The Market Monitor Minding the Nation's Business
By Luis Leoncio
Judging by the result of the World Economic Forum (WEF) annual review through its Global Competitiveness Index (GCI), the last year of President Aquino was a disappointing flop, as the Philippines, out of 138 countries, slipped 10 notches to rank 57th on competitiveness, from 47th place last year.
Aquino had trumpeted claims that his administration was responsible for much of the economic gains for the country and improved business perception.
The GCI survey period for 2016 to 2017 was conducted prior to the May 9 national elections that President Duterte won.
The survey showed that the most problematic factors for doing business in the Philippines were “inefficient government bureaucracy, inadequate supply of infrastructure, and corruption.”
The country’s score dropped from 4.39 to 4.36 out of a perfect seven, but it was enough to result in a huge fall for the country in the ranking.
“The world is so competitive that even small changes make a big difference in ranking,” said businessman Guillermo Luz, NCC private-sector co-chairman, in a statement.
The GCI measures a country’s competitiveness, or the set of institutions, policies, and factors that determine its level of productivity, through 12 pillars.
Among the 12 pillars, the country had low rankings in goods market efficiency at rank 99, infrastructure at rank 95, and institutions at rank 91.
The Philippines had notable rankings in macroeconomic environment at 20th place and market size at 31st place.
Luz, however, admitted the latest ranking brought the country away from its goal of being in the top-third of global rankings.
“We will need to focus even more on our challenges — bureaucracy, infrastructure, technology, and innovation—to make the country more competitive,” Luz said.
Aside from the Philippines, the rankings of other Southeast Asian countries have also declined.
The report showed that the Philippines had the biggest slide in the region.
Malaysia dropped out of the top 20, falling seven places to 25 from last year’s 18th place, while Thailand dropped two notches to rank 34 and Indonesia fell four places to 37.
“A consistent theme for all the region’s developing countries is the need to make inroads into the more complex areas of competitiveness related to business sophistication and innovation if they are to break out of the middle-income trap,” the report noted.
For the eighth consecutive year, Switzerland ranked as the most competitive economy in the world, narrowly ahead of Singapore and the United States, followed by the Netherlands and Germany. The latter climbed four places in two years.
The next two countries, Sweden (6) and the United Kingdom (7) both advanced three places, with the latter’s GCI score being based on pre-Brexit data. The remaining three economies in the top 10—Japan (8), Hong Kong SAR (9) and Finland (10) all moved backwards.
While European economies continued to dominate the top 10, there remains no end in sight for the region’s persisting north-south divide.
Spain improved by one point, climbing to 32; however, Italy dropped back one place to 44, and Greece reversed 5 places to 86. France, the Eurozone’s second largest economy, climbed one place to 21. For all the economies in Europe, maintaining and improving prosperity levels would depend heavily on their ability to harness innovation and the talents of their workforces.
There is some sign of convergence in the competitiveness of the world’s largest emerging markets.
China, on 28, remained top among the BRICS (Brazil, Russia, India, China, and South Africa) grouping although another surge by India—which climbed 16 places to 39—means there is now less of a gap between it and its peers. With both Russia and South Africa moving up two places to 43 and 47, respectively, only Brazil was declining, falling six places to 81.
The competitiveness gap in East Asia and the Pacific, meanwhile, has widened. Although 13 of the 15 economies covered consecutively since 2007 have been able to improve their GCI score over the past decade, this year saw reversals for some of the larger emerging markets in the region.
A consistent theme for all the region’s developing countries is the need to make inroads into the more complex areas of competitiveness related to business sophistication and innovation if they are to break out of the middle-income trap.
The drop in energy prices has heightened the urgency of advancing competitiveness agendas across the Arab world. With three economies in the top 30—the United Arab Emirates (16), Qatar (18), and Saudi Arabia (29), there remains a clear need for all energy-exporting nations to further diversify their economies and for a much greater effort to improve basic competitiveness among the region’s energy-importing nations.
Two countries in Latin America and the Caribbean made it to this year’s top 50. Chile, the outlier in the region on 33, climbed two places, although the gap was closing with the second-highest ranked economy, Panama (up 8 places to 42). Next came Mexico, which performed strongly with a 6-point climb to 51. Argentina and Colombia, the third- and fourth-largest economies in the region, ranked 104 and 6, respectively.
One of the most improved nations in sub-Saharan Africa was Rwanda, which rose 6 places to 52. It is closing in on the region’s traditionally most competitive economies, Mauritius and South Africa, although both these countries registered more modest improvements, climbing to 45 and 47, respectively. Lower down the ranking, Kenya climbed to 96, Ethiopia held steady at 109 while Nigeria slipped three to 127.