REAL ESTATE and investment management firm JLL said that the Philippines has the potential to grow its manufacturing sector as multinational companies (MNCs) diversify their operations away from China.
“Southeast Asia (SEA) and India stand to be net beneficiaries of companies diversifying manufacturing capabilities to complement existing bases in China,” JLL said in a statement on Thursday.
“For decades, China has dominated global manufacturing. However, companies are increasingly diversifying their operations elsewhere, adding manufacturing bases outside of China to hedge against supply chain disruptions,” it added.
Citing multiple sources, JLL said that the primary accelerator of the move outside China is the rising costs in the Mainland.
“Higher demand for industrial land, coupled with rising wages and material costs, has also pushed up land prices in China, which can be up to two times higher compared to some SEA countries and India,” it said.
“Furthermore, factors such as skilled labor, infrastructure, environmental regulations, proximity to suppliers and customers, and political stability contribute significantly to a factory’s long-term success and sustainability,” it added.
JLL said that although China still holds the biggest share of manufacturing foreign direct investment in the region, India and Vietnam are catching up.
In the Philippines, JLL identified the semiconductor and electronics and electrical industries as opportunities for attracting manufacturing investment.
“The Philippines is one of the seven countries that the US partnered under the CHIPS Act, which aims to expand and diversify the US semiconductor supply chain,” it said.
Within the semiconductor industry, the key activities JLL identified as having potential were assembly and testing services, integrated circuits, and RF (radio frequency) or microwave chips.
For the electronics and electrical industry, the key products were consumer electronics, industrial electronics, and telecommunication equipment.
JLL said the Philippines is implementing more policies that aim to boost its manufacturing industries, making land availability and access to capital sources critical.
In the Philippines, JLL said these enabling policies include the administration’s Build Better More program, which is expected to boost efficiency and productivity.
“Each economy in Southeast Asia is at a different level of its manufacturing story, but we can confidently say that policymakers are extremely keen to take advantage of diversification initiatives in supply chains,” said Peter Guevarra, JLL’s director for research consultancy in Asia-Pacific.
“Companies need to carefully evaluate various factors such as costs, market access, infrastructure, labor, and governmental support before determining their global manufacturing investment strategies,” he added. — Justine Irish D. Tabile
