Economic freedom, taxes and tariffs in Asia

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

bw

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).

o4big_120116

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.

Standard

Day 1 of Conference 2016

efn0The Economic Freedom Network (EFN) Asia conference 2016 at Dusit Thani Hotel in Makati ended last Wednesday. Thanks again FNF and EFN for another wonderful conference.

Here are some tweets from #efnasia2016 and my own thoughts about the event.

Protection of human rights is part and parcel of EU policy – Walter van Hattum, EU Delegation to the Philippines.

efn1b

It’s a responsibilty of businesses to respect human rights… It is state duty to protect and defend human rights in its territory.

Nobody can seriously suggest that businesses can opt in and out of respecting human rights as they wish… There is legal obligation for businesses to respect HR.

Businesses should be as transparent as possible so they will be less likely to be attacked by false news. Business leaders are often uncomfortable explaining to the public how they work. It’s understandable but unwise. — Markus Leöning, former Himan Rights Commissioner in Germany.

efn1c

Increasingly populist goverments a threat to human rights and economic freedom. The pendulum has swung as globalization has failed in its promises to those who have lost out in its benefits. Food for thought. — Frank Largo

For me, among the important human rights of the people is freedom to choose in the market place, freedom to sell or not sell, freedom to buy or not buy. Political human rights like the right or freedom from theft (especially organized criminals), murders, prosecution and harassment, that is where the state should come in.

A minimal government focused on enforcing the rule of law, enforcing contracts between and among people, is consistent with economic freedom and human rights protection. That minimal govt should have no business creating and expanding lots of endless welfarist programs. Prosperity is not an entitlement or privilege. Lazy and irresponsible have no right to a prosperous life, they deserve poverty. Politically incorrect statement, as usual.

Rule of law means the law applies equally to unequal people. So the law should apply to both rich and poor people, to big/giant and small firms. A law or contract can be written, verbal, done by govt or private entities. Basic human rights then means that people have access to such equality before the law.

Below, Rainer Heufers moderating, with Wan Saiful Wan Jan, Peter Kompalla, Rishi Sher Singh, Dr. Manzoor Ahmad in the new panel.

efn3

People’s definitions of human rights vary. What may be HR violations to some can also be another’s sole income sourceDefinitions of human rights vary. What may be HR violations to some can be another’s sole income source. — Wan Saiful Wan Jan

Good point. Some westerners may consider temporary child labor as HR violation already but for some households, it is ok and necessary. If a sole family breadwinner is gone for instance, the young need to work to help sustain the family. Harsh but necessary.

Stakeholder values, not just shareholder values. — Rishi Sher Singh

Barun Mitra tweets:

Business of business is indeed business! Inclusive of profitability for investors, benefit to consumers, add values to society.

Better protection of human rights, improved environmental quality, higher sense of justice, necessary social value additions.

Value added products, economic and social, become affordable with prosperity, and necessity in a free competitive market.

Implentating Rule of law carries cost, level of effective enforcement has to be affordable, economically socially politically. #EFNAsia2016

I think corporate branding will help global firms stay the course in HR and econ freedom protection, respecting #ruleOfLaw. Firms would dislike to be associated with bad products, bad services, bad corporate image. So they will try to be as transparent as possible, to be accountable to their products and practices. Transparency is good protection vs negative image/attacks.

Session 2 Panel speakers: H.E. Franz Jessen of EU, Dr. Lee Taekyu of KERI, and Atty. Arpee Santiago of Ateneo Human rights Center.

efn

Govt and countries don’t trade, individuals and businesses do. Govt negotiating trade treaties leading to anti-trade backlash.

Free trade is voluntary, so win win. Govt negotiations may liberalise trade, but legitimises govt in trade n economy, corruption.

Environment, labour or human rights standards in national trade treaties, focus on outcomes, give advantage to large, richer cos!

Society / govt benefit most if they adopt unilateral free trade. All politics is local, a local decision will minimise backlash.

Govt negotiating trade, inevitably adopt export is good, import is bad outlook. Free trade is beneficial when govt has no role.

Access to internet can’t be a “Right”. Political rights are negative rights. Any +ive right paid for by others can’t be a RIGHT.

