009 Philippine Cities
Competitiveness Report, which evaluated the competitiveness of cities using the following
competitiveness drivers: (1) dynamism of the local economy; (2) cost of doing business; (3)
Infrastructure; (4) responsiveness of LGUs to business needs; (5) human resources and
training; and (6) quality of life.

The City was ranked second in the cost of doing business. In particular, the City did well in the
average cost of fuel, rental cost of commercial space, bribery incidence, and minimum wage.
The cost of electricity and water rates were, however, deemed high. The City outranked the top
ranking growth center, Cagayan de Oro City, in the cost of doing business. It was, however,
ranked only 9th in the infrastructure category. While the City boasts of an international port, it
fared poorly in terms of the following: (1) reliability of telephone service; (2) travel time to
airport; (3) road maintenance; (4) reliability of internet service providers; and (5) traffic
management.

Poor traffic management and road maintenance increased travel time to the seaport. It was
also reported that traffic congestion in its main road was one of the City’s major problems.

The City also ranked relatively low in the following drivers of competitiveness: (1) dynamism of
local economy; and (2) quality of life. The City has yet to improve in the following areas: (1)
membership in business organization; (2) importance and participation in trade fairs; (3) number
of cars for hire;( 4) number of fire trucks and firemen; and e) police to population ratio.

The following best practices of the City for competitiveness were, however, noted: (1) presence
of One-Stop Shop for Business Permit Renewal; (2) approval and implementation of the City
Investment Code providing business incentives for incoming businesses; and (3) conduct of job
fairs.

                                                                                                                       
5
Cities were classified into three strata based on levels of development. Classification was based on the weighted
linear combination of the standardized values of population (assigned a weight of 40%) and total local government
income, excluding the Internal Revenue Allotment (IRA) (assigned a weight of 60%). The three classifications are:
metropolitan growth centers, growth centers and emergent cities.

7  
 
 III.
CITY INDUSTRY AND ENTERPRISE STRUCTURE

A. Magnitude of Enterprises and Structure of Industry

The Batangas City has more than 5,000 enterprises, based on the number of business permits
issued in 2011 and 2012 (Table 1). Business registrants rose by 9.6% in 2012, reflecting
aggressive efforts by the city government to capture more establishments in the formal sector.
However, most of the increase in the number of registered businesses belonged to the services
sector, while both the agriculture and industry sectors recorded lower business registrants
during the year. About 23% of these enterprises were new businesses in 2012.

In terms of structure, more than 93% of the enterprises belongs to the services sector. About
6% was in industry and less than 1 percent was in agriculture (Table 1). From 2011 to 2012,
the number of enterprises in the agriculture and industry sub-sector decreased by 13% and 23%
while those in the services sub-sector increased by almost 11%.

 Table  1.    No.  of  Enterprises  by  Major  Sub-­‐sectors,  2011-­‐2012  

    2011   2012  
      Annual  
No.  of   %  to  Total   No.  of   %  to  Total   Growth  
    Enterprises   Enterprises   Rate  (%)  
Agriculture   44   0.8   38   0.7   -­‐13.6  
   
Industry    
295    
5.6    
226    
3.9    
-­‐23.4  
   
Services    
4947    
93.6    
5489    
95.4    
11.0  
   
Total        
5286    
100.0    
5753    
100.0    
8.8  
 

The industry sector is mainly comprised of the following sub-sectors: manufacturing,

construction and electricity, gas and water. In 2011 and 2012, enterprises engaged in
manufacturing comprised about 53% of the total number of enterprises in industry and more
than 40% of the enterprises were in the construction sub-sector (Figure 1). Enterprises in
electricity, gas and water were only 2% and 3% of the total number of enterprises in industry in
both years.

8  
 
 Figure 1. Breakdown of Industry, by Sub-sector, 2012

Within the services sector, majority of the enterprises in the City (51%) was engaged in
wholesale and retail businesses (Figure 2) during the same period. The wholesale and retail
businesses were mainly food eateries, wholesale trading firms, distributors of non-food items
(e.g., automotive supplies, cellphone accessories, and computers and their peripherals), and
motor vehicle repair shops.

Figure 1. Breakdown of Registered Businesses in the Services Sector, 2012

9  
 
The second largest group in the services sector was comprised of enterprises engaged in real
estate activities and accounted for 16% and 14% of the total enterprises in the sector in 2011
and 2012, respectively. Most of these enterprises were engaged in renting or leasing
properties, mostly apartments and office spaces.

