Becoming More CompetitiveGUILLERMO M. LUZCO-CHAIRMAN, NATIONAL COMPETITIVENESS COUNCIL

Competitiveness=

The set of institutions, policies, and factors that

determine the level of productivity of a country, taking into account its level of

development.

Coverage = 142 economies = 99% of world GDP

COUNTRIES WITH COMPETITIVENESS COUNCILS

We are not alone

• Australia• Argentina • Bahrain• Brazil• Canada• Chile• Colombia• Croatia• Dominican Republic• Egypt• India• Ireland• Japan

• Korea• Mexico• New Zealand• Panama• Philippines• Russia• Saudi Arabia• Singapore• Sweden• United Kingdom• United Arab Emirates• United States

2 Singapore 5.633 Sweden 5.61

1 Switzerland 5.74Rank Economy

Score

6 Germany 5.417 Netherlands 5.418 Denmark 5.409 Japan 5.4010 United Kingdom 5.39

5 United States 5.434 Finland 5.47

Rank Economy Score

The Global Competitiveness Index 2011-2012

11 Hong Kong SAR 5.3612 Canada 5.3313 Taiwan, China 5.2614 Qatar 5.2415 Belgium 5.2016 Norway 5.1817 Saudi Arabia 5.1718 France 5.1419 Austria 5.1420 Australia 5.11

21 Malaysia 5.0824 Korea, Rep. 5.0226 China 4.9027 United Arab Emirates 4.8928 Brunei Darussalam 4.7836 Spain 4.5439 Thailand 4.5246 Indonesia 4.3850 South Africa 4.3453 Brazil 4.3256 India 4.3058 Mexico 4.2965 Vietnam 4.2466 Russian Federation 4.2175 Philippines 4.0897 Cambodia 3.85142 Chad 2.87

ASEAN members in bold. Lao PDR and Myanmar not covered

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

Cambodia

China

Indonesia

Malaysia

Philippines

Thailand

Vietnam

GDP per capita (US$)

Why does it matter?

Source: IMF 2011

Why does it matter?

Source: UN 2011

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

-2,000

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

Indonesia

Malaysia

Philippines

Thailand

Viet Nam

FDI inflows (US$ million)

Spaghetti bowl

Bottom

80th

60th

20th

90th

10th

40th

70th

2005 2006 2007 2008 2009 2010 2011

30th

Median

India

China

Indonesia

Cambodia

Malaysia

Philippines

Singapore

Thailand

Vietnam

Global Competitiveness Index

Perc

entil

e

Top 53%

Our Vision

To develop more competitive Philippines To instill a Culture of Excellence in Governance To use Public-Private Sector Partnerships as a

development engine

Our Mission

To build up long-term competitiveness of the Philippines through –opolicy reformsoproject implementationo institution-buildingoperformance monitoringogoal-setting

Work Program

Benchmark against key global competitiveness indices

Map each indicator to the agency responsible Focus on lowest-ranking indicators Track city competitiveness and key indicators Working Groups concentrate on specific projects Link Competitiveness Plan to Philippine

Development Plan, National Budget, LEDAC, Cabinet Agenda

Where we are today

WEF Global Competitiveness Report : No. 75 / 142 (2011)No. 7 of 8 in ASEAN

IFC Doing Business Survey : No. 136 / 183 (2011)No. 7 of 8 in ASEAN

IMD World Competitiveness Report : No. 41/85 (2011)No. 5 of 5 in ASEAN

FutureBrand’s Country Brand Index : No. 65 / 110No. 14 of 17 in Asia Pacific

Our target

• WEF Global Competitiveness Report No. 30 or higher by 2016

• IFC Doing Business SurveyNo. 50 or higher by 2016

• IMD World Competitiveness ReportNo. 20 or higher by 2016

• FutureBrand’s Country Brand IndexNo. 30 or higher by 2016

• No. 2 or 3 in ASEAN in all rankings

Impact : Inclusive Growth

o Higher FDI (new investments of 3-4% of GDP), from US$1.7 billion in 2010

o Double export growth to US$120 billion by 2016 with new products and services to account for 30% of exports

o GDP Growth of 7-8% per yearo Job Growth / Lower Unemployment o Lower Poverty Incidence : 26.5% in 2009 to 16.6% by

2015o Growing C socioeconomic class(currently 8.6%); shrinking

DE class (currently 91%)

Sources: NSCB (Breakdown: 2010 Baseline- US$ 51.39 (goods) US$ 12.27(services) , 2016 Target- US$ 91.5 B (goods) & US$ 28.9 B (services), Chapter 3 Phil Development Plan (Competitive Industry Sector ), NEDA Targets; Phil. Labor and Employment Plan 2011-2016

2011 Performance

World Economic Forum GCI +10IFC Ease of Doing Business - 2

(following a +14 re-rating due to methodology change)

