WORKING PAPER 11/2014

Sustainable assessment of metalindustries for policy advice
The case of the Philippines, Thailand, Indonesia and Viet Nam

IN C LU SI VE A N D SU STA I N A B L E I NDU ST RIAL DEV ELOPMENTRESEARCH, STATISTICS AND INDUSTRIAL POLICY BRANCHWORKING PAPER 11/2014

Sustainable assessment of metalindustries for policy advice
The case of the Philippines, Thailand, Indonesia and Viet Nam

Steve Evans
Institute of Manufacturing
Cambridge University
Smeeta Fokeer
UNIDO
Jae-Hwan Park
Institute of Manufacturing
Cambridge University
Gorazd Rezonja
UNIDO

UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION
Vienna, 2015

Acknowledgements
The paper benefited significantly from the input and collaboration provided by Ioannis Mastoris
during the development of the methodology, for which we are very grateful. Our national
consultants Kittipong Pimarran, Anthony Dadulla, Sarala Aikanathan, Mohammad Helmy and Le
Van Chieu contributed considerably with data collection and the setting up of interviews. We arevery grateful to all the institutions in these five countries which took the time to share their views
with us. Sincere thanks also go to the editor of this Working Paper, Niki Rodousakis.

The designations employed, descriptions and classifications of countries, and the presentation of
the material in this report do not imply the expression of any opinion whatsoever on the part of theSecretariat of the United Nations Industrial Development Organization (UNIDO) concerning thelegal status of any country, territory, city or area or of its authorities, or concerning the delimitationof its frontiers or boundaries, or its economic system or degree of development. The views
expressed in this paper do not necessarily reflect the views of the Secretariat of the UNIDO. The
responsibility for opinions expressed rests solely with the authors, and publication does notconstitute an endorsement by UNIDO. Although great care has been taken to maintain theaccuracy of information herein, neither UNIDO nor its Member States assume any responsibility
for consequences which may arise from the use of the material. Terms such as “developed”,“industrialized” and “developing” are intended for statistical convenience and do not necessarily
express a judgment. Any indication of, or reference to, a country, institution or other legal entity
does not constitute an endorsement. Information contained herein may be freely quoted or
reprinted but acknowledgement is requested. This report has been produced without formal United
Nations editing.
This document reflects work in progress. Its distribution is limited for the purposes of eliciting
comments and reviews only.

Table of Contents
1.

2

3.

Overall introduction .............................................................................................................. 1
1.2

Profile of the metal industry .......................................................................................... 3

1.3

Global overview of the metal industry .......................................................................... 4

Economic analysis ................................................................................................................. 5
2.1

Introduction/conceptual framework .............................................................................. 5

2.2

Methodological considerations ..................................................................................... 7

2.3

Economic assessment .................................................................................................... 9

2.4

Limitation of methodologies ....................................................................................... 26

Environmental and social analysis ...................................................................................... 27
3.1

Introduction and conceptual framework...................................................................... 27

3.2

Methodological considerations ................................................................................... 31

3.3

Indonesia ..................................................................................................................... 34

3.4

The Philippines............................................................................................................ 44

3.5

Thailand....................................................................................................................... 55

3.6

Viet Nam ..................................................................................................................... 68

3.7

Evolution of the methodologies .................................................................................. 77

4.

Synthesis of economic, environment and social analysis.................................................... 78

5.

Policy recommendations ..................................................................................................... 86

6.

Conclusions ......................................................................................................................... 89

References ................................................................................................................................... 92iii

List of Tables
Table 1

Metal industry classification ..................................................................................... 4

Table 2

Sector classification................................................................................................. 17

Table 3Difference in VA per capita .................................................................................... 19

Table 4

Elasticity rates ......................................................................................................... 20

Table 5Interdependence analysis......................................................................................... 22

Table 6

Industry profile for 2011 ......................................................................................... 23

Table 7

Scoring for each dimension ..................................................................................... 31

List of Figures
Figure 1

Global export market share ....................................................................................... 5

Figure 2

Analysis of exports .................................................................................................. 10

Figure 3

Domestic demand analysis ...................................................................................... 12

Figure 4

The mechanics/mechanism of structural change ..................................................... 14

Figure 5

Estimation of value added shares and growth patterns in the metal industry.......... 16

Figure 6

GDP per capita ........................................................................................................ 18

Figure 7

Average growth rates of the metal industry ............................................................ 19

Figure 8

Value added per employee in the metal industry .................................................... 24

Figure 9

Five Enabling Abilities Framework ........................................................................ 28

Figure 10

A healthy industrial system ..................................................................................... 30

Figure 11

Energy analysis of Indonesia’s metal industry ........................................................ 35

Figure 12

Water supply analysis of the metal industry in Indonesia ....................................... 37

Figure 13

Air emissions analysis of the metal industry in Indonesia....................................... 39

Figure 14

Solid waste analysis of the metal industry in Indonesia .......................................... 40

Figure 15

Wastewater analysis of the metal industry in Indonesia .......................................... 42

Figure 16

Labour analysis of the metal industry in Indonesia ................................................. 43

Figure 17

Energy analysis of the metal industry in the Philippines ......................................... 45

Figure 18

Water supply analysis of the metal industry in the Philippines ............................... 47

Figure 19

Air emissions analysis of the metal industry in the Philippines .............................. 49

Figure 20

Solid waste management in the metal industry in the Philippines .......................... 51

Figure 21

Wastewater analysis of the metal industry in the Philippines ................................. 52

Figure 22

Labour analysis of the metal industry in the Philippines ......................................... 55
iv

Figure 23

Energy analysis of the metal industry in Thailand .................................................. 58

Figure 24

Water supply analysis of the metal industry in Thailand......................................... 60

Figure 25

Air emissions analysis of the metal industry in Thailand ........................................ 61

Figure 26

Solid waste analysis of the metal industry in Thailand ........................................... 63

Figure 27

Wastewater analysis of the metal industry in Thailand ........................................... 66

Figure 28

Labour analysis of the metal industry in Thailand .................................................. 67

Figure 29

Energy analysis of the metal industry in Viet Nam ................................................. 69

Figure 30

Water supply analysis of the metal industry in Viet Nam ....................................... 70

Figure 31

Air emissions analysis of the metal industry in Viet Nam ...................................... 72

Figure 32

Solid waste analysis of the metal industry in Viet Nam .......................................... 74

Figure 33

Wastewater analysis of the metal industry in Viet Nam .......................................... 75

Figure 34

Labour analysis of the metal industry in Viet Nam ................................................. 77

Figure 35

Step-by-step analysis from economic aspects to environmental-social aspects ...... 79

Figure 36

Reporting flows of solid waste and toxic waste ...................................................... 89v

1. Overall introduction
Over the past decades, globalization and industrial development have facilitated high economic
growth in several emerging countries in the ASEAN region. The region’s GDP has grown morethan 5 percent annually since 1990 - much faster than the world’s average at around 3 percent.
Unfortunately, this economic growth was coupled with a rapid rise in energy demand, highnatural resource use, as well as a degradation of the environment.
To meet the energy and material demands for development and to ensure that pollutants andunsustainable resource consumption decrease in total terms, it is paramount to decouple
economic growth from environmental impact. This can be achieved with an integrated
framework for supporting the greening of industries, consisting of industry-led initiatives, theadoption of best practice technologies, market-based policy instruments and regulations,accompanied by political support and information flow. However, more often than not, the ruleof the game is damage control in the pursuit of continued economic growth.
This report is the result of a new methodology that aims to provide a sustainable assessment ofindustries in an effort to provide an adequate analysis to inform policy making. It focuses on themetal industry in five ASEAN countries, namely Indonesia, Malaysia, the Philippines, Thailand
and Viet Nam.
“Manufacturing” as the engine of growth is commonly heard as a slogan in favour of
manufacturing. In his most recent book, the internationally acclaimed Cambridge economist,
Ha-Joon Chang, devotes one full section to the importance of manufacturing for economic
growth (Chang, 2007). Chang claims: “History has repeatedly shown that the single mostimportant thing that distinguishes rich countries from poor ones is basically their higher
capabilities in manufacturing, where productivity is generally higher, and, most importantly,
where productivity tends to (although does not always) grow faster than in agriculture andservices” (Chang, 2007:213). Hence, the case for industrial policy remains strong and has
become stronger with technical change and globalization (Lall, 2003) in order to attain the fullpotential of manufacturing sector growth in any country.
Industrial development depends on the international context, which is changing rapidly, driven
by globalization, liberalization and technological change. Specifically, it is characterized bytighter linkages within global value chains based on close coordination between national andinternational actors within integrated systems. The success of national industries thusincreasingly depends on a country’s ability to actively participate in industries that are dynamic,
fast growing and with high returns. On the other hand, the national context also matters. On the1

supply side, the fundamental changes that occur in any economy can, to a large degree, be
associated with changes in a country’s factor endowment which entail differences among
countries in terms of labour and capital stock. At the static level, this notion proposes that any
country must align its productive capacities and labour with its current endowment structure. At
the dynamic level, it suggests that countries which excel in the production of goods and services
that are in line with their endowment structure can accumulate capital and knowledge andthereby change and improve their endowment structure.
1.1

Prospective AEC formation and the industrial sector

Founded in 1967, the Association of Southeast Asian Nations (ASEAN) strives to promoteeconomic and political cooperation between member states in East Asia, at the same time
facilitating interaction between its members and the rest of the world. Following the Bali
Concord II in 2003, the formation of an ASEAN Economic Community (AEC), has beenrecognized as the end-goal of regional economic integration. Transforming ASEAN into asingle market and production base by 2015, while achieving the free movement of goods,
services, investment, skilled labour and freer flow of capital within the region lies at the heart ofthis AEC concept.
The formation of AEC opens up a plethora of opportunities and challenges to industries. We lista few of them in this section.
The most obvious opportunity is the enhanced market, which comprises over 600 million
people. Over the period 1998-2012, the ASEAN’s average economic growth was 5.9 percent,exceeding most other regional blocks, signifying this market’s expanding purchasing power.
Cheaper raw materials: Most industries can tap into the cheaper raw materials stock elsewherein the AEC. ASEAN is rich in natural resources; it holds over 40 percent of the oil and gas
resources of the Asia-Pacific. This, too, will enable industries to find a cheaper and reliablesupply of resources.
Reduction in production costs: In addition to cheaper raw materials, industries can further
reduce their costs through improved logistics, reduction in tariffs and other bureaucracy. A
1McKinsey Research Report finds that firms in the electronic goods industry alone can cut up to
20 percent of their costs due to the formation of AEC. The report also finds scope for similar
cost reductions in other industries as well.

1

McKinsey (2004).

2

Increased competition: With the formation of AEC, all industries must brace themselves formore competition. Firms not only have to compete with their counterparts in other ASEAN
economies, but with foreign counterparts as well, as the formation of AEC will make the regiona more lucrative market.
Increased flow of foreign investments: Charumanee (2012) predicts that the formation of AEC
will result in increased flow of foreign investments to the region. This will definitely have an
impact on the region’s industrial landscape.
The former Secretary General of the ASEAN2 accurately identifies its three strengths: ‘We(ASEAN) have abundant natural resources in our region. We have large supplies ofprofessionals and talented people. And, we have the capability to adopt, adapt and advancetechnology.’ Effective industrial policy must capitalize on these strengths and adapt to theopportunities and challenges posed by AEC. This includes, but is not limited to, improving hardand soft infrastructure to reduce logistic barriers, providing capacity building of domestic firms,
channelling skills development to support industries and creating opportunities for thoserendered unemployed due to increased competition. We provide certain guidelines on suchpolicy measures in this report to foster the ASEAN industrialization strategy’s sustainability.
1.2

Profile of the metal industry

The profile of the metal industry (defined under ISIC Rev 3.1) covers the following activities:
the manufacturing and casting of non-ferrous metals, iron and steel as well as the manufacturingof basic precious metals. This division is based on the productive activities characterized by theprocessing of metal products from metal ore and / or scrap metal. Manufacturing activities varyfrom refining metals, casting molten metal into desired shapes or producing inputs for therefining or casting process. The metal industries utilize both ferrous and non-ferrous metals andproduce pure metal products or alloys in the form of end products or stock and intermediates foruse by other industries.
Steel producers use three types of processes for converting iron ore into steel: coke oven,electric arc furnace or the corex process. Two types of products are manufactured by the main
producers - long products and flat products. Long products include bars, structural products,
wire rods, angles and rounds. They are used in construction and heavy engineering. Flatproducts include hot rolled coils/sheets, cold rolled coils/ sheets and galvanized sheets.

2

Remarks by H.E. Ong Keng Yong, Secretary General of ASEAN, at the ASEAN Gala Dinner, London, 4
December 2006.

3

Table 1 Metal industry classification

ISIC Rev.3.1 code 27: Manufacture of basic metals
 271 - Manufacture of basic iron and steel
 2710 - Manufacture of basic iron and steel 272 - Manufacture of basic precious and non-ferrous metals
 2720 - Manufacture of basic precious and non-ferrous metals
 273 - Casting of metals
 2731 - Casting of iron and steel 2732 - Casting of non-ferrous metals

1.3

Global overview of the metal industry‘The global metal industry experienced a robust growth during the last five years but is expected
to slow down, and the industry revenue is forecast to reach an estimated $2,374 billion in 20173

with a CAGR of 5.5% over the next five years (2012-2017)’ . Looking at the metal industry’s
world export data, Germany, China and Japan top the list with 7.7 percent, 7.4 percent and 6.6
percent market share. The graph below presents the major exporters and their market share inworld metal industry trade.
A survey conducted by the Economist Intelligence Unit in 2011 among the top execuitves ofglobal metal manufacturing firms revealed price volatility of key inputs as the metal industry’s
most important challenge. According to another market research document produced by astrategy consulting firm , the four main challenges attached to the metal industry currently are
1. Decline in demand for metals; 2. Decline of metal prices; 3. Exposure to high procurement
costs; 4. Refinancing difficulties. Most of these challenges are in fact a direct consequence ofthe financial crisis and economic recession. Firms across the globe have used this period ofslowed growth to restructure their businesses, make structural adjustments to their capacity andto achieve cost efficiency. This certainly enables firms to grab opportunities as soon as theworld economy’s growth momentum returns.

3

Lucintel, ‘Global Metal Industry 2012-2017: Trend, Profit, and Forecast Analysis.’ as reported in
http://www.researchandmarkets.com

4Figure 1

Global export market share

Metal Industry : Global Export Market Share
9.00%
8.00%
7.00%
6.00%
5.00%
4.00%
3.00%
2.00%
1.00%
0.00%

Export Market ShareIn the UNEP report entitled ‘Priority products and materials: assessing the environmental
impacts of consumption and production’, which assesses and ranks different product categories
based on their total environmental impact, the members of the metal industry (iron and steel
products) belong to the high impact 1st priority group. This impies that the industry has a lot tooffer in terms of reducing the environmetal impact of manufacturing growth in any economy.
For instance, the recycling of metals is an efficient sustainability strategy but the ‘recycledcontent’ values across the globe remain low and, according to UNEP’s ‘Recycling Rates ofMetals’ report, are expected to remain low in the near future, states the UNEP. A PwC report
warns that ‘the risk of scarcity (of metals and minerals) is expected to rise significantly, leading
4

to supply instability and potential disruptions in the next five years’ . Hence, it is imperative fornational governments and private actors to further investigate the metal industry’s sustainabledevlopment, both to reduce the enviornmental impact and to meet the looming challenge ofmetal scarcity.

2

Economic analysis

2.1

Introduction/conceptual framework

To effectively design appropriate industrial policies, it is crucial for governments in developing
countries to understand their competitive position in comparison to other countries and the restof the world given the current domestic and global demand trends. It is equally important to
4

PWC, ‘Minerals and Metals Scarcity in the Manufacturing: the ticking time bomb’, December 2011.

5

understand the domestic factors and conditions that influence this competitive position. Such ananalysis not only benefits governments, but also the private sector, as it provides the information
on which strategic decisions can be based.
Global integration through international trade and flow of capital are the cornerstones of modern
economics. If an economy is to become competitive and to develop, it will need to actively
engage in trade with other economies – economies that can rely on catering to their domestic
markets only are very few. This means that it is important for a country to identify products andsectors that are:
in line with its current endowment structures.



growing dynamically at the global level due to current and future consumption trends.