The real estate sub-sector was followed by enterprises engaged in community, personal, and
social services. These businesses were mostly those engaged in the provision of professional
services and in entertainment and recreational activities (e.g., billiard halls and bowling centers),
beauty and wellness centers, and hotels and restaurants.

B. Positive Factors for Industry Growth

The City has several resources that can be harnessed to propel its economic growth,
specifically by boosting income and employment. These are:

1. Infrastructure Support. The City is home to the second biggest international port in the
country --- the Port of Batangas. This Port serves as a gateway to the various
provinces and municipalities in the CALABARZON area. Given its current capacities, it
serves as a passenger terminal, general cargo terminal, and an international container
terminal. It is a critical link within the country’s nautical highway, linking Luzon to the
southern islands of the country. As a passenger terminal, it services high-speed ferries,
batels, and inter-island roll-on/roll-off (RoRo) ferries. The Port also has two cargo
berths - a foreign berth with a 185-meter length with a draft of 10.5 meters and a multi-
purpose berth with a length of 230 meters and a draft of 12 meters - which makes it ideal
for general and bulk cargoes such as completely-build-units and bagged cargoes. Most
recently, the Port has built a newly operational international container terminal which is
equipped with two ship-to-shore cranes and other modern cargo stacking equipment.
This terminal has an annual throughput capacity of 400,000 ten-equivalent units or TEUs
(www.asianterminals.com.ph).

However, despite its huge potential and strategic location, only 7% of the port’s capacity
is currently being utilized.  Subic Port, for its part, uses only 5.6% of its actual capacity.
These utilization rates are low compared to that of Manila ports, which reportedly
amounts to 98.2% of total volume of container traffic passing through the Subic,
Batangas and Manila ports.    

Aside from the International Port of Batangas, major road infrastructure facilities leading
to and out of the port are also in place (i.e., the expanded and extended SLEX and the
STAR). This road infrastructure connects the City to Metro Manila and the major cities
(Calamba, Lucena, and Lipa, among others) and key municipalities and provinces within
the CALABARZON area.

2. Educated Citizenry. Considered as one of the centers of education in the province of

Batangas and in the CALABARZON Region, the City has been producing for itself, its
province and its region a highly educated citizenry. As had been previously mentioned,
it has a total of 329 formal and non-formal academic and training institutions that provide
educational and training services to its residents as well as those of nearby
municipalities within the province of Batangas.

10  
 
3. Financial Resources. Compared to other areas, Batangas City has a relatively bigger
amount of financial resources that could be made available for business enterprises due
to the large number of Overseas Filipino Workers (OFWs) coming from the City.
According to the 2011 Survey on Overseas Filipinos (SOF) conducted by the National
Statistical Coordination Board (NSCB), in the period of April to September 2011, about
16.5% of the 2.2 million OFWs were from the CALABARZON area. It is surmised that a
relatively large number of OFWs come from the province of Batangas.

4. Presence of Major Industries. Aside from the port and road infrastructure, Batangas City
is also home to a number of large industries. The City hosts one of the largest oil
refineries in the country, Pilipinas Shell, and three natural gas power plants, namely,
Keilco, First Gas and Malampaya On-Shore Gas Plant. Aside from these, there are
other large industries engaged in manufacturing, power, chemicals, property and food
processing. These are: Bitumen Import, Storage and Distribution Facility; CFC
Clubhouse Property Inc.; LMG Land Development Corp.; San Miguel Mills Inc.; JG
Summit Petrochemical Corp.; Universal Robina Corp.; Himmel Industries Inc.; Chemphil
Bulk Terminal; San Lorenzo Power Plant; and First Philippine Industrial Corp.; Shell Gas
Eastern Inc.; and Total Bulk Terminal Corp. Aside from these large industries, there are
also about 6 small and medium sized industries engaged in manufacturing, processing
and agriculture. These industries are considered drivers of growth inasmuch as they are
able to provide employment to the residents of Batangas City and nearby municipalities.
With increased employment, there is also an increased demand for consumption goods
and services, which are usually produced by micro and small enterprises.

5. Huge number of micro and small industries engaged in trade and services. The City
has more than 5,000 micro and small enterprises, most of which are engaged in
wholesale and retail trade and in services. These enterprises can be harnessed to
provide support and ancillary services to larger-sized industries.

