A new dawn for global value chain industry clusters to start industrial transformation for the Philippines—World Bank report
The World Bank (WB) said it is hopeful that the Philippines can take advantage of the new dawn for global value chain (GVC) industry clusters by repositioning itself and enhancing its participation in the global context of reconfiguration. Achieving this according to the WB requires no less than concerted effort from the government and private sectors and other key players by executing a plan that can guide investments from both domestic and foreign investors.
This was the statement of WB Country Director for Brunei, Malaysia, Philippines, and Thailand Ndiame Diop said as he opened the bank’s recent release of its report “A New Dawn for Global Value Chain Participation in the Philippines” as it eyes increasing the country’s GVC participation in a post–COVID-19 world. The report was released recently (October 6, 2022) at Fairmont Hotel in Makati and was attended by public and private participants actively involved in providing inputs and insights into the report.
“For the Philippines, this is an opening to embark on industrial transformation, reconfigure our exports into industry clusters and strengthen GVC participation; and make the Philippines a more attractive investment destination. We in the new administration are committed to steering the country back to its high-growth path and keeping the momentum toward an inclusive and resilient society,” Department of Trade and Industry (DTI) Secretary Alfredo Pascual said in his keynote message.
Secretary Pascual emphasized that the country is already having signs of an economic recovery as its Gross Domestic Product (GDP) grew by 7.4 percent in the second quarter of this year which marked the fifth consecutive quarterly growth since the start of 2021. “Challenges remain. Inflation stood at 6.9 percent this September and increasing costs and supply chain disruptions slowed the country’s economic momentum. Despite these challenges, the government remains focused on fully reopening the economy and its goals to reduce costs, stabilize prices and ensure health, food, and energy security,” he pointed out.
Pascual said that implementing an inclusive, sustainable, and resilient industrial policy is imperative for building a more competitive economy, and through science, technology, and innovation (STI) and essential digital technologies, industries will be better positioned to face competition in both domestic and export markets and pave the way for industrial transformation.
“We will prioritize four industry clusters to drive our country's growth. The selection of these clusters is guided by the WB’s analytical report on the reconfiguration of GVCs last year and is affirmed through the report being launched today.” Pascual added.
The clusters are identified as (1) the Industrial, Manufacturing, and Transport (IMT) cluster; (2) Technology, Media, and Telecommunication (TMT) cluster; and (3) Health and Life Science (HLS) cluster. “We have added the Modern Basic Needs and Resilient Economy cluster, fostering economic resilience and long-term sustainable and inclusive growth.
Supporting the country’s enhanced participation in reconfigured GVCs is a long-term pursuit that entails addressing structural, systemic, and sector-specific constraints to growth.”
“In terms of policies to make the Philippines an attractive destination for FDIs, we are implementing recently-passed laws or reforms that either ease foreign ownership restrictions or incentivize investments. These include the CREATE Act, amendments in the Public Service Act and Foreign Investment Act, and the Retail Trade Liberalization Act. CREATE, in particular, is supported by the Strategic Investments Priorities Plan (SIPP). Through SIPP, CREATE serves as a tool for innovation, digital transformation, and industrialization,” Pascual expounded.
The DTI is also advocating for legislation that will further enhance trade and industry development. “We are adopting export measures to promote domestic processing for greater value addition from our reserves of green metals, such as nickel, cobalt, and copper. These measures should complement our effort to enable 100% foreign equity in solar, wind, tidal, and other renewable energy (RE) projects by amending the Implementing Rules and Regulations of our Renewable Energy Act,” Pascual said.
The Secretary further added that the Board of Investments (BOI), of which he is Chairman, is working with the Commission on Higher Education (CHED) on the National Skills Mapping and Survey on Human Resource Development. “I am pleased to share that BOI is also promoting Academe-Industry Matching or “AIM!” These projects shall identify appropriate interventions to minimize skills mismatch at the regional or provincial level; they foster interest among university students to take future-ready programs.”
During the event, Souleymane Coulibaly, WB Program Leader for Equitable Growth, Finance, and Institutions and the author of the New Dawn report, presented the highlights of the GVC launching. He said that within the next six months, ”the Philippines will have to address constraints to FDI attractiveness and facilitate trade through full implementation of key recent economic bills adopted. Within the next three years, the country has to promote investment and competition in logistics and connectivity services along with the development of an innovation ecosystem while advancing the digitalization agenda to boost manufacturing.”
When asked how the public would easily understand GVC during the panel discussion, Trade Undersecretary and BOI Managing Head Ceferino Rodolfo laymanized it by quipping “just look at my cellphone. The camera system is from the Philippines, LCD from the Philippines or Vietnam, chips from Indonesia or Thailand, and the software from the Philippines or Malaysia.”
“This New Dawn for GVC Participation in the Philippines presents a golden opportunity for the country. By working together, we can Make It Happen in the Philippines,” Undersecretary Rodolfo summed it up.
In attendance were officials and representatives from the government like DTI-BOI and DOF-FIRB along with corporate officers representing the manufacturing sector, especially automotive; the technology sector, with IT-BPO in particular, as well as the Health and Life Science sector.
