The Philippines has experienced overall growth over the last twenty years, but the growth of the manufacturing sector has been sluggish and the country has lost innovation capacity. Re-gaining momentum will depend on many factors, but skills have a key role to play to support the growing service sector, help improve the competitiveness of the manufacturing sector, and, in general, enhance the long-term ability of the country to innovate and assimilate new technologies. This publication analyzes the functional skills that workers need to be equipped with to be employable and support firms’ competitiveness and productivity and the role of the education and training system in providing them. This report is primarily intended to the policy makers which shape the delivery of education and training in the Philippines and other middle-income countries.