A vision for Philippine industry

Industry, the bulk of which is manufacturing, has lately outperformed services and agriculture in overall output and employment growth. Manufacturing itself has grown faster than the overall economy since 2010, averaging nearly 8 percent growth annually against the economy’s 6-7 percent. This brings more inclusive growth for the Philippine economy, for at least two reasons. First, manufacturing provides more stable jobs than in much (possibly most) of the services sector, which for more than two decades has led the economy’s growth, and largely includes informal jobs like trading/vending, transport (driving of pedicabs, tricycles and jeepneys), and personal or household domestic services. Second, manufacturing jobs demand less education and training than those in the fast-growing formal service sector industries like business process outsourcing, finance and real estate. Thus, it offers relief for the less educated and poorer segment of jobless Filipinos, who still number well over 2 million.

To sustain the resurgence of manufacturing and protect its contribution to the overall economy, the Department of Trade and Industry (DTI) has provided more than its traditional level of support for the sector in recent years. In 2012, it formulated a Comprehensive National Industrial Strategy (CNIS) as a roadmap for the renewed pursuit for Philippine industrialization. Last week, DTI held the Manufacturing Summit 2017, a sequel to a similar summit held almost exactly a year ago. The forum again gathered various stakeholders in manufacturing, including from academe, civil society, government and manufacturers themselves, aimed to reassess and reaffirm the roadmap to Philippine industrial development.

This year, the summit tackled the biggest source of uncertainty facing the manufacturing sector today, often referred to as the Fourth Industrial Revolution or Industry 4.0, which I have written on in recent columns (see, for example, “The unfolding revolution,” 5/30/17). Its prominent feature is the application of artificial intelligence (AI) in the production or provision of various goods and services, disrupting traditional business models and threatening massive numbers of traditional jobs. The rapid changes that are happening have prompted DTI to focus on competition, innovation and productivity as foundation for its Inclusive Innovation Industrial Strategy or i3S to push CNIS forward.

The aim of i3S is to develop innovative and globally competitive industries in the manufacturing, agriculture, and services sectors, strongly linked with domestic and global value chains. Intensified competition with more open markets and a strong competition policy now finally in place in the Philippines impels innovation and increased productivity. DTI thus puts innovation at the forefront of the country’s policies and strategies for strengthening domestic firms for competition in the local and global markets through increased productivity.

In the panel discussion on the country’s industrial vision, I pointed out that productivity ultimately hinges on people, whether as workers, or as innovators who will enable AI to propel industry. The biggest threat to our future productivity, hence our industrial vision, is the cold statistic that one in every three young Filipino children is stunted due to malnutrition. The damage this does is permanent, as physiologists tell us that stunting at age five impairs the child for life from reaching full brain and physical development potential (“A silent crisis in our midst,” 9/6/16). I thus constantly warn that the “demographic sweet spot” we pride ourselves on, marked by predominance of working age people in our population profile over the next few decades, may prove not to be so sweet after all. It could instead be a demographic time bomb of low productivity and massive joblessness unless we correct the situation fast. I have written much about how our restrictive food policies have kept basic foods from being widely affordable to our poor, and will not repeat the arguments here.

Suffice it to say that our industrial vision rests on investing in our people, starting from the very young.