SINGAPORE has again been ranked the world’s second freest economy, while long-time rival Hong Kong retains the top spot, as it has done for 15 consecutive years.
The Index of Economic Freedom - published by The Wall Street Journal and American conservative think-tank The Heritage Foundation - gave Singapore 87.1 points and Hong Kong 90.
The index’s authors, Mr Terry Miller, director of the Centre for International Trade and Economics at the foundation, and Dr Kim Holmes, vice-president of its Foreign and Defence Policy Studies unit, pointed to the reasons behind Singapore’s success.
They said the country’s stellar place in the index was due to ‘an efficient business environment that is well maintained’ and so has ‘long benefited from vibrant entrepreneurial activity’.
The index measures levels of economic freedom on a scale of zero to 100 in 10 categories, including business, trade, investment and labour freedom, fiscal and monetary policy, government size, property rights and freedom from corruption. The higher the score, the lower the level of government interference in the market.
Singapore appears to lag behind Hong Kong most in the category of ‘financial freedom’, which is ‘a measure of banking security as well as a measure of independence from government control’, according to the index’s methodology.
The country’s score of 50 indicates ‘considerable government influence’, where ‘credit allocation is significantly influenced by the Government, and private allocation of credit faces significant barriers’. Hong Kong’s score in this category was 90, indicating ‘minimal government influence’.
Standard Chartered economist Alvin Liew said: ‘To close that gap, Singapore will slowly have to allow foreign participation into the domestic financial sector. But you cannot open up your financial sector overnight.
‘Regulation is still important, especially now, in these times.’
Four Asia-Pacific economies lead the world in economic freedom, said the survey, with Australia in third spot and New Zealand fifth. Ireland was fourth.
Asia as a region did well, too, as 18 regional economies - including India and China - improved their scores this year.
The United States dropped one spot to sixth place, because of increases in government spending as a percentage of gross domestic product, said the Journal.
And as governments attempt to stave off a global recession with new economic policies this year, the authors of the index warn that ‘their meddling could well threaten economic freedom and long-term economic prosperity’.
Mr Liew said: ‘By next year, the United States’ financial freedom score - now 80 - ‘would drop quite significantly because lots of banks are being injected with state funds’.
Mr Miller and Dr Holmes added: ‘There is a real possibility that the scores in this edition might represent the historical high point for economic freedom in the world.’
Source : Straits Times - 14 Jan 2009