Philippine industrial policy journey: transforming the economy in the new digital age

Abstract

This paper examines the Philippines’ evolving industrial policy in light of the accelerated digital transformation catalyzed by the COVID-19 pandemic. The pandemic laid bare vulnerabilities in supply and value chains, prompting a shift towards adopting Fourth Industrial Revolution or Industry 4.0 technologies. As the country prepares for the new digital age, implementing a new strategy is imperative to build a more competitive economy. The new science, technology, and innovation (STI)-driven industrial policy leverages Industry 4.0 to support digital transformation and enhance resilience, agility, and productivity. This necessitates integrating the country’s production systems across manufacturing, agriculture, and services. The new industrial strategy focuses not only on advancing manufacturing but also on its convergence with services and agriculture, embracing “mindfacturing”—a pathway that integrates intellectual work, creativity, and innovation into modern manufacturing.

To achieve this, it is crucial to accumulate investments and STI capabilities while transforming industries to increase the share of STI-driven sectors in GDP. Aligning the Strategic Investment Priority Plan of the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act with STI-driven initiatives is essential for driving industrialization and economic recovery. Sustaining the momentum of digital transformation efforts requires a more permanent budget allocation. Additionally, implementing the Philippine Industry Skills Framework is necessary to equip the workforce with futureready skills. Nationwide establishment of Regional Inclusive Innovation Centers (RIICs) is also recommended to foster collaboration among stakeholders in innovation and entrepreneurship ecosystems. These centers will address societal issues and industry challenges through market-oriented research, facilitating the translation and commercialization of innovations into products and services.

JEL classification: L5, O2, O14