Philippines 6th in world for Marcos era-like crony capitalism
Camille Diola (The Philippine Star) - March 19, 2014 - 12:16pm

MANILA, Philippines — Crony capitalists did not disappear after the Marcos regime was deposed through People Power in 1986, but continued their schemes to this day under President Benigno Aquino III, The Economist revealed.

In its Crony Capitalism Index published Saturday, the prestigious British magazine explained why the rich get richer in developing countries such as the Philippines as billionaires saw their wealth "doubling relative to the size of the economy."

"Most countries in South-East Asia, including Indonesia, Thailand and the Philippines, saw their scores get worse between 2007 and 2014, as tycoons active in real estate and natural resources got richer," the study revealed.

The Economist ranked the country in its list for having huge crony-sector wealth, created by rent-seeking practices of the wealthy.

"In technical terms, an economic rent is the difference between what people are paid and what they would have to be paid for their labour, capital, land (or any other inputs into production) to remain in their current use," The Economist's print edition explained.

It also simplified the behavior of rent-seekers as "grabbing a bigger slice of the pie rather than making the pie bigger."

The results revealed that the Philippines rose to sixth from ninth in the world since 2007 for a rising share of crony sectors in its Gross Domestic Product, currently at about 13 percent.

The Philippines recorded an economy heavily fueled by rent-heavy industries and wealth of dollar billionaires invested in such rent-seeking sectors, including the following:

  • Casinos
  • Deposit-taking banking and investment banking
  • Infrastructure and pipelines
  • Real estate and construction
  • Oil, gas, chemicals and other energy
  • Steel, other metals, mining and commodities
  • Utilities and telecoms services

"The higher the ratio [of billionaire wealth to GDP], the more likely the economy suffers from a severe case of crony-capitalism," the report noted.

The industries are also said to be vulnerable to monopoly or requiring state licensing, which makes them a likely venue for graft and bribery, it added.

Hong Kong topped the list for crony sectors' 58 percent share in its GDP. Russia ranked a far second, while Malaysia, Ukraine and Singapore are the other three countries which surpassed the Philippines' crony capitalism score.

The magazine, however, admitted that its estimates of crony sectors are "crude" as businesses labeled to have heavy rent-seeking practices may actually be competitive, while other sectors deemed to be non-cronies may also be rent-seekers.

"The third limitation is that we only count the wealth of billionaires. Plenty of rent-seeking may enrich the very wealthy who fall short of that cut-off," The Economist added.

Also read STAR columnist Boo Chanco's take on The Economist's Crony Capitalism Index

To improve the country's ranking, The Economist suggests that government tightens antitrust rules, improve regulation and boost competition among rent-heavy industries.

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