TPP may be good agreement, but has lost legitimacy because govts. no longer carry credibility among large sections of people. –– Barun Mitra

As usual, I agree with Barun’s ideas and observations: unilateral trade liberalization; countries and governments do not trade with each other, people do; so governments, national and multilateral, should step back from trade negotiations as much as possible. Let companies and people organizations negotiate with their suppliers and consumers abroad and keep prices low via low or zero tariff, minimal non-tariff barriers

Standard

Program of Conference 2016 in Manila

The Economic Freedom Network (EFN) Asia conference 2016 will start in two days, November 22-23, 2016 at Dusit Thani Hotel, Makati. It is organised by EFN Asia and Friedrich Naumann Foundation for Freedom (FNF), with support from four organizations: the Philippine Economic Society (PES), EU Delegation to the Philippines, Ateneo Human Rights Center, and Bloomberg TV Philippines.

The program is here, http://efnasia.org/wp-content/uploads/2015/10/EFN-Asia-Conf-2016-Full-program-as-of-17.11.pdf. Below, I just copy-pasted the program minus the time and some space.

MC for Day 1 will be Minnie Salao, Program Manager, FNF – Philippines, and Pett Jarupaiboon, Regional Program Manager (Economic Freedom and Human Rights), FNF Southeast and East Asia (based in Bangkok).

Good line up of speakers from many countries on Day 1.

I think President Duterte’s admin might raise their eyebrows on the subject of “human rights”. But the conference will talk less, if ever, of murders and large deaths in the on-going “drugs war” of the government, more on the conduct of business in the age of expanding trade and business globalization.

Day 2 of EFN conferences are always devoted to the launching and discussion of the annual EFW reports by Fraser Institute, based in Vancouver, Canada. Fraser is almost always represented by Fred McMahon for several years now.

Session 9 will be a more political discourse of human rights but not necessarily mentioning the Philippines. This is because the three speakers — Tom (US), Razeen (Sri Lanka) and Barun (India) — are long-time fighters of individual freedom, dating back to 3 decades ago or more.

Economic freedom, not economic central planning. Rule of law, not rule of men and dictators. Looking to another exciting conference next week.

Standard

Economic freedom and human rights

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

bw

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.

o4big_101816

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.

Standard

Economic freedom in Asia: 2005, 2010 and 2013

* This is my article in BusinessWorld last November 25, 2015.

01

Humanity’s material progress and cultural development is made possible largely due to the freedom of people to initiate innovations that did not exist before and their freedom to buy and sell extra output and services produced by themselves and other people.

In short, economic freedom and freedom to trade are among the cornerstones of human progress. Remove this freedom and innovation and ingenuity will largely be curtailed and human misery and underdevelopment will result.

These are other related issues were tackled in the two-day Economic Freedom Network Asia (EFN Asia) Conferences 2015, here at Taj Tashi hotel in Thimpu, capital city of Bhutan. The event’s theme is “Economic freedom as a way to happiness” and the main sponsors are EFN Asia, QED Group, and the Friedrich Naumann Foundation for Freedom (FNF).

QED is a private, independent think tank and consulting firm based in Thimphu while FNF is a German political foundation tasked to help conduct economic and political education around the globe about the merits of classical liberalism, lean state, and increased market competition.

EFN Asia was born in 1998 during a conference in Manila discussing how more economic freedom and less government interventions could have anticipated and minimized the financial turmoil that occurred during the “Asian financial crisis” of 1997-1998. Since then, EFN Asia conferences are held yearly in different big cities in the region.

How is economic freedom measured and quantified? Which countries are the most free and least free in economic innovation? What are the implications of such scoring and ranking in economic freedom of countries and economies?

These and related questions are answered by the Economic Freedom of the World (EFW) annual reports, produced by Fraser Institute in Canada, in partnership with FNF (Germany).

The EFW is measured by getting the scores (0 to 10, zero is totally unfree and 10 is full economic freedom) of countries covered on five areas: (1) Size of government, (2) Legal system and property rights, (3) Sound money, (4) Freedom to trade internationally, and (5) Regulation.

