City crowned as world's freest again

Updated: 2011-01-13 07:50

By Emma An(HK Edition)

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City crowned as world's freest again

Rank marks 17th straight year at top of economic freedom index

Hong Kong has been ranked the world's freest economy for the 17th consecutive year, according to the 2011 Index of Economic Freedom published jointly by the Heritage Foundation and the Wall Street Journal.

The 2011 report tracked economic policy developments since the second half of 2009 in 183 countries, which are on a scale of 1-100 on the basis of 10 measures that assess openness, the rule of law and competitiveness.

Hong Kong scored 89.7, unchanged from last year and well above the world average of 59.7. According to the report, the city scored improvements in three categories: fiscal freedom, monetary freedom and freedom from corruption. But the gains were offset by what it said was worsening government spending and labor freedom ratings.

"Hong Kong, one of the world's most competitive financial and business centers, demonstrated a high degree of resilience during the global financial crisis," editors led by Terry Miller said in the report. Factors such as "effective legal and regulatory frameworks", "openness to global commerce" as well as "overall macroeconomic stability" were highly regarded.

But the think tank reckoned that the city could still do better by reducing its massive fiscal surplus and "excessive" monetary reserves. The HK$20 billion fiscal surplus at the end of last year and the HK$2.4 trillion worth of monetary reserves are "wealth" that should be "given back to the community", said Wall Street Journal Asia editorial page editor Hugo Restall.

"There is no reason to have more (monetary reserves) than the monetary base," Restall said Wednesday at a media briefing. The fiscal surplus, which is projected to reach HK$70 billion this year, is too much and should be cut "at least by half", he added.

And the tax rate in Hong Kong, already one of the world's lowest, should be lowered further to "make Hong Kong a more attractive place to do business," said Restall.

Hong Kong's corporate profit tax of 16.5 percent is only half a point less than that of Singapore, the world's second freest economy in the 2011 index. But the city-state is fast catching up on Hong Kong by improving its score to 87.2 from 86.1 a year earlier.

The tax rate differences between Hong Kong and other markets is also narrowing in the pursuit of more business-friendly environments. "Hong Kong has been stagnant (in) economic freedom over the last couple of years," said Miller, director of the Center for International Trade and Economics at the Heritage Foundation.

Singapore "is moving up", he added, due to recent changes such as opening up its banking sector.

Welcoming the news that Hong Kong retained first place in the latest rankings, a government spokesman said, "We are determined to uphold economic freedom in Hong Kong, which is the cornerstone of sustained economic stability, growth and prosperity."

Australia, New Zealand, Switzerland and Canada came behind the two Asian dragons as the four other "free economies" in the world, each scoring more than the 80 points required. The mainland, with 52 points, ranked 135th, up five places from the 2010 index.

China Daily

(HK Edition 01/13/2011 page2)