The Step We Skipped: What a UNIDO Meeting Revealed About Industrialization and the Philippines’ Future
- Andrew McNeal
- Jul 24
- 4 min read
By Andrew McNeal
ENST 432 Environment and Governance: Sustainable Development in the Philippines
B.S. in Urban Studies and Planning '25, B.S. in Real Estate Development '25
Sol Price School of Public Policy, USC
In an hour-long meeting between my USC Maymester class and representatives from the United Nations Industrial Development Organization (UNIDO), we were introduced to a hard truth: the Philippines is stuck. Not in crisis, not in collapse, but in a developmental limbo, a middle-income trap where growth stalls, inequality persists, and progress remains uneven. UNIDO, the United Nations’ specialized agency for industrial development, has a mandate to help countries unlock long-term, inclusive prosperity. At the center of the discussion was a concept called Inclusive and Sustainable Industrial Development (ISID), which frames industry not as a relic of the past but as a powerful tool to reduce poverty, create jobs, and address climate change, all at once. Our meeting made clear that industrial development, done sustainably, is not optional. It is the step the Philippines skipped, and the one it must now return to.
Why the Philippines Got Stuck
The middle-income trap refers to countries whose per capita income grows beyond the low-income threshold but stalls before reaching high-income status. These nations, more than 100 of them, are home to 75 percent of the global population and 60 percent of the world’s poor. Only 27 countries have successfully transitioned to high-income status since 2000. The Philippines is not one of them.
One major reason, as UNIDO staff explained, is that the Philippines never underwent full industrialization. Instead of following the typical development path, agriculture to industry to services, it jumped directly from agriculture into service-based sectors like business process outsourcing (BPO) and tourism. While these created growth in the early 2000s, they did not lay the structural groundwork for long-term prosperity.
As UNIDO’s Industrial Development Report 2022 explains, industry, when inclusive and sustainable, contributes to income generation, export diversification, and innovation while also reducing ecological harm. This model, ISID, focuses not on outdated manufacturing but on green technology, clean energy, and support for small and medium enterprises (SMEs). These are the industries that enable nations to develop beyond dependency.
The Philippines’ premature leap into services left it vulnerable. Without a strong industrial base, the country remains heavily reliant on imports, unable to move up the value chain, and exposed to global shocks. Economist Dani Rodrik calls this “premature deindustrialization,” a process where countries begin losing industrial jobs before they have built robust manufacturing sectors. That process is visible across the Philippines today, rising GDP alongside underemployment, weak infrastructure, and regional inequality.
Real Projects, Real Impact
UNIDO’s current work in the Philippines demonstrates how ISID can be implemented in ways that are tailored, local, and practical. In Tawi-Tawi, a 262 million hybrid solar power project is now delivering electricity to seaweed farmers, powering production in a remote island province that was previously off-grid. The project tackles energy access, food security, and economic empowerment all at once, precisely the kind of integrated development ISID promotes.
In Bangsamoro, UNIDO is supporting halal certification programs for local agricultural producers, helping them meet international standards and access global markets. In Metro Manila, the organization is working with hospitals to reduce mercury and persistent organic pollutants by reforming healthcare waste disposal systems. And in partnership with the Department of Trade and Industry, UNIDO is helping scale the electric vehicle (EV) industry by providing policy support, institutional coordination, and pilot programs running through 2027.
These projects are not one-off experiments. They are aligned with the Philippine Development Plan 2023-2028, and guided by a Country Programming Framework co-developed with the Philippine government. This ensures each intervention supports broader national goals, from poverty reduction to climate adaptation to export diversification.
Our meeting also touched on the challenges. Investors remain wary due to high energy costs and infrastructure gaps. Local governments vary widely in their capacity to manage complex projects. Some regions lack the tools to implement new industrial zones, while others struggle to connect SMEs to financing or technology. Still, UNIDO staff emphasized that with proper coordination among national agencies, local governments, and international partners, many of these challenges can be overcome.
A New Path Forward
One of the most important takeaways from the meeting was that industrialization today must be defined differently. It is not about reviving dirty factories or copying twentieth-century models. It is about designing industries that are socially inclusive, environmentally sustainable, and economically competitive. That means powering factories with solar energy, creating logistics systems that serve rural cooperatives, and helping local businesses meet global standards. It also means embedding training and sustainability mechanisms so that programs can scale and last.
As we left the meeting, I could not help but reflect on what is at stake. The Philippines has a young workforce, a growing economy, and an urgent need to transition to cleaner, more equitable systems. But it will not get there through services alone. Without reinvesting in domestic industry and doing so sustainably, the country risks remaining stuck at the same level of development for another generation.
The middle-income trap is not just a statistical category. It reflects a set of missed opportunities and misaligned priorities. UNIDO’s work shows that with the right frameworks, countries like the Philippines can build inclusive and resilient industries that serve their people, not just their bottom line.
It only took an hour to understand how we got stuck. But moving forward will take sustained commitment, investment, and imagination. That process has already begun.
References
Halal Friendly Philippines. “UNIDO Explores Halal Opportunities in BARMM through Seafood Value Chain Collaboration.” Halal Friendly Philippines, 18 Dec. 2024, https://halalfriendlyphilippines.com/2024/12/18/unido-explores-halal-opportunities-in-barmm-through-seafood-value-chain-collaboration/.
Mindanao Development Authority. “MinDA Unveils 2 EU-Funded Energy Projects at Mindanao Power Forum.” Mindanao Development Authority, https://minda.gov.ph/news/648-minda-unveils-2-eu-funded-energy-projects-at-mindanao-power-forum.
National Economic and Development Authority (NEDA). Philippine Development Plan 2023–2028. Government of the Philippines, https://pdp.depdev.gov.ph/philippine-development-plan-2023-2028/.
Rodrik, Dani. “Premature Deindustrialization.” Journal of Economic Growth, Harvard University, https://drodrik.scholar.harvard.edu/files/dani-rodrik/files/premature-deindustrialization.pdf.
UN News. “Since 2000, Only 27 Countries Have Moved from Middle to High-Income Status.” United Nations, 25 Apr. 2025, https://news.un.org/en/story/2025/04/1162721.
United Nations Industrial Development Organization (UNIDO). Industrial Development Report 2022. 2023, https://www.unido.org/sites/default/files/unido-publications/2023-03/IDR-2022-en.pdf.
United Nations Industrial Development Organization (UNIDO). “Project 180210: Strengthening MSME Productivity.” UNIDO Compass, https://compass.unido.org/projects/180210.
World Bank. World Development Report 2024: Global Uncertainty. World Bank Group, https://www.worldbank.org/en/publication/wdr2024.