Lai See

Hard to take the Economic Freedom index seriously

PUBLISHED : Friday, 11 January, 2013, 12:00am
UPDATED : Friday, 11 January, 2013, 3:56am

Hong Kong was yesterday ranked the world's freest economy in the Index of Economic Freedom, which is put out by the Heritage Foundation in partnership with The Wall Street Journal. It's been published for 19 years and Hong Kong has won it every time. Yet the longer its goes on the more absurd it seems. It is of course true that Hong Kong is one of the easiest places in the world to set up a company and go into business. Yet to call it the freest economy in the world when the government owns all the land is patently absurd.

When asked how this element of Hong Kong's economy affects its rankings, one of the presenters, Ambassador Terry Miller of the Heritage Foundation, said that it had no direct bearing on the rankings, because of a lack of "comparable data". As we all know, the government's grip on land and the restrictive way in which it disposes of it has had a fundamental impact on the nature of the economy. It is no surprise that the city's richest tycoons made their money from property development.

Miller concedes that this is not an ideal situation. The thrust of the Heritage philosophy is that all good things flow from economic freedom - empowerment, happiness, better environment and so on - in the same way that some people believe "cleanliness leads to godliness". The index is at best superficial and misleading, but that doesn't stop the likes of the Hong Kong government from turning it into a propaganda opportunity.


China fraud eludes SEC

Former US Securities and Exchange Commission chairwoman Mary Schapiro says that the mainland government has spurned a US request for help in cracking down on a string of alleged investment frauds. Speaking to ABC television, she said the lack of co-operation has stymied efforts to recoup investor losses in one of the largest sprees of alleged financial crimes in recent memory.

According to ABC, the losses incurred by US investors that invested in mainland firms listed on the Nasdaq and the New York Stock Exchange has amounted to tens of billions of dollars. The losses significantly exceed the US$20 billion which prosecutors estimate investors lost as a result of Bernie Madoff's Ponzi scheme.

Some 100 mainland companies have been de-listed or left the Nasdaq and the NYSE, though not all have been involved in wrongdoing. The SEC opened some 40 cases during Schapiro's tenure, before she stepped down in December.

"A common theme in many of the cases we have already filed is the brazenness of the fraud. It's quite extraordinary in some cases," Schapiro says.


The joys of tweeting

We were amused to come across the flurry of interest on Twitter after Lionel Barber, editor of the Financial Times, opened a Twitter account. "If anything is an indication of the FT being for sale, it is Lionel Barber getting on Twitter," one wag posted. "Lionel Barber of FT has joined Twitter. A pink welcome... @barberlionel. (Hoping his Tweets are more fun than FT's Sat mag!)" said another.

However, things turned a little testy when Peter Thai Larsen, the Asia Editor of Reuters Breakingviews, joined the banter with, " Oh look, FT Editor @BarberLionel has joined Twitter." To which Barber replies, "Thanks. As usual Breaking News three days late with the news! "Larsen shoots back with, "Does opening a Twitter account qualify as news? PS: it's BreakingVIEWS."


The perils of forecasting

There has been a marked reluctance on the part of mainland securities firms to make public forecasts for the performance of the mainland stock indices this year. We are told that between a third and half of mainland brokers have opted to keep their views to themselves. This is largely a result of the general loss of face that accompanied efforts at forecasting the indices last year which went disastrously awry.

Mainland brokers were not alone in getting them wrong. Even Helen Zhu, Goldman Sachs' China Strategist, expected the SHSZ index to rise some 38 per cent to 3,200 whereas it actually rose about 9 per cent. The most wayward forecast, we are told, was from Chongqing-based Southwest Securities, which forecast the Shanghai Composite index to reach 3,800. This was some way above its eventual 2012 close of 2237.


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