HERITAGE FOUNDATION: PHL MOSTLY 'UNFREE', EFFORTS VS GRAFT INCONSISTENT
MANILA, JANUARY 15, 2012 (TRIBUNE) The Philippines was lumped among the world’s mostly unfree countries in the 2012 Index of Economic Freedom, published annually by The Wall Street Journal and The Heritage Foundation, receiving a rank of 107 out of 179 countries on the list as it continues to rate poorly on the rule of law category despite President Aquino’s straight path mantra.
Aquino has anchored his presidency on an anti-corruption platform but the conservative think tank Heritage Foundation said the efforts remain wanting.
“Despite some progress, government anti-corruption efforts have been too inconsistent to eradicate bribery and graft effectively,” Heritage said in the report.
The report also noted that the country’s rule of law remains uneven, and the legal framework is deficient in independence and efficiency.
The Philippines was sandwiched between Swaziland, 106th, and Mozambique, 108th, in the ranking and defied and overall improvement of Asian countries in the list.
Its neigh-bors Malaysia was ranked 53rd; and Thailand, 60th.
The report added the cumbersome court system and loose regard for contracts continue to be causes for concern.
The Aquino administration has been severely criticized for dissolving contracts from the past administration while stubbornly refusing to provide fair compensation for the operators of the Ninoy Aquino
International Airport (NAIA) that was expropriated by the government.
Heritage Foundation added the local judiciary is nominally independent but susceptible to political interference.
The Philippines received an economic freedom score of 57.1, which was almost the same as last year. The country’s score was below both the world average of 59.5 and the regional average of 57.5.
The Philippines also ranked 19th out of 41 countries in the Asia-Pacific region.
The report noted “lingering institutional challenges” that it said will require deeper commitments to reform. “Despite some progress, corruption continues to undermine prospects for long-term economic development,” it said.
The inefficient judiciary, which remains susceptible to political interference, does not provide effective protection for property rights or strong and transparent enforcement of the law, it added.
Hong Kong was consistent for the past 18 years as the world’s freest economy in the annual list.
The report said overall, 27 of the 41 Asia-Pacific countries were classified as “mostly unfree” or “repressed.”
Three of the 11 lowest-ranked countries are in the region, including North Korea, which ranks as the world’s least-free economy, it said.
Rankings declined for China and Japan, the region’s two largest economies. China dropped because of state control of the economy; Japan because of increased government spending, in part a response to the earthquake and tsunami that afflicted the country.
Launched in 1995, the index evaluates countries in four broad areas of economic freedom: rule of law; regulatory efficiency; limited government; and open markets.
Based on its aggregate score, each of 179 countries was classified as “free” (i.e. combined scores of 80 or higher); “mostly free” (70-79.9); “moderately free” (60-69.9); “mostly unfree” (50-59.9); or “repressed” (under 50).
Hong Kong scored 89.9 on the scale of 100, highest worldwide. Singapore, which has ranked second all 18 years, scored 87.5. Australia and New Zealand ranked third and fourth, respectively, enabling the Asia-Pacific region to account for the four highest-ranked countries.
The world average score of 59.5 was two-tenths of a point below the 2011 average and the second-lowest score recorded over the past 10 years. Among the 179 countries ranked, scores improved for 75 countries and declined for 90. Others did not change.
Hong Kong’s score improved following a recent government plan to rebate excess revenue to citizens. However, Index editors expressed concern that recent policy changes in Hong Kong, particularly implementation of a minimum wage, had “moved Hong Kong modestly in the direction of a more bureaucratic and politicized economy.”
Rankings for economic freedom in some countries, including the United States, declined following massive government spending initiatives. Other countries improved their scores with efforts to broaden tax bases, lower rates and combat inflation.
Asia Pacific, although home to the four highest-ranked countries, scored 57.5 as a region. Despite this improved score, Asia-Pacific finished fifth among the six geographic groupings surveyed. The gain over 2011 was helped by Taiwan, which scored higher in six of 10 categories of economic freedom measured, finishing at 71.9 for 18th place, ahead of Macau.
Index results continued to demonstrate that when countries adopt policies leading to high scores, they also enjoy prosperity, economic security and success. In the United Nations’ assessment of what it calls poverty intensity, mostly free and moderately free countries have only a third the number of people in this position as do mostly unfree and repressed countries.
The top one-fifth of countries in advancing economic freedom grew at an average rate of 3.7 percent. The bottom fifth grew 2.1 percent.
FROM THE HERITAGE FOUNDATION WEB SITE
The Philippines’ economic freedom score is 57.1, making its economy the 107th freest in the 2012 Index. Its score is 0.9 point higher than last year, with a significant improvement in business freedom.
The Philippines ranks 19th out of 41 countries in the Asia–Pacific region, and its overall score is slightly below the world and regional averages.
Despite the challenging global economic environment, the Philippine economy has been on a steady path of economic expansion. The government has pursued a series of legislative reforms to enhance the entrepreneurial environment and develop a stronger private sector to generate broader-based job growth.
Overall progress has been gradual, but regulatory efficiency has been notably enhanced. The economy has expanded at an average annual rate of close to 5 percent over the past five years.
There are lingering institutional challenges that will require deeper commitment to reform. Despite some progress, corruption continues to undermine prospects for long-term economic development.
The inefficient judiciary, which remains susceptible to political interference, does not provide effective protection for property rights or strong and transparent enforcement of the law.
The Philippines’ diverse population, which speaks more than 80 languages and dialects, is spread over 7,000 islands in the Western Pacific Ocean. The country returned to democracy in 1986 after two decades of autocratic rule. President Benigno Aquino III took office in 2010 with a mandate to address pervasive government corruption. Although the previous government’s failure to do anything substantial to liberalize the economy set back efforts to attract much-needed foreign investment in basic industries and infrastructure, and also saw the Philippines continue its long slide from being one of Asia’s richest economies to being one of its poorest, economic growth has accelerated. The economy relies heavily on emigrants’ remittances, which are equivalent to more than 10 percent of GDP.
Rule of Law
The rule of law remains uneven, and the legal framework is deficient in independence and efficiency. The cumbersome court system and loose regard for contracts continue to be causes for concern. The judiciary is nominally independent but susceptible to political interference. Despite some progress, government anti-corruption efforts have been too inconsistent to eradicate bribery and graft effectively.
The top income tax rate is 32 percent, and the top corporate tax rate is 30 percent. Other taxes include a value-added tax (VAT) and an environmental tax, with the overall tax burden amounting to 12.8 percent of total domestic income. Government spending is equivalent to 18.5 percent of GDP. The deficit has been over 3 percent of GDP, and public debt has hovered at around 45 percent of total domestic output.
The business regulatory environment has improved considerably. Although launching a business still takes more than the world averages of seven procedures and 30 days, the overall process has become less costly. The time and cost involved in dealing with licensing requirements have been notably reduced. The labor market remains structurally rigid, but existing regulations are not particularly burdensome. Inflation is modest.
The trade weighted average tariff rate is 4.8 percent, and layers of non-tariff barriers further inhibit more dynamic gains in trade. Despite a strong desire to attract longer-term foreign investment, systemic inefficiency exacerbated by heavy bureaucracy discourages dynamic growth in investment. The financial sector, which is gradually modernizing, remains relatively stable and sound.
The Heritage Foundation is an American conservative think tank based in Washington, D.C. Heritage's stated mission is to "formulate and promote conservative public policies based on the principles of free enterprise, limited government, individual freedom, traditional American values, and a strong national defense".
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