The overall competitiveness of the Philippines has improved by eight ranks in 2010 to No. 89 out of 132 countries, with gains in both macroeconomic and particularly microeconomic competitiveness, according to the Association of Southeast Asian Nations (Asean) Competitiveness Report 2010.

But because of its weak infrastructure and political institutions, the country’s overall competitiveness remains below 67 percent of the countries in the sample, the report added.

The new report is published by the Asia Competitiveness Institute, a Singapore-based research center at the Lee Kuan Yew School of Public Policy of the National University of Singapore.

The report attributed the slight gain in macroeconomic competitiveness to improvements in social infrastructure and political institutions and macroeconomic policy. “The quality of rule of law is perceived to have improved, with lower occurrence of irregular payments by firms, lower impact of organized crime and greater judicial independence, even while political institutions are rated less favorably, such as on the indicator of transparency of government policymaking,” it said.

The better performance on macroeconomic policy, meanwhile, was due to the lowering of government debt as a percentage of gross domestic product (GDP).

But the main weaknesses of the Philippines, the report said, are in administrative infrastructure, where it ranked 124th; logistical infrastructure, 118th; political institutions, 114th; rule of law, 113th; and social infrastructure and political institutions, 106th.

“The Philippines’ overall competitiveness position is below 67 percent of countries in the sample. Although its microeconomic competitiveness is comparatively stronger than its macroeconomic competitiveness, there are a considerable number of areas under both categories that require substantial improvement,” the report stated.

“[The country] has to substantially improve the quality of its domestic transport network and port infrastructure, as well as reduce the number of procedures required to start a business and the burden of its customs procedures,” the report added.

Further, the report stated that with political institutions and rule of law among the weakest areas for the Philippines, the country needs to raise public trust and lessen or remove favoritism when it comes to decisions made by government officials.

The report also said the government needs to increase its effectiveness in reducing poverty and inequality. It can be noted that the country’s poverty rate is still at 26.5 and is still a long way from attaining the Millennium Development Goal of reducing it to 16.6 by 2015.

“There is an urgent need to raise public trust of politicians, lessen favoritism in decisions of government officials, increase government effectiveness in reducing poverty and inequality, reduce the occurrence of diversion of public funds and lower the business costs of corruption, among other things,” the report stated.

The main strengths of the Philippines were in organizational practices, where it ranked 38th overall. This is because all the factors that are under organizational practices, such as the extent of staff training, willingness to delegate authority, extent of incentive compensation and reliance on professional management, were favorably assessed in the report.

The report also said the country’s strengths include macroeconomic policy, where it ranked 42nd overall. The country’s macroeconomic fundamentals have remained strong even with the recent global financial crisis affecting exports, it noted.

Meanwhile, the report said the Asean’s global competitiveness in 2010 is three places behind its rank in 2009. This slight deterioration is largely due to a six-rank drop in microeconomic competitiveness to 49th place. Macroeconomic competitiveness is steady at No. 64.

However, upon closer examination, the report noted that the Asean has worsened its competitiveness rankings across most subcategories and sub-areas except for macroeconomic policy.

The report stated that its competitiveness has not been impressive in recent years from being part of Asia’s miracle in the early 1990s and now, overshadowed by China and India. This weakness across the board will be a problem, especially in the long term.

As such, the head of the Asean called on member-economies not to “rest on their laurels” yet, saying there is much to be done to level off growth among members.

In a statement, Dr. Surin Pitsuwan, secretary-general of Asean said, the regional bloc continues to face “profound challenges” in the world economic climate owing to the record- high growth in powerful economies of China and India.

---Cai Ordinario and Estrella Torres
original source: BusinessMirror