PHL among infra-challenged countries–ADB
POOR infrastructure continues to hinder the Philippines from maximizing its manufacturing potential, according to the Asian Development Bank (ADB).
In an Asian Development Blog, ADB Vice President Bambang Susantono said improving infrastructure facilities will help boost investments and allow the country to increase its participation in global value chains (GVCs).
Data from the Philippine Statistics Authority (PSA) showed the country’s manufacturing output contracted 9.3 percent in August 2019, the ninth consecutive month of decline.
“The region’s economies need to undertake important structural reforms to enhance the business environment. Investing in quality infrastructure, facilitating access to finance, boosting labor quality, and promoting innovation are all important policy areas to make the economies more efficient, productive, and competitive,” Susantono said.
Susantono cited data from the World Economic Forum’s Global Competitiveness Report 2017–2018 showing the Philippines among the infrastructure-challenged countries.
The list includes Cambodia, Indonesia, the Lao People’s Democratic Republic, Malaysia and Vietnam.
Inadequate infrastructure, Susantono said, also limits the access of businesses to finance and financial services, and blocks efforts to remove excessive and unnecessary regulations in product, labor and financial markets.
“Poor infrastructure connectivity hinders a country’s competitiveness globally. Limited access to finance and financial services also creates a problem for most firms, particularly small- and medium-sized enterprises,” Susantono said.
Countries in the region, including the Philippines, Susantono said, could benefit greatly from becoming part of GVCs. These are “networks of production across different countries that share different stages of the production process through trade.”
Susantono quoted the Organisation for Economic Co-operation and Development (OECD) as saying about 70 percent of international trade involves GVCs.
If countries are latched on to GVCs, the manufacturing sector would be able to play a bigger role in economic growth and job creation.
Other benefits include access to better technologies, greater participation of women in the workforce, and higher wages due to interactions with better labor standards at international companies.
Recently, a study conducted by the National Economic and Development Authority (Neda) showed the gender gap in the Labor Force Participation Rate (LFPR) remains at 30 percent, the widest in the region.
PSA data in March also showed nearly 11 million Filipinas have stopped looking for jobs in January as they were forced to just stay in the house and carry out domestic duties.
In a 2016 study, the World Bank said the growth of Filipino’s real wages have been flat since 2000. This despite an average growth of 3.4 percent in labor productivity between 2004 and 2014.
“The expected benefits of global value chains have spurred infrastructure development, facilitating trade between companies serving these manufacturing pipelines. They have also incentivized governments to focus investments on science, technology and engineering education. These initiatives have long-term positive impacts on society, not just on companies and exporters,” Susantono said.
Based on the PSA’s Monthly Integrated Survey of Selected Industries for August 2019, the Volume of Production Index (VoPI) contracted to 9.3 percent in August 2019.
In the same month of the previous year, VoPI posted an annual growth rate of 3.1 percent.
The data also showed that the deepest contraction in factory output was observed in April when the VoPI contracted 13.7 percent followed by June with a contraction of 9.4 percent.
The decline in August was largely due to the declines in petroleum products which contracted 59 percent.
This was followed by furniture and fixtures which contracted 43.4 percent); transport equipment, 19 percent; miscellaneous manufactures, 17.7 percent; and electrical machinery, 11.1 percent.