January 12, 2011
WASHINGTON, JAN. 12, 2011 – For the 17th straight year, Hong Kong and Singapore finished 1-2 and North Korea finished dead last in the Index of Economic Freedom rankings.
The Asian Pacific region boasted the world’s four freest economies. Australia finished third despite a 0.1 drop in its overall score. New Zealand finished fourth, and had the world’s best scores in two of the 10 Index categories: business freedom (99.9 out of 100) and freedom from corruption (94).
Three economies—Macau, Japan and Taiwan—finished in the “mostly free” category with overall scores of 70 or better.
North Korea’s overall score of 1 was more than 22 points lower than any other country and nearly 37 points below the next lowest score in the region. The economies of six other states in the region—Burma, Timor-Leste, Turkmenistan, Kiribati, Uzbekistan, the Solomon Islands and the Maldives—also were rated as “repressed.”
The region’s two largest economies—India and China—ranked as “mostly unfree,” as did 17 smaller Asia-Pacific states.
A joint project of The Heritage Foundation and The Wall Street Journal, the Index ranks countries on a 1-100 scale on the basis of 10 measures that evaluate openness, the rule of law and competitiveness. The 10 scores are averaged to produce the overall score.
Countries that score well demonstrate a commitment to individual empowerment, non-discrimination and the promotion of competition. Their economies tend to perform better, and their populations tend to enjoy more prosperity, better health and more positive measures on a variety of quality-of-life indices.
The Asia-Pacific region performs above the world average on only three of the 10 economic freedoms: fiscal freedom, government spending and labor freedom. But corruption, murky property rights and limited progress on investment and financial freedom continue to plague the region.
Corruption is perhaps the biggest drawback to economic success in the region. Nearly half of the 41 countries in the region scored less than 30 for this component; only eight scored better than 50.
“Asian countries could make the most progress by strengthening their banking and investment institutions and by enhancing transparency and corporate governance,” the editors wrote.
On the bright side, twice as many Asia-Pacific states had ratings improvements this year as had ratings downgrades. Sri Lanka’s score jumped 2.5 points—the largest gain in the region. Tonga, Malaysia and Bangladesh registered significant gains as well.
Overall, the regional economy grew by nearly 8 percent last year. The Index editors credit India and China for spurring this growth, primarily through their commitment to robust trade. Both nations, they note, “have taken good advantage of opportunities available as a result of improvements in global economic freedom, especially in the area of trade.”
Hong Kong led the world in four categories of economic freedom: business freedom (98.7), fiscal freedom (93.3), investment freedom (90) and property rights (90). Singapore gained ground on the strength of its world-best score in labor freedom (98) and moved closer to the top spot with a 1.1-point improvement this year.
Nowhere is the difference in quality of life between economically free and unfree countries more pronounced than in this region. Per capita gross domestic product in the five top-rated countries is nearly 15 times greater than that of the bottom five, where average earners take home only $3,042 per year.
The 2011 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 2011 Index (474 pp., $24.95) can be ordered at www.heritage.org/index or by calling (800) 975-8625.
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(Please go to http://heritage.org/index/pressphoto.jpg for a hi res downloadable photo.)
Edwin Feulner, President of The Heritage Foundation, a Washington D.C. think tank, presents the Honorable Donald Tsang, Chief Executive, Hong Kong Special Administrative Region, with the 2011 Index of Economic Freedom Wednesday, January 12th in Hong Kong.