Manufacturing key to more Philippine jobs

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Phil workersIn order to rid the inglorious reputation of ASEAN’s most economically unequal economy, the Philippines will need to address infrastructure, policy and skills bottlenecks to rev up a simple manufacturing sector, the Asian Development Bank (ADB) has advised.

“In the near term, it is possible for the Philippines to identify some low hanging fruits in the manufacturing sector,” Philippine Country Director at the ADB Neeraj Jain told Inside Investor.

According to the ADB’s Taking the Right Road to Inclusive Growth report, the Philippines should encourage the private sector to manufacture televisions, fabrics, telegraphic apparatuses, calculating machines, refined sugar, porcelain, sewing machines and stationary among other segments to create high spill-over effects. Philippine handcrafted furniture, for example, has high-potential competitive advantages in marketing and could do well if the industry enters a mass-produced stage.

However, beyond the need for further coordination with private sector, the Philippine government needs to actively address serious barriers to manufacturing growth.

“Manufacturing is a long-term investment that requires capital-intensive equipment. Investors in the manufacturing sector essentially take a long-term stake in the country,” Jain observed.

“They therefore need to have a high level of confidence, not only in the country’s ability to provide human capital and infrastructure needs, but also the judicial system and macroeconomic fundamentals.”

This equation seems halfway complete. The Aquino administration has been widely lauded for its drive to create economic growth, but poverty has remained virtually unchanged due to an vicious cycle of poor infrastructure and governance that leads to an absence of labour-intensive industries. In particular, a deficient in skills has also held back manufacturing development as the country leapfrogged developmental norms to a service-led economy.

While a modern services industry is usually the harder economic sector for emerging nations to develop, in the Philippines the reality has been the opposite.

“The Philippines has a highly educated workforce, which is why the business-process outsourcing industry is growing so fast,” Jain remarked, adding: “Technical and vocation skills, however, need to be more focused on.”

An additional measure that needs to pinned up high on policy agendas is promoting increased communication within the manufacturing sector to determine the country’s more exportable goods, as well as the best marketing strategies. In essence, the litany of suggested commercial goods by the ADB implies that the Philippines has yet to comprehensively piece together any comparative advantages manufactures could leverage, a fact that shouldn’t be overlooked.

Inadequate connectivity and roadwork also stands in the way. Indeed, industry leaders in the Philippines point to infrastructure constraints as one of the largest issues facing not just growth in manufacturing, but a slew of other industries, such as tourism and energy.

The government has endeavoured to address this shortfall through private sector investment. Originally accused of a snail-like birth, the Philippine private-public partnership programme has since created buzz with the smooth bidding of the first three projects contracted from the institution.

“There has been no litigation for any of the contracted PPP projects awarded since the new programme began in 2010, which is significant progress for the Philippines,” Jain said.

Addressing all these concerns will not happen over night. But at least things are moving in the right direction.

 

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Reading Time: 2 minutes

In order to rid the inglorious reputation of ASEAN’s most economically unequal economy, the Philippines will need to address infrastructure, policy and skills bottlenecks to rev up a simple manufacturing sector, the Asian Development Bank (ADB) has advised.

Reading Time: 2 minutes

Phil workersIn order to rid the inglorious reputation of ASEAN’s most economically unequal economy, the Philippines will need to address infrastructure, policy and skills bottlenecks to rev up a simple manufacturing sector, the Asian Development Bank (ADB) has advised.

“In the near term, it is possible for the Philippines to identify some low hanging fruits in the manufacturing sector,” Philippine Country Director at the ADB Neeraj Jain told Inside Investor.

According to the ADB’s Taking the Right Road to Inclusive Growth report, the Philippines should encourage the private sector to manufacture televisions, fabrics, telegraphic apparatuses, calculating machines, refined sugar, porcelain, sewing machines and stationary among other segments to create high spill-over effects. Philippine handcrafted furniture, for example, has high-potential competitive advantages in marketing and could do well if the industry enters a mass-produced stage.

However, beyond the need for further coordination with private sector, the Philippine government needs to actively address serious barriers to manufacturing growth.

“Manufacturing is a long-term investment that requires capital-intensive equipment. Investors in the manufacturing sector essentially take a long-term stake in the country,” Jain observed.

“They therefore need to have a high level of confidence, not only in the country’s ability to provide human capital and infrastructure needs, but also the judicial system and macroeconomic fundamentals.”

This equation seems halfway complete. The Aquino administration has been widely lauded for its drive to create economic growth, but poverty has remained virtually unchanged due to an vicious cycle of poor infrastructure and governance that leads to an absence of labour-intensive industries. In particular, a deficient in skills has also held back manufacturing development as the country leapfrogged developmental norms to a service-led economy.

While a modern services industry is usually the harder economic sector for emerging nations to develop, in the Philippines the reality has been the opposite.

“The Philippines has a highly educated workforce, which is why the business-process outsourcing industry is growing so fast,” Jain remarked, adding: “Technical and vocation skills, however, need to be more focused on.”

An additional measure that needs to pinned up high on policy agendas is promoting increased communication within the manufacturing sector to determine the country’s more exportable goods, as well as the best marketing strategies. In essence, the litany of suggested commercial goods by the ADB implies that the Philippines has yet to comprehensively piece together any comparative advantages manufactures could leverage, a fact that shouldn’t be overlooked.

Inadequate connectivity and roadwork also stands in the way. Indeed, industry leaders in the Philippines point to infrastructure constraints as one of the largest issues facing not just growth in manufacturing, but a slew of other industries, such as tourism and energy.

The government has endeavoured to address this shortfall through private sector investment. Originally accused of a snail-like birth, the Philippine private-public partnership programme has since created buzz with the smooth bidding of the first three projects contracted from the institution.

“There has been no litigation for any of the contracted PPP projects awarded since the new programme began in 2010, which is significant progress for the Philippines,” Jain said.

Addressing all these concerns will not happen over night. But at least things are moving in the right direction.

 

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