AN economist-lawmaker has expressed confidence that the Philippines will compete with Vietnam and India for the fastest-growing major economy in Asia-Pacific.
House Ways and Means Chairman Joey Sarte Salceda said he is optimistic about the country’s growth prospects under President Ferdinand R. Marcos Jr.
The lawmaker sees inflation easing next year, and the jobs numbers, which now exceed pre-pandemic levels, will improve further.
“The sense of gloom from some projections does not come from Philippine fundamentals but from expectations of global economic slowdown. I’m much more confident about the Philippine outlook,” Salceda said.
In particular, Salceda says he is seeing signs that the country’s private sector “is starting to accumulate economic muscle.”
“The most recent official manufacturing numbers showed that the fastest growth rate was in manufacture of machinery and equipment except electrical. The sector posted the highest annual growth rate of 76.4 percent in October 2022. That tells you that more businesses are preparing to make more things,” he added.
Salceda noted the country’s electronics and semiconductor manufacturing sector is now operating at an improving capacity.
“Latest manufacturing figures showed that the industry division with highest average capacity utilization for October 2022 was manufacture of computer, electronic and optical products. That’s our top export sector. So, I am optimistic about growth in that sector,” he said.
“If we can keep the momentum, I think we are in the race for fastest-growing major Asian economy in 2023,” he added.
Competition with India, Vietnam
Salceda, however, said the country “must set its sights on being more attractive to investors than Vietnam or India are in the key growth areas of services, especially BPO, and technological manufacturing.”
Salceda is particularly concerned about “the surge in relocation of semiconductor manufacturing companies from China and towards more US-friendly countries.”
Under the Biden administration’s CHIPS Act, US companies are subjected to a 10-year ban prohibiting them from producing chips more advanced than 28-nanometers in China and Russia if they are awarded subsidies under the law.
“Companies will look at other countries where they can make chips and still benefit from US incentives. For those involved in assembly, they will look at India, Vietnam, and the Philippines as candidate locations,” he added.
“Our edge will be that we make the metals—such as nickel, copper, and gold—abound in the country. So, if we can integrate mining, refining, and fabrication in the country, we will have a very important advantage over India and Vietnam in this area,” he said.
Salceda thus urged the country’s investment promotion authorities to be more “aggressive” in selling the country’s merits as a manufacturing destination.
“India has a very strong ‘Make in India’ campaign and policy. Vietnam has made significant strides in attracting FDI due to their early successes in fighting Covid-19. We have to make our own mark,” he said.
Services sector competition
Salceda added that the country is “playing defense” in the BPO sector competition.
“On the services sector front, our strategy is expansionary defense. What I mean by that is, we keep our advantages, such as a very flexible tax incentives regime for the BPO sector, strong command of English and one of the highest college enrollment rates in Asia,” said the solon.
“Thanks to the Universal Access to Quality Tertiary Education Law, we significantly edge Vietnam and India in college enrollment. We are at 35.52 percent, India is at 27.1 percent, and Vietnam is 28.64 percent. But again, we are playing defense. We need to keep improving, and we need to expand college enrollment further. That depends on strong primary and secondary education,” he said.
Salceda, meanwhile, urged Education Secretary and Vice President Sara Duterte and the Commission on Higher Education to craft a comprehensive strategy to minimize drop out rates and really bridge learners to college.
Salceda also hopes that “college and technical-vocational education will see more integration. Not everyone will be white collar. And that’s alright. An economy needs trades just as much.”