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The Philippine economy is “not so free” because of pervasive corruption, a weak judicial system, restricted foreign investment, and a limited regulatory environment.

The 2009 Index of Economic Freedom by the Heritage Foundation placed the Philippines in the 104th spot with a score of 56.8 percent, slightly below the world average. In the Asia-Pacific region, the country ranked 20th out of 41 countries.

Hong Kong landed in the top spot as the freest economy in the world with a score of 90, followed by Singapore (87.1), Australia (82.6), Ireland (82.2), New Zealand (82), United States (80.7), Canada (80.5), Denmark (80), Switzerland (79.4), and the United Kingdom (79.0).

The Heritage Foundation defined economic fredom as one which “provides an absolute right of property ownership, fully realized freedoms of movement of labor, capital, and goods, and an absolute absence of coercion or constraint of economic liberty beyond the extent necessary for citizens to protect and maintain liberty itself.”

The highest form of economic freedom (100), Heritage said, is achieved if “individuals are free to work, produce, consume, and invest in any way they please, and that freedom is both protected by the state and unconstrained by the state.”

The Heritage Foundation measures economic freedom using ten factors, which are then averaged equally into a total score. The ten component freedoms of the Heritage foundation include: business freedom, trade freedom, fiscal freedom, government size, monetary freedom, investment freedom, property rights, freedom from corruption, and labor freedom.

RP low on 4 freedoms

The Heritage Foundation said that the country is particularly weak in freedom from corruption (25), with the country ranking 131st out of 179 countries in Transparency International’s Corruption Perceptions Index for 2007.

“A culture of corruption is long-standing. Enforcement of anti-corruption laws is inconsistent, and the public perception of judicial, executive, and legislative corruption remains high,” Heritage said.

Property rights (30) also scored low in the economic freedom index, with Heritage pointing to the country’s weak judicial system.

“Judges are nominally independent, but some have been appointed strictly for political reasons and are corrupt. Organized crime is a strong impediment to the administration of justice, and delays and uncertainty concern investors. Despite some progress, enforcement of intellectual property rights remains problematic,” the group said.

The Heritage Foundation said that the country is also weak in investment freedom (40) and business freedom (49.3).

“The overall freedom to conduct a business is limited by the Philippines’ regulatory environment. Starting a business takes an average of 58 days, compared to the world average of 38 days. Obtaining a business license takes less than the world average of 225 days. Closing a business can be a difficult and lengthy process,” Heritage said.

“Foreign investment is restricted in a number of sectors. All foreign investment is screened and must be registered with the government. Foreign investors receiving incentives may be subject to performance and local sourcing requirements. Other impediments include regulatory inconsistency and lack of transparency, corruption, and inadequate infrastructure,” it added.

On the other hand, the Heritage Foundation said that the country scored relatively high in trade freedom (78.6), fiscal freedom (75.4), government size (90.8), monetary freedom (77.2), financial freedom (50), and labor freedom (51.4).

“The Philippines has pursued a series of structural reform measures to develop a more vibrant private sector, generate more job opportunities, and enhance business competitiveness. Overall progress has been mixed, and the Philippines still relies heavily on remittances from abroad,” Heritage said.

“The economy scores above the world average in four of the ten economic freedoms. Fiscal freedom is only slightly above average because income and corporate tax rates are burdensome. The average tarrif rate is low, but non-tariff barriers are significant,” it added.

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