5 September 2012 STATEMENT OF MAKATI BUSINESS CLUB CHAIRMAN RAMON R. DEL ROSARIO JR.

ON THE PHILIPPINE PERFORMANCE IN THE WORLD ECONOMIC FORUMS GLOBAL COMPETITIVENESS REPORT 20122013

Good afternoon ladies and gentlemen. Welcome to the Philippine launch of the Global Competitiveness Report 20122013 organized by the Makati Business Club. Background (Slide 1) To give you a brief background on the Global Competitiveness Report, the World Economic Forum first came out with the Global Competitiveness Report in 1979. According to the Geneva-based organizations website, through the annual competitiveness report, it aims to mirror the business operating environment and competitiveness of over 140 economies worldwide. The report series identify advantages as well as impediments to national growth thereby offering a unique benchmarking tool to the public and private sectors as well as academia and civil society.1 (Slide 2) The Global Competitiveness Report ranks national economies based on the Global Competitiveness Index, which measures the microeconomic and macroeconomic pillars that determine national competitiveness. As inputs for the Global Competitiveness Index, the World Economic Forum uses both publicly available data, and data gathered through the Executive Opinion Survey, which is a comprehensive survey conducted each year by the World Economic Forum with the help of its partner institutes. In the Philippines, the Makati Business Club has been the World Economic Forums partner institute in the preparation of the Global Competitiveness Report since 1994. In the first half of this year, as in previous years, MBC administered the World Economic Forums Executive Opinion Survey in the Philippines. Thus, out of 15,000 business leaders polled around the world for the latest Global Competitiveness Report, 132 respondents participated from the Philippines. Philippines Ranking So without further ado, let us now proceed to the findings of the World Economic Forums Global Competitiveness Report 20122013. The Makati Business Club is pleased to announce that, out of 144 economies around the world, the Philippines is one of just 15 economies whose competitiveness rankings rose by double digits. From a ranking of no. 75 in the 20112012 edition of the report, the Philippines jumped 10 places to no. 65 in the latest competitiveness rankings. This is the second straight year that the country climbed 10 places up the competitiveness ladder: last year, the country improved from no. 85 to no. 75. (Slide 3) With a record-high global competitiveness index score of 4.23, (Slide 4) the Philippines is in the upper 45 percentile of economies assessed by the World Economic Forum in 2012, which is notably better than the previous high of 53 percentile in 2008 and in 2011.

http://www.weforum.org/issues/global-competitiveness.

