Japan has urged the Philippines to implement policies and measures to strengthen its participation in the global value chains (GVCs) and to resist the temptation of quick-fix solutions, otherwise lose its competitiveness, including the country’s top dollar earner IT-business process management sector.
In a presentation at the 7TH Philippines-Japan Investment Forum, ASEAN Japan Center Secretary General Fujita Masataka tackled the Philippines’ participation in the GVCs with the help of Japanese manufacturing firms.
“Investments by Japan involved manufacturing and services also helped the Philippines establish GVCs with Japan,” Masataka said noting such collaboration has created an almost balanced bilateral trade between the two countries.
The Philippines is home to over 1,000 Japanese firms that employ thousands of jobs in their manufacturing operations across the country.
But he also raised the issue as to how the Philippines can make its GVCs more resilient and identified 5 policy suggestions for the Philippine government to further its position and attract more investments that would further strengthen its GVC presence.
One is to improve risk management by the private sector because there has been an increasing recognition of the importance of and increasing demand for risk management where many ASEAN countries need capacity-building.
For instance, Masataka said that to cultivate capability and take advantage of experiences in risk management for producing goods and services, the IT-BPM sector should be more digitalized otherwise it will lose its competitiveness in certain areas under the new normal.
Philippines should also exploit more suppliers and buyers of their GVC products as the country does not face much monopoly or oligopolistic situations in both supplier and buyer markets.
The government must also push strongly for digital transformation by both public and private sectors. He noted that ASEAN countries and partner countries have accelerated digitalization following the pandemic.
“Philippines should continue to support the country’s digital transformation by providing the necessary telecommunications infrastructure and funding facility for IT equipment and facilities, and by facilitating e-commerce and e-payment,” he urged.
“Philippines and Japan can move together and establish digital networks, or value chains laden with digital technologies like internet of things.
Japan has also urged the government to implement and utilize policy measures and actions related to production and supply chains. This means, the Philippines should actively inform Japanese companies of measures the government has undertaken to take advantage of and sustain businesses.
Also the Philippines must make use of more liberal market access facilities and avenues for cooperation made available under the Japan-Philippines Economic Partnership Agreement.
In addition, Japan urged the Philippines to promote new and crisis-resistant industries stressing there is a need to shift attention to different sets of industries which are required for successful establishment of the 4TH Industrial Revolution that must also be risk resistant.
Examples of these new crisis-resistant industries include life sciences, agro-food industries, transport equipment such as electric cars, business services such as fintech, telemedicine, personal services for the elderly, ICT, energy, chemistry, and environmental conservation, and others such as technical textiles, and robotics.
“Philippines should continue to create a more conducive environment for new industries and startups to thrive. Philippines and Japanese companies may have common interests in these new industries where Japanese companies may form joint ventures or take an equity investment,” he said.
The last policy recommendation is for the Philippines to reconsider company strategies for international production.
Masataka warned the foreign direct investment activity is likely to decline in significant magnitudes in 2020 by as much as 40 percent globally and 30 to 45 percent in Asia. Japanese FDI outflows already declined by 30 percent in the first six months this year.
To prevent the relocation of existing investors, he urged government to continuously improve location conditions to remain attractive.
“Resist the temptation of quick-fix solutions or protectionism and to maintain an overall favorable business climate,” he concluded.