The Philippines improved its global competitiveness ranking to No. 65 out of 144 economies this year from No. 75 the year before, although the country still trails its Southeast Asian neighbors Singapore (2nd), Malaysia (25th), Thailand (38th) and Indonesia (50th).

In Photo: Makati Business Club (MBC) Chairman Ramon del Rosario (center), and Guillermo Luz, co-chairman of the National Competitive Council (right), listen to Roberto de Ocampo, MBC vice chairman, during the Philippine launch of the World Economic Forum’s Global Competitiveness Report. Del Rosario, speaking on behalf of the MBC, later announced that out of 144 economies around the world, the Philippines was one of just 15 whose competitiveness rankings rose by double digits. From No. 75 in the 2011-2012 report, the Philippines jumped 10 places to No. 65 in the latest competitiveness rankings. The launch was held in AIM Center, Makati City. (By Nonie Reyes)

The World Economic Forum (WEF), which did the ranking on the basis of its so-called 12 pillars of competitiveness, noted that the Philippines was one of few countries that had the most improvement in this year’s ranking, and has advanced 22 places since reaching its lowest mark in 2009.

“The Philippines makes important strides this year in improving competitiveness—albeit, often from a very low base—especially with respect to its public institutions [94th, up 23 places]. Trust in politicians has made considerable progress [95th, up 33], although significant room for improvement remains. The perception is that corruption [108th, up 11] and red tape [108th, up 18] are finally being addressed decisively, even though they remain pervasive,” the WEF report that was released on Wednesday afternoon said.

Malacañang promptly welcomed the report. “These significant gains in the competitiveness of the Philippines are concrete affirmations of the success of the reforms which we continue to implement and foster,” Palace Spokesman Edwin Lacierda said in a statement. 

The Philippines also showed marked improvement in its macroeconomic environment (36th, up 18) and market size pillar (35th).

WEF said the country’s financial sector has become more efficient and increasingly supportive of business activity (58th, up 13). But WEF said many weaknesses still have to be addressed, including the country’s infrastructure that remains in “dire state, particularly with respect to sea [120th] and air transport [112th], with little or no progress achieved to date. Furthermore, various market inefficiencies and rigidities continue, most notably in the labor market [103rd].”

WEF partnered with the Makati Business Club (MBC) in conducting its study for the Philippines.

In a statement, MBC Chairman Ramon del Rosario Jr. said the Philippines was one of just 15 economies whose competitiveness rankings rose by double digits. “This is the second straight year that the country climbed 10 places up the competitiveness ladder: last year, the country improved from No. 85 to No. 75.”

The Global Competitiveness Report ranks national economies based on the Global Competitiveness Index (GCI), which measures the microeconomic and macroeconomic pillars that determine national competitiveness.

As inputs for the GCI, the WEF uses both publicly available data, and data gathered through the Executive Opinion Survey, which is a comprehensive survey conducted each year by the World Economic Forum with the help of its partner institutes.

WEF subdivided the 12 pillars into three categories. The “basic requirements” index include institutions, infrastructure, macroeconomic environment, and health and primary education.  The “efficiency enhancers” rated higher education and training, goods market efficiency, labor market efficiency, financial market development, technological readiness, and market size. The “innovation and sophistication factors,” on the other hand, measured business sophistication and innovation.

WEF said that although all 12 pillars matter to a certain extent for all countries, the relative importance of each one depends on a country’s particular stage of development.

“To implement this concept, the pillars are organized into three subindexes, each critical to a particular stage of development. The basic requirements subindex groups those pillars most critical for countries in the factor-driven stage. The efficiency enhancers subindex includes those pillars critical for countries in the efficiency-driven stage. And the innovation and sophistication factors subindex includes the pillars critical to countries in the innovation-driven stage,” it said.

The Philippines ranked 64th in innovation and sophistication factors, placing 49th in business sophistication and 94th in innovation. The country ranked 61st in efficiency enhancers, taking the 64th position in higher education and training, 86th in goods market efficiency, 103rd in labor market efficiency, 58th in financial market development, 79th in technological readiness, and 35th in market size. Its ranking in basic requirements was 80th, and placed 94th in institutions, 98th in infrastructure, 36th in macroeconomic environment, and 98th in health and primary education.

With these ratings in the 12 pillars, WEF put the Philippines in a 17-nation group that is transitioning from being factor-driven (Stage 1) to becoming efficiency-driven (Stage 2) economies.

Stage 1 or factor-driven economies include 38 countries. Economies in the first stage are mainly factor-driven and compete based on their factor endowments—primarily low-skilled labor and natural resources. Nineteen companies compete on the basis of price and sell basic products or commodities, with their low productivity reflected in low wages. Maintaining competitiveness at this stage of development hinges primarily on well-functioning public and private institutions, a well-developed infrastructure, a stable macroeconomic environment, and a healthy work force that has received at least a basic education.

Stage 2, on the other hand, included 33 economies including China, Indonesia and Thailand. Economies in this stage of development must begin to develop more efficient production processes and increase product quality because wages have risen and they cannot increase prices. At this point, competitiveness is increasingly driven by higher education and training, efficient goods markets, well-functioning labor markets, developed financial markets, the ability to harness the benefits of existing technologies, and a large domestic or foreign market.

Caught in between Stage 2 and Stage 3 are 21 economies, including Brazil, Malaysia, Mexico and Russia.

In Stage 3 or innovation-driven economies are 35 countries, including the United States, most European countries, Japan, Korea, Singapore and Taiwan. In this stage, wages will have risen by so much that they are able to sustain those higher wages and the associated standard of living only if their businesses are able to compete with new and/or unique products, services, models and processes. At this stage, companies must compete by producing new and different goods through new technologies and/or the most sophisticated production processes or business models.

WEF said aside from Singapore, other Southeast Asian economies did well in the survey. “The developing nations of Southeast Asia are not yet competitiveness champions, but their group performance is quite remarkable. Led by Malaysia, all these economies achieve a GCI score above 4.0, the theoretical average of the GCI, and none of them falls into the lowest, dark-blue category.”

“As in previous years, this year’s top 10 remain dominated by a number of European countries, with Switzerland, Finland, Sweden, the Netherlands, Germany and the United Kingdom confirming their place among the most competitive economies. Along with the United States, three Asian economies also figure in top 10, with Singapore remaining the second-most competitive economy in the world, and Hong Kong SAR and Japan placing ninth and 10th,” WEF said.

original source: businessmirror.com.ph (Max V. De Leon)