Low investments in PH causing slower poverty reduction

Posted at 09/03/2012 8:18 PM

MANILA, Philippines - Since it did not attract foreign direct investments (FDI), the Philippines has failed to participate in the regional production network, leading to the decline of the manufacturing sector.

Philippine Institute for Development Studies (PIDS) president Josef Yap said this has contributed to the slow efforts to reduce poverty in the Philippines.

"Ang mahalaga sa Pilipinas is investments. If businessmen will create jobs, labor-intensive industries, this will help the poor," he said.

In a presentation "Regional Economic Integration and Inclusive Growth", Yap noted the Philippine manufacturing sector did not benefit in the production network of multinational companies in the region, compared to other Asian countries.

As of 2009, FDI inward stock to the Philippines stood at $23.559 billion, the lowest among 6 Asian countries. Vietnam had more FDIs, getting $52.82 billion in FDIs in 2009.

"We did not participate in the regional production network. It's a contradiction, we had high percentage (of utilization) in exports and imports but manufacturing deteriorated," Yap said.

The Philippines was mostly importing components, assembling it and reexporting these as finished products, so there was little value added.

"A more dynamic manufacturing sector would have provided more higher-paying jobs to the less-educated workforce, thereby making poverty reduction faster," said Yap.

In the Philippines, the share of manufacturing to GDP continues to fall: 21.4% from 27.7% in 1980; 27% in 1985; 26.8% in 1990; 24.7% in 1995; 24.5% in 2000 and 23.6% in 2006. This is compared to Thailand where the share of manufacturing to GDP stood at 35.6% in 2010.

Yap said the economy has been growing, mostly due to government spending and remittances. But expansion in the manufacturing sector should help hasten poverty alleviation efforts.

"But in order to sustain it, you need higher investment grade, because investments is the key to sustainable economic growth... We're encouraing the manufacturing sector to expand. If you need to reduce poverty, you have to expand manufacturing," Yap said. - With report from Lois Calderon, ANC