Industrial policy for the Philippines: The chip industry is a bright spot

Can the Philippines still be a major exporter of manufactured exports like the East Asian tigers? With all due respect to the contrary opinion, my answer is no.

- BERNARDO M. VILLEGAS

Because of the serious mistake that we made at the beginning of our efforts to industrialize in the last century, it is too late in the day for us to compete with the Asian Tigers, which now include China, in the export of such manufactured products as airplanes, steel, cement, vehicles (especially the electric varieties), computers, smartphones, air-conditioning units, home appliances, and others. By lingering too long at the stage of import substitution, we failed to develop the needed support facilities and infrastructure for manufactured products, such as low-cost energy, highly skilled factory workers, and efficient logistics, among others.

It does not mean, however, that we cannot have a thriving manufacturing sector based on selling to the very lucrative domestic market resulting from our demographic dividend.

As our per capita income transitions from high-middle income to high income ($5,000 to $15,000) in the next 20 years, together with more efficient logistics and lower energy costs, such inward-looking industries like food manufacturing, chemicals, pharmaceuticals, construction materials (steel, cement, wood), and other consumer and intermediate goods will become competitive with imports (with the help of some reasonable tariff rates to protect the domestic market from the dumping of goods). I forecast that as we reach the stage of a high-income economy, our manufacturing sector as a percentage of GDP will attain what is now the average of the developed countries in Asia today, which is 20-25%.