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Duterte's Philippines Climbs The Rankings In Economic Freedom

This article is more than 7 years old.

Duterte’s death squads have been killing democracy in Philippines, but not economic freedom.

In fact, the country gained a couple of notches in the recently published 2017 Index of Economic Freedom ranking.

That’s badly needed good news for investors in Philippines stocks—Philippines’ equity markets have been underperforming other markets in the region.

ETF/Fund 6-month Performance (%) 12-month Performance (%)
iShares MSCI iShares Japan  (EWJ) 4.63 16.45
iShares MSCI South Korea (EWY) 3.76 27.60
iShare MSCI Philippines (EPHE) -14.20 3.37

Source: Finance.yahoo.com  2/24/2017

Published by the Heritage Foundation, the Economic Freedom report measures such things as trade freedom, business freedom, investment freedom, and the degree of property rights protection in 186 countries.

In the 2017 Index of Economic Freedom, Philippines received higher marks in property rights, government integrity, regulatory efficiency, and monetary freedom, and lower marks in government spending and tax burden.  Meanwhile, the government is pursuing a series of legislative reforms to enhance the overall entrepreneurial environment and develop the stronger private sector that is needed to generate broader-based job growth,” according to the same report.

More economic freedom hasn’t translated into lower corruption, however. While Philippines climbed in the index of economic freedom, it dropped six notches in the Corruption Index country ranking published recently by Transparency International.

Thats bad news for Philippines, as corruption and cronyism have prevented this great country from realizing its full potential and join the develop world.

Moreover, corruption and cronyism are also bad news for Filipino people who have seen one Asian country after another bypass them in per capita income. Including Indonesia. 

Year Indonesia Philippines
2009 101 139
2017 90 101

Source: Transparency International 

To be accurate, President Rodrigo Duterte is new to the office. This means that most of the credit for the improvements in economic freedom and most of the blame for corruption must go to the previous government of President Benigno Aquino III (2010–2016).

That’s why investors should give President Duterte more time to pursue his reforms. Provided that his death squads stop killing innocent people, and he stops his flip-flops in the South China Sea disputes.

Those two issues could spell a disaster that hampers economic growth, crushes equity markets and puts an end to the country’s democracy.