Manila: Post-pandemic, the Philippines has more opportunities to deepen its participation in global value chains (GVCs) especially in business clusters like industrial, manufacturing, and transportation; technology, media, and telecommunications; and health and life sciences.
Addressing constraints to participation in these GVCs will boost the recovery, resilience, and competitiveness of the Philippine economy.
A new World Bank report - A New Dawn for Global Value Chain Participation in the Philippines - launched today said there are global trends favoring the country’s chances to succeed in GVCs, among them the increasing use of automation and artificial intelligence, the rise of services in manufacturing demanding higher labor skill, and the efforts by companies during the COVID-19 pandemic to diversify suppliers.
GVCs are international production sharing arrangements where manufacturing and assembly of products take place in multiple countries, with each step in the process adding value to the end-product.
Through GVCs, countries trade more than products; they trade know-how and collaborate, boosting growth and creating jobs within their borders.
"Greater participation in global value chains can be a powerful driver for productivity and growth, enabling countries to leap-frog their development process as seen in many countries in East Asia," said Ndiamé Diop, World Bank Country Director for Brunei, Malaysia, Philippines and Thailand, in a press release on Thursday.
"Countries that embrace GVCs are able to leverage their strengths in specific tasks and roles in manufacturing and services and export at scale, enabling them to sustain growth, create more jobs, and reduce poverty faster," Diop added.
The report says that the Philippines, for instance, can capture bigger shares in the electronics and electrical parts and components GVCs by attracting foreign investments in design capacity so that more value added is captured and manufacturing is retained and expanded in the country.
There are also bigger opportunities for business process outsourcing (BPO) companies to move up the ladder by providing value added services like analytics.
According to the report, the country needs to overcome some "structural constraints" to take advantage of on-going trends in GVCs.
These constraints include restrictions on foreign direct investments (FDI) in various sectors of the economy and scarcity of advanced science, technology, engineering, mathematical skills, among others.
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