THE government must accelerate the rollout of its infrastructure program if it wants to see its competitiveness ranking improve in the next years, as rival economies continue to develop their business environment at the Philippines’s expense.
In the IMD World Competitiveness Ranking 2018, the Philippines scored a dismal 64.66 points, and slipped to the 50th spot from 41st last year in a list of 63 economies. Among the 15 Asia-Pacific countries in the survey, Manila also dropped to 13th from 11th in the previous year.
The country lost grip in all four major indicators of the rankings, and suffered the worst drop in the economic performance factor to 50th from 26th last year. The survey took note of the surging GDP growth of the Philippines, but this was overpowered by the doubled current-account deficit, slow expansion of foreign direct investment inflows and the depreciation of the peso against most major currencies in the previous year. Manila’s government efficiency also slid to 44th from 37th last year, as investors reported they were uncertain of the country’s public finance, institutional framework, business legislation and societal framework.
Only tax policy won the respondents’ nod, owing to the passage of the Tax Reform for Acceleration and Inclusion (TRAIN).
Meanwhile, the efficiency of Philippine firms also slipped by 10 notches to 38th from 28th last year, according to the rankings. This was owed to the declines in financial performance, labor market, attitude and values, and management practices—all leading to the country’s near-bottom performance in overall productivity and in labor productivity.
For the longest time, infrastructure has been the Philippines’s headache in the survey, and is down to 60th from 54th in the previous year. The country was among the three lowest scorers in basic infrastructure, scientific infrastructure and education infrastructure.
The survey had the United States returning as the most competitive economy in the rankings, followed by Hong Kong, Singapore, the Netherlands, Switzerland, Denmark, the United Arab Emirates, Norway, Sweden and Canada. Those in the bottom were mostly economies facing either political instability or economic upheavals, including Venezuela,
Mongolia, Croatia and Brazil.
The IMD rankings also monitored competitiveness in five member-states of the Association of Southeast Asian Nations. Singapore was the most competitive Asean economy, followed by Malaysia at 22nd, Thailand at 30th, Indonesia at 43rd and the Philippines at 50th.
In a policy brief by the Rizalino S. Navarro Policy Center for Competitiveness, research arm of the Asian Institute of Management, the government is urged to fast-track the “Build, Build, Build” program to address the competitiveness gap of the country. This should be done alongside the development of social infrastructure, mostly on labor improvement and education.
“This [low placing in survey] reflects the need to address poor infrastructure in the Philippines, not just physical infrastructure that the current administration’s ‘Build, Build, Build’ program seeks to address, but also social infrastructure that promotes human capital formation, such as education and research and development. Good infrastructure promotes competitiveness by connecting markets and production sites, improving the flow of information and technology and reducing the costs of production,” the paper read.
“Poor infrastructure limits many possibilities in the Philippines. As an example, airport congestion, poor condition of roads and inadequate public transportation prevent full maximization of the potential of tourism. It also hinders businesses from reaching potential markets and consumers from reaching all alternative suppliers of goods and services,” it added.
The policy brief suggested that the government increase its investment in human capital, in order to improve labor productivity—one of the country’s drawbacks in the rankings. It also underlined the need for the government to retool the skill set of its workers to swim along the changes brought about by industrial reforms.
Last, the policy brief told the government to strengthen its institutions that will allow Manila to compete with its Asean neighbors on ease and cost of doing business, quality of governance, implementation of the rule of law and fighting corruption. The paper also suggested boosting digital competitiveness and managing well the short-term inflation.
Image credits: Alysa Salen