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 IV.
THE POTENTIAL FOR INDUSTRY GROWTH IN BATANGAS CITY

A. Opportunities for Industry Growth in Batangas City

Batangas City has very good potentials to grow at a much faster pace due to the following
factors:

1. Development of Batangas City as a Priority in the National and Regional Development

Plans. As stated earlier, the PDP calls for the development of industry clusters that will
promote growth, increase income, and generate employment. In accordance with this
thrust, the CALABARZON RDP has identified Batangas City as one of the growth areas
that will propel growth in the region.

In support of the national development thrust of developing industry clusters, the

National Competitiveness Council (NCC) has also recommended the development of a
Luzon integrated Logistics Hub that covers the Batangas-Clark-Subic corridor. This is
expected to develop “new economic magnets” outside Metro Manila.

Aside from being identified as a logistics hub, the Batangas peninsula has also been
identified as a tourist destination area in the Tourism Master Development Plan.
Batangas City was also identified as one of the cluster destinations within the Northern
Philippine area, being in close proximity to several municipalities with good tourism
resources (e.g.,Tagaytay City, Taal, Anilao, Mabini, and Lemery).

2. Strategic Location of the Port of Batangas, which was constructed as an alternative to

the Port of Manila. Within the CALABARZON Region, there are 42 industrial estates
with more than 1,000 Philippine Economic Zone Authority (PEZA) locators, which
produce 60% of the total export-import cargoes from PEZA-registered firms. These
locators are potential users of the Port of Batangas. The construction of the STAR
tollway, which links the port to the key cities and municipalities where most of the PEZA
locators in CALABARZON are located, augurs well for the City. With increased usage of
the Port of Batangas, ancillary industries would likely be established.

3. Inclusion of Batangas City in the ASEAN Connectivity Initiatives. The ASEAN

connectivity initiative envisions the establishment of an ASEAN community by 2015 by
facilitating the flow of people, goods, services and capital within the region and among
ASEAN member countries. To achieve this goal, the Master Plan on ASEAN
Connectivity identifies three key strategies: physical connectivity, institutional
connectivity, and people-to-people connectivity. Under physical connectivity, maritime
transport has been identified as an important mode of transportation for international
trade. Hence, efficient and competitive shipping routes shall be established to connect
archipelagic regions. A nautical highway system (i.e. the ASEAN Roll-On Roll-Off
System (RoRo)) within the region shall likewise be established. Thus, ASEAN
delineated a trans-ASEAN transport network consisting of 47 ports, which include the
Port of Batangas. The ASEAN RoRo System is also intended to boost tourism, including
cruise tourism, within the region. The ASEAN Tourism Forum in 2012 identified the
following ASEAN cruise corridors: Malacca Straits, Karimata Strait/Java Sea/Flores Sea,

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 and South China Sea/Gulf of Thailand. Located along the South China Sea, the Port of
Batangas may be considered as one of the ports of call for cruise tourism.

Given these ASEAN connectivity initiatives, Batangas City should take advantage of the
Port of Batangas and develop industries that will support increased use of the Port.

B. Potential Industry Drivers in the City: A Story for Consideration

The presence of the Port of Batangas and the growth potentials it makes available, as well as
the current development thrusts and priorities of the country and within the ASEAN region make
apparent two clusters of industries as growth drivers in Batangas City: the logistics industry and
tourism industry clusters.

The Logistics Hub Industry

The City, in coordination with relevant and concerned national agencies (e.g., Philippine Ports
Authority (PPA), PEZA, DTI, and DOTC), should promote the City as a logistics hub that
provides shipping support services to the Port of Batangas. To provide efficient shipping
network services, land transport as well as logistics capacity should be present. Increased
number and capacity of ship calling at the port depends largely on the availability of logistics
and transport services for both exporters and importers. Ease in customs and administrative
clearances are also important. The private sector, particularly the local business community,
should likewise be encouraged to invest in the various ancillary and support service industries.

Should it consider developing a logistics industry hub, the City should implement the following
measures:

1. Advocate with relevant national government agencies (e.g., the PPA) the implementation
of measures that will increase the utilization rate of the Port of Batangas. The following
measures should be focused on:

a. A deliberate policy and program for the decongestion of the Port of Manila anchored
on establishing a cap on each of the total TEUs that pass through the ports; and

b. Development of an inter-modal transport system that will support and increase the
utilization of Batangas Port. For instance, there is a need to complete the
construction of the STAR Express Tollway.

