Competitiveness and Efficiency PDF

Lesson 3.7.
Competitiveness and Efficiency
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Objectives:
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1. State the importance of Competitiveness and efficiency in the economy

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2. Explain the value of International Trade in how one can set up a business
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3. Show the role tourism plays in the economy and how it can be utilized as
business opportunity.
4. Identify and assess small business opportunities
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The fair ranking of the Philippines in world competitiveness means that the
country’s industries are yet on their way from the factor-driven to the efficiency-
driven stage. The Global Competitiveness Report 2013-2014 of The World Economic
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Forum (WE), the country ranked number s8 among the 148 countries on its list.
Factors allowing the free flow of products and resources are already in place such as
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institutions, infrastructure stability, and basic education and health. However, our
industries have yet to attain the efficiency enabled by higher education/skills,
technological readiness, and product/labor market competition. For example, we
nave yet to design and produce the first Filipino car includes engine, transmission)
following in the footsteps of countries like Malaysia and China. Much less are we
even close to the innovative stage driven by business sophistication and innovative
ideas. This stage cuts across standards to produce sophisticated products like the
electric-powered cars of Japan and the United States. Figure 3.6 outlines what
makes a country's industries globally competitive and responsive to both local and
global needs.
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Figure 3.6 Factors for Global Competitiveness Index

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As the country's industries struggle to attain efficiency toward the government's

vision of sophisticated innovation, they do so with those in the rest of the world.
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Figure 3.7 shows that the Philippines still lags behind her neighbors in East Asia in
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labor efficiency alone. Reflective of her global competitiveness, much less is the
country attractive to St foreign businesses serving regional markets. According to
said competitiveness implementing inadequate infrastructure, corruption, inefficient
government bureaucracy, policy, instability crime rate, tax rate, and restrictive labor
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regulations.
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Figure 3.7 Labor Efficiency of ASEAN Countries in 2009
The country's producing sectors also struggle with one another as they compete
for the use of local resources (e.g., labor). The least efficient is Agriculture, Fishery,
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and Forestry combined while the most efficient is Industry. While Agriculture,
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Fishery, and Forestry combined employs one third of local labor for production, it
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only contribute some tenth to the country's total output (Figures 3.8 and 3.9). In
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contrast, Industry has almost twice as much share in output (27%) as it has in
employment (16%). In between Service which has a slightly greater share in output
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(63%) than in employment (53%6).Figure 3.10 shows the comparative efficiencies of
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the country's main producing sectors.
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Agricultural
10%
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Industrial
27%
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Service
63%
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Figure 3.8 Sectoral Shares Output 2013

Source: Philippine Statistical Authority
Industrial
16%
Service
53%
Agricultural
31%
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Figure 3.9 Sectoral Shares Employment 2013
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Source: Philippine Statistical Authority
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Figure 3.10 Sectoral Productivity (2008)

Source: NEDA
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AGRICULTURE AND FISHERY

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In a global setting, these industries are the least competitive despite the country's
natural resources mainly due to human factors affecting efficiency. The uncontrollable nature
(e.g, typhoons, drought, etc.) occasionally disrupts production and causes damage to crops.
But socio-economic and governance factors explain more why the country's agriculture lacks
the technology, skills, market competition, and even credit enabling efficiency to be at least
self-sufficient in food. Figure 3.11 shows that rice production-the leading crop of agriculture-
is even short of consumption. Unlike fishery and livestock, agriculture is more exposed to
both natural and human factors with its longer production cycle involving land cultivation
and nurturing what nature grows.
Figure 3.11 Contribution of Local Production to Local Consumption (2008)
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Source: Bureau of Agricultural Statistics, Department of Agriculture
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In particular, inadequate socio-economic and public infrastructures coupled
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with liberalized trade smother agricultural efficiency of the know-how, resources, and
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competitive environment to at least meet local consumption. Small-scale farming-the
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foundation of agriculture-is limited to take advantage of size and access to
technology, skills, credit, and marketing networks. Most farms (636) are micro in
scale with an average size of 2.2 hectares (List of Establishments, NSO 2009). Also,
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the continuous conversion of agricultural lands for industrial use and settlement even
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threatens to decimate the number of farmlands left. Let alone that almost one-half of
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irrigable lands (44%) is not irrigated yet (World Development Indicators, World Bank
2006). On top of the limitations of size, inadequate infrastructures (roads, transport,
and storage) hamper the free flow of products and input between farms and markets.
On the other hand, trade liberalization (e-g, tariffs) has overwhelmed local production
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that is yet too weak to stand up to foreign competition as of rice from China,
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Thailand, and Vietnam. Figures 3.12and 3.13, respectively, show that we have the
lowest yield per hectare of rice land and per person among ASEAN countries. Thus,
we import cheaper rice to supplement local production although the latter has been
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accelerating to decrease the former.

