The Philippine Institute for Development Studies (PIDS), a state think tank, has advised the country in a recent study to prioritize the role of services in reviving the manufacturing sector to enhance competitiveness. The government’s 2016 Manufacturing Resurgence Program (MRP) focuses on rebuilding existing capacity, strengthening new facilities, and maintaining the competitive advantage. It also seeks to reform the agriculture manufacturing industry, smallholder farmers, and agriculture cooperatives through product development, value adding, and integration with larger organizations for marketing and financing purposes. The program seeks to address supply chain gaps, raw material access, expansion of domestic market, and exports for locally produced products. The goal is to achieve a deeper participation in the global value chain (GVC) and increase product competitiveness. Achieving the goal would require tackling issues such as smuggling, unreliable power supplies, uncompetitive exchange rates, and high logistics and energy costs. Other issues such as linking of SMEs and large firms, supply chain constraints, human resource development, and innovation should also be addressed to maximize competitiveness.
Apart from identifying areas where the manufacturing sector could be improved, the study also suggested that the government should prioritize services to enable manufacturers and exporters to move up the GVC. To do so, four types of upgrading have been identified: process, product, functional, and chain upgrading. Process upgrading requires streamlining production to lower costs, while product upgrading demands moving to more sophisticated product lines. The Philippines’ 26.67 percent share of services in manufacturing exports is one of the lowest in Asia, second only to Indonesia. The top two ASEAN countries are Singapore and Malaysia, with shares of 43.03 percent and 32.76 percent, respectively. As per the PIDS report, the Philippines need to bring in reforms and improve the regulatory regime for further inclusion of services such as ICT to sustain competitiveness and manufacturing resurgence.
Philippines: Government pursues program to improve manufacturing services
