Crossroads (Toward Philippine economic and social progress)
Philippine Star, 11 September 2013

 

Good news for the country was recently received with the release of the 2013-2014 “Global Competitiveness Index.” The Philippines ranked 59th out of 148 among the countries for which the index was calculated.

Exceptional improvement. This is not exceptional news were it not for the fact that the country moved up six notches from the previous year and 11 notches up if considered along a two-year perspective. In 2012, the country was ranked in 65th place (out of 144). In 2011, the country’s ranked 75th (out of 142).

What this suggests is that, during the two year period under review and viewed from the score of all countries ranked, the Philippines moved from the median percentile to the 40th percentile in the competitive rankings among nations.

To be 59th out of 148 is to be exactly on the 39.8 percentile among the ranks. (Divide 59 by 148 and multiply by 100, to derive percentage.) Initially in 2011, we were almost at the median point among the countries (the country was in the 52 percentile rank), and in 2012, we moved to the 45 percentile rank).

What exactly is the ‘Global Competitiveness Index’? The competitiveness index grew out of the discussions of world business leaders who meet yearly in Davos, Switzerland (the “World Economic Forum”). When they discussed the attributes of competitive nations, they struggled for operationally meaningful characteristics of highly competitive nations.

Of course, they meant nations with high standards of living, whose economic development and productivity are sustained from year to year. So, they asked for a measure of global competitiveness that could be aggregated as well as unbundled. The result was the Global Competitiveness Index (GCI) of nations.

The GCI is a composite measure of many things. The measure has evolved over time, from relatively simple attributes to a more complex set of characteristics that mimic development itself. It was built from understanding what business executives thought of a country’s ability to promote growth and high productivity.

In the first place, it is based on the results of surveys of executive business opinion. The respondent sample in this survey is from resident business and economic leaders in a country (including foreign direct investment executives). The survey questionnaire is the same among countries.

The enterprise is a huge effort involving all the countries ranked. Research institutes and business groups in each of the countries included in the ranking are engaged to coordinate the measurement effort. For the Philippines, the Makati Business Club has been undertaking the survey.

The GCI also uses information from various international think tanks and other economic and institutional, and economic data collected by multilateral development institutions.

The competitiveness index is founded on a set of around 110 variables or characteristics, most of them derived from the survey responses that could be calibrated. These characteristics are grouped under 12 broad factors, or “pillars”, of the competitiveness measure: (1) institutions; (2) infrastructure; (3) macroeconomic environment; (4) health and secondary education; (5) higher education and training; (6) goods market efficiency; (7) labor market efficiency; (8) financial development; (9) technological readiness; (10) market size; (11) business sophistication; and (12) innovation.

In turn, these 12 pillars are further regrouped into bigger headings that help to determine the growth and development among nations. The first four (pillars 1 to 4) are the basic drivers of development; the next six (that is, pillars 5 to 10), the efficiency drivers; and the last two, the innovation drivers.

The Philippine competitiveness assessment, 2013. I quote the report fully as it assesses Philippine developments, but I present their observations in terms of bullets for emphasis:

  • Advancing six positions, the Philippines ranks 59th overall. The trends are positive across most dimensions of the Index.
  • In the institutions pillar (79th), the Philippines has leapfrogged over the past years. The current government, which came into power in 2010, has made the fight against corruption an absolute priority; corruption had historically been one of the country’s biggest drags on competitiveness. There are signs that these efforts are producing results: in the ethics and corruption category, the country has jumped from 135th in 2010 to 87th this year.
  • A similar trend has been observed in the government efficiency category (75th) and elsewhere in the Index. But improvements are coming from such a low base that the country cannot afford to be complacent.
  • For instance, transport infrastructure has improved but remains in a dire state (84th), especially with respect to airport (113th) and seaport facilities (116th).
  • Similarly, the labor market has become more flexible and efficient over the years, but the Philippines still ranks a low 100th.
  • The recent successes of the government in tackling some of the most pressing structural issues are encouraging and proof that bold reforms and measures can yield positive results.

Low level of Philippine competitiveness. To show improvement in the country’s ranking does not mean that the country has reached a desirable level of competitiveness. There is a lot of work to be done not only to improve the competitiveness ranking but also to assure that sustainability of the growth and development effort is assured.

This is a worldwide ranking of competitiveness among nations and there are many highly competitive nations in other continents and regions. The East Asian region includes some of the most admired and dynamic nations in the world. Within this grouping are the highly ranked countries (GCI ranking in parentheses): Singapore (2), Hong kong (7), and Japan (9). Then we have Taiwan (12), Korea (25), China (29), all enjoying high ranks although not uniformly performing according to the “pillar” ratings that the GCI uses.

Then, we compare ourselves with the other ASEAN countries: Malaysia (24), Brunei (26), Thailand (37), Indonesia (38). These are nations with whom we naturally belong that have surpassed us in economic performance in recent decades.

Thus, the Philippine rating is quite low, especially when compared with countries in the region we belong to despite the fact that the report notes that our country today is one of the “most dynamic and rapidly improving economies in terms of competitiveness.” What we should do as a nation is to move closer to the ranks where we naturally belong, along with the big countries of ASEAN that have done well in competitiveness.

Behind the Philippines and within ASEAN are the other neighbors that are also truly trying to catch up with the rest of us: Vietnam (70), Cambodia (81), Laos (88), and Myanmar (137). If we don’t work hard doing our homework, any one of these countries can overtake us.