Philippines earns biggest climb in business growth ranking

The Philippines posted the biggest climb in business growth environment rankings, rising 25 places to land on the 21st spot among 60 countries, according to the Grant Thornton Global Dynamism Index (GDI) 2013.
 
The GDI is an annual research commissioned by Grant Thornton that assesses and ranks the dynamism of business growth environments based on five key areas: business operating environment, science & technology, labour & human capital, economics & growth, and financing environment.
 
Dynamism refers to the changes in an economy over the past 12 months that are likely to lead to a fast rate of future growth. The index ranked the world’s largest economies by how much their business growth environments improved in 2012.
 
“The fast-paced growth of the Philippine economy certainly underlined our substantial rise in this year’s GDI,” says Marivic Españo, chair and CEO of Punongbayan & Araullo (P&A), the Grant Thornton member firm in the Philippines. “This means our business growth environment improved quicker than any other country in 2012.”
 
In the area of economics and growth, the Philippines moved up 11 places to rank 4 overall, level with Peru. The country’s GDP expansion last year was the third highest of the 60 economies researched, and private consumption growth – 9.8% – was the 10th highest globally.
 
But the Philippines posted the biggest improvement in the area of labor and human capital. It rose 40 places to rank 5 globally, just behind China (1), Australia (2), Thailand (3), and Indonesia (4).
 
This means the Philippines has the fifth best labour & human capital in the world for growing businesses. The boost was driven by labour productivity growth of 5.4%. Only in China (7.4%) did worker output rise faster in 2012.
 
“I think the key point here is that the Philippines is starting to realize its potential domestically,” explains Españo. “Aside from remittances, which have recovered well since the global financial crisis, private construction and government spending on infrastructure contributed to our above-target expansion. Domestic demand in the form of private investment and consumer growth has also helped the country outpace its Southeast Asian neighbors, which are showing signs of slowing down.”
 
The Philippines ranks 51 for science and technology, a category that tracks the infrastructure improvements that allow dynamic businesses to expand. While IT spending increased by 9.5% in 2012, just 0.1% of GDP went to R&D, the fourth lowest of all 60 economies.
 
“The government recognizes that local infrastructure needs to be improved,” explains Españo. “Eighty public-private partnerships with around US$17.6 billion of capital to boost the investment environment were supposed to be launched between 2011 and 2016, but progress is well behind schedule.”
 
“Add to this a rank of 44 for business operating environment which looks at how easy and risky it is to operate in an economy, and you can clearly see there is some room for improvement.”
 
“The good news is that both total and worker output is expanding rapidly. The key now is to combine this growth with infrastructure and operating environment improvements. With the right mix of policies in place, our economy could offer even more opportunities for dynamic businesses,” says Españo. 

Education makes better employment opportunities accessible

 
Education leads to career and salary advancement as 90 per cent of Filipino online respondents believe that education makes better employment opportunities accessible.
 
The latest Nielsen survey noted 87 per cent of online Filipino respondents believe that education also makes it possible to earn higher income, well above the global average of 72 per cent.
 

“We saw a strong correlation between Nielsen Consumer Confidence Index scores—which measures perceptions of job prospects, personal finances and spending ability—and perceptions for advancement opportunities,” said Stuart Jamieson, managing director of Nielsen Philippines. 

 
Jamieson pointed out those respondents in countries where consumer confidence scores were at 95 or above showed the highest per cent agreement that better employment and higher income were available because of education attainment.
 
Respondents in countries where consumer confidence scores were below an index of 70 showed the most pessimism that education would lead to better jobs and salaries.
 
“The Philippines belong to 78 per cent of respondents who agreed that receiving higher education is important,” Jamieson said. “Although the cost to education can be prohibitive, Filipinos strive to allocate money for education more importantly now that the pace of technological change is creating new opportunities and presenting new challenges for today’s children. Education is seen as a levelling factor that will help them compete for better jobs and better salaries,” he added.
 

Philippine respondents said they allot 15.4 per cent of their monthly household budget for education expenses, far exceeding the global

average of eight per cent.
 
The survey noted that many developing countries across Latin America, Asia-Pacific and the Middle East/Africa regions beat the global average for monthly allocation on education expenses while many European respondents said they allotted the least amount to monthly spending on education due largely to subsidized education programs.
 
Perception on local educational opportunities is high among Filipino respondents with 95 per cent agreeing that opportunities to receive outstanding primary education are abundant in the places where they live, while 93 per cent and 89 per cent showed optimism for secondary level and higher education opportunities.
 
Philippine respondents join respondents from Indonesia, India and Thailand who also surpassed the global average for all levels of educational programs.
 
Concerning the perception of consumers on companies which support education initiatives, 77 per cent of Filipino respondents said that are likely to buy products from a company that supports education initiatives, this is more than the global average of 68 per cent and Asia Pacific average of 74 per cent.
 
“Getting more involved in education initiatives can go beyond monetary contributions. Companies can help promote innovation in the classroom by calling on the expertise of its employees to share knowledge or facilitate access to tools that will aid young people,” recommends Jamieson. “It’s a win-win situation for both corporations and students—employees become more engaged while students benefit from an enhanced learning experience.

