Asian growth engines India, China dubbed ‘mostly unfree’ economiesJanuary 14th, 2009 - 12:00 pm ICT by IANS
Washington, Jan 14 (IANS) Both India and China have been ranked as “mostly unfree” economies by an annual “Index of Economic Freedom” that also suggests the two countries could speed development in Asia if they press on with economic reform.The 2009 edition of the “Index of Economic Freedom”, published annually by The Wall Street Journal and The Heritage Foundation, a Washington think tank, ranks India at 123 with a score of 54.4 out of possible 100 and China at 132 with 53.2 points. The index ranked 179 countries.
“Yet, economic freedom has been improving in those countries and that trend should help speed development in the years ahead,” the index editors said, noting that 18 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.
Hong Kong continues to be the world’s freest economy for the 15th straight year. 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 (second), Australia (third) and New Zealand (fifth).
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 authors Terry Miller and Kim Holmes.
Miller is director of Heritage’s Centre for International Trade and Economics, and Holmes is Heritage’s vice president for foreign affairs.
“Per capita incomes are much higher in jurisdictions that are economically free,” they noted.
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 Myanmar fall into this category, as does North Korea, the world’s least free economy.
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 labour freedom. Ratings in each category are averaged, then totalled 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). Twenty-nine economies are classified as “repressed”, with total freedom scores below 50 percent.