We are under-performing by choice

Across our region, economic competition is intensifying, and we keep on falling behind. We have the abundance in resources, both human and natural, yet we could not fully capitalize on this inherent advantage.

In the Association of Southeast Asian region, Vietnam is now fast becoming the destination of choice as a manufacturing hub for global supply chains. After a devastating civil war that lasted until the late 1960s, this nation moved in revolutionary cadence. Meanwhile, Malaysia continues to move up the value chain in electronics. Indonesia is leveraging its huge domestic market and natural resources to attract and lock in strategic direct investments. Thailand has long surpassed us in infrastructure and tourism.

In this crowded and subtle ASEAN race, the Philippines often presents itself as a promising country with a young, English-speaking, liberal democratic society with an open business environment. But this positioning unfortunately does not convert to a formidable nor effective competitiveness. We are losing the game. The widening gap between our country’s potential and actual collective performance is difficult to ignore. And investors never ignore. Neither do our competitors.

We must recalibrate and establish a much-secured positioning. We have a large and young workforce, a strong consumer demand and a strategic location. Our service sector, particularly business process outsourcing, has substantially generated thousands of good-paying jobs and foreign exchange for decades. Our English proficiency is much higher than the others and our global diaspora provided a culturally linked network. On top of this, more than 2.5 million overseas Filipino workers (OFWs) annually remit $17 to $20 billion. These helped provide resilience in our economy despite the occasional global shocks and downturns.

However, resilience is NOT competitiveness. It’s mere survival. While other ASEAN economies focus on building productive capacities, we have leaned heavily on consumption, remittances and services. We neglected building the foundations of long-term and sustainable growth. Hence the result is an economy that survives but struggles to excel.

The key reason why we lag behind is the absence of a coherent and effective industrial strategy. We have policies and laws that are clobbered with disincentives. The Electric Power Industry Reform Act (EPIRA), for example, failed to support the manufacturers with comparable costs of operations. Our land reform program suppressed the agro-industrial growth needed by an essentially agricultural economy. At the same time, the farmers, who are supposed to be freed from the bondage of soil, remained extremely chained to poverty.  Dozens of required permits and licenses remain as basic hurdles to our desire for an ease of doing business.

Vietnam, for instance, deliberately presents itself as a manufacturing alternative to China by heavily investing in industrial parks, export infrastructure, stable and competitive electric supply and policy consistency. Thailand built strong industrial clusters in automotive and electronics. Malaysia invested heavily in education, research and technologies that support higher-value industries.

By contrast, we have been extremely busy in our politics as if this is the only issue that matters. Our political system has clearly been a deterrent for economic development instead of providing the catalyst for a dynamic inclusive growth.

Infrastructure remains a persistent weakness. The recent scandal in flood control projects showcased the absence of seriousness in formulating the overall plans that would support our industries, agricultural sector and communities for the next 100 years. Despite recent improvements, high logistics costs, ports that need to be modernized, weak transport systems that still don’t include a dependable nationwide rail network for our goods and passengers and relatively expensive electricity continue to erode our competitiveness. Investors and manufacturers fear these more than they enjoy slogans about growth or demographic advantage. Capital moves to countries where it is cheaper to manufacture and faster to move goods.

The mismatch between education and industry needs is a strategic issue. While Filipinos are often recognized for adaptability and communication skills, many still lack the technical and specialized training required for advance manufacturing, engineering and technology-driven sectors. Other ASEAN countries have already aligned education, training and industrial policies. By exigency, we opted to simply export talents instead of absorbing them into domestic industries which we still don’t have much of.

The cost of this underperformance is not theoretical or abstract. It is actually experienced in terms of limited high-quality jobs here, stagnant wages and continued reliance on our OFWs’ remittances. When competitiveness falters, opportunities don’t simply disappear, they migrate to our neighbors.

Competitiveness is a choice. First, we must invest in strategic infrastructure that is clearly defined. This infrastructure must reduce costs and improve business efficiencies. Second, economic policies must be stable, predictable and oriented toward massive productivity rather than short-term consumption. Third, we must seriously bet on and invest in skills development, technical education and innovation. Lastly, we must soon overhaul our political system.

Competitiveness is never built on optimism, promises or potential. It is built on vision, execution, consistency and political will. As the ASEAN move faster and further up the value chain, the Philippines must not remain comfortable with merely being resilient. The region is not waiting – and neither should we.