Philippines suffers big drop in global competitiveness ranking

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Metro Manila (CNN Philippines, May 24) — Concerns on employment and poor infrastructure are among the major factors that dragged down the Philippine's global competitiveness ranking, which measures a country's attractiveness insofar as middle and upper managers from corporations and institutions worldwide are concerned.

The country's decline by nine notches was the largest drop in Asia Pacific, according to Switzerland-based business school International Institute for Management Development (IMD), which conducted the survey in partnership with the Asian Institute of Management (AIM).

In its 2018 World Competitiveness Rankings, IMD said the Philippines fell by nine places to 50th among 63 countries.

The Philippines dropped in rank in all four main factors in assessing competitiveness - economic performance, government efficiency, business efficiency, and infrastructure. Among these, the biggest drop was in economic performance, according to the policy brief on the competitiveness report, which was caused by "a slight increase in unemployment rate and a slight decrease in the number of employed and the size of the active labor force in the context of general improvements in other countries ranked."

According to the latest Labor Force Survey posted at the Philippine Statistics Authority web site, more Filipinos as a percentage of the work force were jobless in January 2018 at 5.3% from the last survey in October 2017 at 5%. The rise in unemployment was even higher at more than two percentage points to 18% from 15.9% over the same period. The unemployment rate measures the need for additional work to make ends meet.

Meanwhile, the policy brief states infrastructure remains the lowest-ranked factor for the country, measured in terms of basic infrastructure, scientific infrastructure, and education infrastructure.

"This reflects the need to address poor infrastructure in the Philippines, not just physical infrastructure that the current administration's 'Build, Build, Build Program' seeks to address, but also social infrastructure that promotes human capital formation such as education, and research and development," according to the IMD-AIM briefing paper.

It further states, "Poor infrastructure limits many economic possibilities in the Philippines. As an example, airport congestion, poor condition of roads, and inadequate public transportation pervents full maximization of the potential of tourism. It also hinders businesses from reaching potential markets, and consumers from reaching all alternative suppliers of goods and services."

The country also suffered a decline in Business Efficiency, measured in terms of labor market, finance, management practices and attitudes and values. The last two items are perception-based indicators.

"This suggests that deteriorating perceptions also played a significant role in the Philippines' overall decline in rating," according to the policy brief.

Moving forward, IMD said the country can invest in quality infrastructure such as information and communications technology.

The country can also increase investments in health and education to improve labor productivity, "currently a major weakness of the country." The briefing paper noted, "investment in education and training provides better opportunities for higher-value employment. In the digital era, workers must learn how to learn fast." It also recommended upgrading of skills through technical and vocational training.

IMD also recommended addressing the recent spike in prices of basic goods and services in the light of the inflationary impact of the tax reform law and the massive infrastrucure program; strengthening quality of governance; and increasing digital competitiveness as "many jobs are at high risk of automation, and yet many opportunities for business and employment may also rise."

Inflation in the country peaked at 4.5% in April, the highest in five years, prompting the Bangko Sentral ng Pilipinas to raise interest rates to 3.25% from 3%.

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Government addressing, disputing issues

"The Duterte administration is already addressing these issues," Presidential Spokesperson Harry Roque said in a statement, referring to the IMD report.

The Palace official cited the "Build, Build, Build" program, the K-12 education program, free medicine, the search for a third telecommunications player and the shift to federalism as ways that the government is working on building a more competitive nation.

Socioeconomic Planning Secretary Ernesto Pernia, on the other hand, shrugged off the IMD's findings.

"It's not a cause of concern because my take is this observation of IMD is largely a misobservation," said Pernia in a phone interview in CNN Philippines News Night.

He said that he is ready to dispute these reports if necessary.

"Of course there's a lot more work to be done, no question about that. But in terms of the observations-- that tourism and employment is falling, public finances is getting bad, and education system is bad-- completely opposite of what is happening," the Secretary added.

On the other hand, National Competitiveness Council Co-Chair Bill Luz said that the survey should be looked at as a snapshot of the economic conditions last year, not of 2018.

"We should look at this data and it provides a snapshot for 2017, not 2018, and provide a plan of action moving forward," Luz said during the same phone interview with CNN Philippines News Night.

He explained that despite the government investing more in education and infrastructure in the past few years, these are sectors whose effects could not be felt immediately. He added that the government needs to keep the pace in infrastructure investments.

"We should plan ahead and make sure that we improve in those areas and that will lift our overall rankings over time, especially since we're already fixing infrastructure so we just need to continue the construction pace," Luz said.

Professor Arturo Bris, director of the IMD World Competitiveness Center, said in a statement there are a number of ways for a country to improve its competitiveness ranking, including improving infrastructure or efficiency in the government.

"One economy, for example, may build its competitiveness strategy around a particular aspect such as its tangible and intangible infrastructure; another may approach competitiveness through their governmental efficiency," Bris said.

The United States, Hong Kong, Singapore, Netherlands and Switzerland are the top five most competitive nations in 2018, with the U.S. overtaking Hong Kong and Singapore to claim the top spot this year.