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PHL found among most improved in global competitiveness index

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By Victor V. Saulon, Sub-Editor

THE PHILIPPINES placed fifth among the nine economies of the Association of Southeast Asian Nations (ASEAN) covered by the Global Competitiveness Report 2018-2019, which measures a country’s standing using a set of criteria that determine level of productivity, and 56th globally among 140 economies on the list.

As reported by the World Economic Forum, the Philippines ranks lower than Singapore — the most competitive in ASEAN and second globally — and other regional neighbors Malaysia (25th globally), Thailand (38th), and Indonesia (45th).

The global competitiveness index 2018 ranking

The latest report qualified that it is not comparable to previous reports, as the Forum has transitioned to a new methodology.

The Forum said in a statement that about 60% of the indicators used in the new index “are brand new, as we increasingly believe factors such as workforce diversity, labor rights, e-government and disruptive businesses are driving competitiveness”.

While the Philippines ranks 56th in this year’s index, applying the new methodology to 2017 yields “a 12-place rise in the ranking, one of the best performances globally”.

The Philippines’ highest score of 90 out of 100, relates to its macroeconomic stability. In the pillars of labor market, financial system, market size and business dynamism it ranks in the top 40 globally. It also ranks 12th worldwide for number of disruptive businesses and 15th for growth of innovative companies.

Its biggest challenge lies in fixing its institutions, ranking 101st, ranking at the bottom worldwide (120th or worse, in the indicators of organized crime, reliability of police services and conflict of interest regulation. Another weakness is actual innovation in the economy where it ranks 67th for innovation, with research and development expenditures (99th) and trademark applications (98th) particular areas of concern. Under the same pillar, however, it scores relatively well in terms of social capital at 21th worldwide.

ASEAN economies covered by the report are Singapore, Malaysia, Thailand, Indonesia, Philippines, Brunei, Vietnam, Cambodia and Lao PDR. Myanmar was not included.

Regionally, the Philippines is third in Labor Market behind Singapore and Malaysia, and also third in Macroeconomic Stability, also behind the two, as well as fourth in Innovation Capability and Financial Systems.

A summary of report findings was also provided in a press release of the Makati Business Club (MBC), the Forum’s partner in the Philippines.

The country placed seventh out of the ASEAN nine and 101st out of the 140 economies in the pillar of Institutions.

It was also seventh regionally in Health and Infrastructure. Its global ranking in the two pillars are 101st and 92nd, respectively. The three pillars are also the country’s weakest, MBC noted.

In a statement, MBC Chairman Edgar O. Chua said that the Philippines’ business dynamism noted in the report was primarily driven by the private sector’s mindset, in finding innovative ways to become more efficient and productive.

“We see companies integrating sustainability and innovation into their business models and harnessing the potential of technology to increase productivity — and this drives the continued growth of the Philippine economy,” he said.

“Hopefully, we will see more business-government-academe linkages to support the growth of priority sectors. This type of dynamic ecosystem has been pursued by other economies which can be improved in the Philippines.”

The Philippines’ competitive advantage or its strong pillars out of 12 in the index are its Market Size, Labor Market, Financial Systems and Business Dynamism.

Top-ranked indicators, or those within the top 10 globally, include rate of change of inflation (tied at #1 with 74 countries), insolvency regulatory framework (eighth out of 140), internal labor mobility (ninth), pay and productivity (10th).

Strong indicators highlight the private sector as a driver for innovation and competitiveness. In terms of companies embracing disruptive ideas, the Philippines ranked 12th globally, as well as 15th each in terms of growth of innovative companies and diversity of workforce.

Under Business Dynamism, time to start a business (115th out of 140), cost of starting a business (97th) and insolvency recovery rates (112th) remain indicators where the Philippines performed poorly.

“While time and cost of starting a business remain problematic factors for the business community, it is worthy to note that the Philippines ranks high in e-participation, or the use of online platforms to link government information to citizens,” Mr. Chua said.

“With the recently passed Ease of Doing Business Act, we remain optimistic that the government will be able to sustain these gains and address the concerns of efficiency in doing business.”

The report noted that in many countries, the root causes of slow growth and inability to leverage new opportunities offered by technology continue to be the “old” developmental issues of institutions, infrastructure and skills.

Two of these are among the Philippines’ three bottom-ranked pillars: Institutions, Infrastructure and Health. In ASEAN, the country consistently ranked seventh out of nine in these three pillars.

Under Institutions, which is the Philippines’ weakest pillar, critical indicators where the country ranked poorly include: terrorism incidence, homicide rate, organized crime, and reliability of police services.

Under Infrastructure, the Philippines lags in road connectivity (129th), exposure to unsafe drinking water (101st), efficiency of train services (100th) and electrification rate (100th).

Among the country’s weakest indicators are under the Institutions pillar, namely: terrorism incidence (136th), reliability of police services (123rd), conflict of interest regulation (121st) and organized crime (120th).

The report cited the Philippines as one of the countries — along with Nigeria, Yemen, South Africa and Pakistan — with problems related to violence, crime or terrorism, and where the police are considered unreliable. Across all countries, the relationship between the prevalence of organized crime and the perceived reliability of the police is strikingly close, it said.

“With WEF’s new competitiveness index, policy-makers and business leaders are guided to focus on long-term development,” Mr. Chua said.

“While we continuously build on our strong pillars, it is equally important to address our weak spots. The business community remains committed to work with the government to address these gaps, especially in our weakest links in ease of doing business, corruption incidence, and infrastructure, particularly in road connectivity.”

The MBC administered the 2018 Executive Opinion Survey, a major component of the Global Competitiveness Report, last Feb. 1-April 31.