Chapter 8 - The Economy's Producing Sectors PDF

Chapter 8 – The Economy’s Producing Sectors Prepared by: Rolando M. Solano Jr. Instructor A sector is an area of the economy in which businesses share the same or related business activity, product, or service. Sectors represent a large grouping of companies wit...

Chapter 8 – The Economy’s Producing Sectors Prepared by: Rolando M. Solano Jr. Instructor A sector is an area of the economy in which businesses share the same or related business activity, product, or service. Sectors represent a large grouping of companies with similar business activities, such as the extraction of natural resources and agriculture. Three Main Producing Sectors: 1. Primary Sector (Agriculture, Fishery, and Forestry) This sector includes farming and cultivation of agricultural products, fishing, and extraction of forest products. The primary / agriculture, fishery, and forestry sector reaps the fruits of natural resources like the soil, water, and forests. However, these environmental resources are vulnerable to climate change, affecting production such as long dry spells and frequent devastating typhoons due to, say, the El Niño phenomenon. 2. Secondary Sector (Industry)  Manufacturing refers to companies that engage in the actual production of goods. Notable manufacturing firms in the country include Nestle Philippines, San Miguel Corporation, SC Johnsons, and Unilever.  Construction refers to the business of putting up buildings, schools, roads, hospitals, and other infrastructures.  Electricity, gas, and water include utility providers such as Meralco, Maynilad, Manila Water, and Manila Gas.  Mining and quarrying include companies that engage in the extraction of minerals and precious metals and stones. The secondary / industrial sector processes raw materials from agriculture, fishery, and forestry into intermediate products, which are further processed into final products. 3. Tertiary Sector (Service)  Trade  Transportation, Communication, and Storage  Banking and Finance  Public Service (Government)  Real Estate  Private Services The tertiary / service sector produces the intangibles supporting and complementing production in the other sectors, as well as among its own industries. Competitiveness - as the set of institutions, policies, and factors that determine the level of productivity of a country. First Pillar: Institutions - This pillar assesses the quality and efficiency of a country's legal framework, government policies, and regulatory environment. It considers factors such as property rights, corruption, judicial independence, and government efficiency. Second Pillar: Infrastructure - This pillar evaluates the quality and development of a country's basic physical infrastructure, including transportation, energy, and telecommunications networks. It looks at factors such as the quality of roads, ports, airports, and broadband connectivity. Third Pillar: Macroeconomic Environment - This pillar examines the stability and soundness of a country's overall economic conditions, including factors like inflation, fiscal policy, and debt levels. It considers indicators such as inflation rates, government debt, and budget deficits. Fourth Pillar: Health and Primary Education - This pillar focuses on the quality of healthcare systems and the education level of the population, particularly at the primary level. It considers indicators such as life expectancy, infant mortality rates, and primary education enrollment rates. Fifth Pillar: Higher Education and Training - This pillar looks at the availability and quality of higher education institutions and vocational training programs. It considers factors such as the quality of universities, research and development spending, and collaboration between academia and industry. Sixth Pillar: Goods Market Efficiency - This pillar assesses the effectiveness of the market in allocating resources and promoting competition in the production and sale of goods. It considers indicators such as market concentration, ease of doing business, and trade openness.  Seventh Pillar: Labor Market Efficiency - This pillar evaluates the flexibility and efficiency of the labor market, including factors like hiring and firing practices, wage flexibility, and worker protection. It considers indicators such as labor market flexibility, worker rights, and the prevalence of informal employment. Eighth Pillar: Financial Market Development - This pillar examines the stability, depth, and efficiency of a country's financial system, including banking, securities, and insurance markets. It considers factors such as access to capital, strength of banking institutions, and availability of financial services. Nineth Pillar: Technological Readiness - This pillar looks at the level of technological adoption and innovation within a country. It considers indicators such as internet penetration rates, research and development spending, and availability of technology infrastructure. Tenth Pillar: Market Size - This pillar takes into account the domestic and international market opportunities available to businesses within a country. It considers indicators such as population size, degree of urbanization, and trade openness. Eleventh Pillar: Business Sophistication - This pillar assesses the level of business knowledge and innovation capabilities within a country. It considers factors such as the presence of advanced business networks, capacity for innovation, and the level of collaboration between academic and industry. Twelfth Pillar: Innovation - This pillar evaluates the capacity for innovation and the ability to generate new ideas, products, and processes. It considers indicators such as research and development spending, patent applications, and the level of collaboration in research and innovation projects.  Sectoral Efficiency The country's producing sectors also struggle with one another as they compete for the use of local resources (e.g., labor). Figure 8.2 shows that the least efficient are passenger and transport combined, while the most efficient is manufacturing. Figure 8.2 – Sectoral Efficiency  Tourism is an emerging industry as expenditures of foreign tourists on related services such as hotels and restaurants, transport, and entertainment grew by 9.3% from 2007 to 2008 (PS4) Gaining importance as an industry, it contributed 4.2% to the gross output of the economy in 2017 (WEF). It also figured as the third leading export of the country after electronics and miscellaneous services, which include business process outsourcing (269). Most tourists prefer hotels and motels for accommodation (77%) and cars for transport facilities (42% PSA). Most also prefer restaurants (68%) and internet access (51%) in accommodating establishments in addition, establishments concentrate operation in Metro Manila and in Western and Eastern Visayas as the most preferred tourist destinations.  International Trade Basic information on Philippine trade covers the top export products, the top import products, Its major trading partners. Based on PSA figures, the following export product groups represent the highest dollar value Based Filipino global shipments during 2018. Also shown is the percentage share each export category represent in terms of overall exports from the Philippines. 1. Electrical machinery and equipment: $32.9 billion (48.7% of total exports) 2. Machinery including computers: $9.6 billion (14.3%) 3. Optical, technical, and medical apparatus: $2.2 billion (3.3%) 4. Fruits and nuts: $2.1 billion (3.1%) 5. Gems and precious metals: $1.5 billion (2.2%) 6. Copper: $1.4 billion (2.1%) 7. Ores, slag, and ash: $1.2 billion (1.8%) 8. Ship and boats: $1.2 billion (1.8%) 9. Animal/Vegetable fats, oils, and waxes: $1.2 billion (1.79%) 10. Mineral fuels including oil: $1.1 billion (1.7%) The Philippines' top 10 exports accounted for about four-fifths (80%) of total exports.  Also based on PSA statistics, the following are the country's top five imports based in term U.S. dollar value in 2017. Product Description Value USD % Electrical Machinery and Equipment 22.59 Machinery and Mechanical Appliances 13.24 Mineral Fuels and Oils 11.23 Vehicles 8.62 Iron and Steel 3.86  Small Business Opportunities In the tourism industry, micro businesses can help maximize tourist arrivals and destinations with timely support and substitute services for big establishments strengthened by cooperative efforts. Car transport services can support hotel accommodations, while lodging houses with restaurants can serve as substitutes in the latter's absence. Micro enterprises can also form associations for timely coordination with big establishments and complementation among themselves. In the meantime, tourism and related services can concentrate on operations in major tourist destinations such as Metro Manila and Western and Eastern Visayas. Better road networks can pave the way for the development of other tourist destinations and services, which include transport.