PHL manufacturers need to move up the value chain

PHILIPPINE MANUFACTURERS should go up the value chain to produce more globally competitive export products and cater to the country’s growing domestic base amid global disruptions, according to industry stakeholders.

Federation of Philippine Industries President John Reinier H. Dizon said that recent global shocks revealed the country’s import dependency for some products.

“I think a couple of years ago, everyone can still remember when the pandemic hit us all. And for me, the key learning there is it actually exposed our risk that we are dependent on the global supply chain,” he said at the BusinessWorld Forecast 2026 on Tuesday.

Mr. Dizon recalled that during the pandemic the Philippines had to manufacture basic items such as face masks. “Then over time we were able to actually develop local industries to support those things,” he added.

In the last 25 years, he said that the Philippines opened its borders to Association of Southeast Asian Nations (ASEAN) members and forged bilateral agreements with several countries.

“Now, there are pros and cons to such free trade, and there is nothing wrong with free trade. It obviously helps companies and individuals procure cheaper products… but many other countries have placed more safeguards vis-a-vis the Philippines,” Mr. Dizon said.

“The Philippines was maybe a little bit more aggressive, and in hindsight, as a consequence, several industries actually faltered,” he added.

Within ASEAN, he said that the Philippines recorded the biggest trade deficit at P54 billion in 2024.

“Now, if we compare that with the likes of Vietnam, they actually had a trade surplus of P28 billion; Thailand’s trade surplus of P6 billion; Malaysia, a trade surplus of P20 billion; and Indonesia, a trade deficit, but at a much more manageable level, at P15 billion,” he said.

To address this, Mr. Dizon said that there should be more support for Filipino products.

“It’s not a silver bullet, but let’s patronize our local products, food, consumer goods, etc. Because it’s always easy to import, it’s cheaper. But make no mistake, it has dire consequences and multiplier effects,” he said.

“We need to revive manufacturing and production in our country,” he added.

Semiconductor and Electronics Industries in the Philippines Foundation, Inc. (SEIPI) President Danilo C. Lachica said that the goal is to maintain the country’s competitive advantage.

“Definitely, we want to maintain whatever limited competitive advantage that we have. But if you look at the challenges, and I’m not just talking about the export industry but even local industries, there’s a whole slew of challenges, both external and internal,” he said.

Domestically, Mr. Lachica said that the Philippines is facing several issues including prop osed legislated wage hikes, field audits by the Bureau of Internal Revenue, and corruption.

“For the electronics industry to be able to catch up, we need to look at moving up the value chain in terms of technology, improving our talent and infrastructure,” he said.

For the semiconductor and electronics industry, Mr. Lachica said that the country needs to build its own wafer fabrication plant to move up the value chain.

“This is what we need to grow — our own integrated circuit design industry. This is what we need to get the Philippines on the map for front-end semiconductor manufacturing,” he said.

Mr. Lachica said it is very important that the Philippines should plan for the long term amid the changing geopolitical landscape and trade policies.

“We cannot be paralyzed by what we hear. We just have to make the most intelligent decisions based on the information, whether it’s investment or the market. We certainly have to minimize dependence on certain markets,” he said. 

“But I think what we all should be doing really is from the private sector, we need to work closely with the government and academe to put forward initiatives and programs to the best interest of the Philippines,” he added.

Meanwhile, Victor Andres C. Manhit, president of think tank Stratbase ADR Institute, said the Philippines does not have to be an export-oriented country, as it has a strong consumer base.

Household consumption, which accounts for around 70% of Philippine gross domestic product, has been a driver of growth.

Instead, Mr. Manhit said the country should focus on capacitating its people, which is key to sustaining growth momentum.

“We focus on building the capacity of our young people. They can consume. They can be hired in more strategic manufacturing industries, part of the global supply chain, continue to grow the business process outsourcing industry, and develop the creative industry,” he added.

Mr. Manhit said giving incentives to export-oriented enterprises and not to domestic enterprises was a “mistake policy-wise.” 

Aside from thinking long term or beyond political timelines, he said that there is a need to invest in the country’s strong sectors.

“Let’s start to think long term and invest in those strengths that we have, build on the capacity of our local industries, look at the consumers as a potential source of growth, and always think about how important we are in geopolitics,” he added. — Justine Irish D. Tabile