By Mayvelin U. Caraballo, May 24, 2018; The Manila Times

THE Philippines dropped nine notches in a worldwide poll of business competitiveness released by Swiss business school IMD on Wednesday.

In the 2018 IMD World Competitiveness Rankings, which covers 63 countries, the Philippines went down to the 50th spot from 41st in the 2017 survey.

“The reasons for such a drop include a decline in tourism and employment, the worsening of public finances and a surge in concerns about the education system,” IMD said.

IMD measures countries’ competitiveness based on four areas: economic performance, government efficiency, business efficiency and infrastructure.

The Philippines’ ranking for economic performance dropped to 50th from 26th; for government efficiency, 44th from 37th; for business efficiency, 38th from 28th; and for infrastructure, 60th from 54th.

Among sub-factors recording the biggest declines were: exchange rate stability, current account balance, consumer price inflation, gross fixed capital formation, patent applications per capita, foreign investors, long-term employment communications technology, higher education achievement, pollution problems, government subsidies, university education, venture capital, protectionism and management education.

Improvements were noted in the areas of: environment-related technologies, internet bandwidth speed, mobile broadband subscribers, tax evasion, total public expenditure in education, exports of goods, computers per capita, pupil-teachers ratio, real personal taxes, pension funding, exports of commercial services, legal and regulatory framework, mobile telephone costs, internet users, and risk of political instability.

IMD said the Philippines experienced the most significant drop in the region. Neighbors Singapore ranked third while Malaysia was at 24th place.

“Investing in quality infrastructure and strengthening investment in human capital are the key challenges for the Philippines,” it said.


Reacting to the IMD report, Socioeconomic Planning Secretary Ernesto Pernia said “the drop in competitiveness is utter misperception.”

“Tourism is more vibrant as sharply higher arrival numbers indicate, un- and under-employment are declining, fiscal space is ample, and results of the introduction of senior high school are remarkable,” he told The Manila Times.

Pernia, the director general of the National Economic and Development Authority, added that the government was doing exactly what the IMD recommended as regards infrastructure and investments in human capital.

He said: “All told, IMD’s observation is highly inaccurate!”

Unemployment fell to 5.3 percent in January from 6.6 percent in the same month last year, according to the Philippine Statistics Authority’s latest Labor Force Survey. This was equivalent to 2.32 million individuals out of work from 2.76 million previously.

However, the underemployment rate – the proportion of the employed wanting additional work – rose to 18 percent, higher than the 16.3 percent a year ago. The latest reading represented 7.49 million underemployed workers, higher than the 6.39 million recorded a year ago.

The Duterte administration is aiming to pave the way for a “Golden Age of Infrastructure” via its centerpiece “Build Build Build” program, which will be backed by a budget that could reach P8 trillion to P9 trillion over a six-year period.

IHS Markit Asia Pacific chief economist Rajiv Biswas said the country had made remarkable economic progress since 2011, with sustained gross domestic product growth of over 6 percent annually.

“However, the IMD report does highlight some key weaknesses in the Philippines’ business climate, such as weak infrastructure. This underlines the importance of the Duterte administration’s ‘Build, Build, Build’ program to boost infrastructure spending over the next five years,” he told The Times.

Making the process of approving projects and the issuance of land titles more efficient are also important, Biswas said.

Although the IMD highlighted weakness in Philippine investments in human capital, Biswas pointed out that the real problem was the lack of domestic skilled job opportunities especially in manufacturing, which had resulted in brain drain.

“Improving infrastructure and improving policies for attracting FDI (foreign direct investments) into manufacturing will therefore be high priorities for the government,” he said.

The rankings have been produced every year since 1989 by the IMD World Competitiveness Center, and is widely acknowledged as the leading annual assessment of the competitiveness of countries, IMD said.