Since the 2000s, the Philippine economy has been on a roll. From 2010 to 2019, it grew an annual average of 6.4 per cent, a jump from 4.5 per cent from 2000 to 2009 (World Bank 2022). Given the economy's rapid growth, the National Economic and Development Authority reported in 2018 that the country could achieve upper middle-income status, with a gross national income per capita of about US$4,000 by end-2019 (Cigaral 2018). The economy's strong performance is nothing less than stunning and tells of the sea change in the country as it moves on from being Asia's “sick man” to a “rising star”.

This chapter examines the Philippines’ economic rise, specifically focusing on the sources of rapid growth. Since the 2000s, international trade in services has played a central role in fast-tracking the country's growth. The share in gross domestic product (GDP) of remittances grew from 2.5 per cent in 1985 to 9.3 per cent in 2019 (World Bank 2021). Similarly, from its slow start in the 1990s, the business process outsourcing (BPO) industry has expanded dramatically since the second half of the 2000s; by 2019, its contribution to GDP was a high 9 per cent (Oxford Business Group n.d.). In this light, the migrant labour and BPO industries have been referred to as the “two legs” on which the Philippines’ growth economy stands (ibid.). The increase in incomes of remittance-receiving households and the BPO talent pool has expanded the domestic market for services industries (e.g., retail trade and other commercial services) and manufacturing.

Whether this trend—which can potentially strengthen the manufacturing-services nexus in the country—will be sustained and lead to more profound structural transformation remains an open question, however. In this connection, the Philippine case provides an opportunity to interrogate services export as the driver of the economy.

This chapter is divided into four sections. The succeeding two sections briefly discuss the factors for the country's rapid growth and key features of and trends in the country's labour and services export industries. The third section will examine the resurgence of the manufacturing sector and provide the broad strokes of the country's “new industrial policy”. The chapter concludes by highlighting the Philippine government's proactive role in effecting such diversification— an approach it adopted to grow service exports more than a decade ago.