Economic freedom slipping, study says

COULD BE BETTER: While the country continued to rank very well globally, the ‘Wall Street Journal’ and the Heritage Foundation said labor freedom needed improvement


Thu, Jan 15, 2009 - Page 3

Taiwan’s economic freedom — an international measure of business conditions — has slipped under the pro-China policies of President Ma Ying-jeou (馬英九), a report published this week said.

However, the country continues to do exceptionally well and is ranked No. 35 out of 183 countries surveyed by the Wall Street Journal and the Washington-based Heritage Foundation, a conservative think tank.

Their annual report, published this week, shows the country’s economic freedom score for last year was 69.5, a drop of 0.7 points compared with the year before.

Taiwan is ranked No. 7 out of 41 economies in the Asia-Pacific region and its overall score is higher than the world average.

Hong Kong continues to be the world’s freest economy, the Index of Economic Freedom said.

Three other economies in the region also made it into the world’s top 10 — Singapore (No. 2), Australia (No. 3) and New Zealand (No. 5).

Index authors Terry Miller and Kim Holmes wrote in an introduction that economic freedom is vital because it is “strongly related to good economic performance.”

Economies rated freer also perform much better in advancing human development, reducing poverty and protecting the environment, the report said.

China was labeled “mostly unfree” with an overall world ranking of No. 132 and received a total score of 53.2.

The report said of China: “The state still guides and directs much economic activity and the Communist Party still maintains ultimate authority over economic decisions. Investment freedom, financial freedom and property rights are very weak. Foreign investment is controlled and regulated, and the judicial system is highly politicized. The state maintains tight control of the financial sector and directly or indirectly owns all banks,” it said.

Under Ma, Taiwan has suffered slight declines in five of the 10 economic freedoms assessed.

The report went on to say: “There is room for improvement in Taiwan’s labor freedom. The labor market remains inflexible, hindering more robust growth of employment and productivity.”

The report also said the country had benefited from “a well-developed legal and commercial infrastructure and a long tradition of entrepreneurship.”

“These institutional advantages have allowed small and medium-sized enterprises to grow, marking their importance as key characteristics of Taiwan’s economy. Over the past five years, the economy has demonstrated its resilience, achieving an average annual economic growth rate of close to five percent,” it said.

Taiwan was well above the world average in providing good development conditions in nine of the areas surveyed — business freedom, trade freedom, fiscal freedom, government size, monetary freedom, investment freedom, financial freedom, property rights and freedom from corruption.

Only in labor freedom — where Taiwan scored 45.7 against a global average of 61.3 — did Taiwan fall below the world average.

“Taiwan’s rigid labor regulations hinder overall employment and productivity growth,” the report said.

“The non-salary cost of employing a worker is low, but dismissing a redundant employee is relatively costly and burdensome. Regulations related to the number of work hours are not flexible,” the report said.