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Figure 3.12 Average Palay Yield Among ASEAN Countries
(In Metric Tons Per Hectare)
Source: Food and Agriculture Organization (2012)
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Figure 3.12 Average Palay Yield Among ASEAN Countries
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(In Kilogram per person)
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Source: Food and Agriculture Organization (2012)
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The same socio-economic and governance factors limit efficiency in the
fishery sector that it can hardly produce a surplus for export. Like in agriculture,
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fishing activities are micro in scale confined to municipal fishing and aquaculture (List
of Establishments. NSOn009). Municipal fishing is fishing by small shore crafts while
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aquaculture is culturing and growing fish in the controlled environment of mostly

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small fishponds. These industries jointly and equally acount for the bulk (71%) of
fishery production (Bureau of Agricultural Statistics, Department of Agriculture 2013).
In contrast, commercial fishing accounts for little over one-third of mostly exportable
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fishery production (39%) by big corporations using big vessels that are instrument-
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navigated in deep sea. On top of size limitations is the inadequacy of road, transport,
and storage facilities to preserve and market the perishable product in order to fetch
more competitive prices. Likewise, industrial and trade policies have even made fuel-
a critical input-more costly especially for the motorized bancas of small municipal
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fishermen. Going back to Figure 3.16, fish supply, mostly from the municipal and
aquaculture industries, is just enough to meet local consumption needs(100%). The
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weakness of these industries deprives the small fishermen of the income opportunity
to produce a surplus of high-valued species for export.
MANUFACTURING
In spite of the liberalization of foreign investment and trade, the manufacturing
industry is hardly competitive even in the ASEAN region due to limitations of size
and structural support. Likewise, these limitations smother manufacturing efficiency
especially of the technology and skills to grow and compete in a global context.
Almost all (89%) manufacturing establishments are micro in scale with limited access
to Competitive opportunities similar to agriculture and fishery (NSO 2008). These
light enterprises produce consumer goods-mostly (866) food manufactures-
contributing the bulk (55%) of manufacturing output using low technology and skills
(NSCB 2012) lacking government support to deepen technology and production, the
fewer enterprises of much larger scale are into the final production stages of
electronics, machineries,2012) Chemicals, petroleum, and garments. In the absence
of intermediate (middle) product industries, they are the most that we can have-
import-dependent and without much for technology and skills. Thus, they do not
contribute much to the economy in terms of output and jobs. The same lack of
government support fails to challenge micro enterprises to grow toward higher
technology and creativity levels. As in agriculture, local enterprises of larger scale
are still to stand up to foreign investment and trade competition induced by
liberalization policies.
TRADE AND TRANSPORT
In spite of being the top grosser (34%) of the biggest sector that is service, the
Industry supported by the transport industry is also handicapped by the limited
establishments. Almost all (92%) are micro in scale engaged in retail trade
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contributes almost one-half (46%) to total trade (Census of Philippine Business and
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Industry, NSO 2012). However, the transport industry has a fair majority (73%) of
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micro Businesses mostly engaged in land transport and transport support services
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(e.g maintenance). Land transport accounts for almost one-half (46%) of all transport
services transport support services accounts for the bulk (52%) of industry output.
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On top of the limitation of size, thirty percent (30%) of trade establishments crowd in
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Metro Man serving only thirteen percent (13%) of the country's population. But
crowding more in the same National Capital Region are more than one-half (56%) of
transport establishment in the country.
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On the other hand, less crowded are thirteen percent (13%) of trade and eight
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percent (8%) of transport establishments in nearby CALABARZON (Cavite, Laguna,

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Batangas, Rizal, and Quezon) industrial zone serving fourteen percent (1496) of the
country's population (Census, NSO 2010). At any rate, even businesses in this
industrial zone are near support industries in the Metro Manila where almost one-
third (30%) o manufacturing establishments are also based.
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INTERNATIONAL TRADE
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Assembled electronic products top the country’s exports (40%) dominated by

