Getting competitive
The gains being made by the Duterte administration to make the Philippine economy more competitive in the eyes of foreign investors are getting noticed.
The Philippines jumped four notches in the 2019 global competitiveness report of Swiss business school IMD (International Institute for Management Development), which cited the country’s skilled workforce, economic dynamism, cost-competitiveness, open and positive attitudes and the population’s high educational level as key factors for businesses to locate here.
The rebound to the 46th position from 50th out of 63 economies surveyed last year was driven mainly by the country’s solid economic performance, reflected in the sustained real GDP growth of 6.2 percent in 2018 and an increase in labor force and employment levels.
The Philippines ranked high in the following: labor marke (10th), domestic economy (12th) and tax policy (14th). However, it ranked low in basic infrastructure (61st), scientific infrastructure or research and development (59th), education (58th), health and environment (56th), business legislation (54th) and international trade (54th).
IMD, which has been doing the annual rankings since 1989, evaluates the extent to which a country fosters an environment where enterprises can achieve sustainable growth, generate jobs and ultimately improve the welfare of its citizens.
It assessed the 63 economies on more than 230 indicators, grouped into four factors: economic performance (including international trade and investment); government efficiency (including governmental discipline with internal financing, the rule of law and the improvement of inclusive institutions); business efficiency (including productivity and efficiency of the private sector and ease of access to finance), and infrastructure (including those for science and technology, health, environmental sustainability and education).
Compared to the previous year, the IMD report cited improvements in the Philippine government’s budget position due to improved tax collection, capital formation (mainly government investments in infrastructure), tourism receipts and easing of protectionism.
It also noted new pieces of legislation on science and technology alongside improvements in communication technology, the entry of foreign investors, total expenditure on research and development, easing of startup procedures, implementation of public sector contracts, knowledge transfer, total public expenditure on education and development and application of technology.
It also cited the declines in inflation, incidences of bribery and corruption, electricity costs for industrial clients, gasoline prices, homicide counts and days for a startup to operate.
Still, despite its improved ranking, the Philippines ranked second to the last, beating only Mongolia, compared to 13 Asia-Pacific countries included in the survey.
The five topnotchers in the Asia-Pacific region were Singapore, Hong Kong, China, Taiwan and Australia. New Zealand, Malaysia, Thailand, Korea, Japan, Indonesia and India also ranked higher than the Philippines. Clearly, the country has a long way to go to become really competitive.
It needs to speed up and sustain investments in infrastructure such as roads, airports and bridges as well as telecommunication; ramp up investment in human capital; address poor digital competitiveness and future-readiness; and sustain investor and consumer confidence. IMD also cited persistent political risks as another stumbling block to improving competitiveness.
The pending economic bills in Congress — especially those aimed at liberalizing the entry of foreign investors — will go a long way in boosting the country’s competitiveness ranking if these are passed without too much delay.
The country can also learn a lesson or two from Singapore, which dislodged the United States as the most competitive economy in the latest IMD rankings.
Singapore’s rise to the top, according to IMD, was driven by its advanced technological infrastructure, the availability of skilled labor, favorable immigration laws and efficient ways to set up new businesses. That’s a template worth emulating.
