IPRI 2012 Report

* This is my article in TV5’s news portal last April 04, 2012.

Protection of private property rights and promulgation of the rule of law are the cornerstones of peace and order in society. Remove such property rights and society can quickly degenerate into chaos and disorder. For instance, if your house or car is also somebody else’s house and car, then they can take and occupy it anytime, anywhere.

There is one free market think tank, the Property Rights Alliance (PRA) based in Washington DC that conducts an annual study of how governments in the selected countries promulgate the rule of law and protect property rights. This annual report is called the International Property Rights Index (IPRI).

The study gives a particular score, then ranks those countries globally based on three major factors: (1) Legal And Political Environment, which includes judicial independence, rule of law, control of corruption and political stability; (2) Physical Property Rights, which include protection of such rights, registering property and access to loans; and (3) Intellectual Property Rights, which include protection of IPRs, such as patents and copyrights.

Our think tank here in Manila, Minimal Government Thinkers Inc. is among the nearly 70 independent and free market institutes, and the only Philippine-based think tank, that co-sponsored the publication of this annual study.

The 2012 Report has been released this week. Please note that while it was released this year, the basis of comparison were 2010 to 2011 data. Of the 130 countries covered by the study, the top 10 positions were garnered by developed economies with small populations. The first five, in order, are Finland, Sweden, Norway, Singapore, and Switzerland. The next five are Denmark, Luxembourg, New Zealand, Netherlands and Canada.

The Philippines ranked 87th out of 130 countries. While it performed fairly in Physical Property and Intellectual Property protection, it performed badly in the Legal and Political Environment. The culprit is the political instability, the bad state of corruption in government, poor observance of the rule of law and lack of judicial independence.

The country’s global rank in previous IPRI reports were 74th out of 115 countries in 2009, 80th out of 125 countries in 2010, and 87th out of 129 countries in 2011. So there was no change in the Philippines’ global ranking this year and last year.

Aside from Singapore, other Asian economies that performed well in the IPRI 2012 Report were Hong Kong in 12th place; Japan, 15th; Taiwan, 21st; Malaysia, 36th; South Korea, 40th; China, 57th; India, 62nd; Thailand, 69th; Indonesia, 86th; and Vietnam, also at 87th place.

The continued low ranking of the Philippines does not look good. If we need to attract more investors, grow the economy and create jobs, we need to assure entrepreneurs and employees, the average folks, that the fruits of their hard work and persistence in life are properly respected and protected. One should not toil hard abroad or in this country to buy a modest house and lot, only to find out later that the land is also being claimed by other people, resulting in additional costs and emotional stress in going to the courts and law enforcement agencies.

Populist and left-leaning policies – such as protection to squatters who illegally occupy private lands and an agrarian reform program with no final deadline and timetable – result in uncertainties.

These plus the weak rule of law end up in weak property rights enforcement for certain properties. These things must change if we want to retain the pool of talented entrepreneurs, as well as attract foreign professionals and investors, to come to the country.

Global Rank
Regional Rank (AO)
Legal and Political Environment
108 of 130
16 of 19
Judicial Independence
46 of 130
8 of 19
Rule of Law
40 of 130
7 of 19
Control of Corruption
40 of 130
7 of 19
Political Stability
13 of 130
3 of 19
Physical Property Rights
76 of 130
16 of 19
Protection of Physical Property Rights
50 of 130
10 of 19
Registering Property
117 of 130
16 of 19
Access to Loans
64 of 130
15 of 19
Intellectual Property Rights
73 of 130
11 of 19
Protection of Intellectual Property Rights
54 of 130
12 of 19
Patent Protection
Copyright Piracy
27 of 130
6 of 19
And this is my article in the online magazine last April 13, 2012.

In a small barrio in Pangasinan province that I visit from time to time to see the agro-forest farm that I help manage, I sometimes hear from our farm caretaker of small-scale robbery happening in the barrio or in the town proper. Things that are stolen are varied: from small items like vegetables, mangos, buko, chicken, kaldero, utensils; to more valuable ones like a tractor, a motorcycle, motorcycle parts, pigs, cows. There could be bigger items like land grabbing but I have not heard stories like that yet.

Then there are small-scale but frequent logging and theft of standing trees in the public forest land. Stolen and felled trees can range from arm-size in diameter to larger trees for lumber.

