BWorld 211, Intellectual property, innovation, and prosperity

* This is my column in BusinessWorld last May 10, 2018.

The BusinessWorld Economic Forum 2018 is fast approaching this coming May 18 and it has a timely theme, “Disruptor or Disrupted? The Philippines at the Crossroads.” Focus is on the challenges, risks and potentials of artificial intelligence (AI) and other technological advances.

Endless trial and error, research and development, intangible and intellectual creations, are at the heart of innovation and economic disruptions. The role of property rights protection in general and intellectual property rights (IPR) in particular cannot be overlooked.

Here are some numbers showing the degree of competition among countries and economies in encouraging and protecting innovation and IPR as shown by three data sources. These are the

(1) World Intellectual Property Organization (WIPO), INSEAD, and Cornel SC Johnson College of Business, “The Global Innovation Index 2017” (GII); (2) Property Rights Alliance (PRA) — International Property Rights Index 2017 (IPRI); and the (3) US Chamber of Commerce (USCC) — Global Innovation Policy Center (GIPC), International IP Index (IIPI) 2018.

WIPO’s methodology is interesting.

The overall GII score is computed by getting the simple average of the Input and Output Sub-Index scores. The Innovation Input Sub-Index is comprised of five pillars: (1) Institutions, (2) Human capital and research, (3) Infrastructure, (4) Market sophistication, and (5) Business sophistication. The Innovation Output Sub-Index is composed of two pillars: (6) Knowledge and technology outputs and (7) Creative outputs.

Each pillar is divided into three sub-pillars and each sub-pillar is composed of individual indicators, for a total of 81 indicators. Cool.

Data on GDP per capita income at purchasing power parity (PPP) $ values are from the International Monetary Fund (IMF), World Economic Outlook database, April 2018. The numbers in parenthesis of each report (WIPO-GII, IPRI, IIPI) represent the total number of countries included in their respective reports (see table).

  

These numbers show the following:

One, countries with high global rank and scores in innovation and IPR index are also those with high per capita income. Conversely, countries with low global rank in innovation also have low per capita income.

Two, the Philippines in particular exhibits this low ranking. Placing only 73rd out of 127 countries in WIPO-GII 2017 report, 64th out of 127 countries in PRA-IPRI 2017 report, and 38th out of 50 countries in the GIPC-IIPI 2018 report. Our GDP per capita income of only $8,300 at PPP values is low, and even lower if nominal GDP prices are used, less than $3,000.

Three, many East Asian economies are rising in ranking, landing in the top 25% in global ranks.

To further reiterate the importance of intellectual property (IP) and innovation, 70 independent and free market-oriented think tanks and institutes worldwide sent an open letter to WIPO Director General Dr. Francis Gurry, during the 2018 World IP Day last week, April 26.

The letter was spearheaded by the PRA in the US and Minimal Government Thinkers is among the 70 co-signatories. The letter was also sent to UN Secretary-General Antonio Guterres, and Director-General of the World Health Organization (WHO) Tedros Adhanom Ghebreyesus.

The letter highlighted some important facts, among them:

* In 2016, a record 3.1 million new patents were filed worldwide. These patents protected groundbreaking technological processes, helped cure devastating diseases, and modernized everyday conveniences.

* Copying is not the same as inventing and enforcement of IP rights helps prevent counterfeits that undermine innovation and help finance criminal organizations. This shadow economy of counterfeits is responsible for nearly 2.5% of global imports, amounting to nearly $461 billion.

* 10% of global pharmaceutical trade is thought to be counterfeit. These “medicines” have serious health consequences, including death. New medicines require research, trials, $2.8 billion, and up to 12 years. IP Rights incentivize commitment and collaboration.

* Removing trademarks through plain packaging has costly economic, health, and security consequences. $300 billion is the implied loss to the beverage industry if such packaging is applied to alcohol and sugary drinks.

Another global group, the Biotechnology Innovation Organization (BIO) is also promoting innovation in biotechnology of innovative health care, agricultural, industrial, and environmental products.

Governments, national and multilaterals like the UN and WHO, should help encourage and respect IPR and innovation. Some cases however show that they do otherwise.

For instance, the 2016 UN High-Level Panel on Access to Medicines, their report has portrayed patents and IP as harmful to global development and human rights. Backward thinking.

The enemy of public health and human rights are counterfeits and substandards — medicine, food, and drinks — and the criminal organizations that manufacture and sell these products.

Bienvenido S. Oplas, Jr. is President of Minimal Government Thinkers, a member-institute of Economic Freedom Network (EFN) Asia.

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See also:

BWorld 206, Intellectual property rights in East Asia, May 09, 2018

BWorld 208, Consumer choice in electricity supply and prices, May 11, 2018 

BWorld 209, Is the PCC a facilitator or a hindrance to business competition? May 15, 2018 

BWorld 210, Electricity competition, EPIRA, and WESM, May 16, 2018

BWorld 206, Intellectual property rights in East Asia

* This is my column in BusinessWorld last April 19, 2018.

The degree of wealth and economic size of East Asian economies generally correlate with their degree of private property rights protection, both physical and non-physical or intellectual property. While protection of physical properties like houses, cars, and land are easier to see and measure, the protection of intellectual property rights (IPR) like patents, copyrights, trademarks, and trade secrets are not so tangible.

