January 16, 2007
HONG KONG, JAN. 16, 2007-For the 13th consecutive year, residents of Hong Kong enjoy the world's freest economy, according to the 2007 "Index of Economic Freedom" published annually by The Wall Street Journal and The Heritage Foundation.
This year's Index provides an even more precise snapshot of economic freedom than its predecessors. It uses a new methodology that draws upon the best and latest information, including World Bank data previously unavailable to outside researchers. It also uses a new rating system: Countries are ranked on a 0-to-100 scale, in which a higher score represents greater freedom-a switch from the 5-1 ranking of previous Indices.
"Hong Kong is clearly blazing a trail for others to follow," write Index editors Tim Kane, Kim Holmes and Mary Anastasia O'Grady. The former British colony leads all others in six of the Index's 10 factors.
Yet Asia remains a study in contrasts, the editors note. The region is home to the two freest economies in the world, Hong Kong and Singapore, and four of the top five. This year, Australia moved up to third and New Zealand clocked in at number five.
At the same time, Asia is also home to several "repressed" economies, including those of Turkmenistan, Vietnam, Laos, Bangladesh and Burma as well as North Korea, which the Index has rated as the world's most economically repressed country for more than 10 years.
Hong Kong's score did drop a bit under the new scoring system. Its measure of economic freedom is 89.3, down 1.6 points from last year (all scores from previous Index's have been recalculated under the new system). But it still leads the world by a wide margin. Singapore is next at 85.7, down 2.8 from last year. The editors laud Singapore as "the top country in business freedom and labor freedom."
Asia's overall level of economic freedom (59.1) lags a bit below the world average (60.6). But the editors predict this will change if two economic giants press on with economic reform. "India and China are ranked 19th and 22nd in the region," the Index notes, making them "mostly unfree." But "there is no denying that the winds of change are blowing in Asia, particularly in India and China," which are being encouraged by fellow Asian tigers Japan (5th in the region), Taiwan (6th) and South Korea (7th).
As in previous years, the Index ratings reflect an analysis of dozens of economic variables, grouped into 10 categories. But this year those categories have been somewhat refined. The 10 freedoms measured are: business freedom, trade freedom, fiscal freedom, freedom from government, monetary freedom, investment freedom, financial freedom, property rights, freedom from corruption and labor freedom. Ratings in each category are averaged to produce the overall Index score.
Worldwide, the average rating for economic freedom held essentially steady, "but there is much room for improvement" the Index editors write. Of the 157 countries ranked, only seven are classified as "free" (a score of 80 or higher). Another 23 are "mostly free" (70-79.9). The bulk of countries-107 economies-are either "moderately free" (60-60.9) or "mostly unfree" (50-50.9). Some 20 countries have "repressed" economies, with total freedom scores below 50 percent.
Under the new rating system, three economies dropped down a category: Kyrgyzstan and Sri Lanka from "moderately free" to "mostly unfree," and Bangladesh from "mostly unfree" to "repressed." No economies moved up in category.
This is the 13th consecutive year The Heritage Foundation and The Wall Street Journal have published the Index. It's edited by Tim Kane, director of Heritage's Center for International Trade and Economics, Kim Holmes, Heritage's vice president for foreign affairs, and Mary Anastasia O'Grady, a member of the Journal's editorial board and editor of the "Americas" column.
Print versions of the 2006 Index of Economic Freedom (408 pp., US$24.95) can be ordered by calling 1-800-975-8625 and are available in English or Spanish. Additionally the full text, along with all charts and graphs, will be available via the Internet at www.heritage.org/index.
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The Wall Street Journal, the flagship publication of Dow Jones & Company (NYSE: DJ; www.dowjones.com), is the world's leading business publication. Founded in 1889, The Wall Street Journal has a print and online circulation of nearly 2.1 million, reaching the nation's top business and political leaders, as well as investors across the country. Holding 31 Pulitzer Prizes for outstanding journalism, The Wall Street Journal provides readers with trusted information and knowledge to make better decisions. The Wall Street Journal print franchise has more than 600 journalists world-wide, part of the Dow Jones network of nearly 1,800 business and financial news staff. Other publications that are part of The Wall Street Journal franchise, with total circulation of 2.7 million, include The Wall Street Journal Asia, The Wall Street Journal Europe and The Wall Street Journal Online at WSJ.com, the largest paid subscription news site on the Web. In 2006, the Journal was ranked No. 1 in BtoB's Media Power 50 for the seventh consecutive year.