2. Provide local incentives and non-fiscal measures to encourage private sector

investments in infrastructure needed to increase the utilization of the Port of Batangas.
Arangkada Philippines pointed out that “major ports should have complete infrastructure
(e.g., terminals, cranes, yards, scales, silos, and discharging equipment and areas)
under a hub-and-spoke system feeding goods by truck and RoRo. Major RoRo ports
should have modern passenger terminals and should allow chassis RoRo (cargo
containers on chassis without truck).” The private sector should be encouraged to
support and to invest in these infrastructures to help increase port utilization. For
instance, most of the truckers that bring cargo in and out of the Port are still based in
Manila, hence, increasing the cost of using the Port. Moreover, the PPA reported that
cargo ships still go to Manila since most, if not all, warehouses are located there. Hence,
it is imperative for the City to be forward-looking by providing specific incentives to

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 business enterprises supportive of port utilization, including those involved in trucking
and warehousing.

3. Facilitate the establishment of transparent governance at the Port. The City should
ensure that there are no illegal fees being extorted from truckers that ferry the cargo in
and out of the Port.

The Tourism Hub Industry

Aside from being a logistics hub, the City may also opt to promote itself as a cruise destination.
Recognizing that the Port of Batangas is situated within the ASEAN cruise corridor and that
Batangas has been identified as one of the tourist destination areas in the country, the City, in
coordination with the Department of Tourism (DOT), may invest in promoting the city as a cruise
destination area.

Should it consider the promotion and development of the tourism hub industry, the City must
implement the following measures:

1. Coordinate with nearby LGUs and the private sector in developing a tourism plan and
strategy with Batangas Port as tourism entry point. The City may use the 5As
Framework 6 developed by the German International in adopting a more strategic
approach in tourism development;

2. Advocate and lobby with concerned national government agencies the development of
road networks to enable tourists to move from one tourist destination to another with
ease.

C. Other Prerequisite Conditions for Promoting the Industry Drivers

To promote and develop these two industry clusters, several measures common for both must
be implemented. These are:

1. Review and, if warranted, revision of the current Investment Code. To promote the
development of the industry clusters, the City must review its current investment code to
determine if it encourages the establishment of businesses and enterprises within the
tourism and logistics industry clusters. Revisions must be made if these are needed.

2. Strengthening of the Regulatory Framework/Enabling Environment. Aside from

incentives provided in the investment code, the City must also look at its current
regulatory environment for businesses and enterprises, especially those within the two
clusters. Are current businesses permitting procedures as well as clearance
mechanisms supportive of enterprises within the logistics and tourism clusters? Are

                                                                                                                       
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The 5As framework encourages LGUs to adopt a more strategic approach in tourism development, and promotes
cooperation with their neighboring areas to cover for components that may be lacking in their locality in order to
create a seamless tourism experience. The 5 As is a term coined by Philippine Chamber of Commerce and Industry
Tourism Committee which refers to Arrival (pre-arrival marketing, air/sea/land transport, air/sea ports); Access
(roads, terminals, and related infrastructure); Accommodation (hotels, lodging, and restaurants); Attractions (natural
& man-made); and Activities (rest, recreation, and education). (Tourism Development for LGU, www. smepsep.ph)
 
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 there rules that impede and discourage businessmen to invest in these industries? If
deficiencies are identified, these must be addressed immediately.

3. Acceleration of Infrastructure Development. The development and growth of the

logistics and tourism industry clusters are premised on a developed and good
infrastructure support system. Road networks should be able to facilitate transport and
logistics services. The City, in coordination with the business sector, should be able to
map up choke points and formulate a strategy that would address issues related to
infrastructure, including traffic congestion.

4. Creation of City Industry Associations. A local government-private sector partnership

has been identified as an important factor in local economic development. To make such
a partnership happen, the City must encourage the establishment of city industry
associations that will represent the voice of the business sector, particularly for the
logistics and tourism industries. The associations will serve as the link of the business
community to the LGU, especially in advocating for the needed reform measures that
are supportive of business and industry development.

5. Ensuring of the Availability of the Appropriate Human Resources. The academe should
likewise be consulted and informed of the city’s development thrusts and policy
directions. As the industry clusters develop, there should be sufficient human resources
with the appropriate skills and capacity for the enterprises within the industry clusters to
take advantage of. Given the City’s priorities, the current course offerings by the schools
in the city should be reviewed to ensure that the supply of needed human resources will
be available to support the priority industries that will propel the growth of the local
economy.

The foregoing requirements as well as the surrounding issues may need to be further discussed
between and among the key stakeholders in the City. Close and coordinated partnership
between and among said parties is important and necessary for the City to sustainably move
forward in developing the City and in maximizing its growth potentials.

