City competitiveness–a flawed concept

THE WORLD ECONOMIC FORUM’S “Global Competitiveness Report 2008-2009” puts the Philippines in a very uncomfortable 74th place (out of 137 economies surveyed), behind such countries as Botswana (59th), Indonesia (58th), and Brunei Darussalam (42nd). The IMD World Competitiveness Yearbook 2009 puts the Philippines at 43rd place among 57 countries. The country’s ranking by other international rating institutions is equally disconcerting.

For all their obvious shortcomings—too numerous and too complex to discuss here—these rankings do give some indication of a country’s (relative) capacity for sustained growth. This is more than can be said of the notion of “city competitiveness.”

The Asian Institute of Management Policy Center has an ongoing Philippine Cities Competitiveness Ranking Project. It is an extensive effort that covers 65 cities, involves 13 academic partners and includes 68 individual indicators that are compressed into seven so-called “drivers.” It employs elaborate scoring and ranking methods in determining each city’s relative “performance.”

I had the opportunity to react to a paper presented at a forum sponsored by Philippine Economic Society on the competitiveness of Baguio City. I left the conference unimpressed.

A zero-sum game

The concept of competitiveness when applied to a geographic area—say, the Cordillera Autonomous Region—or a political unit (a city or a province) should have ultimate reference to national social and economic wellbeing, and not just the interests of the local units in question. From this perspective, the concept of country competitiveness makes a good deal more sense than that of city competitiveness.

When the term “competitiveness” is applied to cities, the question foremost in our minds is: Competition for what? Presumably for income from the sale of products and services (such as proceeds from tourism), for investment funds, and even for developmental grants from funding agencies.

Another question is: Competition against whom? Presumably against other cities in the country.

Viewed in this way, Philippine cities in effect are pitted against each other. Competition on the national or regional scale is a zero-sum game, and what some cities gain, others lose. From the standpoint of national social and economic welfare, the net impact is potentially nil.

Core competencies

To the extent that outside resources tend to flow to the more “competitive” cities such as Cebu or Davao, and away from those that are less favorably positioned but more badly in need of such resources, for example, Tagbilaran or Carigara, there is even a sense that potential enhancement of national economic welfare will decline.

The way I see it, the notion of city competitiveness is a variant of the concept of “core competencies” in business competitive strategy, a concept that is germane to the so-called Resource-Based View (RBV) of strategy.

In the RBV, it is not the types and amounts of resources that are important but the way that these resources are used and combined to maximize value. Far more important than resource availability or competencies from whatever source are the governance mechanisms and work processes that enable the production units, be they cities or business firms, to bring these together into a coherent work environment in which value from synergies is maximized.

One particular indicator that caught my attention is “Performance of the city government in crafting of new legislation …” Upon careful reflection, this probably is more of a liability than an asset to a city. It is indicative of a common tendency among city councils to legislate one ordinance or resolution after another, but not following through with strict implementation. The Zoning Code of Baguio City (where I live!) is a case in point. Here, the exemptions from the city’s zoning regulations have become more of the rule than the exception.

Summing individual measures in coming up with an overall index of competitiveness is a flawed procedure; it involves adding up non-comparable measures, and the resulting index gives no unambiguous indication of capacity to produce value.

Theoretically, a city further down the ranking may have a greater potential for value creation.

Far more important than coming up with the desired metrics and bringing these together into a single competitiveness index is an assessment of the cities in terms of their governance mechanisms and work procedures by which their resources are combined and utilized in a manner that yields substantial value from synergies.

Collaborative strategies among cities

To maximize welfare overall, there is a need for a unified, collective effort among adjoining cities as against actions taken in isolation. Problems of social and economic development and those of human ecology are not defined by political boundaries. Actions taken by one city invariably have spillover effects on the others. The need for and capacity for collaborative effort among cities are not captured by the concept of city competitiveness.

There is also a need for collaboration among the individual, self-seeking interests within cities, both in the public and private sectors.

Tremendous opportunities for value creation are lost for the reason that business firms, government agencies, educational institutions, and professional associations pursue their respective agendas without due regard for the impact of their actions on the other entities and on the community as a whole.

City competitiveness measures should look more closely at a city’s existing governance mechanisms—or their absence—in determining how well it stacks up against the others.

Conclusion

The concept of city competitiveness, as currently articulated, is seriously flawed and does not provide a sound basis for developmental strategy and policy. It has to be re-conceptualized.

(This article reflects the personal opinion of the author and does not reflect the official stand of the Management Association of the Philippines. The author is vice chair of MAP Publications and Advocacy Research Committee, an active academic and a knowledge management consultant. Feedback at map@globelines.com.ph. For previous articles, please visit .) –Niceto Poblador, Philippine Daily Inquirer