The former represents the supply side of our analysis, i.e. what the core competencies of thecountry are, and the latter signifies the demand side of our analysis, i.e. is there a growing
market for the products of specific industries.
Understanding supply side constraints relates to understanding a country’s comparativeadvantage which is defined by its endowment structures. According to the former chief
economist of the World Bank, Justin Lin, a country’s factor endowment entails differencesamong countries in terms of labour and capital endowments as well as with a country’s ability tocreate the necessary capabilities given those endowments (Lin, 2011; 2012). These in turn
determine what countries are capable of producing. Lin’s theory builds on an integrated
approach, which, on the one hand, emphasizes the role of markets for resource allocation and on
the other, on the government’s role in actively coordinating investments for industrial upgrading
and diversification, and in compensating for externalities generated by first movers in the
dynamic growth process.
One cannot look independently at the supply side of the coin and continue to produce goods thatare declining in terms of demand. Demand is driven by international and domestic markets.
Some industries, like food and beverages or construction materials, are inherently more geared
towards demand on the domestic market, while others focus more on the international market.
Products are increasingly becoming more complex and reliant on intermediate goods, which inturn depend on other intermediate goods. The result is that the production of final goods is
becoming increasingly intrinsically linked with their degree of reliance on intermediate goods
along the supply chain. Consumption patterns and, hence, demand, be it domestic orinternational, affect the growth of industries that produce final goods, as well as those that6

produce intermediate goods. The entire value chain is consequently affected by consumption,and this makes it important for an economy to identify its growing industries in terms ofinternational and domestic demand both for final goods as well as for intermediate ones.
Consolidating these two aspects to construct a rigorous approach for industry selection is not aneasy undertaking, but can be paramount for a country to successfully undergo structuraltransformation from poorly performing industries to dynamic ones that generate high value
5

added and provide sufficient employment opportunities without harming the environment.
This opens up the following questions.
On the demand side: Which are the dynamically growing industries at the global
level? What weight does a country carry in globally growing industries and how has its
position changed from a decade ago? Can such industries also cater to domestic
demand?

On the supply side: Are these industries in line with its comparative advantage and its
endowment structure? Does the development of selected industries guarantee positive
spillovers to other industries of an economy through the supply linkages?

These two aspects form the basis of the analysis framework presented in this report.
2.2

Methodological considerations

Some important methodological considerations need to be outlined: Use of quantitative and transparent data. This report does not rely on business perceptions
to assess countries’ industrial competitiveness. Notwithstanding their usefulness, perceptionbased surveys generate partial indicators for inter-country comparisons, as the views ofindividuals and companies are shaped not only by objective circumstances, but by subjective
and context-sensitive factors as well. The United Nations Industrial Development
Organization’s (UNIDO) methodology relies on a number of carefully selected objective,
outcome-based indicators published by international organizations. Although quantitative
indicators will never be perfect proxies of what they intend to measure, they provide a solid
foundation for inter-country analyses.

5

At UNIDO, this approach is called the “3 E’s” - “economy, employment and environment”.

7 Analysis of levels and trends. The report assesses countries’ industrial performance as wellas the overall trends for a specific period. Such an analysis is particularly useful for countries
experiencing high levels of growth and which have not yet achieved the rates ofdevelopment typical of industrialized countries. The analysis covers the period 2000–2009
for all countries.
 Macro- and sectoral analysis. Macro-analysis provides a general overview of a country’s
industrial competitiveness vis-à-vis other countries. By using UNIDO’s methodology, thereport combines macro- with sectoral analysis, enabling policymakers to establish realistic
and applied parameters. The depth of sectoral analysis depends on various factors, including
data availability and the objective of the study. The report analyses sectoral performance atthe 2-digit level in SITC revision 3 and ISIC revision 3.
 Data- Value added data source. Value added is defined as the return to factors of production. It
is the difference between total output and total operating costs incurred in the productionof goods where total operating costs refers to the sum of total materials and operating
costs. This data can be derived from INDSTAT. The major limitations of INDSTAT arelimited sector, country and year coverage. The case may be that there is a number ofmissing data for a given country for certain years in a selected industry. Anotherlimitation of the INDSTAT data relates to the fact that some countries report data as a
combination of two or more 2-digit ISIC categories – this requires us to aggregate thedata, which can lead to the loss of relevant information, which we would otherwise attainat a more disaggregated level. Furthermore, for the 2-digit ISIC categories, the source ofvalue added data is industrial surveys, which only include a representative subset of all
the firms operating within that industry.
- Export data source. Export data was obtained from UN Comtrade and covers extensive
international trade data in terms of product, sector, country and time coverage. The data
can therefore provide us with a detailed overview of trade patterns at the global andcountry level for a selected industry or product. UN Comtrade data have two major
limitations. First, data are presented in nominal terms, meaning that they are not adjusted
for inflation and might therefore show a distorted picture in terms of actual tradeperformance, which could either be under- or overestimated, depending on the country inquestion. The second limitation is that all trade data are output data, meaning that wecannot determine the true value addition of a country’s trade performance, as we are also8accounting for intermediate input, which covers: (a) value of materials and supplies for
production (including cost of all fuel and purchased electricity); and (b) cost of industrial
services received (primarily payments for contract and commission work as well as repair
and maintenance work).
- Input-output tables. Input-output tables capture the most important financial transaction
between different industries and consumers within an economy. They provide an
overview of the whole economy along the production and supply chain to intermediate
and final use. Input-output tables can be obtained at the national and international level.
In this paper, we use input-output tables at the international level. One of the major
limitations of input-output tables is that they are disaggregated at the sectoral level andnot at the product level, which can lead to omission of some of the most importantinterdependencies.

2.3

Economic assessment

2.3.1

Analysis of exports

A sector’s competitiveness can be assessed by analysing its world export share, along with the
product’s international dynamism and demand for it (measured by the annual growth of the
product in the world market). Our analysis covers a period of 11 years, from 2000 to 2011. To
evaluate the dynamism of the industrial sector in the world market, the key question we aim toanswer is how the industry is growing in relation to the manufacturing sector’s average. We
calculate the compound annual growth rates (CAGR) of the industry-specific exports and of the
manufacturing sector’s total exports. From this analysis, we can determine whether anindustry’s exports are growing faster or slower than the average manufacturing exports. Those
industries that are growing faster than the average manufacturing exports are considered to be
dynamic, while those industries that are growing slower than the average are considered to bestatic.
The share of the country’s manufactured exports is then calculated for the period 2000 to 2011
to measure the country’s impact on world demand for the products of that particular industry.
The share of exports in the world exports of a particular industry reveals a country’s competitive
position relative to others in the international market. Gains in world market share reflect
improved competitiveness, while losses denote a deterioration of the country’s competitive
position. Such an analysis provides us with a methodology to classify industries into four
categories based on their export performance (described below).

9

Champions: a champion export is a highly dynamic product—growing above the average ofworld exports—with a gain in world market share. Successful exporters tend to have an
important number of champion exports, reflecting the country’s ability to gain world market
share in the most dynamic and demanded products;
Underachievers: these exports are highly dynamic in world markets, but the country is losing
world market share. Such exports are considered ‘lost opportunities’ as the country is failing tocompete in fast growing products;
Champions in Adversity: overachiever exports are not very dynamic products—they growbelow the average of world exports—and yet the country is gaining world market share. This
tends to be a common feature of many resource-rich. developing countries as their major
exports see sluggish growth in world demand;
Decline: products from this group are slow growing exports in world markets where the country
is losing world market share. It must be noted that it is not necessarily a bad sign for the country
to have declining exports if they are balanced out by champion exports. This is indeed a featureof many industrialized countries that lose competitive edge in slow growing, labour-intensive
exports while strengthening the position of high value added and technology-intensive exports.
Figure 2 groups the five ASEAN economies’ metal industries into the respective four categories
based on their export performance.
Analysis of exports

23%

Underachivers
18%

Growth of world demand

Figure 2

ChampionsAverage world
growth of basic
metal sector

13%

Average world growth of
manufacturing sector

Declining

8%

Champions in Adversity
3%
Change in the country's contribution to World demand-0.5% -0.4% -0.3% -0.2% -0.1%-2%0.0%

0.1%

0.2%

0.3%

0.4%

0.5%

0.6%

0.7%

0.8%

-7%

Malaysia

Philippines

Thailand10

Indonesia

Vietnam

0.9%

1.0%

Manufacturing accounts for the bulk of world exports (78 percent in 2010), and is less exposed
to external shocks, price fluctuations, climatic conditions and unfair competition policies. The
price of manufactured goods tends to be more stable than that of commodities, as unfair
competition policies have distorted prices around the world, limiting the potential for export
growth of some commodities. Our figures show that this growth in manufacturing exports is asustained one, with an average global growth of 10 percent between 2000 and 2011.
On a global scale, the metal industry’s products have been faring even better than the average
manufacturing exports, with an average global growth in demand of over 12 percent. This trend
is set to continue with the industry’s extensive links with other growing industries such as
metallurgy and construction, which are both set to experience a tremendous boost in the region
due to Asia’s increased growth momentum.
Hence, it is important to examine the countries’ responses to the increasing world demand formetal products. Between 2000 and 2011, out of the five countries investigated here, Thailand
and Indonesia managed to take the biggest share of the world’s growing market for metal
products, with a growth of 0.66 percent in the world market. Malaysia and Indonesia follow
with a growth of 0.36 percent and 0.16 percent, respectively. Viet Nam and the Philippines,
however, lag behind with a minor increase of 0.08 percent and 0.06 percent, respectively.
The metal industry is a “Champion” industry in each of the countries studied here. In essence,
demand for products ofr the metal industry has, on average, been growing at a higher rate than
products of the manufacturing sector as a whole, and all five countries increased their share inworld exports of metal products during this period.
2.3.2

Analysis of domestic demand

In the previous section, we analysed the metal industry’s performance with regard to the export
performance dimension. In this section, we apply a similar analysis, but at the domestic level.
We want to determine how local demand for products from the metal industry grows over timeand how the metal industry performed in terms of adjusting its production capacity.
Furthermore, we track the domestic demand for products of the metal industry (measured by theindustry’s annual growth in the domestic market) relative to domestic demand for manufactured
goods on the whole.
For this analysis, we use input-output tables to calculate the growth rate of domestic demand as
the sum of the industry’s intermediate and final demand. Unfortunately, no input-output table
was available for Viet Nam. Due to the reliance of this analysis on input-output tables, ouranalysis covers a period of 10 years, from 1990 to 2000. We rely on INDSTAT for data on
sectoral value added.
11

To conduct the analyses, we employ a graph (Figure 3) with the following description. The yaxis shows the changes in domestic demand for products of the metal industry and the x axis
shows the changes in value added for the metal industry in the country’s total manufacturing
value added. The dotted line represents the average domestic growth of the demand for productsof the manufacturing sector on the whole during the same time period.
Domestic demand analysis
14%
12%

10%
8%
6%

Change in domestic demand

Figure 3

4%
2%

0%
-6%

-5%

-4%

Indonesia

-3%

-2%

-1%

Thailand

Malaysia

Change in country's VA/MVA
0%
1%
2%

Philippines

Those industries that registered a growth in demand that was higher than the manufacturing
average (i.e. above the dotted line) while at the same time recording a positive change in theratio of sectoral value added to total manufacturing value added, will be termed ‘Local
Champions’. Yet the above figure reveals that the metal industry did not emerge as a ‘local
champion’ in any of the countries. Malaysia witnessed the biggest change (13 percent) indomestic demand for products of the metal industry, followed by a 3 percent and 1 percent risein Indonesia and Thailand, respectively. Changes in demand for products of the metal industry
in the Philippines remained negligible. The only country that increased its metal production
share in total manufacturing over the ten-year period covered by this analysis is Thailand.
Indonesia experienced the biggest movement away from the metal industry. Despite the highincrease in domestic demand in Malaysia, the industry’s structure was not able to meet thatdemand. Malaysia was also the only country where the metal industry was very dynamic, withdomestic demand being higher than the average demand for manufactured goods.

122.3.3

Analysis of structural change

It is important to compare the development and performance of different manufacturingindustries with those of other countries that are in a similar stage of economic development orwith countries that have successfully transformed themselves through manufacturing growth
and are therefore considered a role model. The structural change analysis described in thissection is a comparative analysis. It builds on a comparative advantage argument, assuming that
income level is associated with a country’s endowment structure, which entails differences
between countries in terms of supply of labour and capital, as well as the necessary capabilities.
These in turn determine what countries are able to produce and are related to structural change.
This implies that if countries are able to perform well in industries which are aligned to theirendowment structures, they can accumulate capital and their income per capita can grow. The
implication is that the country’s endowment structure also changes as it accumulates capital andthe labour force acquires higher skills. As a country’s endowment structure changes, it moves tomore technologically sophisticated industries with higher capital intensity.

13

Figure 4

The mechanics/mechanism of structural change

Development stage 1(Income per capita: US$ 1,000 – 3,000)

Development stage 2(Income per capita: US$ 3,000 – 10,000)

Agriculture

Manufacturing

14

Development stage 3(Income per capita: US$ 10,000 – 15,000)

ECONOMIC DEVELOPMENT(GDP ranges are subject to change – this is just for illustrative purposes)

ServicesThe chart above shows that countries in development stage 1 (which roughly corresponds to a
GDP per capita that ranges between US$ 1,000 and 3,000) have endowments in terms of labourand capital which are more aligned towards agriculture. As countries’ agriculture sector grows,
they are able to move to the next development stage. The assumption is that during the growthof the agriculture sector, countries start investing in hard and soft infrastructure, which changes
the country’s endowment structure, aligning it more towards manufacturing and eventually
towards services.
We apply this logic to the manufacturing sector and show how manufacturing industries go
through pre-takeoff, growth and decline at different income levels. It is assumed that morelabour-intensive industries have higher growth rates at lower income levels and start declining
as income grows, while more capital-intensive industries can sustain high growth rates over alonger income range.
Given the selected ASEAN economies’ development stage, we identify which industries are
suitable given the countries’ income level and analyse their deviation from the different
industries’ benchmark pattern identified above.
The structural change assessment methodology is based on the following steps:
1. Identification of relevant country groups with similar exogenous characteristics based onsize, resource endowment and other relevant factors. Statistical testing indicates that three majorgroups share similar patterns of structural change:-

Large countries: More than 12.5 million inhabitants-

Medium countries: More than 3 million and less than 12.5 million inhabitants-

Small countries: 3 million and less inhabitants.

All countries selected for this study fall into the large countries category.
2. Estimation of value added shares and growth patterns of manufacturing industries atdifferent income levels (development stages) for the identified country groups, using thefollowing model:-

Where X stands for dependent variable: value added share in MVA and value added
per capita.
15

-

It is assumed that industries go through three development stages—pre-takeoff,
growth and decline—following a pattern of a cubic function. Therefore, we apply a
cubic functional form with real GDP per capita (PPP adjusted): RGPD as theindependent variable.

-

α represents any unobserved effects due to country-specific conditions.

-

Both dependent and explanatory variables are expressed in logarithmic terms tomeasure the elasticity of each variable.

The resulting pattern is presented in the following figure.
Figure 5

Estimation of value added shares and growth patterns in the metal industry

3. Step: Classify industries into early, middle and late industries. The 18 manufacturingindustries examined in this report are classified into early, middle and late industries
depending on whether the given industry has reached its highest share in total
manufacturing value added before a GDP per capita of US$ 5,000, between US$ 5,000 and
US$ 20,000 or more than US$ 20,000, respectively.

