RP remains a laggard in global competitiveness

A WEEK ahead of President Gloria Macapagal-Arroyo’s State of the Nation Address wherein she is expected to trumpet the gains of the economy, a survey among 55 countries finds the Philippines continuing to lag behind in terms of global competitiveness.

From 42nd place last year, the country slipped further to 45th place in the World Competitiveness Yearbook (WCY) rankings which the Swiss-based Institute for Management and Development (IMD) releases every year. Based on four main factors: economic performance, government efficiency, business efficiency and infrastructure, the WCY rankings aggregate a mix of indicators, two-thirds of which are quantitative data monitored by IMD’s global network of partner institutes — the Asian Institute of Management (AIM) Policy Center in the case of the Philippines — and one-third coming from the results of the Executive Opinion Survey.

This is the lowest ranking in global competitiveness obtained by the Philippines in five years and only demonstrates that improvements will require sustained measures over the long-term. The AIM Policy Center highlights strengthening the nation’s human resources, beginning with improvements in primary education, along with four other recommendations for turning around the country’s lagging competitiveness.

(Click here for the Philippines’s competitiveness profile.)

The Philippines achieved impressive results on a number of indicators: female representation in society (1st), high-tech exports (1st), cost-of-living index (2nd), stock market index (3rd), compensation levels (4th), labor market costs (4th), labor productivity (7th), investment in telecoms (7th), exports of commercial services (8th), and openness of the national culture to foreign ideas (9th).

However, the 54th-place ranking in GDP per capita shows clearly that economic growth in the Philippines is not keeping pace with other countries. Another poor ranking, at 53rd, was due to the absence of economic diversification.

Poor rankings for institutional framework, business legislation and especially for public finance meanwhile contributed to the “Government Efficiency” ranking falling from 39th to 47th. Education and scientific infrastructure both also registered declines this year, with the Philippines ranking 54th in primary education and 55th for its pupil-teacher ratio in primary education.

In response to the poor WCY ranking, the AIM Policy Center has articulated five main challenges for the Philippines in 2007. These involve:

• Further developing policies that ensure cost competitiveness and self-sufficiency in energy sector;

• Fast-tracking implementation of key infrastructure projects;

• Accelerating simplification and streamlining efforts to reduce transaction costs and make it easier to start and run businesses;

• Formulating a regulatory framework that ensures balance between protection and enablement, guarding against unfair competition and giving more freedom for foreign companies to acquire control in domestic companies;

• Adopting measure to address the education-skills gap.

“Everything starts with human resources,” says Dr. Federico Macaranas, executive director of the AIM Policy Center, which strongly advocates for education spending as the biggest infrastructure priority.

“To have a booming economy and for business to flourish, human resource capability must be addressed as it provides the needed component to support businesses, the economy and eventually towards global competitiveness,” he says.

Ambassador Cesar Bautista, co-chair of the National Competitiveness Council (NCC), also reiterates the call to improve human resource competency, particularly through primary education, as the biggest priority for competitiveness.

More training in technical skills and entrepreneurship are needed, says Bautista, who stresses that English, science and math should be the foundation. He pointed to better and more teacher training as one measure which would lead to improved math, science and English competency in students.

Bautista also suggests: (1) ensuring that more teachers specialize in English, science and math, (2) unifying and increasing private sector efforts to train teachers over Christmas break, and (3) pursuing measures to make teaching a more attractive profession.

That 30 percent of children leave school before completing four years, notes the ambassador, is a very costly waste of human resources. Bautista blames a lack of nutrition for the difficulty which many children have succeeding in school. The NCC endorses a school feeding program as a supplement for the first three to four years. This program would provide national coordination for the private sectors existing efforts, which have resulted in three to four sponsors for some schools while others have none.

When asked if building roads and bridges would not have more immediate benefits than education spending, Macaranas warned that “countries that do not look too far into the future are condemned to always be dealing with short-term problems.”

“To overcome short-term thinking, we need to provide education which will empower the Filipino people to think for themselves, making them believe that they can makes changes in the long-term,” he says.

To prove his point, Macaranas cites China’s incredible progress since it changed from closed Communism to being open, which resulted in empowering the Chinese people to respond to opportunities, including free markets.

Macaranas says that though the Philippines is graduating lots of well-trained people, we have yet to learn how to keep them in the country. The NCC wants to make it attractive to stay in the Philippines by providing opportunities here. This challenge needs to be approached with creativity and entrepreneurial spirit, he suggests, by empowering Filipinos “to think of alternatives that they can do here rather than going abroad.”

For example, many scientists go abroad to receive funding because scientific research is not supported by legislation — a reflection of the lack of scientific infrastructure that the WCY survey pointed to as one of the Philippines’s biggest weaknesses. However, Filipino scientists have shown they can spawn new industries from natural resources — take coco-chemicals, and pharmaceuticals from flora and fauna for example — if only given adequate research funding.

“It all comes back to improved human resource capacity and utilization,” reminds Macaranas.

Download the reports from each of the NCC working groups outlining the public-private partnerships undertaken in the past year, and linking the results from the 2007 WCY to specific action priorities for the coming year:

• Competitive Human Resource
• Efficient Public and Private Sector Management
• Effective Access to Financing
• Improved Transaction Costs and Flows
• Seamless Infrastructure Network
• Energy Cost Competitiveness and Self-Sufficiency

Philip Ney is a senior political science and economics student from the University of Lethbridge in Alberta, Canada. He is taking summer internship credits with the PCIJ.