Human prosperity is not possible if there is no economic
freedom, if people do not have the freedom to own private property and have
freedom to trade. Misery is the result if people live under political
dictatorships and bear the effects of the state’s economic central planning.
These, among others, were the topics discussed in the
two-day Economic Freedom Network Asia (EFN Asia) Conference 2016 last Nov.
22-23, 2016 at Dusit Hotel, Makati City. The event’s theme was “Economic
freedom and human rights in business,” primarily sponsored by EFN Asia and the
Friedrich Naumann Foundation for Freedom (FNF).
The event also launched the results of the Economic
Freedom of the World (EFW) 2016 Report by Fraser Institute in Canada. The EFW
index is measured by getting the scores (0 to 10, zero is totally unfree and 10
is full economic freedom) of countries covering five criteria: (1) Size of
government, (2) Legal system and property rights, (3) Sound money, (4) Freedom
to trade internationally, and (5) Regulation.
Countries with big governments and high taxes get low
scores in the first measure while nations with highly corrupt legal systems and
unstable property rights protection will receive low ratings in the second, and
so on. The composite score of the five criteria covered is generated and
countries are ranked from highest to lowest (see table).
The numbers on the right show the following.
One, for many years now, Hong Kong and Singapore are
recognized as the two freest economies in the world. Their governments are
strong in enforcing the rule of law and protecting property rights, have low
income tax rates, zero or near-zero tariff rates. They may have many non-tariff
barriers (NTBs) but that is for another paper.
Two, many ASEAN countries are in the middle tier in
global ranks out of 157 countries covered. Outliers are Singapore which is high
up there, and Vietnam and Myanmar which are among the bottom-ranking countries.
Three, the Philippines and other ASEAN countries’ score
and global ranking do not significantly move up or down and I think there are
flaws in the scoring made by Fraser. Here’s why.
In sub-area “Freedom to own foreign currency bank
accounts,” the Philippines, Malaysia, Thailand, and Vietnam got 0 (out of 10).
Similarly, these four countries also posted low scores in criteria 3, Sound
Money. I think foreigners and foreign corporations can own forex bank accounts
here in the Philippines, also in Malaysia, so why did Fraser give a score of 0?
In sub-area “Capital controls,” the Philippines,
Malaysia, and Vietnam scored only 0.77 while Indonesia and Thailand scored 1.54
(again, out of 10) such that their scores under Area 4, Freedom to Trade
Internationally, are again low.
Perhaps the capital control that Fraser refers here is
the maximum amount of Pesos (about P10,000) and dollars ($10,000) that
Filipinos and foreigners can bring in or out when they travel abroad. But many
travelers hardly use big cash for their transactions, they use credit and debit
cards. People can also send huge amounts of money anytime via banks or money
couriers from abroad to the Philippines and vice versa, without capital control
limits.
Since countries’ global ranks are separated only by one
or two decimal places, significant low score in Areas 3 and 4 in this case
would mean overall low score. As a result, the Philippines’ overall score of
7.01 made it rank 80th while Taiwan’s score of 7.65 made it ranked 23rd. A
difference in score of 0.64 already spells a huge difference of 67 places in
global ranking.
Fraser should either check its data properly or adjust
the scoring.
Instead of 0 or 10 for “freedom to own forex account,”
“capital control” and other sub-areas, it may adjust the score to 0 or 4 or 5.
This will reduce the distortion in overall score and hence, in global ranking.
Nonetheless, Fraser is doing a good job in promoting the
philosophy of economic freedom, free trade, rule of law, low taxes and limited
government. Its annual EFW report is being cited in various international
studies and helps guide civil society and corporate leaders, government and
public policy makers in instituting reforms towards a freer, more prosperous
world.
Bienvenido S. Oplas, Jr. is the head of Minimal
Government Thinkers and a Fellow of SEANET. Both institutes are members of EFN
Asia.
---------------
See also:
BWorld 91, Free trade means faster growth in manufacturing, November 14, 2016
BWorld 92, Climate action and Asian energy realities, November 19, 2016
BWorld 93, ASEAN multinationals, December 02, 2016
No comments:
Post a Comment