Philippines competitiveness: Don’t worry, be happy

Michael Alan Hamlin

Posted on June 10, 2012

Amid an unusual bout of optimism in the Philippines—renewed investor confidence following the conviction of former chief justice Renato Corona and strong first-quarter economic expansion of 6.4%—IMD released its annual World Competitiveness Yearbook (WCY) ranking. The Philippines fell three points from 41 in 2011 to 43 this year. Oddly, no one seemed to take much notice, except to say the ranking will improve next year.

Other than Malaysia—which is hard to explain on multiple levels—the rest of Asia suffered a similar fate, either maintaining their competitiveness ranking or falling. Malaysia moved up two notches from 16 to 14. Indonesia suffered a somewhat precipitous fall, winding up one notch above the Philippines at 42 after scoring at 37 a year earlier. Thailand, another tough competitor for foreign investment, also fell three points to 30 from 27 in 2011.

“The most competitive of the 59 ranked economies in 2012 are Hong Kong, the US, and Switzerland,” IMD’s World Competitiveness Center said in statement. “Despite all its setbacks, the US remains at the center of world competitiveness because of its unique economic power, the dynamism of its enterprises, and its capacity for innovation.” Apparently the same can be said of Hong Kong in Asia.

Hong Kong benefits from China’s decades-long but now slowing economic expansion while providing investors a base featuring a mostly level playing field and high levels of government efficiency not found on the mainland. I’m not sure that efficient but highly regulated Switzerland has much economic impact on any country other than itself, where IMD coincidentally has its main campus. Despite the survey’s real or imagined shortcomings and insights, the WCY is a closely watched indicator of global competitiveness.

This year’s WCY says some interesting things about the Philippines, which actually improved in three of four broad areas representing over 300 criteria in all. In the areas of government efficiency (from 37 up to 32), business efficiency (from 31 up to 26), and even infrastructure (from 57 up to 55) the Philippines improved perceptibly to fairly significantly. However, it fell short in dramatic fashion in economic performance, dropping steeply to 42 from 29.

Last week’s announcement of robust first-quarter growth—second only to China’s 8.1%—may help explain why the WCY announcement was met with a noteworthy yawn by analysts and the business community, whose opinions were reflected in this year’s results.

Global financial services firm Nomura—Japan’s largest brokerage firm despite a less-than-brilliantly checkered history (It’s currently under investigation for insider trading and has been under fire for its own lackluster performance.)—said in a statement that the Philippines is already addressing the issues responsible for its drop in this year’s WCY, especially economic performance. Perhaps not the endorsement desired, but probably correct in its assessment.

“The Philippines has fallen two spots to 43rd due to weak ranking in the economic performance criterion, which we think is related to last year’s under spending by the government. But now this is being reversed, so there should be improvement in future rankings,” the company said. Last year’s so-called under spending is said to be the result of efforts by the administration of President Benigno S. Aquino III to reform corrupt state bidding processes.

For anyone willing to make the effort, drilling down a bit deeper into the 2012 WCY reveals other results that are at least mildly encouraging to both business and the administration, if not at least marginally inspiring. Foremost is the high competitive ranking the Philippines enjoys for labor: It’s number one. That’s right, one. The Philippines’ deep, hardworking, service-oriented workforce is accountable for its two engines of growth: IT-BPO and overseas foreign workers. And they’re being acknowledged.

Imagine what the Philippines’ competitiveness ranking would be without them. The Philippines’ strong labor competitiveness sets it apart from its neighbors. In Southeast Asia, Thailand and Malaysia scored the next highest rankings, at four and six, respectively, for labor. Indonesia was ranked seven. The Philippines also ranked a respectable 11 in fiscal policy—better than Malaysia’s 12 but worse than Thailand (6) and Indonesia (5) —and 17 on prices. Thailand ranked 28 on prices, and Indonesia, a shameful 46.

Attitudes and values—a measure of managerial professionalism and maturity—was fair at 20, but a far cry from Malaysia’s five, which for some observers must be mystifying indeed. Malaysia has many attributes, but anecdotally, widespread management expertise isn’t one of them because opportunity is generally parceled out to government cronies on the basis of loyalty, not competence; and, educational infrastructure has been hobbled by outmoded equal opportunity policies favoring ethnic Malays.

The WCY rankings to at least some degree show perception of reality, rather than reality. That’s because most of the 59 countries ranked not only do a better job managing themselves, they do a better job selling themselves. Despite this year’s overall drop in the WCY, individual categories of competitiveness show that the Philippines is finally making progress on both fronts. That doesn’t mean it’s time to stop worrying about Philippine competitiveness.

Obviously, there’s more to be done.

(Michael Alan Hamlin is the managing director of TeamAsia and a Manila-based author. His latest book is High Visibility: Transforming Your Personal and Professional Brand. Write him at mahamlin@teamasia.com and follow him on TwitterFacebook and LinkedIn. Copyright © 2012 Michael Alan Hamlin. All Rights Reserved.)

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