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Shooting ourselves in the foot

The Philippines’ rankings dropped 10 slots in the INSEAD Global Innovation Index (GII)—from 90th out of 142 in 2013 to 100th out of 143 in 2014. Such slipping capacity to innovate is quite sad against a backdrop of stellar economic performance.  It may send the message we can’t sustain the growth trajectory.

The 2014 GII noted the country’s improvement in terms of the political, regulatory, and business environment, which attracted both foreign and domestic investments and tourism.

What brought our ranking down is dismal performance in human capital and research. The GII placed the Philippines’ education system 7th out of 8 in the ASEAN (No data was available for Vietnamor Lao PDR).

Public expenditure for education in the Philippines may have increased in recent years, but at 2.7 percent of GDP as of 2013, it still falls below the minimum 3 percent recommended by the United Nations for developing countries. We are ahead of Cambodia (2.6) and Myanmar (0.8), and are joined by Indonesia (2.8) and Malaysia (2.9) in falling below the UN-recommended standard.

Thailand invested 5.8 percent, while Brunei poured in 3.5 percent.  Both ranked higher than the Philippines in the 2014 GII — 48th and 88th respectively. Far ahead in economic development,Singapore ranked 2nd in the GII overall, yet still devoted up to 3.0 percent for education.

Underinvestment has rendered our education system anemic. This is saddening given the country will enter a so-called demographic window next year.  By then, the country’s working-age population would have grown proportionately larger than our dependent population.  Such a massive pool of young and able-bodied Filipinos could spell unprecedented productivity and prosperity gains for the country — that is, if they are trained adequately to land gainful employment.

Throughout history, large working-age populations yielded great dividends. Up to 50 percent of the per capita income growth that India achieved since the 1970s is attributable to its shifting age structure.  A 1997 World Bank (WB) working paper explained that the faster growth rate of the working-age population in Hong Kong, Singapore, South Korea and Taiwan contributed heavily to the “economic miracles” these East Asian Tigers experienced between 1965 and 1990.

The Philippines became the world’s 12th most populous nation with the birth of the symbolic 100 millionth Filipino last Sunday.  The United Nations said that such a large population presents challenges to the Philippines but also numerous opportunities.  In 2012, HSBC cited strong demographics as one of the factors that will drive the country’s rise to becoming the world’s 16th largest economy by 2050.

Favorable demographics may be necessary for breakthrough growth but not a sufficient condition for it.  The GII study points to how other factors, especially a conducive policy environment for education, training and human capital development, can be pivotal. For a massive working-age population would still be unproductive if they remain inadequately trained, and hence, unemployed. And the Philippines’ 7.3-percent unemployment rate is the highest in the ASEAN.

World Bank President Jim Yong Kim described the Philippines as the “next Asian miracle.” President Aquino indeed has done a spectacular job convincing the investment community that the country is a desirable investment and tourism destination.  That situation cannot be sustained without dynamic and visionary education, training and other human capital development initiatives.

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