THE PHILIPPINE ECONOMY is now considered “mostly unfree” as it dropped nine spots in the latest economic freedom ranking by US-based think tank The Heritage Foundation.
In the 2023 Index of Economic Freedom report, the Philippines slumped to 89th out of 176 countries with a score of 59.3, 1.8 points lower than a year ago. Its economic freedom score is approximately the world average.
Last year, the Philippines ranked 80th out of 177 countries with a score of 61.1.
The country’s latest ranking is now equivalent to an economic freedom status of “mostly unfree,” after being “moderately free” for nine straight years.
The Philippines’ economic freedom ranking has declined for a third straight year, after placing 73rd in 2021 and 80th in 2022. It stood at 70th place in 2019 and 2020.
Singapore was the world’s freest economy, followed by Switzerland, Ireland, Taiwan, and New Zealand.
Among 39 Asia-Pacific countries, the Philippines ranked 18th, lagging behind Malaysia (42th), Indonesia (60th), Vietnam (72nd) and Thailand (80th).
The Heritage Foundation said the Philippine government pushed for legislative reforms to improve the entrepreneurial environment and generate more jobs.
“Overall progress has been gradual. There are institutional challenges that need to be overcome. Despite some progress, corruption continues to undermine long-term economic development,” it said.
The index analyzes economies using four key aspects: rule of law, government size, regulatory efficiency, and market openness.
“The overall rule of law is weak in the Philippines. The country’s property rights score is below the world average; its judicial effectiveness score is below the world average; and its government integrity score is below the world average,” the Heritage Foundation said.
Under the regulatory efficiency, the Philippines improved its score for business freedom but saw a decline in scores for labor and monetary freedom.
The Heritage Foundation noted that the Philippine business regulatory environment has generally been streamlined.
“The time and cost involved in dealing with licensing requirements have been reduced. The labor market remains structurally rigid, but regulations are not particularly burdensome,” it added.
For market openness, the Philippines logged a higher score for trade freedom, while scores for investment and financial freedom were unchanged.
“The financial sector is dominated by banking and relatively stable, but capital markets are underdeveloped,” The Heritage Foundation said.
Sought for comment, University of Asia and the Pacific (UA&P) Senior Economist Cid L. Terosa said the country’s economic freedom ranking could be improved by addressing the rule of law concerns.
“The Philippines is woefully below the world average. Although judicial effectiveness has improved, property rights and government integrity fared poorly. This means that a clearly specified and well-enforced structure of property rights continues to be a challenge for the country, and that wavering public trust in government continues to erode the legitimacy and credibility of the government,” Mr. Terosa told BusinessWorld in an e-mail interview.
The government’s efforts to pursue digitalization will also help improve transparency and reduce corruption, he added.
Mr. Terosa said the Philippines should improve its scores in regulatory efficiency and open markets after the passage of key economic reforms such as the amendments to the Foreign Investment Act, Retail Trade Liberalization Act, Public Service Act, and the Corporate Recovery and Tax Incentives for Enterprises Act.
He said participation in the Regional Comprehensive Economic Partnership (RCEP) trade deal will improve the country’s economic freedom ranking as it is “an indication of the government’s desire to strengthen and facilitate trade and investment, research and development, technology transfer, and public-private partnerships.”
Touted as the world’s largest free trade agreement, the RCEP is set to take effect for the Philippines around May. It includes Australia, China, Japan, South Korea, New Zealand and members of the Association of Southeast Asian Nations.
Ebb Hinchliffe, American Chamber of Commerce of the Philippines (AmCham) executive director, said that the country’s ranking was not a surprise due to economic challenges.
“This news is saddening but not surprising since our economy has been badly affected by the coronavirus disease 2019 (COVID-19) pandemic, high foreign debt and regional disturbances. However, the chamber remains optimistic about the future of the Philippines,” Mr. Hinchliffe said in a Viber message.
Mr. Hinchliffe said digitalization of government processes would address corruption and mitigate bribery.
“We recognize that corruption seems to be a mainstay in the Philippines — but so is the world, and it can surely be discouraging for potential investors. AmCham firmly supports measures that would strengthen accountability, transparency, and promote checks and balances in all public offices,” he said.
The passage of laws on ease of doing business, freedom of information and the creation of the Anti-Red Tape Authority “signifies that the government is serious about eliminating corruption,” Mr. Hinchliffe said.
Calixto V. Chikiamco, Foundation for Economic Freedom president, told BusinessWorld in a Viber message that the Philippines’ economic freedom ranking would improve if it amends some provisions of the 1987 Constitution.
“Remove the Filipino First and Filipino Only provisions in the (1987) Constitution because it will improve fair competition and enhance choice,” Mr. Chikiamco said.
On Feb. 28, a bill containing the procedures for Charter change via a hybrid constitutional convention passed on second reading at the House of Representatives. — Revin Mikhael D. Ochave, Reporter
This article originally appeared on bworldonline.com