By Bernie Cahiles-Magkilat
The Philippines just moved up one spot to 45th place this year from 46th last year among 63 countries ranked for their overall competitiveness and ability to generate prosperity with little improvement on major indicators, according to the World Competitiveness Ranking 2020 (WCR) conducted by the Swiss-based Institute for Management Development’s (IMD) Business School.
The IMD World Competitiveness Ranking 2020 used four parameters to gauge the overall competitiveness of a country. Economies are ranked on economic performance, government efficiency, business efficiency and infrastructure, with various sub-markers within each of these four categories.
Competitiveness is defined as “ability of a nation to create and maintain an environment that sustains more value creation for its enterprises and more prosperity for its people.”
Overall, Singapore retained its number one position as the most competitive country for the second year in a row followed by Denmark, Switzerland, the Netherlands and Hong Kong SAR showcasing the strength and versatility of small economies which have performed well against larger ones. With the exception of Singapore, Philippines, Taiwan and the Korean Republic, most Asian economies dropped in rankings this year.
Based on the report, despite the Philippines moving up one spot in the overall ranking, it did not improve in any of the four main factors or dimensions of competitiveness when taken individually. Economic Performance declined by six notches from 38th to 44th; Government Efficiency went down one spot from 41st to 42nd, and Business Efficiency declined from 32nd to 33rd.
On economic performance, the Philippines ranked higher in employment at 26th and 30th on domestic economy, but ranked poor at 43rd on international investment, 44th on prices, and 48th on international trade.
On government efficiency, the Philippines also ranked higher on tax policy at 14th and ranked middle at 37th for public finance, but lower at 48 for international framework, 53th for societal framework and down below at 57th for business legislation.
The country also performed better in business efficiency with labor market at 10th place although productivity and efficiency was down at 45th. It also ranked 37th for finance, 29th for management practices and in the middle level at 33rd for attitudes and values.
The Philippines did not also improve in the infrastructure measure, which was a big drag as the country ranked bottom in all indicators under it. The country ranked 48th on technological infrastructure, 60th for basic infrastructure, 59th for scientific infrastructure, 55th for health and environment and 61st for education.
Dr. José Caballero, Senior Economist at IMD World Competitiveness Center, said in an email interview with the Business Section of Manila Bulletin that the Philippines’ slight improvement from 46th to 45th is mainly due to an increase in international trade and a steady performance of its labor market. The improvement also reflects an increase in overall productivity and efficiency. In addition, measures of labor market remain strong and the country boost its managements practices, particularly in terms of measures that capture the agility of the private sector and the effective use of big data and analytics by companies in their decision-making process. Increases in the overall investment in telecommunication also contributes to the country’s improvement.
But the Philippines ranked lower on the measure of infrastructure despite the huge Build Build Build program of the government.
“Our measure of infrastructure goes beyond the physical infrastructure to capture the strength of the technological and scientific infrastructure, the health and environment, and education. In that sense, the Philippines low ranking in the overall infrastructure is the result of a deficient performance in all the above elements,” said Caballero.
In the accompanying Executive Opinion Survey of the competitiveness ranking report, executives rated countries based on 15 indicators.
For the Philippines, executives showed their high regard for the local talent. It ranked higher in skilled labor with a score of 76.7 percent followed by dynamism of the economy at 67.8 percent followed by open and positive mind at 64.4 percent, high education level at 61.1 percent, cost competitiveness at 48.9 percent, access to financing at 41.1 percent and quality of corporate government at 32.2 percent, 28.9 percent business friendly environment and effective labor relations at 22.2 percent.
But the executive survey showed the Philippines scored lower with only 12.2 percent for policy stability and predictability, 5.6 percent for reliable infrastructure, 4.4 percent for competency of government, 3.3 percent for strong R and D culture, 3.3 percent for competitive tax regime and 0.0 for effective legal environment.
Based on the survey, the challenges faced by the Philippines in 2020 include mitigating COVID-19’s economic impacts and adjusting to the new normal. The country would also be challenged on the preparations for the healthcare system for possible succeeding waves of COVID-19.
Other challenges include ensuring adequate and prompt aid to vulnerable households and businesses, quickly resuming the governments BBB infrastructure investment program, and reviving business and consumer confidence.
In the context of the rankings, Caballero noted that the Philippines ranked just below Italy and India thus they can be considered as its closest competitors. Regionally, Indonesia and Malaysia, both ranking higher, can be seen as the Philippines’ competitors.
According to IMD, the impact of COVID-19 on the competitiveness ranking is partially captured in the executives’ opinions about the effectiveness of the different health systems.
In the ASEAN countries included in its sample, only Singapore (remains at 4th) and Thailand (improved from 28th to 22nd) have a positive performance in the effectiveness of the health infrastructure. Indonesia slightly declined from 36th to 38th, and the Philippines from 45th to 49th.
Malaysia experienced the largest decline in the health infrastructure (from 17th to 23rd) among ASEAN countries.
The IMD World Competitiveness Ranking has been produced every year since 1989 and is widely acknowledged as the leading annual assessment of competitiveness.