By Karl Angelo N. Vidal, June 17 2019; Business World

http://www.bworldonline.com/finance-department-disputes-imd-competitiveness-studys-methodology/

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THE Department of Finance once more disputed the results of the International Institute of Management Development’s (IMD) world competitiveness rankings even as the Philippines’ score improved this year, saying that the study appears to have focused on “backward-looking” indicators.

The Philippines rose four places in the 2019 World Competitive Ranking conducted by the Swiss business school, placing 46th out of 63 countries surveyed, from last year’s 50th spot.

However, the country remained a laggard in the region, placing 13th of 14 economies surveyed in the Asia-Pacific, unchanged from its performance in 2018.

“The greater sin of this series of reports, however, is that methodologically it is backward-looking, much like trying to figure out which way to go next by looking at the rear view mirror,” the Finance department said in a statement on Monday, quoting its Chief Economist Gil S. Beltran.

He added the over 340 criteria used in the index to measure “different facets of competitiveness” are “at best indicators of past performance and may not be indicative of future performance.”

He cited IMD’s use of 2018 gross domestic product growth to measure their competitiveness this year.

“Thus, even if a country’s growth prospects are negative 8% for 2019 but if it was actually 8% in 2018, IMD would assign this country in question a high score for the 2019 report,” he said.

Mr. Beltran also noted the study penalizes countries with fiscal deficits, such as the Philippines, which is pursuing a program of infrastructure development to boost its competitiveness.

“IMD equates surpluses with competitiveness, so that the Philippines, because of its Build, Build, Build Program, is expected to incur deficits and, thus, be artificially rated as one which is losing in competitiveness,” Mr. Beltran said. “Ironically, infrastructure is intended to improve competitiveness.”

The government is pushing for comprehensive tax reform to simplify the tax regime and generate more revenue to support its infrastructure program and expand social services. It embarked on the “Build, Build, Build” program in an effort to boost economic growth to 7-8% until 2022.

Based on the 2019 study, the country’s ranking improved based on economic performance (38th), government efficiency (41st), business efficiency (32nd) and infrastructure (59th).

In an earlier email to BusinessWorld, IMD World Competitive Center Senior Economist Jose Caballero said the country needs to “strengthen all aspects of infrastructure,” particularly in the sub-sector of education. He also noted the development of human capital and risk of political instability remain as challenges.

The Finance department also disputed the same study in 2018, saying the findings were not backed by actual data.

“[T]he ratings methodology employed by IMD mechanically ranks cold numbers without understanding the dynamics of the economy. The result is that rankings tend to be volatile. Neither does it use benchmarks with which to gauge relative performance,” Mr. Beltran said in a May 2018 economic bulletin. — Karl Angelo N. Vidal

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