Climbing the competitiveness ladder

[This guest column contributed by Ric Saludo’s colleague Verbo Bonilla.]

First of two parts

While President Benigno Aquino 3rd has repeatedly cited conditional cash transfers as a prime anti-poverty strategy, even CCT’s advocates like the World Bank would stress that economic growth and jobs through massive investment remains the sure-fire way to lift millions out of destitution. Indeed, the healthier and more educated youth the CCT is intended to engender, would have trouble making a living if the economy did not attract enough job-generating investment.

Hence the imperative to make the Philippines more competitive in the eyes of investors here and abroad. Enter the National Competitiveness Council. If the public-private NCC gets its way, the Philippines will rise to the top 30 to 50 countries in terms of competitiveness by the time President Aquino’s term ends in 2016.

In setting this goal in May, Bill Luz, the private-sector co-chairman of the coordinative body, argued in a recent column: “Tracking these surveys and improving our rankings in them are important,” since major investors look at global surveys such as the World Economic Forum’s Global Competitiveness Report before making investment decisions.

The Philippines’ standing in various global surveys has been mediocre. In the WEF’s Global Competitiveness Report 2010-2011, the Philippines placed 85th out of 139 countries surveyed, ahead only of Cambodia among eight Asean countries covered.

Other surveys and studies on national competitiveness similarly find the Philippines approaching the bottom rankings. In the Swiss-based International Institute for Management and Development’s IMD World Competitiveness Yearbook in May, we dropped to No. 41 from 39 out of 59 economies, ranking lowest among the Asean countries it covered. The International Finance Corporation’s Doing Business 2011 Survey saw the country slip to No. 148 from 146 out of 183 countries, while the Asia Competitiveness Institute’s 2010_report placed the Philippines at No. 89 out of 132.

The NCC’s goal is ambitious, to say the least. Reaching the top third in these surveys means keeping up with such countries as China, Thailand, Spain, and Italy, and edging out the likes of Vietnam and India. It would demand marked improvements in many areas, particularly in indicators where the Philippines consistently did poorly.

Most of these surveys and studies on country competitiveness agree on where the Philippines needs to improve:

ñ logistical infrastructure – critical for facilitating and even determining the very kinds of economic activities in a country.

ñ political institutions – the maturity, transparency and accountability of political or governance institutions influence the stability of investments

ñ transaction flows – the efficiency with which transactions are conducted between businesses and the government can dampen or boost business initiatives.

In a conscious attempt to raise our competitiveness, the Aquino Administration announced in June that the indicators from the WEF report have been mapped to the Philippine Development Plan 2011-2016 and matched to relevant government agencies.

“The competitiveness indicators will be used in our agency’s results matrix, which will become the basis for monitoring and assessing the country’s performance,” said Rolando G. Tungpalan, National Economic and Development Authority deputy director-general, in a BusinessWorld interview.

Recently, President Aquino approved the 2011 Investment Priorities Plan (IPP), which lists 13 preferred activities, including the government’s flagship Public-Private Partnership program, to be given special incentives.

But the government needs to do more — and fast. Indexing our agencies’ performance to competitiveness indicators is a good start, and may prod the bureaucracy to perform better. Even then, without corresponding institutional and regulatory reforms, they are bound to fall short of the target. After all, the public sector can only do so much within a given policy environment.

Meanwhile, the hodgepodge of incentives that is the IPP has so far proven ineffective, judging from the foreign direct investments we have been attracting in the past.

Figures cited by Arangkada Philippines 2010, an advocacy paper of the Joint Foreign Chambers of the Philippines, show our country attracting the lowest yearly and accumulated foreign direct investment among Asean-6 countries – Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam – since 1990. And early this month, the Bangko Sentral ng Pilipinas reported a 15.1% drop in foreign direct investment for the first four months of 2011 compared to the same period last year, just when global FDI has been recovering from the world recession.

In the concluding part, we look at what the Philippines needs to do in order to grab a decent share of global capital and the technology, expertise and business linkages that go with the investment inflows. Then after all those tens of billions being spent on CCT, the poor would not only be healthier and better educated, but would also get the jobs that would make doleouts a thing of the past.

The last part will be published on Monday.

Verbo Bonilla (MPM National University of Singapore/Harvard) is senior analyst with Center for Strategy, Enterprise & Intelligence, which publishes The CenSEI Report on major national, global and business issues. –RICARDO SALUDO, Manila Times