PH urged to adopt cluster approach in industrial policy, rethink skills dev’t

Published August 5, 2021, 3:24 PM

by Bernie Cahiles-Magkilat

The Philippines is urged to adopt a cluster approach by leveraging on sectors where it has built competitiveness, redeployment of resources to growth sectors, and rethink skills development of its workforce, a World Bank official said.

At the virtual “ThrivePH Session 3: Exploring Opportunities for Economic Diversification and Productive Employment in the Philippines,” Ndiame Diop, World Bank country director for Philippines suggested that Philippines adopt the cluster approach.

Ndiame Diop, World Bank country director for Brunei, Malaysia, Philippines and Thailand

Diop suggested for the Philippines to distinguish the economy between the sort of tradable and non-tradable sectors. He noted that shopping malls, the retails restaurants with creative activities, transport for services, etc. are bound to grow in a country like the Philippines because of demographic groups, urbanization, remittances and the gradual development of connective infrastructure in every country.

He said he was not worried about the Philippines’ non-tradable sectors as the tradable or the export-oriented sectors that support the manufacturing sector.

“If the companies that are producing them are not very competitive because consumers want the best in terms of the product they buy, and in the tradable sectors, they have the choice between the product that is produced overseas, and the product that is produced locally. And it is also harder for the Philippines to increase its market share abroad in the global market,” he pointed out.

This is where the Philippines should develop its competitiveness in the manufacturing sector even as he cited the Department of Trade and Industry’s industrial policy. “I do think that that the Philippines has the basis to develop its manufacturing competitiveness. And this is really a matter of a strategy, in a matter of very rigorous monitoring and implementation,” he said.

To implement the country’s industrialization policy, Diop suggested that it should leverage on industries where it has built its competitiveness around or the cluster approach. This means the electronics sector, which comprises more than 50 percent of the country exports.

For example, he said, the Philippines has a potential to grow to semiconductors for the automotive and aerospace because automotive and aerospace are increasingly dependent on semiconductors. “So having a very strong semiconductor basis, provides the Philippines I think with the basis to develop a cluster that aren’t that you can do the same for the other three to two key strengths of the Philippines,” he said.

In addition, the Philippines is also world renowned for BPO and is the world’s largest exporter of skills, nurses. “I think a good strategy is to leverage this to these sectors, and to develop clusters around them,” he said.

The cluster includes media and telecommunications and around the skills of health in life science and wellness will follow to blossom.

In addition, he urged the government to also look into the redeployment of service workers and capital because the service sector has been compressed or reduced due to depressed demand following the pandemic.

He noted that the tourism sector, a huge services industry, in the Philippines suffers the most. Like all countries, the tourism sector are seeing overcapacity and high unemployment rate.

“It will, it is absolutely critical, I think, in this context, you really have the redeployment of those resources that used to be in the services sector in the tourism sector definitely deployed in other parts of the economy,” he said.

He noted that COVID has also created new opportunities. The e-commerce is booming, and with digitalization there are new opportunities that are emerging.

He urged policymakers to reallocate resources from slow growing sectors to fast growing so people can get jobs. There are more than 600,000 people joining the workforce annually.

“It’s not just about skills, you know like upskilling or reskilling or helping the mobility of labor, it’s also about looking at the regulation, to see whether some of the regulation can be across trends, or not, in

terms of labor in deployment but also capital,” he added.

More importantly, he said it is not just infrastructure that the Philippines should be catching up fast but also on the skills part of its workers. “Skills part is the most challenging part in the Philippines.”

This is because, he said, workers often arbitrage the lure of better income offered for overseas posts. As such, he said that “deeper reflection” is needed on how to build skills and retain them here.

“And in the past what has been a handicap for the Philippines is really the skills, element, either because not enough skills that the industries need are available, or if they’re available, the arbitrage between being employed in the Philippines, and being employed abroad, would be in favor of emigration. So I think this is really a key equation to solve if that industrial new industrial policy is successful,” Diop said.