New year, new approach

It’s a new year and, I believe, a time to explore a new (and additional) approach to improving the Philippines’ international competitiveness. We have been tracking 12 global competitiveness indices so far to check the country’s performance. In 2015, we made gains in eight of the global reports (including the World Economic Forum’s Global Competitiveness Index, Economic Freedom Index, WEF Global IT Report, WEF Travel and Tourism Report, and World Intellectual Property Organization Global Innovation Index), dropped in three (including the World Bank-IFC Ease of Doing Business Report), and are waiting for the results of the Transparency International report (which will be released later this month).

In the last five years, the Philippines has been credited with the largest jumps in selected global competitiveness rankings: +49 in the Transparency International Corruption Perception Index, +45 in the World Bank-IFC Ease of Doing Business Report, +39 in the Heritage Foundation’s Economic Freedom Index, and +38 in the WEF Global Competitiveness Index.

Our goal has been to move the country from the bottom third of world rankings into the top third. We have attained that position in two of the indices—the WEF’s Global Competitiveness Index and the Gender Gap Report (where we rank seventh in the world).

While we have moved up into the middle ranks within Asean, we remain quite a distance from our goal of being in the global top third by the end of 2016. With Asean economic integration formally in place as of end-2015, it is doubly important that we pick up the pace of reform to enable the country to move up in the competitiveness rankings. There is a high correlation between these rankings and a country’s ability to draw foreign direct investments. While we have seen investments rise, we still have much catching up to do. We have our work cut out for us.

Part of our work at the National Competitiveness Council (NCC) involves building a foundation for long-term competitiveness in the country. These involve projects like the Gameplan for the Ease of Doing Business, the City and Municipality Competitiveness Index, Business Permits and Licensing System, Performance Governance System, Islands of Good Governance, and Annual Enterprise Survey on Corruption. This work underscores our strategy that we need to work on sectoral, geographical and institutional bases to improve overall national competitiveness.

Starting this year, we will add these new projects to build up an even longer-term approach to building and maintaining a foundation for global competitiveness.

The first is Project Repeal. In the last several decades, the Philippines has piled layer upon layer of legislation and regulation across many sectors. Though no formal estimate has been made, we can assume this overregulation has increased the cost of doing business, the cost of compliance (on the part of the business community and the entrepreneur), the cost of enforcement (on the part of the government), and the opportunities for corruption (on the part of both the government and the private sector). It’s time we established a systematic review and repeal process of legislation, executive and departmental orders, and even local government ordinances and issuances so we can streamline our regulations and clean the books of unnecessary laws.

A number of countries (such as the United Kingdom, Korea, Australia and Vietnam) have attempted to do this. Australia is a good example. It has institutionalized a repeal process (cuttingredtape.gov.au) and reserved two days a year in Parliament for a mass repeal of laws or provisions of law. It has been systematic in estimating the cost of compliance (hence the savings) for business and set annual targets in terms of savings it wants to achieve. In its initial year, 2014, it surpassed its target of AU$1 billion in cost of compliance savings to the Australian economy.

We propose a similar exercise in the Philippines, dividing the work between the executive branch (Cabinet departments) and the legislative branch (Congress). The Department of Trade and Industry has started by eliminating about half of its departmental orders after finding these outdated or redundant. Relieving entrepreneurs of unnecessary regulatory burdens will spur economic growth and job generation.

A second project is the Liveable Cities Design Challenge, an urban design competition which we ran on a pilot scale in 2014 with support from USAID. With the Philippine population now hitting 104 million, it is clear that we cannot build a strong country from so few good cities. We must have a systematic way of improving urban planning and building better cities across the country. Given our size, we probably need at least 30 significantly strong cities to act as the country’s growth engines.

Last year, during the Asia-Pacific Economic Cooperation activities, we teamed up with PricewaterhouseCoopers in a study of 28 cities in Apec measured for liveability, sustainability, and competitiveness. Metro Manila and Metro Cebu were included, and both fared poorly. We need to use metrics to gauge our cities’ development and resilience against disaster, probably the most important factor for building the competitiveness of Philippine cities.

Both of these projects (as well as others we have in the pipeline) will have long-term effects on our global competitiveness. In fact they will have profound institutional impact. They will be welcome additions to our current portfolio of projects.

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