16

Table 2 Sector classification

Real GDP per capita(PPP adjusted) range inUS$

Industry

Food and beverages
TobaccoTextilesWearing apparel
Early industries - real
GDP per capita (PPP
Wood products
adjusted): US$ 0 - 5,000
Printing and publishing
Coke and refined petroleum
Non-metallic minerals
Furniture, n.e.c.
Paper
Middle industries - real
Basic metals
GDP per capita (PPP
adjusted): US$ 5,000 Fabricated metals
20,000Precision instruments
MetalsLate industries - real
Rubber and plastic
GDP per capita (PPP
Machinery and equipment
adjusted): US$ 20,000 andElectrical machinery and apparatus
higherMotor vehicles

Given the income levels of the five ASEAN economies studied here, we establish that thePhilippines, with a real GDP per capita of US$ 4790.58, and Viet Nam, with a real GDP per
capita of US$ 3742.71, have endowment structures which are more conducive for thedevelopment of early industries. The endowment structures of Indonesia (with a real GDP per
capita of US$ 5185.75) and Thailand (with a real GDP per capita of US$ 5185.75) are more
conducive for the development of middle industries, while Malaysia’s, with a real GDP per
capita of US$ 7892.7, it is the late industries.
This reinforces our results of the previous sections, whereby Malaysia’s metal industry is moremature and more integrated vertically, while Thailand and Indonesia’s metal industry iscatching up, with growing production, domestic demand and exports. The metal industry has not
yet achieved its full potential in the Philippines and Viet Nam.
By plotting the time series data of individual countries for GDP and value added per capita on
the same graph as that of their country group, it is possible to compare the country’s
17performance relative to the average benchmark of its country group in terms of level andelasticity rate.
Figure 6

GDP per capita
Pattern for a specific industry
sectorLevel

Elasticity rate = gradient

The difference in VA per capita is calculated as:D  VApccountry,latest  VApcbenchmark,latest
The elasticity rate is calculated as:

VApclatest  VApcinitia
VApcinitia
Ei 
GDPpclatest  GDPpcinitia
GDPpcinitia
Interpretation:
If E>1, then the industry is growing faster than the economy

If 1> E>0, then the industry is growing, but slower than the economy

If E<0, then the industry is declining.

We were only able to apply this methodology to the metal sector of three of the five countries
selected for this study, as long time series data were not available for Viet Nam and Indonesia.
On the other hand, the Republic of Korea was included in our analysis as a “role model” in theregion against which to benchmark performance other than against the average of all “large
countries”. The analysis was also limited to the time period for which data were available. Table
3 compares the differences in VA per capita of each country and its respective country group.
18

We find that the VA per capita of Malaysia and Thailand is negative, implying a lower capacityof the metal industry compared to the country group average. While the Philippines performed
at par with its country group average, the Republic of Korea’s performance significantly
exceeded its country group average.
Table 3 Difference in VA per capita

For last year of available data (measurement
point of level)

Difference(VApc in
US$)

Country

Lastyear ofavailabledata

GDP per capita(PPP adjusted)
in US$

Indonesia

NA

NA

NA

NA

NA

Viet Nam

NA

NA

NA

NA

NA

Malaysia

2004

15875

32

90

-58

Philippines

1996

3481

12

6

6

Thailand

2002

7528

21

28

-7

Republic of
Korea

2004

21332

424

122

302

Figure 7

Country's
VApc inUS$

Average growth rates of the metal industry

19

Country
Group’s
VApc in US$

Table 4 presents the time period analysis of the elasticity rates depicted in Figure 7 above. The
metal industry’s average elasticity rates in Malaysia, the Philippines and Thailand closely
followed the benchmark average of their respective country group. During this period, theRepublic of Korea, the role model country, recorded a significantly higher elasticity rate thanthat of the benchmark country group, indicating a considerable expansion of the metal industry.
Table 4 Elasticity rates

Time Period Analysis of Elasticity Rates

CountryTimeperiodanalysed

GDP per capita(PPP adjusted)range in US$

Elasticity
rates ofindustry incountry

Elasticity rates ofindustry in countrygroup

Indonesia

NA

NA

NA

NA

Viet Nam

NA

NA

NA

NA

Malaysia

1970 - 2004

3041 - 15875

3

4

Philippines

1963 - 1996

2396 - 3481

2

2

Thailand1968 - 2002

1712 - 7528

5

5Republic of
Korea

1968 - 2004

2599 - 21332

24

5

2.3.4

Analysis of interdependence of industries

In addition to the above analysis, we examine the metal industry’s impact on othermanufacturing industries in the country. It is of crucial significance for policy purposes toestablish the production linkages between manufacturing industries, or to determine whether
any interdependencies exist at all among the manufacturing industries.
Defining these linkages and their changes over time is only possible with the use of input-output
tables, which hold a detailed account of the country’s economic structure in terms of demandand supply at the subsector level. Flows from one industry to another within the country can be
examined as well as inter-industry flows between the country and another one.
Table 5 presents the manufacturing linkages in the different countries. The calculations are
based on backward linkages. Backward linkages exist when the growth of a given industry leads
to the growth of the industries that supply it. Hence, the values in Table 5 show how much a one
dollar increase in the respective industries’ output would affect demand for inputs from all other20

manufacturing industries, including both direct and indirect effects. Direct effects are purchasesof resources (inputs) by an industry from all other industries to produce one unit of output.
Indirect effects are purchases of inputs by an industry that influence the growth of anotherindustry, which in turn influences yet another industry. There can be multiple chains of indirect
linkages.
As Table 5 reveals, all manufacturing industries are complementary and not a single industry
has a negative effect on the manufacturing sector as a result of its own growth. However, what
is visible is that some industries have a bigger impact on the growth of the manufacturing sector
as a whole than others.
By contrasting the individual linkages with the average, it is possible to determine which
industries have higher than average linkages with all other manufacturing industries and would
thus generate higher than average spillovers to the rest of the economy. Industries with above
average interlinkages are classified as ‘high impact’ industries. In Table 5, we highlight such‘high impact’ industries for each country in yellow. We find that the metal industry emerges asa ‘high impact’ industry in Indonesia and the Philippines, whereby a unit increase in the metalindustry would trigger a 0.15 and 0.11 increase, respectively, in the manufacturing sector as awhole.
2.3.5

Macroeconomic linkages

It is important to analyse each industry’s macroeconomic position. We achieve this by looking
at the sectoral contribution to exports, manufactured value added and employment. Table 6
provides the data required for such a macroeconomic linkage analysis of the metal industry in
the five ASEAN countries.

21

Table 5 Interdependence analysis

Indonesia

Malaysia

Philippines

Thailand

1.18

1.19

1.18

1.18

products

1.15

1.12

1.08

1.16

Lumber and wooden products

1.17

1.16

1.13

1.10

Pulp, paper and printing

1.12

1.12

1.09

1.10

Metal products

1.13

1.15

1.11

1.13

Petroleum and petroleum products

1.10

1.14

1.04

1.03

Rubber products

1.13

1.15

1.06

1.17

Non-metallic mineral products

1.15

1.14

1.16

1.14

Metal products

1.15

1.09

1.11

1.09

Machinery

1.12

1.06

1.04

1.07

Transport equipment

1.14

1.10

1.13

1.11

Other manufacturing products

1.13

1.10

1.06

1.12

1.14

1.13

1.10

1.12

Food, beverages and tobacco
Textile, leather and textile and leather

Average
All highlighted industries are ‘high impact’ industries.

22

Table 6 Industry profile for 2011
Country’s
metalindustry
exports(billion
USD)

Metal
industry’s
share incountry’s
manuf.
exports (%)

Country’s
VA frommetalindustry(billion
USD)

Metal
industry’s
share incountry’s
manuf. value
added (%)

Country’s
employment
in metalindustry (1000of people)

Metal
industry’s
share incountry’s
manufacturing
employment(%)

Indonesia

12.41

11

2.71

4

64

1

Thailand

9.80

5

1.41

3

71

2

Malaysia

8.33

4

1.93

5

55

3

Philippines

2.13

6

0.68

5

24

2

Viet Nam

1.85

3

0.09

2

29

2

In Indonesia, the metal industry accounted for 11 percent of the country’s total manufacturingexports (US$ 12.41 billion), but only 4 percent of the country’s value added share (US$ 2.71
billion). This implies that a significant share of the industry’s production is geared towards thedomestic market. It is also characteristic of an industry with resource-based manufacturing
products that have a high inherited value content. Indonesia is well endowed with raw materials
for the metal industry such as tin, nickel, bauxite, copper, gold and silver. The same is true for
Thailand and Malaysia, which are rich in tin, tungsten, tantalum, lead and tin, copper, iron ore
and bauxite. Thailand’s total export value is US$ 9.8 billion, but the metal industry’s
manufacturing value added only accounts for US$ 1.41. The same is true for Viet Nam and thePhilippines, but to a much lesser extent.
The metal industry accounts, on average, for 2 percent of total manufacturing employment in
the countries included here. Thailand’s metal industry employs the largest number of workers,
but is nonetheless not the most labour-intensive, which is claimed by Viet Nam, with a low
exports and value addition per employee. At the other end of the spectrum, Indonesia shows thebest labour productivity both in terms of exports and value added. The high exports and value
addition per employee in Indonesia is made possible by vertical integration of the industry
within the country, whereby intermediate goods downstream in the value chain are sourced fromwithin the country itself. In the metal industry, this is possible due to the existence and operationof foundry plants.

23

Value added (1000 USD) per employee

Figure 8

Value added per employee in the metal industry

45000

40000
35000

Malaysia

30000

Indonesia

25000

Thailand

20000

Philippines

15000

Vietnam

10000
5000

0
0

50000

100000 150000 200000 250000

Exports (1000 USD) per employee

2.3.6

Country level summary of economic analyses of the metal industry

1. IndonesiaThe metal industry has emerged as a champion industry in terms of export
analysis. It is a dynamic industry in the world market and the country has been
expanding its world market share.

The domestic demand analysis revealed that demand for products of theindustry increased at a rate lower than that of the manufacturing average.
Indonesia’s metal industry decreased its capacity relative to the overall
manufacturing capacity (measured by the industry’s VA /total MVA).



Due to lack of data availability, we could not conduct a structural change
analysis for Indonesia.

In the domestic demand analysis, the industry exhibited a linkage effect that is
marginally higher than the manufacturing average’s; hence, the industry
emerged as a ‘high impact’ industry.

2. Malaysia


The metal industry emerged as a champion industry in the export analysis. It isa dynamic industry in the world market and the country has been expanding its
world market share.
24The domestic demand analysis revealed that even though demand for productsof the metal industry increased at a rate proportional to that of the
manufacturing average, it did not increase its capacity relative to the overall
manufacturing capacity (measured by the industry’s VA /total MVA). This
could imply increased dependence on imports.



Malaysia’s value added per capita is lower than that of the country groupaverage. The elasticity rate of the industry’s value added per capita with respect
to GDP growth per capita was lower than the country group average, which
implies that the value added per capita will drop further than the country groupaverage in future.

In the domestic demand analysis, the industry’s linkage effects were lower thanthose of the manufacturing sector’s average.

3. The Philippines

According to the export analysis, the metal industry emerged as a championindustry. The metal industry is a dynamic industry in the world market and thecountry has been expanding its world market share.

The domestic demand analysis revealed that demand for products of the metalindustry increased at a rate lower than that of the manufacturing sector’s
average. The domestic metal industry decreased its relative capacity relative tothe manufacturing sector’s overall manufacturing capacity (measured byindustry VA /total MVA).

The Philippines’s value added per capita is higher than the country group’s
average, while the elasticity rate of the metal industry’s value added per capita
with respect to GDP growth per capita is similar to the country group’s average.



According to the domestic demand analysis, the industry exhibited linkage
effects that were marginally higher than those of the manufacturing sector’s
average, hence, the industry emerged as a ‘high impact’ industry.

4. Thailand

According to the export analysis, the metal industry emerged as a championindustry. The metal industry is a dynamic industry in the world market and thecountry has been expanding its world market share.

The domestic demand analysis revealed that demand for products of the metalindustry increased at a rate lower than that of the manufacturing sector’s
average, but the country’s domestic industry increased its relative capacity
relative to the manufacturing sector’s overall capacity (measured by industry
25

VA /total MVA), which could imply increased export growth of the industry
and domestic production driven mostly by global demand.


Thailand’s value added per capita is lower than the country group’s average,
while the elasticity rate of the metal industry’s value added per capita withrespect to GDP growth per capita is similar to that of the country group’s
average.

The domestic demand analysis showed that the metal industry exhibited linkage
effects that were marginally lower than those of the manufacturing sector’s
average.

5. Viet Nam


The export analysis revealed that the metal industry emerged as a championindustry. The metal industry is a dynamic industry in the world market and thecountry has been expanding its world market share.



Unfortunately, due to a lack of available data, we could not conduct any further
economic analyses of the metal industry’s performance in Viet Nam.

2.4

Limitation of methodologies

Analysis of exports


The methodology is useful for assessing industries that are already exporting. It does
not, however, take account of potential industries that may be producing goods but are
not exporting these at the moment. This means that new or emerging industries are notincluded.

The methodology also does not take account of the diversity of the industries. In cases
in which the products of an industry are very diverse, variations in the performance of
these products are expected relative to average world growth of the manufacturingsector.

Analysis of domestic demands:

Since this analysis does not indicate the types of products for which there is growing
domestic demand, we cannot ascertain whether the country is importing more raw
materials or more finished goods.



Nor is it possible to determine the share of manufacturing output by a specific industry,
which ends up on the domestic market.
26

Analysis of structural changeThe analysis is based on benchmarking a country’s performance to the average ofcountries with the same endowment structure. This methodology generates two
criticisms: firstly, that endowment structures are determined solely on the basis ofincome per capita. Secondly, it implicitly sets the bar against which performance isassessed relative to the average achievements of the given country’s peers rather than toa country that has excelled in the given industry. This also raises the question whether itis really not recommended for a specific industry to have a lower share and another tohave a higher share than that of the country’s peers’ average. Hence, this analysis is
only used as a reference tool, not as one from which any actions are recommended.

In addition to factor endowments, historical and socio-political factors can also have an
impact on a country’s competitiveness, which are not accounted for in the methodology.

Analysis of interdependence of industries
In his early paper, Carl F. Christ (1955, p.140) made two major assumptions about input-output
analysis. These assumptions still apply today.
Constant returns to scale. This assumption is contested on the grounds that functions are
more complex and cannot realistically describe production processes simply using
shares.

No substitution of the inputs in the production of any good or service is possible.
According to C. F. Christ, “the second assumption is sufficient to exclude any
optimizing from the supply side, because it excludes all choice about the proportions inwhich inputs are to be combined in the production of a given output. With suchproduction function, all inputs are perfect complements” (1955: 140).

3.

Environmental and social analysis

3.1

Introduction and conceptual framework

3.1.1

The Five Enabling Abilities Framework for analysing manufacturing processes

This analysis is structured in a way that goes beyond the typical simple measure of the scale ofenvironmental or social issues. For each of the six dimensions of environmental and social
performance – energy supply, water supply, emissions to air, emissions to water, solid waste
and labour – we analyse data across all five enabling abilities (where data is available). The fiveenabling abilities are constraints, planning, operation, monitoring and education. These provide27

a framework for identifying parts of performance that may strongly influence the future ability
to manage the environmental/ social issue. For example, a nation may currently be far from its
total capacity to deliver water, but a poor score in constraint, planning and education would help
identify a future water issue for industry before it actually occurs. To understand environmental
and social dimensions in detail, we must explore the following abilities individually, rather thancharacterize the entire industry using a single parameter.
Figure 9

Five Enabling Abilities Framework

This more granular approach enables us to identify the likelihood of future problems, as well as
the specific abilities that strongly influence the given industry. It should be noted that theseabilities are interdependent. The definitions of the five abilities are as follows:Constraint of systems

The ability of industry X to understand current and future constraints. This ability isconcerned with knowledge. Competent industries will understand how close they currently
operate to the limits of the natural system they are part of and be able to extend thisknowledge into the future to determine how close they will be operating to the limits if aplanned expansion or changes occur. This includes a need to understand a system’s limits,which are often determined by governments, NGOs or trade bodies. Limits may be nationalor watershed, physical or legislative or mandated by customers; hence, limits are complex
and awareness of these is a pre-requisite for analysis and planning.
28

Planning of systems (Design of systems)

The ability of industry X to develop a plan for a sustainable future. This ability is concernedwith the effectiveness of those institutional mechanisms that bring together the manycollaborators needed for effective action. Solutions are built and implemented by multiple
actors – for example, the government introduces pollution regulations which are delivered
to industry and monitored by NGOs or government bodies and felt by local citizens.
Sensible and workable solutions must be designed. This enabling ability is crucial forcomplex interactive systems.
Operation of systems

The ability of industry X to deliver current value within current national limits. This
enabling ability is concerned with the current situation, and the industry’s performance interms of delivering an industrial system that can operate within current limits. It emphasizes
how close the industry is operating to the actual limits. If the industry is currently working
above its limits, then expansion is much more challenging. Equally, demonstratingcompetence at operating within the current limits is a good indicator of the industry’s ability
to continue operating within these limits in the future.
Monitoring of systems

The ability of industry X to assess its own performance. This enabling ability is concernedwith the institutional mechanisms that are in place to monitor, measure and enforce
performance. This entails government competences in the enforcement of current
legislation, scientific competence and capacity for full testing and monitoring, combinedwith industry competence to monitor developments at the plant level (to avoid failures). The
ability to collect this data and use it to guide actions is also considered, as there is little
value in accurate reports that go nowhere.
Education for systems

The ability of industry X to organize and develop competence/knowledge. This enablingability is concerned with the longer term ability to deliver the four abilities alreadydiscussed. Without competent people, the design, operation, monitoring and understandingof constraints will be severely limited. This ability analyses national institutions’ ability tobuild educational programmes and to encourage enrolment. This may be professional
accreditation or degree level, and may be delivered by academic institutions, tradeassociations or private companies.
29

Analysis
This study focuses on physical constraints that can prevent or enable an industry’s future
progress. ‘Physical constraints’ refer to those national resources that are critical for the specificindustry to maintain current and future manufacturing activities. This includes labour
performance as well as use of resources and creation of waste that needs to be managed.
In addition, we analyse the relationships between authorities, industry and society (includingNGOs). A functioning system of checks and balances between industry, governments andcitizens is useful to establish a robust licence to operate in the industry. In particular, the proper
checks and balances should lead to better environmental and social performance, but also
improved stewardship of national constraints.
Figure 10

A healthy industrial system

Analysis dimensions
To measure an industry’s environmental impact, five dimensions are selected: energy used, airemissions, water used, solid waste and wastewater. For the social impact analysis, labour was
selected. The analysis dimensions allow for varying situations across industries and nations.
Scores are given using the five ranking index shown here (with the exception of cases in which
no information is provided, which are termed ‘blank spots’ and have a zero score).

