Labor cost in the Philippines may be the cheapest in Southeast Asia, but the country is failing to maximize this in attracting investments due to the scarcity of skilled workers, according to a report released by a government-supported Japanese organization.
In a survey by the Japan External Trade Organization (Jetro), the Philippines posted the lowest basic monthly salary for workers and engineers in manufacturing at $236 and $381 per month, respectively, in a group of five Southeast Asian economies. Thailand posted the highest basic salary for workers at $446 per month, while Malaysia has the highest paid engineers among the group at $851 per month.
As such, the number of Japanese firms in the Philippines said that rising wages is a challenge for their operations dropped to 45 percent, from last year’s 50 percent.
However, as much as labor cost is cheap, the supply of manpower is becoming the country’s obstacle in pulling investments and encouraging expansions. The survey reported 53 percent—from 44 percent last year—of Japanese firms said they are finding it harder to secure qualified human resources in the Philippines.
Further, 44 percent, from 30 percent, admitted it is becoming difficult to seek skilled engineers in the country, while 39 percent, from 35 percent, said they consider it a business challenge to acquire capable middle management, the survey added.
The survey also reported that the number of Japanese firms in manufacturing that listed insufficient level of quality control as a problem to production jumped to 59 percent. These manufacturers lamented the lack of professionalism and careless inspection within their labor force, as well as high turnover rate of their skilled engineers.
“From business point of view, abundant, talented, English speaking human resources for competitive compensation is one of the important strength of the Philippines. However, year by year, it gets harder for Philippine respondents to secure skilled engineers and capable middle management. Besides, high rate of personal turnover and ongoing labor issues are likely to reduce the advantage of Philippines as an investment destination,” the Jetro report read.
Overall, the number of Japanese firms in the Philippines expecting to profit this year slipped to 69 percent, from last year’s 76 percent. Also, 44 percent of firms, from 56 percent, said they expect profit to increase for the following year.
The Japanese firms said that they anticipate profit to go up next year attributed it to expansion of sales in the domestic and overseas markets, as well as an improvement in the efficiency of their operations.
The Jetro survey this year covered the responses of 139 Japanese firms doing business in the Philippines, of which 73 are in manufacturing and 66 are in nonmanufacturing. The sample size this year was higher than that of last year, which tallied the insights of 127 respondents.