Philippines to ride global manufacturing growth wave to be one of Asia Pacific’s economic standouts

With Asia well poised for future economic success, the Philippines is slated to be one of the region’s growth leaders, as long as it continues to reduce corruption, invest public monies to build key infrastructure, and solve its electric generation and transmission issues. This is a according to Competitiveness: Catching the next wave: The Philippines a report released today by Deloitte Touche Tohmatsu Limited (Deloitte Global). Additionally, the report projects the key industries that will likely drive the Philippines growth over the next 20 years include manufacturing, business process outsourcing (BPO), construction, transportation and logistics, and information and communications.

The report also outlines steps the government can take to make the region more attractive to business, including increasing corporate governance and reducing corruption.

“The strong growth in global manufacturing to 2033 will drive world growth, and this presents the Philippines with great potential to integrate into the global supply chain of high-value manufacturing,” said Gary Coleman, Managing Director, Global Clients and Industries, Deloitte Global. “If the government makes smart investments in infrastructure—including roads and harbors—that would help to boost the construction and transportation sectors and lead to higher productivity growth in the coming years as well.”

While the report notes that the BPO industry will be a source of employment for new graduates, it cautions that to achieve long-term growth, the Philippines must reduce unemployment and the government must implement policies to improve the business climate. It also urges the government to reduce bribery and corruption through reform measures that include the procurement process, civil servant training and wages, and instituting reporting and enforcement mechanisms.

Additional industry driving growth highlights include:

• Manufacturing: To help boost manufacturing initiatives, the government should introduce a number of special industrial zones that benefit from a combination of supportive government policies. The Philippines should also begin to specialize in higher-value manufacturing.
• Business Process Outsourcing: After India and China, the Philippines has the third-largest annual graduate supply in subjects relevant to the BPO. In 2014, metro Manila overtook Mumbai to become the second-largest global outsourcing destination for BPO. Labor costs in the Philippines are also lower than in many other large BPO destinations.
• Construction: Construction of roads, harbors, and other public infrastructure can boost the nation’s employment, productivity, and economic output. Reconstruction efforts following the devastation of Typhoon Haiyan and upgrades to existing infrastructure should contribute to a growth rate of 5.2 percent per year from 2014 to 2033.
• Transportation and logistics: The poor quality of the transportation infrastructure has held back the economic development of the Philippines for many years. The Aquino government has laid out a four-point strategy to address ongoing transportation infrastructure issues. Assuming that the government successfully implements these strategies, a baseline forecast of 4.9 percent growth in sector between now and 2033 can be expected.
• Information and Communications: Ready access to high-quality information is critical for economic development and poverty reduction. Boosting Information Technology (IT) and broadband access as well as improved communication infrastructure can help jumpstart BPO services. The sector is expected to grow 5.1 percent per year between now and 2033.

“Relaxing limits on foreign ownership could boost foreign direct investment, increase efficiency and prompt higher levels of competition,” said Chaly Mah, Chief Executive Officer, Deloitte Asia Pacific. “Additionally the government should look to public-private partnerships to help speed investment spending on infrastructure, reduce bottlenecks, and implement policies that promote inclusive economic growth.”

The report projects that the Philippines will grow faster than Southeast Asia as a whole over the next two decades, with overall GDP expanding by 4.8 percent per year in the 2014–33 period.

“Compared to other regions that have experienced slower economics, the Philippines’ story is quite remarkable, said Mah. “There are great opportunities—if the Philippine government can seize them—to fuel growth and become one of the most competitive nations in the region.”