Country competitiveness

GOVERNMENT RHETORIC routinely exhorts the citizens to exert themselves for greater competitiveness. Politicians discourse on how business corporations, labor unions, even universities and their-students, must strive to become globally competitive.

They are mainly preaching to the converted. The private sector recognizes that customers, clients and investors can shop around the world and locate or even relocate to where the best bargain is on offer. It must improve on business efficiency. But competitiveness critically depends on three other factors driven by political decision-makers: infrastructure, economic performance and government efficiency.

President Aquino and his Cabinet understand the dismal state of Philippine national competitiveness that they have inherited from the Arroyo administration and the challenge they face in rebuilding it. The 2010 World Competitiveness Yearbook, published by the International Institute for Management Development (IMD) shows the starting point for the P-Noy administration.

Since 1989, IMD has tracked these competitiveness factors that contribute to an environment enabling “more value creation for its enterprises and more prosperity for its people.” At a public forum convened last month by the AIM Policy Center (APC), lawyer Meilou Sereno, APC executive director, discussed the 2010 competitiveness rankings, which placed the Philippines 39th out of the 58 countries covered.

Of the five countries ranked most competitive in the world, Singapore (1), Hong Kong (2), the United States (3), Switzerland (4) and Australia (5), three are in the Asia Pacific region. In this grouping, the Philippines placed 13th out of 13, behind its fellow Asean members, Singapore, Malaysia, Thailand and Indonesia.

Among the four competitiveness factors, the Philippines lags farthest behind in infrastructure. In the nine years of the Arroyo administration, the country slipped from 39th out of 49, to 56th out of 58, countries on this category. Infrastructure covers six sub-factors, including not only basic, technological and scientific infrastructure, but also health and environment, as well as education.

There are 20 sub-factors with 227 indicators under the four primary competitiveness factors. The government does not have the resources to achieve dramatic gains in all of the competitiveness indicators. But it can raise its rankings by focusing on the sub-factors which pull down its competitiveness score and over which it has greater control.

The point of the exercise is not simply to rack up higher scores for international bragging rights. The Yearbook’s sub-factors identify services important to the public and low scores registered there signal that the government is failing to meet public expectations and must improve its performance.

Education, along with basic and scientific infrastructure and international investment, is one of the four sub-factors where the Philippines registers at 56th place. P-Noy, fortunately, is already moving on the right track in focusing on basic education.

The worst scores in education are in high school pupil-teacher ratio (58th) and enrollment (58th). In tertiary education, which is largely driven by the private sector, the scores on university education (35th) and higher education achievement (31th) are less disreputable.

Institutional framework, a sub-factor of government efficiency, records the lowest-scoring indicator; the Philippines ranks 58th, or the second worst country, in “bribing and corruption.” Not far behind come “government decisions (56th),” “country credit rating (54th)” and “transparency (54th).”

Critics may debate the IMD premises about the salience and weight of the elements it considers in the rankings or the information-gathering process. IMD, for instance, will only accept official government data. But governments in developing countries often face major problems with data adequacy and accuracy.

More and better data could move the rankings positively or negatively. Whether they improve or depress the scores in some of our competitiveness indicators, government should welcome the prospects of more accurate data for their planning and evaluation work. This consideration should encourage the government to ensure adequate resources for, and effective implementation of, the national census project.

IMD annual competitiveness reports do attract attention. Like university rankings, national competitiveness rankings have themselves become competitiveness markers. The actual scores may not greatly matter, but the rankings provide a quick way to compare the competitors. Perceptions influence the behavior of both its foreign and domestic constituencies, and this should concern the government.

P-Noy was correct in focusing the State of the Nation Address on corruption and governance issues, which have been the Arroyo legacy. But the themes he pursued also established the standards by which his administration will be judged. The systemic character of corruption, for instance, requires a concerted Cabinet strategy. No department can effectively combat corruption even in its own ranks without the help of other agencies and, ultimately, of the President.

Critics and allies alike will await with anticipation the 2011 edition of the IMD World Competitiveness Yearbook.

Edilberto C. de Jesus is president of the Asian Institute of Management. –Edilberto C. de Jesus, Philippine Daily Inquirer