Thursday, 8 September 2011

Thank you ‘BusinessMirror’ readers

Business Mirror

THE World Economic Forum’s Center for Global Competitiveness has just released its Global Competitiveness Report 2011-2012.

From the report: “Up 10 places to 75th, the Philippines posts one of the largest improvements in this year’s rankings. The vast majority of individual indicators composing the GCI [Global Competiveness Indicator] improved, sometimes markedly.”

The administration’s press office is probably working overtime to insure that the proper people get the credit and congratulations for this GCI success. Or maybe not.

For a nation the size and complexity of the Philippines to have a substantial improvement in the rankings, as well as the actual GCI score, is an achievement to be proud of. However, the recognition and praise belongs to you, BusinessMirror readers, not to the government.

Quoting the report: “The quality of the country’s Public Institutions continues to be assessed as poor: the Philippines ranks beyond the 100 mark on each of the 16 related indicators. Issues of corruption and physical security appear particularly acute [127th and 117th, respectively]. The state of its infrastructure is improving marginally, but not nearly fast enough to meet the needs of the business sector. The country ranks a mediocre 113th for the overall state of its infrastructure. Finally, despite an enrollment rate of around 90 percent, primary education is characterized by low-quality standards [110th].”

When it comes to the crucial jobs that the Philippine government should be doing, it gets a failing grade not only for the quality of the “work” but for the lack of improvement.

However, the one area in which the government is doing a good job is with fiscal and monetary policy. “Against such weaknesses, the macroeconomic situation of the Philippines is more positive: the country is up 14 places to 54th in the macroeconomic environment pillar, thanks to slightly lower public deficit and debt, an improved country credit rating, and inflation that remains under control.” The government is getting better at managing public money; it just does not know how to spend that money wisely and efficiently. For “Diversion of Public Funds,” the government ranks 127 with a score of 2.3 out of 5. For “Public Trust of Politicians, the score is 1.8 and ranks 128.

What are the greatest problematic factors for doing business in the Philippines? Corruption, inefficient government bureaucracy and an inadequate supply of infrastructure. While President Aquino made reducing corruption the centerpiece of his administration, after one year, there are little, if any, tangible results regardless of press releases to the contrary. The battle against corruption is, at the worst, being lost, and at the best, going nowhere.

Why do I say that you, readers who own, operate and are concerned about Philippine business, deserve the accolades for our GCI improvement?

One of the most critical factors that contribute to the overall macroeconomic environment (PHL ranked 54th) is “Business Sophistication.” Says the report: “Business sophistication concerns two elements that are intricately linked: the quality of a country’s overall business networks and the quality of individual firms’ operations and strategies.

“On a more positive note, the country ranks a good 57th in the business-sophistication category, thanks to a large quantity of local suppliers, the existence of numerous and well-developed clusters, and an increased presence of Filipino businesses in the higher segments of the value chain.” This is a job well done by Philippines business people and Filipino businesses are getting better at the business of doing business.

The report also shows one of the structural factors that I have been talking about for some time where we stand ahead of so many others; banking. The financial soundness of local banks is ranked 46 in the world, ahead of China and Taiwan and in the same league as Thailand and Austria.

We rank 44th in the case of companies’ ability to raise money through the stock market. In Corporate Governance, the Philippines is 52nd. However, when it comes to investor protection, a government function, the Philippines is 111th. It may not be easy operating a Filipino business as the intensity of local competition is high, 47th in the world. For Filipino business to thrive, they must make smarter decisions to beat the local competition. And it is very hard to start a business, thanks to the government, as the Philippines ranks 3rd from the bottom on the number of procedures needed to start a business. The Philippine government is not business-friendly.

The conclusion of the GCI report is obvious. The Philippine government does not provide the situation that is necessary for business and the economy to maximize its potential. And yet in spite of this hostile environment, Filipino business people are able to constantly improve.

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