The Philippines has been identified as one of the emerging manufacturing nations in the region, but the country’s developments in this sector may still be paling in comparison to those seen among its neighbors in the Association of Southeast Asian Nations (Asean).
In a July 2014 edition of the Asia Briefing Magazine entitled, Manufacturing Hubs Across Emerging Asia, the Hong Kong-headquartered Dezan Shira and Associates specifically identified the six most competitive and promising locations in the region as India, Singapore, Malaysia, Thailand, Indonesia and Vietnam.
This was based on a number of factors such as key industries, investment regulations, and labor, shipping and operational costs, according to Chris Devonshire-Ellis, principal at the Dezan Shira and Associates.
In the Asean alone, the current leading manufacturers were Singapore, Malaysia and Thailand, with the key industries identified as electronics, machinery, chemicals, medical products, apparel, and automobiles.
Vietnam, Indonesia and the Philippines were, meanwhile, regarded as “emerging manufacturing nations.” Among the key industries identified for the Philippines alone were electronics, apparel and food.
Matthew Zito and Kezia Hardingham, both from Dezan Shira and Associates, explained that the Asean manufacturers can be divided into those that have invested in mid- and high-tech manufacturing and those which, for the time being, are concentrated in low- or no-tech assembly.
The former, they said, tend to feature higher minimum wage levels and highly skilled workforces, as exemplified by Singapore, whose manufacturing wages are well above those of its regional neighbors.
The latter type of manufacturing nation described states such as Vietnam and Indonesia, where strides are currently being made in education and infrastructure investment as a means of avoiding the specter of low-value added manufacturing. The state of manufacturing in Vietnam is said to parallel that of China 10 or more years ago, the report stated, when low-wage, low-tech, low added value manufacturing acted as a magnet for foreign direct investments into the country.
“As China moves further up the value chain in manufacturing, Vietnam is well-poised to pick up the slack. As a result, Vietnam’s manufacturing sector grew at a compound annual growth rate of more than 9 percent between 2005 and 2010 and today accounts for 25 percent of gross domestic product (GDP),” it added.
Zito and Hardingham further noted that Thailand and Malaysia meanwhile represented the “middle of the pack, striking a fine balance between mid- and high-tech manufacturing capabilities and competitive labor environments.”
“Both countries have done remarkably well to situate themselves in this ‘Goldilocks zone,’ with Malaysia slightly preferable if only for its lack of the environmental and political risk occasionally threatening Thailand,” it added.
The Philippine government, for its part, has been aggressively pushing for a resurgence of the local manufacturing sector, which was deemed as key to inclusive economic growth. The development of this sector is expected to generate the much-needed employment and could help the country tap regional production networks.
At present, the goal was to make the Philippine manufacturing sector account for 30 percent of the country’s GDP by 2030 from the current 23 percent.
Written by: Amy Remo