The Philippines' economic freedom ranking went up four places after improved scores in “sound money” measuring inflation and money growth, according to a global report that measured 2019 data.
The Economic Freedom of the World report released by Canadian conservative think tank Fraser Institute on Tuesday said that the Philippines ranked 58th out of 165 jurisdictions in 2019 compared with adjusted 2018 data, with a rating that went up by 0.8 to 7.42.
The report measures economic freedom based on five categories, in which the Philippines performed best in “sound money,” with higher scores in inflation measures.
The country retained its 7.08 score in international trade and increased its regulation score to 7.48 from 7.45 through improvements in credit market regulations and private sector credit.
The legal system and property rights was still the country’s lowest score at 4.41, although it grew from 4.31 through more judicial independence. The Philippines’ size of government score went down to 8.39 due to government consumption.
The index measures voluntary exchange, freedom to enter markets and compete, and security of privately owned property. Economies with the highest scores are Hong Kong, Singapore, New Zealand, Switzerland, and Australia.
“The apparent increased insecurity of property rights and the weakening of the rule of law caused by the interventions of the Chinese government during 2020 and 2021 will likely have a negative impact on Hong Kong’s score, especially in Area 2, Legal System and Property Rights, going forward,” the report said.
“A number of developing nations have a small fiscal size of government but rate low in other areas and, as a result, have a low overall rating.”
Despite the year-on-year improvement, the Philippine score is lower than its 2015 rating of 7.45, in which it ranked 52nd. Its scores declined under the government size and regulation categories, along with legal system and property rights, in which judicial independence, integrity of the legal system, and police reliability ratings fell.
University of Asia and the Pacific Senior Economist Cid L. Terosa said institutional reforms in the judicial system can help the Philippines improve perception.
“Perceptions of the impartiality of the judicial system are closely linked to perceptions that influence peddling and military interference in the rule of law and politics have heightened. The reliability of the police, particularly in the conduct of activities that seek to stamp out social ills, has been intensely questioned both domestically and internationally,” Mr. Terosa said.
“As regards government size, I believe there are perceptions that the government has not done enough to stamp out socio-economic problems. Although the government has instituted broad tax reforms and has ramped up investments in capital formation, many continue to believe their impact has yet to be maximized.”
UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said in an e-mail the country still has work to do in terms of institutional strength.
“From my own readings, I have come to understand that the strength of institutions in one country is a function of economic freedom. This means that the stronger the institutions that we have, a higher level of economic freedom can be achieved,” he said.
Mr. Asuncion recommended changes to the electoral process and a “big push for digitalization and transformation of processes should be done to eliminate red tape and corruption.”
British Chamber of Commerce of the Philippines Executive Director Chris Nelson said in a phone interview that the country should look at regional trade agreements to improve its ranking.
“The other which I think is going to be important going forward is how much has the Philippines done to digitalize the economy, because that’s obviously going to be a critical factor.”
Source: BusinessWorld and Fraser Institute
Comments