Manufacturing’s declining share in GDP alarms Neda
THE share of the country’s manufacturing sector to GDP has been declining for the past 22 years and is the greatest threat to the prospects of reducing poverty nationwide, according to the National Economic and Development Authority (Neda).
In a forum hosted by the Economic Journalist’s Association of the Philippines and San Miguel Corporation on Monday, Socioeconomic Planning Secretary Arsenio M. Balisacan cited a need to boost manufacturing growth to increase productivity and incomes nationwide.
In a presentation, Balisacan said the share of manufacturing to GDP was at 20.2 percent in the 2001 to 2003 period, but it declined to 16.2 percent in the 2011 to 2013 period and 15.3 percent in the 2021 to 2023 period.
“Given the country’s low level of development, the steady decline of manufacturing share in GDP significantly limits our opportunities for poverty reduction,” Balisacan said in a speech at the forum. “In the recent economic history of nations, especially in Asia, manufacturing growth was a primary driver of poverty reduction.”
On the sidelines of the forum, Balisacan explained that the manufacturing sector is associated with high-quality jobs, especially for unskilled and semi-skilled workers.
Balisacan said the manufacturing sector provides an alternative for those leaving the farm sector for high-quality and more productive employment.
While services remain a way out for farm sector workers, many unskilled and semi-skilled workers end up in informal employment, which is often the case in the services sector.
Contrary to manufacturing, the share of services in GDP has been increasing the past 22 years.
Balisacan said services accounted for 46.3 percent of GDP between 2001 and 2003; 50.4 percent between 2011 and 2013; and 54 percent in 2021 and 2023.
“We want quality growth. We want growth that deliver prosperity. So, we need to see those high productivity sectors and those pillars of growth must also come in and augment the economy,” Balisacan said.
Balisacan said one way the country can boost manufacturing is to adopt what Germany has done. In Germany, there are many small manufacturing firms requiring semi-skilled type of work.
He admitted that the country would not be able to catch up with other countries in terms of attracting large manufacturers who produce in very large volumes.
But by integrating information technology and business process outsourcing in the manufacturing sector, Balisacan believes the country has a prayer to boost the industry sector.
“In Germany, small and medium enterprises are the big part of the economy. But there’s so much human element in the sector. That’s what we need to capitalize on,” Balisacan said.
“We are so known for that human touch in our service industry around the world. And we should capitalize on that to power our manufacturing and service sector as well,” he added.
Crucial in doing this is for the country to invest significantly on addressing the root cause of the problem, which is poor infrastructure.
Balisacan said the current administration is very focused on addressing infrastructure gaps by undertaking more Public Private Partnership (PPP) projects.
Last month, the PPP Center said the national government’s pipeline for public private partnerships (PPPs) now covers 134 projects amounting to P3.03 trillion. (See: https://businessmirror.com.ph/2024/06/03/pipeline-for-ppps-now-covers-134-projects-worth-%E2%82%B13-03t/)
The pipeline was recently updated to include 13 new projects, estimated to cost at least P38 billion, and delisted four projects. With this, the pipeline is shorter than the 137 projects initially included, which amounted to P3.1 trillion.
Delisted projects were the Cavite Tagaytay Batangas Expressway Project; Unsolicited Proposal for Edsa Bus Rapid Transit (BRT); Unsolicited Proposal for the Development, Operations, and Management of the Davao International Airport; and Advance Passenger Processing and Passenger Name Record (APP-PNR).
Source: https://businessmirror.com.ph/2024/07/09/manufacturings-declining-share-in-gdp-alarms-neda/