SOMETIMES it is easy to be fed up with the Philippines.
The political atmosphere seems to come down to “our crooked politicians are not as bad as yours.” There is a huge divide between the priorities of the national government and those of local governments. A lot of people, from big-time smugglers to sellers and collectors of “three for P100” pirated movies, often have little respect for the rule of law. We too easily accept the imbalance between the rich and the poor. We teach our children that who you know is as important as what you know.
Yet, we are constantly looking at other countries and saying how we wish we could be like them while doing little to imitate the behavior that made them supposedly better.
However, we also know that these same countries look at the Philippines and, perhaps, ask how did the so-called basket case beat them.
After 10 years, India is still scratching its head, trying to figure out how it lost most of their call-center business. Thailand has never reached the same level of economic growth that the Philippines reached in the 21st century. Philippine business and consumer confidence about the future has consistently run much higher than in Malaysia since the 2008 financial crisis started. With the exception of 2009, Indonesia’s inflation rate has been nearly double that of ours since 2000.
Of course, these are unfair companions, as every nation overpowers another in some category. That is why we say not to compare yourself with others, as you will always find somebody better and somebody worse than you.
But for all of the deficiencies of the Philippines, there is one category where it truly stands out and actually far apart from its regional neighbors. We are comparable to Spain, Belgium, Israel and France, according to 2014 Economic Freedom of the World Report of the American Cato Institute and Canada’s Fraser Institute.
The first Economic Freedom of the World Report was published in 1996 and used 42 separate variables to arrive at a measure of economic freedom. The index quantifies the size of a government and a country’s legal structure that protects the security of property rights. How sound a nation’s money is, and if there is a smooth international trade flow of goods and services, both in and out of the nation, is part of the index. Finally, government regulation of credit, labor and businesses in general is included in economic freedom.
The Philippines ranks 51st out of 152 nations. Hong Kong is No. 1, while Venezuela holds the last spot. The United States comes in at No. 12. Our neighbors mentioned earlier hold the following places: Malaysia at 74th; Indonesia, 80th; Thailand, 102nd; and India, 110th.
Many have criticized the index. The report’s authors contend that higher economic freedom equates with higher and more equally distributed economic growth. However, China, for example, does not score highly at No. 115.
But nations with higher scores have fared better during the continuing global economic problems. More economic freedom, as measured by the index, may not be the solution to these problems, such as unequal wealth and income distribution, but it may be a positive factor when times get tough.
What may be important, though, is to look at where the Philippines has improved in and where the index says we are going down.
Since 2010 the score on the Philippine government’s financial participation in the economy has remained constant, with government consumption actually growing worse. That fact is not surprising.
There has been no improvement in international trade flow, as evidenced by the lack of foreign direct investment. But the domestic regulatory environment is slightly better. The Philippines may have made a substantial improvement in business regulations, but we still have one of the worst scores on the planet.
So where are we doing well? Since 2010 our “sound money” score has improved from 9.29 to 9.42, with the biggest jump (7.94 to 9.29) between 2005 and 2010, as the government put its fiscal house in order.
The conclusion of the index is very clear. Less government regulation means more local and foreign investment, which creates better and more equal economic growth.
On personal note, if you like to get a signed copy of my book Outside the Box: Mangun’s Broader Look at Today’s Business you may order directly through my website, www.mangunonmarkets.com.
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E-mail me at mangun@gmail.com. Visit my website at www.mangunonmarkets.com. Follow me on Twitter at @mangunonmarkets. PSE stock-market information and technical analysis tools provided by the COL Financial Group Inc.