The Philippines Industrialization: A Disaster

Summary

The Philippines, despite being labeled as a 'newly industrialized country,' has not fully industrialized. It faces challenges in infrastructure, governance, and education, and remains reliant on agriculture and remittances. Its manufacturing sector lags behind neighbors like Vietnam and Thailand, with a lower percentage of GDP from manufacturing. Historical policies and a focus on services rather than manufacturing have contributed to this lag. While the service sector, including BPO, has grown, there are concerns about over-reliance and future competition. The country's unique economic model has bypassed traditional industrialization, but there are ongoing efforts to boost manufacturing and address the trade deficit.

Takeaways

• 🌟 The Philippines is often misunderstood as fully industrialized despite being classified as a 'newly industrialized country'.
• 🏭 The country's manufacturing sector contributes only about 18% to its GDP, which is significantly lower compared to its neighbors.
• 📈 The Philippines has a unique economic trajectory, skipping the industrial phase and moving from agriculture to services.
• 💼 The service sector, particularly Business Process Outsourcing (BPO), has been a significant driver of the Philippine economy.
• 💼 The value added by the service sector to the GDP is the highest in the region, standing at 61% as of 2021.
• 🏗️ Historical policies like 'Philippine First' and protectionism have hindered the growth of a robust manufacturing sector.
• 🔍 The country's industrialization has been affected by oligarchism, lack of export-oriented subsidies, and insufficient government support.
• 💼 The reliance on remittances from Overseas Filipino Workers is a significant factor in the economy, highlighting the service sector's importance.
• 🚀 The Philippines' economic model, while unique, faces challenges from competition and technological advancements like AI.
• 🔄 There is a merchandise trade deficit, indicating a weak exportation of goods, which a stronger manufacturing sector could help address.

Q & A

What does the term 'newly industrialized countries' imply about the Philippines?

The term suggests that the Philippines has developed a significant manufacturing sector, but this is often misunderstood as the country has not fully industrialized and still faces challenges in infrastructure, governance, and education.

Why is the Philippines' industrialization phase considered lagging?

The Philippines' industrialization is lagging because its manufacturing sector contributes less to GDP compared to its neighbors, and it has not been able to develop a strong manufacturing base like some of its regional peers.

What is the Philippines' GDP percentage attributed to manufacturing as of 2021?

As of 2021, the Philippines' manufacturing sector contributes approximately 18% to its GDP, which is lower than many of its neighboring countries.

How does the Philippines' service sector compare to its manufacturing sector in terms of GDP contribution?

The service sector in the Philippines contributes a higher percentage to GDP than the manufacturing sector. As of 2021, services account for 61% of the GDP, which is the highest among its neighbors.

What historical policies have hindered the growth of the manufacturing sector in the Philippines?

Historical policies such as 'Philippine First' with high tariffs and non-tariff barriers, and various industrialization plans that were dismissed due to internal and external shocks have hindered the growth of the manufacturing sector.

Why has the Philippines been successful in the Business Process Outsourcing (BPO) industry?

The Philippines has been successful in the BPO industry due to its English-speaking workforce and the growth of this sector as an alternative to boost its economy when the manufacturing sector lagged.

What are the potential threats to the continued growth of the BPO industry in the Philippines?

Potential threats to the BPO industry include intense competition from countries like India, which offer lower wages, and the rise of Artificial Intelligence, which may automate some call center jobs.

Why is it important for the Philippines to not over-rely on its service sector?

Over-reliance on the service sector could be risky as it may not provide long-term stability. The BPO industry, for example, faces competition and technological disruption. Additionally, manufacturing often adds more value per worker and can help reduce merchandise trade deficits.

What is the merchandise trade deficit of the Philippines in 2022?

In 2022, the Philippines is projected to have a merchandise trade deficit of more than 50 billion dollars, partly due to weak exportation of goods.

What are some of the government initiatives aimed at improving the manufacturing sector in the Philippines?

Government initiatives include foreign investment-led projects and partnerships with local companies like SteelAsia Manufacturing Corporation to build steel factories and other manufacturing facilities.

What is the value added per worker in the manufacturing sector compared to the service sector in the Philippines?

As of 2019, the value added per worker in the industry sector of the Philippines is over $14,511, which is about 50 percent more than the $9,312 in the services sector.