January 13, 2009 | News Releases on Economy
It's the 15th straight year that Hong Kong has earned the number-one ranking. No other economy has yet managed to surpass it. Three other economies in the Asia-Pacific region also made the Index's top 10, Singapore (2nd), Australia (3rd) and New Zealand (5th).
The Index reflects data compiled in 10 key categories and tells a crucial story. Economic freedom is vital because it's "strongly related to good economic performance," write Index authors Ambassador Terry Miller and Dr. Kim Holmes. "Per capita incomes are much higher in jurisdictions that are economically free." Economies rated freer also perform much better in advancing human development, reducing poverty, and protecting the environment. The authors found strong correlations between economic freedom scores and these economic and social variables.
The Asia-Pacific region proves that, even as it remains a study in contrasts. "Four of the world's 10 freest economies are in this region," the authors write, "yet most other economies in the region remain 'mostly unfree.'"
The region is home to several economies which the Index classifies as "repressed". Turkmenistan, Bangladesh and Burma fall into this category, as does North Korea, the world's least free economy.
Hong Kong improved its score slightly this year, lowering its top tax rates and improving the efficiency of business licensing to finish at an even 90 out of a possible 100. Singapore retained its second-place standing with a score of 87.1. The editors note that "with an efficient business environment that is well maintained, Singapore has long benefited from vibrant entrepreneurial activity." Australia passed Ireland to move into 3rd place in the rankings, and New Zealand beat out the United States for 5th place.
Eighteen Asian economies improved their scores in the 2009 Index while 12 lost ground. The region's average level of economic freedom is below the world average of 59.5, but the editors predict this could change if two economic giants press on with economic reform. Both Indiaand China are ranked as "mostly unfree." Yet economic freedom has been improving in those countries, and that trend should help speed development in the years ahead.
The 2009 Index has expanded its country coverage significantly to 183 economies, although four of these could not be graded because of insufficient data. Levels of economic freedom in 10 categories were rated on a scale of 0 to 100. The higher the score, the lower the level of government interference in the marketplace.
The 10 freedoms measured are: business freedom, trade freedom, fiscal freedom, government size, monetary freedom, investment freedom, financial freedom, property rights, freedom from corruption and labor freedom. Ratings in each category are averaged, then totaled to produce the overall Index score.
Worldwide, the average rating for economic freedom held essentially steady this year. However, as governments attempt to stave off a global recession, their meddling could well threaten economic freedom and long-term economic prosperity. "There is a real possibility that the scores in this edition might represent the historical high point for economic freedom in the world," the authors warn.
Of the 179 economies ranked (the most ever), only seven are classified as "free" (a score of 80 or higher). Another 23 are classified as "mostly free" (70-79.9). Most of the economies ranked--120--are either classified as "moderately free" (60-60.9) or "mostly unfree" (50-50.9). 29 economies are classified as "repressed", with total freedom scores below 50 percent.
The 2009 Index was edited by Ambassador Terry Miller, Director of Heritage's Center for International Trade and Economics, and Dr. Kim Holmes, Heritage's vice president for foreign affairs. Copies of the 2009 Index (455 pp., US$24.95) can be ordered at heritage.org/index or by calling 1-800-975-8625 and are available in English or Spanish. Additionally the full text, charts and graphs, is available via the Internet at www.heritage.org/index.
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