Compete, connect, build competence: World Bank

Amid rapid changes in technology and trade patterns, developing countries like the Philippines can bolster their export-led manufacturing sectors by adopting the “3Cs” of competitiveness, capabilities, and connectedness, according to a new World Bank report.

“Changing technologies and shifting globalization patterns are destined to reshape manufacturing-led development strategies,” said the report, “Trouble in the Making? The Future of Manufacturing-Led Development.”

“Trade is slowing. Global value chains remain concentrated among a relatively small number of countries. Smart automation, advanced robotics, 3-D printing and other advances being incorporated by global manufacturers of cars, electronics, apparel, consumer and other goods are shifting how countries and firms compete for production,” it added.

In the past, the manufacturing sector created jobs for unskilled workers and increased productivity. In the future, developing countries will need to update their policies along with their infrastructure, firm capabilities, and job creation strategies to meet the demands of a more technologically advanced world.

As heightened global competition raises the bar for what it takes to succeed in export-led manufacturing, the report said that by adopting the “3Cs,” the manufacturing sectors can keep pace with these changes.

To ensure competitiveness, the importance of reforms that reduce unit-labor costs needs to increase. But competitiveness will also require each economy to be better able to consider new business models, seek new contracting relationships that embrace new technologies, and devise new ways for manufactured goods to also deliver services.

Building capabilities will in- volve giving workers new sets of skills, strengthening firms’ abilities to absorb new technologies, and providing new infrastructure and new rules to support the use of new technologies.

Promoting connectedness will continue to emphasize openness to trade in goods, including raw materials and components. But it also increases the importance of grasping the synergies with services that are increasingly embodied and embedded within manufactured goods.

“Technology and globalization are changing how manufacturing contributes to development. We will need to embrace this change rather than fear it,” said the World Bank.

“Those countries that don’t are likely to face not just economic costs, but also social costs associated with increased inequality and more limited access to opportunities.”