For innovation to flourish it needs the tools. And among those is infrastructure – everything from roads and seaports to good communications and an adequate power supply. If it’s going to be competitive, however, it needs something else – it needs efficiency in all those areas. It needs smooth and efficient processes that ensure goods and services can travel around the country and be exported abroad in an uncomplicated, cost-effective and timely fashion.
The Philippines has been handicapped by its poor physical infrastructure for generations, which is why the present government has put in place the biggest building programme in the country’s history – a PHP8 trillion mega-build. When all that’s in place it’ll be a massive help. But to get the maximum benefit from it – for it to make the Philippines more competitive – it will need operators and innovators who can increase the efficiency of all those facilities.
Here’s how eight Association of Southeast Asian Nations (Asean) states ranked in the 2017 Global Innovation Index (GII) in terms of their ‘Infrastructure’. Asean members, Laos and Myanmar, were not included in this survey.
This is the overall ranking for the GII ‘Infrastructure’ pillar which assesses three key area: ‘General infrastructure’; ‘Information and communication technologies (ICT)’; ‘Ecological sustainability’. These rankings show their global positions among 127 countries world wide. Singapore, 2nd; Malaysia, 45th; Brunei, 55th; Thailand, 71st; Philippines, 72nd; Vietnam, 77th; Indonesia, 81st; Cambodia, 113th. So, half way in Asean.
Now we turn to ‘General infrastructure’. On the GII, this is shown as an average of electricity output in kWh per capita; logistics performance based on the Logistics Performance Index (LPI); and gross capital formation, which consists of outlays on additions to the fixed assets and net inventories of the economy, including land improvements (fences, ditches, drains); plant, machinery, and equipment purchases; and the construction of roads, railways, and the like, including schools, offices, hospitals, private residential dwellings, and commercial and industrial buildings.
Here’s how the Asean countries did globally in terms of ‘General infrastructure’: Brunei, 6th; Singapore, 10th; Indonesia, 35th; Malaysia, 37th; Vietnam, 42nd; Thailand, 51st; Philippines, 84th; Cambodia, 92nd. The Philippines comes next to last in Asean which really tells a story – specifically, it has an insufficient electricity output and a poor logistical performance.
The first of these speaks for itself – no-one’s under any illusions about power shortages in the archipelago. Thankfully that’s something that’s also being addressed – not just by the administration but also by the private sector.
This year, three of the country’s largest corporations are investing heavily in power. Ayala Corporation’s PHP185 billion capital spend, PHP21 billion will be sunk into power projects; Aboitiz Equity Ventures is shelling out PHP59 billion for an installation of 4,000 megawatts of electricity; the lion’s share of San Miguel Corporation’s PHP63 billion capital expenditure for this year will also go on power.
The second – poor logistical performance – refers to the Philippines’ showing on the LPI which is released every two years by the World Bank. It was last published in 2016.
This tracks (a) the efficiency – in particular, the speed and simplicity – of border-control agencies, such as the Bureau of Customs, in clearing goods; (b) trade quality and transport-related infrastructure – ports, road, rail, air and ICT; (c) the competence and quality of logistics services such as those of transport operators and customs brokers; (d) the ability to track and trace consignments; (e) the timeliness of shipments – whether or not delivery schedules are adhered to; (f) the ease of arranging competitively priced shipments.
Reading those criteria, even lay observers in the Philippines can understand why the country’s having problems with its logistics. The Bureau of Customs has always been dogged by inefficiency, while transport links, up to now, have virtually defined the country’s inability to move things around.