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Philippines has to do more to be competitive—MBC

By Riza Lozada

The recently released Global Competitiveness Report 2017- 2018 of the World Economic Forum (WEF) indicated that the country has to do more to keep pace with its quickly progressing neighbors, the Makati Business Club (MBC) said.

The country went up a notch in the World Economic Forum’s (WEF) ranking to 56th out of 137 economies from 57th last year but it fell against its Association of Southeast Asian (Asean) peers as it is now 7th out of nine countries listed in the region from 5th last year.

Of the 10 Asean members, only Myanmar was not included in the WEF report. In the current regional standing, the Philippines is now below Vietnam and Brunei Darussalam, which both made large strides in their respective competitiveness rankings.

“It is good to see that we have maintained our overall competitiveness and even moved one notch higher. However, as we implement changes to improve, other countries are doing the same. In fact, Vietnam and Brunei have overtaken us this year,” MBC Chairman Edgar Chua said.

“We therefore need to do much more at a much faster pace. We call on Congress to focus on passing priority bills identified by the business sector especially the CTRP (comprehensive tax reform program) and not allow itself to be diverted by various political maneuvers like impeachment proceedings,” he said.

MBC Executive Director Peter Perfecto said the state of infrastructure is in dire need of attention and action.

“While the quality of air transport infrastructure was identified as one of the country’s greatest disadvantages, ranking 124th out of 137 countries, the quality of other infrastructure such as roads and ports stand as big disadvantages, as well,” he said.

“In fact, we trail behind our Asean neighbors in almost all measures of infrastructure. We ranked lowest in Asean in terms of Quality of Overall Infrastructure, in Quality of Roads, and in Quality of Air Transport Infrastructure,” he said.

“Implementing the plans under the ‘Build Build Build’ program is critical for the effective functioning of a growing Philippine economy,” he added.

“We cannot advance to the next stage unless our public institutions are strengthened by addressing corruption and we improve our legal and regulatory frameworks,” Chua added.

“The global competitiveness report figures on cost of terrorism, crime and violence are sources of concern and we believe that a root cause of these is poverty. We all need to work on helping government implement its 10-point socio-economic agenda and achieve a truly inclusive growth,” he added.

The MBC, which is a WEF partner in the annual survey said in 2017, the Philippine’s highest gains, based on the so-called WEF pillar of competitiveness, are in market size where it gained four notches from last year; labor market efficiency, up four notches up; and higher education and training, three notches up.

The Philippines was the only Asean member with a considerable decline in regional ranking.

Singapore remains as the most competitive in the region, despite its one-notch slide down to being third most competitive globally, now behind the United States.

In the region, Indonesia, Vietnam, and Brunei Darussalam made the largest strides in terms of rankings, with Indonesia going up five notches, Vietnam with a five-notch gain, and Brunei with the most significant improvement in the region, jumping 12 spots from its rank the previous year.

The MBC identified delays in the implementation of the comprehensive tax reform package (CTRP) as among reasons for the Philippines to lad behind its neighbors in terms of competitiveness.

Based on the WEF index, macroeconomic environment remains as the country’s highest-ranking pillar at 22nd but it slid down two spots from its 2016 ranking at 20th.

The country also slid in the financial market criteria by four notches from 48 in 2016, to 52 in 2017, but remains the third-highest pillar of the country.

Market size, the second highest-ranking pillar, has jumped four notches up, now at 27th.

Based on top-ranked indicators, the country’s competitive advantages included inflation (ranked 1st out of 137), government budget balance (ranked 24th), business impact of Malaria (26th), domestic market size index (27th), and available airline seat kilometers (27th).

Out of the 5 top-ranked competitive advantages, government budget balance slid down 7 spots from 2016, while domestic market size gained 3 notches up from the previous year.

The bottom indicators for the country, considered as competitive disadvantages, worsened in the index.

These bottom-ranked indicators include: the number of procedures to start a business (ranked last out of 137), tuberculosis incidence (126th; not in the top 5 disadvantages of the previous year), burden of Customs procedures (ranked 125th, down 4 spots from 2016), business cost of terrorism (ranked 125th, down 5 spots from 2016), and quality of air transport infrastructure (ranked 124th, down 8 spots from 2016).

Based on the Executive Opinion Survey, a major component of the Report, the most problematic factors for doing business in the Philippines also remained the same: inefficient government bureaucracy (same rank in 2016), inadequate supply of infrastructure (same rank in 2016), corruption (same rank in 2016). Tax regulations are now in 4th, a spot higher than last year, while tax rates slip one spot, now at 5th.

A big mover in the index was Indonesia which ranked 36th overall, up from 41st last year.

It improved in 10 of 12 “pillar” categories, including health, primary education and infrastructure.

And though it did not move up in the innovation category, the report praises the country as “one of the top innovators among the emerging economies,” ranking it 12th in government procurement of advanced technology products.

Vietnam, meanwhile, jumped into 55th place, up five rungs from last year and 20 places from five years ago.

The country made notable improvements in technological readiness and labor market efficiency. Trade is another big factor propelling Vietnam upward: It now ranks seventh in terms of the ratio of imports to gross domestic product, and 11th by the ratio of exports.

Other Asian winners include Malaysia, in 23rd place; China, in 27th; and Thailand, in 32nd. Each moved up a peg or two.

Japan is headed in the opposite direction: It now ranks ninth after falling for the second year in a row.

The world’s third-largest economy continues to perform well in categories like infrastructure, health and primary education, but it is struggling on the macroeconomic environment front due to massive public debt.

Singapore falls behind the United States to rank 3rd globally, but remains the most competitive economy in the region.

Hong Kong SAR is closing the gap, rising from 9th to 6th, while Japan slips back one place for the second year in a row and now ranks 9th.

The lowest-ranked performer among the region’s advanced economies continues to be the Republic of Korea, which remains 26th for a fourth consecutive year, placing

it behind Malaysia (23rd), the region’s top emerging economy, and just ahead of China (27th).

Many of the region’s advanced economies— including Korea, Hong Kong SAR, and Taiwan (China), but not Japan—and a few emerging economies have benefited from a favorable macroeconomic context.

This could be partly explained by a regional financial market stabilizing after the volatility of late 2016, although the recent escalation of tensions in the Korean peninsula has again raised uncertainty.

High levels of household debt in many advanced economies may also eventually threaten the region’s economic and financial stability.

There have been signs of a productivity slowdown among the region’s advanced economies and in China, suggesting the need for greater focus on advancing technological readiness and promoting innovation.

For instance, greater access to mobile technology in China has fostered the expansion of the “sharing economy,” which is expected to reach 10 percent of gross domestic product (GDP) by 2020.

Hong Kong SAR is the region’s only economy among the top 10 globally in technological readiness, a category dominated by European economies—but all the others, except Singapore, have made tremendous progress since last year.

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