Growth recovery is not transformation

Amid the continued decline in economic growth, Secretary Arsenio Balisacan has outlined five priorities to restore growth: reviving investment, accelerating infrastructure, strengthening food and energy security, creating better jobs through higher-value industries and expanding trade and investment partnerships.

Although sensible on the surface, these are tired prescriptions. Investment promotion, infrastructure expansion, export growth and industrial development have long defined the country’s economic agenda. Yet the Philippine economy remains vulnerable to external shocks and domestic weaknesses. Are we recycling familiar responses without confronting why they have failed to produce lasting structural change? Are these not the same lazy policies that were meant to make us resilient, yet did not shield us from this turmoil?

These priorities are not wrong. They are hollow and incomplete. A recovery agenda centered on investment, production and employment, without upgrading productive capabilities, could lock the country into routine jobs generating routine income. Growth may resume without sustained productivity gains or greater domestic value capture.

The Philippines faces geopolitical uncertainty, volatile food and energy prices, climate disruptions and changing trade patterns. At home, weak productivity, limited technological capabilities, poor agricultural performance, inadequate infrastructure and corruption compound these vulnerabilities. Without addressing these weaknesses, the stated policies trap us in this position of weakness.

Growth vs transformation

Growth can return without the economy changing. That is recovery, not transformation. An economy can attract foreign investment and expand exports while remaining dependent on low-value activities and routine work.

Promoting higher-value industries does not automatically bring better jobs. A capital-intensive factory with routine jobs is still a routine economy. Investment brings capital. Capabilities keep the returns.

As stated, the priority of creating better jobs in “higher-value industries” is nothing more than a policy slogan. A priority names a destination. A strategy explains the route. The issue is not simply moving workers into industries labelled high-value, but upgrading their tasks toward design, engineering, research, technological adaptation and complex problem-solving.

When Filipino workers and domestic firms perform these tasks and capture the income they generate, they build capabilities that can move the economy toward higher-value industries. Without task upgrading and domestic income capture, the country risks entering sophisticated sectors while remaining confined to routine production and capturing little of the value created.

Building productive capabilities

Industrial policy must develop the technological, organizational and human capabilities needed to perform sophisticated functions and capture their returns. Infrastructure should be judged by how effectively it connects producers, lowers costs and enables domestic firms to join sophisticated production networks—not simply by the roads and ports built.

Food security should strengthen agriculture through mechanization, climate-resilient production, postharvest technology and agroprocessing. Energy security requires a deliberate policy to build domestic capabilities in renewables, storage and grid management, not just to expand supply or import technology.

Transformation must also reach micro, small and medium enterprises (MSMEs). Advanced firms can diffuse capabilities through supplier development, technology transfer, technical assistance and worker training. Without these linkages, upgrading may remain concentrated among large and foreign-invested firms. Upgrading that stops there is an enclave, not a transformation.

Not just a moral failure, corruption is also a capability failure. Distorted contracts, poorly implemented projects and opportunities allocated through political power divert resources from productive uses, raise costs and serve private rents instead of social returns. An economy where positions beat competence will not build capabilities.

Transparency, accountability and institutional competence are not add-ons to transformation. They are its foundation.

Making transformation inclusive

Upgrading must benefit more than a few firms and skilled workers. Agricultural communities, informal workers and MSMEs need pathways to participate. Productivity gains must translate into better wages, secure employment and wider opportunities.

The five priorities can support recovery, but the country must go beyond this familiar formula if we are to sustain this recovery. The challenge is not simply to increase investment, production and employment, but to move to a higher level of tasks while capturing more of the income they generate.

Government should identify the technological and skills gaps that prevent firms and workers from taking on higher-value functions, then align public investment, incentives, training and research support to enable them.

Make firm support conditional on measurable gains in technology, skills, local sourcing and domestic value capture. Publish results, keep procurement transparent, protect competition and cut programs that fail.

Trade and investment partnerships should include practical mechanisms for technology transfer, local sourcing, workforce development and joint innovation—not merely promises of capital and market access.

Success should be measured by whether Filipinos perform more sophisticated tasks, domestic firms capture more value and capabilities spread across industries and enterprises. A matatag, maginhawa at panatag na buhay para sa lahat (Strongly-rooted, comfortable and secure life for all— he long-term vision under the Philippine Development Plan) requires more than renewed growth within the same channels. It requires changing the foundations of the economy so more Filipinos, firms and communities can participate in and benefit from progress.

Leonardo A. Lanzona Jr. is a professor of economics at the Ateneo de Manila University.