(Slide 5) This is what the report had to say about the Philippines: Ranked 65th, the Philippines is one of the countries showing the most improvement in this years edition. Indeed, it has advanced 22 places since reaching its lowest mark in 2009. The Philippines makes important strides this year in improving competitivenessalbeit often from a very low baseespecially with respect to its public institutions (94th, up 23 places). Trust in politicians has made considerable progress (95th, up 33), although significant room for improvement remains. The perception is that corruption (108th, up 11) and red tape (108, up 18) are finally being addressed decisively, even though they remain pervasive. The macroeconomic environment also exhibits marked improvement (36th, up 18) and represents one of the strongest aspects of the Philippines performance, along with the market size pillar (35th). In addition, the financial sector has become more efficient and increasingly supportive of business activity (58th, up 13).2 Pillars of competitiveness The sustained and rapid advance of the Philippines in the global competitiveness index owes a lot to improvements in 11 out of the 12 pillars of competitiveness considered by the Global Competitiveness Report. You will see in the table that institutions went up 23 places to no. 94. Infrastructure went up 7 places to no. 98. Macroeconomic environment went up 18 places to no. 36. Higher education and training went up 7 places to no. 64. Goods market efficiency went up 2 places to no. 86. Labor market efficiency went up 10 places to no. 103. Financial market development went up 13 places to no. 58. Technological readiness went up 4 places to no. 79. Market size went up 1 place to no. 35. Business sophistication went up 8 places to no. 49. Finally, innovation went up 14 places to no. 94. The lone category in which the Philippines did not see an improved ranking was in the health and primary education pillar. None of the 10 indicators falling under health and primary education posted an improvement in ranking. Some of them are part of our commitments under the Millennium Development Goals of the United Nations. The Philippine ranking in HIV prevalence, in particular, notably dropped from no. 1 to no. 12. Strengths Out of 111 indicators listed by the Global Competitiveness Report, the Philippines ranked no. 50 and below in 25 indicators. These indicators, considered the countrys competitive advantages, are: HIV prevalence (though our ranking dropped in this category, HIV prevalence in the Philippines is still low compared to other countries), available airline seat kilometers, degree of customer orientation, willingness to delegate authority, domestic market size, extent of staff training, affordability of financial services, government budget balance, financing through local equity market, cooperation in labor employer relations, reliance on professional management, state of cluster development, quality of management schools, FDI and technology transfer, foreign market size, soundness of banks, extent of marketing, quality of the educational system, ease of access to loans, regulation of securities exchanges, firm level technology adoption, gross national savings, local supplier quantity, intensity of local competition, and availability of financial services. Weaknesses On the other hand, the report notes: Despite these very positive trends, many weaknesses remain to be addressed. The countrys infrastructure is still in a dire state, particularly with respect to sea (120 th) and air transport (112th), with little or no progress achieved to date. Furthermore, various market inefficiencies and rigidities continue, most notably in the labor market (103rd).3 The report pinpoints areas wherein the Philippines continues to be weak and needs to improve on. The country ranked no. 100 or worse in the following indicators: number of procedures to start a business, burden of customs procedures, business costs of terrorism, tuberculosis cases, redundancy costs, quality of port infrastructure, flexibility of wage determination, business impact of tuberculosis, quality of air transport infrastructure, number of days to start a business, strength of investor protection, ratio of women in labor force to men, burden of government regulation, hiring and firing practices, irregular payments and bribes, business costs of crime and violence, efficiency of legal framework in settling disputes, government procurement of advanced technological products, fixed telephone lines, business impact of malaria, efficiency of legal framework in challenging regulations, life expectancy, total tax rate, quality of scientific research institutions, diversion of public funds, net primary education enrolment, and reliability of police services.

2 3

World Economic Forum, The Global Competitiveness Report 20122013, page 30. World Economic Forum, The Global Competitiveness Report 20122013, page 30.

(Slide 6) Corruption, inefficient government bureaucracy, and inadequate supply of infrastructure still remain the top three problematic factors for doing business in the Philippines. This has been the finding of the World Economic Forums Executive Opinion Survey in the last five years, although these weaknesses have been cited by fewer survey respondents this year. As I quoted the report earlier, the perception is that corruption has not been totally stamped out but is being addressed decisively.4 As an advocate of strengthening the culture of integrity in the private sector, however, the Makati Business Club is pleased to note that the ranking of ethical behavior of private firms in the Philippines has significantly improved by 31 places to no. 87 from no. 118.

Acknowledgements (Slide 7) Before I conclude my portion of todays presentation, please just allow me to make a few important acknowledgements. First of all, I would like to express my sincere thanks to the local and foreign corporations doing business in the Philippinesrandomly drawn from members of the Makati Business Club, Management Association of the Philippines, Business Processing Association of the Philippines, and the Semiconductor and Electronics Industries of the Philippineswho participated in the Executive Opinion Survey. Without their cooperation, we would not have been able to attain the record-high number of survey responses this year. The Makati Business Club would also like to thank the World Economic Forum for their continued confidence in our partnership. We look forward to strengthening our collaboration in the years ahead. Finally, MBC would like to cite the National Competitiveness Council and its co-chairmenTrade and Industry Secretary Greg Domingo representing the government and Bill Luz for the private sectorfor their dynamic pursuit of reforms and projects in the private and public sectors to raise the countrys competitiveness standing. The Makati Business Club shares the National Competitive Councils dream for the Philippines to be counted among the top 30% most competitive countries in the world by 2016. With that, I will now turn you over to Makati Business Club co-vice chairman Bobby de Ocampo, who will discuss further findings of the Global Competitiveness Report that pertain to the Philippines. ###

World Economic Forum, The Global Competitiveness Report 20122013, page 30.