Hong Kong widens lead over Singapore in free economy ranking

Hong Kong has been ranked the world's freest economy for the 23rd straight year, climbing in overall points to widen the lead over second-placed Singapore, according to the 2017 Heritage Foundation index released on Thursday.

The US think tank's annual Index of Economic Freedom report, first published in 1995, grades 10 freedoms - from property rights to entrepreneurship - on a scale of zero to 100 in about 180 economies across four broad categories: rule of law, government size, regulatory efficiency and open markets.

Hong Kong achieved scores of 90 or above in eight components, and attained the top positions in fiscal health (100), trade freedom (90) and financial freedom (90). The city's overall score of 89.8, derived by averaging the grades of the 10 economic freedoms, was well over the global average of 60.9 and an improvement of 1.2 points after the last two years of decline. The city also extended its lead over rival Singapore from 0.8 point last year to 1.2 points this year.

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The report noted Hong Kong's "high degree of economic resilience" and lauded its legal framework, regulatory efficiency, openness to global commerce, government transparency and lack of corruption. The city has also benefited from "more intense" interaction with China "through strengthened financial and other non-economic linkages", the report added.

Hong Kong Financial Secretary Paul Chan said on Thursday that the latest rankings affirmed the city's "steadfast commitment in safeguarding the free market principles".

"On top of maintaining our favourable business environment, free trade, simple and low tax regime, the rule of law and independent judiciary, the government would also strive to enhance our financial infrastructure and foster closer economic co-operation with major trading partners, so as to strengthen Hong Kong's leading position as an international city," said Mr Chan.

A government spokesman added that Hong Kong's administration is "fully aware of the keen competition globally and the rapid economic development of our peers in the region" and will strive to maintain Hong Kong's competitive edge.

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That Hong Kong has retained its top spot yet again is expected, but how the city has managed to grow its lead is noteworthy, said Chan Yue-cheong, an associate professor of economics at Hong Kong Polytechnic University. "What is surprising is that the margin is now wider over Singapore because Singapore is also trying very hard to improve," said Prof Chan. "In fiscal health, Hong Kong has an advantage, and has had very big surpluses in recent budgets."

But competitor Singapore - which scored higher in government spending, rule of law components and regulatory efficiency - has different strengths that may serve the city-state better and push it ahead of Hong Kong in the long run, said City University's economics faculty head, Ma Yue.

"Singapore's fundamentals are actually, I think, much stronger than Hong Kong's. There is much more support from the government, for instance in technology, whereas Hong Kong has a non-intervention policy," said Prof Ma. While Hong Kong and Singapore both gained ground at the top of the ladder, the United States slipped from its 2016 11th spot to a new low of 17th, with an overall score of 75.1 - the worst American score ever recorded in the index.

This article was first published on Feb 17 , 2017.
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