The Philippines should pursue industrial upgrade, transitioning from assembly-centric manufacturing to more upstream production activity to strengthen its exports resilience during the period of uncertainty brought about by the new US trade regime, economist Rafaelita Aldaba of the Philippine Institute for Development Studies said on Wednesday.
Speaking at Unicapital Securities Inc.’s second-half market outlook briefing, Aldaba said the country needs to diversify its manufacturing sector to include more upstream activities and move into other products.
“We’re highly concentrated in terms of our semiconductor and electronics exports, and we need to be able to diversify our products, perhaps move more towards high-value product production of AI hardware, as well as IC integrated packaging,” she said.
“We’re doing this already, but it’s really on the more basic, the more simple processes. And what we want is to be able to move up to the more complex stages in the value chain of the semiconductor industry,” she added.
Aldaba said the country also needs to prioritize investments in critical sectors such as EV components, textiles, green metals and sustainable electronics.
“But I’d like to emphasize that the industrial policy that we’re pursuing is really integrated with our trade policy, and hence the use or the application of subsidies and other fiscal and financial support to our manufacturers,” Aldaba pointed out.
The government should also invest in reskilling and upskilling of the workers in order to align the technical, vocational and higher education programs “with 21st century industrial needs,” she said. “So things like automation, electronics, AI, digitize and upgrade our logistics and customs operations.”
Aldaba also cited the country’s need to strengthen collaboration with its Southeast Asian neighbors to shield its industries against the fallout from US President Donald Trump’s tariff policy.
She pointed out the many opportunities for partnerships such as that between the Philippines and Malaysia — complementing their manufacturing capabilities in electronics and in lithium battery pack assembly.
The country can likewise partner with Vietnam in the manufacturing of light electric devices, appliances, footwear, garments, including toys, she said.
“But of course, we need to be able to harmonize our rules of origin and it’s really important for us to work together with our neighbors. At the same time … we’ve been advocating for the full implementation of the Regional Comprehensive Economic Partnership Agreement (RCEP). And the members here are the Asean’s 10 countries, including China, South Korea, not Taiwan, Japan, New Zealand and Australia,” Aldaba said.
“We need to be able to ensure that the RCEP countries agree on the full implementation of zero tariffs, for example, because right now it’s not yet zero tariffs. The full implementation of zero tariffs will accelerate the liberalization” of trade among them, she said.
