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DoF expects improved performance in 2020 economic freedom index

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Gil S. Beltran
Gil S. Beltran -- BW FILE PHOTO

THE Department of Finance (DOF) said it expects the country’s Index of Economic Freedom (IEF) performance to improve next year with the implementation of fiscal reforms elevating the Philippine score in various sub-indices.

In an economic bulletin, Finance Undersecretary and Chief Economist Gil S. Beltran said the country’s IEF performance is “expected to improve significantly” in the 2020 index year.

“The signing of the Personal Property Security Act will improve the score on property rights. The signing of the rice quota tariffication bill into law will also reduce the penalty for non-tariff barriers in the computation of trade freedom index,” Mr. Beltran said in an e-mail.

The IEF is compiled by the Heritage Foundation, a conservative US think tank. The index purports to measure the degree to which economies allow individuals the freedom to pursue their own economic interests, modeled on principles laid down by Adam Smith.

In August, President Rodrigo R. Duterte enacted the Personal Property Security Act, which provides micro-, small and medium enterprises better access to lending.

Meanwhile, the rice tariffication bill that seeks to lift quantitative restrictions on rice imports in exchange for a 35% tariff is expected to make the industry competitive and lower prices for the staple grain.




The tariffication bill is now up for Mr. Duterte’s signature, after it was ratified by both chambers of Congress in November.

“We recognize that government should not stand in the way of private sector participation in the economy. That is why TradeNet.ph, for example, should already be made operational to cut red tape in the processing of trade-related documents by 76 trade regulatory agencies,” Mr. Beltran added.

The Finance Department recently urged the Bureau of Customs to activate TradeNet, an online portal which allows traders to apply for permits online, and enable government agencies to receive the forms and send feedback.

In the 2019 IEF, the Philippines fell nine places to 70th out of 186 economies, from the previous year’s ranking of 61st, after weaker performances in the sub-indices of monetary freedom, government integrity, trade freedom and tax burden, among others.

“The absence of entrepreneurial dynamism thwarts development. Despite the adoption of some fiscal reforms, deeper institutional reforms are needed in interrelated areas: business freedom, investment freedom, and the rule of law,” the Heritage Foundation said.

Meanwhile, Mr. Beltran flagged some issues with the study, which he claims ”leaves out important details.”

He said the study penalizes a country for increasing state spending, whether an economy is industrialized or developing.

“But a developing economy may require greater government involvement in the economy as in the provision of infrastructure and social services such as basic education, health, and social protection,” Mr. Beltran said.

On the issue of tax burden, Mr. Beltran also noted that a lower score may be incurred due to higher tax effort, or the tax collected in relation to the country’s gross domestic product, resulting from improved tax administration.

The IEF also did not take into account the equity issues of a progressive tax system, as well as corrections made for bracket creep which “benefited millions of salary workers.”

The Heritage Foundation had not replied to a request for comment at deadline time. — Karl Angelo N. Vidal