Export earnings up 2.3% to $4.8 billion

Export earnings in July 2013 posted a 2.3 percent growth to $4.83 billion from $4.72 billion recorded in the same period last year.
 
The National Statistics Office (NSO) reported that on a monthly basis, export earnings grew by 7.7 percent from $4.49 billion posted in June 2013, supported by five major commodities – machinery and transport equipment, woodcrafts and furniture, chemicals, electronic products and cathodes.
 
The aggregate merchandise exports for the first seven months of 2013 showed a decrease of 3.4 percent from $31.48 billion in 2012 to $30.42 billion in 2013.
 
Electronic products emerged as the country’s top export with total receipts of $1.893 billion, up by 11.2 percent from $1.702 billion registered in July 2012. 
 
Semiconductors which comprised 26.1 percent of the total exports, shared the biggest among the major groups of electronic products with export earnings worth $1.261 billion, down by 6.2 percent from $1.344 billion registered in July 2012.
 
Machinery and Transport Equipment was the second top export earner in July 2013 with export revenue of $516.46 million, up 131.7 percent.
 
Other manufactures recorded as the country’s third top export with revenue valued at $285.25 million, down by 37.6 percent compared to $457.41 million in same period a year ago.
 
Ranked fourth in July 2013 and contributing 5.3 percent share to the total export receipts was woodcrafts and furniture with earnings amounting to $255.08 million, up by 44.2 percent from $176.84 million last year.
 
Chemicals with 3.4 percent share to the total export receipts, ranked fifth with value posted at $165.37 million, up by 22.8 percent from $134.72 million recorded in the same month last year.
 
Other top exports were other mineral products with export earnings of $156.90 million, down by 21.3 percent; cathodes with export receipts of $140.59 million; articles of apparel and clothing accessories with earnings at $122.81 million, down by 19.5 percent; ignition wiring set with export earnings of $114.05 million, losing by 16.6 percent and coconut oil with total receipts of $113.87 million slightly down by 0.9 percent compared to same period in 2012.

Unemployment rate inches up to 7.3%

Philippine unemployment rate has slightly increased to 7.3 percent in July 2013 from 7 percent in the same period last year.
 
Socio-economic Planning Sec. Arsenio Balisacan said the pool of unemployed persons consists largely of young people who lack competency and experience, which are important requirements of firms and key factors for successful entrepreneurship.
 
Balisacan noted that high school graduates constituted the biggest share of the unemployed at 32.8 percent followed by college graduates with 21.8 percent and college undergraduates at 13.6 percent.
 
“These figures stressed the importance of intensifying government efforts to make education programs more responsive to the needs of the business sector as well as to encourage entrepreneurship in the country,” said Balisacan.
 
In the latest labor force survey conducted by the National Statistics Office, the number of wage and salary workers decreased by 1.6 percent while the number of unpaid family workers went up by 6.4 percent in July 2013 compared to the same period in 2012.
 
In terms of hours worked, part-time employment grew faster at 3.9 percent compared to full-time employment, which increased by 0.5 percent in July 2013.
 
“These suggest to us that recent gains in improving the quality of available employment have yet to take root. Hence, the urgency  to ensure that the growth momentum is sustained and supported by  strategies that will create the conditions for  stable, productive, remunerative, and  decent employment,” said Balisacan.
 
The underemployment rate has improved to 19.2 percent in July 2013 from 22.8 percent in the same period last year.
 
“Even though this decline does not indicate a sustainable downtrend, underemployment decreased across all major industry groups.”
 
Double-digit declines were recorded in the sectors of agriculture by 13.9 percent, industry by 13 percent, and services 15.1 percent.
 
Underemployment also decreased across all categories of class of workers: wage and salary workers down by 20.8 percent, own family-operated farms or business by 23.4 percent, unpaid family workers by 10.2 percent, self-employed without any paid employee by 1.3 percent.
 
Balisacan stressed that employment creation remains a big challenge in the country. 
 
“While positive growth in agriculture employment is encouraging, this was accompanied by employment losses in manufacturing and accommodation and food services activities sectors, which are crucial employment-generating sectors in an emerging economy. This is why it is necessary to accelerate the revival of the manufacturing subsector.”
 
Balisacan said this can be done through well-designed and carefully-targeted interventions in certain sectors of the economy that have the potential to deliver massive employment creation and meaningful growth.
 
He noted that the manufacturing sector has the highest backward and forward linkages with the other production sectors of the economy.
 
“Manufacturing is the heaviest user of agricultural output, meaning that growing the sector means increasing demand for agricultural output, which means better business and more gainful work for our farmers and fishermen.”
 
“The government and the private sector working together have already developed industry roadmaps which should be further reviewed and strategically implemented,” said Balisacan.
 
He underscored the urgency in addressing infrastructure gaps particularly in logistics and power.
 
“The government must relentlessly continue its catalytic role in job creation in the country as pointed out in the current updating of the Philippine Development Plan.”
 
Balisacan said sustaining and improving enabling conditions for the private sector to invest in productive sectors of the economy would help rapidly increase employment opportunities.
 
“Maintaining a positive sentiment from local investors, entrepreneurs, and households is crucial in building up the confidence of foreign direct investors in the country,” he added.