Country context

According to the World Bank classification, the Philippines is a lower middle-income country with a GNI per capita equal to USD 3,430 in 2020 and one of the emerging market economies in the East Asia and the Pacific region boasting a globally-recognized competitive workforce.

Despite a host of endogenous and exogenous challenges spanning increasing risk of natural disaster events exacerbated by climate change, soaring food and fuel prices, protectionist tendencies in developed economies, and global financial stress, the country’s GDP growth rate amounted to 6.4% between 2010 and 2017 in comparison to 4.5% scored during the 2000-2009 period. Between 2016 and 2017, the economic growth level was even higher, having registered a percentage of 6.9 and 6.7, respectively. Nonethless, this increased GDP did not correspond to a satisfactory parallel decline in poverty incidence. Still in 2015, the proportion of Filipinos living in poverty averaged at 23.5% against the Millennium Development Goal target set to 17.2%. In rural areas, poverty incidence heavily surpassed this threashold, with a reported rate of 29.8% for the same period, highlighting uneven economic development efforts and access to social services. Unemployment levels were estimated at 5.7% in 2017 while youth unemployment was at 14.4%. Yet, official data show that a positive correlation between unemployment and poverty is hard to trace since employed poor outnumber unemployed poor, indicating that the underlying problem lies with low wages rather than the occupational situation.

Mindful of the reforms needed to address long-standing structural issues, in 2017, the National Economic and Development Authority (NEDA) under the Duterte Administration inaugurated the Philippine Development Plan (PDP) 2017-2020 with the ultimate goal to reduce poverty incidence, especially in the agricultural sector and regions lagging behind. Taking off from the government’s 0 to 10 point socioeconomic agenda and the long-term country’s vision fo 2040, the “AmBisyon 2040”, for a strongly-rooted, secure, and people-centered society, the PDP is articulated into the three major pillars of “Malasakit” (Enhancing the social fabric), “Pagbabago” (Inequality-reducing transformation), and “Patuloy na Pag-unlad” (Increasing growth potential). Buttressing these objectives are cross-cutting strategies to pave the way for sustainable development and enable a supportive economic environment with sound macroeconomic fundamentals and a healthy competition policy.

Hence, through greater institutional trust, resilience against natural and human-induced shocks, innovation and expanded infrastructural capacities, the PDP expects to drive inclusive and sustained growth. Although still underway, since its release, it has taken substantial strides forwards as figures illustrate. Between 2018 and 2019, employment number improved, underemployment rates in areas outside the National Capital Region (AONCR) remained within target, overall poverty incidence declined to 16.7% in 2019 and rural poverty decreased dramatically from 34% in 2015 to 23.5% in 2018. In addition, the Human Development Index (HDI) jumped from 0.699 before 2015 to 0.711 in 2018 and to 0.718 in 2019, marking the first time that the Philippines joins the high-level HDI category. The country also gained severeal notches in the global innovation index in recent years.

Touted as a soon-to-be Asian Tiger economy in 2019 before pandemic-induced restrictions disrupted the growth momentum and development trajectory, the Philippines was on a promising track in its industrialization efforts as core industry-related indicators showcase. In the Competitiveness Industrial Performance Index by UNIDO, the country ranked 43nd in 2017 and in 2019 and 44th in 2018. For the 2016-2019 timeframe, Manufacturing Value Added (MVA) oscillated between 19.59% and 18.52% of GPA and industry accounted for 8.4% and 7.3% growth in 2016 and 2018. With 69% of the total industry gross value added (GVA), the manufacturing sector was in the driver’s seat in 2017. Positive growth figures were recorded in the services sector and in the agriculture, forestry, and fisheries sector as well, with the former at 6.7% in 2017 and the latter at 3.9%. As large contributors to the Filippo economy, having a total value addition of 36.7%, micro-, small-, and medium-scale enterprises (MSMEs) generate 61.6% of the total employment, thereby potentially contributing to inequality and poverty reduction.

However, important challenges hindering industrial progress, such as limited infrastructure and investment capacities, poor incentive regime for business, a weak knowledge ecosystem and underdeveloped market linkages for MSMEs, remain. This is why the PDP’s second pillar intends to expand economic opportunities and pillar 3 to stimulate an innovation and technology-conducive climate, in conjunction with the implementation of the following sectoral plans: the MSME Development Plan 2017-2022, industry roadmaps, the National Climate Change Action Plan (NCCAP), the Manufacturing Resurgence Program, the Inclusive and Innovation-led Industrialization strategy and program (i3S), the Small Enterprise Technology Upgrading Program (SETUP), the MSME Disaster Resiliency Program, the Startup Ecosystem Development Program (SEDP), the National Intellectual Property Strategy (NIPS) Project, and the Philippine Rural Development Project.

