The Market Monitor Minding the Nation's Business
The World Economic Forum (WEF) has cited several “problematic factors” hampering the Philippines’ business environment, even as it reported that the country rose five places to the 47th spot in the recent World Economic Forum-Global Competitive Index (WEF-GCI).
The problems underscored were the country’s “high tax rates” and “complexity of tax regulations,” as well as its “inefficient government bureaucracy, inadequate supply of infrastructure and corruption.”
The WEF Global Competitiveness Report 2015 to 2016 said the Philippines obtained its highest rank on macroeconomic environment at 24th, market size at 30th, and business sophistication at 42nd. But it lagged behind on infrastructure at 90th, health and primary education at 86th and labor market efficiency at 82nd.
In Southeast Asia, the WEF-GCI ranked Singapore No.1, followed by Malaysia, Thailand and Indonesia; the Philippines was No. 5, slightly higher than Vietnam, which is relatively new in opening its market to foreign investments.
In the WEF-GCI ranking, Singapore was 2nd; Malaysia, 18th; Thailand, 32nd; Indonesia, 37th; the Philippines, 47th; and Vietnam, 56th.
The Makati Business Club (MBC), which is the WEF partner in the country, recognized the weak points in the country’s competitive ranking, and noted Vietnam was fast gaining on the Philippines. (Forty years ago, Vietnam emerged from a long drawn-out armed conflict, first with France {French Indochina war}, then with the United States and its allies, including the Philippines, that left it in shambles.)
“Placing the rankings in perspective, the Philippines placed fifth out of the nine Southeast Asian countries included in the survey. Noteworthy was that, while Vietnam ranked 68th overall and sixth in the Association of Southeast Asian Nations (Asean), it was steadily gaining on the Asean 5, garnering the highest jump among Southeast Asian countries with a 12-place improvement,” MBC said.
Asean 5 is composed of the original members of the association: Indonesia, Malaysia, the Philippines, Singapore and Thailand.
The Philippines ranked 16th among the 19 members of the Asia-Pacific Economic Cooperation (Apec) included in the survey.
From last year, the country moved up in 10 out of 12 pillars in the index, with the largest improvements in labor-market efficiency (up by nine places to 82nd), health and primary education (up six places to 86th), and market size (up five places to 68th). What is noteworthy, however, is that since 2010, the strongest performing pillars for the Philippines were in innovation (up 63 places to 48th), institutions (up 48 places to 77th), and macroeconomic environment (up 44 places to 24th)—pillars that lay the groundwork for long-term, sustainable growth.
MBC said it recognized the “problematic factors” cited by the WEF-GCI. “These are supported by poor performances in the burden of government regulation (down 28 places to 101st), efficiency of legal framework in challenging regulations (down 24 places to 80th), quality of overall infrastructure (down 11 to 106th), and prevalence of diversion of public funds (down 22 to 100th), among others.” In terms of information-technology infrastructure, dropping in ranks were the availability of latest technologies (down 20 to 78th) and international Internet bandwidth (down 30 to 76th).
“These three factors are among the priority areas of focus by the Philippine Business Groups and Joint Foreign Chambers (PBG-JFC) in the letter sent to the President last May,” MBC said.
The PBG-JFC recommended the nationwide implementation of a National Competitiveness Council initiative to reduce the number of steps to establish a business here, more intensified efforts to implement critical infrastructure projects, and the enactment of the Department of Information and Technology Act, the Freedom of Information Act and the PPP Act.
“We are very happy with the upgrade, but realize that we need to maintain momentum,” National Competitiveness Council (NCC) Co-chairman Guillermo M. Luz said. “We have risen 38 spots in the last five years, but more work needs to be done.”
Philippine Chamber of Commerce and Industry (PCCI) President Alfredo Yao said the country’s improvement in the GCI could make the Philippines more attractive to foreign investors.
“It’s good news. Still, we look forward to some more improvements, like fine-tuning investment laws,” the PCCI chief added.
The lowest ranking that the Philippines got was in infrastructure—90th place.
The criteria covered the quality of roads, railroads, ports and air-transport infrastructure, among others. These were practically the same reasons cited as to why the Philippines had also lagged behind other Asean economies in the inflow of foreign direct investments (FDI).
In its latest report, the Bangko Sentral ng Pilipinas (BSP) said that, as of the first half of this year, net FDI inflow into the country reached only $2.02 billion, down 40.1 percent from the same period in 2014.
In contrast, FDI inflows to Indonesia for the first half of 2015 amounted to $13.66 billion, the highest in the region. The amount corresponds to 31 percent of all FDI that flowed into the region.
Data from financial sources showed that, in the first half of 2015, Vietnam garnered $7.53 billion, while Malaysia got $7.01 billion, or 17 percent and 16 percent, respectively, of the FDI inflows to Southeast Asia.
The recently released Open Markets Index (OMI) of the International Chamber of Commerce (ICC) has ranked the Philippines among those in the bottom of the 75 economies it assessed.
The Philippines is still deemed by the international investor community to have trade restrictive measures and a protectionist regime, the ICC said. LUIS LEONCIO