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ANNEXES

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ANNEX 1. Philippine Standard Industry Classification (PSIC)

Definition
PSIC Classification
Agriculture, Forestry and Agriculture includes the production of all agricultural crops such as
Fishery palay, corn, coconut, sugarcane, banana, and the raising of
livestock and poultry including the production of milk and eggs.
Services provided to agriculture on a fee or contract basis such as
veterinary services, the operation of irrigation systems, and pest
control are also included in this subsector.
Fishery covers fishing, fish culture, and the gathering of other
marine products such as reptile skins, seaweeds, shells, and
sponges.
Forestry includes logging and the gathering of minor forest products
such as firewood, bamboos, etc. and the burning of charcoal in the
forest.

Mining and Quarrying Mining and quarrying covers the production of all metallic and non-
metallic minerals by extraction from nature and its related
processes. Underground and surface mines, quarries and wells
and all supplemental activities for beneficiating ores and other
crude materials for marketing ores are included.

Manufacturing Manufacturing is the mechanical or chemical transformation of

organic or inorganic substances into new products, whether the
work is performed by power driven machines or by hand, whether it
is done in a factory or in the worker’s home and whether the
products are sold at wholesale or retail. Activities carried out in
connection with the main manufacturing activity such as the
production of goods in their workshops, the operation of cafeterias
or bakeries, the printing of books, pamphlets and postcards and
minor own-account construction are also accounted for in the
sector.

Construction Construction covers the activities of putting up of buildings and

structures and other land improvements. Other related projects as
its secondary activities such as the provision of technical and
engineering services as well as the manufacture and trading of
construction materials are also included.

Electricity, Gas and Electricity and water covers the generation, transmission and
Water distribution of electricity to households, industrial and commercial
users as well as the collection, purification and distribution of water.

Transport, Transport services consist of the transport of passenger and freight

Communication and by land, water and air including transport related operation like the
Storage operation of toll roads, terminal facilities, piers, airports and the
like. It also covers services incidental to transport. Communication
includes mail express service, telephone, radio and related
services.

Wholesale and Retail Trading pertains to the services provided by production units
engaged in buying and reselling of goods, without transformation,
either in bulk as in wholesaling, or in small quantities as in retailing.

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 PSIC Classification Definition
Finance Finance sector covers the activities of financial institutions such as
banks, nonbanks and insurance companies. Banks include
commercial banks, savings and mortgage banks, private
development banks, stock savings and loan associations and
specialized government banks. Nonbanks include financing
companies, fund managers, investment houses, investment
companies, security dealers, security brokers, venture capital
corporations, mutual building and loan associations, credit
cooperatives, pawnshops and government nonbank financial
intermediaries. Insurance includes incorporated, mutual, and other
entities mainly engaged in providing life, accident, sickness, fire,
casualty or other forms of insurance.

Real Estate Real estate covers the renting, management and operation of
residential and non-residential buildings, the subdivision and
development of land into building lots, the operation of residential
and industrial estates, cemetery development and sale including the
activities of real estate agents, brokers and managers engaged in
renting, buying, selling, managing and appraisal of real estate on a
fee or contract basis.

Private Services Private services sector includes educational, medical and health,
personal recreation, hotels and restaurants and other private
services. Producers of these services are the profit-making
industries, private non-profit organizations engaged mostly in social
and community services and households and own account workers
rendering social and community services to others.

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ANNEX 2. Map of Batangas Province

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ANNEX 3. Map of Batangas City

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 REFERENCES

Aldaba, Rafaelita, “Small and Medium Enterprises' (SMEs) Access to Finance: Philippines,”
Philippine Institute of Development Discussion Paper, 2012.

Asian Institute of Management, Philippine Competitiveness Ranking Project, 2009

Batangas City Socio-Economic and Political Profile, 2011

CALABARZON Regional Development Plan, 2011-2016

Industry Clustering Using Value Chain Approach, Powerpoint Presentation by Undersecretary

Merly Cruz, March, 2012

Ignacio, Laura, Cluster Development Strategy in the Philippines, Bangko Sentral Newsletter,
May-June 2011.

KyeongAe Choe and Brian Roberts, 2011, Competitive Cities in the 21st Century: Cluster
Based Local Economic Development, Asian Development Bank

Maximizing the Use of Batangas Port, Powerpoint Presentation by the Research, Education
and Institutional Development (REID) Foundation

Philippine Development Plan, 2011-2016

Stanley Nollen, “ Improving City Competitiveness: City Management and the Business
Climate,” Policy Note for the World Bank Institute, 2011

www.nscb.gov.ph

www.bas.gov.ph

www.batangas.gov.ph

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