IPRs are important because they represent the “heart and soul” of private enterprises and the goods and services that they produce.

For instance, people differentiate and choose shoes made by companies as represented by their logos such as a big check, three striped leaves, or letter F. These same people also choose products from food companies with logos of a double arch, a happy insect, or a smiling young female.

Here are some numbers showing the degree of IPR protection of selected East Asian economies. (Data and report sources are (1) Property Rights Alliance (PRA)- International Property Rights Index (IPRI) 2017 Report, (2) US Chamber of Commerce (USCC)- Global Innovation Policy Center (GIPC), International IP Index (IIPI) 2018, and (3) World Economic Forum (WEF), Global Competitiveness Report (GCR) 2017-2018. The numbers in parenthesis beside each report represent the number of countries or economies covered. The WEF’s GCR is composed of 12 pillars and pillar #1 is about Institutions; among the sub-pillars there is IPR protection).

These numbers show that East Asian tiger economies also rank high in IPR protection. Conversely, emerging economies aspiring to join the club of tiger and developed countries tend to have medium to low ranking in IPR protection. The exception is Brunei, a developed economy in terms of per capita income (thanks to its high gas exports and small population) but it is low in IPR protection.

The issue of IPR protection in the region was tackled by a symposium early this week entitled “Intellectual Property Rights in the ASEAN Economic Community: Challenges and Potentials” at Intercontinental Kuala Lumpur, Malaysia. The event was organized by the Institute for Democracy and Economic Affairs (IDEAS), Malaysia’s first and most dynamic free market think tank.

There are moves to abolish the trademark, corporate logos and branding of products deemed “unhealthy” in many countries.

For instance, plain packaging of tobacco products has been legislated in Australia and France, and is currently considered to be legislated in Singapore too. Such trademark busting policies are also considered as extended to other “unhealthy” products like alcohol, sugary food like chocolates, confectionery and candies.

IDEAS commissioned a study that was presented in the symposium entitled “Challenges in Improving Intellectual Property Rights in ASEAN: Case study of Singapore, Malaysia, Indonesia, Thailand and Philippines” by Adidarmawan, S.H. and Marolita Setiati.

In the paper, the two authors noted that:

“Trademark promotes freedom of choice and enable consumers to make quick, confident and safe purchasing decisions. Standardizing… packaging for tobacco products that would restrict the use of brands, trademarks and trade… concern is if brand marks are eroded, then consumers are not able to differentiate between inferior products and those with a reputation for reliability that may create an environment in which companies may end up competing on price instead of quality. In addition, plain packaging is easier for counterfeiters to copy and could result in an increase in inferior — and more dangerous — imitations. The counterfeiters will have an easier time duping the consumer into buying products that are sub-standard. Brand restriction sets an unfortunate precedent, opening the door for IP rights to be weakened in other industries.”

A BusinessWorld report early this week entitled “Excise tax increase triggers widespread cigarette smuggling” also underscores these concerns.

High taxes, rising regulations and plain packaging have similar effects — they make the consumption of legal and branded products like tobacco and alcohol more restricted and more costly, which open up more space and markets for illicit, illegal, smuggled, and cheaper products. This results in more smoking, more drinking, more consumption of the restricted products.

Governments should focus on protecting private property rights, both physical and intellectual. Weakening such property rights will also lead to a weakened state and strengthen the powers of smugglers and criminal syndicates who do not pay taxes and do not respect brands and intellectual property.

Bienvenido S. Oplas, Jr. is President of Minimal Government Thinkers, a member-institute of Economic Freedom Network (EFN) Asia.

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See also:
BWorld 203, TRAIN, inflation and PPP, April 10, 2018
BWorld 204, Mining attractiveness index and the Philippines, April 30, 2018 

BWorld 205, Energy mix and wishful thinking, April 30, 2018

BWorld 183, Why low or zero income tax can mean more development

* This is my article in BusinessWorld last January 29, 2018.

“The people are hungry: It is because those in authority eat up too much in taxes.

When the government is too intrusive, people lose their spirit.”

— Lao Tzu, or Laozi

(6th-5th century BC)

The good news about the new tax law called TRAIN (Tax Reform for Acceleration and Inclusion) is that overall personal income tax (PIT) rates have declined. The bad news is that the high rates of 30% and 32% were retained, and an even higher rate of 35% was introduced for incomes P8 million a year or higher.

In a period of growing global tax competition, growing decentralization if not disintegration by big governments and countries, economies should introduce low taxes.

Currently, Asian economies with low, flat income tax rates are Mongolia with only 10%, Macau with 12%, and Hong Kong with 15%.

Currently too, there are 10 countries and/or jurisdictions around the world that have zero income tax policy.

Eight of them are in the table below, the two others, Bermuda and Cayman islands, have no available data in the IMF and WEF reports. Hence, they are not included in the table. The global rank and score in the World Economic Forum’s (WEF) annual Global Competitiveness Index (GCI), pillar #1 — Institutions, would represent or proxy for the rule of law of countries included in the report (see table).

These numbers show the following:

1. Citizens of zero income tax countries on average are actually richer (except Bahamas) than people of countries that impose and collect income taxes.

