The plan of President Rodrigo Duterte to focus on the manufacturing sector during his term will create more jobs and continue to attract more foreign direct investments, DBS Bank of Singapore said Monday.
In a report titled Philippines: Duterte’s game plan, the bank said prioritizing the manufacturing sector would also fulfill the ambition to diversify the economy from an over-dependency on services.
“… We reckon this high interest in the sector will continue. Manufacturing is a key sector that the Duterte administration will focus on to absorb the growth in labor force,” the bank said.
Duterte during the campaign period in the run-up to the presidential elections in May this year promised to create more jobs to lessen the unemployed in the country. The unemployment rate last year declined to 6.3 percent from 6.8 percent a year ago.
Duterte also said there was a need to further liberalize the economy by adjusting the cap on foreign ownership of local companies from 40 percent to 70 percent. Limits on property land-lease could also be lifted to 40 years from 25 currently.
DBS said the move was potentially significant. It said while foreign direct investment increased several fold during the Aquino administration, it remained low compared to the rest of the region.
“… Easing restrictions on foreign ownership is likely to encourage more inflows in the medium-term. About 60 percent of FDI applications over the past five years have been directed in the manufacturing sector,” DBS said.
The volume of production index in April grew 10.5 percent, a significant improvement from the 1.8-percent expansion posted in the same month last year, according to the Philippine Statistics Authority’s Monthly Integrated Survey of Selected Industries.
The value of production index recorded a 6.8-percent growth in April 2016, a turnaround from a 6.4-percent decline in April 2015.
Factory output grew stronger at the onset of the second quarter, driven by robust domestic activities during the election season. The National Economic and Development Authority said the manufacturing sector’s growth benefited from the robust machinery production, food manufactures, transport equipment, printing and export-oriented goods.
The manufacturing industry’s average capacity utilization remained at 83.4 percent. Among surveyed manufacturing firms, 24.1 percent of the establishments operated at full capacity (90 percent to 100 percent). About 58.2 percent operated at 70 percent to 89 percent capacity, while 17.7 percent operated below 70 percent.
DBS, however, cited risks along the way.T he bank said greater regional autonomy could never be a guarantee for faster budget disbursement. Also, the confusion between the regional and central authorities might actually bring about a more complicated bureaucracy.
