Philippines falls 10 notches in competitiveness list

September 28, 2016 at 16:30

“This is a 10-place decline in our Global Competitiveness Index and marks the first time in 10 years we have been using the current methodology that the country has gone down in our rankings,” the Forum said in a summary of Philippine findings e-mailed to journalists, noting that the country placed 71st in 2007.

This year’s report covered 138 economies, compared to 140 previously, since Guinea and Haiti did not have complete data for the survey.

Combined output of economies covered in the GCI accounts for 98% of global gross domestic product.

The Forum cited the Philippines as one of the larger emerging markets in East Asia and Pacific that have slipped despite making significant gains since 2007, along with Malaysia which fell seven places to 25, Thailand which slipped two notches to 34 and Indonesia which went down four places to 41.

“A consistent theme for all the region’s developing countries is the need to make inroads into the more complex areas of competitiveness related to business sophistication and innovation if they are to break out of the middle-income trap,” the Forum said in a statement that accompanied the report.

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The GCI is derived from 114 indicators grouped into 12 “pillars of competitiveness” that, in turn, form three subindices, namely: basic requirements, efficiency enhancers, as well as innovation and sophistication factors. Each economy gets a score in the range of 1 to 7, with the latter being the highest.

The Forum said that the three subindices are given different weights in the calculation of the overall GCI, depending on each economy’s stage of development.

The Philippines moved a notch higher this year, ranking 65th in the basic requirement index which consists of four pillars namely: institutions (91st from 77th place in the previous report), infrastructure (95th from 90th), macroeconomic environment (20th from 24th) as well as health and primary education (81st from 86th). While the score on infrastructure remained flat at 3.4, two of these four pillars saw slightly lower scores from the previous report, with institutions scoring 3.6 from 3.8 previously and macroeconomic environment with a grade of 5.6 from 5.7. The figure on health and primary education improved to 5.6 from 5.5.

The country moved seven rungs down to 58th in the efficiency enhancers subindex that is made up of six pillars, namely: higher education and training (58th from 63rd), goods market efficiency (99th from 80th — the lowest rank among all 12 pillars), labor market efficiency (86th from 82nd), financial market development (flat at 48th), technological readiness (83rd from 68th) and market size (31st from 30th). Only the higher education and training pillar saw a higher score of 4.6, from 4.5 previously. Three pillars got lower scores, namely: labor market efficiency (4.0 from 4.1), technological readiness (3.6 from 3.9) and goods market efficiency (4.1 from 4.2); while market size and financial market development remained flat at 4.9 and 4.2 respectively.

For innovation and sophistication factors, the Philippines fell six places to 53rd from 47th. Under the subindex, the country placed 52nd from 42nd in terms of business sophistication and 62nd from 48th in the innovation pillar. Scores in these pillars both fell to 4.1 from 4.3 and to 3.4 from 3.5, respectively.

The report also pointed to an inefficient government bureaucracy as the most problematic factor for doing business, scoring 18.8 in a range that tops at 20. This is followed by inadequate supply of infrastructure (17.8), corruption (16.9), tax rates (10.8) and tax regulations (8.3).

‘VERY DISAPPOINTING’
Business leaders called the country’s latest competitiveness ranking a disappointment.

“It is very disappointing after several years of consistent improvement in this ranking that the country has slipped at the end of the Aquino administration. However, we hope the Duterte administration can make early progress in the four top problems for doing business: inefficient government bureaucracy, inadequate supply of infrastructure, corruption and tax rates,” said John D. Forbes, senior adviser of the American Chamber of Commerce of the Philippines, in a text message yesterday.

Henry J. Schumacher, external affairs vice-president of the European Chamber of Commerce of the Philippines, shared the opinion, adding that it was “surprising” to find other Southeast Asian countries drop due to lack of innovation and business sophistication.

“The good news is that the most problematic factors: inefficient government bureaucracy, inadequate infrastructure, corruption and tax rates are on the priority list of the Duterte administration,” Mr. Schumacher said in a telephone interview.

“If these changes materialize fast, the Philippines should rise in the next survey.”

Donald G. Dee, president of the Employers Confederation of the Philippines, said in a phone interview yesterday that the latest findings should prod the government even more to improve in the various indicators.

“Ibig sabihin hindi ka puwede mag-stagnate (That means you can’t stagnate). We really have to improve if we want to keep moving up. ‘Yun ang sinasabi namin. That’s why we have to work on simplifying local business,”he said in a phone interview yesterday.

Guillermo M. Luz, private sector co-chairman of the National Competitiveness Council, zeroed in on the country’s low ranks in goods market efficiency and labor market efficiency, saying: “I think by introducing more efficiencies and competition, that number should improve.”

“The competition commission is very new. In fact, we are yet to see its impact yet. Maybe we’ll see it next year. I think for this year the number does not reflect the new PCC,” Mr. Luz said by phone, referring to the Philippine Competition Commission that was formed this year.

The Philippines’ ranking and score in labor market efficiency worsened, he said, because of “the rigidity of hire and fire policies.”

“Because it’s difficult to hire and fire, that makes it a very inefficient system. That’s why people go into contractual work: it is a response to the rigidity of the system. If we can make the system more flexible, that number would improve,” he said.

“If they stop ‘endo’ but they don’t make it more flexible, then I don’t know if the number would get better. There still has to be an alternative,” he added, referring to the practice of hiring employees for up to five months to avoid paying benefits provided to regular workers after the sixth month.

Source: www.bworldonline.com