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Environmental issues

Global Innovation Index 2017: Regulatory Environment

‘Institutions’ provide the nuts and bolts for the environments – political, regulatory and business – which can foster innovation. In today’s world, more than ever, this has become a vital force for generating economic growth. In short, political stability, non-invasive but fair regulation and ease of doing business provide the best possible framework for innovators and those who sponsor innovation.

In the 2017 Global Innovation Index (GII); ‘Regulatory environment’ draws on three criteria. The first two of these are ‘Regulatory quality’ and ‘Rule of law’ which, in turn, capture perceptions on the government’s ability to, (a) formulate and implement cohesive policies that promote private-sector development and, (b) evaluate the extent to which the rule of law prevails. This covers such aspects as contract enforcement, property rights, the police, and the courts.

The third indicator evaluates the cost of severance pay. This is calculated as the sum, in salary weeks, of the cost of advance-notice requirements added to redundancy-dismissal payments due when terminating a redundant worker.

All that may sound quite technical, but the importance of the ‘Regulatory environment’ is quite simple. If it functions well, it enables innovators to get on with the business of innovating, allowing them to make a valuable contribution to the broader economy; if it functions poorly, it inhibits innovation.

Here’s how eight Association of Southeast Asian Nations (Asean) states ranked in the 2017 Global Innovation Index (GII) in terms of their ‘Regulatory environment’. Asean members, Laos and Myanmar, were not included in this survey of 127 countries world wide. The rankings show their global positions on the 2017GII. Singapore, 1st; Brunei, 27th; Malaysia, 75th; Cambodia, 101st; Vietnam, 103rd; Philippines, 105th; Thailand, 110th; Indonesia, 126th.

And this is how they ranked in terms of ‘Cost of redundancy dismissal’. Brunei, 1st; Singapore, 1st; Cambodia, 80th; Vietnam, 101st; Philippines, 111th; Malaysia, 115th; Thailand, 121st; Indonesia, 125th.

What all that says is that the Philippines has not provided a competitive regulatory environment for its entrepreneurs and innovators. That doesn’t mean they’re all going to disappear – though some inevitably will – but it does mean that the pace of innovation is being seriously handicapped. And we know the main culprits for this – the slug-slow judicial processes for which the Philippines is so renowned, lack of political will and enough red tape to drown in.