Let manufacturing drive investment-led growth
Across the years, we’ve seen fast and slow periods of growth, and our economic structure has been relatively constant: Second quarter 2023 numbers from the Philippine Statistical Authority show that consumption accounts for 68.8 percent of gross domestic product (GDP), with government spending and gross capital formation taking up 16.1 percent and 25.8 percent, respectively. (Net exports/imports account for the rest). From the supply side, agriculture contributes 8 percent, industry 29.9 percent, while services make up 62.1 percent of GDP.
These, alongside the remittances from overseas Filipino workers, have given the Philippine economy its unique character as it went through various phases with varying degrees of success.
Unfortunately, this skewed distribution has also made the Philippines vulnerable to external global developments and other factors like weather and other disturbances.
Today, even with COVID-19 behind us, economic concerns remain the top urgent national concern of Filipinos. The September 2023 Pulse Asia survey reveals that 74 percent of Filipinos see inflation as their top concern.
This represents an 11-percentage-point increase from the 63 percent who cited the same concern in June. Inflation was also the top answer among all geographic areas and socioeconomic classes. Other concerns are increasing the pay of workers (cited by 49 percent of respondents), creating more jobs (27 percent), reducing poverty (25 percent), and fighting graft and corruption in government (22 percent).
These numbers are expected to worsen because of developments in the Middle East and the additional inflationary pressures.
The World Economic Forum’s Global Risks Report 2023 said an impending cost-of-living crisis is the most severe global risk in the next two years, as the higher prices of goods affect people’s consumption patterns.
How, then, do we minimize overdependence on personal consumption activities, and thus ensure the economic resilience of the Philippines with the end in view of attaining sustainable, inclusive growth?
The Stratbase ADR Institute has long been pushing for economic growth driven by investments instead of mostly relying on consumption. Investments are always good for the economy because of their long-term benefits. Investments mean additional infrastructure, more jobs for the populace, and thus greater opportunities for income and upward mobility. Long-term national prosperity would then be realistically achievable.
And yet, we cannot just will investments, whether foreign or local, to come and drive our economy. Governance plays a crucial role in attracting and keeping investments. Our government needs to establish and cultivate a business environment that is conducive for businesses to operate in. Policies need to be guided by the rule of law.
Consistency and logic are key. They have to make it easy for investors to do business here, not make investors’ lives difficult. Investors have to see that our leaders are running the country in a transparent and accountable manner. A great part of this hinges on the resolve of the administration—present and future—to build this kind of enabling environment, as well as to nurture economic relations with its most beneficial trading and investment partners, the United States and Japan.
Going further, Stratbase also believes that the potential of the manufacturing sector has yet to be tapped. The manufacturing sector’s potential is certainly more than its current contribution of 17.6 percent of GDP.
Investments in manufacturing, targeting both the international and domestic markets, are important in driving economic growth. Such a strategy will have a strong multiplier effect, increasing consumer spending, generating jobs and livelihood opportunities, ensuring income security, boosting productivity and ultimately enabling inclusive growth. Ultimately, this will strengthen our country’s role in the global supply chain amid—and despite—various geopolitical developments.
Filipinos themselves appear to be aware of the potential of the manufacturing sector. A Stratbase-commissioned survey also conducted by Pulse Asia in the first quarter of 2023 showed that 89 percent of Filipinos agree that the government should support the sector for its capacity to accelerate growth and development. The government, respondents said, should provide training opportunities for workers to upgrade or learn new work skills, provide more incentives comparable to other countries, and develop more economic zones.
Let’s work toward pushing investments, specifically in the manufacturing sector. This is a good avenue to make our economy less vulnerable to shocks and enable Filipinos to thrive through long-term prosperity.
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Dindo Manhit is founder and CEO of the Stratbase Group
