Closer look into Phl competitive rank

World competitive rankings offer the Philippine government an opportunity to gauge where and how it can improve its performance in a variety of areas. Well, sometimes the self-assessment comes after some ranting, especially if the report has not been favorable.

Happily, with the recent annual report of the Switzerland-based International Institute of Management Development (IMD), our economic managers found little reason to complain with a four-notch rise in the Philippines’ standing against 62 other economies.

Yet, upon closer look, the grim reality is that the country continues to be a laggard among 14 Asia-Pacific economies that were tracked in the IMD report, placing 13th or just one rung ahead of last-placer Mongolia. The Philippines’ position remained in 13th place also in last year’s tracker.

In the IMD’s assessment using 235 indicators categorized in the four areas of economic performance, government efficiency, business efficiency, and infrastructure, all-around improvements in a number of areas contributed to raising the Philippines’ ranking to 46 from 50 last year.

The four-notch rise, in reality, is not a cause for celebration since the Philippines had already kept its overall ranking in the low 40s since 2014, only to have it drop by a staggering nine notches in 2018. And even among the 14 Asia-Pacific economies, the Philippines had enjoyed a higher rank.

What should be done?

What should our government do to regain lost points in our competitive standing?

The IMD’s World Competitiveness Report provides a gauge of the Philippines’ economic and business potential by identifying factors that affect productivity, as well as engines of and barriers to growth. Two-thirds of its data comes from established databases, while the remaining third is from its Executive Opinion Survey.

In the four major areas used by the IMD in organizing its tabulations, efforts by the Philippine government in the infrastructure sub-index continued to show the least improvement, and ranked at a low 59th place.

We should be seeing an improved performance ranking in the coming years with regards basic infrastructure, one of the five pillars in this sub-index, as the government’s P8.4-trillion Build Build Build program takes wings and accelerates.

However, more effort is needed to improve the other four pillars – technological infrastructure, scientific infrastructure, health and environment infrastructure, and education infrastructure – to be able to meet the needs of business.

Future-proofing

In particular, as the IMD report noted, investment in human capital needs to be sustained, while digital competitiveness and future-readiness has to be improved. The role of these factors cannot be underestimated with the emerging new industrial revolution dominated by cyber-physical systems and artificial intelligence in a digital age.

Our vulnerability is most pronounced in the business process outsourcing (BPO) sector, which has contributed significantly to mopping up unemployment rates over the last decade and has transformed the country into a leading provider of such services in the world.

While our executives, whose opinions were weighed in in the recent IMD report, take pride in the country’s skilled labor as well as high education levels, more soft skills improvements will be needed to future-proof our human resource.

Singapore, which has invested heavily during the recent past in advancing its technological infrastructure and retooling its labor sector, is now understandably ranked as the world’s most competitive economy by the IMD, dislodging the United States which has been too obsessed with its trade wars.

Government efficiency

While there was an improvement in the Philippine government’s efficiency ranking, much more needs to be done mainly in the area of legislation to ensure that governance will support competitiveness.

The Tax Reform for Acceleration and Inclusion Act (TRAIN), which was passed in end 2017 and took effect on the first day of 2018, is responsible for raising additional revenues to fuel the expected increase in state spending.

But the second installment of the Department of Finance’s Comprehensive Tax Reform Program, called the Tax Reform for Attracting Better and High-quality Opportunities Act (TRABAHO) that should introduce lower corporate income taxes, while rationalizing other tax incentives given to businesses operating in the country just recently passed.

The Ease of Doing Business and Efficient Government Service Act (EODB) should have helped improve the bureaucratic efficiency when it was passed mid-2018. It remains in a semi-frozen state pending the activation of the Anti-Red Tape Authority (ARTA).

Activation of ARTA, primarily with the appointment of a director general whose first and foremost responsibility would be to sign the EODB’s implementing rules and regulations, has kept crucial reforms in reducing government red tape from being executed.

The revised Corporation Code of the Philippines amending the original 38-year-old law should, likewise, complement the above law by easing some of the stringent and outdated requisites in starting and doing business in the country. This law was passed last February.

Bickering amidst urgent pending bills

More economic bills need to be churned out by the legislative, foremost of which would be the amendment of the 82-year-old Public Service Act. Business is keenly anticipating the changes that would clarify the confusing regulatory framework on electricity and water utility businesses.

However, bickering among newbies and re-elected legislators eager to get their share of the spoils of political victory may hamper the processing of other priority legislative reforms.

Having obtained the objective of super-majority position in both chambers of congress, now is the time for President Duterte to vigorously crack the whip and eliminate those that will stop his administration’s ability to provide better lives for its citizens – as he has promised repeatedly.

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