DTI Secretary Ramon Lopez. (File photo)
MANILA – Department of Trade and Industry (DTI) Secretary Ramon Lopez has underscored the need to increase the local content of manufactured goods in the country to lessen the domestic producers’ dependence on imports.
Lopez told the Philippine News Agency that a big chunk of the country’s imported products is intermediate goods, which would translate to improving manufacturing activities.
He added that 17 percent of Philippine inbound shipments were consumption goods and 6 percent were capital goods.
“With the huge portion of intermediate goods, it shows that its growth would lead to growing the manufacturing sector as well. But over time, we need to increase local content by production capacity of basic and intermediate goods,” the trade chief said.
With the Philippine peso becoming stronger, Lopez said manufacturers are more encouraged to import.
The country’s trade deficit in August 2020 has widened to USD2.1 billion from USD1.8 billion in July this year.
But year-on-year, trade deficit narrowed from USD3 billion in August 2019.
Contrary to some claims that relaxed rules on imported products were huge factors of the country’s trade deficit, the DTI chief noted that the country’s balance of trade is “beyond regulations” since regulations are almost similar between imports and exports.
“The deficit has been there for decades. It is a result of decades of import liberalization policies with no or very limited support to local manufacturers compared to support subsidies to companies in other countries given by their governments. This lowers the cost structure in many countries relative to Philippine manufacturers. This makes them more cost-competitive, though artificially, it improves their ability to export to other countries,” Lopez said.
He added that these factors limit the growth of many manufacturers.
“The country would resort to importing every time the growth in demand cannot be met by domestic production capacity,” Lopez noted.
He said the country’s exports have been improving in the past years and even in the first two months of 2020 before the lockdown measures were implemented due to Covid-19.
“We have to remember that our exports have been picking (up) in past years even up to 2019 and the first two months of this year, prior to the lockdown starting March, even when other economies except Vietnam were already posting negative export growth,” he said. (PNA)