Specifically, the i3S program, as one of the linchpins of the Philippines’ industry revitalization, foresees a highly-liberalized market environment by boosting international competitiveness of manufacturing, agriculture, and services sectors and by better integrating them into the global supply and value chains while safeguarding their domestic resilience at the same time. Underscoring the urgency of placing innovation on the front line to enhace productivity and increase job creation, the i3S bargains on stepping up assistance and unfreezing funds for industries and enterprises that shift to Industry 4.0 technologies, adopt automatization, and bring forth smart factories. To this end, clustering arrangements and agglomeration that consolidate R&D solutions and buoy up innovation-centered initiatives strengthening the capacity of local firm will be prioritized. Human resources necessary to utilize new tech-based appliances will also be built up as part of the Philippine i3S. Assessment of the industrial sector’s regulatory and structural burderns made evident the urgency of the passage of sizeable institutional reform packages to fast-track a digitally-supported economy, adopt inclusive business models, and restore consumer and enterprises confidence. It was precisely against this backdrop worsened by the Covid-19 pandemic that the Philippine Government updated its PDP 2017-2022 to get back on track towards its long-term Ambisyon 2040.

Despite its commitment to inclusive and environmentally-sustainable industrial development consistent with the 2030 Agenda, the Philippines is confronted with multiple challenges which might adversely affect the CP implementation phase. To start with, with high exposure to extreme weather disturbances, rising sea levels, change in land use patterns, the country is categorized by the World Bank and Climate Analytics as one of the most vulnerable to the climate crisis. Natural and biologic disasters are further aggravated by growing demographic pressure which translates into higher demand for food, housing, and other commodities, in turn causing heightened stress and multidimensional insecurities.

Amid global recession due to decreased output, trade restrictions, financial markets’ disconnect risk from real economy, and sovereign debt projected to hike up significantly are other hurdles that may likely decelerate preset socioeconomic interventions and development targets.

As the Philippines embarks on digital adaptation and green economic transition, costs of switching from traditional manufacturing and workforce reskilling and retooling are to be considered challenging facets of this adjustment.

In 2012, after an all-round consultative process with the Philippine Government, the civil society, development partners and other stakeholders, the inter-agency body UN Country Team (UNCT) formulated the United Nations Development Assistante Framework (UNDAF). As the first-ever attempt to synchronize the delivery of the UN assistance with the national development plan 2011-2016, the UNDAF aimed to make the best use of its comparative advantage in the country’s development pathway over the course of a seven-year cycle, from 2012 to 2018. Centered around the theme “supporting inclusive, sustainable and resilient development”, this strategic results framework was expected to expedite and consolidate the capacity development requirements of the 2011-2016 PDP in four outcome areas:

  • Universal access to quality social services with focus on the Millennium Development Goals (MDGs);
  • Decent and productive employment for sustained, greener growth;
  • Democratic governance;
  • Resilience towards disasters and climate change.

In addition, UN assistance was anchored on the normative programming principles of human rights, gender equality, environmental sustainability, and cultural and development with strategic emphases on equity, localization, institution-building and governance.

In the wake of the UN Development System (UNDS) reforms, in 2018, the UNCT signed a coordination strategy, the Partnership Framework for Sustainable Development (PFSD) 2019-2023, with the Government. The PFSD unshered in a new phase of the UN engagement in the Philippines from development assistance to strategic partnership towards the implementation of the 2030 Agenda. Embodying the collective vision of the UN System to the Philippines’ development priorities, the PFSD positions the Sustainable Development Goals (SDGs) at its core to provide quality support to the country in its aspiration to fulfill the “leave no one behind” transformative promise enshrined in the 2030 Agenda. As the rallying point of the UN work in the country, it rests on the three above-mentioned pillars of People, Planet/Prosperity, and Peace, each representing a development objective in line with the broader SDGs themes.

Within this interlinked framework, UNIDO’s work is most visibly grounded in the progress made on SDG9 “Build resilient infrastructure, promote inclusive and sustainable industrialization and foster innovation”, which affirms the critical impact of ISID and its contribution to all 17 goals.

According to the integrated approach set out in the UN Coordination Framework to maximize results and effectiveness, CPF, PFSD and country priorities are pursued in such a way that commingle with the 2030 Development Agenda targets. Therefore, for each priority area at the UNIDO and national level, the SDGs are across-the-board aims to champion and attain in concert, as illustrated in the priority matrix below.

context

The UNSDCF, 2020 – 2023, provides a roadmap for prioritizing, aligning, and positioning the UN in the Philippines, incorporating follow-on actions from the Covid-19 Humanitarian Response Plan (HRP), updating the PFSD, and serving as the UN COVID-19 response and recovery plan, addressing in an integrated manner the areas most in need of attention and support across the UN Philippines’ three mutually reinforcing pillars: People, Prosperity and Planet, and Peace.