A powerful Philippine manufacturing sector

Talking earlier than the members of the Monday Circle Discussion board final February 23 was the indefatigable and never-aging long-time advocate for financial nationalism and home trade improvement, Dr. Jesus L. Arranza, chairman emeritus of the Federation of Philippine Industries (FPI).  

Just like the echo — and damaged file enjoying — for the previous a number of a long time, Dr. Arranza continues to be the “knight-errant” of the noble however typically already given-up imaginative and prescient for the native manufacturing trade as a significant key participant in nationwide development and improvement.  

Like Don Quixote, he’s in an uphill battle in his nearly private quest within the battle to resurrect the manufacturing trade, a pursuit that some modern economists have dismissed completely by their derisive query as as to if there may be one to talk of. 

Even Dr. Arranza might presumably concede to their argument for they aren’t in actuality completely incorrect contemplating how the home economic system has advanced over the previous few a long time. They definitely don’t actually imply that there isn’t any manufacturing trade to talk of — for clearly, there may be one. It’s simply that our manufacturing trade now “lacks the dimensions, depth, innovation, and home integration into the remainder of the economic system” to drive actual industrial development or create high-quality jobs.

The manufacturing trade was once a significant development driver. This was very true from the Fifties to the Nineteen Seventies, accordingly “through the nation’s import-substitution industrialization period.” However within the Nineteen Eighties, the share of producing trade within the nation’s gross home product (GDP) dropped and “stagnated between 18 to twenty%” whereas nations like Vietnam and Indonesia noticed “manufacturing rising between 25–30%” of their GDP.

Dr. Arranza admits that a lot of our development in latest a long time got here as an alternative from providers, significantly the Enterprise Course of Outsourcing (BPO), retail, and remittances-driven consumption.

State of the manufacturing trade 

Dr. Arranza was spot on in how he depicted the dire scenario of our manufacturing trade immediately as a basis for inclusive, sustainable financial development along with his quick narratives in regards to the textile and shoe industries.  

The Philippines was a world powerhouse in textiles within the Nineteen Seventies and 80s. However rampant smuggling of low cost materials and “ukay-ukay” (second-hand clothes) decimated native mills. To place it in context we will respect, he stated: “We had 1.5 million spindles earlier than. One spindle can rent 35 folks on a 24-hour shift. Immediately, we solely have 100,000 spindles courtesy of ukay-ukay.” (READ: Unlawful? What you’ll want to find out about ukay-ukay)

Ukay-ukay has grow to be a nationwide cultural phenomenon that caters not simply to low-income shoppers however to bargain-hunters searching for sturdy, distinctive, or designer objects at a fraction of the price of new objects.  

With rampant corruption, smuggling, and misdeclarations of importations that circumvented Republic Act No. 4653 (the regulation which prohibited the business importation of used clothes, apart from charitable functions), native garment producers and textile producers discovered it troublesome to compete underneath this new pattern. Buyers, likewise, had been left with no incentive to take a position extra. This basically led to the trade’s stagnation.

Marikina was additionally as soon as known as the “Shoe Capital of the World.” Within the Nineteen Eighties, Marikina had over 2,000 registered shoe producers. Smuggling and low cost sneakers by way of technical smuggling or undervaluation of imports rendered them to be offered for lower than the price of the uncooked supplies utilized by Marikina shoemakers. This example closely affected the trade. As of late, there are roughly 300 shoe producers left, with most of them surviving solely as small boutique retailers reasonably than large-scale factories.  

Immediately the manufacturing sector is essentially thought to be an “assembly-type” trade, which accurately interprets into placing collectively imported components reasonably than producing elements regionally. There’s little home value-added, which means we don’t develop provide chains, design, or high-tech capabilities.

In distinction, Vietnam, Thailand, and Malaysia have deeper manufacturing ecosystems — producing auto components, equipment, and electronics subcomponents domestically.

Dr. Arranza recognized excessive energy prices, inefficient logistics, and port congestion (particularly round Metro Manila) as vital components which can be making manufacturing costly. Each bureaucratic pink tape and inconsistent regulatory enforcement has additionally discouraged large-scale industrial investments.

Newest information additionally point out that manufacturing accounts for roughly 15.7% to 16.2% of GDP. It’s thought-about the second-largest part, subsequent to the providers sector. Electronics, meals merchandise, and drinks are the highest contributors inside the trade. The sector employs over 1.19 million Filipinos.

In 2023, the sector generated roughly P3.78 trillion in worth. By late 2025, quarterly manufacturing GDP was estimated at roughly P1.15 trillion.

This share of the trade to GDP is decrease in comparison with neighboring nations like Vietnam and Thailand, with respective contributions equal to 24% and 25%, respectively.

The manufacturing sector is taken into account essential for long-term financial improvement. Together with different industrial sectors like development, mining, and utilities, the sector contributes round 29.5% of the entire Philippine GDP. 

Lastly, Dr. Arranza reported that the manufacturing sector confirmed a restoration in 2025, with GDP from manufacturing reaching roughly P1.15 trillion (US$19.7 billion) in fixed costs by December 2025. 

Optimistic indicators and bucket lists

Regardless of this present state of the manufacturing trade, Dr. Arranza may be very optimistic the trade might quickly do higher. The inventory market’s ongoing sturdy rebound is proof that confidence is returning and market fundamentals are reasserting themselves. This might result in the influx of recent investments into the sector.  

Buyers learn greater than headlines — as they learn a pacesetter’s posture and course, or his physique language. With no signal of panic or drift, there’s no cause to imagine the political noise might unsettle the economic system or dampen traders’ urge for food. By staying centered on his work, Dr. Arranza is satisfied the President Ferdinand Marcos Jr. is doing the suitable factor. Buyers reply positively to this sort of management.

As well as, with President Marcos’ calm and regular demeanor over all of the political noise surrounding the flood-control scandal and different points which were undermining his administration, Dr. Arranza is emboldened.  

Extra importantly, this common angle of the president offers him hope that his advocacies — and that of his federation’s aspirations — might be given a greater probability of being heard.  

Amongst these are: 

• uniting the private and non-private sectors to guard native producers, authorities income, and Filipino jobs
• safety for shoppers and legit industries from smuggling, counterfeit items, and substandard merchandise
• holding of a nationwide summit to convey collectively regulators and trade leaders to coordinate campaigns in opposition to smuggling, significantly in sectors like tobacco, agriculture, and petroleum
• to categorise the smuggling of industrial merchandise (not simply agricultural) as financial sabotage, making it a non-bailable offense
• encouraging shoppers and the federal government to prioritize Filipino-made merchandise to maintain native employment and counter the inflow of smuggled items
• the FPI to volunteer its sources to assist the federal government establish smugglers and gives common inputs to the Bureau of Customs (BOC) and Bureau of Inner Income (BIR) to shut tax “loopholes”
• the total digitalization of the BOC to get rid of face-to-face transactions, which he identifies as a main supply of corruption and “technical smuggling”
• launch a powerful marketing campaign in opposition to the unlawful importation of palm olein (which hurts the native coconut trade) and smuggled cigarettes, which he estimates prices the federal government billions in misplaced excise tax income. 

Just like the novel Don Quixote de la Mancha by Miguel de Cervantes Saavedra, its storyline was regarded in a different way in numerous ages — than when first revealed. Within the nineteenth century, it become a forceful commentary to convey social change.  

Hopefully, Dr. Arranza’s quixotic dream for the manufacturing trade might also flip right into a forceful narrative to prod authorities motion and help. – Rappler.com