Think tank sees need for higher investment rate

CITES NEED TO REVIVE PHILIPPINE INDUSTRIAL SECTOR TO GENERATE MORE JOBS

A Higher investment rate is needed to sustain Philippine economic growth and reduce poverty, state think-tank Philippine Institute for Development Studies (PIDS) said on Monday.

According to PIDS President Josef Yap, the country shows improvement when it comes to the economy, because of government spending and increasing consumption which was driven by remittances.

However, he noted that in order to sustain, expand and deepen the growth, the country should have a higher investment rate because that is the key to economic growth.

Yap added that investments could also reduce poverty by generating more jobs that absorb less-educated people, a group which have a higher poverty incidence.

Meanwhile, the PIDS official also encouraged the expansion of the manufacturing sector to ensure that benefits can be availed by the poor and less-skilled members of society.

In a presentation, Yap noted that manufacturing sector employs more less-educated labor compared to the services sector. It also has more high-paying productivity and high-paying jobs.

However, the official mentioned that the country’s manufacturing sector did not benefit as much compared to other neighboring countries in terms of regional economic integration. PIDS said that the Philippines was one of the latecomers when it comes to regional economic integration which started in the mid-1980s in East Asia.

It added that at the time when Japanese firms were out scouting for places to trade and invest in, the country was in the middle of an economic and political crisis and was hence bypassed by the first wave of Japanese investments.

Thus, in later years, the Philippine was able to draw some investments and gained advantage in the electronics sector, which is a part of a regional production chain.

At present, the country is a major supplier of semiconductor and other electronic goods. However, the gains in this sector did not spur widespread industrial development.

PIDS added that that although labor-intensive, the sector has remained heavily dependent on imported inputs and failed to establish strong backward linkages with the domestic economy, which has led to the stagnation of the manufacturing sector.

“Given the manufacturing sector’s capability to absorb lower-skilled labor and integrate other productive sectors, its continued stagnation had a negative impact on the country’s employment and poverty situation,” the think tank noted.

Declining share

PIDS also cited a United Nations report on the share of the manufacturing sector in the economic growth of the Philippines, which showed that from 27.7 percent in 1980, the sector’s growth declined to 21.4 percent in 2010.

To underscore the importance of regional economic integration in achieving higher and inclusive economic growth for the country, PIDS also announced the observance of the 10th Development Policy Research Month (DPRM) this September with the theme “Regional Economic Integration and Inclusive Growth: Engaging Nations, Embracing People.”

DPRM aims to harness the full benefits of regional economic integration which entails the harmonization of regional and sovereign priorities, and resolving issues on trade, investment, labor and migration.

The think tank added that the various activities lined up for the celebration of the DPRM will hopefully provide the appropriate base to better understand and resolve the issues related to the revitalization of the manufacturing sector. –MAYVELIN U. CARABALLO REPORTER, Manila Times