9 October 2019 – The Philippines slid 8 places to 64^th out of 141 countries, from last year’s 56th spot in the 2019 Global Competitiveness Report of the World Economic Forum. This was due to its global competitiveness score dropping by 0.3, from 62.1 to 61.9 this year while other countries improved their scores. It also dropped to 6^th from 5^th among nine covered ASEAN countries due to the significant improvement in the scores of Brunei.^[1]

In the global ranking, Singapore took the top spot this year, with an overall competitiveness score of 84.8, outranking last year’s top performer, the United States.

DECLINES

The biggest drop in both rank and score in the Philippines is on Pillar 3 (ICT Adoption), from 67^th to 88^th global rank and from the 6^th to the 8^th place in the ASEAN region. Its score dropped from 54.8 to 49.7 in this year’s report.

The second biggest drop in rank in the Philippines is on Pillar 4 (Macroeconomic Stability), from 43^rd to 55^thglobally, despite maintaining a score of 90. One of the two indicators under this pillar is inflation rate which, in the year’s Report, recorded 4%, up from the previous year’s average inflation rate of 2.5%. It is worthy to note that the country’s inflation rate has significantly dropped since. The Philippines still ranks 3^rd in this pillar compared to other ASEAN countries.

On the other hand, Pillar 5 (Health) is the Philippines’ least competitive pillar, ranked 102^nd out of 141 countries. The Report noted a decrease in healthy life expectancy of 65.6 years this year, from 67.6 years last year.

PILLARS OF COMPETITIVENESS

The highest increase in a pillar’s rank and score for the Philippines is Pillar 1 (Institutions), ranked 87^th globally this year from 101^st last year with an improved score of 50. Notable improvements under this pillar is on Incidence of Corruption (from rank 95^th to 85^th this year) and on Shareholder Governance (from 106^th to 95^th). The following indicators were added under this pillar this year, which helped improve the country’s performance: Energy efficiency regulation (ranks 39^th of 141 countries), Renewable energy regulation (ranks 43^rd) and Environment-related treaties in force (ranks 36^th globally). These three indicators collectively measure a government’s commitment to sustainability, an indication of its future orientation.

“One of the key messages of this Report is the importance of the Sustainable Development Goals (SDGs) in pursuing sustained economic growth. The world needs to do a lot of catching up to reach the SDG targets by 2030, and the Philippines is no exemption. The business community needs to be more responsible and innovative in its operations to help improve the country’s social and economic goals,” says MBC Chairman, Ed Chua.

Of the 12 pillars in the Report, the strongest pillars of the Philippines are its Market Size (ranked 31^st), Labor Market (ranked 39^th), Financial System (ranked 43^rd), Business Dynamism (ranked 44^th), and Product Market (ranked 52^nd).

Meanwhile, the Philippines landed in the Top 10 for the following indicators: Internal labour mobility (7^th out of 141), Insolvency regulatory framework (9^th out of 141), Diversity of Workforce (9^th out of 141), and Companies embracing disruptive ideas (10^th out of 141). Other strong indicators are related to labor market, which are Ease of finding skilled employees (ranked 13^th), Pay and productivity (ranked 13^th), and Cooperation in labor-employer relations (ranked 15^th).

FOCUS: HUMAN CAPITAL AND LABOR

The performance of the Philippines in Pillar 6 (Skills) is above the ASEAN average, maintaining its global rank of 67^th, with a slight increase in score by 0.8 points. The Report noted the country’s strong edge in terms of human capital. Businesses in the Philippines find it relatively easy to find skilled employees, and employees hired are given growth opportunities through training. The Report also highlighted the good skills set of graduates in the Philippines, as well as good digital skills of its population, which ranked 20^th and 22^nd, respectively.

The Philippines is also competitive globally in terms of teaching. The country ranks 24^th in Critical thinking in teaching ranks, and 29^th in the Quality of vocational training. However, its pupil-to-teacher ratio in primary education is one of the weakest in terms of global ranking, despite an improvement in score this year.

“We would like to stress the need to foster investments in human capital, and matching the benefits of innovation with talent development and a well-functioning labor market,” says Chua. “Innovation in education is the key. We should use technology in classrooms and in training grounds. Furthermore, upskilling of workers will help us meet the changing demands of industries.”

On the other hand, there is a 0.4 improvement in the Philippines’ score for Labor Market (Pillar 8) with a score of 64.9. Despite this, the Philippines dropped in this pillar from 36^th to 39^th place globally. Within the ASEAN, its rank declined from 3^rd to 4^th place, overtaken by Brunei (38^th to 30^th). Nevertheless, the score performance of the Philippines is above the ASEAN average.

Looking at the Labor Market indicators, we note that the Philippines, relative to other countries, has more cooperative labor-employer relations (ranked 15^th) and has higher mobility of workers within the country (ranked 7^th). Labor market policies also help in reskilling the unemployed and in helping find employment opportunities (ranked 50^th). However, Redundancy costs remain high globally, ranking 116^th in this year’s report.

PH, AMONG ASEAN ECONOMIES

Within ASEAN, Singapore is followed by Malaysia (with a competitiveness score of 74.6), Thailand (68.1), Indonesia (64.6), Brunei Darussalam (62.8), the Philippines (61.9), Vietnam (61.5), Cambodia (52.1), and Lao PDR (50.1). This year, Brunei Darussalam outranks the Philippines, claiming the 5th spot from 6th last year. Four from ASEAN join the top 50 most competitive countries, namely Singapore (1st), Malaysia (27th), Thailand (40th), and Indonesia (50th).

In this region, the Philippines lags behind in the pillars of Infrastructure (8th out of 9 in ASEAN), in ICT Adoption (8^thout of 9 in ASEAN), and in Health (7^th out of 9 in ASEAN). Its strength compared to the eight other ASEAN countries includes Labor Market (4^th out of 9 in ASEAN) and Financial System (4^th out of 9 in ASEAN). Last year, the Philippines was the third most competitive in the region in terms of Labor Market and Macroeconomic Stability, which dropped to 5^th in ASEAN this year).

GLOBAL COMPETITIVENESS INDEX

The WEF Global Competitiveness Report 2019 uses the Global Competitiveness Index (GCI), which assesses the drivers of productivity. This GCI was updated last year to provide a much-needed compass to bridge the long-term solutions for major economic challenges, and short-termism that prevails in governments, administrations, and corporations around the world. The new GCI highlights an important factor for global competitiveness: it is not a zero-sum game, and all countries can become more productive at the same time. Cross-country comparisons, therefore, can be instructive by pointing to benchmarks and best practices.

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The Makati Business Club (www.mbc.com.ph), WEF’s partner institute in the Philippines, administered the 2019 Executive Opinion Survey, a major component of the Global Competitiveness Report, from March 15 – April 30, 2019.

The World Economic Forum (www.weforum.org), committed to improving the state of the world, is the International Organization for Public-Private Cooperation. The Forum engages the foremost political, business, and other leaders of society to shape global, regional, and industry agendas.

^[1] ASEAN economies included are Singapore, Malaysia, Thailand, Indonesia, Philippines, Brunei, Viet Nam, Cambodia, and Lao PDR. Myanmar is not covered in WEF’s Global Competitiveness Report 2019.

Download the complete WEF Global Competitiveness Report 2019 here