Filipino companies need to innovate to ride out the pandemic and boost export sophistication and competitiveness.

“Innovation is gonna be at the center of the Covid (coronavirus disease) outbreak recovery and to also stimulate competitiveness in the Philippines,” said Jaime Frias, senior economist at The World Bank.

Frias said even before the Covid outbreak, the Philippines has been unable to leverage the full benefits of global value chains (GVCs).

“Per capita GDP (gross domestic product) is low relative to the sophistication of its exports, suggesting that leveraging of the full benefits of GVC participation was below potential,” he said.

Citing the result of an earlier study, Frias said absence of substantive innovation seems to be limiting Philippines’ potential for upgrading GVC participation.

“Absence of substantive “product innovation” seems to correlate with Philippines’ relative specialization in low value added manufacturing,” he added. “Process innovation is the primary way of innovation for Philippines’ supplying firms, with little or no product level innovation.”

Frias said most manufacturing exporters depend on external sources of knowledge for innovation.

“There is an opportunity of course to increase the competitiveness of exports. Typically, this is driven by the lack of awareness in terms of the opportunity by firms so there is an issue about what is feasible,” he said.

Frias said important innovation policy pertains to absorption or building technological capacity of firms.

“Vast range of policies –some relates to the extension and the absorption that usually would include technology extension services or business advisory services, technology centers, universities and knowledge providers,” he added.