POLYTECHNIC UNIVERSITY OF THE PHILIPPINES GRADUATE SCHOOL M.H. Del Pilar Campus, Valencia St., corner R. Magsaysay Blvd.

Sta. Mesa, Manila

PHILIPPINES: 12 PILLARS OF COMPETITIVENESS 2013 ____________________

In Partial Fulfillment of the Requirements for the Subject MBA 663 Philippine Business Environment

____________________

Submitted by: ANALYN E. CABRERA October 05, 2013

Submitted to: DR. OFELIA M. CARAGUE Class Instructor

In an online article posted with title Philippine global competitiveness ranking: Improving but low for the column CROSSROADS (Toward Philippine Economic and Social Progress) By Gerardo P. Sicat (The Philippine Star) | Updated September 11, 2013 - 12:00am, which is stated below:

Good news for the country was recently received with the release of the 2013-2014 Global Competitiveness Index. The Philippines ranked 59th out of 148 among the countries for which the index was calculated. Exceptional improvement. This is not exceptional news were it not for the fact that the country moved up six notches from the previous year and 11 notches up if considered along a two year perspective. In 2012, the country was ranked in 65th place (out of 144). In 2011, the countrys ranked 75th (out of 142).

What this suggests is that, during the two year period under review and viewed from the score of all countries ranked, the Philippines moved from the median percentile to the 40th percentile in the competitive rankings among nations.

To be 59th out of 148 is to be exactly on the 39.8 percentile among the ranks. (Divide 59 by 148 and multiply by 100, to derive percentage.) Initially in 2011, we were almost at the median point among the countries (the country was in the 52 percentile rank), and in 2012, we moved to the 45 percentile rank). What exactly is the Global Competitiveness Index? The competitiveness index grew out of the discussions of world business leaders who meet yearly in Davos, Switzerland (the World Economic Forum). When they discussed the attributes of competitive nations, they struggled for operationally meaningful characteristics of highly competitive nations.

Of course, they meant nations with high standards of living, whose economic development and productivity are sustained from year to year. So, they asked for a measure of global competitiveness that could be aggregated as well as unbundled. The result was the Global Competitiveness Index (GCI) of nations.

The GCI is a composite measure of many things. The measure has evolved over time, from relatively simple attributes to a more complex set of characteristics that mimic development itself. It was built from understanding what business executives thought of a countrys ability to promote growth and high productivity.

In the first place, it is based on the results of surveys of executive business opinion. The respondent sample in this survey is from resident business and economic leaders in a country (including foreign direct investment executives). The survey questionnaire is the same among countries.

The enterprise is a huge effort involving all the countries ranked. Research institutes and business groups in each of the countries included in the ranking are engaged to coordinate the measurement effort. For the Philippines, the Makati Business Club has been undertaking the survey.

The GCI also uses information from various international think tanks and other economic and institutional, and economic data collected by multilateral development institutions.

The competitiveness index is founded on a set of around 110 variables or characteristics, most of them derived from the survey responses that could be calibrated. These characteristics are grouped under 12 broad factors, or pillars, of the competitiveness measure: (1) institutions; (2) infrastructure; (3)

macroeconomic environment; (4) health and secondary education; (5) higher education and training; (6) goods market efficiency; (7) labor market efficiency; (8)

financial development; (9) technological readiness; (10) market size; (11) business sophistication; and (12) innovation.

In turn, these 12 pillars are further regrouped into bigger headings that help to determine the growth and development among nations. The first four (pillars 1 to 4) are the basic drivers of development; the next six (that is, pillars 5 to 10), the efficiency drivers; and the last two, the innovation drivers. The Philippine competitiveness assessment, 2013. I quote the report fully as it assesses Philippine developments, but I present their observations in terms of bullets for emphasis: Advancing six positions, the Philippines ranks 59th overall. The trends are positive across most dimensions of the Index. In the institutions pillar (79th), the Philippines has leapfrogged over the past years. The current government, which came into power in 2010, has made the fight against corruption an absolute priority; corruption had historically been one of the countrys biggest drags on competitiveness. There are signs tha t these efforts are producing results: in the ethics and corruption category, the country has jumped from 135th in 2010 to 87th this year. A similar trend has been observed in the government efficiency category (75th) and elsewhere in the Index. But improvements are coming from such a low base that the country cannot afford to be complacent. For instance, transport infrastructure has improved but remains in a dire state (84th), especially with respect to airport (113th) and seaport facilities (116th). Similarly, the labor market has become more flexible and efficient over the years, but the Philippines still ranks a low 100th.

 The recent successes of the government in tackling some of the most pressing structural issues are encouraging and proof that bold reforms and measures can yield positive results. Low level of Philippine competitiveness. To show improvement in the countrys ranking does not mean that the country has reached a desirable level of competitiveness. There is a lot of work to be done not only to improve the competitiveness ranking but also to assure that sustainability of the growth and development effort is assured.

This is a worldwide ranking of competitiveness among nations and there are many highly competitive nations in other continents and regions. The East Asian region includes some of the most admired and dynamic nations in the world. Within this grouping are the highly ranked countries (GCI ranking in parentheses): Singapore (2), Hong kong (7), and Japan (9). Then we have Taiwan (12), Korea (25), China (29), all enjoying high ranks although not uniformly performing according to the pillar ratings that the GCI uses.

Then, we compare ourselves with the other ASEAN countries: Malaysia (24), Brunei (26), Thailand (37), Indonesia (38). These are nations with whom we naturally belong that have surpassed us in economic performance in recent decades.

Thus, the Philippine rating is quite low, especially when compared with countries in the region we belong to despite the fact that the report notes that our country today is one of the most dynamic and rapidly improving economies in terms of competitiveness. What we should do as a nation is to move closer to the ranks where we naturally belong, along with the big countries of ASEAN that have done well in competitiveness.

