By Bernie Cahiles-Magkilat, May 27, 2018; Manila Bulletin
Amid the country’s dismal performance in the recent 2018 IMD World Competitiveness Yearbook, the Department of Trade and Industry (DTI) said strategic reforms shall be accelerated to leapfrog the competitiveness standing of the country.
DTI Secretary Ramon M. Lopez noted the speed and efficiency of the government in addressing key reforms such as the passage of the TRAIN law, job creation programs (Trabaho, Negosyo, Kabuhayan), and the implementation of ease of doing business reform initiatives which have already resulted in positive outcomes and will further post more significant improvements by 2019.
Lopez also underscored major initiatives currently underway that will help boost the country’s competitiveness.
For instance, he cited the passage and implementation of TRAIN 1, which lowers personal income tax rates, and TRAIN 2 which will reduce the corporate income tax and will directly benefit investors, businessmen, and capitalists.
The government has also implemented cash budgeting in 2019 which is expected to result in significant increase in public infrastructure spending;
The enactment of the Ease of Doing Business/Efficient Delivery of Government Services Act is seen as a game-changer reform of the government which aims to improve and speed up the delivery of government services by simplifying the issuance of permits and licenses.
Guillermo Luz, private sector co-chairman of the National Competitiveness Council, has expressed confidence the Philippines will recover the 9 rungs it lost in the recent survey and to reach higher levels.
But he also noted that the challenge is to maintain high investments in public infrastructure as well as technology, innovation, and education.
“Those will be the key factors for success in the future,” Luz said.
In the latest release of the International Institute for Management Development (IMD) World Competitiveness Report, the Philippines declined 9 notches from No. 41 in 2017 to No. 50 in 2018 out of 63 economies around the world. The IMD WCY measures a country’s competitiveness based on four major factors – Economic Performance, Government Efficiency, Business Efficiency, and Infrastructure.
While the Philippines was ranked fifth highest in GDP growth, other factors overcame the sterling economic growth of the country as the study did not only consider GDP but also efficiencies in government, business and infrastructure.
“Our GDP growth remains as one of the highest among the economies measured in the report at 6.7 percent. In addition, investments have also picked up on the back of credit ratings upgrades and renewed investor confidence,” stressed Lopez.
Jamil Paolo S. Francisco, executive director at the Asian Institute of Management RSN Policy Center for Competitiveness, explained at the launch of the 2018 WCY that it is possible for a country to fall in ranking despite the fact that it has improved its competitiveness because GDP is not the only measure being looked into by the study.
In this 2018 WCY, the economies were evaluated using 340 indicators spread across four factors: Economic Performance, Government Efficiency, Business Efficiency, and Infrastructure. These four factors are in turn divided into sub-factors. The WCY uses both macroeconomic data and perceptions-based indicators in ranking the competitiveness of countries.
“Although real GDP grew by 6.7 percent – the fifth highest in WCY – other macroeconomic indicators overcame this improvement. For instance, current account deficit more than doubled,” Francisco said.
“We’re not deteriorating, but many economies have rebounded so they’re back in the game and we’re still playing the same game 3-4 years ago.”
Lopez noted that while the Competitiveness report cited recent improvements, such as on tax collection, pension funding, political stability, environment related technology, public spending on education, it did not capture the gains made by the country such as the rapid growth in the economy, per capita income growth, industry and manufacturing record growth rates, GDCF or investments growth, employment, cost of capital, Central bank policy, trade and investment policy liberalization, market-based forex policy, rule of law, Intellectual Property Right, higher education gains, and the Build Build Build program under the Duterte administration.
The Trade Secretary also underscored the improvement in the country’s economic indicators such as the reduction in unemployment rate to 5.3 percent from 6.6 percent.
In terms of public finance, the Department of Finance (DOF) has reported that in the first two months of the year the Bureau of Internal Revenue (BIR) has already surpassed its target following the implementation of the first tax reform law.
Through the “Build, Build, Build” program, the government also posted a double-digit growth in public infrastructure spending.
The stock market also performed highest in 2017 while foreign direct investments accelerated to $10 billion from $7.9 billion in 2016; the country was averaging $ 4-5 B in the past.
Atthe executive branch of government, Lopez said, “Undeniably, the leadership has shown political will. With the reforms undertaken, the concerns identified by business executives in the WCY report clearly showed that the government is listening and mindful of its citizens’ requests,”
The DTI highlighted that as illustrated by the 2018 World Competitiveness Report, the Philippine economy remains attractive given our skilled workforce, cost competitiveness, and economic dynamism.
Further, he said, “the government continues to address challenges affecting our development by improving our basic and technological infrastructure through the Philippine Inclusive Innovation Strategy (i3S, which puts innovation at the core of the country’s industrial policy), modernizing our incentive system, and strengthening institutions and governance.”