As a result, countries with big governments and high taxes get low scores in area (1); countries with highly corrupt legal systems and unstable property rights protection will get low scores in area (2); countries that have high inflation rates and make it difficult for their citizens to own and use other currencies will get low scores in area (3); countries that have low import tariffs, have few non-tariff barriers will get high scores in area (4); and countries with less restrictions and regulations in credit, hiring of labor and few business permits and compliance costs will get high scores in area (5).

The composite score for the five areas covered is generated and countries are ranked from highest to lowest. For Asia, here are some results. (See table)

02

For many years now, Hong Kong and Singapore are recognized as the two freest economies in the world. They have small and few taxes, their governments enforce the rule of law, and protect property rights. Since they have low or zero import tariff, it is easy and less costly for their exporters and importers to buy and sell goods abroad, and so on. Taiwan, Japan, and South Korea try to follow these policies set by the two freest economies.

The Philippines has been ranking modestly in the 60th to 70th positions in the three years above. It gets high scores in area (1) as it does not have too many transfers and subsidies, have few government enterprises. But the Philippines gets low score in area (2) with scores of only 3 to 4 in sub-areas Judicial independence and impartial courts, other sub-areas.

That presents a big challenge for the Philippine government (and other Asian governments too) and civil society organizations — nongovernment organizations, media, academe, professional organizations, church groups, and so on: Control or minimize corruption and bribery by having rule of law: the law applies equally; no one is exempted and no one can grant an exemption to penalties set by the laws.

Bienvenido S. Oplas, Jr. is the head of Minimal Government Thinkers, Inc., and a Fellow of the South East Asia Network for Development (SEANET). Both think tanks are members of EFN Asia.

Standard

Conference 2015 in Bhutan has ended

Yesterday, the Economic Freedom Network (EFN) Asia Conference 2015 has ended. Reposting below some of the tweets under #efnasia2015, other tweets.

@efnasia  @meinardus giving Welcoming Address

0

‏@QEDBhutan  “Freedom is a condition for happiness…” H E Kwon Tae-shin delivering keynote at #efnasia2015

@rdieckhoff  Kwon Tae-Shin’s keynote stresses need for limited AND strong governments

@parthjshah  Discussion on Buddhism n econ freedom. And we judge morality of action by outcomes or intentions?

02

@subodhtweet  Speed Dating #efnasia2015. An innovative way to get to know each other in large groups. interesting!!

01

@meinardus  You need growth, you cannot redistribute your way to poverty reduction, argues Dr Sethaput

@meinardus  Authoritarianism per se doesn’t deliver. What does deliver is economic freedom, it’s the core to poverty reduction, Najaf  Khan

@QEDBhutan  A human being is not just a happiness machine…there are other dimensions to being human – ” Fred McMahon

‏@meinardus   Presenting UN data, @FraserInstitute Fred Mac Mahon says: Nations with least economic freedom are also least happy.

@QEDBhutan  Making the world your market- place is the key to prosperity here in Bhutan – Fred McMahon

@subodhtweet  @QEDBhutan is the latest member to the Economic Freedom Network, announced Fred McMohan, Fraser Institute

@Kellerhoff  Phub Tshering, SecGen #Bhutan Chamber of Commerce: With freedom comes innovation

03

@QEDBhutan  According to a CBS study, men are happier than women and, on the whole, framers are the unhappiest- Sunil Rasaily

Development in Bhutan is nuanced, and we need to be aware of this. – Sunil Rasaily

@QEDBhutan  Dasho Sonam P Wangdi delivering remarks after launching the EFW 2015 Report – Bhutan Edition

0

@meinardus  Economic damage done to #Nepal through the #India embargo several times bigger than that caused by #earthquake

05

‏@Kellerhoff  @robsitoula #southasia needs to improve foreign relations, in #Nepal we have a political crisis

‏@QEDBhutan  Yes, Bhutan is landlocked but so is Switzerland. Why can’t Bhutan be another Switzerland ?  – Peter Wong

‏@Kellerhoff  @peterwongbi #efnasia2015 #HongKong came out stronger out of each crisis. Just take bitter pill prescribed by Hayek

@meinardus  Democratic dividend: As politics in #India became more competitive economic growth has picked up, @barunmitra

@meinardus   Negative impact of intolerance: a country that restricts freedom of speech eventually also limits economic freedom  @barunmitra

@meinardus  Strong appeal by @barunmitra to promoters of economic #freedom to pay more attention to “real world of politics

@Kellerhoff  Economic Freedom and inclusive growth #efnasia2015 with @tomgpalmer @parthjshah @wansaiful @razeensally

04

@IDEASMalaysia  @wansaiful sharing Msia’s experience on the panel for econ freedom & inclusive development @ #efnasia2015 in Bhutan.

