Philippines Ranks 56th in World Economic Forum's Global Competitiveness Report

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The Philippines ranked 56th out of 137 economies worldwide in the latest World Economic Forum Global Competitiveness Report, basically holding steady versus its ranking of No. 57 last year. The country maintained its score of 4.4 on a scale of 7.

Among the strong areas of performance for the Philippines was its macroeconomic environment, ranked No. 22 in the work. The country is ranked highly in such areas as inflation management (No. 1), government debt as a percentage of GDP (No. 33), country credit rating (No. 48), and, government budget balance as a percentage of GDP (No. 24).

The Philippines also improved performance in higher education (from No. 58 to No. 55), quality of primary education (No. 75 to 66), labor market efficiency (from No. 86 to 84), and market size (from No. 31 to 27). Market size reflects both an increase in population and consumer power.

In the Financial Markets category, the country was also cited for its soundness of banks (No. 35) and Regulation of securities exchanges (No. 36). However, in spite of the soundness of the banking system, the country received moderate downgrades in the areas of financing through local equity markets (from No. 30 to No. 38), ease of access to loans (No. 46 to 54), and venture capital availability (No. 65 to No. 70).

In the Technological Readiness category, the country was cited for improvements in the number of internet users as a percentage of the population (No. 92 to No. 75) and the number of fixed broadband internet subscribers as a percentage of population (from No. 92 to No. 88). However, service levels have been challenged by this growing user base with indicators on internet bandwidth, mobile-broadband subscriptions, and mobile-cellular telephone subscriptions all being ranked lower this year versus last year.

For investors surveyed by the World Economic Forum, the key challenges associated with the Philippines continues to be the inefficient government bureaucracy, inadequate infrastructure, corruption, tax regulation, and tax rates. Different government programs in the Administrations 0-10 Point Priority Program are currently addressing these issues.

Among the other areas ranked with lower scores this year were the quality of airports (No. 124), ports (No. 114), and roads (No. 104) from the Infrastructure sector. Overall, Infrastructure was ranked No. 95. Other indicators ranked low also included time to start a business (No. 116), burden of customs procedures (No. 125), agricultural policy costs (No. 115), labor redundancy costs (No. 116), and government procurement of advanced technology products (No. 91). This last indicator illustrates the relatively low use of technology in government services.

One aspect of concern for us should be that two countries in ASEAN – Brunei and Vietnam – have now overtaken the Philippines to take the fifth and sixth positions in the region. Brunei improved its ranking by twelve spots this year while Indonesia improved by five. This drops the Philippines to seventh out of nine ASEAN countries ranked by the World Economic Forum. “This basically illustrates the intensity of the competition in the region, with six countries all improving their performances in the last year,” according to Guillermo M. Luz, private sector co-chairman of the National Competitiveness Council. “We simply cannot afford to let up in our efforts to improve processes, introduce reforms, and make the country more competitive because other countries are also working hard.”

According to the NCC, the World Economic Forum report provides one framework to analyze areas for improvement to make the country more competitive and attractive for investments. In the short-term (1-2 years), areas which will contribute to improved competitiveness will be Institutions (which refers to governance and bureaucracy improvements), Infrastructure, and Primary Education and Health. Over the medium-term (3-5 years), areas such as Technological Readiness, Higher Education, and Innovation, Science and Technology will play a bigger role in country competiveness. Investments will need to be made in these areas today in order to reap the benefits over the next three to five years.