2. Zero income tax countries on average have high scores and rank in the WEF’s GCI (except Kuwait), in institutional strength. The same pattern is also observed for developed Asia except South Korea.

3. Developing and emerging Asia like the ASEAN 5 in the above table have lower scores and global ranking, except Malaysia.

One lesson here is that it is the rule of law, the stability and predictability of institutions, public and private, that largely determine an economy’s wealth and prosperity. Not higher taxes and welfarism, not more regulations and endless subsidies.

These countries like Qatar, Brunei, and United Arab Emirates, even Singapore and Hong Kong, are not known for their big mountains and waterfalls, many white sand beaches and sprawling golf courses. They are known for their liberal and secure investment policies that properly respect and protect private property rights, especially big investments and projects, and non-intrusive tax policies.

Currently, the Department of Finance (DoF) is preparing TRAIN 2, focus on lowering the corporate income tax (CIT) rate from 30% to 25% but with fewer fiscal holidays and exemptions. The goal of DoF is to have a “revenue neutral” law, reduce revenues on one side to be compensated by additional revenues on the other side.

Since the Duterte administration is gung-ho on federalism, this will be a good opportunity for them to drastically cut CIT — only 10%, or 15%, little or no exemptions — then allow the regional or state governments to have their own CIT.

The advantage of this setup is that it instills tax and investment competition among the regions and states.

Thus, the future state of southern Luzon for instance will have a CIT of 15%, the state of western Visayas will have a CIT of 10%, the state of northern Mindanao will have a CIT of only 6%, another state will have zero CIT, and so on.

The DoF should align its fiscal priorities with the political priorities of Malacañang and Congress.

TRAIN 1 was lousy because it raised many national taxes or created new ones even if the DoF is aware that soon there will be less national government departments, bureaus, and welfarism to be compensated by more state government departments and welfarism.

Let TRAIN 2 compensate for the short-sightedness of TRAIN 1. Let the national and soon federal government step back as the regional and state governments step forward.

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See also:

BWorld 171, Global vs national tax reforms, December 29, 2017

BWorld 180, Has East Asia liberalized its trade enough? January 19, 2018 

BWorld 181, Effects of Supreme Court TRO on RCOA, January 22, 2018
BWorld 182, Asia Liberty Forum 2018 in Jakarta, January 31, 2018

BWorld 153, Property rights, trademarks and consumer protection

* This is my article in BusinessWorld last September 18, 2017.

Private property rights that people and businesses enjoy are among the cornerstones of a free and dynamic society. People have exclusive rights on what to do with their private properties — use them, sell, rent out, or donate.

However, when rights to private property — both physical and intangible assets — are unprotected, society can quickly degenerate into disorder. As a result, consumers will be unable to recognize which among manufacturers and service providers are trustworthy and which are suspicious.

Measuring the extent of property rights protection across many countries is done annually by the Property Rights Alliance (PRA), a Washington DC-based think tank. It produces the International Property Rights Index (IPRI) annually and partners with independent, nongovernment, and market-oriented think tanks and institutes from many countries.

IPRI is derived by getting the score (1 to 10, 10 being the highest) of each country covered in three major areas:

1. Legal and Political Environment (LP), covers judicial independence, rule of law, control of corruption, and political stability of a country or economy.

2. Physical Property Rights (PPR), includes registration and protection of physical properties, access to loans.

3. Intellectual Property Rights (IPR), includes protection of patents, trademarks and brand, and copyrights.

Countries with high scores in two or all three of these areas will have a high IPRI overall score and global rank (see table).

Among the important insights in the above numbers are: One, the more developed the economies are like Singapore and Japan, the higher the IPRI score and global rank. Which implies that as private property is better recognized and protected, there are more economic activities and innovations that occur.

Two, the Philippines experienced some improvement in its global rank, from 77th out of 131 countries in the 2013 report. It rose to 64 out of 127 countries in 2017. Its low score in legal and political environment was compensated by its high score in physical property rights.

One emerging issue in IPR non-protection is plain packaging (PP) of tobacco products purportedly for health reasons. Besides being slapped with high taxes, tobacco products also feature graphic warnings on packaging. Advertising tobacco products have also been restricted and smoking in may areas have been disallowed, which are part of several moves to deter people from lighting up.

These have been tried in many countries but smoking incidence does not seem to significantly decline as people shift to cheaper and often, illegal, illicit products. So the next step is to prohibit the use of a tobacco brand, logo, or trademark. This has been done in Australia and there are plans to introduce legislation in Singapore, Malaysia and Taiwan.

This plan does not appear to be right because a brand or logo of a company represents how effective it is in developing consumer loyalty and service. Imagine also if all ice cream, all soft drinks, all beer, all wine, etc. will simply be labeled as “ice cream,” “soda,” “beer,” etc. with no brand recognition of who produced or manufactured the products.

Or all government departments and agencies (DoH, DoF, DPWH, NEDA, etc.) will lose their logo and will simply have a generic brand “Philippine government,” it would not seem right.

I have never been a smoker nor have I been a fan of smoking but was once a fan of tobacco ads in cycling or in the F1 race. But I will not recommend the scrapping of a brand or trademark of companies in a particular industry. People who hate the companies should attack them as such and they may even use the company brand for their attacks.

