Philippines Improves in Global Competitiveness Ranking

The Philippines has moved up five places in the latest IMD World Competitiveness Report—from No. 43 in 2012 to No. 38 in 2013—according to the National Competitiveness Council (NCC). A total of 60 economies around the world were reviewed for the 2013 report. The country is ranked 11th in Asia-Pacific, up from 13th in 2011 and 2012, after overtaking Indonesia and India. The Philippines is ranked 4th out of five ASEAN economies reviewed in the report, but registered the largest gain over the last year.

The IMD World Competitiveness Report reviews four major factors – economic efficiency, government efficiency, business efficiency, and infrastructure. Each factor is further divided into five sub-factors. The 2013 report places the Philippines in the middle-third of the list and out of the bottom-third position in prior years.

The Philippines improved its ranking in three out of the four factors – economic performance (from 42nd to 31st), government efficiency (from 32nd to 31st), and business efficiency (from 26th to 19th).

The double-digit improvement in economic performance can be attributed to big gains in real GDP growth (2nd, up 23), growth in exports of goods (6th, up 53), and international trade (30th, up 25). The 6.6% GDP growth in 2012 was the second highest not only in Asia but also in the latest World Competitiveness Yearbook report. The GDP growth also boosted overall productivity growth (4th, up 43) measured as change of real GDP per person employed.

The country is also ranked 5th (up two) in stock market performance, with the continued upswing in the local index. These increases in business efficiency, however, were not accompanied by job generation. The Philippines is actually down seven places in employment (29th) and is 59th in the level of overall productivity (down one) and labor productivity (down two).

For government efficiency, gains in fiscal policy (9th, up two) and institutional framework (33rd, up three) were offset by drops in public finance (38th, down six) and business legislation (51st, down two). While reform measures seem to have begun to take effect, they must be implemented with increasing urgency and scope. The 2013 World Competitiveness Yearbook echoes the results of the 2012-2013 Ease of Doing Business Report of the International Finance Corporation and World Bank which ranked the Philippines low in global rankings on starting a business and paying taxes. The IMD World Competitiveness Yearbook now has the Philippines ranked 57th in number of days to start a business (down two) and 59th in number of procedures (down one). The National Competitiveness Council is optimistic that these will improve with the recent efforts to facilitate the ease of doing business in the country, particularly with the creation of a task force which joins the public and private sectors in promoting streamlining, transparency, and efficiency in business practices.

With a more business-friendly environment, the country hopes to attract more foreign direct investments, where it continues to trail in ASEAN. In the international investment sub-factor, the Philippines slipped one notch to 55th. The NCC is confident that this trend will reverse over time as investors begin to understand and appreciate the reforms being undertaken and the gains made. For the first quarter of 2013, there is already a sharp turnaround in capital formation, up 47.7% over the same quarter one year ago.

In addition to business regulations, infrastructure is another factor that concerns investors. It is the only factor where the Philippines registered a drop in ranking in the last year from 55th in 2012 to 57th in 2013. On account of the early data collection period for the IMD report, NCC feels it fails to account for improvements in public infrastructure spending and rollouts. In contrast to the IMD report, the first quarter 2013 economic report reflects 7.8% GDP growth with government spending up 13.2% and overall construction up 33.7%. Increased infrastructure rollouts and improved efficiency in the PPP rollouts are expected to improve performance in infrastructure.

Overall, the Philippines is moving in the right direction and its improved rankings in growth rates  are a reflection of this. Since the country still lag in actual levels of performance across a number of key fronts (e.g., investments, trade, and others), it is absolutely critical for us to maintain momentum and a pace of improvement that is faster than that of our major competitors. NCC is confident that the pace will continue to pick up. The release of strong first quarter 2013 figures of 7.8% GDP growth is an indication that the momentum continues for the Philippines.

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