PH Economy remains riddled with Crony-Capitalism, Ranks 4th in Global Index

In its latest crony-capitalism index, the British newspaper The Economist reported that the wealth of billionaires in the Philippines surpassed 10% of the country’s GDP. Additionally, as a share of GDP, almost 1/10 of wealth generated occurred in crony-friendly sectors.

The Economist defines crony sectors as “a host of industries that are vulnerable to rent-seeking because of their proximity to the state, such as banking, casinos, defense, extractive industries, and construction.” As such, their article states that “crony sectors still account for four-fifths of total billionaire wealth [in the Philippines].”

The newspaper ranks the Philippines’ crony capitalism as the fourth highest in the world, following Russia, Malaysia, and Singapore.

Previously, The Economist warned that “supporters of Rodrigo Duterte, the front-runner to win the presidential election [that year], hope he will open up a feudal political system that has allowed cronyism to flourish.”

The country has had a long-standing history of high crony capitalism. In previous crony-capitalism rankings, the Philippines placed fifth and third highest.

“Globally, crony wealth has declined as a share of the total, reflecting in part the surge in tech-related wealth. Nonetheless, it remains entrenched in many places,” The Economist said.

In its research, the British newspaper gathered data from the International Monetary Fund (IMF) and Forbes magazine’s annual billionaire’s list.

“Rent-seeking entrepreneurs tend to use their relationships with the state to maximize profits. Technically speaking, economic rent is the surplus remaining once capital and labor have been paid a market price. With the perfect competition that surplus would not exist,” The Economist noted.

“But rents can be artificially elevated if firms win contracts at beneficial prices, form cartels to stitch up consumers, or lobby governments for favorable rules. Most rent-seeking businesses are operating perfectly legally,” The Economist added.

Source: Inquirer