Intellectual property rights like medicine patents, song copyrights, company brand or trademarks, play an important role of recognizing efficiency and innovation. Consumers look up to these brands and decide which ones to support and patronize and which ones to reject based on their specific needs and interests.

Governments therefore, should respect and protect these IPRs the same way it should respect and protect physical private properties. Moreover, people own their bodies and not the state nor NGOs.

After rising taxes, health warnings, and business regulations are in place, governments should leave individuals and allow them to seek their own happiness without harming other people.

Bienvenido S. Oplas, Jr. is the president of Minimal Government Thinkers, which is a member of EFN Asia and the Property Rights Alliance (PRA).

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See also:

BWorld 150, Rising state-inspired murders and budget 2018, September 18, 2017 

BWorld 151, Mining taxes per hectare of land, September 22, 2017 
BWorld 152, Cronyism in Renewable energy, gas sectors? September 23, 2017

BWorld 81, Property rights are human rights

* This is my article in BusinessWorld last August 25, 2016.

Private property and its protection is among the cornerstones of a free society. It bestows upon the individuals, households and enterprises exclusive rights what to do with their private property like a car or a piece of land -- use it, sell it, rent it out, or donate it.

When private property rights are unprotected, society can quickly degenerate into chaos and disorder. Gangs and bullies can confiscate other people’s houses, cars, or shops, and the enterprising people will flee and escape such society and only the lazy, bullies, and opportunists will stay.

Measuring property rights protection across many countries has been done by the Property Rights Alliance (PRA), a Washington DC-based think tank. It produces the International Property Rights Index (IPRI) annual reports and partners with independent, nongovernment and market-oriented think tanks and institutes from many countries around the world in spreading the philosophy and measurement of protecting private property rights.

The IPRI 2016 Report was released in partnership with 102 independent think tanks from 70 countries and it was launched on Aug. 10, 2016 in Delhi, India.

PRA Executive Director, Lorenzo Montanari summarized the value of this exercise:

“Property rights are the linchpin of a prosperous society. They say what is yours, what is not, and how to exchange with others in order to create value... that is why they are human rights and essential to individual liberty.”

IPRI is derived by getting the score (1 to 10, 10 being the highest) of each country covered in three major areas:

(1) Legal and Political Environment (LP), which covers judicial independence, rule of law, control of corruption and political stability of a country or economy.

(2) Physical Property Rights (PPR), which includes registration and protection of physical properties, access to loans.

(3) Intellectual Property Rights (IPR), that includes IPR protection, especially patents and copyrights.

Thus, countries with high scores in two or all three of these areas will have a high IPRI overall score and global rank.

Below are the scores and global rank of ASEAN (Association of Southeast Asian Nations) countries and their neighbors in the region. Three ASEAN countries -- Brunei, Cambodia, and Laos -- were not included in the IPRI annual reports, mainly for lack of reliable data for comparative purposes. Myanmar was included only starting 2015.

The table show the following:

1. The more developed the economy is (Singapore, New Zealand, Japan,...), the higher the IPRI score and global rank. Which implies that as private property is better recognized and protected, there are more economic activities that occur.

2. Emerging markets of the ASEAN except Thailand have improving global rankings: Malaysia, Philippines, Indonesia and Vietnam. The decline in Thailand’s ranking coincided with the rise of the military leadership there.

3. The Philippines experienced the biggest improvement among the emerging markets in the region, from 77th in 2013 it rose to 64th in 2016. Its overall score of 5.15 in 2016 is a result of its low score in LP of only 4.15 but compensated by its high score of 6.07 in PPR, while its IPR score in IPR was a modest 5.23.

The continuing uncertainties in human rights protection due to the ongoing extrajudicial killings (EJKs) related to the drugs war of the Duterte administration may have some negative repercussion in the country’s future low scores and position in rule of law and judicial independence. These two are part of the Legal and Political environment (LP). There is danger of a possible decline in the Philippines’ overall IPRI score and global rank if these uncertainties continue for long.

The main functions, the raison d’etre or reason for existence of governments are to enforce the rule of law, to protect the citizens’ right to life (against aggressors, murderers, rapists, etc.), right to private property (against thieves and destroyers of properties), and right to liberty (against censorship, bullies and despots).

Private property rights as human rights are good incentives for the people to become productive citizens and stay away from being dependent on state welfare. Governments should stay the course in securing this philosophy and veer away from forcing equality by penalizing the hard working with high, multiple taxes, fees and permits.

