Foundations for competitiveness

“Will the Philippines become the next Asian tiger?” This was the question Dato Timothy Ong of Brunei posed to the academic, business and political leaders from the Asean countries that he had gathered in Manila last week to take stock of regional developments in the last year.

At the close of this Asean 100 Conference, bookended by a keynote speech from Transportation Secretary Mar Roxas and an open forum with President Aquino, the overseas participants appeared cautiously optimistic that the new administration may indeed lead the country to tigerdom. They recognized that a one-year record was not sufficient to establish an irreversible growth pattern. But they also perceived the sea-change produced by the election of a president the people believed they could trust not to steal from the public coffers.

Both foreign and Filipino participants drew encouragement from the 2011-2012 Global Competitiveness Index of the World Economic Forum. The Philippines was one of only six countries that registered a double-digit improvement in its rating, as it moved from the 85th to the 75th slot and a score of 4.08 on a seven-point scale. A close look at the components of the competitiveness score indicates that the Philippines has a great deal of room for improvement, but also that it has good prospects of actually maintaining its forward momentum.

Consider, for instance, the areas where the Philippines is in the bottom 20 percent of the 142 countries covered in the report. On Public Trust of Politicians, the Philippines ranks 128th, with a score of 1.8. Often criticized as insensitive to public opinion, Singapore holds the top position, with a score of 6.4. Even Thailand, which has had its share of political instability and turbulence, is 37 places ahead of the Philippines, with a score of 2.4.

Singapore also tops the list, with a score of 5.6, on the issue of Burden of Government Regulation. The Philippine score of 2.6 is only good for the 126th slot, 13 places behind Vietnam, which is supposedly disadvantaged by a rigid communist bureaucracy. On Transparency of Government Policymaking, the Philippines holds the 120th position, with a score of 3.6, 16 places behind Cambodia. Singapore apparently has no need of an Official Secrets Act, as it claims the No. 1 slot on this category. We could use a Freedom of Information Act.

Regarding vulnerability to Irregular Payments and Bribes, the Philippines ranks 119th, with a score of 3, two places behind Cambodia. The burden of extortion victimizes the private sector, but public funds are not spared. On Wastefulness of Government Spending, the Philippines scores 2.6 for the 109th position, seven rungs behind Vietnam. Singapore, with a score of 6.1, emerges as the least wasteful in public spending.

The legal system also drags down Philippine competitiveness. On the Efficiency of the Legal System in Challenging Regulations, the Philippines places 118th, with a score of 2.8, 45 places behind Vietnam. On the Efficiency of the Legal Framework in Settling Disputes, it places 115th, with a score of 2.9, 46 places behind Indonesia. Singapore tops the list on this item with a score of 6.3.

On these seven areas for which government is accountable, the Philippines ranks last among the eight Asean countries included in the report; Laos and Myanmar were not rated. From the scores, the Philippine government comes across as wasteful, inefficient, opaque, untrustworthy and corrupt, echoing the common complaints of the private sector. But the private sector cannot cast stones without risking its own glass houses.

The Philippines ranks second to the last among the eight Asean countries on the Strength of Investor Protection (111th slot, with a score of 4) and on the Protection of Minority Stockholders’ Interests (84th slot, with a score of 4). On the first item, it is 26 places ahead of Vietnam and, on the second, nine places ahead of Cambodia.

Noteworthy, however, is its 118th place and 3.2 score—last among the Asean countries—on the Ethical Behavior of Firms. Equally intriguing, respectable scores on the Strength of Auditing and Reporting Standards (4.8 for the 62nd slot) and on the Efficacy of Corporate Boards (4.8 for the 52nd slot) accompany the low rank on ethical behavior. Philippine firms apparently receive correct information and proper guidance from the auditors and clear directions from the boards.  These apparently do not suffice to ensure their ethical behavior.

The 2011-2012 global competitiveness report exposes the dismal perception of both government and private sector performance on ethical issues. Fortunately, this is precisely the area on which both the President and business leaders have decided to focus. Even before the publication of the competitiveness report, the business sector had already mounted its Integrity Initiative, directed precisely at promoting a unified code of ethical conduct among its members. At the Asean 100 Conference, P-Noy reaffirmed his commitment to the anti-corruption program on which he had based his campaign.

If business and government can continue working together on the ethical front, we can look forward to a major improvement in the Philippines’ ratings in next year’s competitiveness report.

Edilberto C. de Jesus is president of the Asian Institute of Management.