30

Table 7 Scoring for each dimension
Scoring(meaning)

Constraint

Planning

Operation

Monitoring

Education

3.2

0

1

2

No dataNotLessavailable

desirable

desirable

Blank
spots

Very closeor over
constraints

3

Close toconstraints

Blank

Not

Less

spots

desirable

desirable

Blank

Not

Less

spots

desirable

desirable

Blank

Not

Less

spots

desirable

desirable

Blank

Not

Less

spots

desirable

desirable

Acceptable
Neither close
nor far fromconstraints
Acceptable

Acceptable

Acceptable

Acceptable

4

5

Very

Most

desirable

desirable

Far from
constraints

Very farfromconstraints

Very

Most

desirable

desirable

Very

Most

desirable

desirable

Very

Most

desirable

desirable

Very

Most

desirable

desirable

Methodological considerations

Lack of data
There is no institutional or international agreement on data collection of environmental andsocial impacts, especially at the level of an industry (i.e. our analysis). Countries have no
obligation to regularly report data to international entities such as the World Bank or ADB informs that would facilitate a sectoral analysis (where reporting does exist, it is typically atnational level). Voluntary efforts are also extremely limited, making it difficult to create a data
set for industry level analysis of environmental and social aspects from published reports.
Environmental data is known to be notoriously scarce as it is not yet common practice tomeasure environmental variables, especially at different levels of aggregations. There have beensome attempts at national level measurements and estimations for some of the environmental
variables, but industry and sub-manufacturing industry level data with sufficient disaggregationand time series coverage is nearly impossible to come by, whether in international or national
databases. Of the variables of interest for this study, energy was the only exception, with data at
ISIC 2 digit level disaggregation being available in the IEA database.
This lack of data affects our ability to conduct a purely quantitative analysis of theenvironmental and social impacts as originally envisaged. Qualitative research methods were
therefore developed where a lack of data occurred. In the long term, however, it would be31

desirable for each country to establish an own data collection system and a centralized national
environmental database to facilitate an assessment of the main industries’ environmental andsocial impacts.
Pre-fieldwork
Various metal industry reports, national competitiveness reports and environmental orsocial reports for the case countries were obtained and studied;International databases were checked for data availability;

The main concepts and analysis methodology were developed, including detailed
interview questions for authorities, industry and NGOs.

Two-week fieldwork per country

National consultants were hired to facilitate the fieldwork. Specifically, the national
consultant helped secure interviews with the relevant parties and coordinated the visits.

All researchers participated in the first fieldwork exercise to share common goals anddevelop and refine the approach to fieldwork.

Several interviews were conducted with the relevant authorities, private sector, sectoral
associations and NGOs.



A small number of forums were organized to ensure that the views of firms across awide range of firm sizes were obtained.

Post-fieldwork
It was necessary to modify the research methodology to also include a qualitative
analysis of the information gathered during the fieldwork due to the lack of quantitative
data.

Information provided in this report was collected either from a desk study or during the twoweek fieldwork in the country. It was generally assumed that ministry officials are in a better
position to gather higher quality data on account of their networks and because they did nothave a two-week time constraint.
A note on Malaysia’s environmental and social data and analysis
After applying the above methodology in Malaysia, i.e., after two weeks of data collection in
the country supported by local country experts, and covering around 60 interviews and meetings
32

with over 100 people and the compilation of Malaysian government and NGO reports, we failed
to gather sufficient quantitative and/or qualitative data on the environmental performance of themetal industry to arrive at a robust analysis. Therefore, no environmental analysis for
Malaysia’s metal industry is presented here.
No comparison across countries
The objective of this study is to explore and understand the environmental and social
implications of deepening activities of a specific manufacturing industry within a country to
inform future industrial policies and strategies. The data and information collected were
therefore very contextual to a specific industry in a specific country. As a result, themethodology does not allow for cross-national comparison and it would be ill-advised to engage
in such an activity during the readership of this report.
Reading this report
The following sections follow a common format. Each of the four countries studied is presented
in turn. The analysis of all six dimensions of environmental and social performance is presented
for each country, namely energy used, water supplied, emissions to air, solid waste, emissions towater and labour. The report draws conclusions from the data for each dimension, starting withconstraints on the system (energy system, water system, etc.), followed by planning, operation,
monitoring and education abilities. Each of these is assigned a score from the above table and adiagram is used to present the scores (5 = best, 1 = worst, 0 = insufficient data).
The most important restrictions and enablers of industry growth in the given country are thensummarized.
Next phase of methodology development
The methodology presented here discusses industry hotspots in terms of environmental andsocial aspects. Future developments could include the concept of industry coolspots. Coolspots
represent opportunities for a positive environmental or social impact and relate to a particularindustry. Secondly, the newly developed methodology is applicable not only to countries in the
ASEAN region but also to countries in other regions, including developed countries. Finally, as
this was the first attempt to collect data for this kind of methodology, it must be mentioned thatthe identification and collection of data was challenging.

33

3.3

Indonesia

Environmental assessment
3.3.1

EnergyAnalysis of enabling abilities
Constraints
Blank spots: The desk study and fieldwork revealed that insufficient data is available on theexchange of information between local and national authorities and between industry and the
local population about the capacity of the metal industry to understand current and future energy
constraints. It is therefore not possible to make any conclusive statements on the energy
constraints of Indonesia.
Planning
Considerable efforts have been made on the part of the authorities to establish a national energyplan, including subsidies, a pricing policy and the use of alternative energy sources. The
Indonesian government notes that much of the country’s clean coal is exported, whilst dirty coalis used for domestic energy production. The National Energy Council is in charge of thenational energy policy, and deals with available energy types as well as their utilization. It is
unclear, however, to what extent industry and the local population are engaged in addressing
energy issues in the metal industry. In particular, beyond industrial committee meetings, it is notclear to what extent Indonesian authorities have effective communication channels with industry
and the local population on energy demand, energy supply and energy saving within the metalindustry. As such, it appears that the primary influence on the domestic metal industry is topdown policy formulated against the international community’s standards.
Operations
The Indonesian authorities have introduced several policies in an attempt to encourage energy
saving in industry. These efforts include the establishment of a ‘green industry award’, a ‘newenvironmental law for both new and existing industries’ and various activities carried out by the‘Centre for Green Industry and Environmental Affairs’. Whilst the aforementioned policies andinitiatives appear to have an influence on large national and international companies, it is notclear to what extent energy saving efforts (e.g. installing new energy facilities or general bestpractice operations) are undertaken by SMEs in the metal industry.

34

Monitoring
Energy efficiency is currently being addressed by GIZ. Companies are audited to check whether
they are complying with the regulations; compliant companies are rewarded with preferential
credit terms from the Federal Bank. Furthermore, companies that collect energy efficiency andwaste minimization data are accorded green status, whilst more advanced, high performing
firms are awarded gold status.
Education
Blank spots: The desk study and fieldwork revealed that insufficient information is available onenergy education in the metal industry is available. This was also confirmed by the authorities,
industry and local population. It is therefore not possible to make any conclusive statements on
the energy monitoring systems of Indonesia.
Summary
Figure 11

Energy analysis of Indonesia’s metal industry

EnergyEducation

Constraints
5
4
3
2
1
0

Planning

Monitoring

3.3.2

Operation

Water supply

Constraints
On the positive side, from the industry perspective, water supply is not problematic as there are
a number of water treatment plants close to cities. The rate of water consumption per metric ton
has also decreased. Some companies in the metal industry have a formal energy, water
conservation and air pollution reduction policy endorsed by the top management. The main
constraint is that the cost of energy, materials, water and waste management are considerable.
35Planning
The Indonesian Ministry of Public Works deals with the regulation of water resources and withwater-related issues for industry. The problem with water management in Indonesia is that it
lacks centralized information management. To obtain detailed information, researchers need toacquire data from each individual water municipality office. Furthermore, information oncollaborative work in water supply planning by the authorities, industry and local population
could not be obtained.
Operations
Blank spots: The desk study and fieldwork revealed that insufficient data is available on efforts
undertaken by industry, the authorities and the local population to better manage and reducewater consumption. It was therefore not possible to make any conclusive statements on
Indonesia’s water operation system.
Monitoring
In terms of general environment monitoring, the Centre for Green Industry and Environment
Affairs of the Ministry of Industry is preparing a new environmental law for industry which will
include the metal industry. Furthermore, the Ministry of Environment has introduced a ‘Green
Industry Award’ scheme which reviews firms’ environmental performance.
Education
Blank spots: The desk study and fieldwork revealed that insufficient information is available onefforts undertaken by industry, the authorities and the local population to educate one another as
regards industry water supply in the metal industry. It is therefore not possible to make any
conclusive statements on the education system related to water in Indonesia.

36Summary
Figure 12

Water supply analysis of the metal industry in Indonesia

Water supply

Education

Constraints
5
4
3
2
1
0

Monitoring

3.3.3

Planning

Operation

Air emissions

Constraints
Blank spots: The desk study and fieldwork revealed that insufficient information is available onefforts undertaken by industry, the authorities and the local population to educate one another as
regards water supply in the metal industry. It is therefore not possible to make a conclusive
statement on constraints related to air emissions in Indonesia.
Planning
A National Action Plan to reduce emissions in Indonesia was established by Presidential
Instruction No. 61/2011. Target industries of this regulation are basic metals, cement, pulp andpaper, glass and ceramic, fertilizers, petrochemical, food and beverages and textile. The
objective of the National Action Plan is the reduction of emissions in these industries which areespecially problematic and energy intensive. The Ministry of Industry and the Ministry ofEnvironment have carried out a number of studies and published evaluation reports.
Industry in Indonesia is in a stage of fast growth. The country’s water capacity is expanding.
The domestic market and domestic demand for metal products is increasing as metal products
are being used as inputs to other industries. The metal industry is expected to grow over the next
decade as there is still a large gap to fill in the growing domestic market. Air emissions are
expected to increase as a result.

37

Operations
Air emissions are regulated by the government and inspections are conducted biannually.
Indonesian firms are generally compliant, with occasional cases of firms exceeding thecompliance guidelines. In cases where raw materials cannot be substituted, some firms plant
trees around their facilities to absorb the CO2 emissions produced by the factory. It is estimatedthat 1,195 trees are able to absorb around 29 tonnes of CO2. In addition, by saving energy, firms
are also able to reduce CO2 emissions. For reheating furnaces, for example, firms use aregenerator with a ventilation system which is efficient since it reduces energy used by 35
percent and decreases CO2 emissions into the air. This technology is being imported from Japanand the Indonesian government regularly sends experts to Japan for training in such newtechnologies.
Monitoring
Blank spots: The desk study and fieldwork revealed that insufficient information is available onefforts undertaken by industry, the authorities and the local population to educate one another as
regards industry water supply in the metal industry. It is therefore not possible to make aconclusive statement on monitoring of air emissions in Indonesia.
Education
Blank spots: The desk study and fieldwork revealed that insufficient information is available on
the tools, techniques, education programmes or best practices being shared between theauthorities, industry and the local population. It is therefore not possible to make any conclusive
statements on air emission-related education in Indonesia.

38Summary
Figure 13

Air emissions analysis of the metal industry in Indonesia

Air Emission

Education

Constraints
5
4
3
2
1
0

Monitoring

3.3.4

Planning

Operation

Solid waste

Constraints
Blank spots: The desk study revealed that insufficient information is available on solid waste
management in the metal industry in Indonesia. It is therefore not possible to make any
conclusive statements on the constraints Indonesia faces with regard to solid waste
management.
Planning
Blank spots: The desk study and fieldwork revealed that insufficient information is available onsolid waste management in the metal industry in Indonesia. It is therefore not possible to makeany conclusive statements on the planning Indonesia needs to undertake in solid waste
management.
Operations
According to the authorities, the Basel Convention Regional Centre for South-East Asia assists
authorities in dealing with the hazardous component of waste from all industries and from otheractivities. In addition, according to the Ministry of Environment, the Centre is authorized to set
standards on waste for each industry. It is not clear how often this actually takes place for the
metal industry.

39

Monitoring
The Centre for Green Industry at the Ministry of Industry is in charge of enforcing waste
management in the industrial sector. Monitoring is conducted in the following areas:Toxic free water campaign which focuses on the Citarum River (20 percent of industry is
located in close proximity to the river). Around 70 percent of industry in this area is textiles.
80 percent of water is supplied to Jakarta.

Climate and energy issues: the main focus in the energy discussion is on coal. The
government considers coal a driver of economic development. Indonesia is the second
largest coal exporter after Australia. Reserves are being depleted and now only lie at 0.4
percent.



Coal usage in domestic industry is significant: allegedly, 33 percent of domestic industry
uses coal;

85 percent of coal is exported; the rest is used domestically;Social impact of coal power plants:oHealth: respiratory diseaseoLoss of livelihoodoEnvironmental impact

Education
Blank spots: The desk study and fieldwork revealed that insufficient information is available onsolid waste management in the metal industry in Indonesia. It is therefore not possible to makeany conclusive statements on education relating to solid waste management.
Summary
Figure 14

Solid waste analysis of the metal industry in Indonesia

Solid Waste

Education

Monitoring

Constraints
5
4
3
2
1
0

Planning

Operation40

3.3.5

Wastewater

Constraints
Blank spots: The desk study and fieldwork revealed that insufficient information is available on
wastewater management in Indonesia’s metal industry. It is therefore not possible to make any
conclusive statements on wastewater management constraints in Indonesia’s metal industry.
Planning
Blank spots: The desk study and fieldwork revealed that insufficient information is available on
wastewater management in the Indonesian metal industry. It is therefore not possible to makeany conclusive statements on wastewater management planning in the metal industry.
Operations
Blank spots: The desk study and fieldwork revealed that insufficient information on thewastewater operations of Indonesia’s metal industry. It is therefore not possible to make any
conclusive statements on wastewater operations in the metal industry.
Monitoring
As regards water pollution and emissions, the department conducts inspections of firms todetermine whether they comply with the regulations. Based on a set of criteria, they categorize
firms and label them: black, red, blue, green and gold, with gold indicating that the respective
firm is more advanced. The main purpose of the inspection, however, is to check firms’
compliance status. The status of firms is also used by the Federal Bank to decide whether theindustry will get investment credit through low interest rates, etc. For gold and green industries,
data related to energy efficiency, waste minimization, CSR, etc. is available.
The Centre for Green Industry at the Ministry of Industry is responsible for enforcing waste
management in the industrial sector. Monitoring is conducted in the following areas:Toxic-free water campaign which focuses on the Citarum River (20 percent of industry is
located in close proximity to the river). Around 70 percent of industry in the area is textiles.
80 percent of water is supplied to Jakarta.

