Business Matters

10 lessons on competitiveness

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As we close out the year, what lessons have we drawn from monitoring and trying to improve our competitiveness rankings over the past 21 months? Let me focus on our 10 most important lessons.

1.) Transparency leads to competitiveness. From the beginning we felt that governance matters, so “transparency leads to competitiveness” was the theme of our earliest presentations to different audiences. Though some people doubted it, we pointed out that many competitiveness indices actually measure this. The WEF Global Competitiveness Index, for instance, measures budget and procurement reform and even favoritism and wastefulness in government spending as part of its coverage on governance.

2.) “Work in progress” is not good enough. In the business of measuring competitiveness, “work in progress” doesn’t count for anything. Reforms count only when they are passed into law via Congress or executive action, put into effect and used by citizens, and measured in terms of usage. Anything less doesn’t count.

3.) Execution and delivery matter. The corollary to the lesson above is that execution, delivery, and implementation are what really matter in competitiveness scoring. Moreover, reforms or change must be implemented along timelines. For instance, in the IFC Ease of Doing Business Report, reforms must be written up, in force, and measurable by July 1 for it to count in the current calendar year. If a reform comes into force on July 2, that is filed for the following calendar year’s rating.

4.) Teamwork is important. Because so many public reform challenges cut across several agencies, teamwork is required. We can no longer afford silos in government. For instance, developing a system for incorporating a company online will involve the cooperation of at least five agencies (e.g., Department of Trade and Industry, Securities and Exchange Commission, Social Security System, PhilHealth, and Pag-Ibig). No single agency can accomplish this task.

5.) We need to work on multiple fronts. Competitiveness is measured along a number of parameters, typically 10 to 12 broad categories that can be broken down into over 100 subcategories. Different categories may carry different weights. Focusing on only a few items will not move the country’s entire score or ranking. For instance, in the WEF, the weights are not distributed equally for the 12 categories. The four largest (e.g., Institutions/Governance, Macroeconomic Performance, Infrastructure, Public Health and Education) carry a 60-percent weight. Improving on only one category will not move the needle. Fortunately, the country scored improvements in 11 of the 12 categories last year. For the IFC report, concentrating on the functions of local government units alone will not change the score radically because those cover only parts of four (out of 10) categories.

6.) The competition never sleeps. The nature of competition is that it is precisely a contest among many. Even if your own performance improves, that is not a guarantee that your ranking will improve because the other competitors may be improving on their performance at an even better pace. Your relative standing might even drop. That is exactly what happened to us as a country. We must recognize that our competition never rests and is also trying to improve itself. More importantly, countries at the top of the tables are among those who work hardest at staying there. For instance, Singapore has ranked No. 1 in the Ease of Doing Business report for the last seven years.

7.) The bar always rises. Standards change from year to year as countries move in terms of GDP per capita. As one moves up, the importance of the categories change and standards go up.

8.) “Speed to reform” is important. Because “work in progress” no longer counts and deliverables are measured against deadlines, we should focus on “speed to reform.” We no longer have the luxury of time to move too slowly on some reforms. The world is moving fast and we need to keep pace.

9.) Maintaining momentum is important. As we gain speed, we should realize that maintaining momentum is important. Holding the same speed is not good enough because the competition is constantly on the move and also trying to gain speed. Momentum also has its own value. It keeps people focused on constant improvement, in sync with each other, and keeps a machinery well-oiled. The worst thing that can happen after we have gained a certain speed is to ease up and get complacent. That’s when costly mistakes occur.

10.) We need to institutionalize change. Now that things are going well for us, the question we hear most often now is one of concern: What happens to all the good things when the administration changes in 2016? Will all the reforms be swept away? If we play our cards right, that may not necessarily happen. In fact, we can (and should) prevent it from happening. Playing our cards right lies in our ability to institutionalize reforms and deeply embed them in the system so it will be difficult (if not impossible) to change. Reforms have to be seen, felt, and experienced as a positive thing so people will clamor for them to remain, and complain if they are lost. That may be our biggest challenge in the next three years.

Guillermo M. Luz is the private-sector cochair of the National Competitiveness Council. For inquiries or comments, contact him at gm.luz@competitive.org.ph.

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