News Analysis Trade

Competitive-less Philippines

Technological Readiness

There’s no question that the Philippines is struggling to be competitive – and that’s despite a slew of reforms that have hacked back the bureaucratic red tape, eased business processes for setting up an enterprise in the archipelago, weeded out some of the corruption within central government and local government units.

Don’t get us wrong, that work still has a long way to go before any of those areas reach an acceptable level. But at least, strives are being made to clean up a public-sector act that traditionally has been about as welcoming to foreign investors as a toxic-hazard sign.

But even if the Philippines managed to deal with all those issues – eradicate red tape and corruption and make the Philippines the easiest place on Earth to do business – it would still be lacking as an attractive investment destination.

Even leaving aside the wretched courts system which is unfit for purpose in almost every respect – and particularly for foreign investors seeking recourse to justice over contract disputes, for example – even ignoring the woeful infrastructure that’s long been one of the biggest deterrents to setting up shop in the Philippines; even disregarding the anti-competitive legislation that continues to repel investors, there’s another major problem.

And this one, unlike all the others which can, relatively quickly, be put right through effective legislative reforms and implementation of them, plus money and other resources – President Rodrigo Duterte’s PHP8 trillion infrastructure spend, for example – will take time. In short, it’s a generational problem.

We’re talking about changing a culture – from one that for so long has had to accept defeat to one that truly believes in itself. One that will embrace innovation and entrepreneurship; that will take a risk; start something new. But before that can become effective, the Philippines needs to encourage and develop a workforce that’s as up to speed technologically as any it hopes to compete with. If it can’t be, it can’t compete in this electronic age and it will continue to sink against those economies that can.

All this is handled by the 2017-18 Global Competitiveness Index (GCI). Produced by the World Economic Forum, the GCI is a comprehensive study that rates the relative competitiveness of 138 countries world wide. Here, under the sub-index, ‘Efficiency Enhancers’, we look at two indicators: ‘Higher Education and Training’ and ‘Technological Readiness’.

We’ve condensed these results to show the Philippines in the context of its peer group, the states of the Association of Southeast Asia Nations (Asean). Asean member, Myanmar, is not covered in this survey. Rankings shown are the global positions of these countries. Let’s take a look.

‘Higher Education and Training’: Singapore, 1st; Malaysia, 45th; Philippines, 55th; Thailand, 57th; Indonesia, 64th; Brunei, 67th; Vietnam, 84th; Laos, 105th; Cambodia, 124th.

Although in general terms this result looks good, in the breakdown of this ranking are two key areas that are real causes for concern. Those two indicators are: ‘Quality of Math and Science Education’, and ‘Internet Access in Schools’. We need to show those results which are:

Math/Science Education Quality: Singapore, 2nd; Malaysia, 14th; Indonesia, 33rd; Brunei, 34th; Laos, 53rd; Thailand, 65th; Vietnam, 71st; Philippines, 76th; Cambodia, 79th.

Internet Access: Singapore, 1st; Malaysia, 27th; Brunei, 40th; Indonesia, 45th; Thailand, 48th; Philippines, 60th; Vietnam, 77th; Laos, 95th; Cambodia, 101st.

We won’t elaborate on these figures – sufficient to say that the disciplines of science and technology are crucial for any economy that wants to ascend the value chain beyond simple production processes and simple products. But for that to happen, workers need to adapt swiftly to a changing industrial/commercial environment; they need to be on top of evolving requirements of processes and systems.

And one of the biggest handicaps to all that is lack of access to knowledge pools – in other words, Internet access which starts in earnest at the secondary level of education. Frankly, this is an outrageous situation and is the result of the political pampering of the duopoly that dominates the country’s telecoms sector. If students and workers don’t have fast, reliable and cheap connectivity to the Internet, there’s no way on God’s Earth that they can compete with students and workers who do.

The second sub-index, ‘Technological Readiness’, bears this out. Let’s start with the results. Singapore, 14th; Malaysia, 46th; Brunei, 60th; Thailand, 61st; Vietnam, 79th; Indonesia, 80th; Philippines, 83rd; Cambodia, 97th; Laos, 110th.

What this actually measures is an economy’s agility in adopting existing technologies to enhance industrial productivity. Involved here is the capacity to fully leverage information and communication technologies (or, ICTs) in daily activities and production processes for increased efficiency and enabling innovation for competitiveness.

Given the deplorable state of the country’s Internet access, it’s not surprising that the Philippines warrants such a low ranking. Connectivity across the majority of the country is slow and unreliable. It’s the most sluggish in Asia Pacific according to the last survey by Akamai, one of the world’s largest distributed computing platforms. It’s also pricey. A separate study by Internet-analysis provide, Ookla, ranked it the 161st most expensive of 202 countries surveyed world wide.

The current administration wants to develop regional economies – provinces-based, away from the main commercial hub of Manila. How can that happen if businesses can’t get online? What hope is there of attracting investors to those parts of the Philippines? It would be like a slow death for them.

These are very, very serious problems and until they’re fixed, the likes of Asean member, Vietnam – a one-party communist state that didn’t start opening up its economy until 1986 – will surge ahead of the Philippines as it already has done on a number of metrics. And not least among these is foreign direct investment (FDI) – in itself a good gauge of a country’s competitiveness. Last year Vietnam welcomed US$15.8 billion of actual FDI; the Philippines got US$7.93 billion.

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