Philippine Competitiveness Improves
http://www.bworldonline.com/BW051608/content.php?id=001
RECORD ECONOMIC GROWTH and an improved image moved the Philippines up five notches to 40th place in a yearly ranking of 55 economies based on competitiveness, the country’s best performance since joining the listing over a decade ago.
While still in the bottom third of this year’s edition of the World Competitiveness Yearbook, the Philippines surpassed countries like Italy, Russia, and Greece but was still behind more affluent neighbors Thailand and Malaysia and economic powerhouses India and China.
The Philippines improved its score by more than three points to 50.478 in the World Competitiveness Scoreboard, where the highest-ranked country, the United States, got a perfect 100.
The 20th edition of the yearly ranking by Europe’s top business school, the Institute for Management Development (IMD) in Switzerland, saw Singapore within striking distance of dislodging the perennial number one, and all Southeast Asian countries on the list improving.
Philippine scores rose across the board — economic performance, government efficiency, business efficiency, and infrastructure — but the robust domestic economy and improved state finances were the main factors for the country’s improved ranking, said Ronald A. Rodriguez of the Asian Institute of Management (AIM) Policy Center, the IMD’s local partner for the yearly report.
The five-notch ascent this year erased the previous record of a three-notch gain in 2005, when the country was in 40th place. But while the latest ranking is the same as three years ago, it doesn’t mean there were no real improvements, said Mr. Rodriguez, head of the AIM Policy Center’s Global Competitiveness Program.
The Philippines was in fact given credit for improved tax collections, which has led to a surge in infrastructure spending, he told BusinessWorld.
“Policies have somewhat become more predictable, and the impression by the business sector is that the government can now manage the economy better,” Mr. Rodriguez said.
The domestic economy grew by 7.3% last year, the fastest in 31 years, while the government achieved the narrowest budget deficit in ten years at P9.4 billion, or only 0.1% of gross domestic product. This year, the government is set on balancing the budget although economic growth will be tempered by a US-led global slowdown.
Other countries also made impressive gains. Thailand moved up six places to 27th while Slovenia and Poland improved eight notches to 32nd and 44th, respectively.
The Philippines was ahead of Indonesia which rose three places 51st. Another regional peer, Vietnam, was not included in the ranking.
The World Competitiveness Yearbook is focused mainly on hard data, with two-thirds of indicators from international, regional, and national sources. A third of data is based on perception, through an opinion survey of expatriate and local managers.
The IMD report , though, is narrower in scope than the Doing Business survey of the World Bank’s International Finance Corp. where the Philippines ranks 133rd out of 178 countries.
Sergio R. Ortiz-Luis, Jr. head of the Philippine Exporters’ Confederation, agreed that the government had made headway in terms of infrastructure.
Examples are the opening of the Subic-Clark-Tarlac Expressway, the country’s longest tollway which connects two major economic zones in Luzon, and the so-called “nautical highway” of roll-on, roll-off ports.
But the government still has a lot to do in making it easier for businesses to deal with local governments as well as achieving political stability.
The Philippines’ goal is to make it to the upper third of the rankings by 2010, and the public-private sector National Competitiveness Council was created in 2006 to map out a plan.
The task force has set out goals to streamline the government and improve links with businesses, reduce transaction costs, boost human resources, lower electricity costs, improve infrastructure, and increase financing.
“We are just barely scratching the surface and yet we have already produced results,” noted Mr. Ortiz-Luis, one of the task force’s “private sector champions.”
US is No. 1
The United States remains the world’s most competitive eco-nomy but risks plunging into economic recession just like Japan in the 1990s due to structural weaknesses, the IMD report warned.
“Singapore is closing the gap with the US and 2008 might be the turning point where the US falls from its leadership of top competitors,” the IMD said in a statement.
IMD economist Stephane Garelli said the US situation bore hallmarks of Japan’s position 20 years ago, just before it slid into a decade of recession, and when the Lausanne-based institute carried out its first survey.
“The past crisis in Japan bears some resemblance with the pre-sent turmoil in the US,” he said.
In 1989, “Japan’s competitiveness seemed unassailable, with a strong domination in economic dynamism, industrial efficiency and innovation.”
“Then all hell broke loose: the stock market went into reverse in 1989, land prices collapsed in 1992, credit cooperatives and regional banks came under attack in 1994, large banks teetered on the edge of bankruptcy in 1997 and a major credit crunch occurred in 1998.”
“Does this ring a bell?,” Mr. Garelli asked.
The US economy has been badly hit by the subprime mortgage crisis and the International Monetary Fund has forecast a “mild recession” with annual growth at a paltry 0.5% for 2008.
But Mr. Garelli said the comparison with Japan was not watertight, noting that “because of its openness, resilience and entrepreneurship, [the US] always seems to find the means to reinvent itself in ways that Japan often lacks.”
Washington has also learned from Tokyo’s mistakes in some respects, particularly in supplying liquidity to embattled financial institutions, he said. — with a report from AFP
