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Business Matters

The challenge to get competitive

Since the early 1990s, the Philippines has been included in various international competitiveness reports, starting with the World Economic Forum’s Global Competitiveness Index, IMD World Competitiveness Yearbook, Heritage Foundation’s Index of Economic Freedom and others, to the more recent World Bank-IFC Ease of Doing Business Report.

Dating back to 2011, we tracked Philippine performance across 12 of these global reports to see if we were improving in our competitiveness or not.

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Traditionally, the Philippines has been ranked at the bottom-third of the world in competitiveness and around the midpoint for Asean. Today, the country ranks in the middle-third of the world but close to the bottom in Asean. That tells you something about the quality and pace of competitiveness in Southeast Asia. Asean is quite simply one of the most competitive regions in the world.

Recently, IMD released its World Competitiveness Ranking for 2019. The good news is that the Philippines improved by four positions from No. 50 in 2018 to No. 46 this year out of 63 countries. The country improved across all four main indicators: economic performance (+12 from No. 50 to No. 38); government efficiency (+3 from No. 44 to No. 41); business efficiency (+6 from No. 38 to No. 32); and infrastructure (+1 from No. 60 to No. 59). It is worth noting that we also performed well in some subindicators such as domestic economy (12th), tax policy (14th) and labor market (10th).

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However, we continue to trail badly in the indicators that matter the most for the long-term buildup of competitiveness: basic infrastructure (61st), health and environment (56th), education (58th), scientific infrastructure (59th), business legislation (54th) and international trade (54th). For five of these six subindicators, we improved marginally (if at all) over the last year. Take note that only 63 economies are ranked, so that puts us near-bottom of the rankings for these important subindicators.

The harsh reality of global competitiveness hits hardest when you compare the Philippines against its peer groups in Asia-Pacific and Asean. The country ranked second to last among 14 countries in Asia Pacific, only ahead of Mongolia (which clocked in at 62nd). In Asean where the original five members are included, the Philippines ranked dead last, with Singapore leading the way at No. 1, Malaysia at No. 22, Thailand at No. 25, and Indonesia at No. 32. More importantly, across all four main indicators, the Philippines is consistently last in Asean, most often by a large margin.

Most often, one of the most ignored aspects about global competitiveness reports is how quickly countries move up and down the rankings. So, while we may be happy about how the Philippines moved up the ranks by four positions, excitement dampens somewhat when you see that Thailand moved up by five (from No. 30 to No. 25) and Indonesia moved up by 11 (from No. 43 to No. 32) over the same period. This means that the gap widened in the last 12 months. Even Singapore, already No. 3 last year, managed to move up to No. 1 in 2019.

This all boils down to execution and implementation of a game plan for competitiveness. The country made one big step in this direction when it passed Republic Act No. 11032 or the Anti Red-Tape Act (Arta, also named the Ease of Doing Business   and Efficient Government Service Delivery Act of 2018), which created the Anti Red-Tape Authority. The Arta was signed into law on May 28, 2018, and went into effect on June 18, 2018. This law could have a major impact—if only it were implemented and put to work. Yet, one year after its signing into law, its implementing rules and regulations have yet to be released, and its director general and advisory council have yet to be appointed.

If a law can’t even be implemented after going through the legislative mill in relatively short order, how can we even expect to move up the global competitiveness rankings? The story behind the difference between us and other countries lies in the implementation of laws and plans.

Guillermo M. Luz served as private sector cochair of the National Competitiveness Council on  2011-2018 and is currently chief resilience officer of the Philippine Disaster Resilience Foundation.

Business Matters is a project of Makati Business Club ([email protected]).

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TAGS: Global Competitive Index, Philippines, world competitiveness, World Economic Forum
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