Hong Kong's status as world's freest economy threatened by Singapore, says Heritage Foundation

City tops world rankings again, but with Singapore snapping at its heels, American think tank says

PUBLISHED : Tuesday, 14 January, 2014, 1:20pm
UPDATED : Wednesday, 15 January, 2014, 1:43am

Hong Kong has been ranked the world's freest economy for the 20th consecutive year by a right-wing US think tank.

But the free-market-orientated Heritage Foundation has warned that increasingly populist policies, perceived levels of corruption and potential political instability mean the SAR's lofty position is being threatened by Singapore.

Hong Kong's overall score, at 90.1, rose 0.8 points year on year - but the rate of growth was weaker than Singapore's 1.4 points, which brought its score to 89.4.

The foundation says today's policy address by Chief Executive Leung Chun-ying could hold the key to the future standing of the city, as an expected increase in public spending to tackle poverty could weaken its position in the eyes of its annual index of economic freedom.

"In recent years, populist policies that increase spending and empower the administrative bureaucracy, as well as an increasing level of perceived corruption, have held back Hong Kong's overall rating," the conservative think tank said in its 2014 Index of Economic Freedom report.

Business interests had also exerted "a strong influence" on the legislative and executive branches of the government.

Terry Miller, director of the foundation's centre for international trade and economics, warned against further populism as the city plots its future democratic development.

Political turmoil could occur here as we move towards direct election … in 2017

"A lot of potential political turmoil could occur here as we move towards direct election of the chief executive in 2017," Miller said.

"Turmoil ... can pose risks for economic freedom. [The foundation] will keep a close eye and make sure there is not a growth of populist measures to curry favour with certain segments of the electorate."

On the Occupy Central civil disobedience plan, Miller said its impact on next year's index "would depend on the disruption of Hong Kong society that took place", but he placed emphasis on the city's "ultimate respect of the rule of law".

Freedom from corruption fell a "significant" 1.7 per cent, recording 82.3 points (on a scale of one to 100). It was the city's second-weakest criterion on the index after monetary freedom, at 82 points.

The Independent Commission Against Corruption said it would continue to tackle graft to provide a level playing field for businesses. It said "isolated" cases that had attracted media coverage "may have affected" public perception recently.

Financial Secretary John Tsang Chun-wah said the government "is committed to maintaining the key elements of economic freedom".

The report said Singapore's openness to global investment had encouraged a more competitive financial sector. Mainland China dropped a place to 137th.