The Index of Economic Freedom, which is a series of 10 economic measurements, describes economic freedom as the “fundamental right of every human to control his or her own labor and property.”

Garnering a score of 56.2 in economic freedom, the Philippines made it to the 21st spot out of 41 countries in the Asia–Pacific region.

Heritage Foundation, which created the index, published the report in conjunction with the Wall Street Journal.

It said the Index score represents the state of a free society wherein individuals are free to work, produce, consume, and invest in any way they please, with that freedom both protected by the State and unconstrained by the State.

In economically free societies, governments allow labor, capital, and goods to move freely, and refrain from coercion or constraint of liberty, beyond the extent necessary to protect and maintain liberty itself.

The Index stated that there was weakness in the previous administration, under thenPresident-now-Pampanga Representative Gloria Macapagal Arroyo, in instituting additional structural reform measures.

Instead of further liberalizing the economy, such weakness “set back efforts to attract much-needed foreign investment in basic industries and infrastructure.”

Thus, the country has continued its long slide from being one of Asia’s richest economies to being one of its poorest as the Philippines relies heavily on remittances from its migrant workers, which are equivalent to more than 10 percent of its Gross Domestic Product (GDP).

The Philippines’ score this year, which is slightly below the world and regional averages, is 0.2 point lower than last year, with small reductions in business and labor freedom offsetting modest gains in monetary freedom and freedom from corruption.

The 2011 Index stressed that despite the challenging global economic environment, the Philippines has made a notable recovery since mid-2009, driven mainly by strong export performance.

The absence of entrepreneurial dynamism, however, still makes long-term economic development a difficult task.

According to the Index, deeper institutional reforms in the country are required in four interrelated areas--business freedom, investment freedom, property rights, and freedom from corruption.

It stressed that the government imposes formal and non-formal barriers on foreign investment, and foreign remittances do little to promote sustainable growth.

The judicial system remains weak and vulnerable to political influence and corruption.

Scoring and ranking

The Economic Freedom Index scores nations on 10 broad factors of economic freedom, using statistics from organizations like the World Bank, the International Monetary Fund (IMF), and the Economist Intelligence Unit.

The 10 factors are averaged equally into a total score. Each one of the 10 freedoms is graded using a scale from 0 to 100, where 100 represents the maximum freedom.

This year, the Philippines was ranked a slot higher than its fellow Association of Southeast Asian Nations (ASEAN) member-country, Indonesia.

Other ASEAN member-states, such as Malaysia, Thailand, and Cambodia, were ranked higher than the Philippines as it occupied the 53rd, 62nd, 102nd places, respectively.

Other Southeast Asian neighbors, on the other, scored lower - Vietnam (139), Laos (141), and Burma (174).

The top six "free" economies identified by the 2011 index were those of Hong Kong, which remained at the top spot with 89.7, followed closely by Singapore (87.2), Australia (82.5), New Zealand (82.3), Switzerland (81.9), and Canada (80.8).

Hong Kong and Singapore have both occupied the No. 1 and 2 positions, respectively, ever since the creation of the Index 11 years ago.

The United States was ranked 9th, the United Kingdom 6th, and China, 135th out of the 179 countries studied.

Business, Trade, and Fiscal Freedom

The 2011 Index gave the Philippines a 43.4 score in Business Freedom, which was 4.7 lower than the previous year as it pointed out that potential entrepreneurs face severe challenges in the country, considering that the overall regulatory framework here is burdensome, and the legal framework ineffective, holding back more dynamic and broad-based expansion of the private sector.

Trade Freedom, on the other hand, remained at 77.8. as the Philippines’ weighted average tariff rate was pegged at 3.6 percent in 2007.

Adding to the cost of trade, the Index said, are some high tariffs, import and export restrictions, quotas and tariff rate quotas, services market access barriers, import licensing requirements, restrictive and non-transparent standards, labeling and other regulations, domestic bias in government procurement, inconsistent and non-transparent customs valuation and administration, export subsidies, widespread corruption, and weak protection of intellectual property rights.

The Index deducted fifteen points from the Philippines’ trade freedom score to account for non-tariff barriers.

Fiscal freedom also did not change with 78.8 as the Philippines has relatively high tax rates, the Index declared.

The top income tax rate is 32 percent, while the top corporate tax rate is 30 percent.

On the other hand, investment freedom remained at 40.0, the same as last year, as foreign investment is restricted in several sectors of the economy, the Index said,

In many industries where foreign investment is allowed, the level of foreign ownership is capped.

The economic freedom indicator explained that, in the Philippines, regulatory inconsistency and lack of transparency, corruption, and inadequate infrastructure hinder investment.

It pointed out that dispute resolution can be cumbersome and complex, and enforcement of contracts is weak.

Financial freedom in the country also did not change, as the score remained at 50.0.

The 2011 Index pointed out that the Philippines’ financial system welcomes foreign competition, and capital standards and oversight have improved.

Property Rights, Freedom from Corruption, and Labor Freedom

The Philippines' score on property rights also remained unchanged.

The Index said although the Philippines has procedures and systems for registering claims on property, including intellectual property and chattel/mortgages, delays and uncertainty associated with a cumbersome court system continue to concern investors.

Finally, the score of the country with regard to labor freedom de¬creased by 1.2 or 50.7.

The labor market remains structurally rigid, the Index said, although existing labor regulations are not particularly burdensome.

It noted that many of the country’s skilled workers have migrated to other advanced economies.