Hong Kong suffered another blow to its self-esteem yesterday, with a threat that Singapore will snatch its coveted title of the world's freest economy. The US-based think-tank behind the Annual Index of Economic Freedom, the Heritage Foundation, blamed the Government's market intervention in August and urged it to sell the $120 billion portfolio to prove its commitment to non-intervention. 'Although Hong Kong remains number one in the current index it will not be in that position a year from now unless it sees the error of its ways and reverses course,' foundation president Edwin Feulner said. 'All other factors remaining equal this would give Singapore top spot in next year's index,' he said. It would be the first time in the index's five-year history that Hong Kong has not been top. In its latest economic freedom report, the foundation said: 'Not only has the Hong Kong Government failed to allow its currency board to function properly by letting market forces take over, but it has violated a sacred rule of free-market economics: governments should avoid direct ownership of private companies.' The report highlights a growing divide between the SAR and Singapore as they vie for the position of the region's international financial centre. Speaking at the Hong Kong General Chamber of Commerce Annual Business Summit, Financial Secretary Donald Tsang Yam-kuen hit back, calling into question the foundation's methodology and offering a barely disguised critique of Singapore. He urged the foundation to see whether 'other economies also hold local stocks and if so to what extent?' - a reference to Singapore's government-owned investment company, Temasek. In further barbed comments, he drew attention to factors such as transparency and disclosure, freedom of the press and 'whether the Government makes any dictation on wages'. The Singapore authorities last week imposed across-the-board pay cuts for civil servants and backed a plan to impose five to eight per cent reductions for all workers. 'I am sure all these things will be looked at by the Heritage Foundation in coming to their decision next year in assessing Hong Kong,' Mr Tsang said. Mr Feulner said the foundation was watching the SAR closely for signs of a further weakening of its commitment to free markets and added there were 'indicators that concern me'. He said the stock exchange's attempt to undermine the launch of a futures contract on the Hang Seng Index in Singapore by banning Reuters from providing real-time information was 'not the kind of signal we want to see being sent to the international community'. The foundation's next index will be released in June. The grim state of the economy has been further underlined by a survey showing many of the biggest local employers believe Hong Kong's performance will deteriorate further next year. In its first business prospects survey published yesterday, the General Chamber of Commerce found 43 per cent of respondents expected the economy to be weaker next year than this year, while 12 per cent said it would be much weaker. Only nine per cent said it would be stronger and 36 per cent expected no change. The Hang Seng Index skidded 4.09 per cent lower yesterday to close below 10,000 points, as a steep fall on Wall Street on Monday compounded fears about the economy's outlook. The index fell 426.47 points to 9,975.85, its first close below 10,000 since November 13.