Indexes and the Philippines

is my Trade Tripper column in this weekend issue of BusinessWorld:

The year's start is a good time for studying indexes. While some would take them with the proverbial grain of salt, nevertheless, your Trade Tripper finds such statistical measures interesting. Particularly if one takes a number of them and they end up corroborating each other directly or indirectly. Besides, as is oft said: you can’t manage what you haven’t measured.

The first of the indexes for the year is the 2014 Economic Freedom Index released just over a week ago. As its name indicates, the Heritage Foundation’s study measures a country’s openness to trade, economic mobility, and prosperity.

The Philippines apparently presented a somewhat blurry picture in terms of economic freedom (see http://www.heritage.org/index/country/philippines). It is currently ranked 89 (out of 186 countries), although the same is said to be an improvement by 1.9 points. Amongst Asia-Pacific countries, the Philippines placed 16th out of 42. Overall, the Philippines is considered "slightly below the world average" or "moderately free."

However, it is in the Index’s category of "Rule of Law" that is of interest. For the Philippines: "Corruption and cronyism are rife in business and government, with a few dozen leading families holding an outsized share of wealth and political power. Judicial independence has traditionally been strong, but the rule of law is generally weak. A culture of impunity, stemming in part from a case backlog in the judicial system, hampers the fight against corruption. Delays and uncertainty negatively affect property rights."

The foregoing should be read alongside the SWS survey of Filipino businessmen, with "a lot" reporting of corruption increasing by 56% in 2013. Also interesting is the comparative with the country whose progress is most closely observed in the Philippines: Vietnam. As of 2010, Vietnam has overtaken the Philippines in terms of lessened corruption and is currently three ranks higher than the latter.

The Economic Freedom Index goes on to discuss ease of doing business or "regulatory efficiency," noting that in the Philippines "launching a business takes 15 procedures and 35 days." This should be read alongside the category Open Market: "The average tariff rate is 4.8%. Tariffs provide over 20% of government revenue. Tariff-rate quotas restrict some agricultural imports. The legal and regulatory systems may be difficult for foreign investors to navigate."

Then there is the World Economic Forum’s 2013-2014 Global Competitiveness Index (see http://reports.weforum.org/the-global-competitiveness-report-2013-2014/).

The Philippines has certainly made improvements in this regard, ranking 59 out of 148 countries. However, the data seems to indicate that it is more of a private sector achievement overriding the obstacles placed by government.

One can see this in our high scores in "business sophistication" and market size (which perhaps can be related to the fact that the Index declares our population to be at 94.9 million, with a substantial chunk of that -- it must be added -- belonging to the youth sector).

It is in the areas that government has the most responsibility that the Philippines ranks lowest: infrastructure, corruption, inefficient government bureaucracy, burdensome tax and labor regulations, and last (but certainly not the least) policy instability (which has been a peculiar Philippine flaw for the past decade and a half).

Nevertheless, the undoubted key for whatever prospects that may open to the Philippines is in education. I’ve written previously of one striking Philippine statistic and that is in the area of demographics: Filipinos 30 years old and below comprise around 70% of the population (with those below 14 years at 35%, with the median age at 22.9 years old). Those at 65 years old comprise only about 4.1%. The future of this country quite simply depends on how well that 70% is educated.

The Times Higher Education World University Rankings 2013-2014 (see http://www.timeshighereducation.co.uk/world-university-rankings/2013-14/world-ranking) declares itself to be "the only global university performance tables to judge world class universities across all of their core missions -- teaching, research, knowledge transfer and international outlook. The top universities rankings employ 13 carefully calibrated performance indicators."

The usual suspects are there: Cambridge and Oxford definitely (as well as some school called Harvard). From the Asian region, the list is filled with Japanese, Singaporean, Hong Kong, South Korean, Taiwanese, Indian, Israeli, Turkish, Saudi Arabian, and Thai schools.

And yet (although one is free to ignore the rankings for whatever excuse) not one of our schools joined the list of top universities. Not even in the "looser" Times Higher Education World Reputation Rankings, which is based on "nothing more than subjective judgment."

Which is quite disappointing considering all the fanaticism generated by the local top universities here among their students and all the basketball games and all the personality cults created by their faculty.

The foregoing, of course, should spur us to try harder. All the more when one considers this final index: Germanwatch’s 9th annual Global Climate Risk Index (http://germanwatch.org/de/7659), finding the Philippines as among those suffering worst from weather related devastation.

But then we don’t really need an index to tell us that.