After months of pro-democracy protests followed by the coronavirus crisis, Hong Kong lost its title of the world’s freest economy to Singapore for the first time in 25 years. In the 2020 Index of Economic Freedom, published by the Heritage Foundation, the parameter of investment freedom took a major hit which dragged down the overall score to 89.1, while Singapore stood at 89.4.
Hong Kong has been at the helm of the Economic Freedom Index since 1995 when the conservative US think tank published the ranking for the first time. In the latest rankings, Hong Kong’s overall score dropped by 1.1 while Singapore’s score remained unchanged. China semi-autonomous region showed a decline on several fronts including business freedom, labour freedom, and monetary freedom.
“The ongoing political and social turmoil has begun to erode its reputation as one of the best locations from which to do business, dampening investment inflows,” said the report.
Even after months-long demonstrations against the government, however, Hong Kong displayed upward trajectory on Rule of Law parameter. It includes property rights, judicial effectiveness, and government integrity. The think tank noted that GDP had been growing steadily over the past five years, but the territory fell into recession in 2019.
Meanwhile, Singapore has been among the world’s freest economy for years now and maintained its overall score on the back of the enhanced business and monetary freedom. According to the report, the southeast Asian nation has sustained extraordinary performance resulting in one of the world’s highest per capita incomes and solid rates of GDP growth.
“Ongoing restrictions on civil liberties, while not directly affecting the country’s score, may have an indirect impact on economic freedom and remain a concern,” the report noted.
Singapore and Hong Kong exchanged the top two places and New Zealand remained at the third position among the 42 countries in the Asia-Pacific region.