DTI-BOI advises 5 sectors to join global value chains

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THE Philippines’s five key industrial sectors are still stuck in low value-added production activities and lack product diversification. They need to upgrade technologies to deepen participation in multinational companies’ (MNC) value chain.

Thus, said researchers of the Duke University Center on Globalization, Governance and Competitiveness (CGGC) on their global value-chain analysis of five priority sectors chosen by the Department of Industry’s Board of Investments (BOI).

“From the general perspective, all five sectors are in the production stage but in relatively low-valued added activities, showing the Philippines is a relative newcomer to manufacturing,” said Penny Bamber, senior research associate at Duke CGGC.

The five sectors—auto, electronics and electrical machinery, chemicals, paper and aerospace—have been selected by the BOI for further research as local industries have shown strengths in these areas and already have some participation in global value chains (GVCs).

“[The DTI’s] New Industrial Policy has been global value chain focused. The results of their analysis on GVCs, offering upgrading trajectories would allow our industries, especially small and medium enterprises, to position themselves in global value chain and give us an idea how to support them,” Industry Development and Trade Policy Assistant Secretary Rafaelita Aldaba said during the forum.

Scaling up in higher value-adding in sectors is also needed to sustain the recent upswing of the Philippine manufacturing sector, added the trade official.

For the electronics and electrical machinery sector, which takes up the bulk of Philippine exports, the opportunity lies in diversifying to nontraditional markets, such as in medical devices and auto electrical parts.  Thus far, Bamber said the Philippines’s product mix in electronics has not diversified.

“The particular set of products that have been produced hasn’t changed much. Where do we go next? What we propose in the short to medium term is to strengthen and expand the automotive electronics and electrical machinery. This could be your base. This is the fastest-growing nontraditional market for electronics,” Bamber noted, emphasizing the Philippines continues to leverage on its strength in manufacturing analog circuits, a main semiconductor in automotive electronics.

Linking this to the automotive and auto parts sector, Bamber said the Philippines is already the fourth-biggest producer of wire harnesses globally.  While there is not much value-adding in this product, this could be an opportunity as technology is driving more electronic components to be integrated in wire-harness production.

“As more and more electronic pieces are added in wire harnesses, we can begin to integrate in higher value systems, and can increase more research and development activities. We already have some companies who do research and development, and this sets the stage for the maturing of the industry,” she said.