Local competitiveness: measurement and management

There is a saying in business that what gets measured gets managed. This is one of the underlying principles of our Cities/Municipalities Competitiveness Index (CMCI). When people asked us a couple of years ago what were the best places to do business in the Philippines in terms of ease and cost of doing business, governance, and business environment, we were actually hard-pressed to come up with objective answers. The reason was that it was not that easy to obtain detailed information on a particular city or municipality.

On the other hand, we observed that when people talked about main business centers in the country, the places routinely mentioned were Metro Manila, Cebu and Davao. However, in reality about two-thirds of the economic weight of the country (measured in GDP) was actually concentrated in Metro Manila, Region 4-A (Cavite, Laguna, Batangas), and Region 3 (Central Luzon).

We have a problem with that. First, we do not think it is possible to build a competitive, progressive country if economic activity were concentrated in so few places. These areas of concentration would become such urban magnets, with all the attached problems and to the detriment of other areas. Second, this would limit the geographical areas for investors and entrepreneurs. Third, and most important, growth could never be inclusive if the economic opportunity and access were concentrated in such a small area of the country.

For these reasons, we organized 15 Regional Competitiveness Committees all over the country and developed the CMCI so that we could begin to create a culture of measurement and management in local government units. After two years of compiling and releasing the CMCI and its rankings of cities and municipalities, we are quite pleased with the results and hopeful that the program would gain even more traction among government agencies and city residents and businesses.

On Aug. 7, we held our second annual Regional Competitiveness Summit and released the CMCI results. The Index measures competitiveness at the local government level using 28 indicators grouped into three equally weighted pillars: economic dynamism, government efficiency, and infrastructure. Scores on each pillar were combined to form the overall score used to rank cities and municipalities.

CMCI 2014 featured a record number of 136 cities and 399 municipalities (for a total of 535 local government units), up from 122 cities and 163 municipalities (or 285 LGUs) in the pilot run in 2013. Leading the roster of the most competitive cities were Makati, Cagayan de Oro (Misamis Oriental) and Naga (Camarines Sur), in that order. The most competitive municipalities were Daet (Camarines Norte), General Trias (Cavite),  and Kalibo (Aklan), in that order.

Awards were also given to the top three cities and municipalities per pillar. The National Capital Region swept the economic dynamism category with the cities of Parañaque, Makati and Manila taking the top spots. But the government efficiency category was dominated by cities outside Metro Manila: Naga, Iloilo and Angeles ((Pampanga). The top cities in the infrastructure category were Davao, Cagayan de Oro, and Marikina.

Among the municipalities, the most competitive for economic dynamism were Tanza (Cavite), General Trias (Cavite) and San Pedro (Laguna), all from Southern Luzon. The most competitive municipalities for government efficiency were Kalibo (Aklan), Tupi (South Cotabato) and San Mateo (Isabela). Finally, for infrastructure, the most competitive municipalities were Daet (Camarines Norte), Rodriguez (Rizal) and Paniqui (Tarlac).

Developing a competitive advantage across several variables was important for the top-ranked cities and municipalities in the CMCI.

The results highlighted the importance of being competitive in several factors, especially those which are closely examined by potential investors. It should be noted that the top three cities and municipalities for overall competitiveness also received at least one award in another category.

Moving  forward, it is important for all stakeholders to work together to build cities and municipalities that are affordable, accessible, socially acceptable, environmentally friendly, economically viable, climate-resilient, and competitive. In this way, they will be able to attract the right businesses to their city or municipality. The CMCI was designed to encourage local governments to regularly track data and eventually benchmark performance against other cities in the Asean to better manage their regions.

One final word about the Index. It is not based on public opinion surveys or boards of judges. It is based solely on statistics and data collected per LGU. In this way, we have tried to remove as much subjectivity as possible in any selection. We are hoping that this process makes it useful for both residents and outside investors to make it a basis for their decisions.

Next year we plan to double the number of LGUs we cover in the Index to 1,000 so that we will be able to generate a new one for the most competitive provinces. In the meantime, the full ranking as well as all underlying information on this year’s Index is available on our website www.competitive.org.ph.

Guillermo M. Luz (gm.luz@competitive.org.ph) is private-sector cochair of the National Competitiveness Council.