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2008 Index of Economic Freedom March 4, 2008

Posted by Brian L. Belen in Academically Speaking, Odds and Ends.
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In relatively belated news, it turns out that the 2008 Index of Economic Freedom prepared by the Heritage Foundation/Wall Street Journal has been available online for quite some time now.

As these things go, there are some noteworthy developments in the index compared to its 2007 counterpart. Hong Kong and Singapore remain at the top of the list, with Ireland edging out Australia for the top third spot. The United States, New Zealand and Canada round out the countries deemed “free” by the index, whereas the usual suspects — Libya, Cuba, Zimbabwe and North Korea — constitute the handful of “repressed” economies that dwell at the bottom of the list. Meanwhile, China finds itself dropping several notches on the index, ranked 126th out of 162 in 2008 compared to 119th out of 161 in 2007.

The Philippines also finds itself slipping in this gauge of economic liberties. Whereas the country came in ranked 97th out of 161 and was deemed “moderately free” in 2007 based on the index, in 2008 it ranks among the “mostly unfree”, coming in 92nd out of 162 with a score that barely edges out Pakistan. As in the previous year, the index reports that the Philippines does well in terms of trade freedom, fiscal freedom, and “freedom from government” (i.e. dependence on government spending to support the economy) yet performs poorest in the areas of investment freedom, property rights and most of all freedom from corruption.

Accompanying the Index Rankings are summary reports of the findings for each country. For posterity’s sake, the following is an excerpt from the report on the Philippines:

The economy of the Philippines is 56.9 percent free, according to our 2008 assessment, which makes it the world’s 92nd freest economy. Its overall score is essentially unchanged from last year. The Philippines is ranked 15th out of 30 countries in the Asia–Pacific region, and its overall score is roughly equal to the regional average.

The Philippines scores relatively well in just two areas: trade freedom and government size. Fiscal freedom is average because income and corporate tax rates are burdensome, although overall tax revenue is low as a percentage of GDP. The average tariff rate is low, yet non-tariff barriers are significant. Total government expenditures in the Philippines are equal to roughly 20 percent of national GDP.

The Philippines is relatively weak in business freedom, investment freedom, property rights, and freedom from corruption. The government imposes both formal and non-formal barriers to foreign investment. Inflation is fairly high, and the government subsidizes the prices of several basic goods. The judicial system is weak and subject to extensive political influence. Organized crime is a major deterrent to the administration of justice, and bureaucratic corruption is extensive.

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