Philippines leapfrogs 12 rungs in ‘economic freedom’

Despite the human-rights issues repeatedly raised against President Duterte, the Philippines has advanced 12 notches in the 2017 Index of Economic Freedom of the conservative US think tank Heritage Foundation.

According to the Washington-based institution, the country improved to 58th place in 2017 from 70th in 2016. The Philippines was among countries categorized as “moderately free.”

The annual index ranks economies based on 12 independent factors called “economic freedoms,” with the addition of “judicial effectiveness” and “fiscal health” this year.

Heritage said the Philippines showed improvements in property rights (+19.2); monetary freedom (+2.9); and labor freedom (+.1). “Despite the challenging global economic environment, the Philippines has achieved notable economic expansion, driven by the economy’s strong export performance and inflows of remittances that have bolstered private consumption,” the think tank said.

The country achieved an “economic freedom” score of 65.6 out of a possible 100, which is significantly better than the global and regional averages. Among countries in the Asia-Pacific, the Philippines ranked 14th among states surveyed in the region.

While noting the problems posed by absent entrepreneurial dynamism, still needed institutional reforms, and a weak judicial system in the Philippines, the Heritage Foundation also highlighted positive developments.

It recognized that the government is pursuing a series of legislative reforms to enhance the overall entrepreneurial environment and develop a stronger private sector in order to generate broader-based job growth.

Heritage also said that some fiscal reforms have been accomplished. Welcoming the release of this 2017 Index of Economic Freedom, Minister Patrick Chuasoto, charge d’affaires of the Philippine Embassy in Washington, DC said this marks our progressing economic standing. Continuing further, he said this also indicates the sustainability of the robust and excellent Philippine economic performance of the last few years.

“We hope that this underpins continued business and investor confidence in one of Asia’s most dynamic economies,” he added. As per the Heritage Foundation, the improvement in the ranking brings the Philippines into the first-third of the countries evaluated by the index.

Since 2010, the Philippines, rank has improved 51 spots from its rank at 109 and when the country was identified as “mostly unfree” in its economic competitiveness. Heritage Foundation said despite the challenging global economic environment, the

Philippines has achieved notable economic expansion, driven by the economy’s strong export performance and inflows of remittances that have bolstered private consumption.

“The absence of entrepreneurial dynamism, however, still makes long-term economic development a challenging task,” it said. It added the government is pursuing a series of legislative reforms to enhance the overall entrepreneurial environment and develop the stronger private sector that is needed to generate broader-based job growth. “Progress has been mixed, although some fiscal reforms have been accomplished.

Deeper institutional reforms are required in interrelated areas: business freedom, investment freedom, and the rule of law.

The judicial system remains weak and vulnerable to political influence,” it said.

Heritage Foundation said during the six-year term of President Benigno S. Aquino III, the Philippines became one of the region’s best-performing economies. “Now the question is whether his successor, longtime mayor of Davao City Rodrigo Duterte, will maintain and expand his predecessor’s successful policies,” it said.

“While agriculture is still a significant part of the economy, industrial production in areas like electronics, apparel, and shipbuilding has been growing rapidly. Remittances from overseas workers are equivalent to nearly 10 percent of GDP,” the think tank said.

The think tank said implementation of laws protecting property rights is weak. “Judicial independence is strong, but the rule of law is generally ineffectual. Courts are hampered by inefficiency, low pay, intimidation, and complex procedures. Corruption and cronyism are pervasive,” it added.

It added a few dozen leading families hold a disproportionate share of land, corporate wealth, and political power. “A culture of impunity is reinforced by the strong-arm tactics of the new president,” it said. Heritage Foundation said the labor market remains structurally rigid, but existing regulations are not particularly burdensome.

“In 2016, the government used its authority to grant special agriculture subsidies in response to El Niño drought conditions. There are price controls on pharmaceuticals and some food and household fuel items,” it said.