RP not doing bad, given adverse environment

Editor’s note: Elmer Hernandez is the undersecretary for Industry and Investments at the Department of Trade and Industry. Following is his reaction to the competitiveness report.

Overall, 2009 will be about achieving a flat trend in competitiveness rating because of the global financial crisis.

In the International Institute for Management Development (IMD) World Competitiveness Yearbook 2009 released by the Asian Institute of Management (AIM), the Philippines slid marginally from 40th to 43rd position out of 57—not bad, considering the adverse environment that dropped Taiwan, Greece, Ireland, Spain, among others, by five to 10 slots.

Note that the number of countries included in the survey increased by two, with the inclusion of Qatar and Kazakhstan, and that one of our neighbors, Indonesia, improved its ranking by 13 notches.

Take note, too, that both Qatar and Kazakhstan have relatively smaller populations than the Philippines and have oil and natural gas revenues to perk up their economies.

Most of our weaknesses are in the so-called social indices brought about by the low level of economy—jobs, markets, and savings. These are infrastructure, health, education and environment.

However, IMD ranked the Philippines 32nd out of 57 in Stress Test on Competitiveness, indicating our economy’s robustness.

We are ahead of the United Kingdom, Indonesia, Belgium, Mexico, France and Italy, among others. This is the result of the right mix of fiscal and monetary policies that the national government has been implementing which has significantly helped to mitigate the adverse impact of the global economic crisis on the Philippine economy.

Other surveys

Besides the IMD and the World Economic Forum, there are other institutions looking into critical competitiveness indicators.

For example, eStandardsForum of New York rates the Philippines very good in its compliance with 12 key standards for sound financial system: No. 26 out of 81.

However, we are not as highly rated in Business Indicator Index: No. 64 out of 81—although ahead of our neighbors Malaysia, India, Indonesia, Vietnam and Thailand.

This year, the annual Forbes Best Countries for Business ranks the Philippines No. 91 out of 127—ahead of Argentina and other South American countries, as well as Vietnam. The ranking is eagerly awaited by big businesses especially in the West who are looking for investment opportunities.

Investors are attracted by our good trade balance and the potentially big market, although they take note of the high unemployment rate. Joblessness is the main threat to our economy—hence our market remains small despite our huge population because of the “low buying power” of Filipinos.

The weakness of social indices is a manifestation of the imbalance between our big population and the low revenue collection that makes it difficult for government to carry out its basic obligations effectively.

Additionally, there are “inefficiencies,” or “leaks” that need to be addressed to ensure that the precious revenues collected are spent judiciously.

But ultimately, all three functions—high population, low revenues, inefficiencies—must be addressed to achieve an improvement in social indices.

Corporate governance

The Organization for Economic Development and Cooperation (OEDC) is doing an annual evaluation of corporate governance practices with several countries worldwide. The hypothesis is that good corporate governance is a prerequisite for business to grow and take more responsibility for the country’s credibility.

After all, bribery and corruption are two sides of the same coin. The worst situation takes place when the line of business interests intercepts with the line of government authorities, per the study of Asian Institute of Management.

Lately, the OEDC finds the Philippines among the top in corporate governance in Asia and will showcase this experience in its Asia Business Roundtable later this year.

This acknowledgement has ramifications on the maturing trend of our corporations and their ability to bring public governance to a higher plane in the spirit of private-public-association.

Depending on how soon and how well the world economy recovers, the aggregate Competitiveness Rating for the Philippines may be even higher in 2010.

Road to recovery

With the active role of the private sector in working with government agencies to improve processes in certain key agencies, we are confident that the Philippines is on its way to competitiveness recovery.

The global economic situation puts a lot of challenge to the country to be able to sustain these measures in terms of resources given the effects of the global financial crisis.

But there is a silver lining in the horizon as I am happy to note that confidence in the Philippine economy remains, as pointed out by the World Bank in its latest East Asia and Pacific Update titled “Battling the Forces of Global Recession.”

However, this should not give us reason to be complacent or contented. On the contrary, we should always be in a state of constructive discontent, which moves us to always make things better. –Elmer C. Hernandez