REBUILDING the Philippine economy in the aftermath of the pandemic means boosting wholesale and retail trade, manufacturing, tourism, and the digital economy, according to the Asian Development Bank (ADB).
In an assessment report titled, “Post-Covid-19 Economic Recovery in Southeast Asia,” ADB listed areas of focus in the Philippines, to boost GDP growth: the wholesale and retail trade as well as repair of motor vehicles and motorcycles, a major driver of employment.
The report cited labor-intensive manufacturing and processing; innovative and high-end manufacturing; accommodation and food service activities; information and communication.
“Recovery prospects in Southeast Asia are encouraging, but not without persistent risks, including heightened uncertainty from the Russian invasion of Ukraine and the evolving conflict, the emergence of coronavirus variants and the scarring effects of the pandemic through large employment and education losses, production disruptions and fragile business confidence, and declining productivity growth,” said ADB Director General for Southeast Asia Ramesh Subramaniam.
“Supporting industries with the competitive advantage to propel a green, resilient, and inclusive recovery will not only require sector-specific interventions by governments, but cross-cutting measures that encourage an enabling business environment, improved infrastructure, and stronger intra-regional linkages,” he added.
The wholesale and retail trade as well as repair of motor vehicles and motorcycles as well as accommodation and food service activities were placed under Tourism by ADB.
Tourism is a major source of jobs for millions of Filipinos. Per ADB estimates, this sector created 2.5 million jobs between 2015 and 2019 alone.
However, the sector can still create more jobs if more is done to increase average tourist per capita spending. The average tourist per capita spending in the country is $1,357, still below the Asean target of $1,500.
Efforts to attract more tourists are key to increasing tourist per capita spending. Intra-Asean visitor arrivals in the country only reached 3.5 million between 2014 and 2018 and extra-Asean visitor arrivals, 10.8 million in the same period.
The latest results of the Travel and Competitiveness Index show that “Cambodia, Indonesia, the Philippines, and Thailand all have ‘Natural and Cultural Resources’ rankings that are above their overall industry competitiveness rankings,” the report stated.
“This implies a strong potential for focus countries to develop new tourism hotspots, relying in part on improving infrastructure and other enabling conditions highlighted by the index,” it added.
The Philippines can also improve health and wellness tourism — part of government’s plans to revive the sector after the pandemic. However, much needs to be done.
ADB noted that brain drain restricts Thailand and the Philippines from developing health and wellness tourism.
In Thailand and the Philippines, there are eight and six physicians per 10,000 people, not even half of the 22 physicians per 10,000 people in Singapore.
Electronics
ADB said labor-intensive manufacturing and processing as well as innovative and high-end manufacturing include developing the electronics industry.
Electronics already contributes as much as 2 percent of GDP and accounts for 9 to 15 percent of gross value added in manufacturing.
The Philippines employs over half a million people and over 14 percent of manufacturing’s total workforce. The industry employs a big number of women.
“In the Philippines, every P1.00 increase in electronics export sales could generate at least P0.12 in additional indirect taxes for the economy, and P0.11 to P0.25 of additional household income. Every P1 billion increase in investment in the sector could create between 600 to 1,400 additional jobs,” the ADB said.
ADB recommends further developing the agro-processing sector by giving priority to upgrading infrastructure; facilitating digital transformation; streamlining regulatory functions; accelerating investments and improving communication policies; and pursuing food-related policies, among others.
Garments
It recommended boosting the garments sector in the Philippines, noting that over half or 53.3 percent of the 800,000 workers receive below-minimum wage salaries.
The gender wage gap — nearly 10 percent in the Philippines and Thailand — was also noted. This remained even after adjusting for demographic, educational, geographical, sub-industry, and occupational variances.
“In the Philippines, more than half the garment workers are not paid the minimum wage. The situation is worse for those with lower education. According to the ILO, in the focus countries, workers with primary education are more likely to receive a wage less than the minimum wage than those with secondary education,” the report added.
In terms of digital trade, ADB quoted the IT & Business Process Association of the Philippines (ITBPAP) data saying the industry contributed 2.7 percent to total employment in the Philippines in 2016.
The ITBPAP had also claimed a 10-15 percent slice of the global IT-BPO market share.
The ADB report noted that estimates suggested that digital exports are quite vital to countries like the Philippines, which ranked 6th in terms of the largest digital exporters. ADB said the numbers in terms of digital exports could grow as much as nine times by 2030.
To further develop the industry, ADB cited a need to support skills development and enable small and medium enterprises (SMEs) to go digital.
“In the Philippines, industry representatives developed the IT-BPO Roadmap 2022, projecting that the sector could increase revenues from $22.9 billion in 2016 to $38.9 billion in 2022 by prioritizing five high-value subsectors: contact centers and BPO, IT services, health information management, animation and game development, and global in-house centers,” the report stated. It examined growth opportunities, sectoral strategies, and priority reforms that can help countries boost their medium-term economic recovery.
ADB Senior Economist James Villafuerte presented the report findings during the webinar, “Economic Recovery in Asean+3: New Drivers of Growth and Optimism,” jointly organized by ADB and the Asean+3 Macroeconomic Research Office (AMRO).
“Covid-19 has been both a major disruptor and a catalyst for change. After two years and counting, some extent of scarring is unavoidable—although it will take different forms in different economies and some economies will be more affected than others. On the other hand, the pandemic has spurred innovation in sectors such as retail, finance, and health care, which might lift the region’s economies in the long run toward higher productivity-driven growth,” said AMRO Group Head and Lead Economist for Regional Surveillance Ling Hui Tan during the panel discussion.