ADB to PH: Diversify exports, or else…

Top ADB officials called again for the Philippines to diversify its exports and expand its manufacturing base to reduce vulnerability to global economic shocks and achieve inclusive growth

MANILA, Philippines – Top officials of the Asian Development Bank (ADB) reiterated an earlier call for the Philippines to diversify its exports and expand its manufacturing base, stressing that the country would remain vulnerable to global economic shocks and fail to have inclusive growth if it does not.

In separate press briefings on Wednesday, May 2, ADB President Haruhiko Kuroda and Philippine Country Director Neeraj Jain each highlighted how the country’s dependency on electronics exports and a stagnant manufacturing industry are reasons why the benefits of the country’s economic gains have been felt by only a few.

Jain cited that, while Philippine exports have recently shown early signs of recovery from a dramatic 6.9% slump in 2011, diversification is crucial. He said the country is highly dependent on electronics, particularly semi-conductors. Diversification, he stressed, provides “greater resiliency.”  

“Look for higher value items, like camera, television,” Jain said.

One crucial investment the government must do to facilitate the upgrade into higher value export products is on infrastructure. “Infrastructure spending must go up.”

The vulnerability of Philippine exports to the world’s economic and supply woes is one of the 2 major lessons from the poor economic performance in 2011.

The performance of exports has been traced to the narrow export base of the Philippines. Electronics has traditionally accounted for half or more of Philippines’ export receipts. In February, electronics accounted for 52.7% of total export earnings.

Various groups have long pointed out that Philippines’s manufactured products are too focused on churning low-end semiconductor parts components that find their way into mobile phones, televisions, and other electronic products.

Manufacturing

For his part, Kuroda stressed that “Widening the manufacturing base beyond these products will create much-needed jobs, promote inclusive growth and help reduce the persistent poverty. Stronger manufacturing with diversified export markets, with emphasis on emerging economies outside of East Asia, will also help further strengthen the resilience of Philippines’ economy to global economic downturns.”

Earlier, the ADB said in a report that the Philippines need to revive its ailing manufacturing sector, which provides more jobs. It cited that, while increasing jobs in the Business Process Outsourcing (BPOs) are considered a plus, only few are qualified for them and excludes a greater chunk of the labor force.

The ADB president noted that the Philippines has the potential to become a key production hub in the region, citing the country’s educated workforce and rich natural resources. He said these are why foreign investors are growing more interested in the Philippines.

Kuroda added that by developing the Philippines’ industry sector and modernizing services, the local economy could create more jobs for more Filipinos, allowing the overall economic growth to trickle down.

“By fully exploiting its favorable demographics and strategic location in the heart of Asia, the Philippines can transform its economy to one of sustainable and inclusive growth that benefits all,” Kuroda said.

Both ADB officials were at the 2012 ADB Annual Governors Meeting, which Manila is hosting for 4 days. The theme of the high profile gathering is “inclusive growth.” – Rappler.com