Expert conference

Philippines Competitiveness Still Needs To Be Improved



On July 19, Konrad-Adenuauer-Stiftung partner the AIM Policy Center (APC) marked its 10th year of involvement with the World Competitiveness Yearbook (WCY) with the holding of the State of Philippine Competitiveness 2006 National Conference at the Sofitel Philippine Plaza. Every year the Konrad-Adenauer-Stiftung works with the APC to publish the WCY’s analysis and ranking of the abilities of economies and regions to create and maintain an environment conducive to the competitiveness of its enterprises, as well as the APC’s Philippine specific analysis of the results. This year, in addition to presenting the results of the annual study and prospective directions for the country, APC invited luminaries from the Creative Industries Sector to speak on how the convergence of art-business-innovation might turn the sector into a main driver of the country’s economy.

The conference began with new AIM President Mr. Francis G. Estrada announcing that the Philippines had maintained its position as the 49th most competitive economy in the world, despite drops in terms of economic performance (41st to 52nd), business efficiency (38th to 44th), infrastructure (55th to 56th) and a slight improvement in government efficiency (47th to 45th). The study covers the performance of 61 countries and regional economies in 2005.

Estrada noted that according to the study, the Philippines ranks high in the following domains: cost-of-living index (1st), real short-term interest rate (2nd), consumption tax rate (6th), collected total tax revenues as percentage of GDP (7th), compensation levels (4th), working hours (5th), remuneration in services professions (6th), high-tech exports as percentage of manufactured exports (1st) and investments in telecommunications as percentage of GDP (9th).

The Philippines scored poorly, however, in terms of: GDP per capita (59th), GDP (PPP) per capita (58th), relocation of production (55th), consumer price inflation (54th), employment (54th), risk of political instability (60th), bribing and corruption (60th), custom’s authorities and efficient transit of goods (59th), independence of public service from political interference (59th), country credit rating (58th), brain drain (58th), value traded on stock markets (58th), overall productivity (57th), country image abroad (57th), foreign high skilled people attracted (57th), pupil-teacher ratio (61st), dependency ratio (60th), total health expenditure (60th), total public expenditure on education (60th), and total expenditure on R&D (60th).

Several Asia-Pacific economies figured prominently in the rankings. Hong Kong and Singapore were shown to be gaining on the US, remaining at 2nd and 3rd, respectively. China, India, Japan, and Malaysia posted the biggest gains while Korea and Thailand suffered from drastic declines in competitiveness. Overall, the Asia-Pacific region’s performance boosted its position as the new driver of global economic growth. The Philippines remained as the 14th most competitive economy out of the 15 Asia-Pacific economies included in the study.

The AIM Policy Center listed the following challenges for the Philippines for the year 2006: (1) the need to undertake capacity-building for regulatory agencies to ensure transparency, non-discrimination and procedural fairness; (2) the need to improve the quality of basic education to further promote human capital development; (3) the need to make progress on a clear and coherent population policy; (4) the need to improve the distribution of infrastructure -- faster turn-around times and lower transaction costs; and, (5) the need to accelerate the implementation of e-governance projects to promote transparency and to facilitate trade.

The AIM Policy Center noted that in 2005 the threats to Philippines competitiveness outweigh the gains. Improvement in terms of government efficiency was attributed chiefly to the likelihood of improvement in the management of public finances, reforms in tax measures, real short-term interest rate (real discount/ bank rate), central bank policy’s positive impact on economic development, and gender related issues. Decline in the other indicators presaged a much longer term negative effect on the country’s ability to compete. The Philippines’ dismal performance in the domains of education, basic infrastructure, technological infrastructure, scientific infrastructure, health and environment, and corruption were considered particularly alarming and unless immediately addressed predicted to result in irreversible damage. Education or the lack thereof, for example, could disrupt the country’s labor advantage. Poor infrastructure, as another example, could retard the economy’s ability to innovate and further develop its high-tech industry.

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Philippine Plaza, Manila


Klaus Preschle