Manufacturing’s game-changing potential

Globalization has yielded many benefits for Filipinos. It has allowed our people to showcase our goods and services to the international community and has provided us access as well to what they can offer. It has encouraged businesses to improve their efficiency and value to be up to par with the rest of the world.

But globalization has also highlighted weaknesses in our economy. Specifically, being part of the global supply chain makes us vulnerable to economic, political, and environmental changes—a big-scale domino effect. Nations and economies have become so intertwined in many respects, such that geopolitics and geoeconomics in one part of the world are sure to have tangible consequences in other parts. Cooperation and partnerships among countries are important for a collective response to such developments.

A case in point is what is happening in the Indo-Pacific region. China’s adventurism—maritime harassment, more accurately—presents a multifaceted threat to the Philippines. Aside from disrespecting our territorial sovereignty and international law, as well as impeding the free movement of Philippine vessels in the exclusive economic zone and disrupting fishing activities, these acts also undermine the Philippines’ attractiveness to global manufacturers who are seeking alternatives to China. Thus, the reliability of supply chain logistics in the region is compromised.

Indeed, the broader term “security” covers not only territory but economic security as well. A September 2023 survey commissioned by the Stratbase ADR Institute revealed that Filipinos are keen for the Marcos administration to work with like-minded states in strengthening economic security. This includes the United States (74 percent), Japan (55 percent), and Australia (46 percent). The same survey also revealed that 70 percent of respondents agree that the private sector plays an instrumental role in economic security as it can make goods that are more affordable and accessible to Filipino consumers (64 percent), create jobs (60 percent), and expand livelihood opportunities (58 percent).

—————-There is no doubt that the Philippines has a vibrant international trade situation; what is not so apparent is that we have been running a widening trade deficit as imported goods continue to dominate external trade, whereas export activities leave much to be desired.

There is an opportunity to change this, through boosting production, ensuring food security, and generating jobs, and through engaging with our most beneficial trading partners like the United States and Japan.

Last June, President Marcos led the launching of the Philippine Export Development Plan for the next five years. This is intended to serve as a road map as the Philippines transforms our export industry into a significant engine for economic growth, specifically addressing constraints to production in terms of scale and scope, developing a strong and innovative export ecosystem, and increasing the Philippines’ mindshare in the global market.

Manufacturing is emerging as the prime candidate to be the driver of all of this, both for the export sector, while also serving the needs of the domestic market.

According to data from the Philippine Statistics Authority (PSA), there are 129,436 establishments engaged in manufacturing activities in the Philippines as of 2021—accounting for 12 percent of all establishments in operation. Almost 30 percent of these establishments are located in the National Capital Region and Calabarzon. Further, the PSA’s latest Labor Force Survey shows that as of October 2023, around 3.6 million persons are employed in the manufacturing sub-sector, representing 7.5 percent of the total 47.8 million employed persons in the country.

All these establish that the potential of the manufacturing sector is there, yet it could still be tapped to its fullest.

Much work lies ahead, not the least of which is the strengthening of the country’s regulatory framework so that investors would be able to plan their operations, anticipate their expenses, and be assured that the rules won’t change midstream. Transparency and accountability are key concepts as the government gets its house in order. If it is successful in doing so, it will be in an even better position to persuade investors to take their manufacturing business here—and keep doing business here.

There are many ways to boost our economy and enable it to grow sustainably for the benefit of more Filipinos. However, the advantages of and initial gains in the manufacturing sector tell us that this is an area that carries a lot of potential and that minimizes our vulnerability to external events that might affect the supply chain once again. Partnerships with like-minded economic partners are crucial, as are efforts to cultivate an environment that is conducive to business to be established and thrive. More business means more jobs, better income options, and greater opportunities for Filipinos today and in the future.

—————-Dindo Manhit is founder and CEO of the Stratbase Group.