Philippines has 25-year window to reap benefits of young population

The Philippines has to take advantage of the changing population structure in the next 25 years, when the working-age population will outnumber dependents, according to the World Bank (WB).

“The country has a 25-year window to harness the benefits of a changing population structure. So, the country will have a larger working-age population relative to dependents,” Toni Joe Lebbos, World Bank economist for human development, East Asia and the Pacific, said.

“If we invest today wisely in education, health, and jobs, this demographic shift can boost economic growth. This is a chance to stress that this opportunity won’t last forever and not taking action now would mean missing out on a lot of benefits,” he added.

The Philippines’ latest Human Capital Index (HCI) stood at 0.52, which means that a child born in 2020 can only achieve about 52% of their productive potential by the age of 18. This is lower than the average HCI of upper middle-income economies at 0.56.

The HCI measures the health, education, and training of individuals — indicators deemed crucial to a country’s economic growth.

“In our aging region, the Philippines’ human capital provides an important lifeline of services that are needed for growth. Yet the Philippines is only utilizing only half of its human capital investment,” Mr. Lebbos said.

According to the World Bank, key challenges affecting the Philippines’ human capital include high fertility, limited and unequal access to education and healthcare, poor learning outcomes, low-quality jobs and skills, persistent poverty and inequality, and vulnerability to global headwinds like climate change and pandemics. 

For the Philippines to realize its human capital potential, it must invest in the development of children below 10 years old, the World Bank said in its latest report.

“To ensure optimal start in life for every child as a foundation for boosting human capital, holistic services in the early years including maternal and child health, nutrition, early education and stimulation, development of foundational skills, and social protection in the first 10 years are paramount,” it said.

The World Bank said the Philippine government must also improve the delivery of social protection services.

Local government units (LGUs) have a key role in ensuring on-the-ground investments for human capital, it said. Disadvantaged LGUs, especially those farther from the capital region, are at risk of losing about 26 percentage points of human capital potential, it added.

“The LGUs that have lower indicators seem to be hindered by capacity and governance challenges that often lead to inequitable access to services, and unequal access to services,” Mr. Lebbos said.

Asked which policies can support the development of human capital, National Economic and Development Authority (NEDA) Secretary Arsenio M. Balisacan suggested a possible expansion of the government’s conditional cash transfer program to support out-of-school children.

During the forum, Mr. Balisacan called on lawmakers to approve the Academic Recovery & Accessible Learning Program, which mandates students to take refresher courses in the summer break and address the learning gap. It also backed the passage of the Enterprise-Based Education and Training Framework Act to fit workers’ skills to industry demands.

Meanwhile, the World Bank also expects the country to reach upper middle-income status by 2026, but its key human capital indicators remain below the average of such an income class.

“Whether the Philippines will reach a high-income economy and developed status will really depend on investment in human capital today,” Ndiamé Diop, World Bank country director for Brunei, Malaysia, Philippines and Thailand said during the forum.

The multilateral lender classifies the Philippines as a low middle-income economy, but the government is hoping it can gain upper middle-income status by next year. 

Upper middle-income economies have a gross national income per capita of $4,466 to $13,845, according to the World Bank.

Source: Business World

Philippines slips in WEF Energy Transition Index

The Philippines dropped 11 spots in an index that measures countries’ energy transition efforts, reflecting the slowing global momentum amid increasing uncertainty.

The Philippines ranked 105th out of 120 countries in the World Economic Forum’s (WEF) Energy Transition Index (ETI), from 94th in 2023.

The Philippines’ latest ranking was its lowest since 2015 when it ranked 87th in the ETI, which analyzes a country’s current energy system performance and enabling environment for energy transition.

It scored 48.4% on a 0% to 100% scale, lower than 50.2% last year. This is below the global average score of 56.5% and emerging and developing Asia’s average score of 53.9%.

European countries topped this year’s index led by Sweden with a score of 78.4, followed by Denmark (75.2), Finland (74.5), and Switzerland (73.4).

