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ADB: Manufacturing is key to becoming high-income economy

August 25, 2013 10:06pm
The Asian Development Bank on Sunday criticized some developing Asian countries, including the Philippines, for shifting from agriculture to service-oriented jobs, noting that the neglect in the creation of manufacturing jobs slows the country’s bid to become a high-income nation.

"Historically, no economy has reached high-income status without reaching at least 18-percent share of manufacturing in output and employment for a sustained period," ADB chief economist Changyong Rhee said in the bank's latest report.

Rhee said a low-income country can move to middle-income status by moving its focus from the agricultural sector to the low-service quality sector. But he said in order to become a high-income country, “you need high-paying service jobs in legal services, IT services, and business-related services—and that requires some experience in industrialization."

Rhee contrasted the developing economies of the Philippines, Bangladesh, India and Pakistan to the more industrialized ones of Hong Kong, Japan, South Korea, Singapore, and Taiwan, which have more developed industrial sectors.

Rhee also advised low-income countries to modernize the agricultural sector, which remains the region's largest employer and provides an income for 700 million people.

For middle-income economies heavily dependent on labor-intensive sectors or currently bypassing industrialization on the other hand, the focus should be on upgrading their industries.

"Many middle-income countries need to further diversify and keep improving their industrial base,” he said.

The economic expert also cautioned against abandoning the manufacturing sector, noting that despite rapid growth in the service sector, manufacturing remains the key source of growth in Asian economies.

"Right now, as services boom in the region, it's tempting to shun industrialization, but it will be a serious mistake if a country wants to be prosperous," Rhee said in the report.

Rhee also noted that the manufacturing industry remains essential if any country wants to have a highly productive services sector while also working on technological innovations. Likewise, manufacturing is essential to the modernization of agriculture, Rhee said. — BM, GMA News
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