IMD World Competitiveness Report - 2Transparency International +5Millenium Challenge Account Pass

World Economic ForumGlobal Competitiveness Rankings

2011 2010 2009 2008PHILIPPINES 75 85 87 71

Key Drivers

Macroeconomic Management +14

Technological Readiness +12

Market Efficiency for Goods + 9

Institutions (Governance) + 8

Key ConstraintsInstitutions (Governance) + 8

Infrastructure - 1

Innovation + 2

Labor Market Efficiency - 2

EducationHigher education & training + 2Science & Math education quality - 2Quality of primary education -11

Corruption

Inefficient government bureaucracy

Inadequate supply of infrastructure

Policy instability

Tax rates

Crime and theft

Tax regulations

Restrictive labor regulations

Inadequately educated workforce

Access to financing

Inflation

Government instability/coups

Poor work ethic in national labor force

Foreign currency regulations

Poor public health

0 5 10 15 20 25 30

24.4

18.3

16.5

7.9

5.7

5.6

5.6

4.6

2.5

2.2

2.0

1.9

1.9

0.5

0.5Percent of responses (weighted totals)

The most problematic factors for doing business in the Philippines in 2011

Philippine Competitiveness RankingIFC Doing Business Report 2009 - 2012

Indicators2012 (183

economies)

2011 (183

economies)

2010 (183

economies)

2009(181

economies)

Over-all ranking 136 134 144 140

Starting a business 158 155 162 155

Dealing w/ construction permits

102 98 111 105

Getting electricity 54 57 - -

Employing Workers - - 115 126

Registering Property 117 109 102 97

Getting Credit 126 116 127 123

Protecting Investors 133 131 132 126

Paying Taxes 136 127 135 129

Trading across borders 51 54 68 58

Enforcing contracts 112 114 118 114

Resolving Insolvency 163 161 153 151

INDICATORS RANKING (2010) RANKING (2011) change

OVER-ALL RANKING 85/139 75/142 + 101st pillar: INSTITUTIONS 125 117 + 81.01 Property rights 99 105 - 61.02 Intellectual property protection 103 102 + 11.03 Diversion of public funds 135 127 + 81.04 Public trust of politicians 134 128 + 61.05 Irregular payments and bribes 128 119 + 91.06 Judicial independence 111 102 + 91.07 Favoritism in decisions of government officials 131 118 +131.08 Wastefulness of government spending 118 109 + 91.09 Burden of government regulation 126 126 01.10 Efficiency of legal framework in settling disputes 122 115 + 7

PHILIPPINE COMPETITIVENESS RANKING

WEF GLOBAL COMPETITIVENESS REPORT 2010 & 2011

2010 2010 2011 2011

RED – bottom 20% (111th – 139th) 25 indicators (113th – 142nd) 21 indicators

PURPLE – bottom 40-21% (83rd – 110th) 37 indicators (85th – 112th) 36 indicators

ORANGE – bottom 50 – 41% (69th – 82nd) 20 indicators (71st– 84th) 17 indicators

BLACK (1st – 68th) 29 indicators (1st – 70th) 37 indicators

111 indicators 111 indicators

INDICATORS RANKING (2010) RANKING (2011) change

1.11 Efficiency of legal framework in challenging regulations

116 118 - 21.12 Transparency of government policymaking 123 120 + 3

1.13 Business costs of terrorism 126 130 - 4

1.14 Business costs of crime and violence 104 112 - 8

1.15 Organized crime 106 102 + 4

1.16 Reliability of police services 105 112 - 7

1.17 Ethical behavior of firms 129 118 + 11

1.18 Strength of auditing and reporting standards 75 62 + 13

1.19 Efficacy of corporate boards 56 52 + 4

1.20 Protection of minority shareholders’ interests 80 84 - 4

1.21 Strength of investor protection* 109 111 - 2

INDICATORS RANKING (2010) RANKING (2011) change

2nd pillar: INFRASTRUCTURE 104 105 - 12.01 Quality of overall infrastructure 113 113 02.02 Quality of roads 114 100 + 142.03 Quality of railroad infrastructure 97 101 - 42.04 Quality of port infrastructure 131 123 + 82.05 Quality of air transport infrastructure 112 115 - 32.06 Available airline seat kilometers* 28 28 02.07 Quality of electricity supply 101 104 - 32.08 Fixed telephone lines* 106 103 + 32.09 Mobile telephone subscriptions* 88 92 - 4

3rd pillar: MACROECONOMIC ENVIRONMENT 68 54 + 143.01 Government budget balance* 62 71 - 93.02 National savings rate* 74 70 + 43.03 Inflation* 73 69 + 43.04 Interest rate spread* 75 50 + 253.05 Government debt* 102 89 + 133.06 Country credit rating* 75 63 + 12

