Asians’ march to liberty and progress

* This is my article in BusinessWorld last January 30, 2017.

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“Progress by its very nature cannot be planned. It is knowing what we have not known before that makes us wiser men… Progress is movement for progress’ sake, for it is in the process of learning, and in the effects of having learned something new, that man enjoys the gift of his intelligence.”

— Friedrich Hayek, Chapter 3,
“The Common Sense of Progress,”
The Constitution of Liberty (1960)

Many Asian societies have experienced economic and social upheavals and ups and downs in growth and political stability for more than the past two decades. These have been expected because people aspire for improvement and, as a result, they demand change.

After going through these upheavals, societies emerge somehow stronger, better, and more dynamic.

There are many indicators of growth and development and among them is the ability of the people in developing Asian economies to (a) travel by plane, (b) buy new models of mobile phones for communication and information, and (c) have access to the Web and the Internet.

Below are the numbers for selected Asian economies, grouped into three: (1) developing north and south Asia, (2) developing South East Asia, and (c) developed Asia plus Australia. For purposes of brevity, countries with small populations, those three million and below — Bhutan, Brunei, Maldives, Mongolia — are excluded from this list (see table).

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The above numbers show the following:

(1) The pace of expansion in mobile phone subscriptions and Internet use in developing economies has been very fast over the past decade and a half, especially for India, Bangladesh and Nepal; Cambodia, Laos, Myanmar and Vietnam (CLMV). As a result, people now can learn new and more skills, or simply be regularly connected with their families, clans, and friends.

(2) The same pattern can be seen in air travel, as indicated by the number of airline passengers in the region. Indonesia and the Philippines experienced fast rate of growth in this area, along with China, India, and CLMV.

(3) Expansion in developed Asia + Australia is muted and modest compared to their developing neighbors.

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Therefore, Hayek is correct in his observation about human progress. It is the less-planned and less socially-engineered economies that are experiencing faster improvement at least in these three indicators. This is partly because the developed economies are dealing with plenty and rising government regulations that tend to restrict faster growth.

The subject of human and social progress in Asia will again be discussed in the forthcoming “Asia Liberty Forum” (ALF) in Mumbai, India, Feb. 9-11. This big international conference will be jointly sponsored by the Center for Civil Society (India), Atlas Economic Research Foundation (USA) and the Friedrich Naumann Foundation for Freedom (FNF, Germany).

Among the important topics to be discussed will be (a) overview of what’s happening in the freedom/liberal movement around the world and Asia, (b) State, private sector and liberty in a digital world, (c) Regulations for a prosperous and innovative market economy, (d) Property rights as a human right, and (e) Education of choice for all: the role of budget private schools.

The Economic Freedom Network (EFN) Asia is also participating by sending some of its regular and long-time partners in the region to the ALF. Aside from holding its own annual EFN Asia Conference, EFN is also participating in the annual ALF and the Jeju Forum for Peace and Prosperity in South Korea.

Through continuing involvement in these three important regional and global annual meetings and conferences, EFN Asia is doing its share in securing a more prosperous, more developed Asia through the path of less government planning and more market competition, deregulation, and innovation.

Bienvenido S. Oplas, Jr. is the head of Minimal Government Thinkers and a Fellow of SEANET. Both institutes are members of EFN Asia.

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Economic freedom, taxes and tariffs in Asia

* This is my article in BusinessWorld last December 01, 2016.

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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).

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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.

Economic freedom and human rights

* This is my article in BusinessWorld last October 18, 2016.

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Economic freedom is the ability and privilege of people to engage in various social and economic activities without unnecessary restrictions and prohibitions. Such freedom is guided by voluntary exchange, open markets, personal choice and accountability, and clearly defined private property rights.

People are economically free if they can choose to buy or not buy certain goods and services from various sellers, when they are not forced and coerced to buy something expensive and/or poor quality. Freedom is not absolute though and free people have no freedom to harm other people nor destroy, burn or steal their private properties.

Human rights include the right to life, right to private property, and right to liberty and security of person. Thus, even a person who has committed a wrong act should be given due process to defend him/herself from false or exaggerated accusations. Murders of individuals based on flimsy or unsubstantiated accusations like what is happening in a number of instances in the on-going war on drugs are deprivations of those people’s human rights.

Combining these two concepts is very important for people to live with freedom and dignity.

And these two concepts will be tackled in a big international conference by the Economic Freedom Network (EFN) Asia on the theme, “Economic freedom and human rights in business” this coming Nov. 22-23 at Dusit Thani Manila Hotel, Makati City. The conference is jointly organized by EFN Asia Economic Freedom Network Asia (EFN Asia) and the Friedrich Naumann Foundation for Freedom (FNF), supported by four local organizations, the Philippine Commission on Human Rights (CHR), Philippine Economic Society (PES), Ateneo Human Rights Center (AHRC), and Bloomberg TV Philippines.

Among the key speakers and major resource persons in this event will be Siegfried Herzog, head of Regional Office, FNF South East and East Asia; Ms. Rosemarie Edillon, president of PES; Markus Loening, former German Federal Government Commissioner for Human Rights Policy and Humanitarian Aid, and Vice-President Leni Robredo.

Other speakers will be Wan Saiful Wan Jan, CEO of the Institute for Democracy and Economic Affairs (IDEAS), Malaysia; Chito Gascon, chairperson of CHR; Franz Jessen, ambassador and head of Delegation of the European Union to the Philippines; Nicholas Sallnow-Smith, chairman of the Lion Rock Institute, Hong Kong; and Peter Perfecto, executive director of the Makati Business Club (MBC).

So, how economically free are the people of the Philippines and big nations of the ASEAN? How free or unfree are they from heavy regulations that tend to restrict entry into markets and interfere with the freedom to engage in voluntary exchange?

The Economic Freedom of the World (EFW) 2016 report give scores to countries (0 most unfree, 10 most free) based on five criteria and areas: (1) Size of government, (2) Legal system and property rights, (3) Sound money, (4) Freedom to trade internationally, and (5) Regulations. Then they are ranked from the most free to the least free economies.

For this short paper, only the performance in Area 5 will be tackled and in particular, sub-areas on labor regulations and business regulations.

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The Philippines has a modest score in both labor and business regulations, meaning not yet choked by those multiple bureaucracies and permits. In particular, the country has a good score in labor hiring regulations and enforcement of the minimum wage, but it has a low score in hiring and firing of employees.

From some existing policy debates in the Philippines today, we can apply the principles of economic freedom and human rights on these issues.

(1) On labor contracting including endo, being hired for short-term labor contracting is a privilege, a human right for new job entrants and the unskilled. It is much better than being rejected and not hired by employers because of the high cost of hiring new additional workers and the threat of government harassment for firing the un- or less-experienced, less skilled people.

(2) On a nationwide minimum wage and abolition of regional wage disparities, this one-size-fits-all policy will make hiring people in the provinces become more expensive, and, as a result, there will be fewer hiring of lesser-skilled, lesser-experienced people. There are now more machines and robots available that can slowly replace more laborers.

(3) On entrepreneurship, it is a privilege and human right for the more hard-working, more ambitious people and they should not be deprived or discouraged to try that route because of heavy government regulations, bureaucratism, and taxation.

Increased market dynamism and fewer government regulations and taxation are the keys to ensuring economic freedom and protection of human rights.

Bienvenido S. Oplas, Jr. is the head of Minimal Government Thinkers and a SEANET Fellow. Both organizations are members of EFN Asia.