Among the emerging and developing Asian countries, the Philippines had one of the lowest rankings, only ahead of Bangladesh (109th), Pakistan (113rd) and Mongolia (116th).

China had the highest ranking among Asian countries at 17th place, followed by South Korea (23rd), Japan (26th), Vietnam (32nd), Malaysia (40th) and Indonesia (54th).

“Ensuring equitable access to energy is a critical issue in this region, characterized by limited rural electricity access, affordability challenges, extensive energy subsidies and energy prices not returning to pre-pandemic levels,” the WEF said.

The WEF noted this year saw the highest global average scores in the history of the energy transition index, “with modest improvements in system performance of about 0.2% and strong progress in transition readiness, with a growth of 2%.”

“From 2015 to 2024, the global average scores for the ETI have consistently increased, driven by improvements in both system performance and transition readiness,” the report read.

However, WEF said the overall pace of energy transition has slowed worldwide, due to “economic volatility, heightened geopolitical tensions and technological shifts.”

“We must ensure that the energy transition is equitable, in and across emerging and developed economies,” Roberto Bocca, WEF’s head of the center for energy and materials, said in a news release.

“Transforming how we produce and consume energy is critical to success. We need to act on three key levers for the energy transition urgently: reforming the current energy system to reduce its emissions, deploying clean energy solutions at scale, and reducing energy intensity per unit of GDP (gross domestic product),” he added.

The latest annual edition of the report, published in collaboration with Accenture, used indicators such as energy access, energy affordability, economic development, supply, resilience, reliability, energy efficiency, decarbonized energy, clean energy, regulation and political commitment, finance and investment, education and human capital, innovation, and infrastructure.

Terry L. Ridon, a public investment analyst and convenor of think tank InfraWatch PH, said the Philippines still has limited innovation and research on low-carbon technology.

“Government should partner with other nations which have advanced low carbon research in order to develop our knowhow in this field,” he said in a Viber message.

Source: Business World

PH competitiveness unchanged

The Philippines saw its ranking in an annual global competitiveness report remain unchanged and continued to be one of the laggards in the Asia-Pacific region amid a drop in business efficiency.

In its 2024 World Competitiveness Ranking (WCR) by the Switzerland-based International Institute for Management Development (IMD), the Philippines ranked 52nd out of 67 economies, unchanged from last year.

It also marked the seventh year that the Philippines remained in 13th place out of the 14 Asia-Pacific economies included in the report.

Singapore topped this year’s list, followed by Switzerland, Denmark, Ireland and Hong Kong.

This year, the index expanded its scope to include Ghana, Nigeria and Puerto Rico. In 2023, there were only 64 economies covered by the index.

IMD ranked the economies using 336 indicators spread across four competitiveness factors: economic performance, government efficiency, business efficiency, and infrastructure.

José Caballero, senior economist at the IMD World Competitiveness Center, said that the factors that have diminished the Philippines’ competitiveness this year are related to government and business efficiency.

Mr. Caballero said that the country saw a decline in measures of business legislation such as the protection of foreign investors (65th), the transparency of public sector contracts (56th), the impact of state-owned enterprises (46th), and new business density (62nd).

Asian Institute of Management (AIM) Rizalino S. Navarro Policy Center for Competitiveness Executive Director Jamil Paolo S. Francisco said the Philippines remained in 52nd place despite a decline in two factors — business efficiency and infrastructure.

The Philippines fell three spots to 43rd on business efficiency this year from 40th in 2023. Significant declines were seen in labor market, finance, management practices, and attitudes and values.

“The drop in business efficiency is particularly worrisome because this was a factor that the Philippines performed relatively well at 10 years ago, and we have observed a steady decline in this factor since 2019,” Mr. Francisco said in an e-mailed statement.

For the infrastructure factor, the Philippines slipped three places to 61st in 2024 from 58th last year. This as challenges persist in basic infrastructure, technological infrastructure and education.

