PES Logo

Boosting manufacturing seen as key to higher GDP growth

Boosting manufacturing seen as key to higher GDP growth
Date Published

MANILA - The Philippines needs to beef up its manufacturing sector in order for the economy to grow significantly, according to several economists at a forum organized by the Philippine Economic Society and Stratbase ADR Institute.

Former National Economic and Development Authority (NEDA) Sec. Ernesto Pernia said the manufacturing industry needs a lot of help from the government as it is lagging behind many regional peers. 

One key factor is the low foreign direct investments or FDI to the country, which would have created more manufacturing plants and generated more jobs.

Citing data from the Bangko Sentral ng Pilipinas, Pernia said the Philippines’ FDI in 2022 was only around $9.4 billion, lower than Thailand’s $10.2 billion, Malaysia’s $15 billion, Vietnam’s $17.9 billion, and Indonesia’s $21.4 billion. 

"The current status quo makes it quite challenging for the Philippines being the laggard in advancing its manufacturing sector. Enhancing the manufacturing sector, as our ASEAN peers have, requires ample foreign direct investments, domestic investments and the capacity to export, which is facilitated by FDIs themselves," Pernia said. 

Pernia added that the Philippines' exports-to-GDP ratio is at 13.8 percent, much lower than Indonesia's 19.6 percent, Thailand's 53.5 percent, Malaysia's 63.3 percent, and Vietnam's 104.2 percent.

"We are not attracting not enough FDI because we are seen as having too many complex regulations, which actually tends to be an avenue for corruption also," said Pernia.

Ser Percival Pena-Reyes, Director of the Ateneo Center for Economic Research and Development, described the growth of the industry as sluggish. He said the manufacturing sector faces some challenges aside from the low FDIs.

"It’s really quite painful a challenge to do business here," Pena-Reyes said citing some issues with regulations, permits and the ease of doing business.

Prof. Dindo Manhit, President of Stratbase ADR Institute, agreed saying investors are also reluctant because of issues of red tape and corruption in general.

"Perception of corruption will always threaten any interest for investment. Side by side with encouraging investment-led growth is improvement with regards to greater transparency and accountability," Manhit said.

But Roberto Batungbacal, an engineer and former head of the Samahan sa Pilipinas ng mga Industriya Kimikal asserted that the Philippines has a very active and growing manufacturing sector, contrary to the statements of other speakers. He said that the manufacturing sector is the biggest sector in the country.

"Coming from a non-economist, the Philippines is a manufacturing economy…. We are in the top 13 percent of countries in the world in terms of manufacturing," said Batungbacal.

However, he agreed that there are things that still need to be done, like urging the government and the private sector to further beef up the industry like creating more higher-value products that can be exported. Pernia also agreed saying the country can look into mining, but process it locally to add value before exporting to other countries.


Pernia on Wednesday said the government is too focused on infrastructure and should invest more in education and health. 

The former NEDA chief said that compared to other countries in the region, the budget per student in the country is very low. 

“The budget for education is huge, but we have a huge studentry. Malaki ang ating student population. If you spread them [budget] over so many students, it’s very thin,” said Pernia.

He also hit the government’s spending on infrastructure which amounts to about P9 trillion, while budget and health getting a much smaller slice of the budget.

“Our government tends to prefer visible projects, infrastructure projects, because spending on education and health is not visible, not as visible as infrastructure projects. And yet the transportation, infrastructure projects tend to benefit more the well-off than the poorer classes,” asserted Pernia.


Written By
Jekki Pascual
PES in the News