To be competitive: Phl should revive manufacturing

CEBU, Philippines - To fully brace for the ASEAN integration and to be able to compete head-on against the neighboring countries in the region, the Philippines must take serious effort in reviving the manufacturing sector.

Philippine Institute for Development Studies (PIDS) vice president Rafaelita Aldaba said in a statement that the Philippines needs to transform the manufacturing industry, which is crucial to attaining inclusive growth.

Secondly, she cited the importance of more foreign direct investment (FDI) inflows and stronger participation of the country in regional production networks given the large market potential of the Asean Economic Community (AEC) offers.

Third, the Philippines should pursue domestic reforms necessary to maximize the benefits of regional trade agreements.

Josef T. Yap, PIDS former president said that manufacturing is important as a source of inclusive growth as it can generate more high-wage and high-productivity jobs, as compared with services.

In the region, Yap said growth has come from regional production networks that are largely beneficial to the manufacturing sector.

Yap said the local manufacturing sector has stagnated, he mentioned that Thailand’s share of manufacturing to gross domestic product in 2010 was 35.6 percent, compared with the Philippines’ 21.4 percent.

In 2011, Thailand recorded US$139.7 billion in inward FDI stock, compared with the Philippines’ US$27.6 billion.

“Why do we have to focus on manufacturing despite its low performance? Because history shows that transformation led by the industrialization is important for sustained economic growth despite arguments that we should shift to the service sector,” Yap said adding that a more dynamic manufacturing sector should have provided higher-paying jobs to less-educated workers, thereby making poverty reduction faster.

Aldaba also emphasized that the “hollow, missing middle” brought about by the subdued performance of small and medium enterprises (SMEs) in the manufacturing sector.

The Philippines on the other hand, can learn from large Korean business enterprises that subcontracted jobs to small and cottage producers, and the strategic industry policies of Malaysia and Singapore that tapped SMEs for skills and technology transfer.

However, PIDS believes that reviving manufacturing doesn't mean abandoning services as services also input to manufacturing.

To benefit from the envisioned single market and production base under AEC, the country should look at the entire region of 600 million people as the market for Philippines products, Aldaba added.

“The opportunity is there. AEC is there. It is up to us to take advantage of it or we can just sit down and do nothing,” Aldaba concluded./JOB (FREEMAN)