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AIM holds the 2018 World Competitiveness Yearbook results launch

Posted: 2018-05-24
Resources
Global Results
Philippine Results
The 2018 World Competitiveness Yearbook Results (J. Francisco)
Firm Creation and the Ease and Cost of Doing Business (T. Canare)
Reaction #1 (R. Fernandez)
Reaction #2 (M. Limjoco)
Reaction #3 (G. Luz)

Response to Dip in PH Competitiveness Rankings: a Commitment to Improve the Ease and Cost of Doing Business

The Asian Institute of Management Rizalino S. Navarro Policy Center for Competitiveness (AIM RSN PCC), in cooperation with the International Institute of Management Development (IMD) and with support from the Konrad-Adenaur-Stiftung (KAS) Philippines, hosted the 2018 World Competitiveness Yearbook (WCY) Results: Business Insights and Policy Recommendations last Thursday, 24 May 2018. Now on its 30th year, the World Competitiveness Yearbook (WCY) is one of the world’s leading competitiveness ranking publications. It ranks the competitiveness of countries based on four pillars – Economic Performance, Government Efficiency, Business Efficiency, and Infrastructure. WCY is published by the International Institute for Management Development (IMD), with the AIM RSN PCC as its Philippine partner.

To set the tone for the event, Ms. Tonette De Jesus, KAS Senior Program Manager, raised the following questions during her opening remarks: Why does competitiveness matter? What is the Philippine Competitiveness Ranking and what are the reasons for it? Which sub-factors drastically backslided and why?  She then briefly discussed the need to promote and enable competitiveness in the private sector; and emphasized the role of the government in creating more dynamism in the economy, enhancing human capital, and improving the business climate.

A significant drop in ranking

AIM RSN PCC Executive Director Jamil Paolo S. Francisco then presented the results of the 2018 WCY. He started by explaining that competitiveness is a ranking game – it is about performing better than one’s competitor countries. Dr. Francisco proceeded by revealing that the country ranked 50th this year, a drop of 9 places from 41st the previous year, and by discussing the details behind the ranking.

Among the pillars, Economic Performance experienced the sharpest decline from 26th last year to 50th this year. The sub-factor Employment had the biggest drop of them all, from 4th in 2017 to 32nd in 2018. Other sub-factors such as Domestic Economy (from 12th to 24th) and International Trade (from 44th to 52nd) also dropped in rankings.

Meanwhile, Business Efficiency ranking went down from 28th to 38th. The downward movement was due to declines in sub-pillars Labor Market (from 5th to 19th), Finance (from 33rd to 39th), Management Practices (from 28th to 33rd), and Attitudes and Values (from 18th to 34th).

Government Efficiency also experienced a decline in ranking from 37th to 44th. This was driven by the sub-pillars Public Finance (from 25th to 34th), Institutional Framework (from 41st to 46th), Business Legislation (from 58th to 60th) and Social Framework (from 51st to 54th).

Finally, Infrastructure remained low at 60th this year from 54th last year. The lowest-ranked sub-factors were Basic Infrastructure (61st), Scientific Infrastructure (60th) and Education (61st).

After having elaborated the results and trends derived from 2018 WCY, Dr. Francisco identified the following key competitiveness challenges for the Philippines:  

  1. Investing in quality infrastructure
  2. Increasing investment in human capital (health and education)
  3. Strengthening institutions
  4. Increasing digital competitiveness
  5. Managing inflation (in the short term)

 

Cost of doing business as an important driver of business creation

Following Dr. Francisco’s presentation, AIM RSN PCC Associate Director and Senior Economist Tristan A. Canare discussed the results of the Center’s study titled “Firm Creation and the Ease and Cost of Doing Business”. Using data from Philippine cities and municipalities from 2011 to 2015, the authors tested for the relationship between business creation, and the ease and cost of doing business.

The results provide evidence that the overall ease and cost of doing business is associated with business creation, but the relationship becomes more apparent with disaggregation. Lower financial cost of doing business is a much stronger predictor of business creation than time and administrative cost of doing business.  The relationship between business creation and the ease and cost of doing business also changes across city and municipal income levels. Among the poorest municipalities, ease and cost of doing business loses its importance as a determinant of business creation; governance indicators become more important.

 

Wake up call for government and business

Reactors from the private sector were then asked during a reactors’ session to give their responses to the preceding presentations.  

Mr. Ramoncito S. Fernandez, the President of the Management Association of the Philippines (MAP), mentioned that MAP priority programs are geared towards improving competitiveness rankings, specifically, (1) ease of doing business and competitiveness, (2) managing business disruptions and (3) data privacy and cyber security. On behalf of MAP, he expressed their support towards government reforms such as the TRAIN phase 1 and the upcoming TRAIN phase 2, and amendments to certain provisions in the 1987 Philippine Constitution, to name a few. MAP has also acknowledged the age of disruption and has made it its theme for 2018.

Meanwhile, Ms. Ma. Alegria Sibal-Limjoco, the President of the Philippine Chamber of Commerce and Industry (PCCI) expressed lament by saying that declining overall competitiveness is a wake-up call for government and business. Ms. Limjoco pointed out that a right mix of macroeconomic policies and governance that support business efficiency is key to sustaining competitiveness. She mentioned that good governance in infrastructure, agriculture, and natural resources are giant steps to prosperity.

Finally, Mr. Guillermo Luz of the National Competitiveness Council (NCC) talked about the importance of competitiveness. He mentioned that the country competes for investments, trade, service exports, tourists, people (OFWs) and brand. Mr. Luz then proceeded by comparing different competitiveness rankings and noted that the Philippines is in a short-term decline in most of them. He concluded by offering lessons on how to be competitive in today’s setting. In gist, he emphasized that the competition never sleeps, and thus work-in-progress is no longer good enough. He also stressed the importance of reform, the speed of reform, transparency, good governance, and public-private collaboration to improve competitiveness.

After the responses from the reactors, Dr. Federico Macaranas of AIM, the moderator of the reactors’ session, posed questions that mostly focused on priority actions steps and ways forward to the reactors and speakers. Aside from answering questions from Dr. Macaranas, the speakers and panel reactors answered inquiries coming from the general audience.

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