AfDB lists ‘best’ sectors for reconstruction

According to the Asian Development Bank (ADB), REBUILDING the Philippine economy in the aftermath of the pandemic means boosting wholesale and retail trade, manufacturing, tourism and the digital economy.

In an assessment report titled “Post-Covid-19 Economic Recovery in Southeast Asia”, the AfDB listed areas of focus in the Philippines to boost GDP growth: wholesale and retail trade as well as as the repair of motor vehicles and motorcycles, a major sector. engine of employment.

The report cited labor-intensive manufacturing and processing; innovative and high-end manufacturing; accommodation and catering activities; information and communication.

“The outlook for recovery in Southeast Asia is encouraging, but not without lingering risks, including heightened uncertainty related to Russia’s invasion of Ukraine and evolving conflict, the emergence of coronavirus variants and the scarring effects of the pandemic through large job and education losses, production disruptions and fragile business confidence and declining productivity growth,” the AfDB Managing Director said. for Southeast Asia, Ramesh Subramaniam.

“Supporting industries with the competitive advantage to propel a green, resilient and inclusive recovery will require not only sector-specific interventions from governments, but also cross-cutting measures that encourage a conducive business environment, improved infrastructure and intra-network linkages. -stronger regionals,” he added.

Wholesale and retail trade as well as repair of automobiles and motorcycles as well as accommodation and catering activities have been placed under Tourism by the AfDB.

Tourism is a major source of employment for millions of Filipinos. According to AfDB estimates, this sector created 2.5 million jobs between 2015 and 2019 alone.

However, the sector can still create more jobs if more is done to increase average tourist spending per capita. Average per capita tourism spending in the country is $1,357, still below the ASEAN target of $1,500.

Efforts to attract more tourists are key to increasing tourism spending per capita. Intra-ASEAN visitor arrivals to the country only reached 3.5 million between 2014 and 2018 and extra-ASEAN visitor arrivals reached 10.8 million during the same period.

The latest Travel and Competitiveness Index results show that “Cambodia, Indonesia, the Philippines and Thailand all have ‘natural and cultural resources’ rankings above their overall industry competitiveness rankings. “, says the report.

“This implies strong potential for the target countries to develop new tourism hotspots, partly based on improved infrastructure and other favorable conditions highlighted by the index,” he said. added.

The Philippines can also improve health and wellness tourism – part of the government’s plans to revive the sector after the pandemic. However, much remains to be done.

The AfDB noted that brain drain is preventing Thailand and the Philippines from developing health and wellness tourism.

In Thailand and the Philippines, there are eight and six doctors per 10,000 people, not even half of the 22 doctors per 10,000 people in Singapore.

Electronic

The AfDB said labor-intensive manufacturing and processing as well as innovative and high-end manufacturing comprise the development of the electronics industry.

Electronics already contributes up to 2% of GDP and accounts for 9-15% of gross value added in the manufacturing sector.

The Philippines employs over half a million people and over 14% of the total manufacturing workforce. The industry employs a large number of women.

“In the Philippines, every 1.00P increase in electronics export sales could generate at least 0.12P in additional indirect taxes for the economy, and 0.11P to 0.25P in revenue extra for households. Every one billion peso increase in investment in the sector could create between 600 and 1,400 additional jobs,” the AfDB said.

The AfDB recommends further developing the agro-industrial sector by giving priority to upgrading infrastructure; facilitate digital transformation; streamlining regulatory functions; accelerate investments and improve communication policies; and pursuing food-related policies, among others.

Clothes

He recommended boosting the garment sector in the Philippines, noting that more than half or 53.3% of the 800,000 workers receive wages below the minimum wage.

The gender pay gap – almost 10% in the Philippines and Thailand – has also been noted. This remained even after adjusting for demographic, educational, geographic, sub-industry, and occupational variances.

“In the Philippines, more than half of garment workers are not paid minimum wage. The situation is worse for those with low levels of education. According to the ILO, in the focus countries, workers with primary education are more likely to be paid less than the minimum wage than those with secondary education,” the report adds.

In terms of digital trade, the AfDB cited data from the IT & Business Process Association of the Philippines (ITBPAP) indicating that the industry contributed 2.7% to total employment in the Philippines in 2016.
The ITBPAP had also claimed a 10-15% slice of the global IT-BPO market share.

The AfDB report noted that estimates suggest that digital exports are quite vital for countries like the Philippines, which ranks 6th in terms of largest digital exporters. The AfDB said digital export figures could increase ninefold by 2030.

To further develop the industry, the AfDB spoke of the need to support skills development and enable small and medium-sized enterprises (SMEs) to go digital.

“In the Philippines, industry representatives have drawn up the IT-BPO 2022 roadmap, forecasting that the sector could increase its revenue from $22.9 billion in 2016 to $38.9 billion in 2022 by giving the priority to five high-value subsectors: contact centers and BPOs, IT services, health information management, animation and game development, and internal global centers,” the report said. sector strategies and priority reforms that can help countries accelerate their economic recovery in the medium term.

AfDB Senior Economist, James Villafuerte, presented the findings of the report during the webinar titled “Economic Recovery in Asean+3: New Drivers of Growth and Optimism”, jointly organized by the AfDB and the Office of macroeconomic research of ASEAN+3 (AMRO).

“Covid-19 has been both a major disruptor and a catalyst for change. After two years and more, some degree of scarring is inevitable, although it will take different forms in different economies and some economies will be more affected than others. On the other hand, the pandemic has spurred innovation in sectors such as retail, finance and healthcare, which could in the long term move the economies of the region towards higher growth focused on productivity,” said the AMRO Group Leader and Senior Economist for Regional Surveillance. Ling Hui Tan during the round table.