Manufacturing revival key to Philippine economic growth - ADB report means BUSINESS

MANILA, Philippines - The "right road" to solving poverty in the Philippines lay in reviving the country's manufacturing sector, according to the Asian Development Bank (ADB) in a new report.

In a report titled "Taking the Right Road to Inclusive Growth," the ADB Philippine Country Office said the manufacturing industry could propel the economy not only to higher growth, but more importantly to inclusive growth, which is possible only if expansion is anchored on higher labor productivity. This in turn hinges on more jobs and higher incomes for Filipinos.

"It's a pity. You already lost your chance in the mid-80's. You cannot afford to lose this golden opportunity this time. So that means, it is urgent. But at the same time, the government should set up all the needed requirements. This chance is in front of your eyes. Why miss this opportunity?" said Norio Usui, ADB Philippine Country Office senior economist, on the sidelines of the launch of the report on Wednesday.

In contrast to the service sector, which can generate jobs for only one percent of the Philippine population, manufacturing can create millions of jobs, Usui said.

Because of the inordinate focus on service-sector jobs, labor productivity rose 10 percent in the last 30 years, as against the 100 percent of Asian neighbors, the ADB report said.

"Labor productivity of services, which has been the key growth engine of the Philippine economy and absorbed labors from rural activities, has persistently been less than half of that of industry. In contrast, industry, which has indeed retained the highest productivity over the years, has neither raised its productivity level nor absorbed workers from the less productive sectors," the report said. 

Usui said the government has to support industry through the provision of basic infrastructure, good governance, and measures that would improve the perception of doing business in the country.

"The Philippines has enormous potential to become a key production base within the region. With tightening labor markets in some countries, recovery from natural disasters in others, and the appreciation of the Japanese yen, there are growing opportunities for the Philippines to attract foreign investors. Success is not always as distant as it seems," the economist said.

According to Emmanuel de Dios, former dean of the University of the Philippines-School of Economics, the dismantling of the manufacturing sector began during the 1980's.

"I think the more important thing was the collapse of the entire industrial sector as a result of the debt crisis, there was not even a possibility of importing the inputs to many of our industries," he said.