Climate and energy issues: the main focus in the energy debate is on coal. The government
considers coal a driver of economic development. Indonesia is the second largest coalexporter after Australia. Reserves are being depleted and only lie at 0.4 percent.



Coal usage in domestic industry is significant: 33 percent use coal;

85 percent of coal is exported; the rest is used domestically;Social impact of coal power plants:41

oHealth: respiratory diseaseoLoss of livelihoodoEnvironmental impact.

Education
Blank spots: The desk study and fieldwork revealed that insufficient information is available on
educational programmes relating to wastewater management for the Indonesian metal industry.
It is therefore not possible to make any conclusive statements on this issue.
Summary
Figure 15

Wastewater analysis of the metal industry in Indonesia

Wastewater

Education

Constraints
5
4
3
2
1
0

Planning

Monitoring

Operation

Social Assessment
3.3.6

LabourConstraints
The education system in Indonesia is deemed adequate for the needs of the country. However, it
was also reported that the country is facing a ‘brain drain’ problem, especially to the Middle
East.
Planning
Blank spots: The desk study and fieldwork revealed that insufficient information is available on
the planning of labour needs for Indonesia’s metal industry. It is therefore not possible to makeany conclusive statements on this issue.

42

Operations
Blank spots: The desk study and fieldwork revealed that insufficient information is available on
the efforts undertaken by industry, the authorities and the local population to improve working
conditions. It is therefore not possible to make any conclusive statements on Indonesia’s labour
management system.
Monitoring
Blank spots: The desk study and fieldwork revealed that insufficient information is available on
the planning of future labour management and future skill needs of Indonesia’s metal industry.
It is therefore not possible to make any conclusive statements on this issue.
Education
Blank spots: The desk study and fieldwork revealed that insufficient information is available on
the necessary level of education of the workforce in Indonesia’s metal industry. It is therefore
not possible to make any conclusive statements on this issue.
Summary
Figure 16

Labour analysis of the metal industry in Indonesia

Labour

Education

Constraints
5
4
3
2
1
0

Planning

Monitoring

Operation

43

3.4

The Philippines

Environmental assessment
3.4.1

EnergyConstraints‘Reliability/availability of power’ and ‘energy costs’ can represent constraints on national
environmental and social aspects.
Planning
The Ministry of Energy is in charge of energy regulations and planning. The authorities havecreated industrial zones in which industries are concentrated, away from residential areas andwith adequate facilities. The industry reported that various energy efficiency programmes havebeen introduced, such as ‘Waste Plastic to Fuel’, but little evidence was found of cooperation
between the authorities, industry and the local population in the development of energy supply
plans. Nor was any information available on the use of any form of sustainability indices tomonitor environmental performance either nationally or internationally.
Like local NGOs, international organizations produce energy research reports on energy use
patterns and energy efficiency at the country level, such as ‘Resource Efficiency: Economic andOutlook for Asia-Pacific’ (UNEP, 2012) or ‘Shaping Policy Reform and Peer Review inSoutheast Asia: Integrating Economies Amid Diversity’ (OECD, 2008).
According to ‘Resource Efficiency: Economic and Outlook for Asia-Pacific’ (UNEP, 2012), theregion should strengthen existing fiscal and financial instruments to incentivize renewable energy
development in the Asia-Pacific region. Tax incentives, while not prominent in China, are widelyused in India to attract investment. Renewable energy funds in various forms are used in economies
such as China, India, Australia, New Zealand and the Philippines to support renewable energy
development. Various forms of subsidies are also currently being implemented.
Further, according to ‘Shaping Policy Reform and Peer Review in Southeast Asia: Integrating
Economies Amid Diversity’ (OECD, 2008), the energy development package will develop biofuels
and renewables like wind, solar and geothermal energy. It will also promote oil and gas exploration,enhance energy conservation through the use of energy-efficient technologies and optimize
privatization of the power industry. In 2006, Congress passed the Philippine Biofuels Act thatprovides fiscal incentives to companies producing and selling biofuel-blended petrol and diesel.

44

Operations
Industry believes that energy is not a hotspot as it accounts for only 4 percent of national
demand. Some petro-metal producers have their own power plants to overcome periods ofblackouts suffered by the national grid.
Monitoring
The electricity stock exchange has profound knowledge on demand and supply of energy.
Education
Blank spots: The desk study and fieldwork revealed that insufficient information is available on
the efforts undertaken by industry, the authorities and the local population to educate one
another as regards energy issues in the metal industry. It is therefore not possible to make any
conclusive statements on the education system related to energy in the Philippines.
Summary
Figure 17

Energy analysis of the metal industry in the Philippines

EnergyEducation

Constraints
5
4
3
2
1
0

Planning

Monitoring

3.4.2

Operation

Water supply

Constraints
Blank spots: The desk study and fieldwork revealed that insufficient information is available on
the metal industry’s water demand and how this information is shared among stakeholders. It istherefore not possible to make any conclusive statements on the education system related towater supply in the Philippines

45

Planning
The authorities interviewed claim that water supply for the mental industry is plentiful, with
only a one-month drought in summer and occasional flooding. However, firms in the metalindustry are still using old technology to capture water (silt dams). The metal industry has
expressed concern about poor water capture and water management. Water tables are drying up
due to over-exploitation and deforestation, and fresh water capture capacity is low.
According to the report ‘Green Growth, Resources and Resilience’ (ESCAP/ADB/UNEP,
2012), the Philippines is one of the countries with the most urgent sustainability challenges inrelation to water. Specific problems afflicting the Philippines include ‘increasing water
scarcity’, ‘deteriorating water quality’ and the fact that the country is ‘flood-prone’ and‘cyclone-prone’.
Operations
According to the metal industry, water supply costs in production are negligible.
Blank spots: It is unclear to what extent knowledge on operations in water supply planning in
the metal industry is shared between the authorities, industry and the local population . Moreinformation is needed to understand how knowledge of operations is shared among
stakeholders.
Monitoring
Blank spots: The desk study and fieldwork revealed that insufficient information is available onefforts undertaken by industry, the authorities and the local population to educate one anotheron water-related issues in the metal industry. It is therefore not possible to make any conclusive
statements on the water monitoring systems in the Philippines.
Education
Blank spots: The desk study and fieldwork revealed that insufficient information is available onefforts undertaken by industry, the authorities and the local population to educate one anotheron water-related issues in the metal industry. It is therefore not possible to make any conclusive
statements on the education system related to water in the Philippines.

46

Summary
Figure 18

Water supply analysis of the metal industry in the Philippines

Water supply

Education

Constraints
5
4
3
2
1
0

Planning

Monitoring

3.4.3

Operation

Air emissions

Constraints
According to the report ‘Resource Efficiency: Economic and Outlook for Asia-Pacific’ (UNEP,
2012), a high level of deposits of sulphur ions was detected at several sites in the Philippines.
This is in part caused by the use of coal in metal plants, but these specific concentrations weremainly attributable to the large amounts of precipitation in those areas. This is likely to continue
unless major changes are introduced and constitutes a limiting factor in the growth of the metalindustry in the Philippines.
Planning
It is not clear how the Philippines’ metal industry collaborates in the policy making process withthe local population or NGOs. Despite the existence of international reports funded by UN
agencies such as ‘Resource Efficiency: Economic and Outlook for the Asia-Pacific’ (UNEP,
2012) and ‘Resource Efficiency: Economic and Outlook for the Asia-Pacific’ (UNEP, 2012), it
is unclear to what extent the local population and industry use the data from these international
reports in the process of designing policies on air emissions.
Operation
Activities such as plating, galvanizing and painting are hotspots in terms of air emissions.
According to the metal industry, more realistic environment regulations are necessary.

47

Monitoring
The metal industry has expressed concern that no strict and regular monitoring of air emissions
has been carried out in the metal industry because only few government staff work in this area.
Industry and the local population call for emissions monitoring to take place on a regular basis.
The authorities tend to believe that the threat of a law suit suffices to ensure that industry andindividuals comply with the regulations. They also acknowledge, however, that harassment andpetty corruption are common in the metal industry.
While a wide range of environmental regulations exist in the Philippines, the authorities areaware of the lack of manpower to adequately enforce them. The country therefore heavily relieson the role of CSOs to report environmental offences. In addition, the fear of being sued is
widespread and functions as a deterrent to violating environmental regulations. There is anational monitoring programme for total suspended particulate (TSP); other initiatives include
the Air Quality Management Fund and the Metro Manila Air Quality Improvement Sector
Development Program (MMAQISDP).
National total suspended particulate (TSP) monitoring from 2003 to 2007 showed a 33%
improvement over the four-year period, with concentrations decreasing from 144 to 97 micrograms
per normal cubic metre (µg/Ncu.m.) Although the concentration of metals is decreasing, TSP
geometric mean concentrations are still above the 90 µg/Ncu.m. annual mean TSP guideline value
for one year averaged over time. Hence, more efforts are needed to comply with the guidelines by2010, as set out in the General Plan of Action for Air Quality Management.
The Air Quality Management Fund (AQMF) was established as a special account in the National
Treasury to be administered by the DENR to finance government containment, removal and cleanup operations in air pollution cases; to guarantee restoration of ecosystems and rehabilitate areas
affected by the actions of CAA violators; and to support research, enforcement, monitoring
activities and capabilities of the relevant agencies pursuant to Section 14 of the Philippine Clean
Air Act of 1999. The AQMF is also used by the Airshed Governing Boards. The AQMF was
assigned Fund Code 155 by the National Bureau of Treasury (BTr) in April 2004.
The Metro Manila Air Quality Improvement Sector Development Program (MMAQISDP) is an
Asian Development Bank (ADB) loan-financed programme implemented by various national
government agencies headed by the DENR. Its general objective is to promote policy reforms to
improve air quality through the reduction and control of mobile and stationary sources of air
pollution. It focuses on the Metro Manila air shed, the location of the main concentrations of air
pollution, but policies developed have nationwide implications and/or may be replicated in otherairsheds.

48

Education
Blank spots: The desk study and fieldwork revealed that insufficient information is available onefforts being undertaken by industry, the authorities and the local population to educate one
another on air emission issues in the metal industry. It is therefore not possible to make any
conclusive statements on the education system related to air emissions in the Philippines.
Summary
Figure 19

Air emissions analysis of the metal industry in the Philippines

Air Emission

Education

Constraints
5
4
3
2
1
0

Planning

Monitoring

3.4.4

Operation

Solid waste

Constraints
Blank spots: The desk study and fieldwork revealed that insufficient information is available on
education relating to water management in the metal industry. It is therefore not possible to
make any conclusive statements on constraints to the solid waste management system in thePhilippines.
PlanningIndustry runs various efficiency programmes such as ‘Waste Plastic to Fuel’. However, it
reports that no guidance on waste minimization or management is offered to firms; nor does asustainability index exist to allow for national and international comparison.
Industry claims that EAF dust and slag from factories is not properly processed due togeographical mismatches and the lack of a dedicated heavy industrial zone; there is no poolingof treatment facilities and foundry sand.
49

Although solid waste management is handled at the local government level, the Department of
Natural Resources initiated the respective programme, requiring landfills to be established.
However, many open dumps still exist because landfill sites fill up quickly. It was reported thatthe disposal of waste is not considered expensive and there is therefore little incentive, otherthan the intrinsic value, for waste valorization.
Nevertheless, some basic examples of waste valorization were noted, with schemes including
the resale of waste generated during shutdowns, the use of unconverted monomers as power
plant fuel and the conversion of gypsum to cement. The disposal of toxic waste, e.g. Silica
chips, phosphoric acid and gypsum waste, is managed at individual plants with no pooling ofresources. As of yet, there are no plans to pursue green chemistry. Socio-political problems
surrounding the disposal of plastics were also noted.
Monitoring
A US-Philippines full-cost accounting guidebook for solid waste management was developed.
Little to no evidence was found whether this guidebook has actually been implemented into
practice for industry monitoring activities. The desk study and fieldwork revealed that
insufficient information is available on monitoring activities of authorities in the metal industry.
Education
Insufficient information was available on education programmes developed by authorities onwaste management in the metal industry. The manual ‘Solid Waste Management Made Easy: A
Field Book on Implementing a Community-Based Ecological Solid Waste Management
Programme (UNDP/DENR/NSWMC, 2012)’ has been published. There was no evidence,
however, suggesting how solid waste management practices have been affected as a result.

50Summary
Figure 20

Solid waste management in the metal industry in the Philippines

Solid Waste

Education

Constraints
5
4
3
2
1
0

Planning

Monitoring

3.4.5

Operation

Wastewater

Constraints
Blank spots: The desk study and fieldwork revealed that insufficient information is available on
education relating to water management in the metal industry. It is therefore not possible to
make any conclusive statement on wastewater system constraints in the Philippines.
Planning
The Department of Natural Resources initiated the Responsible Care programme. Industrial
zones in which to concentrate industries, located away from residential areas and with adequate
utilities, were also created by the authorities. The desk study and fieldwork did not reveal any
information on the use of any form of sustainability indices to monitor environmental
performance, either nationally or internationally.
Operation
The government’s requirements for the disposal of solvents and lubricants are not stringent.
Plating, galvanizing and painting are hotspots in terms of wastewaterWastewater is treated before discharge in accordance with the environmental code
(BOD, PH)

Increasing costs of water treatment (sludge)51No pooling of treatment facilities, due to geography and lack of a dedicated heavy
industrial zone.

Monitoring
There is no monitoring of effluents due to a limited number of government staff and lack ofadvanced technological systems.
Education
Blank spots: The desk study and fieldwork revealed that insufficient information is available on
education relating to water management in the metal industry. It is therefore not possible to
make any conclusive statements on water management education programmes in thePhilippines.
Summary
Figure 21

Wastewater analysis of the metal industry in the Philippines

Wastewater

Education

Constraints
5
4
3
2
1
0

Planning

Monitoring

Operation

Social assessment
3.4.6

LabourConstraints
Blank spots: The desk study and fieldwork revealed that insufficient information is available on
education relating to water management in the metal industry. It is therefore not possible to
make any conclusive statements on labour constraints in the Philippines.

52

Planning
Labour costs in production make up around 10 percent of the entire production costs. However,there is no well-established exchange between labour demand and labour supply in the metalindustry for the purpose of labour planning. The authorities offer scholarships to universities in
the Philippines to create the next generation of industry leaders. However, little information was
found on how the authorities, industry and the local population collaborate to develop suchprogrammes.
There are a number of international reports that are relevant to the Philippines’ education
system, such as ‘Shaping Policy Reform and Peer Review in Southeast Asia: Integrating
Economies amid Diversity’ (OECD, 2008) and ‘Skills Development Pathways in Asia:
Employment and Skills Strategies in Southeast Asia’ initiative (ESSSA) (OECD, 2012). The
reports’ key recommendation for labour is to upgrade under- and un-qualified instructors andoutdated training systems in the Philippines.
Operation
The authorities have established the ‘Metal Industry Research Development Centre (MIRDC)”
which provides ISO9001 training. In addition, the government offers a three-year formal
vocational training course

and athree-month course

on welding.

Graduates oftechnical/vocational schools produce skilled workers, while universities or colleges createtechnicians for the metal industry.
It was noted that the quality of the labour force generated by technical and vocational schools
for the metal industry is adequate. However, vocational training for metal casting is needed.
There is a mismatch between what academia is producing (white collar employees) and theneeds of industry (blue collar workers).
Monitoring
Severe ‘brain drain’ is being observed in the metal industry, with only low quality labour
remaining in the country.
Education
Blank spots: The desk study and fieldwork revealed that insufficient information is available on
the methods of educating the metal industry’s labour force. It is therefore not possible to makeany conclusive statements on the needs of education of the labour force in the Philippines.

