Older generations of Filipinos remember when the country ranked second in the region only to Japan in terms of economic prosperity and many human development indicators. Since then the Philippines has slid progressively, left behind by Asia’s tiger economies and then by faster achievers such as Thailand. China became the world’s second largest economy only in the past four decades.
A recent report indicates that the downward trend for the Philippines continues. In the latest World Competitiveness Yearbook prepared by the International Institute of Management Development, the Philippines fell by nine notches to 50th spot among 63 economies.
It was the biggest fall for the country in the past 10 years in the competitiveness ranking, after a four-notch slide to 42nd place in 2014. It also made the country place second to the worst among 14 economies in the Asia-Pacific – a region that is home to the world’s three most competitive economies, the United States, Hong Kong and Singapore.
What accounted for the Philippines’ nine-notch drop? The explanation can help guide policy makers. The report pointed to declines in tourism and employment, concerns about the education system and the need for more investments in human capital. It also cited the inadequacy of quality infrastructure and worsening of public finances.
Based on 258 indicators, the country saw significant competitiveness declines in terms of government efficiency, economic performance and business efficiency. In sub-indicators, the Philippines ranked 61st in basic and education infrastructure, and 60th in technological infrastructure as well as business legislation.
The labor market remains one of the bright spots; the workforce has long given the country its competitive edge. But almost all the other indicators need improvement. Competitiveness rankings tend to reflect the level of development in every economy. It’s not so much that the Philippines is doing worse. There has been progress in the past decades, and the country remains one of Asia’s fastest growing economies. It’s that other countries are doing better. The nine-notch drop should ring alarm bells and give urgency to reforms.