To build PH industry, strengthen bank boards

The Philippines aims to raise manufacturing’s share of gross domestic product (GDP) to 20 percent by 2030, as outlined in the National Economic and Development Authority’s Philippine Development Plan 2023–2028. Achieving this will require better infrastructure, reliable power supply, and consistent policies. Yet one often overlooked factor could prove decisive—the composition of the boardrooms of our leading banks.

Manufacturing accounts for only 13.7 percent of Philippine GDP, according to World Bank data for 2024. This lags well behind Association of Southeast Asian Nations or Asean neighbors: Malaysia at 23.1 percent, Vietnam at 24.9 percent, Thailand at 25.2 percent, and Indonesia at 18.8 percent. Closing this gap will require more than mobilizing capital—it will require confidence in financing complex industrial projects beyond the familiar terrain of real estate lending or trade finance.

That confidence often takes shape in the bank boardroom. Bank boards determine how capital flows across the economy: which sectors receive long-term financing, how much risk institutions accept, and how patiently they can wait for returns. These decisions are not purely financial. They are also industrial—and they benefit from the perspective of directors who have built and operated real enterprises.

In my more than 50 years of dealing with banks on industrial projects in the Philippines and United States, I have seen how discussions change when such expertise is present. The questions become sharper and more informed—probing process yields, technological advantages, market positioning, and operational capability rather than focusing solely on collaterals and firm supply agreements.

Manufacturing investments operate on a different horizon from property loans or trade financing. A new electronics line or steel mill may take five to 10 years to generate strong returns, with much of its value embedded in technology, efficiency, and market position—intangibles that rarely appear clearly in financial statements

For banks, this is not simply a national development issue. Industrial background on boards can strengthen risk evaluation and portfolio quality. Directors who understand manufacturing operations, supply chains, and technology cycles are better able to distinguish viable projects from weak ones. In that sense, stronger industrial representation in bank governance is not about encouraging riskier lending—it is about enabling smarter lending.

Industrial economies recognized this long ago. Japan’s Keiretsu banks integrate 25 percent directors with industrial pedigrees. South Korea’s Chaebol-affiliated banks maintain about 30 percent industrial representation. Germany’s two-tier system ensures approximately 35 percent engineering and technical share. Singapore and Taiwan maintain 22 to 28 percent technical and industrial allocation, supporting export-driven manufacturing growth. Citibank under former CEO John Reed recruited engineers, recognizing finance as fundamentally a systems discipline.

Philippine banks deserve acclaim for building strong and resilient institutions. They have weathered global crises and maintained financial stability, as highlighted in the Bangko Sentral ng Pilipinas (BSP)’s 2024 Annual Report. The next step is to align this strength more closely with the country’s industrial ambitions.

Encouraging such experience need not rely on heavy mandates. The BSP already enforces fit-and-proper standards as well as mandates diversity and independent directors under Republic Act No. 8791 and its circulars. A similar policy nudge—encouraging 20 to 25 percent representation from technical and industrial experts—could ensure such perspectives are consistently present in bank governance.

Infrastructure reforms and policy stability will create opportunities. But whether those opportunities translate into factories and productive industries will ultimately depend on the decisions made in bank boardrooms.

—————-

Pete Maniego is an industrial engineer, lawyer, and industry executive. He is former chair of the National Renewable Energy Board, Institute of Corporate Directors, University of the Philippines Engineering Research & Development Foundation, and Energy Lawyers Association of the Philippines. This is his fifth article on industrialization.