Competitiveness and economic performance

WHY is it that at this time when the Philippines is finally improving its economic performance, it is still slipping in economic competitiveness vis-à-vis the world, ranking 45th in the latest rankings from 42nd a year ago? In all logic, our competitiveness should be improving not regressing.

 According to the World Competitiveness Yearbook 2007, there is a fundamental difference between competitiveness and economic performance. Although the GDP tells us how a country has performed today, it does not take into account how well it is preparing for the future. Competitiveness, on the other hand, takes that into account – and some of the most important elements of competitiveness cover issues like education, technology, research and science, all of which are preparatory for the future. Surveying competitiveness over almost 25 years, the WCY says that the nations who have made it are those who had a blueprint for prosperity and knew where they were going.

Preparing for the future has been erratic at best in our case. Our last quarter century has been marked by political turbulence, contradictory economic policies, and economic boom-and-busts. And we are just seeing now our emergence from the crippling Asian crisis of 1997.

The administration of President Gloria Macapagal Arroyo deserves high marks for steering the nation and the economy in the right direction during the past three years. Paradoxically, at a time of severe challenge when certain sectors were actively trying to bring it down, her government found the will to pass the right policies, particularly in the fiscal sector. Some of the fiscal measures were costly of popular support – like the expanded VAT – but in toughing it out, the nation and the economy started to pick up steam. As the government started to push forward programs to improve infrastructure, tourism, investments and trade, foreign investments have in turn began to flow into the economy.

The nagging problem is that the improvement is slow when compared to other countries in the region. In a competitiveness ranking of 15 countries in the Asia-Pacific region, we ranked 14th, ahead only of Indonesia. We still have a lot of catching up to do.

The main reasons for this are no big mystery, even to laymen. They are poor infrastructure, government inefficiency, and comparatively low foreign investment.

In the last analysis, the vital sector that can catalyze change for the better is government. It has to lead the way. As the WYC observes: “Competitiveness is a matter of balanced policies. Too many governments have not yet mastered the economic imperatives necessary to support and stimulate the competitiveness of their country. Such governments become a hindrance to growth. Others, such as Finland and Denmark, are more proactive. The government and the economy need to remain in sync in order to contribute durably to the competitiveness of a nation.”

There is much that we still have to do to become more competitive. The inconsistencies and contradictions in policy, the clashing signals from government managers, and the perpetual tug-of-war between the Executive and Congress must yield to unity of direction and teamwork. Playing as a team we can compete in the world; divided we are doomed to the shallows.

Reversing course on ICT

This is why the recent actions of government in the ICT (information and communications technology) sector are perplexing and counter-competitive.

It used to be a source of pride for me that our government understood ICT and its implications on economic growth, political maturity and socio-cultural development.  In 2000, we were among the first ASEAN countries to pass an e-Commerce Law.  We are arguably the leading nation in the use of mobile devices in government (or m-government).   In 2004, we created the Commission on Information and Communications Technology (CICT), a government agency that brought together under one roof all agencies looking after information technology and communications.  For the first time we had an agency championing causes like e-Government, CyberServices Corridor, and ICT in Education.

 Many in the private sector were thrilled that the government had created a governance structure for ICT in the country. And they even dared to hope that we would eventually create the Department of ICT, which would put the Philippines at par with countries like Singapore (with its Infocomms Development Authority) and Thailand (with its Ministry of ICT).

 To our dismay and shock, however, the administration suddenly reversed course on the ICT governance structure this year. Just before the elections last May, Executive Order No. 603 (s. 2007) emasculated the CICT by ordering the return of the communications offices under it to the DOTC. (These offices, particularly the  Telecommunications Office, developed and would manage the controversial NBN contract with ZTE – but that is another story).  After the elections, a new CICT chair was appointed, a young man with the right education and background but unknown to the industry.

 But more than the appointment of a new Chair (and the two commissioners to replace those who have resigned), what CICT needs now is a reinstatement of its original mandate from the President.  The only way it can remain viable is for it to remain the body which sets overall ICT policy and strategic direction. CICT should also continue to oversee the implementation of  the government’s information infrastructure with NTC as the regulator of both the Telecoms and IT sectors. Unless the President makes this very clear and gives her new CICT Chairman this explicit mandate, the commission will become a useless agency.

 Falling short of this, the private sector can of course lobby Congress to pass a law creating a Department of Information and Communications Technology.  This has always been the ultimate goal.  The CICT and its predecessors (NITC and ITECC) were always considered by the private sector as stop-gap measures.  And now its Achilles heel has been exposed.  As a creation by executive fiat, it can also be changed by executive whim. This was a risk those who pushed for the CICT by Executive Order were willing to take. No one anticipated that this administration would devour its own creation.

The President once said that ICT is the future.  If she still believes this, then she should seriously look at CICT and figure out how to get this agency back on track. There can be no doubt that a single agency defining overall ICT policy and strategy is needed. To deny this is to go against the practice of advanced and modernizing countries in the world today. It compromises our ability to harness ICT for national development and competitiveness.