Working Groups

1. Education and Competitive Human Resources 2. Performance Governance System3. Infrastructure for Competitiveness 4. Transaction Costs and Flows 5. Import and Export Clearance Process / Single Window 6. Power and Energy : Cost and Availability 7. Transparency in Budget Delivery 8. Judiciary 9. Anti-Corruption 10. IT Governance Framework

Wor

king

Gro

ups

NCC Co-ChairmenSec. Domingo (Public Sector) Mr. G. Luz (Private Sector)

Infrastructure for Competitiveness

Education and Human Resources

Performance Governance System

Transparency in Budget Delivery

Customs/National Single Window

Transaction Costs and Flows

Anti-Corruption

Agriculture *

Judiciary System

Special Projects

ICT Governance Framework

Science and Technology *

Energy and Power

NCC SecretariatBoard Members:

Public: Secretaries of DepEd, DOT, DOE, DOF, NEDA,Private: J. Ayala, E. Chua, D. Banatao, T. Tancaktiong

Building Momentum for Transparency

National Competitiveness Council

Open Government Partnership

Integrity Initiative

APEC Code of Conduct for Business

National Competitiveness Council Office of the Ombudsman

Process improvements in business permits, licenses, registration

Budget transparency measures

Balanced Scorecard and Multisectoral Governance Councils in National Agencies – DPWH, DSWD, Army, PNP, etc.

COMELEC – Campaign Finance Reforms

Open Government Partnership

• Government + Business + Civil Society• International partnership. Steering Committee from US,

Brazil, Mexico, Norway, UK, South Africa, Indonesia, Philippines

• Time-based Country Action Plan (examples)– Disclosure of Budget Information– Disclosure of LGU use of funds– Online posting of “pork barrel” and lump sum disbursements– Freedom of Information Act– Social Audit for Public Infrastructure Projectswww.opengovpartnership.org

Integrity Initiative

Private Sector + Government

Integrity Pledge (1000+ enterprises)

Unified Code of Conduct

Pre-requisite for bids ?

APEC Code of Conduct for Business

“Corruption is a serious threat to good governance and deters investment…fighting corruption is essential to the development of our economies for the benefit of our people.”

APEC-wide Business Integrity and Transparency Principles for the Private Sectorwww.apec.org

2012 Plan

o Continuous tracking of global reports

o Regional / Local Competitiveness Councils

o Industry Roadmaps

o National Competitiveness Assessment and Plan

Maintain focus on …

o Governance and Bureaucracy

o Infrastructure

o Macroeconomic management

o Education

o Goods Market Efficiency

o Labor Market Efficiency

o Technological Readiness

Global Competitiveness Index: Comparative WeightsPhilippines

Rank Score(1–7)

GCI 2011–2012 (out of 142) 75 4.1

BASIC REQUIREMENTS 60.0 % 100 4.2

Institutions 117 3.2 Infrastructure 105 3.1 Macroeconomic environment 54 5.0 Health and primary education 92 5.4

EFFICIENCY ENHANCERS 35.0% 70 4.0

Higher education and training 71 4.1 Goods market efficiency 88 4.1 Labor market efficiency 113 3.9 Financial market development 71 4.0 Technological readiness 83 3.5 Market size 36 4.6

INNOVATION AND SOPHISTICATION FACTORS 5.0% 74 3.4

Business sophistication 57 4.1 Innovation 108 2.8

Regional Competitiveness Councils

o Encourage creation of regional / local competitiveness

councils co-chaired by Public and Private Sector

o Build template of indicators so regions can track their

competitiveness for comparison with national and

global standards

o Involve universities in data-collection and analysis

Industry Roadmaps

• As competitive environment is created, industry and individual firms are drivers of growth and wealth creation.

• DTI will invite industries to prepare 5 - 10 year industry roadmaps

• Roadmaps should describe –– State of industry today– Other country competitors– Potential of industry for value and employment growth– Projected investments by industry players– Policy environment required by industry (e.g., regulatory,

infrastructure, human resources, financial, etc.)

National Competitiveness Assessment and Plan

o Annual assessment of performance indicators

o Global performance indicators linked to 6-

year Philippine Development Plan

o 10 to 20 year strategic long-term

perspective

Building BlocksNational Competitiveness Plan

Working Groups Industry Roadmaps Regional Competitiveness Councils

Next steps

• Concentrate on Basic Requirement and Efficiency Enhancers (75+% of weight).

• More networking with other clusters (e.g., Social Cluster, Governance Cluster)

• Undersecretaries permanently assigned to Working Groups as point persons for Departments

• Establishment of Competitiveness Teams in key Departments

What lies ahead ?

• The bar always rises – moving up the “weight class”

• The competition never sleeps• The definition is evolving sustainable

competitiveness not compromising future generations’ ability to grow