The Philippines ranked higher at the Global Financial Development Index 2011 released by the World Economic Forum (WEF), thanks to the boost from the country's nonbanking services and financial markets. Download the full report
The jump to No. 44 this year from No. 50 last year highlights the gains made in the insurance sector, as well as the advances noted in the domestic capital markets, whose depth and width has broadened.
The Philippines was the biggest gainer among members of the Association of Southeast Asian Nations included in the index.
The country also improved its overall score to 3.13 points in 2011, up 0.17 points from 2.96 points in 2010. The increase in its score made the Philippines among the top 10 biggest gainers in the index.
"The Philippines improved significantly over the past year, moving up an impressive six spots in the index. Financial intermediation remains an area of strength for the Philippines as its nonbanking financial services and financial markets continue to develop," the report said.
The index measures financial development of countries through seven pillars, such as institutional environment, business environment, financial stability, banking financial services, nonbanking financial services, financial markets and financial access.
The Philippines's highest rankings were in nonbanking financial services (No. 20, with a score of 2.53 points) and in financial markets (No. 33, with a score of 2.04 points).
The WEF also paid tribute to advances the Philippines and its regulators made in such fields as securitization, where new investment instruments are carved out of a pool of assets; or in the field of mergers and acquisitions, where the Bangko Sentral ng Pilipinas has made significant progress in reducing the number of banks and financial institutions and transforming them into leaner but stronger entities able to compete with some of the best in the region.
Nevertheless, the Philippines failed to convince the WEF that the local business environment was as conducive to doing business compared with other countries in the region. The lowest rankings of the country were in business environment where it was ranked No. 55, and in financial access (No. 50).
Philippine regulators are some of the first to admit that some key sectors of the economy could benefit from greater competition from foreign players but so far, these have been kept beyond the reach of overseas interests that have the financial clout and economies of scale to provide greater efficiency levels translating to lower cost for Filipino consumers.
The country's relative lack of physical infrastructures such as grains silos or farm-to-market roads, for example, also help keep the Philippines a fairly expensive place to commit long-haul investments, according to the WEF.
"Its business environment and financial access continue to hinder its development. A weak business environment is the result of lack of infrastructure and an extremely high cost of doing business. Other impediments include limitations in financial access in areas such as foreign direct investment and the total number of ATMs," the report stated.
Hong Kong overtakes US, UK
"Hong Kong Special Administrative Region overtakes the United States and the United Kingdom to top the World Economic Forum's fourth annual Financial Development Report. As the first Asian financial center to achieve this rank, Hong Kong's position was bolstered by strong scores in non-banking financial services such as IPO activity and insurance," the WEF said.
The Financial Development Report "aims to provide a comprehensive means for countries to benchmark various aspects of their financial systems and establish priorities for improvement. It is published annually so that countries can benchmark themselves and track their progress over time."
For the various index components, the 60 countries were rated using a 7-point scale with 7 being the highest value. The Philippines' 44th ranking was the result of an overall rating of 3.1 out of a highest possible 7.0.
