Manufacturing in the Philippines

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The Philippines, now considered a Newly Industrialized Country, has come a long way in terms of development in the manufacturing industry. In fact, in 2004 manufacturing contributed 24 percent of the GDP. The manufacturing sector accounts for a larger share of national income than agriculture, fishing, and forestry combined. However, more people are employed in those traditional sectors than in manufacturing. Manufactured goods, however, have a different story having found a way to still make it up as a major component in Philippine exports: nearly 90 percent in the early 21st century. This figure holds significant improvement from the 6 percent share in had during the 1960s. To put it simply, while the number of people employed in manufacturing jobs has not quite increased, the contribution of manufacturing to the national economy has rather increased remarkably.

Contents

History

The traditional function of manufacturing in the Philippines was food processing. Mills were built to process rice and corn, some to refine sugar. The nation later tried its hands on the import replacement program, this means factories had to be built make produce goods that were previously only imported. Plants that bottled, packaged, and assembled goods made overseas were established along with steel mills, fertilizer plants, and the like. The aim was to make the country less dependent on such imported goods therefore making it stand on its own. Unfortunately, the concept was doomed to fail because although the establishment of plants and the production of goods were possible, the materials and components needed still had to be imported, defeating the general purpose of the program.

Recent developments

More recently, many less developed nations like the Philippines have changed to a strategy of manufacturing for export, as Japan did with great success beginning in the mid-1950s. The emphasis becomes making goods specifically for export sales instead of local consumption. This goal led to the establishment of government-run export processing zones (EPZs) where multinational corporations have built factories to take advantage of tax and export fee exemptions—and, of course, of cheap labor.

The government EPZs had only a limited effect on the national economy. Privately run industrial complexes that followed the pattern of the original EPZs were more successful. All of these enterprises, however, have been criticized in some quarters for unfair labor policies. The plants produce or assemble a wide variety of products, including clothing, electronic goods, and watches. The two leading exports in the early 21st century were electronics and clothing.

Local entrepreneurs, often with foreign financial partners, continue to process primary commodities for export. These products include plywood, refined sugar, canned pineapple, copra, and coconut oil. Other industries that have operated in the Philippines, especially in Manila, for a long period are the manufacture of footwear and of tobacco products.

Manufacturing output

Nondurable goods such as processed food, textiles, and tobacco products make up the largest percentage of manufacturing output of the Philippines. Other major products include refined petroleum, chemicals, construction materials, and clothing. The Philippines has increased its production of durable items, especially electrical and electronic equipment and components, nonelectrical machinery, transport equipment, and furniture. The manufacture of electronic items, especially computer components such as microchips and circuit boards, increased substantially in the 1990s for the export market, constituting 62 percent of all exports in 1999. The Philippine economy was therefore affected by the worldwide slump in demand for these items in the early 2000s.

Manufacturing zones

The bulk of manufacturing is concentrated in the Manila area. The city is the principal point of entry for raw materials and other goods. It has a huge local market, a pool of skilled labor, and large financial institutions—along with the presence of cultural institutions and the central government. The metropolitan area accounts for more than half of the total manufacturing employment.

Another area with a heavy concentration of industry is northern Mindanao around Iligan. Heavy industry began there in the 1950s because of the hydroelectricity generated at nearby Maria Cristina Falls. Plants that produce steel, fertilizers and other chemicals, and cement are among the most important in the area. Unfortunately, due to the low demand for the products of these plants, they have rarely produced to full capacity. In the Cagayan de Oro area, also on the northern Mindanao coast, a number of establishments are located, including a steel plant and a pineapple processing factory that cans pineapples for a nearby plantation.

The second and third largest metropolitan areas, Davao City and Cebu City, also have significant concentrations of manufacturing. These include plywood and lumber mills, furniture firms, food processing plants, and cement factories. Cebu City is a world center for the making of rattan furniture and also has a well-known shell craft industry. Small, often family-operated firms, or cottage industries, produce traditional handicrafts to meet tourist demands and local needs. Some of these handicraft products—wood carvings, basketry, woven items, brassware, matting, and pottery—are exported.

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