Bienvenido S. Oplas, Jr. is the President of Minimal Government Thinkers and a SEANET Fellow. Both institutes are among the 102 independent organizations and partners of PRA in producing the IPRI 2016 Report. minimalgovernment@gmail.com

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See also: 

BWorld 26, IPRI 2015 in APEC economies, November 19, 2015 

BWorld 45, Asia Liberty Forum and property rights, February 29, 2016

BWorld 78, If the US becomes protectionist, who loses? August 11, 2016 
BWorld 79, Brownouts, coal power and the electricity market, August 21, 2016 

BWorld 80, Declining share of agriculture in GDP, September 11, 2016

Fat-Free Econ 5: Property Rights and Policy Lefts, April 04, 2012

IPR and Innovation 30, More on IPRI 2015 launching in KL last year, February 01, 2016

IPR and Innovation 30, More on IPRI 2015 launching in KL last year

I am reposting this article from the Property Rights Index (PRA, Washington DC) last year, about the launching of IPRI 2015 in Kuala Lumpur that I attended. The photos I added and not part of the original PRA article.
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2015 International Property Rights Index

Monday, November 16, 2015 | By Dennis Cakert

The 2015 International Property Rights Index (IPRI) was officially launched this morning in Kuala Lampur, hosted by Wan Saiful Wan Jan, Director of Southeast Asia Network for Development (SEANET). Today featured an introduction to the IPRI given by the Executive Director of the Property Rights Alliance, Lorenzo Montanari, followed by a presentation on this year’s findings by the 2014-2015 Hernando De Soto Fellow, Prof. Sary Levy Carciente….

Lorenzo Montanari released this statement earlier this morning:

“The 2015 IPRI emphasizes the necessity of property rights for creating a free market and driving economic growth” said Lorenzo Montanari, Executive Director of the Property Rights Alliance, “but we also recognize that property rights are first of all a matter of human rights. Property rights are directly related to the values and principles of individual liberty. The special case studies in this year’s edition demonstrate the importance of property rights for women and the poor in developing countries. This year data was available in countries where it was previously not, which is a good sign for future improvement. There are now 129 countries included in the analysis, up from 97 countries in last year’s edition. Countries that had strong property rights systems experienced significantly higher GDP per capita. In the EU, for example, IP accounts for 26 percent of employment and 39 percent of GDP. Societies undoubtedly achieve greater societal development by protecting property rights of authors, entrepreneurs, artists, innovators and inventors.”

There was also a presentation from Ganesh Muren, founder of Saora Industries, a Malaysian Innovative Social Enterprise that specializes in delivering safe and clean drinking water to rural and marginalised communities. Saora has innovated a proprietary solar powered water purification system that is able to purify any surface water (e.g. river water, rain water, pond) to safe clean drinking water through nanotechnology. The competitive advantage of Saora is their intellectual property. They have developed proprietary nanotechnology that replaces the usage of UV light to kill and eliminate bacteria and viruses. The affordability of this new technology developed by Saora makes it appealing and reachable to the poor, those at the “bottom of the pyramid”.

Mr. Burhan Irwan Cheong, Malaysia’s Lead Negotiator for the IP Chapter, Ministry for Domestic Trade, Cooperatices, and Consumerism, presented on the Intellectual Property Chapter in the TPPA and how it will implement a fair and transparent patent system in member countries. Young entrepreneurs like Ganesh Muren is a perfect example about how the TPPA will contribute to protecting the patent on his water purification system. Without the certainty of the rule of law, innovation does not exist.

Lastly, Bienvenido Oplas Jr., President of Minimal Government Thinkers in the Philippines and a SEANET Senior Fellow, presented his economic analysis on the benefits of the TPP for trade. His extensive research showed that if the Philippines joins the TPP, exports are expected to rise 48 percent and real GDP will increase 61 percent. He also spoke regarding the importance of property rights to maintain order in society, while debunking the myth that IP hurts public health, proving instead that government taxation of medicine is the real problem.

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Afternoon of that day, Dr. Sary Levy was interviewed in Bloomberg TV Malaysia, live. The place is outside KL proper.

The interviewer was a pretty and very articulate lady.

Among the footages shown while Prof. Levy was speaking. It's Wan, the CEO of IDEAS and Director of SEANET.

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See also:

IPR and Innovation 26, Countries with most patent applications, most innovative universities, September 19, 2015 

IPR and Innovation 27, India strengthening its IP protection, September 30, 2015 

IPR and Innovation 28, Recent IP development in Singapore, October 10, 2015

IPR and Innovation 29, Civil society enforcement of patents, copyrights, January 18, 2016

BWorld 26, IPRI 2015 in APEC economies, November 19, 2015

Free Trade 57, Growth, IPRI 2015 and the TPP, November 28, 2015

Free Trade 57, Growth, IPRI 2015 and the TPP

Two weeks ago, I attended the launching of  the International Property Rights Index (IPRI) 2015 Report in Kuala Lumpur, then I also gave a short presentation on IPR and the Trans Pacific Partnership (TPP) Agreement.

I showed portions of Dr. Ramon Clarete (University of the Philippines School of Economics, UPSE) paper during the UPSE-Ayala forum, Going Regional: Which Mega Trade Deals Should the Philippines Join? last February 2015.

He used the Gravity model of trade in estimating the level of bilateral exports or imports between two trading partners.

* Dependent variable: flow of trade between and among countries studied

* Independent or explanatory variables, their expected signs or relationships: GDP (+), population (+), dist. between two countries (-), commonality of language (+), shared borders (+), landlocked state (-).

* In addition, TPP and RCEP indicators or dummy variables are introduced: (a) TB1, 1 if both trading countries are TPP or RCEP members, 0 otherwise, (b) TB2, 1 if exporting country is a TPP or RCEP member, 0 otherwise; (c) TB3, 1 if importing country is a TPP or RCEP member, 0 otherwise. For overlapping memberships, a dummy variable where TPP*RCEP =1 if both trading partners are members of the two trade blocs.

