Roadblocks stunt job creation in PH

Limitations on foreign ownership, high minimum wages, low agricultural productivity and an “unrealistic” foreign exchange rate continued to hamper the Philippines’ bid to boost its manufacturing sector, which is deemed critical in generating much-needed, high-value jobs.

In his speech at the 3rd Philippine Manufacturers and Producers Summit on Thursday, political economist Calixto Chikiamco noted that the country has “de-industrialized” or entered a post-industrial stage where services account for the biggest share of the GDP, even if the Philippines did not pass the industrial stage.

“The sad truth is that the growth in services that’s being recorded as GDP growth is actually low productivity services. The business process outsourcing industry represents only a small portion of the service sector and touches only the college-educated elite. If we talk about inclusive growth, we need to emphasize growth of employment in manufacturing,” Chikiamco explained.

The government, however, will need to address what Chikiamco labeled as four binding constraints which, if eliminated, will boost Philippine industrialization. These constraints include a poor investment climate, characterized mainly by inconsistent government policies, foreign ownership restrictions and corrupt judiciary among others; low agricultural productivity; high minimum wages and legal requirement for labor permanency after six months; and unrealistic foreign exchange rates.

Addressing roadblocks, he explained, will entail amendments on some of the economic provisions of the Constitution, particularly the foreign ownership restrictions on public utilities, as well as a more modern labor code with less emphasis on minimum wages and labor security after six months, to more emphasis on labor flexibility, labor training and labor productivity.

Also critical would be abolishing the National Food Authority monopoly on rice importation and allowing free trade in rice; and undervaluing the exchange rate.

“If these four reforms sound familiar, it is. It’s the Chinese formula for hyper-growth: an undervalued exchange rate, openness to large foreign investment, labor flexibility, stable food prices and agricultural growth,” Chikiamco further said.