Philippines' competitiveness

MANILA, Philippines — The Philippines jumped 10 according to the 2011-2012 edition of the Global Competitiveness Report of the World Economic Forum (WEF), placing 75th among 142 nations from its ranking of 85th out of 139 countries in the 2010-2011 report. Our score in the index improved from 4.0 to 4.1, from a scale of 1 (lowest) to 7 (highest).

The WEF considers us now in the transition from a factor-driven economy – the first stage of development characterized by dependence on unskilled labor and natural resources – toward becoming efficiency-driven.

To make that transition successfully, we need to enhance our ability to harness existing technologies to develop more efficient production processes and higher quality products. At that stage of development, competitiveness is driven by higher education and training, efficient goods, financial and labor markets, market size, and technological readiness.

The WEF attributes our higher ranking this year to improved performance in the majority of indicators, which total 111 across 12 pillars of competitiveness. Our macroeconomic environment is notably sound and strong owing to lower public deficit and debt, improved country credit rating and low inflation.

We also scored high in indicators measuring business sophistication, which cover the quality of a country’s overall business networks and the quality of individual firms’ operations and strategies. Another boon is the size of our domestic market, the 36th biggest in the world.

Macroeconomic stability, business sophistication, and a sizeable domestic market will help propel us to the next stage of development, but they would have to be coupled with extensive improvements in many other areas in which we continue to do poorly.

For instance, our public institutions remain among the weakest in the world. It is no surprise then that corruption has always been seen as the top deterrent to doing business in the country. Add to that acute issues of inefficient bureaucracy, political instability and physical security.

Another perennial problem is the dismal quality of our infrastructure for which we rank 113th overall. The quality of our seaports and airports is even worse at 123rd and 115th, respectively. This situation is not helped by the administration’s underspending. As of last month, the government had yet to spend P1.012 trillion of this year’s programmed budget of R1.645 trillion. It is doubtful that it would be able to spend all this especially to build infrastructure now that the typhoon season has set in.

Also a stubborn issue is the deteriorating quality of our education. The quality of our math and science education – the drivers of innovation and higher productivity – is so poor at 115th place. If these persist, we can only expect our educational standards to decline from its present standing of 61st place.

So while we did better than last year, we cannot afford to rest on our modest laurels. We have to evaluate our progress vis-à-vis that of our regional neighbors – our closest rivals in foreign investment and exports.

We remain third from the bottom among nine Southeast Asian countries covered by the index, ahead only of Cambodia and Timor-Leste. Furthermore, while we did make a big leap this year, it only helped us gain lost ground. We had actually ranked as high as 71st in the 2007-2008 and 2008-2009 rankings.

The Philippines has been displaying stagnant, if not regressing, growth, pushing us into the middle-income trap. This is how Vietnam – with a more vibrant, rapidly growing economy, zoomed past us over the last decade. It is now ranked 65th most competitive in the world – certainly still within our reach if we institute reforms in our problem areas now.

This is also how Cambodia might overtake us. Back in 2006-2007, Cambodia ranked 105th while we placed 75th. This year, Cambodia made a 12-notch leap from 109th to 97th. There remains a considerable gap between us, though it is not impossible to overcome, as Vietnam has demonstrated.

This year’s performance, albeit modest, should be our impetus to remain aggressive and single-minded about meaningful reform, both in the near and long term, to catch up with our Southeast Asian peers. Over the years, Malaysia has only improved marginally while Thailand even backslid. Brunei and Indonesia have improved substantially. Singapore is far ahead, not only in the region, but also in the world, ranking 2nd overall. Meanwhile, Cambodia and Timor-Leste are demonstrating through their improving rankings that they now know how to become more competitive.

In short, one could rise through the rankings quickly – and also fall as fast. In a highly globalized, interconnected world, we cannot afford to be nearsighted and inward looking. In the context of the competitiveness rankings, the Philippine government’s priorities are crystal clear – and they are all of crucial urgency.


More critical than ever

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original source: The Manila Bulletin