And here are some results.

Then I briefly discussed my article in BusinessWorld that day, Property rights protection in APEC economies. Then I discussed the IPR on medicines aspect of the TPP.

And showed actual texts in the TPP agreement....

Below, from left: Lorenzo Montanari, Exec. Dir. of the Property Rights Alliance (PRA); Dr. Sary Levy, author of IPRI 2015, and Wan Saiful Wan Jan, CEO of IDEAS and Director, SEANET.

Concluding Notes:

1. Joining the TPP has more gains than pains for member-countries, especially in exports and overall GDP expansion.

2. IPR health provisions in TPP are not scary, they do not reduce access to cheaper generic drugs. Existing TRIPS flexibilities are maintained.

3. It seems that the generic pharma lobby + the anti-capitalism, anti-globalization NGOs created more noise and fear than what the TPPA actually provides.

4. There is more to fear in government taxation of medicines, in mandatory drug price discounts and price controls, than IPR protection.

“IPR create incentives for businesses to invest in ideas, to develop new products, and to earn a profit from the sale of those products. This in turn leads to improved customer satisfaction, improved profitability, and greater employment opportunities.”
– Prof. Sinclair Davidson, RMIT Univ. (Econ Dept.), Melbourne, Australia.

The full presentation is posted here.

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See also:

Free Trade 53, TPP "final push" this September + paper by Dr. Clarete, September 19, 2015 

Free Trade 54, Eco-protectionism at APEC 2015 meeting, September 28, 2015 

Free Trade 55, TPP Agreement, finally, October 06, 2015

Free Trade 56, Trade, investments and taxes in APEC countries, November 08, 2015

BWorld 26, IPRI 2015 in APEC economies

* This is my column in BusinessWorld last Monday, November 16, 2015.

KUALA LUMPUR -- The protection of property rights and promulgation of the rule of law are the cornerstones of peace and order in society. When such property rights are removed and unprotected, society can quickly degenerate into chaos and disorder. For instance, your house or car is also somebody else’s house and car, and he/she can take and occupy it anytime, anywhere.

Measuring property rights protection across many countries has been done by the Property Rights Alliance (PRA), a network of 74 independent, nongovernment, and market-oriented think tanks from 57 countries around the world and is based in Washington, D.C.

PRA produces the International Property Rights Index (IPRI) annual reports, which is a measurement of how governments in the countries covered promulgate the rule of law and protect property rights, public and private, physical and non-physical or intellectual.

The IPRI 2015 Report is launched today here at Park Royal Hotel in the capital city of Malaysia. The event is jointly sponsored by the PRA and the South East Asia Network for Development, which is a regional project of the Institute for Democracy and Economic Affairs in Malaysia.

The event’s theme is “Protection of Property Rights, Economic Growth, and the TPP.” The Trans-Pacific Partnership (TPP) is included in the theme because of its recent approval by the original 12 member-countries including Malaysia. TPP of course will not be implemented unless each member-country ratifies the agreement.

IPRI is derived by getting the score (one to 10, 10 being the highest) of each country covered in three major areas:

1 Legal and Political Environment (LP), which includes judicial independence, rule of law, control of corruption and political stability;

2 Physical Property Rights (PPR), which includes registration and protection of physical properties, and access to loans; and

3 Intellectual Property Rights (IPR), which includes protection of IPRs, in particular patents and copyrights.

As a result, countries with high scores in two or all three of these areas will have a high IPRI score and global rank.

In the 2015 Report, the top 10 from 1st to 10th places are: Finland, Norway, New Zealand, Luxembourg, Singapore, Switzerland, Sweden, Japan, Canada, and Netherlands.

For this piece, the focus will be on Asia-Pacific Economic Cooperation (APEC) member-countries that are covered in the IPRI annual reports. Only 19 countries are in this table because Brunei was not included in the IPRI 2014 and 2015 Reports while Papua New Guinea was never included in all IPRI reports, past and present. (See Table)

APEC countries that were not included in the 2014 Report because of some incomplete data were given this observation in that report:

1 Philippines: Between 2010 and 2014, the Philippines IPRI score increased by +2.9%. In 2014 IPRI increased by +0.2 due to slight increases in all components. LP increased by +0.2 points due to all four of its items increasing in 2014. In particular, item Political Stability improved by +22.7% between 2013 and 2014.

2 South Korea: Over the 2010-2014 period of analysis, the South Korea IPRI score fluctuated around the value of 6.3. PPR data is missing from the analysis completely and IPR is missing for 2010 and 2011... In general, the overall IPRI value for South Korea is good and stable.

The Philippines’ jump in global rank from 77th in 2013 to 65th in 2015 is somehow impressive despite the flat score of 5.1 and 5.0, respectively. The reason for the big jump is because many countries have suffered significant decline in their scores from 2014 to 2015.

Within the Association of Southeast Asian Nations-6 that are also APEC members and covered in this annual report, there is a mixture of results over the years. The bad news is that (a) the gap in overall score between high-ranked Singapore and low-ranked Vietnam was very wide, with the average score of the former almost twice that of the latter; (b) Thailand and Vietnam suffered significant declines in scores and global rank, both falling by at least 19 notches in ranking from 2014 to 2015; and (c) Indonesia global rank also fell significantly from 59th in 2014 to 70th in 2015.

