World Competitiveness Yearbook 2006

Glimpse of Hope for the Philippines:Why and why not?


The Philippines maintains its position as the 49th most competitive economy in the world. This is despite of its drops in terms of economic performance (41st to 52nd), business efficiency (38th to 44th), infrastructure (55th to 56th) and a slight improvement in government efficiency (47th to 45th). The study covered the performance of 61 countries and regional economies in 2005.

The Philippines ranks high in the following domains: cost-of-living index (1st), real short-term interest rate (2nd), consumption tax rate (6th), collected total tax revenues as percentage of GDP (7th), compensation levels (4th), working hours (5th), remuneration in services professions (6th), high-tech exports as percentage of manufactured exports (1st) and investments in telecommunications as percentage of GDP (9th).

The Philippines scores poorly in terms of: GDP per capita (59th), GDP (PPP) per capita (58th), relocation of production – threat to the future of economy (55th), consumer price inflation (54th), employment (54th), risk of political instability (60th), bribing and corruption (60th), custom’s authorities and efficient transit of goods (59th), independence of public service from political interference (59th), country credit rating (58th), brain drain (58th), value traded on stock markets (58th), overall productivity (57th), country image abroad (57th), foreign high skilled people attracted (57th), pupil-teacher ratio (61st), dependency ratio (60th), total health expenditure (60th), total public expenditure on education (60th), and total expenditure on R&D (60th).

Several Asia-Pacific economies figure prominently in the rankings. Hong Kong and Singapore are gaining on the US and remain 2nd and 3rd, respectively. China (+12, 31st to 19th), India (+10, 39th to 29th), Malaysia (+5, 28th to 23rd) and Japan (+4, 21st to 17th) post the biggest gains while Korea (-9, 29th to 38th) and Thailand (-5, 27th to 32nd) suffer from drastic declines. The Asia-Pacific region’s performance boosts its position as the new driver of global economic growth. The Philippines stays as the 14th most competitive economy out of the 15 Asia-Pacific economies included in the study.

The world economy has been booming in 2005. Of the 61 economies covered by the World Competitiveness Yearbook in 2005, 22 had a growth rate above 5%, 39 above 3% and 48 above 2%. The Philippines posted a 5.1% (22nd) growth. In fact, Italy is the only economy that did not post any economic growth last year.

The AIM Policy Center, as IMD’s partner institution, lists the following challenges for the Philippines for the year 2006: Undertake capacity-building for regulatory agencies to ensure transparency, non-discrimination and procedural fairness; Improve quality of basic education to further promote human capital development; Progress on a clear and coherent population policy; Improve distribution infrastructure for faster turn-around times and lower transaction costs; and, Accelerate implementation of e-governance projects to promote transparency and facilitate trade.

The AIM Policy Center notes that the threats to the Philippines’ competitiveness outweigh the gains in 2005. The improvement in terms of government efficiency is attributed chiefly to the likelihood of improvement in the management of public finances, reforms in tax measures, real short-term interest rate (real discount/ bank rate), central bank policy’s positive impact on economic development and gender related issues. The declines in the other indicators presage a long term negative effect on the country’s ability to compete. The Philippines’ dismal performance in the domains of education, basic infrastructure, technological infrastructure, scientific infrastructure, health and environment, and corruption are particularly alarming and unless immediately addressed can result to irreversible damage. These indicators pose enormous degrees of multiplier effects on the other indicators of competitiveness. Education or the lack thereof, for example, can disrupt our labor advantages. The poor infrastructure, as another example, can retard the economy’s ability to innovate and further develop the high-tech industry.