As we begin the second half of 2013, the National Competitiveness Council would like to highlight the continued ascent of the Philippines in various international competitiveness surveys, two of which were published recently. In the Failed States Index 2013 report released last June 23 by the Fund for Peace, the Philippines moved three spots from 56th in 2012 to 59th of 178 countries. (The Index is reverse-ranked with the 178th nation as very sustainable.) This was followed shortly by the release of the Global Innovation Index 2013 report last July 1 by the World Intellectual Property Organization, Cornell University, and INSEAD. The Philippines is now ranked 90th of 142 countries, reversing a four-notch drop to 95th in 2012.

Failed States Index
    The Failed States Index annually ranks nations based on their levels of stability and the pressures which can push them towards failure. In a range that spans from Alert (for weak and failing states) to Warning to Stable to Sustainable, the Philippines maintains its Very High Warning position but moves closer to next category with a score of 82.8, up from 83.2 last year. Higher scores indicate high pressure and high risk of instability, with a maximum of 10 per indicator and 120 overall.

Among the 12 major social, economic, and political indicators measured in the study, the Philippines improved its scores in six. These were demographic pressures (such as disease and natural disasters, up 0.2 to 7.1), human flight and brain drain (up 0.3 to 6.2), uneven economic development (up 0.3 to 6.5), legitimacy of the state (measuring corruption and representativeness, up 0.3 to 7.6), human rights and rule of law (up 0.3 to 6.7), and finally, external intervention (up 0.3 to 5.5). On the other hand, drops were recorded in refugees and internally displaced persons (down 0.3 to 6.5), group grievances (measuring tension and violence, down 0.3 to 7.9), poverty and economic decline (down 0.3 to 5.6), public services (down 0.1 to 6.4), and security apparatus (down 0.3 to 8.7). There was no change in the score for factionalized elites (8).

Tied with Mozambique at 59th, we are now at the brink of breaking into the upper two-thirds of the rankings. The pressure is on to sustain this pace and move on all fronts, with the rest of the ASEAN registering gains in their overall scores. Similar to last year, the Philippines stayed as 7th of 10 in the ASEAN.

Global Innovation Index
    While the entire ASEAN advanced in the Failed States Index, only three nations moved forward in the Global Innovation Index, which ranks economies based on their enabling environment to innovation and their innovation outputs. These were the Philippines (95th to 90th), Indonesia (100th to 85th), and Cambodia (129th to 110th). With the exclusion of Laos from the survey, we are now 7th of 8 in the ASEAN, having been overtaken by Indonesia.

     Our rankings have improved in four of the seven pillars composing the index. The biggest jump was in creative outputs (108th to 91st), with significant gains on the ICT and business model (58th to 42nd) and organizational model (96th to 31st) creation sub-indicators. The two indicators measure the perceived extent to which technology is creating new business models, products, and services and new organizational models like virtual teams, remote working, and telecommuting. The remaining three pillars with improvements were institutions (132nd to 128th), human capital and research (121st to 116th), and market sophistication (106th to 95th).

Rankings dropped for the infrastructure (69th to 78th) and knowledge and technology outputs (59th to 61nd) pillars. The biggest drop was in business sophistication (down 24 from 72nd to 96th), with declines in all sub-pillars, namely, knowledge workers (62nd to 73rd), innovation linkages (70th to 87th), and knowledge absorption (79th to 105th).

Some of our higher-ranked indicators were research and development financed by business enterprise (as % of total gross domestic expenditure on research and development, 8th); high-tech and medium high-tech output (11th); market capitalization (20th); number of utility model applications filed at the national patent office (21st); communications, computer and information services exports (22nd), and graduates in science and engineering (27th). This bodes well for our booming ICT sector which is expected to generate $50 billion worth of revenues by 2016 on the back of government support and incentives.

At the tail end of Philippine rankings were ease of starting a business (125th), FDI net inflows as % of GDP (125th), political stability (130th), scientific and technical publications (133rd), gross tertiary outbound enrolment (136th), and resolving insolvency (139th).

The Global Innovation Index paints a similar picture as other competitiveness reports. The positive changes in our rankings show that our reform initiatives are a step in the right direction. However, we must continue to speed up and increase the margin of change if we want to reach top-third of overall world rankings by 2016. This means implementing long-term and high-impact reforms.