The good news is that Singapore and Malaysia have managed to retain their high scores and global ranking.

The results of this annual study should prod the governments of the Philippines and other East Asian economies to remember the main function, the raison d’être or reason for existence, of governments: to enforce the rule of law, the protection of the citizens’ right to life (against aggressors), right to private property (against thieves and destroyers of properties), and right to liberty (against bullies and despots).

There is a positive relationship between economic development and economic freedom, and the strength of property rights protection. Civil society leaders should keep reminding governments of this reality, and dissuade the latter from enacting and implementing various programs that directly or indirectly erode the respect of private property. 

Bienvenido S. Oplas, Jr. is the President of Minimal Government Thinkers, Inc., which is one of the 74 think tank-members of PRA. He is also a SEANET Fellow.

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See also:
BWorld 22, WESM, PEMC and search for competitive electricity prices, November 05, 2015 
BWorld 23, ASEAN trade bureaucracies and Doing Business 2016 Report, November 07, 2015 
BWorld 24, Traffic and Newton's 3 laws of motion, November 12, 2015 
BWorld 25, Feed in tariff means expensive electricity, November 14, 2015

Inequality 26, Pew survey result on support for free market, July 27, 2015 
Inequality 27, ADR Institute forum on poverty and growth, August 18, 2015

Pol. Ideology 62, Marx and Hayek on Property Rights

Nearly six years ago, I presented this paper in a seminar on "Freedom and Property" in Manila, sponsored by the Friedrich Naumann Foundation for Freedom (FNF) Philippine Office.

Yeah, I recalled my UP student activism days in the 80s, when the Maoist Nat-Dems were the dominant leftist groups, but our small group dissociated with their ideology as we read more Marx and Lenin, not Mao Tse Tung :-) I re-read portions of "Das Kapital"  and "The Communist Manifesto" in making that presentation.

Recognizing the mistakes of Marx' analysis contributed why I abandoned the Marxist ideology. And later embraced the philosophies of Adam Smith, Friedrich Hayek, Mises, etc.

Property Rights Alliance's (PRA) annual IPRI Reports are good materials in the study of how countries and economies respect or disrespect private property ownership and control, both physical and intellectual property.

My first published article in BusinessWorld was in November 2007. (This year I have two articles already in that newspaper, a 3rd article coming up this Friday :-))

The full text and presentation is available in my slideshare page.

I posted this paper because next week, I will be a reactor to a mainly socialist paper presentation on "Alternative Economic System", with a largely socialist audience. No problem with me, I don't evade any debate, civil debate. Excitng.

See also: 

Pol. Ideology 58: Democracy, Coercion and Civil Society, November 29, 2014 

Pol. Ideology 59: On PostModern Politics, December 14, 2014 

Pol. Ideology 60: Lecture in Nepal on Liberalism, Rule of Law, Civil Society, January 13, 2015 

Pol. Ideology 61: Raison d 'Etre of Government, January 30, 2015

Property Rights 6: IPRI 2013 Report

The International Property Rights Index (IPRI) 2013 Report was released last week. Our think tank here in Manila, Minimal Government Thinkers, Inc. is the Philippine partner of the Property Rights Alliance (PRA, USA) in producing the annual IPRI.

There are many annual studies and reports measuring economic freedom, economic competitiveness and related concepts of countries, and ranking them. IPRI incorporates many of those factors and indicators, but it is focused on studying property rights and their protection worldwide.

IPRI is composed of three main indicators, which themselves have their own sub-indicators. And this makes the IPRI unique and useful.


For many governments that are stuck in the welfarist and central planning philosophy, they are characterized by soft or implicit disrespect, or less protection of private property rights. Since private property is among the cornerstones of a free society, disrespect of property rights is the path to socialism and dictatorship.

Here is the result of the 2013 IPRI, the ranking of 131 countries covered by the study. I separated the East and Southeast Asian economies for easier identification.

The Philippines ranked 77 out of 131 countries covered by the study. Not good for us.
 

And here's the score for the three components of IPRI by country. The Philippines scored poor in legal and political environment (LP), pulling the overall IPRI score.

The report made this observation:

... there is a positive relationship between economic development and strength of property rights regimes. In addition,this finding is also confirmed when looking closer to specific groups, such as different regions or different average household income groups.

Kudos to PRA for persistently producing this annual report.
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See also:
Property Rights 1: IPRI 2009 Report, March 02, 2009
Property Rights 2: IPRI 2010 Report, February 27, 2010
Property Rghts 3: IPRI 2011 Report, March 29, 2011
Property Rights 4: Trees, SM Baguio, Henry Sy and Twitter, April 12, 2012
Fat-Free Econ 5: Property Rights, Policy Lefts, April 04, 2012 
Property Rights 5: IPRI 2012 Report, April 18, 2012

Property Rights 5: IPRI 2012 Report

(Note: this is my article last week, April 13, in the online magazine,
http://www.thelobbyist.biz/perspectives/less-gorvernment/1295-small-scale-robbery-and-property-rights)

In a small barrio in Pangasinan province that I visit from time to time to see the agro-forest farm that I help manage, I sometimes hear from our farm caretaker of small-scale robbery happening in the barrio or in the town proper. Things that are stolen are varied: from small items like vegetables, mangos, buko, chicken, kaldero, utensils; to more valuable ones like a tractor, a motorcycle, motorcycle parts, pigs, cows. There could be bigger items like land grabbing but I have not heard stories like that yet.

