Poor labor capital drags down PH’s ranking in new trade index

The Philippines ranked only 13th among 20 economies in the inaugural Hinrich Foundation Sustainable Trade Index, a new gauge in assessing if a country is engaged in trade that promotes inclusive growth for all.

Singapore, South Korea, Japan, US and Hong Kong rounded up the top five. Below the Philippines were the likes of India, Indonesia, Myanmar and Bangladesh.

The Hinrich Foundation, a Hong Kong-based philanthropic institution, commissioned the Economist Intelligence Unit to create a new index to measure the capacity of various countries to participate in the international trading system in a manner that supports the long-term domestic and global goals of economic growth, environmental protection and strengthened social capital.

The Philippines got high scores in the economic and environmental pillars. But it placed only 13th overall, weighed down by a significant underperformance in the social pillar due to high inequality, poor education and weak labor standards.

The Philippines is seen somewhat unique in its relative lack of a manufacturing sector, the mainstay of most Asian economies climbing up the development ladder.

“The Philippines skipped the manufacturing step, which means there’s still a lot of low-productivity agriculture and a lot of poverty; there’s no manufacturing sector that would be drawing low-skilled employment away and then transitioning to services,” Asian Development Bank vice president Stephen Groff said.

He noted the service sector is productive but low in terms of its percentage to total employment.

“There are not a lot of options in rural areas, they can’t work in business process outsourcing or anything like that,” he noted.

The Philippines is also seen facing other challenges as can be gleaned from its poor scores in the corruption and political stability indicators. Thus, it also ranked low in attracting foreign direct investments despite the country’s physical and technological infrastructure.

Along with Bangladesh, Cambodia, Myanmar, Pakistan and Sri Lanka, the Philippines has “perennially struggled with one or other of these threats to political stability.”