“There is no evidence that fuel and electricity subsidies benefited the poor. There is no evidence that trade protection benefited the poor. Elimination of subsidies if compensated by reduction of cost doing business (corruption) will help the poor.”

— Muhamad Chatib Basri
Presentation about Indonesia energy and food subsidies
EFN Asia conference September 2004, Hong Kong

 

Those conclusions were made by Dr. Chatib “Dede” Basri in his presentation, “Can subsidy and protection do any good for the poor?” at the Economic Freedom Network (EFN) Asia conference in 2004. At that time, he was a faculty member of the University of Indonesia and individual member of EFN. He used an econometric model and the Grosman and Helpman (G-H) model (trade protection is the result of bargaining between government and various lobby groups). The inevitable conclusion of his paper was that market reforms and the reduction, if not removal of dependence by the poor on the state will actually help them and taxpayers over the long term.

Dr. Basri later became Minister of Finance from May 2013 to October 2014 when the administration of Indonesian President Susilo Bambang Yudhoyono ended. Dr. Basri will be among the keynote speakers in the Asia Liberty Forum (ALF) this coming Feb. 10-11 at Mandarin Hotel Jakarta, Indonesia. The event is sponsored by the Atlas Foundation and co-hosted by the Center for Indonesian Policy Studies (CIPS).

Aside from Dr. Basri, other important speakers in this year’s conference will be the following:

1. Saidah Sakwan, chairwoman, CIPS; also a commissioner of the Indonesian Business Competition Commission (KPPU).

2. Brad Lips, CEO of Atlas Network, Washington DC, USA.

3. KH Yahya Cholil Staquf, general secretary of Nahdlatul Ulama (NU) Supreme Council, world’s largest Muslim organization with 50+ million members.

4. Siegfried Herzog, Regional director for Southeast and East Asia, Friedrich Naumann Foundation for Freedom (FNF), Thailand.

5. Suraj Vaidya, chairman of SAARC Chamber of Commerce and also chairman of Samriddhi Foundation, Nepal.

6. Rainer Heufers, executive director of CIPS.

7. Razeen Sally, Prof. at Lee Kuan Yew School of Public Policy, National University of Singapore.

8. Ronald Meinardus, Regional director, FNF South Asia, India.

9. Parth Shah, president of the Centre for Civil Society, India.

10. Lorenzo Montanari, exec. director of Property Rights Alliance (PRA), Washington DC, USA.

11. Barun Mitra, founder and Director of Liberty Institute, India.

12. Junjie Ma of Unirule Institute, Beijing, China.

There are many other interesting speakers to talk on many topics — policy reforms to broaden support for classical liberal principles, education policy, Ease of Doing Business Index, Protection of private property rights, Intellectual Property Rights (IPR), micro-enterprises, entrepreneurship in e-commerce, state-owned enterprises (SOEs).

Are Asian economies getting more market-oriented or state-distorted? Is there greater rule of law now or greater rule of men? Are public institutions more protective or more confiscatory of private property rights?

There are many studies and annual reports that track and monitor various indicators and parameters to help answer these and related questions. Among the important annual reports are Fraser Institute’s Economic Freedom of the World (EFW) reports, Heritage Foundation’s Economic Freedom Index (EFI), PRA’s International Property Rights Index (IPRI), World Bank’s Doing Business, and World Economic Forum’s (WEF) Global Competitiveness Index (GCI).

The GCI is composed of 12 pillars and the first pillar are Institutions. These are composed of 21 sub-pillars like property rights, IPR protection, diversion of public funds, public trust in politicians, irregular payments and bribes, judicial independence, favoritism in decisions of government officials, burden of government regulation, efficiency of legal framework in settling disputes and challenging regulations, transparency of government policy making, and reliability of police services.

I checked the latest WEF 2017-2018 report for East Asian economies and compared with the report two years ago for pillar #1, Institutions (see table).

The Asia Liberty Forum and the search for rule of law and economic freedom

So for Institutions, the numbers above show three important results: One, out of the 144 countries and economies covered, many East Asian nations land in the first half (i.e., 1st to 72nd), 11 of the 15 economies mentioned above. Singapore and Hong Kong are in the top 10.

Two, the biggest gainers in global ranking are India (+21!), South Korea, China, and Laos. And three, the biggest loser in ranking is the Philippines, dropping 17 places or notches.

In the WEF Executive Opinion Survey 2017, the most problematic factors for doing business in the Philippines were: (1) inefficient government bureaucracy, (2) inadequate supply of infrastructure, (3) corruption, (4) tax regulations, and (5) tax rates.

For Asian countries outside the first half like Thailand, Vietnam, Philippines and Cambodia, there is an immediate need to improve the rule of law and further debureaucratize, deregulate and depoliticize the economy.

 

This first appeared on BusinessWorld as an article under the regular column My Cup Of LiberTea by Bienvenido S. Oplas, Jr. is President of Minimal Government Thinkers, a member-institute of Economic Freedom Network (EFN) Asia.

 

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