Then there are small-scale but frequent logging and theft of standing trees in the public forest land. Stolen and felled trees can range from arm-size in diameter to larger trees for lumber.

These small- to medium-scale robbery are actually more of exception rather than the rule as most of the people there, or in other parts of the country for that matter, are honest, have jobs, and would rather work than steal someone else’s property. But we notice and remember such petty or small-scale crimes because of the threat that someday those abnormal characters might victimize us too.

So I ponder as I hear these stories, that many Filipinos have little respect for property rights, whether public or private property. Stealing in public property like cutting trees in public forest land is often regarded as “tolerable”. One reason is that the extent of robbery and corruption in many government agencies and offices are a lot more damaging than stealing trees in the mountains. Another reason is the “tragedy of the commons” where a property is owned by everyone and no one in particular. So an upland charcoal maker or illegal logger is actually “part-owner” of the trees that they cut and transport from public forest lands.

When incidence of stealing of private property becomes predominant, that sends a bad signal to would-be rural and farm investors and entrepreneurs. So some agri-business projects, small to big/corporate, may not take off in certain areas of the country because of this fear of being victimized by thieves, both from within and outside the business organization.

It is important therefore, that a culture of respect for property rights, respect for the rule of law, be ingrained in the minds of our people. Then more investments, more job creation will follow.

The International Property Rights Index (IPRI) 2012 Report was released late last month in the US. It ranks countries on how much they respect and protect private property rights. The annual study looks at three major components:

1. Legal and Political Environment (LP)
2. Physical Property Rights (PPR)
3. Intellectual Property Rights (IPR)

For this paper, I will just focus on the 2nd component, the protection of physical properties – a house, car, cellphone, tv, rubber shoes, etc.
PPR is composed of three sub-sections or sub-components.

a. Protection of Physical Property Rights. This variable relates to the strength of a country’s property rights system as reflected on the quality of judicial protection of private property including financial assets.

b. Registering Property. This shows businesses’ point of view on how easy or how difficult it is to register property, to sell or dispose property like land, house or building.

c. Access to Loans. Access to bank loan without collateral is a proxy for the level of development of financial institutions in a country.

Overall, out of the 130 countries covered by the study, the Philippines ranked 87th. Not a good rank, but at least not too low either.

In the 2nd component, PPR, the Philippines ranked 76th out of 130 countries, or it ranked 16th out of 19 Asian economies in the PPR category. What pulled down the country is the long and tedious procedures in registering property, even in opening a business. Another reason is the limited practice of loan without collateral. Poorer people with no credit cards or no bank deposits will have a hard time getting a bank loan unless they present some of their physical properties (land, tractor or tricycle, etc.) as collateral.

Other Asian economies and their global ranking in PPR are:

1st Singapore, 8th Hong Kong, 11th Taiwan, 19th Malaysia, 24th Japan, 29th China, 40th Indonesia and Thailand, 46th India, 65th S. Korea, 68th Pakistan, 76th Philippines and Vietnam, 84th Brunei. See http://www.internationalpropertyrightsindex.org/ranking.

This looks like an odd or weird result, that communist China has a higher global rank than capitalist Thailand and S. Korea in protecting physical property rights.

The incidence of robbery, direct or indirect, is often directly related to public perception of the integrity of public institutions and government officials. If the people think that many government personnel and officials are wasteful and corrupt, then stealing others’ property is a thought that they might just commit, knowing that government law enforcers are busy with other activities like extortion and do little in going after the real thieves. If thieves are caught, perhaps they can bribe their way out of prison and the probability of punishment goes down.
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More about this year's Report

The Property Rights Alliance (PRA, http://propertyrightsalliance.org/), the main sponsor of the annual reports, did not produce a hard copy of the report this year. But the online copy is more interactive, readers can explore topics and ranking of countries or regions.

Ranking of countries is more reader friendly. One can click the country, or any of the three components (Legal Environment, Physical Property, Intellectual Property) to show ranking of countries.

The 2012 Report was backed up by many partners, independent (non-government) free market think tanks and institutes from many countries around the world. MG Thinkers is among them, and the only one from the Philippines which is a partner of this important project.

We are thankful to the PRA and the Americans for Tax Reforms (ATR, http://atr.org/) for inviting us each year (since the 2009 Report) to be a partner of the annual IPRI Report.

Thanks Kelsey, thanks Grover.
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See also:
Property Rights 1: IPRI 2009 Report, March 02, 2009
Property Rights 2: IPRI 2010 Report, February 27, 2010
Property Rghts 3: IPRI 2011 Report, March 29, 2011
Property Rights 4: Trees, SM Baguio, Henry Sy and Twitter, April 12, 2012
Fat-Free Econ 5: Property Rights, Policy Lefts, April 04, 2012