Manufacturing Revival: Can Philippines Reclaim Industrial Glory?
The Philippine manufacturing sector stands at a crossroads, with industry veterans like Dr. Jesus L. Arranza, chairman emeritus of the Federation of Philippine Industries, continuing their decades-long advocacy for industrial revival despite mounting challenges.
Speaking before the Monday Circle Forum on February 23, Dr. Arranza painted a sobering picture of the nation's manufacturing landscape, one that "lacks the scale, depth, innovation, and domestic integration into the rest of the economy" needed to drive substantial growth or create quality employment opportunities.
From Industrial Powerhouse to Assembly Line
The Philippines once commanded respect in global manufacturing circles. During the 1950s to 1970s import-substitution era, manufacturing served as a primary growth engine. The textile industry exemplified this golden age, with the country operating 1.5 million spindles that employed 35 workers each on 24-hour shifts.
Today, only 100,000 spindles remain operational, a dramatic decline attributed largely to the proliferation of ukay-ukay (second-hand clothing) and smuggled textiles that undercut local producers.
Marikina's transformation tells a similar story. Once hailed as the "Shoe Capital of the World" with over 2,000 registered manufacturers in the 1980s, the city now hosts roughly 300 producers, most operating as small boutique operations rather than large-scale facilities.
Regional Comparison Reveals Gaps
Current data shows manufacturing contributes approximately 15.7% to 16.2% of the Philippines' GDP, generating P3.78 trillion in 2023 and employing over 1.19 million Filipinos. However, this pales compared to regional neighbors Vietnam and Thailand, where manufacturing accounts for 24% and 25% of GDP respectively.
The sector has evolved into primarily "assembly-type" operations, assembling imported components rather than developing local supply chains or high-tech capabilities. This contrasts sharply with Vietnam, Thailand, and Malaysia, which have cultivated deeper manufacturing ecosystems producing auto parts, machinery, and electronics components domestically.
Structural Challenges Persist
Dr. Arranza identified several critical obstacles hampering industrial growth:
- High power costs making production expensive
- Inefficient logistics and port congestion, particularly around Metro Manila
- Bureaucratic red tape and inconsistent regulatory enforcement
- Rampant smuggling and misdeclarations that circumvent trade regulations
Cautious Optimism Under Marcos Leadership
Despite these challenges, Dr. Arranza expresses measured optimism about the sector's prospects under President Ferdinand Marcos Jr.'s administration. He cites the stock market's strong rebound as evidence of returning investor confidence and notes that the President's calm demeanor amid political controversies signals steady leadership that investors appreciate.
"Investors read more than headlines, they read a leader's posture and direction," Dr. Arranza observed, suggesting that President Marcos' focused approach provides the stability needed to attract fresh industrial investments.
The manufacturing sector showed recovery signs in 2025, with quarterly GDP reaching approximately P1.15 trillion by December, offering hope that Dr. Arranza's "quixotic dream" for industrial renaissance might yet materialize into concrete policy action and sustained growth.
As the Philippines navigates its economic future, the manufacturing sector's revival remains crucial not just for GDP growth, but for creating the high-quality jobs and technological capabilities that could secure the nation's competitive position in an increasingly complex global economy.