By Justine Irish D. Tabile, Reporter
THE PHILIPPINES must use foreign exchange to its advantage in response to growing investor interest in the service sector, as manufacturing loses favor due to tariffs, an economist said.
Aris D. Dacanay, HSBC economist for ASEAN, said the manufacturing outlook is currently clouded by uncertainty due to the reciprocal tariffs imposed by the US.
“Ever since US President Donald J. Trump came into power in 2016, the number of trade restrictions on goods we produce has been increasing,” he said at the International Information Technology and Business Process Management (IT-BPM) Summit on Wednesday.
“If you are an investor, why invest in something uncertain when you can invest in something that is more certain, and that is services,” he added.
He said over the last six years foreign direct investment in services has exceeded that of manufacturing, with India and the Philippines among the beneficiaries.
“Since we are a service-oriented economy, we are insulated… Manufacturing as a percentage of total jobs in the Philippines is around 7% because most are in services,” he said.
“Because of that, job creation in the Philippines has remained intact,” he added, citing the weaker job creation trend in manufacturing countries like Vietnam, Thailand, and Malaysia.
Mr. Dacanay said Philippine IT-BPM needs to remain competitive vis-a-vis India, whose own currency has weakened.
“We are among the top two in the world; we are competing with India,” he said.
He noted, however, that India has been able to take market share away from the Philippines because of currency factors.
“If you look at the average peso exchange rate, it has been stable since 2023, but for India (the rupee) depreciated by as much as 6%,” he said.
“By currency movements alone, Indian services have become cheaper… And that, I think, is a wake-up call for us,” he added.
He said that the Philippines should be more accepting of a weaker peso as a service exporter.
He also said that India’s IT-BPM services are much more diverse compared to the services being offered by the Philippines.
“The IT-BPM industry is too big not to innovate; it is too big not to diversify. And to be able to keep ourselves on our toes, we need to be accepting of a weaker peso, and at the same time diversify and make sure that we innovate to the best extent,” he said.
“We are moving in the right direction, moving towards global capability centers and moving towards artificial intelligence,” he added.