53

‘Shaping Policy Reform and Peer Review in Southeast Asia: Integrating Economies amid
Diversity’ (OECD, 2008): the Philippines has long attempted to eradicate poverty in its poorest
region of Mindanao. Inequality has been persistent in countries with the highest levels ofpoverty such as the Philippines.
‘Skills Development Pathways in Asia: Employment and Skills Strategies in Southeast Asia’
initiative (ESSSA) (OECD, 2012): reducing skills mismatches and increasing the links
between training and industry needs. The Philippines seeks to strengthen industry educationand training linkages with a focus on an enterprise-based training system.
The quality of skills training must be guaranteed and vocational pathways for high schoolleavers created. Despite the high unemployment rate among college graduates, vocational
training paths are not chosen in the Philippines. High school graduates and their parents value
academic studies more than vocational studies, aiming for white collar jobs that are not related
to industry demands. There is also a high share of low-skilled workers in the Philippines, who
are faced with demands to improve their skills.
There is a large share of micro, small and medium-sized enterprises (MSMEs) in thePhilippines, accounting for 70 percent of total employment, 30 percent of total sales and valueadded in manufacturing and 25 percent of total exports. Demand for training in the Philippines
is two-fold: existing and potential entrepreneurs need to acquire business skills andknowledge—particularly in financing, marketing, technology and human resources
development—to be competitive in the world market, and MSME workers need to be trainedin the skills required in technology intensive industries and for improving productivity. The
needs are even higher for smaller MSMEs. However, employer-provided training is very
limited and the following constraints have been cited: insufficient access to finance, poor
information on training needs, low perception of formal training and lack of training facilities.
The government and education and training institutions, both public and private, are the major
providers of the required skills training for the MSMEs, in which the Technical Education and
Skills Development Authority (TESDA) is the lead government agency for managing TVET.

54

Summary
Figure 22

Labour analysis of the metal industry in the Philippines

Labour

Education

Monitoring

3.5

Constraints
5
4
3
2
1
0

Planning

Operation

ThailandEnvironmental Assessment
3.5.1

EnergyConstraints
Independent power plant production is a government policy designed to help cope with demand.
The government encourages private sector investments in power plants. The complicated tariffstructure is controlled by National Energy, with demand determining the prices.
Planning
Considerable efforts have been made on the part of the authorities to establish a national energyplan, including subsidies, a pricing policy and the use of alternative energy sources. The
Metropolitan Electricity Authority (MEA) analyses load factors for customers and helps
improve these to ensure that the load is acceptable. The 10 industries with poor energy
efficiency were identified as department stores (retail), automotive tyre production, metal for
construction, home appliance manufacture, paper, cardboard & packaging, wire, automotive
assembly, plastics and textiles. Government energy efficiency targets are set by the industry in a
20-year plan (2010-2030), with the aim of reducing energy intensity by 25 percent over theperiod, although this has not yet been implemented.
In general, it is considered easy to operate, as energy capacity exceeds demand by more than 10
percent. The top energy consumers are commercial services, industry (which represents
55

approximately 30 percent of demand) and residential. Calls have been made to expand the gridto support commercial services, but there is a lack of funds for investment. In total, Thailand has
400,000 manufacturing units, with MEAs representing around 10,000 medium and large units
each and 100,000 small units.
Department of Alternative Energy Development and Efficiency (DEDE)
The DEDE has set targets to reduce energy intensity by 25 percent over the 20-year period from2010 to 2030. These targets vary across sectors, with the targets for industry and transport set
fairly high (a reduction in energy intensity by 35 percent). Energy conservation based on
ISO15001, is also being promoted, which targets the 3,500 factories drawing more than 1 MW.
These factories are required to submit annual energy management reports, perform annual
audits and assign someone who is responsible for energy (PRE). Factory breakdowns byindustry are available and accredited consultants recommend energy saving measures althoughtargets are not set. The PREs receive energy efficiency training by the Department, which
including on benchmarks and good practice. In addition, the alternative energy development
plan sets a target of achieving a 25 percent increase in alternative energy provision. Incentives
are also in place for small and very small power producers. Overall, the aim is to reduce relianceon imported energy, although no specific target has been set for this objective.

Operation
The Electricity Generating Authority of Thailand (EGAT) is responsible for electricity
generation in Thailand, although distribution is carried out regionally by the Metropolitan
Electricity Authority (MEA) and the Provincial Electricity Authority (PEA). Industry consumes
52 percent of total energy, and whilst GDP is growing at 2-3 percent per annum, electricity
demand is growing by 5 percent each year. Demand side management aims to minimize energy
consumption, and encourages energy efficient appliances in households. A time of use (TOU)
tariff has also been employed with a 30 percent to 40 percent variation in price/usage. The
reliability of current electricity supply is very high, and is even higher than that of the USA. The
first 50 units of electricity are free, and prices range between BHT 3.28 for residential
customers to BHT 3.502 for industrial consumers.
The limit for imported electricity lies at 15 percent, with current imports of electricity (drawn
from the Lao People’s Democratic Republic and Malaysia) at around 10per cent. Renewables(including small hydro, wind solar and biomass) account for 5 percent of Thailand’s electricity
supply, and hydro accounts for a further 10 percent. Local NGOs argue that renewables shouldbe pursued; however, other sources suggest that growth opportunities in solar should be limited56

as this could increase tariffs by 10 percent. Seventy percent of gas supply is purchased from
Myanmar. Further, whilst the long-term plan was to move towards nuclear energy, it was
postponed following the Fukushima crisis in Japan. The ASEAN master plan is ultimately tolink the members’ grids with each other.
Monitoring
Local NGOs point out the following problems:a. Steel and petrometals, in particular, consume a lot of energy and cause environmental
damage, leading to the destruction of local communities.
b. Thailand has scarce natural resources available for those industries.
c. Such industries tend to move towards coastal areas, which causes environmental
damage to those areas (fisheries) and creates social tensions, i.e. immigration of workers
from neighbouring countries, who work for wages lower than the minimum wage.
Local NGOs also argue that environmental standards in Thailand are very weak in comparison
with other countries’, and companies thus participate in ‘legalized’ pollution. Companies do notprovide full public disclosure on how they comply with environmental standards. At the sametime, the ‘policing’ of industries is very weak, with penalties only being imposed on a few
industries. Local NGOs add that they support industrialization, but only where the local
population benefits.
Education
Blank spots: The desk study and fieldwork revealed that insufficient information is available onenergy education in the metal industry. It is therefore not possible to make any conclusive
statements on energy management education programmes in Thailand.

57

Summary
Figure 23

Energy analysis of the metal industry in Thailand

EnergyEducation

Constraints
5
4
3
2
1
0

Planning

Monitoring

3.5.2

Operation

Water supply

Constraints
Government departments, such as the Pollution Control Department, are aware of the current
water challenges: water extraction is close to carrying capacity in most areas, making waterintensive industries a key issue. Poor waste infrastructure for municipal waste means there arepotential opportunities for new industries to grow in this area.
Water infrastructure is particularly problematic for small enterprises. However, authorities do
not collect specific industry-level data on water demand or supply, though the water authorities
have water data based mainly on geography rather than industry. Like in other countries, a firmthat seeks to establish factories needs to submit a permit request to the Department of
Groundwater Resources. In the permit document, the firm needs to state the amount of water
consumption per day and identify the water resource (i.e. provide a water supply plan).
However, these water consumption plans do not seem to be collected at the level of industry.
In Thailand, no central unit exists that supervises water, with responsibility for different areas
divided across multiple organizations, including the Irrigation Department, East Water, River
Basin Management and the Department of Industrial Works

58

Planning
According to the report ‘Green Growth, Resources and Resilience’ (ESCAP/ADB/UNEP,
2012), Thailand is one of the countries with an urgent sustainability challenge in relation towater.
The Department of Water Resources sets standards on effluent discharge and pollution control
for each industry. It is also responsible for monitoring such activities in the country’s majorrivers. There are plans to increase water capacity by constructing more dams, although there arephysical constraints to this activity. A further option to increase capacity is to transfer waterfrom neighbouring countries, e.g. Myanmar and Cambodia. There is no fixed policy on watertransfer, but has been practiced in the past. From 2000 to 2005, there were serious water
shortages in the eastern area (River Basin Easter Coast). A project by East Water (a water
management company) was implemented to transfer water from other regions to this area. This
led to major protests. The transfer of water from the Mekong River Basin to Bangkok is being
considered. Data for specific industries is not available, but some sources of data are available
from the Institute for Sustainable Water at the Federation of Thai Industries. Some industries
use groundwater supplies and, although there are plans to recharge suppliers, these have not yet
been implemented.
Local NGOs point out the following problems:a. Steel and petrometals, in particular, cause environmental damage, leading to thedestruction of local communities.
b. Thailand has scarce natural resources available for these industries.
c. These industries tend to move towards coastal areas, which causes environmental
damage in those areas (fisheries).
Local NGOs also argue that environmental standards in Thailand are very low in comparison to
those of other countries, and that companies in Thailand participate in ‘legalized’ pollution.
Local NGOs add that they support industrialization, but only when the local population benefits.
Operation
Blank spots: The desk study and fieldwork revealed that insufficient information is available onwater supply operation activities in the metal industry. It is therefore not possible to make any
conclusive statements on energy management education programmes in Thailand.

59

Monitoring
Data for specific industries is not available, but some data sources are available from theInstitute for Sustainable Water at the FTI. Water use varies across the regions, and water is alsotransferred between regions (e.g. from Mekong to Bangkok). Some industries use groundwaterand although there are plans to recharge supplies, these have not yet been implemented.
Education
Blank spots: The desk study and fieldwork revealed that insufficient information is available onwater supply education in the metal industry. It is therefore not possible to make any conclusive
statements on energy management education programmes in Thailand.
Summary
Figure 24

Water supply analysis of the metal industry in Thailand

Water supply

Education

Constraints
5
4
3
2
1
0

Planning

Monitoring

3.5.3

Operation

Air emissions

Constraints
The authorities point out that industries have been known to dump pollution. Thailand isreported to have tight environmental regulations covering a wide range of polluting activities.
However, ensuring compliance is problematic due to under-staffing.
Planning
One of the main authorities responsible for air emissions planning in Thailand is the Office of
Natural Resources & Environmental Policy and Planning (ONREP). There is scope for further
integration between the ONREP plans and the national 20-year plan from the Ministry of60

Industry (MOI). ONREP use both policy and regulations to achieve its mandate, with a clear
priority sequence in area planning as follows: air pollution, water pollution, landfill and water
extraction.
Operation
Blank spots: The desk study and fieldwork revealed insufficient information is available onefforts undertaken by industry, the authorities and local population to reduce air emissions. It istherefore not possible to make any conclusive statements on the water operation system inThailand.
Monitoring
Various government departments, such as the Department of Industrial Works and the Pollution
Control Department, engage in continuous emission monitoring. Authorities are neverthelessaware that industries have been known to dump pollution. Thailand is reported to have tightenvironmental regulations covering a wide range of polluting activities. However, ensuring
compliance is problematic due to under-staffing.
Education
Blank spots: The desk study and fieldwork revealed that insufficient information is available on
how air emission prevention tools, techniques, education programmes or best practices in themetal industry are shared between the authorities, industry and the local population. It istherefore not possible to make any conclusive statements on air emission education in Thailand.
Summary
Figure 25

Air emissions analysis of the metal industry in Thailand

Air Emission

Education

Constraints
5
4
3
2
1
0

Planning

Monitoring

Operation

61

3.5.4

Solid waste

Constraints
The authorities are aware that industries have been known to dump pollution. Thailand isreported to have tight environmental regulations covering a wide range of polluting activities.
However, ensuring compliance is problematic due to under-staffing.
Planning
A Strategic Impact Assessment for the Area has been issued to encourage the waste recycling
industry to begin operations.
Operation
Large companies, such as PTT, undertake considerable efforts to reduce their solid waste: PTT
has reduced its solid waste by approximately 60 percent; however, this requires close
collaboration with every firm in the supply chain. The extent of efforts undertaken by local
SMEs, in particular firms that do not supply large companies, to reduce solid waste to landfills
is unclear.
Examples of waste treatment at industry level include:oCentral wastewater plant in each regionoProvision of incinerators for general wasteo

For hazardous waste: Central Disposal Unit in some areas – IEA controlled
transportation to the facility.

Monitoring
Authorities are aware that industries have been known to dump waste. Thailand is reported tohave tight environmental regulations covering a wide range of polluting activities. However,ensuring compliance is problematic due to under-staffing.
The authorities claim that the amount of waste being collected and transported from facilities
poses a problem. The collection system itself is also considered problematic. The authorities
believe that improved systems for the collection of waste and increases in the capacity of waste
treatment should be developed and implemented to improve solid waste management. The
Department of Industrial Works collects data on the amount of waste factories generate. The
Department also gathers data on waste that factories transport outside of their boundaries. The
Department of Industrial Works needs to define industrial waste in a way that is consistent withindustrial standards; currently, they are using a range of their own definitions.
62

Education
Blank spots: The desk study and fieldwork revealed that insufficient information is available on
how solid waste management tools, techniques, education programmes or best practices in themetal industry are shared between the authorities, industry and the local population. It istherefore not possible to make any conclusive statements on energy related education in
Thailand.
Summary
Figure 26

Solid waste analysis of the metal industry in Thailand

Solid Waste

Education

Constraints
5
4
3
2
1
0

Planning

Monitoring

3.5.5

Operation

Wastewater

Constraints
The authorities are aware that industries have been known to dump pollution. Thailand isreported to have tight environmental regulations covering a wide range of polluting activities.
However, ensuring compliance is problematic due to under-staffing.
Planning
Government departments, such as the Department of Water Resources, the Ministry of Natural
Resources and the Royal Irrigation Department, collaborated to develop a water management
plan. Components of the plan include the centralization of water regulations, the preservation ofnatural water resource areas, wet land preservation, general improvements and the building of
small reservoirs in rural areas. However, it is unclear to what extent the metal industry and the
local population, including NGOs, participate in the planning activities associated with
wastewater management. Moreover, authorities do not have sufficient data to analyse specific63industries. Firms do not provide full public disclosure on how they comply with environmental
standards. At the same time, the ‘policing’ of industries is very weak, demonstrated by the factthat only few penalties have been imposed on firms for pollution.
Operation
A wastewater collection system is in place: if a factory breaches the relevant regulations, theauthorities can either fine the responsible firm or impose a number of other sanctions.
Monitoring
The authorities are aware that industries have been known to dump pollutants. Thailand isreported to have tight environmental regulations covering a wide range of polluting activities.
However, ensuring compliance is problematic, mainly due to under-staffing, but also due tolimitations in technical equipment and training.
Local NGOs also argue that environmental standards in Thailand are very weak in comparison
with other countries, and allow firms to participate in ‘legalized’ pollution. Companies do notprovide full public disclosure on how they comply with environmental standards. At the sametime, the ‘policing’ of industry is very weak, and only few industries have been penalized. Local
NGOs add that they support industrialization, but only where the local population benefits.
According to the Word Bank, the indicator for water pollution by the metal industry (in % of
total BOD emission) in Thailand was 1.81 (January 1995), 1.59 (January 1998), 1.72 (January
2000), 1.68 (January 2002) and 1.89 (January 2006).
Water pollution of the chemical industry (% of total BOD emissions) in Thailand
12.16 (January 1996), 11.87 (January 1998), 12.29 (January 2000), 10.76(January 2002) and12.41 (January 2006)
Source: World Bank database64

Indonesia
Water pollution of the chemical industry (% of total BOD emissions) in Indonesia
12.915 (1998), 11.894 (1999), 12.044 (2000), 13.536 (2001), 13.156 (2002), 13.129 (2003),
12.618 (2004), 13.044 (2005) and 11.988 (2006)
Water pollution of the metal industry (% of total BOD emissions) in Indonesia
1.406 (1998), 1.400 (1999), 1.437 (2000), 1.660 (2001), 1.353 (2002), 1.319 (2003), 1.326(2004), 1.338 (2005), 1.380 (2006)
Source: World Bank database

The Philippines
Water pollution of the chemical industry (% of total BOD emissions) in the Philippines
9.791 (1996), 9.777 (1997),9.051 (1998), 8.629 (1999), 9.287 (2001), 9.928 (2003), 9.536(2005)
Water pollution of the metal industry (% of total BOD emissions) in the Philippines
3.647 (1996), 3.580 (1997),3.613 (1998), 3.450 (1999), 3.084 (2001), 3.107 (2003), 2.632(2005)
Source: World Bank database

