Improving country competitiveness pays off

Good news from the Philippine economic front are coming in at an increasingly frequent pace. The recent reporting on the country’s advances in the World Economic Forum’s (WEF) latest Global Competitiveness ranking certainly falls into this category. Indeed, climbing from 85th to 65th position in only three years is no mean feat. Clocking up a vault of no less than 6 positions in the past year alone certainly has more than a few heads turning. And rightly so.

Why is a country’s competitiveness ranking and the rate of progress so important? And what can it mean for policy makers and business? Globalization through the opening of markets has many facets. Increasing competition is one of them. Companies and countries strive to outperform each other, competing for market shares, resources, and investments. The WEF defines competitiveness as “the set of institutions, policies, and factors that determine the level of productivity of a country.” A number of mutually-reinforcing aspects determine its significance: the quality of institutions and infrastructure, the stability of the macroeconomic environment, the state of health and education, healthy market competition, the efficiency of the financial sector, technological readiness, market size, business sophistication and innovation. Even if the interdependence is multifold and complex, it takes no rocket scientist to realize that enhancing a country’s productive capacity is bound to increase its competitive edge with all its accessory advances such as job creation, income gains and technological headways. And as we all know: nothing breeds success more than success.

Looking at where the improvements in the Philippines’ competitiveness rating was achieved bears little surprises. Along with the country’s market size, respect for public institutions, trust in politicians, the perception that corruption and red-tape are being addressed, and — most significantly — the improvement of the macroeconomic environment combined with a more efficient finance sector stand out. Starting from a relatively low level, these advances were progressively realized over a period of time, and are set to be sustained into the future. This said, factors like the country’s inadequate infrastructure as well as various market inefficiencies and rigidities most notably in the labor market continue to constrain further progress of the country’s competitiveness.

With notable progress achieved, should the Philippines undertake more efforts to further improve the country’s competitiveness? May be the Swiss experience can serve as a reference. The Swiss government has consistently pursued policies that facilitate business activities, enhance innovation and ensure a labor market, that is not only efficient but also provides the skills required by companies to quickly react to market forces and, indeed, be productive and competitive. According to the WEF Report, effective institutions, transparent governance and a stable macroeconomic environment are further factors that contributed to achieve robust and sustained growth rates even with a small home market and when other advanced countries struggle in times of economic downturns. Accomplishing such outcomes reflects the government’s determination to broadly and effectively address all factors determining a country’s competitiveness. Maintaining its place at the top of the global competitiveness ranking suggests that this comprehensive approach has its merits.

Competitiveness is not an academic concept. It is a reflection of a country’s ability to balance various economic, social, political and natural challenges and opportunities for the benefit of its economic actors and the society as a whole. In accepting this embracing notion, enhancing competitiveness not only improves the opportunities for the business sector and the economic actors as a whole. It is good politics supporting endeavors to create a more inclusive society.

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(Ivo Sieber is the Swiss ambassador to the Philippines.)