Behind the Philippines and within ASEAN are the other neighbors that are also truly trying to catch up with the rest of us: Vietnam (70), Cambodia (81), Laos (88), and Myanmar (137). If we dont work hard doing our homework, any one of these countries can overtake us.

SOURCE: http://www.philstar.com/business/2013/09/11/1194861/philippine-globalcompetitiveness-ranking-improving-low

COLUMN REACTION:

The writer specified that although it is quite appealing to the eye that the rank of the Philippines have increase in the ranking for the Global Competitiveness Index (GCI) from the last year rank of 65 out of 144. The Philippines is still missing something that it needs not to be complacent about being satisfied with the ranking it has gained. The Philippines still show a slow improvement even though the country is tagged as the most dynamic and rapidly improving with regards to competitiveness.

As the author clearly stated that the country must not only grow in ranking but also it has to sustain the improvement and development of the country. We may be increasing with the ranking but we are still trailing by the ASEAN countries that are near to us. We are also being trailed by other countries that are slowly showing improvement and if the country will not focus on improving the pillars of competitiveness they might overtake us.

The 12 pillars of Competitiveness have been the criteria for the Global Competitiveness Index (GCI). The Philippines who have ranked 59 over 148 countries shows that it is competitive enough. However, the writer detailed the report, he emphasize the flaws that the ranking could be deceiving.

12 PILLARS OF COMPETITIVENESS:

a. Institutions

The good governance of the Philippines and the fight against corruption has been a big factor that the competitiveness of the Philippines leapfrogged from its ranking in 2010. The government is trying its best to be efficient and effective enough to prove that it is competitive enough for the world. Although efforts have been seen and improvements are currently reflecting in the rankings, the government should not be complacent in achieving to higher competitiveness and constant improvement. The government must be able to sustain the ranking and make room for improvements for the world to see that the country is really competitive.

b. Infrastructure

Although ranking shows that our country is competitive enough, the author have specified that in terms of our infrastructure we are still not that competitive. The countrys airport, seaport is still trailing behind in comparison with the facilities of other countries. The government must invest on improving the airport and seaport facilities because they have the effect on the trade of goods. If infrastructures are invested properly it will clearly have a large effect on improving the competitiveness of the country with regards to trade and flow of goods.

c. Macroeconomic Environment

The trust of the investors and the businessmen to the government has been seen in the macroeconomic environment. More businesses are interacting again with the government and willing to do business in the country. This improvement must be taken care of the government to be able to sustain such trust and investments to continue. The government must not be lenient in improving the legislations that will assist investors to be attracted to invest in the country.

d. Health and Primary education

Health program of the country is being prioritized as well as the primary education. The department of Health has been actively participating in improving and attaining the goal for the Universal Health Care program for the country. This health care program is in lieu with the Millennium Development Goals of the country. The primary education of the country is the foundation of educating the young and making them competitive enough for the future. The new education program is in pattern with the worldwide education program that is being adapted in most countries. The program of the Department of Education, K-12 program enhances in strengthening the foundation of primary education in producing competitive students.

e. Higher Education and Training

The efforts of having a labor force that are well-trained and capable have been an aspect in the competitiveness of the country. Affordable education and vocational or short courses have been targeted to provide training and soon employment to competitive students in the skilled field. The country have been adapting to have an education system that will make the global standards and making our graduates accepted worldwide in the same degree that they have accomplished in the country.

f.

Goods market efficiency

The country has ranked higher on this field. The market is being competitive with regards to its pricing. The prices are unbiased and are slightly lower or higher than the true value. It only shows that the countrys market is adaptable to the actual price value of the products.

g. Labor market efficiency

The country has a large labor work force if only it can be utilized effectively. Most of the available jobs are for blue-collared or skilled workers but most of our graduates are aiming for white-collared jobs. We have a competitive work force and most of them excel in their chosen field. The cost of labor in the country is still relatively low in comparison to other counties. More efforts on making the labor force to be efficient and flexible should be in the aim of improvement of the country to rank higher.

h. Financial development

The country has ranked higher in terms of the financial development because of the availability of financial services and affordability of financial services. Financing through local equity market and the ease of access to loans have been factors that affect the increase in ranking. Investors have been attracted because of the venture capital availability , restriction on capital flows. Banks have shown stability and soundness. Legislations have been intensified through the regulation of securities exchanges and Legal rights index.

i.

Technological readiness

The country is way behind the other countries with regards to technological readiness. Although constant improvement and adaptation is being implemented, effects have shown that this is not enough. The country is merely copying or adapting what technology of other countries have experience and when the country fully adapted the new technology a much better technology have been introduced.

One example of the trailing technology is the weather system of the country. We are still relying on some technology that has been phased out by the other countries for more accurate weather forecasting.

j.

Market size

The country has shown increase and competitiveness with regards to its domestic market size index and foreign market size index.

It shows that the country is venturing not only the local market as weel as the foreign market to increase its market size and show that the products are globally competitive.

k.

Business sophistication

The country remained at the same ranking as of last year due to deteriorating local supplier quantity, state of cluster development and nature of competitive advantage.
Most of the goods being sold are form importation, the government must exert additional efforts to attract local supplier to increase their production and continue in supplying products that are globally competitive.

l.

Innovation

Innovation has been a priority project of the country. The country has shown the competitiveness with the Capacity for innovation and the Quality of scientific research institutions. Many companies are spending on R&D and engaging in Universityindustry collaboration in R&D. The Government invests on the procurement of advanced technological product together with availability of scientist and engineers are the factors that show the competitiveness of the country in terms of innovation.