As its rise in the Global Competitiveness Report shows, the economic conditions are improving. Still, many challenges remain.
In the World Economic Forum’s new Global Competitiveness Report just released last week, the Philippines continued its recent trend of rising in the rankings, moving up 10 spots from last year’s position and 20 from two years ago to 65. The Philippines is one of only two countries to improve their position in the rankings by 20 spots over the past two years and has now surpassed Vietnam, though it still lags behind Indonesia.
The rankings rely on a mix of hard data and surveys from top executives in the country to measure the perceived competitiveness of an economy on a weighted formula of 12 pillars of productivity and growth potential. The release of the rankings adds to the growing sentiment that the Philippine economy is preparing for lift-off.
The Philippines’ rise in the rankings has been fueled by improvements in the categories classified as basic requirements by the report: institutions, health and primary education, infrastructure, and macroeconomic environment. Large gains in public trust in institutions and improvements in the macroeconomic environment have been the two primary factors driving the Philippines rise in the ranks.
Trust in government officials and institutions has seen great progress since the beginning of the Aquino administration. Since campaigning on the slogan kung walang kurap, walang mahirap (if there’s no corruption, there will be no poverty), the administration has made a concerted effort over the past two years to strengthen transparency in budgeting processes, ensure competitive bidding in procurement, and reduce influence peddling within government agencies. The Department of Budget Management has strived to increase transparency by reducing lump sums in the budget, making the executive drafts of the national budget available to the public in spreadsheets, insisting on competitive bidding for projects, and avoiding unsolicited project proposals. Along with a more open procurement process, increased trust in government has enhanced the perception of secure property rights which has encouraged investment.
The other major factor behind the Philippines’ rise in the rankings has been its improved macroeconomic position. The savings rate as a percentage of GDP has been steadily increasing – from 2011 to 2012, the national savings rate increased from 20.1 percent to 24.6 percent. In the past two years, there has also been a reduction in budget deficits to a nearly balanced budget in the past year, and there has been a substantial decline in government debt-to-GDP, which is nearing 40%.
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