Country up five notches in global survey

THE PHILIPPINES HAS IMPROVED ITS STANDING in a global opinion survey of executives regarding competitiveness in terms of the business environment, landing 63rd in a list of 127 countries.

The country’s 2007 ranking in the Business Competitiveness Index (BCI) of the World Economic Forum went up by five notches, with the Philippines earning points for improvements in the “quality of the national business environment.”

But from a list of 14 “factors for doing business,” senior business executives in the poll selected corruption, inadequate supply of infrastructure, policy instability, an inefficient government bureaucracy, and “government instability/coups” as their five top concerns.

Others include stiff taxes and complicated tax regulations, lack of access to financing, restrictive labor regulations, crime and theft, poor worker ethics, and inflation.

The BCI ranking is the second part of the Global Competitiveness Report released annually by the World Economic Forum based in Davos, Switzerland.

Based on the results, businessmen think the business climate is better in neighboring countries such as Malaysia (21st), Indonesia (36th), Thailand (37th), and China (54th), and even in Mexico (61st) and Colombia (62nd).

The Philippines, though, was able to beat Russia (67th) and Vietnam (72nd).

The Philippines inched down to 45th from 44th in a sub-ranking taking into account only company operations and strategy, in which executives rated the extent of company spending on research and development, willingness to delegate authority, breadth of international markets, extent of marketing, the prevalence of foreign technology licensing, extent of staff training, production process sophistication, reliance on professional management, and capacity for innovation.

On the quality of the national business environment sub-ranking, the Philippines went up by five notches to 69th. The ranking took into account buyer sophistication, the presence of demanding regulatory standards, local supplier quality, intensity of local competition, laws relating to information and communication technology, quality of math and science education, and ease of access to loans, among others.

In the latest Global Competitiveness Report, Michael E. Porter of Harvard University and Christian Ketels and Mercedes Delgado of the Institute for Strategy and Competitiveness said the BCI aims to “provide rankings but also to identify the competitive strengths and weaknesses of each country’s economy, highlight trends in the global economy, and deepen the understanding of imperatives of successful economic development.”
Going after Erap’s assets Court sheriff Ed Urieta (L) serves writ of execution to Banco de Oro officials to turn over to the government kickbacks that deposed president Joseph Estrada collected from illegal gaming. Mr. Urieta said it was the first step in recovering P215 million that Mr. Estrada deposited in the bank under the name of a charitable organization. — AFP
Going after Erap’s assets
Court sheriff Ed Urieta (L) serves writ of execution to Banco de Oro officials to turn over to the government kickbacks that deposed president Joseph Estrada collected from illegal gaming. Mr. Urieta said it was the first step in recovering P215 million that Mr. Estrada deposited in the bank under the name of a charitable organization. — AFP

The Philippines, Indonesia, Argentina, Brazil, Nigeria, Venezuela, Korea, Japan, and Italy were among those “where [the] gap between the expected and the actual national business environment is highest; their business environments are significantly worse than expected given the sophistication of their companies.”

Algeria, Australia, Botswana, Estonia, Portugal and Qatar, meanwhile, were among the countries whose business environments are “significantly ahead of their company sophistication.”

“Both groups of countries suffer from these imbalances: weaker business environments can erode the ability of companies to sustain high levels of sophistication, and stronger business environments remain underutilized if companies do not upgrade their operations and strategies as well,” they said.

In an interview, Oscar R. Sañez, Business Processing Association of the Philippines chief, said investors should see the improvement as “something to look forward to in terms of progress.”

But he said the government still has a lot to do in improving transparency and efficiency.

“The message is clear. There should be a close coordination between the government and private sector,” he said.

Zest-O Chairman Alfredo M. Yao said even if the macroeconomic situation is getting better, it will take time to reach ordinary people.

On the issue of corruption, he said, “Let’s face it, it has been a problem ever since. We can’t improve it overnight. A lot of things has to be done.”

American Chamber of Commerce legislative director John D. Forbes noted that the Philippines has been falling in competitiveness for years.

“What really matters is the direction it is going … I am optimistic it is going to rise,” he said. “But the question is how much will it rise.”

Mr. Forbes said the Philippines has the potential to lure investments of $9 billion but is only getting $3 billion this year.

“Vietnam is getting $10 billion. Thailand and Malaysia are getting more foreign investments than the Philippines. We need to work harder,” he said.

National Competitiveness Council member and Asian Institute of Management professor Dr. Federico Macaranas said the business environment would improve if there is transparency and good governance aside from higher business standards.

“When government and private sector governance are very global, you will find very competitive industries. The Philippines has become too frugal; we should partner adversity with inventiveness,” he said.

Mr. Macaranas also said the Philippines is very strong in human resources but is “in danger” of losing that edge.

“Our own educational system has several problems such as poor nutrition at early age. In later life, they end up to be less productive,” he said.

With the Philippine business process outsourcing sector aiming to capture 10% of the global market by the end of the decade, Mr. Sañez said the industry will depend even more on an adequate supply of talent.

“Some of the efforts we are doing are focused on training, which is making an impact on the country’s competitiveness. We can definitely do better,” he said.

The BCI report warned that competitiveness depends not on low labor costs, which the Philippines is using to lure investors, but on productivity.

“Low wages can be a sign of low competitiveness, not a competitive advantage. High wages in a country, if they are justified by high productivity, can be an excellent value,” the report said.

Mr. Macaranas agreed, saying “You cannot bring down the cost of highly skilled people. They have to be more educated and more trained. You have to spend for it.”

The report said there is a need for countries to “refocus their economic policies on microeco-nomic competitiveness.”

“In moving from macroeconomic to microeconomic policies, governments need to find better way to coordinate policies across a multitude of ministries and agencies. They also need to find better ways to mobilize the involvement of companies, educational and research institutions, and others through persuasion, incentives, and leadership. Competitiveness will increasingly depend on countries’ ability to build effective collaborative structures for delivering sustained upgrading of micro-economic fundamentals,” the report said.