Will Cambodia overtake us in global competitiveness?

Montage of Phnom Penh

The World Economic Forum (WEF) recently released the 2011-2012 edition of the Global Competitiveness Report (GCR).

The WEF, through the GCR, reports on the competitiveness of economies worldwide annually on the basis of the Global Competitiveness Index (GCI), a comprehensive tool that measures the microeconomic and macroeconomic foundations of national competitiveness.

There is both good and bad news for the Philippines from the latest survey.

The good news, as trumpeted in the major dailies recently, is that the Philippines improved its ranking from 85th out of 139 countries in 2010-2011 to 75th out of 142 countries in the most recent report.

Kudos to the Aquino administration!

The report covers the first full year of the Aquino administration.

But lest we are lulled into complacency, let’s do a reality check on how we compare with other Asean countries that were rated in the 2011-2012 survey.

To start with, there’s no question any more that Asean countries, which trailed behind us during our glory days in Asia—Indonesia, Malaysia, Singapore and Thailand—have long overtaken us in the Asean ranking. Even war-ravaged Vietnam has already surpassed us a few years ago. The data speak for themselves.

Res ipsa loquitur, as we lawyers call it.

Focusing on the 2011-2012 survey, Singapore scored the highest among the Asean countries in the overall score. In fact, Singapore—a tiny nation not gifted with abundant natural resources like us—is way up in the world ranking.

From fifth place in 2008, Singapore moved up to second place in this year’s ranking, displacing powerhouses like the United States in the world ranking.

The Philippines is second-to-the-last in the Asean (75th), 10 notches below Vietnam (65th) and better only than another war-torn country, Cambodia (97th ).
Indeed, we have our work cut out for us.

There are three sub-indices in the GCI divided into 12 pillars by which countries all over the world are rated.

The first sub-index is “Basic Requirements,” which ranks countries in terms of the quality of their primary education, public institutions, macroeconomic environment, and health.

On this sub-index, we placed second to the last in the Asean at 100th place, better only than Cambodia, which is ranked 108th in the world.  Clearly, we were outranked by Vietnam (76th place) by 24 steps. This is not even comparable with our co-founding members of the Asean like Indonesia (53rd), Thailand (46th), Malaysia (25th) and, of course, Singapore (1st).

The second sub-index is “Efficiency Enhancers,” which rank countries in terms of higher education and training, goods market efficiency, labor market efficiency, financial market development, technological readiness, and domestic market size.

We ranked third to the last in the Asean region. Asean countries like Thailand and Vietnam, which we used to teach in the not-so-distant past, are now ahead of us by miles. Thailand, for example, is ranked 43rd compared with our ranking of 70th place. Even Vietnam, whose score deteriorated from the previous year, is higher than us by four notches at 66th place.

The last sub-index is “Innovation and Sophistication,” where countries are ranked on the basis of their business sophistication and innovation.

Here, we are again ranked third to the last in the Asean at 74th place.  And, as with the other sub-indices, we are far behind our co-founding members of the Asean with Thailand at 51st; Indonesia at 41st; Malaysia at 22nd and Singapore at 11th place in the world.

While we outperformed Cambodia in the latest survey, Cambodia did extremely well in improving its ranking during the recent years.

Let’s do a four-year review (2008-2012) based on the readily available figures from the WEF website.

In terms of overall ranking, we dropped four ranks from 71st in the 2008-2009 ranking to 75th in this year’s ranking. Cambodia, on the other hand, went up 12 notches from 109th to 97th place. Cambodia surpassed us by 16 notches in the overall score over the four-year period.

In terms of the sub-indices, Cambodia did a lot better than the Philippines.

In “Basic Requirements,” which accounts for about 60 percent of the total score, Cambodia went down by only one notch while we nose-dived by 15 notches from 85th to 100th position. Otherwise stated, we were overtaken by Cambodia by 14 notches during the four-year period.

Similarly, in “Efficiency Enhancers,” we went down by two steps (rank 68th to 70th) while Cambodia gained 17 steps from 115th position in 2008 to 98th place this year. Using marathon language, Cambodia outran us by 19 miles in this leg of the race over a four-year period.

Our poor ratings in “Basic Requirements” and “Efficiency Enhancers” vis-a-vis Cambodia should be a wake-up call for us. These two sub-indices carry significant weights in our category of the global competitiveness report.

Lastly, in terms of “Innovation and Sophistication,” Cambodia improved its ranking by 21 notches from 112th place in 2008 to 91st in this year’s ranking.

The Philippines, on the other hand, went down seven rungs of the competitive ladder from 67th to 74th place over the four-year period.  Again, Cambodia outpaced us by a whopping 28 long miles in the race for business sophistication and innovation.

The big question then is: “Will Cambodia overtake the Philippines in the world competitiveness ranking?”

The writing on the wall appears clear, erasable only IF we as a people finally get our act together.

Paraphrasing President Barrack Obama, this, indeed, is the leadership challenge to President Aquino—shall we move forward together as a nation, or not at all?

Point of Law
by: Francis Lim
(The author, formerly the president and CEO of the Philippine Stock Exchange, is now the co-managing partner and head of the Corporate and Special Projects Department of the Angara Abello Concepcion Regala & Cruz Law Offices or Accralaw. He can be contacted through felim [at] accralaw [dot] com.)

original source: Philippine Daily Inquirer