A local think tank suggested the Philippines, with an already sophisticated labor pool, should consider moving from the low-cost manufacturing and service to more advanced technology and design-based manufacturing industry.
Philippine Institute for Development Studies President Gilberto Llanto said the country should develop “higher-value industries,” as other Southeast Asian countries are now offering lower labor cost to attract investors.
“You cannot just rest your hopes on low-cost labor-intensive manufacturing because, sooner or later, low-cost countries, like Cambodia, would just take away those industries from us. So what we can do is, because we are a bit more on the higher development, more sophisticated than Myanmar, Lao PDR, Cambodia and Vietnam put all together, is really to try to develop our capacities,” Llanto said.
He cited as an example the electronic industry where the Philippines can move from assembly to do more research and design.
Likewise, Australian-New Zealand Chamber of Commerce of the Philippines Chairman Emeritus Peter Wallace said other countries offering cheaper labor could easily outlast the Philippines in competitiveness if the country stays on its track as a low-cost manufacturing country.
He added that there is a need to adapt to technologies and eventually explore ideas of robotics integrated into business.
“Low-cost manufacturing is very competitive and goes with countries and shifts very easily to where the lowest cost is and Philippines is not lowest cost. So instead of struggling to compete with low cost of garments and so on, move into higher productivity businesses where you need more skills. I think, that is an inevitability and, in today’s highly technical work, needing more skills is becoming more important,” Wallace said.
However, Wallace is concerned with the impact of adapting to advanced automation in employment, saying there has to be a solution for those people working traditional jobs which robotics can easily replace.
“We have to be able to adapt to that, but I am concerned in the service sector as we talk about robotics. It is taking over a lot of skills that are already there. You look at all the auto industry, manufacturing cars, there are no people. It is all robots putting it all together. Before, it was a hundred people working in a factory, now there are five or 10, and that is going to get worse,” Wallace said.
Llanto said robotics can be easily integrated to jobs whose nature is “repetitive,” like in call centers. He added that, while this may seem bad news for the business-process outsourcing (BPO) sector, the industry is expanding to include management and other higher-value tasks that require more skill from their labor force.
“What is good with the BPO is that it has transformed. They are not just call centers in the Philippines right now. We have all these activities which are not voice-dependent so it is not just call centers. The risk is that artificial intelligence will prosper in activities that are repetitive. Call center is repetitive, customer inquiry, those jobs can be taken over by robotics,” Llanto said.
Llanto added that Philippines should strengthen its apprenticeship program in light of the transition from low-cost manufacturing to higher skill jobs so as to “bring in surplus from the agriculture sector.”