CEBU, Philippines - Economy-wide productivity, industrial upgrading and product diversification could further promote the Philippines’ competitiveness and efficiency in taking the road towards inclusive growth, an economist pointed out.
Asian Development Bank Senior Country Economist Norio Usui said in a convention on Tuesday that the Philippines, which was dubbed as the “Sick Man of Asia”, should push for “Walking on Two Legs” in industry, manufacturing and modern services and also consider targeted public support for industrial upgrading and diversification.
Usui was one of the speakers during the 2nd National Business Conference of Independent Business Clubs and Chambers at Marco Polo Plaza that was organized by the Makati and Cebu Business Clubs.
The country, he added, has posted an annual average Gross Domestic Product (GDP) growth of only 4.1 percent for the past decade and 6.1% growth in the first half of 2012, ranking third among other Asian countries.
He noted that the past growth has been largely led by services with its 66.6% contribution to GDP growth from 1880-2009 followed by the industry sector at 26.3% and agriculture at 7.1%.
The Philippines has been considered as one of the top destinations for the growing business process outsourcing industry, he said.
In 2009, the BPO sector had exported $7717 million and employed 444,811 Filipinos for contact centers, transcription, animation, software development and other services.
Usui, however, said that the Philippines has to identify its structural weaknesses such as poverty as the weak link between growth and development, rising growth yet declining investment and limited diversification of exports.
“This is a long-term development puzzle. Know your capabilities. Diversify your products in the market. There’s a big chance for you. But we have to focus on poverty and economy-wide labor productivity,” he said.
He also said that economy-wide productivity can rise through productivity growth in the tradable sector and resource reallocation toward productive tradable sectors.
Competition with foreign suppliers could also improve efficiency in the production of tradable sectors, he said.
“This kind of growth leads to the rise of new products that propel the economy forward and also results to the reallocation of resources from traditional to new industries that diffuses the gains to the entire economy,” he explained.
Usui also emphasized that the lagged growth of the country is rooted in persistent productivity growth deficit due to stagnant industrialization, in particular lack of product diversification.
Unlike the manufacturing industry, he pointed out that the service-led growth do not require a relatively high investment and that the limited job opportunities resulted in the slow poverty reduction since the employment in the booming BPO industry is only limited to a scale of utilized workforce given its bias toward the educated labor.
“To join the growth club in the region and translate the growth into an inclusive one, the country needs to “walk on two legs” both in industry and modern services. Your growth has depended more on services. Create job opportunities not just to the specific educated people but for a wider range where manufacturing industries could come in,” he pointed out.
Usui further advised the private sector and the government to be prepared to enter the ASEAN common market in 2015 and be more efficient and strategic upon participating the “too dramatic” free trade globalization.
“Opportunities are here in the Philippines but it may transfer to other countries. You have to be prepared to compete with them since there is no discrimination anymore in the free market,” he concluded. (FREEMAN)