manufactures reflective of the country's waning agricultural sector (Philippines
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Statistics Authority, Foreign Trade Statistics 2013). The assembled parts are imports
from subsidiaries in the global networks of the same multinational corporations (eg.
Intel, Texas Instrument). These electronic parts are also the country's leading
imports(22%) followed by minerals, fuels, machineries and equipment, and the like.
Almost all imports are semi-final and final manufactures in the absence of
intermediate producing industries. As already mentioned, electronics products hardly
contribute to local output and employment being import-dependent and without much
need for technology. Unlike their counterparts in other sectors, their assembly plants
are mostly found in the CALABARZON industrial zone where support industries in
manufacturing and trade are also moving into.
TOURISM
Tourism is an emerging industry as expenditures of foreign tourists on related
services such as hotels and restaurants, transport and entertainment grew by twenty
nine percent (29%) in 2012. Gaining importance as an industry, it contributed six
percent More(6%) to the gross output of the economy (NSCB, Tourism Statistics
2012). It is also figured as the third leading export of the country after electronics and
miscellaneous services which include business process outsourcing (26.9%). Most
tourists prefer hotels for accommodation (80%) and cars for transport facilities
(42%). Most also prefer restaurant accommodations, (68%) and avail of Internet
access (51%) in accommodating establishments. In addion, establishments
concentrate operation in Metro Manila, Western, and Eastern Visayas mostly
preferred tourist destinations. However, the industry mostly composed of micro
enterprises (90% ) is yet to grow to its fullest potential. The country lags behind
event he ASEAN region as a tourist destination with a minimal share (5%) in total
arrivals in contrast to Singapore (16%), Malaysia (30%), and Thailand (246). Thus, in
Figure 314it also lags behind in tourist arrivals per 100 population even in the
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ASEAN region.
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SMALL BUSINESS OPPORTUNITIES
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Small farmers and fishermen can tap urban consumer markets and
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distribution centers with cooperative efforts to minimize the limitations of size and
inadequate farm- to-market facilities. They can engage in the cooperative activities
not only of sharing/ collectively owning resources to preserve freshness or delay
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perishability of goods at lower cost. Collectively, they can also gain direct and faster
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access to market networks to command higher product prices as well as cheaper

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production input.
Let alone that they can access credit for expansion on collective credibility.
However, more government provisions of farm-to-market infrastructure like concrete
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road network can b0ost the efficiency of cooperative market activities even of
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farmers and fishermen in the hinterland.

The country's growing population also affords cooperating micro enterprises in
the manufacturing, trade, and transport of new consumer markets for growth and
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expansion. More micro manufacturers of light consumer products can find new
markets in growing industrial and urban areas like CALABARZON, away from
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overcrowded Metro Manila. Low complementary and support industries are already
gravitating toward these growing centers, let alone the concentration of government
infrastructures and services promoting market efficiency. Thus, new micro trade and
transport enterprises can complement or support. Support the growing number even
of light manufacturers moving to these grow the limitation of size, micro enterprises
can form associations for inter Owner's industry coordination and timely availability of
services. In addition, manufacturers association can improve market access on
competitive terms. But more govern micro id provisions of physical infrastructure like
concrete road network can greatly in also in inter-industry coordination and market
access.
In the tourism industry, micro businesses can help to maximize tourist arrivals
and destinations with timely support and substitute services for big establishments
strengthened by cooperative efforts. Car transport services can support hotel
accommodations while lodging houses with restaurants can serve as substitutes in
the latter's absence. Micro enterprises can also form associations for timely
coordination with big establishments and complementation among themselves. For
the meantime, tourism and related services can concentrate operation in major
tourist destinations such as Metro Manila and Western and Eastern Visayas.
However, better road networks can pave the way for the development of other tourist
destinations and services, which include transport.
References:
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Rosemary P. Dinio, PhD and George A. Villasis. Applied Economics. First Edition. Kto12 Program
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Bureau of Agricultural Statistics, Department of Agriculture , Contribution of Local Production to
Local Consumption (2008)
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Food and Agriculture Organization (2012) Average Palay Yield Among ASEAN Countries
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National Economic Development Authority (NEDA), Republic of the Philippines. 2010. A
Strategic Framework and Action Plan for Inclusive Growth.
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Lesson 3.7.

Competitiveness and Efficiency

1. State the importance of Competitiveness and efficiency in the economy

Figure 3.6 Factors for Global Competitiveness Index

As the country's industries struggle to attain efficiency toward the government's

Figure 3.8 Sectoral Shares Output 2013

Figure 3.10 Sectoral Productivity (2008)

AGRICULTURE AND FISHERY

accelerating to decrease the former.

Source: Food and Agriculture Organization (2012)

aquaculture is culturing and growing fish in the controlled environment of mostly

percent (8%) of transport establishments in nearby CALABARZON (Cavite, Laguna,

Assembled electronic products top the country’s exports (40%) dominated by

access to market networks to command higher product prices as well as cheaper

farmers and fishermen in the hinterland.

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