Notes

The hlS cluster is facing challenges such as sustainability, market access, and intellectual property risks that present opportunities for the Philippines. As pharmaceuticals, medical devices, and health care services become more integrated and the management of information becomes as important as the management of products,6 development of the IMT and TMT clusters could facilitate the emergence of an hlS cluster in the Philippines, with the IMT cluster (through electronic components) reaching the medical devices sector, the TMT cluster (through health care information technology services) reaching the health care service sector, and the pharma sector attracting lead multinational corporations, while promoting networks of domestic suppliers.

The pharmaceutical GVC is quite opaque, which has exacerbated the disruptions triggered by the COVID-19 pandemic. The COVID-19 stress experienced by pharmaceutical GVCs at the height of the health crisis illustrates the risks posed by relying too heavily on China and India. A clear trend during the last decade was increased merger and acquisition activity in the sector, leading to increased market concentration and dominance by a few big players. The last decade also witnessed a sustained increase in global pharmaceutical investment. The value of biotechnology global investment projects announced increased from about uS$3.1 billion in 2014 to more than uS$7.2 billion in 2018 (fDi Markets 2019).

Over the next decade, more emphasis will be placed on research and discovery, along with clinical developments. Multinational corporations will continue manufacturing medicines faster and more cost-effectively, while smaller, innovative, more agile companies will take their products to market. Contract research organization activity will increase, as will the big data and analytical needs of the health care sector. These areas offer the Philippines additional opportunities for growth of the BPO and information technology outsourcing sectors. But the lack of a life sciences and biotechnology ecosystem means that, for the next decade, the country is poorly placed to capitalize on the growth of the biopharmaceutical sector. Neither pharmaceutical multinational corporations nor large indigenous companies in the Philippines tend to export, resulting in pharmaceutical imports being 33 times greater than exports in 2019.7 The Philippines needs to address this imbalance; technical assistance and expertise would help to invigorate the embryonic life sciences sector. Success in this area would turn the COVID-19 crisis into an opportunity, with the postCOVID-19 recovery benefiting from the reconfiguration of the country’s leading export sectors in the three clusters.

NOTES

1. In late March 2020, one month after COVID-19 was declared a pandemic, China, Germany,

Japan, the republic of Korea, and the united States, five countries central to manufacturing

GVCs across the world, had 42 percent of cases worldwide (Baldwin and Weder di Mauro 2020). 2. An event-study methodology following Majune (2020) was employed to investigate the impact of lockdown policies on the Philippines’ import and export trade. Monthly productcountry data are for January 2019 to December 2020. Data for lockdown measures were obtained from the COVID-19 Government responses Tracking Database compiled by

Blavatnik School of Government of the university of Oxford (hale et al. 2020). 3. Toyota Aisin manufactures traditional transmissions (five-speed gearboxes) in the

Philippines, of which 95 percent are exported, mainly to Thailand. For companies like this