Part 2 News: Becoming More Competitive

Translating competitiveness to economic growth

This is a re-posted opinion piece.

WITHOUT doubt, the country deserves kudos for doing better in the latest Global Competitiveness Index ranking by the World Economic Forum (WEF). Our Philippines was reported to have jumped to No. 75 in the ranking of 142 economies, up from No. 85 out of 139 economies in the world in 2010.

This jump was reportedly one of the highest recorded worldwide for 2011 by the WEF, and was the highest for the country since its entry into the global competitiveness rankings in 1994. But improved competitiveness, obviously, is just the start of the game. Now that we find ourselves in the middle rung from near bottom, where do we go next?

The goal now is to use the new ranking to prompt new local and foreign investments, and thus create more jobs and provide better income opportunities for people. This way, as the economy grows, people truly benefit. The ultimate aim, of course, is to minimize, if not eliminate, poverty.

The great challenge is how to carry on the positive changes, and how to sustain them, if not improve on them, with the target of pushing the Philippines out of the developing world and onto Industrial if not the Information Technology Age. Admittedly, this is a difficult task that will take more than one administration to achieve.

Many old folks note how the country was already No. 2 in Southeast Asia in the 1960s, but somehow lost its way in the following decades. Various reasons have been put forth, but nothing more compelling perhaps than the claim that the country’s leaders lost focus and prioritized personal over national interest, with little regard for the country’s future.

In a press statement, the National Competitiveness Council (NCC) noted that the Global Competitiveness Index measured over 110 key indicators spread across 12 major categories or “pillars,” and that the Philippines recorded improvements in ranking in nine of the 12 pillars, with significant jumps in terms of “macroeconomic environment” (from No. 68 to No. 54), “technological readiness” (from No. 95 to No. 83); and “institutions” (from No. 125 to No. 117).

The council also said the key driver for the rise in rankings was the management of the macroeconomic environment. In particular, the Philippines showed improvements in its rankings on credit rating (from No. 75 to No. 63), government debt management (from No. 102 to No. 89), interest rate spreads (from No. 75 to No. 50), and management of inflation (from No. 73 to No. 69).

Another key driver was in the area of market efficiency for goods, particularly in the intensity of local competition (from No. 65 to No. 47), extent and effect of taxation (from No. 77 to No. 52), prevalence of foreign ownership (from No. 104 to No. 72), and local supplier quantity (from No. 68 to No. 52).

The remaining challenges are management of public funds, counter-corruption, legal framework, and favoritism and transparency in government decisions. Noted NCC Co-chairman Bill Luz, “Many of these indicators have begun to move in the right direction in terms of slightly improved rankings but room for improvement and gains remain.”

The other key challenge, he added, was infrastructure. While the overall ranking of quality of infrastructure improved marginally, all key infrastructure sectors remained low in rankings, particularly port infrastructure and air transport infrastructure. Also cited was the need to improve on health and primary education.

With these key challenges still to be addressed, one cannot help but wonder if the improvement in competitiveness ranking can actually be a cause for any celebration now. This is not to say that debt and inflation management are not important, but to what extent can the economy significantly grow unless there is major improvement in infrastructure, public health, public education and governance?

While the country is doing well in terms of “efficiency enhancers” such as higher education and training and market efficiency, as well as technological readiness and business sophistication, it remains challenged by the lack of the basic foundations for sustainable and inclusive economic growth, such as infrastructure and primary education.

Consider the following scores (out of 142 countries): 134 in the Number of Procedures to Start a Business;128 in Burden of Customs Procedures;128 in Public Trust of Politicians; 127 in Diversion of Public Funds; 126 in Burden of Government Regulation; 119 in Irregular Payments and Bribes; 119 in Tuberculosis Incidence; 118 in Favoritism in decisions of government officials; 113 in Overall Quality of Infrastructure; and 110 in Quality of Primary Education.

At the start of the Aquino administration in July 2010, it said it would concentrate on efforts against corruption and on improving governance. And to an extent, such single-minded focus was practically blamed for limited public spending and thus slower economic growth in the first half of 2011.

Sadly, despite such efforts, WEF rankings indicate that the country is still not doing too well in governance and in battling corruption. And though other competitiveness indicators have improved, sustainable and inclusive long-term economic growth appears to remain elusive. Indeed, the situation is challenging.

Comments to [email protected]
By: Marvin A. Tort
Source: Business Mirror, Sept. 8, 2011
To view the original article, click here.

Comment here

This site uses Akismet to reduce spam. Learn how your comment data is processed.