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.