In a significant shift, Singapore has surpassed Hong Kong to claim the title of the world’s freest economy, marking the end of Hong Kong’s 53-year reign at the top. This shift is according to a report released by the Canadian think tank Fraser Institute. The Economic Freedom of the World Index, which has been tracking economic freedom since 1970, placed Hong Kong in second place for the first time.
Factors Contributing to the Change:
Ease of International Trade:
- The index assesses economic freedom based on various factors, including the ease of international trade. Singapore’s strong position in global trade contributed to its rise.
Freedom to Enter and Compete in Markets:
- Another key metric is the freedom to enter and compete in markets. Singapore’s business-friendly policies have made it an attractive destination for entrepreneurs and investors.
- The report also considers business regulations. Singapore’s regulatory environment, which promotes business growth, played a role in its ascent.
2023 Report Based on 2021 Data:
- It’s important to note that the findings in the 2023 report are based on data from 2021, the most recent year with comparable statistics across 165 jurisdictions.
Hong Kong’s Decline:
Reasons for Slipping in Rankings:
- Hong Kong’s decline is attributed to new regulatory barriers to entry, an increase in the cost of doing business, and limitations on employing foreign labor. These factors have collectively impacted its economic freedom score.
Political and Civil Freedom Connection:
- The report highlights how Hong Kong’s recent shift is closely linked to civil and political freedom. The imposition of a national security law in 2020, which criminalizes secession and sedition, has raised concerns about the city’s autonomy.
Impact on Prosperity:
- The report suggests that Hong Kong’s diminishing economic freedom could negatively affect its prosperity in the long run.
Factors Leading to the Top Rank:
- Singapore’s ascent to the top spot is attributed to improvements in its government size and regulation components. These enhancements resulted in a slight increase in its overall score.
India’s Economic Freedom Index Ranking:
Rank Decline: India slipped from the 86th position to 87th out of 165 countries on the Economic Freedom Index.
- Report Source: The ‘Economic Freedom of the World: 2021 Annual Report’ by Canada’s Fraser Institute was jointly released in India with the Centre For Civil Society in New Delhi.
- Relative Improvement: Despite an increase in its rating from 4.90 to 6.62 since 1980, India’s rank has fallen, indicating that while it has made absolute improvements, it lags behind other countries in relative terms. However, it performs relatively well in South Asia.
- Score Changes: India saw a marginal increase in the size of government (7.64 from 7.57) and regulation of credit, labor, and business (5.98 from 5.96). Conversely, it experienced slight decreases in the legal system and property rights (5.29 from 5.3) and freedom to trade internationally (6.19 from 6.27). A score closer to 10 signifies higher economic freedom.
- Global Rankings: Singapore claimed the top spot in the index, followed by Hong Kong, Switzerland, New Zealand, the United States, Ireland, Denmark, Australia, the United Kingdom, and Canada.
Comparison with China: India ranked higher than China, which held the 111th position on the index.
Venezuela’s Ranking: Venezuela ranked at the bottom of the index, once again, indicating its lack of economic freedom.
Top 5 Freest Economies:
- Hong Kong
- New Zealand
- United States
Other Notable Mentions:
- The United Kingdom secured the ninth position, while Japan and Germany claimed the 20th and 23rd spots, respectively.
- China maintained its ranking at 111th place.