Govt's populist policies could threaten SAR's future rank, warns Foundation

Hong Kong topped the world's freest economy list for the 19th consecutive year, according to the 2013 Index of Economic Freedom, suggesting that government measures to curb home price rises have done no harm to the city's rating.

But compilers of the index cautioned that some concerns have been aroused over the city's commitment to economic freedom due to implementation of "populist" policies.

According to the index, published by The Heritage Foundation and The Wall Street Journal, Hong Kong scored 89.3 points - 0.6 point lower than last year's as a result of increased government spending relative to GDP and rising inflation.

A total of 177 countries were graded in this year's Index. Hong Kong is followed closely by Singapore (88), Australia (82.6), New Zealand (81.4) and Switzerland (81), while the least free economies are North Korea, Cuba, Zimbabwe and Venezuela.

Although Hong Kong retains the top spot in the rankings, the uniqueness of its commitment to economic freedom has eroded in recent years, and any further implementation of populist policies that empower the bureaucracy or undermine the principle of limited government could threaten its standing in the future, according to the index.

Hong Kong is under a lot of pressure from its high reserves (and it is expected) to spend more to resolve social problems and take care of the poor, but there is rising pressure for new spending entitlements, and each year's (government) budget has more and more "hand out goodies", which is a worrying trend, said Hugo Restall, editorial page editor at The Wall Street Journal.

He said the government's intention to expand its role in the local housing market, which could have a negative impact on the SAR's economic freedom, is another source of concern.

Besides, Hong Kong has introduced minimum wage, and there has been pressure to raise it further and to regulate working hours, which will also have a negative impact on its entrepreneurial culture, Restall warned.

According to the 2013 Index, Hong Kong's score in "Rule of Law" was the lowest among the five freest economies. The "Rule of Law" measures two parts - property rights, in which Hong Kong scored 90 points and ranked second; and freedom from corruption, in which the city scored 84 points and ranked 12th.

Terry Miller, director of the Center for International Trade and Economics at The Heritage Foundation, said the scores were based on a survey of local citizens, with the lower score in "freedom from corruption" reflecting the perceptions of Hong Kong people.

Secretary for Financial Services and the Treasury, Chan Ka-keung, said the government welcomed the accolade given to Hong Kong as the world's freest economy for the 19th year in a row.

He said the government will continue its efforts to maintain Hong Kong's strength in economic freedom, which is the cornerstone of the city's sustained economy, growth and prosperity.

The government will also continue to provide a favorable and fair business environment, in which, enterprises can flourish, Chan said, adding that the government will establish an appropriate regulatory regime to ensure that the free market is able to maintain a fair and smooth operation, and is also committed to removing barriers for enterprises to enter new markets.

sophiehe@chinadailyhk.com

(HK Edition 01/11/2013 page2)