The Philippines is in a strategic position to become a hub of innovation and human capital development for key sectors such as aerospace and automotive.

However, inadequate infrastructure hampers the country’s bid to become a significant player in global value chains, a study by a university-based research center showed.

“The future looks bright for the Philippines. It is in the middle of the factory of Asia and has the market size as well as the cultural affinity with the Western world. (The Philippines) can be a very good location for being a hub of innovation and human capital development,” said Karina Fernandez-Stark, senior research analyst at the US-based Duke University Center on Globalisation, Governance and Competitiveness (Duke CGGC).

The university-based research centre conducted five studies covering aerospace, automotive, chemicals, electronics and electrical, and paper, which were selected based on their potential for export earnings, employment creation, technology transfer, and value addition to raw materials. These industries also already have a presence in the global market.

The studies – which are expected to help the government craft policies that will enable local firms to integrate in the global value chains – were commissioned under the Science, Technology, Research, and Innovation for Development (Stride) programme and the Advancing Philippine Competitiveness (Compete) project of the US Agency for International Development (Usaid) for the board of investments.

An assessment of the five industries based on these factors showed that the Philippines ranked the lowest in infrastructure, which pertained to the high energy costs and inadequate roads, ports and airports, and in the development of local sectors. It, meanwhile, saw the most favourable scores under human capital development and business environment.

One of the main takeaways from these studies, according to Trade Assistant Secretary Rafaelita M Aldaba, was the recommendation to link three key industries, namely automotive, aerospace and electronics, given the growing trend towards automation.