Viet Nam
Water pollution of the chemical industry (% of total BOD emissions) in Viet Nam
7.512 (1998), 7.069 (2000), 7.103 (2001), 7.004 (2002), 6.690 (2003), 6.783 (2004), 6.607(2005), 6.775 (2006), 6.752 (2007)
Water pollution of the metal industry (% of total BOD emissions) in Viet Nam
2.888 (1998), 1.859 (2000), 1.695 (2001), 1.526 (2002), 1.480 (2003), 1.406 (2004), 1.429(2005), 1.395 (2006), 1.448 (2007)
Source: World Bank database65

Education
Blank spots: The desk study and fieldwork revealed that insufficient information is available in
how wastewater management tools, techniques, education programmes or best practices in themetal industry are shared between the authorities, industry and the local population. It istherefore not possible to make any conclusive statements on energy-related education in
Thailand.
Summary
Figure 27

Wastewater analysis of the metal industry in Thailand

Wastewater

Education

Monitoring

Constraints
5
4
3
2
1
0

Planning

Operation

Social assessment
3.5.6

LabourConstraints
University graduates have to settle for jobs which they are over-qualified for. Others refuse tocompromise and instead remain unemployed or migrate. Therefore, low-skilled jobs are
increasingly taken by migrant workers, a situation which has the potential to cause social
problems in the future.
Planning
The Department of Skills Development (DSD) provides pre-employment training to primaryschool drop-outs. This programme is an alternative to secondary education and has a weakstatus in terms of recognition. The DSD also provides the opportunity for those already
employed to upgrade their skills, e.g. entrepreneurship training for domestic staff. The
authorities do not keep track of the educational profiles of employees in manufacturing or66

industry, but do keep track of how many people employed in different industries have graduatedfrom their skills training programmes. Local NGOs add that they support industrialization, but
only when the local population benefits.
Operation
Blank spots: The desk study and fieldwork revealed that insufficient information is available onefforts undertaken by industry, the authorities and the local population to reduce deaths andaccidents among labourers as well as child labour and to provide generic training. It is therefore
not possible to make any conclusive statements on labour operation systems in Thailand.
Monitoring
Blank spots: The desk study and fieldwork revealed that insufficient information is available onefforts undertaken by industry, the authorities and local population to monitor labour conditions
and activities. It is therefore not possible to make any conclusive statements on the labourmonitoring systems in Thailand.
Education
Blank spots: The desk study and fieldwork revealed that insufficient information is available onefforts undertaken by industry, the authorities and local population to observe labour conditions
and activities. It is therefore not possible to make any conclusive statements on the labour
education system in Thailand.
Summary
Figure 28

Labour analysis of the metal industry in Thailand

Labour

Education

Constraints
5
4
3
2
1
0

Planning

Monitoring

Operation

67

3.6

Viet Nam

Environmental assessment
3.6.1

EnergyConstraints
The economy has an overall growth rate of 6 percent to 10 percent annually, to which the metalindustry is a major contributor. The government, industry and local population are highly awarethat the metal industry’s energy demands are increasing.
Planning
The government’s efforts focus on the development of energy plans across a range of issues;
however, there is little evidence of the authorities communicating with the metal industry andlocal population—including NGOs representing the local population—on the issue of energy
supply to the metal industry. The industrial sector is aware that the metal industry is able toproduce a wide range of metals, such as fertilizers and nitrogenous fertilizers, which can replace
imports.
Operation
Metal firms routinely try to improve their energy supply and energy efficiency. Financial
investments are often required to save energy or improve energy supply. However, most SMEs
do not have sufficient access to capital to install new energy saving technologies.
UNIDO has implemented an energy productivity programme in various Vietnamese industries,
including rubber and pulp: the project, which includes an investment of US$ 62 million, isfunded by the Global Environmental Fund and was initiated in May 2011.
Monitoring
There are no financial incentives for firms to comply with the regulations set by authorities andthere is little government monitoring of energy supply and efficiency. There is also little
evidence on the involvement of the local population or NGOs in the monitoring of the metalindustry’s energy saving activities, although international entities do play a significant role inmonitoring.
Education
Blank spots: The desk study and fieldwork revealed that insufficient information is available on
how energy supply, energy efficiency tools, techniques, education programmes or best practices
in the metal industry are shared between authorities, industry and the local population. It is
68therefore not possible to make any conclusive statements on energy-related education in Viet
Nam.
Summary
Figure 29

Energy analysis of the metal industry in Viet Nam

EnergyEducation

Constraints
5
4
3
2
1
0

Planning

Monitoring

3.6.2

Operation

Water supply

Constraints
The metal industry considers some of the government’s environmental policies and regulations
to be onerous; since they are largely regarded as “formalities”, they do not have a substantial
practical impact. The industry points out that an effective policy could be helpful for enterprises,
but that firms sometimes face financial burdens and tax problems related to environmental
regulations.
Planning
Although it seems that considerable efforts have been undertaken by the authorities to formulate
water supply plans, little evidence was found as to how the metal industry and the local
population (including NGOs) are involved in the development of such plans. Furthermore, watersupply data is only available at regional level, not at industry level. Accordingly, this lack of
information on water demand in the metal industry poses obstacles to water supply planning in
the metal industry.

69

Operation
Those interviewed in the metal industry stated that there is a gap between the authorities’
policies and industrial reality, citing the fact that environmental policies are seldom consistently
applied and do not have clear direction. It was also noted that people working in the metalindustry believe that some environmental regulations are too rigid, particularly for the majorityof SMEs. Also, it is unclear what efforts the metal industry—in particular SMEs—isundertaking to reduce water use in their operations. To improve their operations in terms ofwater supply, firms need to reduce water usage.
Monitoring
Those interviewed in the metal industry stated that financial incentives for enterprises to comply
with water regulations are limited. Government monitoring of water supply is scarce. There isalso little evidence on the involvement of the local population or NGOs in the monitoring ofwater supply to or water use in the metal industry, although international bodies play asignificant role in water supply research in general. The authorities and the Vietnam Metal
Industry Federation could monitor or collect information on the annual amount of water supply
or water use of large firms and SMEs in the metal industry, but it seems that there is virtually nosuch monitoring activity.
Education
Blank spots: The desk study and fieldwork revealed that insufficient information is available on
how water management tools, techniques, education programmes or best practices in the metalindustry are shared between the authorities, industry and the local population. It is therefore notpossible to make any conclusive statements on energy-related education in Viet Nam.
Summary
Figure 30

Water supply analysis of the metal industry in Viet Nam

Water supply

Education

Monitoring

Constraints
5
4
3
2
1
0

Planning

Operation

703.6.3Air emissions

Constraints
According to the metal industry, some of the government’s environmental policies andregulations on air emissions are onerous; since they are largely regarded as “formalities”, they
do not have substantial practical impact. Those interviewed in the metal industry highlighted thefact that effective policies could be useful for the metal industry, but that environmental taxes
can be a financial burden on businesses.
Planning
Blank spots: The desk study and fieldwork revealed that insufficient information is available on
the prevention of air emissions by Viet Nam’s metal industry. It is therefore not possible to
make any conclusive statements on the issue.
Operation
Those interviewed in the metal industry contend that there is a gap between the authorities’
policies and industrial reality, citing environmental policies that are seldom consistently applied
and which do not have clear direction. It was also noted that people working in the metalindustry believe that some environmental regulations are too rigid, particularly for the majorityof SMEs.
Monitoring
Those interviewed in the metal industry stated that financial incentives for companies to comply
with regulations are limited. Government monitoring of air emissions is rare. There is also little
evidence on the involvement of the local population or NGOs in the monitoring of the metalindustry’s environmental activities, although international bodies play a significant role.
Education
Blank spots: The desk study and fieldwork revealed that insufficient information is available on
how tools for controlling air emissions, techniques, education programmes or best practices in
the metal industry are shared between the authorities, industry and the local population. It istherefore not possible to make any conclusive statements on energy-related education in Viet
Nam.

71

Summary
Figure 31

Air emissions analysis of the metal industry in Viet Nam

Air Emission

Education

Constraints
5
4
3
2
1
0

Planning

Monitoring

3.6.4

Operation

Solid waste

Constraints
The metal industry claims that some of the government’s environmental policies and air
emissions regulations are onerous; since they are largely regarded as “formalities”, they do nothave substantial practical impact. Those interviewed in the metal industry highlighted the factthat effective policies could be useful for the metal industry, but that environmental taxes can bea financial burden on businesses.
Planning
It is reported that the authorities have undertaken considerable efforts to develop plans,
strategies and regulations on how to deal with solid waste, such as the “Policy on solid waste
management in urban and industrial areas of Vietnam” issued on 10/07/1999 in Decision
152/1999/QD-TTG of the Prime Minister and “The National Environmental Action Plan 2001 2005 (NEAP)” which focuses on five programmes, among them Programme 2 which aims to
improve solid waste management capacity, especially hazardous waste management in densely
populated urban areas and industrial zones (The Asia-Link Progamme, 2008).
No information was available on how the authorities communicate with the metal industry andlocal population, including NGOs, to formulate a solid waste plan for the metal industry. The
Vietnam Institute of Industrial Chemistry is responsible for drawing up a list of metals the72manufacturing and industrial sectors are allowed to use, as well as those which can be used forfood processing and agricultural production.
Operation
Many of those interviewed in the metal industry state that a gap exists between the authorities’
policies and the needs of industry. For example, some environmental policies of the Ministry of
Natural Resources and Environment (MoNRE) and other ministries are inconsistent and do not
set out a clear strategy concerning solid waste. Also, the metal industry is concerned that certain
environmental parameters are too rigid for businesses to follow, and most SMEs struggle tocomply with the regulations.
Monitoring
The government monitors the metal industry’s hazardous waste in Viet Nam’s largest cities:
2,242 tonne/year (Ha Noi), 3,300 tonne/year (Hai Phong), 73 tonne/year (Da Nang), 5,571
tonne/year (Ho Chi Minh City), 1,029 tonne (Dong Nai) and 879 tonne/year (Ba Ria-Vung Tau)
(Centre for Research Investment Consult for Rural Development, 1999).
There are no financial incentives for firms to comply with the regulations set by authorities.
Furthermore, there is limited government monitoring of solid waste. Little evidence is available
on the monitoring of local solid waste by the local population or NGOs; international bodies are
involved in monitoring the metal industry’s environmental activities.
Education
Blank spots: The desk study and fieldwork revealed that insufficient information is available on
how solid waste management tools, techniques, education programmes or best practices in themetal industry are shared between the authorities, industry and the local population. It istherefore not possible to make any conclusive statements on energy-related education in Viet
Nam.

73

Summary
Figure 32

Solid waste analysis of the metal industry in Viet Nam

Solid Waste

Education

Constraints
5
4
3
2
1
0

Planning

Monitoring

3.6.5

Operation

Wastewater

Constraints
According to the metal industry, some of the government’s environmental policies and air
emissions regulations are onerous; since they are largely regarded as “formalities”, they do nothave substantial practical impact. Those interviewed in the metal industry highlighted the factthat effective policies could be useful for the industry, but that environmental taxes can be afinancial burden on businesses.
Planning
Various government bodies, such as the Ministry of Industry and Trade (MOIT), the Ministry ofAgriculture and Rural Development (MARD), the Ministry of Health (MOH), the Ministry of
Science and Technology (MOST), the Ministry of Natural Resources and Environment(MONRE), the Ministry of Defence (MOD) and the People Committee have participated inmetal management policy in Viet Nam.
MONRE is primarily in charge of wastewater treatment plans. It is reported that the authorities
undertake considerable efforts to develop wastewater plans. However, no information wasavailable on how the authorities communicate with the metal industry and local population,
including NGOs, on wastewater plans for the metal industry.

74

Operation
According to the metal industry, there is a gap between the authorities’ policies and the actual
situation in industry: some environmental policies are inconsistent across MOIT, MARD, MOH,
MOST, MONRE and MOD and do not provide a clear strategy on the environment. Also, themetal industry considers some environmental regulations to be too restrictive on enterprises, andthe majority of SMEs struggle to comply with the authorities’ rules.
Monitoring
According to the metal industry, wastewater from its industry can often be dealt with more
effectively by the industry itself. Also, individuals who work in the private sector state that
authorities rarely monitor wastewater in the metal industry.
Moreover, there are no financial incentives for firms to comply with the regulations set by
authorities. Finally, little evidence was obtained on how the local population or NGOs are
involved in the monitoring of the metal industry’s environmental activities.
Education
Blank spots: The desk study and fieldwork revealed that insufficient information is available on
how wastewater management education programmes or best practices in the metal industry areshared between the authorities, industry and the local population. It is therefore not possible to
make any conclusive statements on energy-related education in Viet Nam.
Summary
Figure 33

Wastewater analysis of the metal industry in Viet Nam

Wastewater

Education

Constraints
5
4
3
2
1
0

Planning

Monitoring

Operation

75

Social assessment
3.6.6

LabourConstraints
Two issues have been raised by the metal industry: firstly, that the human resources available do
not meet the requirements of enterprises; and secondly, that the metal industry considers someof the government’s environmental policies and labour regulations to be onerous; since they arelargely regarded as “formalities”, they do not have considerable practical impact. Thoseinterviewed in the metal industry highlighted the fact that effective policies could be useful forthe industry, but that environmental taxes can be a financial burden on businesses.
Planning
Well-established communication channels between the government, industry and the local
population exist in the development of labour plans.
Operation
Health and safety in operations have been improved, mainly due to recent efforts undertaken inthese areas. Viet Nam’s metal industry has collaborated with international bodies, including
APEC, AMEICC, UNIDO, KEMI (Sweden), METI (Japan) and KOICA (Republic of Korea).
Monitoring
Some national regulations have been issued on metal safety and the laws regulating the use of
metals:

Environmental Protection Law

Health Care Law

Safety Code for production, use, storage and transportation of dangerous metals

Narcotics Prevention Law

Radiation Safety Law

Ordinance on Plant ProtectionPrime Minister’s Decision on Controlling Petrol, Oil and LPG.

However, no specific evidence was obtained on how the local population or NGOs are involvedin the monitoring of labour issues in the metal industry.

76

Education
Blank spots: The desk study and fieldwork revealed that insufficient information is available on
how the improvement of working conditions, labour programmes or best practices in the metalindustry are shared between the authorities, industry and the local population. It is therefore notpossible to make any conclusive statements on education concerning labour in Viet Nam.
Summary
Figure 34

Labour analysis of the metal industry in Viet Nam

Labour

Education

Constraints
5
4
3
2
1
0

Planning

Monitoring

3.7

Operation

Evolution of the methodologies

To foster a rich discussion on environmental and social constraints and enablers, quantitative
data for the energy, water supply, solid waste and wastewater systems is required in order tosupplement the qualitative data already collected. Data availability and quality are always the
key challenge of environmental analysis and the methodology has deliberately been designed touse both quantitative and qualitative data to paint the richest picture possible. Where
quantitative data is missing—which is the case far too often—the methodology attempts to use
only qualitative data to assess the situation. Often, this is possible, but is insufficiently robust toallow for a conclusive statement to be made. In these cases, the methodology relies on the
researcher’s ability to remain as subjective as possible during the course of the interviews andforums.
Data gaps, referred to as ‘Blank Spots’, are highlighted where they exist in order to draw clear
attention to this problem and encourage local improvement in data collection. Over time, themethodology is designed to encourage more data availability and a shift to quantitative data77

where appropriate. Over time, it will be possible to use the assessments to demonstrate adevelopment path for the given nation and industry. Due to the different levels and the diverse
nature of data across countries and industries, cross-nation or cross-industry comparisons are
not appropriate.

4.