Mr. Francisco said that the country’s drop in the infrastructure factor was a concern, as this has been the Philippines’ weakest area for a very long time.

“This is also worrisome because this means we are really lagging behind in terms of providing the physical, human, technological, and social infrastructure needed by private enterprises to generate employment and create business value,” he added.

The Philippines maintained its 40th rank on economic performance, while it climbed three spots to 49th on government efficiency.

Philippine Chamber of Commerce and Industry Chairman George T. Barcelon said the country should address basic and transport infrastructure in order to be competitive.

“When you want to be competitive, especially in the industry and service side, you need to have some of the basic infrastructure, such as availability of quality and affordable power,” Mr. Barcelon said in a phone interview.

“The other one is the availability of mobility or connectivity like roads, seaports, airports, and main corridors for the agriculture sector, which we don’t have,” he added.

The government should also address the decline in the skills of the country’s workforce.

“We are not giving them the proper tools… The technology that’s required now for higher value-added jobs requires more, such as in information technology and in the fourth industrial revolution,” Mr. Barcelon said. “There are some shortcomings in that. But that can be easily addressed if we beef up more specific or targeted skill sets for certain industries.”

According to IMD, the Philippines was less competitive in the areas of business legislation (60th), basic infrastructure (62nd), and education (63rd).

“In 2024, the Philippines faces significant challenges, including revitalizing economic dynamism and growth trajectory, managing inflation expectations, building sustainable physical, social, and technological infrastructure to improve productivity and reduce vulnerabilities, and addressing territorial disputes in the West Philippine Sea to mitigate economic disruptions,” the AIM center said.

Meanwhile, the Management Association of the Philippines (MAP) views the country’s unchanged competitiveness ranking as both good news and a challenge.

“Infrastructure is a major consideration, so we all understand our rank, knowing the need to improve our infrastructure, which the administration of President Marcos is working on,” said MAP President Rene D. Almendras in a Viber message.

“The other consideration is labor productivity, which is a function of the education and development of the Filipino workforce,” he added.

Meanwhile, the National Economic Development Authority (NEDA) and the Anti-Red Tape Authority (ARTA) are hopeful that the country will improve its ranking next year as the government ramps up its infrastructure projects.

“With the strict implementation of this Executive Order No. 59 as well as related government programs, we expect our ranking to improve next year,” ARTA Secretary Ernesto V. Perez said.

On Tuesday, ARTA launched the implementing guidelines of EO 59, which aim to streamline the permitting process for the government’s infrastructure flagship projects.

“Hopefully, with the full implementation of EO 59, we could notch a bit higher in the next round. In addition to permitting and processes, I think what is also included are right-of-way (ROW) issues,” said NEDA Undersecretary Joseph J. Capuno.

He said that these issues could be addressed by the ROW bill, which is one of the priority bills of Frederick D. Go, the special assistant to the President in charge of investment and economic affairs.

For Foundation for Economic Freedom President Calixto V. Chikiamco, the Philippines will be able to achieve a better ranking in the world competitiveness index if it removes protectionism, especially in relation to agricultural products.

“Protecting the agriculture sector signals no need to improve competitiveness and productivity,” said Mr. Chikiamco in a Viber message.

He added that the country must forge more bilateral free trade agreements, amend the Labor Code, improve education, and reduce bureaucratic regulations, especially in the grant of mining concessions.

According to IMD’s Mr. Caballero, economies that reach high levels of competitiveness have focused on strengthening their public and private institutions, entrepreneurship, and innovative capabilities.

For the Philippines, he said that the country must strengthen its education system to “facilitate the effectiveness of talent development,” as it will also ensure alignment between the country’s available talent and socioeconomic objectives.

In the report, the country ranked 55th in total public expenditure on education, 60th in the quality of primary education, and 63rd in secondary education in terms of pupil-teacher ratio.

“Furthermore, the Philippines’ performance in research and development is feeble,” he added, citing that the country ranked deficiently in all measures of expenditure and the total number of researchers and personnel.

Source: Business World