Rigid labor markets and poor access to credit are among the reasons why the Philippines only had a medium level of creative productivity compared to other countries in the region, according to data released by the Asian Development Bank (ADB).
Based on the new Creative Productivity Index (CPI) developed by the ADB and the Economist Intelligence Unit (EIU), the Philippines only ranked 18th out of 24 economies. It had an overall score of 0.386.
The ADB explained that creative productivity is a requirement for knowledge-based economic development. The new index is a tool to assess how governments can foster innovation and creativity.
“The Philippines is ranked 18th out of 24 economies and has a medium level of creative productivity. On the input side, the country’s performance is average on most dimensions, but is behind on firm dynamics, owing to rigid labor markets and financial institutions, which prevent firms from accessing credit. The low-medium output score is driven by the low levels of scientific output and creative-sector goods [books and films],” the ADB and EIU said.
The index measures input and output creative productivity. The Philippines ranked 17th out of 24 countries in input and ranked 18th out of 24 in output.
Input is measured through 36 indicators on capacity and incentives for innovation such as the number of global top 500 universities in the country, urbanization rate, research and development spending, protection of intellectual property rights, and corruption and bureaucracy.
Output, on the other hand, is measured by eight indicators to measure innovation which include the number of patents filed, export sophistication, value added to agriculture, and the number of books and films produced.
“The country’s input scores are dragged down by its inadequate financial institutions [ranked in joint last place for access to credit] and inflexible labor market, although the World Bank notes that the cost of firing workers is lower than in Indonesia, Thailand and Vietnam,” the ADB and EIU said.
The CPI also revealed that while the Philippines did well in competition and human capital, which are under creative productivity input, issues still surround the sanctity of contracts and the dominance of family-owned conglomerates.
“Despite the fact that policy-makers are broadly in favor of private enterprise and competition, concerns linger over the sanctity of contracts and the influence of the country’s family-owned conglomerates,” ADB and EIU said.
Further, ADB and EIU said that while the country was doing well in terms of the enrollment ratio of students in technical and vocational programs, and of tertiary students in science, the Philippines suffers from brain drain.
The report stated that around two-thirds of the 1.5 million people who depart the Philippines each year are skilled or semi-skilled workers.
“This [good enrollment ratio, etc.] masks the fact that the country suffers from brain drain, with many technically skilled Filipinos emigrating to work in countries where wages are higher,” the report stated.
The report also stated that the Philippines must prioritize the number of patents and scientific publications in academic journals, and agricultural value added per worker to improve its ranking in the CPI.
It must also address the relatively low level of patents and scientific publications despite high enrollment ratios of students in technical and vocational programs and in science at tertiary level.
The report also added that the Philippines must increase its investments in retaining professionals to stop the brain drain currently being experienced by the country.
“This, combined with the large numbers of technically skilled Filipinos who take up employment abroad, including medical professionals, suggests that more investment is needed domestically to retain these workers, so that the benefits are felt at home,” ADB and EIU said.
The CPI ranks Japan and the Republic of Korea as the most efficient in the Asia and Pacific region at turning creative inputs into tangible innovation. However, Myanmar, Pakistan and Cambodia were ranked as the least efficient innovators.
On innovation inputs alone, ADB said Singapore topped the rankings with strong political institutions, protection of intellectual property, and contract enforcement.
Among Asian countries, Hong Kong, China topped the list in terms of innovation outputs due to a high level of export sophistication and its prolific film production industry.
“As countries seek to innovate to avoid middle-income traps, all governments—especially those with limited resources—need to be sure that their investments boost both efficiency and productivity, benefiting their economies and people, and move to a knowledge-based economy,” ADB Vice President for Knowledge Management and Sustainable Development Bindu N. Lohani said.
The CPI differs from existing innovation-related indices by focusing on how efficiently countries turn their creative inputs into innovation outputs rather than just the absolute level of creative inputs.
This allows countries to seek the most effective—and affordable—innovation investments. It also captures elements of creativity that are more relevant in less-developed countries, such as agricultural innovation.