Synthesis of economic, environment and social analysis

In the previous sections, methodologies were developed to independently conduct an ‘analysisof the economic component’ and an ‘environmental and social analysis’ of an industrial
subsector. In this section, a methodology to combine the earlier analyses is provided to derive
policy recommendations that define potential pathways to green growth. Before doing so,
however, it must be understood that bringing together these diverse aspects into one frameworkis challenging and that there are multiple ways of carrying out this task. Questions naturally
arise regarding which aspects should be prioritized, and whether these priorities need to behomogenous across countries.
Hence, in formulating this synthesis methodology, we rely on the principle that any industrial
sector with a promising potential in terms of any of the economic dimensions (namely export
performance, local demand and domestic multiplier impact) deserves further policy attention.
We then screen these industries through an environment and social lens in search of thoseindustries with the highest positive impact. It should be noted that we never recommend an
industry’s closure or withdrawal if it has a highly positive economic or social impact, unlessthere is the possibility of an extremely adverse negative environmental impact that cannot be
mitigated. In addition, even those industries which do not emerge as clear winners in terms of
economic and social dimensions are tested to determine whether they have some potential
environmental benefits that could distinguish them as a worthy investment. The methodology
has been designed in such a way that none of our policy recommendations will result in any
significant trade-off in the industrial sector’s growth as a whole. Finally, by no means are wesuggesting a ‘one-size-fits-all’ policy tool; on the contrary, we have developed a synthesis
framework which incorporates country-specific contexts and local realities. The majoradvantage of this framework is the fact that we are able to incorporate the economic,
environmental and social dimensions into one, a practice that is far from the norm in the current
policy approaches. Such integration is indispensable in the quest to realize green growth, and we
expect significant further developments of this and similar methodologies as we learn more
about the practicalities of such integration. The overall structure of our synthesis framework is
depicted in the following flow chart.

78

Figure 35

Step-by-step analysis from economic aspects to environmental-social aspects

79Step 1: The first step in the synthesis exercise is to conduct an economic analysis to test theeconomic potential of the industry. An industry is termed an ‘economic winner’ (‘Positive
Economic Impacts’ in the figure) if it meets any one of the following criteria:

The industry is classified as a ‘champion’ or ‘under-achiever’ in the export
analysis conducted in section 2.3.1.

The industry has been classified as a ‘local champion’ based on the domestic
demand and production analysis conducted in section 2.3.2.

The industry is classified as a ‘high impact’ industry based on the domestic
interdependence analysis conducted in section 2.3.4.

For all case countries, the metal industry is a ‘champion’ according to the export analysis(conducted in section 2.3.1), hence we can classify this industry as an ‘economic winner’(‘Positive Economic Impacts’ in the figure) based on the synthesis framework described above.
It should be noted that the metal industry is also a ‘local champion’ in Thailand and Indonesia
based on the domestic demand analysis, whilst it is a ‘high impact’ industry in Malaysia, thePhilippines and Thailand according to the domestic interdependence analysis. The metalindustry thus qualifies as an ‘economic winner’ (‘Positive Economic Impacts’ in the figure)based on multiple dimensions. Next, we move to the environmental and social analyses.
Step 2: The second step in the synthesis exercise is to conduct an environmental and social
analysis to determine the industry’s environmental and social potential. The environmental andsocial analysis examines the physical constraints that can obstruct or enable an industry’s future
progress and covers energy, material and water inputs, as well as air, waste and water emissions
and labour. Classifying an industry as medium, high or very high indicates that it is operating at
near or over the national constraint limits, and that there is a current or imminent issue that may
cause a growth plan to be delayed or halted.
If the industry is classified as very low or low in the environmental and social analysis, theindustry’s growth will not be constrained by national capacity.
It should be noted that the analysis does not calculate future industry growth targets as the data
is not yet of sufficient quality in the majority of countries, and that the actual environmental andsocial impacts occur as part of a larger system in which multiple industries influence national
capacity.

80

Step 3: The third step in the synthesis exercise is to establish a recommendation category for theindustry (in this case, the metal industry) in each case country. This categorization is based on
the results of Step 1 and Step 2 and is also described in the figure. Further analysis is thenrecommended to identify the opportunities for improving value creation in the given country
and industry, considering economic, environmental and social aspects.
The policy recommendations are classified into five growth categories: ‘Green
growth’, ‘Growth with care’, ‘Strong medicine’, ‘Double trouble’ and ‘Forget.’Positive economic impacts lead to one of two categories ‘Green growth’ and‘Growth with care’, depending on the environmental and social impact analysis.



Negative economic impacts lead to one of three categories ‘Strong medicine’‘Double trouble’ and ‘Forget’, depending on the environmental and social
impact analysis.

81Indonesia
Indonesia

Metal industry

Economic analysis
 Export
Yes

Judgment:‘Growth with Care’
These are industries that emerged as economic winners but are quite
close to the constraints defined in our environmental and social analyses

Domestic demand
YesInterdependence (Interlinkages)
No

Detailed suggestions for ‘Green growth’:
Please see next section, ‘Policy recommendations’

Result: Economic winner
Environmental and social analysis


82



Water supplySolid waste



2

3

4

5

Air emissions

Holistic view of environmental and social assessments

Energy1

Energy4

3
LabourWastewater2

Operation

Monitoring
Air
Emissi
on

Yes

Yes

Yes
Very High High

Yes

5

Solid
Waste

6
Yes

Moderate Low

Yes
Very Low

Planning

0
Waste
water

Result (Degree of constraints):
0
1
2 3
4

Constraints

1

LabourNo

Water
supplyEducation

The Philippines
Philippines
Economic analysis
 ExportYes

Metal industry
Judgment:‘Growth with Care’
These are industries that emerged as economic winners but are quite

Domestic demandNoclose to the constraints defined in our environmental and social
analyses

Interdependence (Interlinkages)
Yes
Result: Economic winner

Environmental and social analysis
 Energy 1
2
Air emissions



Water supply

4

5

Holistic view of environmental and social assessments:

83



3

Detailed suggestions for ‘Green Growth’:
Please see next section, ‘Policy recommendations’

Energy4Solid waste

LabourWater
supplyConstraints
Planning

Wastewater0

LabourYes

Result (Degree of constraints):
0
1
2
3
Yes

4
Yes

Very High High Moderate Low

5
Yes

6
Yes

Very Low

Operation
Air
Emissi
on

Waste
water

No

Yes

2

Solid
Waste

Monitoring
Education

Thailand
Thailand

Metal industry

Economic analysis


ExportYesDomestic demand
Yes

Judgment:‘Growth with Care’
These are sectors that emerged as an economic winner but are quite near theconstraints defined in our environmental and social analyses

Interdependence (Interlinkages)
Yes
Result: Economic winner
Environmental and social analysis
Energy 1

Detailed suggestions for ‘Green Growth’:
Please see the next section, ‘Policy recommendations’

2

3

4

5
Holistic view of environmental and social assessments:

Air EmissionWater supplySolid Waste



WastewaterLabour84LabourEnergy
3
2.5
2
1.5
1
0.5
0

Water supply

Constraints
Planning
Operation
Monitoring

Wastewater

No
Result (Degree of constraints):
0
1
2
3
Yes

Yes

Very High HighYes
Solid Waste
4

Yes
Moderate

Air Emission

5
Yes

Low

6
Yes

Very Low

Education

Viet Nam
Viet Nam

Metal industry

Economic analysis:
 ExportYes

Judgment:‘Growth with Care’
These are industries that emerged as economic winners but are quite close to theconstraints defined in our environmental and social analyses

Domestic demand
No dataInterdependence (Interlinkages)
No dataResult: Economic winner
Environmental and social analysis: Energy 1
2
3

Detailed suggestions for ‘Green Growth’:
Please see next section, ‘Policy recommendations’45
Holistic view of environmental and social assessments:

85

Air EmissionWater supplySolid Waste



WastewaterLabourEnergy543210Water supply

Planning
Operation
Monitoring

LabourWastewater
No
Result (Degree of constraints):
0
1
2
3
Yes

Constraints

Yes

Air Emission

Yes
4
Yes

Very High High Moderate Low

5
Yes

6
Yes

Very Low

Solid Waste

Education

5.

Policy recommendations
 The metal industry has been identified as a ‘Growth with Care’ industry: these areindustries that emerged as economic winners but are quite close to the constraints
defined in our environmental and social analyses. Policymakers should consider thefollowing actions:

Take measures to further improve the competitive positions of these industries
by taking strategic policy actions.



Conduct an ‘AEC scenario’ analysis of the industries to forecast how thedomestic market will respond to the AEC formation in 2015. Take steps toprepare the industries for possible increased competition.



If the industry is an ‘under-achiever’ according to the export analysis, thecountry should try to improve the industry’s export performance throughproactive policy interventions to capture the increased world demand in thisdynamic industry.



It is important to evaluate the sustainability of future demand growth for these
dynamic industries. If demand growth is found to be short-lived, then the
country should not invest too many resources into these industries.



The skills requirements in these industries need to be determined and thenational education institutions encouraged to cater to these requirements.



An in-depth industry-specific constraint analysis must be conducted and policy
measures adopted to mitigate these constraints in order to foster faster industrial
growth. This is crucial for ensuring that any growth policy is not hampered by
an external constraint.



An industry-level value chain analysis must be carried out to explore options
for producing more value added goods within the industry.



Organize stakeholder consultations to explore options to minimize the hotspot
impact.



The use of global best practices should be encouraged. Leading companies use
less water and energy and generate less waste per unit of added value. The
government should ensure a programme of learning for any growth industry,
identify the best global standards and support programmes to upskill local staff
to deliver such practices.



National governments should consider using local government procurement tosupport high levels of performance by setting clear environmental and social
86

standards for supply, where such delivery performance is feasible. Government
should work with local trade associations to develop these standards.
Trade associations and leading companies in the industry should be encouraged
to develop a roadmap for taking the industry to global levels of environmental
and social performance. Such roadmaps should be endorsed by government andmade public.

Many firms in the metal industry suffer from poor infrastructure (national andinternal). Trade associations and governments should seek ways to shareinfrastructure resources (such as two plants building one wastewater treatment
facility), which may then become economically sensible due to increased
volume.



The metal industry is widely failing to maximize the value generated per weightof product. This is often attributable to poor quality raw materials and to limited
technical competence. Poor quality processing also means that products mayneed re-processing, which significantly increases costs, environmental impacts
and adds no value. Technical competence in process quality is a minimum
competence and again there is considerable opportunity to improve skills and,hence, competitiveness.

Finally, the metal industry has limited capacity to coordinate between firms interms of by-product use (where one plant’s waste is used as input material inanother). We have seen some excellent examples, but they are still too rare.
Other nations’ experiences clearly show that government and trade associations
play a key role in brokering such industrial symbiosis, which must be
supported.

Local best practice
We have noted that in most of the countries studied, there is at least one particular firm that
understands what global best practice means and implements an active programme to deliver
such performance. Such firms are often part of global initiatives, such as the World BusinessCouncil for Sustainable Development. Governments would benefit from identifying these
initiatives and encouraging participation in road-mapping at the national level.
The development of measurement and monitoring competence is generally needed, both within
industry and government, while research and development competence in the emerging area ofgreen chemistry should also be supported.
87

Data collection improvement for better industry policy
To support better policy design for industry, each country needs to further develop its national
data collection system for environmental and social information. For example, if authorities
want to determine the water demand of a certain industry, authorities can construct total water
demand from one of two information sources: factories’ annual water demand report (to local
authorities) or factories’ annual water consumption (which can also be collected by local waterauthorities).
Not all of the data required can, however, be collected in this way; here, we explore analternative approach for the collection of data. Measuring the amount of solid waste in a certain
industry is not a simple task. Across many countries, local authorities and central government
collect solid waste data according to region. Accordingly, the collection of waste data at thelevel of industry, e.g. the metal industry, is not only difficult, but not necessarily important for
local authorities. However, an indirect approach can provide important evidence as to theamount of solid waste and wastewater at the level of industry.
During the process of establishing a new factory, the firm is required to report the expected
solid waste and wastewater production to the local authorities before a license to operate can beissued. Every year, the company needs to update this report to maintain its certification. Data
that can support analysis therefore exists within a given country, but this data is in many cases
not gathered nationally or processed at industry level.
If the government collects the data from waste plans held by the local authorities, a better
picture of regional and industry-based waste production can be established. The plancalculations are unlikely to match the actual waste production in a region or industry, but can atleast allow for an assessment to be made.
There are three important implications: first, local authorities should monitor the waste
produced by local factories; second, they need to monitor the firms’ plan for annual waste
production. Third, firms shall be given a chance to review the amount of their waste production.

88

Figure 36

Reporting flows of solid waste and toxic waste

Communication among authorities, industry and the local population
This industry report found that opportunities exist to share information that can be used to set
environmental and social targets. We strongly recommend for the three participants (authorities,
industry and the local population) should improve their formal communication across all
manufacturing processes from constraints, planning and operation, to monitoring and education.
All three parties need to be aware that the five manufacturing processes are interlinked andinterdependent in terms of delivering environmental and social improvement. In addition, theauthorities should take note of the fact that social awareness of the environmental and social
factors can help exert a positive influence on the metal industry in the long term.

6.

Conclusions

The metal industry is a large part of the ASEAN countries’ industrial economy and will be
expected to form a key part of any green growth future. All five countries studied haveconstraints that limit the ability of their own metal industry to expand; this is in some cases awater and/or wastewater issue or an air emissions, etc., with the specific constraint changing
from country to country. As such, the metal industry has been identified as a ‘Growth with care’industry in each case country, hence, industry expansion must be based on an in-depth
environmental and social analysis of detailed plans. We have identified actions that emphasize
skills and coordination, as these offer long-term strategic advantages at low cost. However, they
are not without challenge and should not be rushed.
There is robust evidence that outstanding global companies exist in many locations. First, theseoutstanding companies are testimony that local conditions are not a limiting factor for achieving
excellent environmental or social performance (though they often struggle with local
infrastructure and the technical competence of the workforce, in particular). Secondly, they89

offer proof that higher value creation is correlated with higher environmental performance(based on our interviews with industry representatives, we would argue that this is explained by
the more successful companies’ ability to demonstrate better process control). This implies that
there is no structural reason for the ASEAN metal industry to push toward lower costs, lower
quality and lower environmental and social standards, though this is a frequently used strategy
that seems to offer an obvious logic – ‘if our costs are lower than those of our competitors, thenour market share will increase’. This is a ‘race to the bottom’ that is unnecessary and does notoffer a means to increase added value, quality jobs and exports while improving local
conditions. Thirdly, and finally, these outstanding companies offer local access to knowledge,
which can be sought out, supported and used by the government to support progressive policies
and develop practice-sharing education programmes that can help increase other companies’
performance.
We have gathered some evidence that government and industry—whether through individualcompanies and/or trade associations—are failing to produce future roadmaps. Roadmaps help
industry and government better understand each other’s objectives and available instruments,and encourage efficient allocation of resources. Roadmapping can identify critical constraints
and challenges (for example, skills) and offer a shared solution. Roadmaps can be negatively
affected by strong lobbying from industry or strong short-termism from politicians, and must be
conducted with care, especially where there is little history of co-operative problem solving.
Many of the metal companies in the region struggle with process quality control, which thencreates more scrap, more re-work and thus uses more energy and water and generates morewaste. This is both a company competitive and a national competitive issue, as the lack of
capacity in the energy, water or waste system means that sector growth relies on infrastructure
growth. The cost of such infrastructure growth is typically much higher than the cost of
efficiency programmes that can deliver the same capacity. We strongly recommend thedevelopment of process quality control skills and national provisions of the more sophisticatedprocess quality equipment. Such education and equipment availability will also enable the longterm development of better research competence in this crucial area. These actions have theadditional benefit of helping to accelerate the shift of the industry towards higher value adding
outputs.
The metal industry faces various local environmental challenges, in some cases competing withcitizens for key resources such as water and in many cases polluting local air, rivers and soil.
The government’s competence to fully monitor performance is in many cases low, which
discourages industry from carrying out its own monitoring. Monitoring competence is being
90

increased in each country with the provision of more education and more equipment and statelaboratories, but this development must be increased rapidly as part of an agreed governmentindustry plan. Monitoring competence simultaneously increases the problem-solving
competence of staff, which is key to decreasing any costs that may typically be associated withimproving environmental performance.
It is important to note that there is a strong economic logic for supporting the ASEAN metalindustry. None of the case countries exhibit critical environmental or social conditions thatwould immediately limit the growth of the metal industry. But each country’s metal industry is
operating near its capacity for one or more resources, and any growth plan must be accompaniedwith an equally powerful plan to increase the constraining capacity.

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