These small- to medium-scale robbery are actually more of exception rather than the rule as most of the people there, or in other parts of the country for that matter, are honest, have jobs, and would rather work than steal someone else’s property. But we notice and remember such petty or small-scale crimes because of the threat that someday those abnormal characters might victimize us too.

So I ponder as I hear these stories, that many Filipinos have little respect for property rights, whether public or private property. Stealing in public property like cutting trees in public forest land is often regarded as “tolerable”. One reason is that the extent of robbery and corruption in many government agencies and offices are a lot more damaging than stealing trees in the mountains. Another reason is the “tragedy of the commons” where a property is owned by everyone and no one in particular. So an upland charcoal maker or illegal logger is actually “part-owner” of the trees that they cut and transport from public forest lands.

When incidence of stealing of private property becomes predominant, that sends a bad signal to would-be rural and farm investors and entrepreneurs. So some agri-business projects, small to big/corporate, may not take off in certain areas of the country because of this fear of being victimized by thieves, both from within and outside the business organization.

It is important therefore, that a culture of respect for property rights, respect for the rule of law, be ingrained in the minds of our people. Then more investments, more job creation will follow.

The International Property Rights Index (IPRI) 2012 Report was released late last month in the US. It ranks countries on how much they respect and protect private property rights. The annual study looks at three major components:

1. Legal and Political Environment (LP)
2. Physical Property Rights (PPR)
3. Intellectual Property Rights (IPR)

For this paper, I will just focus on the 2nd component, the protection of physical properties – a house, car, cellphone, tv, rubber shoes, etc.
PPR is composed of three sub-sections or sub-components.

a. Protection of Physical Property Rights. This variable relates to the strength of a country’s property rights system as reflected on the quality of judicial protection of private property including financial assets.

b. Registering Property. This shows businesses’ point of view on how easy or how difficult it is to register property, to sell or dispose property like land, house or building.

c. Access to Loans. Access to bank loan without collateral is a proxy for the level of development of financial institutions in a country.

Overall, out of the 130 countries covered by the study, the Philippines ranked 87th. Not a good rank, but at least not too low either.

In the 2nd component, PPR, the Philippines ranked 76th out of 130 countries, or it ranked 16th out of 19 Asian economies in the PPR category. What pulled down the country is the long and tedious procedures in registering property, even in opening a business. Another reason is the limited practice of loan without collateral. Poorer people with no credit cards or no bank deposits will have a hard time getting a bank loan unless they present some of their physical properties (land, tractor or tricycle, etc.) as collateral.

Other Asian economies and their global ranking in PPR are:

1st Singapore, 8th Hong Kong, 11th Taiwan, 19th Malaysia, 24th Japan, 29th China, 40th Indonesia and Thailand, 46th India, 65th S. Korea, 68th Pakistan, 76th Philippines and Vietnam, 84th Brunei. Seehttp://www.internationalpropertyrightsindex.org/ranking.

This looks like an odd or weird result, that communist China has a higher global rank than capitalist Thailand and S. Korea in protecting physical property rights.

The incidence of robbery, direct or indirect, is often directly related to public perception of the integrity of public institutions and government officials. If the people think that many government personnel and officials are wasteful and corrupt, then stealing others’ property is a thought that they might just commit, knowing that government law enforcers are busy with other activities like extortion and do little in going after the real thieves. If thieves are caught, perhaps they can bribe their way out of prison and the probability of punishment goes down.

More about this year’s Report

The Property Rights Alliance (PRA, http://propertyrightsalliance.org/), the main sponsor of the annual reports, did not produce a hard copy of the report this year. But the online copy is more interactive, readers can explore topics and ranking of countries or regions.

Ranking of countries is more reader friendly. One can click the country, or any of the three components (Legal Environment, Physical Property, Intellectual Property) to show ranking of countries.

The 2012 Report was backed up by many partners, independent (non-government) free market think tanks and institutes from many countries around the world. MG Thinkers is among them, and the only one from the Philippines which is a partner of this important project.

We are thankful to the PRA and the Americans for Tax Reforms (ATR, http://atr.org/) for inviting us each year (since the 2009 Report) to be a partner of the annual IPRI Report.

Thanks Kelsey, thanks Grover.


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