@acorn  “People have died from poverty, but so far as we know, no one has died from inequality” – @tomgpalmer #efnasia2015

@QEDBhutan  “There are many poor counties with rich people. What we want is rich countries … ” Dr Tom Palmer

‏@Armin_”Freedom is happiness” @QEDBhutan & @FNFreiheit closing #efnasia2015  in #Bhutan

06
07

All photos above taken from tweets and fb, not one from my camera. Thanks for the opportunity to attend this great event, EFN Asia.

Standard

The 5 fishbowls of economic freedom in Asia

The two-days Economic Freedom Network (EFN) Asia conference 2015 in Bhutan is just 3 days away. Among the important activities on Day 1 is the dynamic discussion on Economic Freedom and Happiness: Five Fishbowls.

efn1

The term “fishbowl” is taken from the seating arrangement of participants: listeners form a circle in the centre of which sit the discussants.

Each fishbowl will have six persons at the centre: 1 expert, 1 moderator, 1 rapporteur, and 3 “open” resource persons. The listeners form a circle. The first 3 persons never leave their positions while the 3 open resource persons can, they can be replaced by some listeners who want to speak, upon the permission of the moderator for orderly allocation of time and discussions in case there are debates.

I have not attended this type of discussion before, it looks challenging and exciting.

The five fishbowl topics are also the five areas that constitute the Economic Freedom of the World (EFW) scoring, and “Happiness” is added to each fishbowl topic. Here are the topics and the facilitators that day:

  1. Size of government: expenditures, taxes, and enterprises and Happiness

Expert: Muntasir Mamun Iqbal, Lecturer, North South University, Bangladesh

Moderator: Ruben Dieckhoff, Regional Project Manager, FNF Regional Office South Asia

Rapporteur: Akash Shrestha, Senior Research Office, Samriddhi, The Prosperity Foundation, Nepal.

  1. Legal structure and security of property rights and Happiness

Expert: Muntasir Mamun Iqbal, Director, Takshila Foundation, India

Moderator: Subodh Kumar Agarwal, Programmes Executive, FNF Regional Office South Asia

Rapporteur: Sreya Majumder, Executive, Energy, Confederation of Indian Industry (CII) (TBC)

  1. Access to sound money and Happiness

Expert: Nonoy Oplas, President, Minimal Government Thinkers Inc., The Philippines

Moderator: Moritz Klein-Brockhoff, Resident Rep. Indonesia, Project Director Malaysia, FNF

Rapporteur: Yu Suhyeon, Programme Officer, FNF Korea

  1. Freedom to trade internationally and Happiness

Expert: Prof. Eric Gartzke, Professor of Political Science, University of California, San Diego, USA

Moderator: Olaf Kellerhoff, Head of Asia Department and Human Rights, FNF Head Office

Rapporteur: Khim Sophanna, Programme Manager, FNF Cambodia

  1. Regulation of credit, labor, and business and Happiness

Experts: Suwanchai Lohawatanakul, President, Institute of Small and Medium Enterprise Development, Thailand

Moderators: Armin Reinartz, Regional Project Manager, FNF Regional Office South East and East Asia

Rapporteur: Sorasak Phaengkote, Student, Thammasat University, Thailand

Below, from left to right:
1st row: Muntasir Mamun Iqbal, Muntasir Mamun Iqbal, me.
2nd row: Eric, Gartzke, Suwanchai Lohawatanakul.
3rd row: Ruben Dieckhoff, Subodh Kumar Agarwal, Olaf Kellerhoff.
4th row: Moritz Klein-Brockhoff, Armin Reinartz.

fishbowls
Excited to see Bhutan, and experience the fishbowl discussion. Both for the first time.

Standard