THE Philippines has made an embarrassing showing in yet another global report, and this one will wound the sensitive self-image of the current government more than most: The Global Illicit Trade Environment Index 2018 ranks the Philippines 64th out of 84 countries studied, and while the country did not do particularly well in any category, it was in the area of government policy that it did spectacularly poorly.
The index is produced by The Economist Intelligence Unit (EIU), the research arm of the eponymous journal, and the 84 countries that are part of the study represent 95 percent of global GDP and 95 percent of global trade flows. It measures countries on 14 quantitative and six qualitative indicators, which are grouped into four broader categories: Government policy, supply and demand, transparency and trade, and customs environment.
The overall score, on a scale of 0 to 100, determines each country’s rank; Finland took the top spot with a score of 85.6, while Iraq and Libya bring up the rear with scores of 14.4 and 8.6, respectively. The Philippines’ overall score of 48.5 puts it in 64th place, ahead of Vietnam and Indonesia, ranked 66th and 68th, respectively, but trailing Singapore (25), Malaysia (47), and Thailand (48) by a wide margin.
In its discussion of the results, the EIU described the global state of illicit trade as “dispiriting,” which puts the Philippines’ poor performance in an even dimmer light. The average score for the whole world is just 59.6, for which the EIU puts the primary blame on the “supply and demand” and “transparency and trade” indicators. The Philippines had rather good results in terms of transparency and trade, which “measures an economy’s transparency as regards illicit trade and the degree to which it exercises governance over its FTZs and transshipments.” In these areas, the country scored well above the global and regional averages, and was just a bit below average in terms of supply and demand, which “measures the domestic environment that encourages or discourages the supply of and demand for illicit goods.” Likewise, the country was not far below average in terms of its customs environment, which may come as a surprise given the persistent impression that customs administration is riddled with corruption and inefficiency.
What really depresses the Philippines’ ranking, however, is its abysmal result in indicators of government policy, or “the availability of policy and legal approaches to monitoring and preventing illicit trade.” The global and regional average scores for this category are 58.8 and 54.0, respectively; the Philippines’ score is just 32.3, putting it ahead of only the world’s perennial basket cases — Cambodia, Myanmar, Laos, Libya, and Iraq — at the very bottom of the rankings. Not only does this fly in the face of the current administration’s tiresome anti-corruption and law-and-order mantras, it does so with largely quantitative indicators.
Included in the category are: The number (out of 14 in force) of international conventions related to illicit trade the country has adopted; specific legislation authorizing investigative techniques under UN Conventions against Transnational Organized Crime (UNTOC) and against Corruption (UNCAC) guidelines; compliance with FATF (Financial Action Task Force) standards on anti-money laundering and other financial crimes; and extent of corruption among public officials (measured as a proportion of cases successfully prosecuted to cases filed), among others.
It would be surprisingly out of character for the administration to react to the EIU report with anything more than dismissive contempt, but there are good reasons to take it more seriously than they usually view these types of reports.
Unlike most of the other ‘global ranking’ reports that appear during the year that are rather broad in scope — last week’s Global Peace Index 2018 report is probably a good example — the Global Illicit Trade Environment Index is comparatively narrow in its focus, which makes its indicators and findings correspondingly more specific and actionable.
Part of that is just the mathematics of statistics at work; because having a narrower focus allows a greater number of quantitative rather than qualitative indicators to be applied to the analysis — 14 out of 20 indicators, in this case — the “robustness” of the results is stronger.
Robustness is a test of validity; the results are said to be robust if they remain consistent across comparisons of different pairs of countries most of the time. 70 percent is considered a reasonable level of robustness; the EIU analysis is slightly better than that, meaning its finding can be considered reliably valid.
The other thing to consider is the report’s source. Unlike the Institute of Economics and Peace, which produces the Global Peace Index, or other organizations like the Heritage Foundation, which produces the annual Index of Economic Freedom, the EIU and its parent company are business- and economy-oriented, rather than political in character. The company makes most of its money in trade, investment, and market consulting, which means that its primary audience is probably more likely to act on the results of the report in tangible ways.
It is unlikely, of course, that anyone would take the EIU report completely at face value, or use it as the sole basis for making an investment decision. By the same token, the same audience’s skepticism is not going to be assuaged by a glib pronouncement that the government “disagrees” with the findings, or thinks the EIU “should mind its own business.”
The government can and should take the opportunity to build a little credibility by indicating that, even if it doesn’t necessarily accept the report and its conclusions out of hand, it is at least considering what it can learn from them.
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