The country needs to diversify export portfolio covering complex and simple global value chains (GVCs) to manage global risks under Industry 4.0.

A discussion paper released by the Philippine Institute for Development Studies (PIDS) said the new globalization is characterized by economic restructuring which saw the rise of GVCs over the past three decades.

“Value chain participation of developing economies is now on the whole shifting away from complex towards simple GVCs,” it said of GVCs under Fourth Industrial Revolution (FIRe).

The paper said disruptions of mega-value chains need to be addressed, noting the new patterns of GVCs contribute to the way the global economy will look in the future.

“The country needs to pay attention to the new patterns that have emerged; re-evaluating the strategies solely focusing on upgrading to participate in complex GVCs as simple GVCs may be another strategy that needs to be explored,” it added.

The paper underscored the need to equip domestic industries to participate in evolving GVCs through innovation support, reskilling, and retooling of employees, and strengthening business matching and international partnerships.

It is likewise imperative to reduce unit labor costs, improve logistics and connectivity, and provide an efficient process for meeting international requirements and standards, it said.

“Take advantage of the possible trade diversion by attracting businesses and FDI (foreign direct investments) to locate in the Philippines,” the paper said.

To address economic restructuring, there is a need to strengthen the digital trade of services and new technologies to improve trade and investment, it said.

“Levering new technologies requires that technical and regulatory challenges to the adoption of new technologies in government processes and procedures be addressed,” it added.

Likewise, transport and other logistics services should remain competitive; while investment, both public and private, in basic infrastructure should be mobilized, particularly those related to information communications technology (ICT).