| Heritage Foundation President Dr Edwin Feulner presents Hong Kong Chief Executive Donald Tsang with a copy of the 2007 Index of Economic Freedom.|
Hong Kong has been ranked as the world's freest economy for the 13th year running, according to an index published Tuesday and Ireland gets a 7th place ranking
The 2007 Annual Index of Economic Freedom published by the Heritage Foundation, a Washington-based think tank and The Wall Street Journal, assessed 10 broad factors of freedoms in 157 economies worldwide.
The average freedom score this year for the 157 countries ranked is the second highest since we began measuring economic freedom 13 years ago. It is down a fraction from last year, but each region of the globe enjoys greater economic freedom than it did a decade ago. Hong Kong, Singapore and Australia are the three freest economies in the world this year, in that order. The U.S. ranks No. 4, New Zealand 5th, UK 6th, Ireland 7th, Luxembourg 8th, Switzerland 9th and Canada 10th. Among the 20 freest economies in the world, Europe holds 12 places.
Hong Kong scored the highest in four of the categories notching up an overall score of 89.3 out of 100. Singapore scored 85.7, followed by Australia at 82.7, the United States at 82 and New Zealand fifth at 81.6. Ireland got a score of 81.3. China ranked 119th with a score of 61.6, compared to the Asian average of 59.1 and the world average of 60.6.
This year, a 16-member academic advisory board to oversee methodology, one of the most critical aspects of the annual survey, has been established. The methodology also has some changes. The annual survey still grades countries on a combination of factors including property rights protection, tax rates, government intervention in the economy, and monetary, fiscal and trade policy. But this year the authors have renamed the "regulation" factor "business freedom" in order to reflect our emphasis on liberty. Thanks to data from the World Bank's annual "Doing Business" report, they expect this factor to better capture the varying levels of entrepreneurial freedom around the globe. The authors have also crafted a new category to measure "labor freedom," meaning the flexibility of labor laws. Finally, the Index scoring scale will now be 0 to 100 instead of 1 to 5, to allow a more nuanced overall measure.
"As it has in past editions, the 2007 Index also looks at income levels around the globe and finds that economically free countries enjoy significantly greater prosperity than those burdened by heavy government intervention. The per capita GDP of the top quintile of countries, ranked according to economic freedom, is now almost $28,000 while the bottom quintile is less than $5,000. The associated higher GDP rates that come with economic freedom "seem to create a virtuous cycle, triggering further improvements in economic freedom. Our 13 years of Index data strongly suggest that countries that increase their levels of freedom experience faster growth rates," says the report.
According to the survey, Ireland is ranked 2nd out of 41 countries in the European region, behind only the UK, with a score of 81.3 per cent - much higher than the regional average.
Labour freedom is identified as Ireland's weakest area. "As in many other European nations, generous labour laws mean that employment is not as flexible as it should be for maximum job creation and sectoral dynamics.
"Government spending as a proportion of GDP is also a disincentive. Even though tariffs are low, non-trade barriers reduce Ireland's trade freedom score."
Ireland scores highly on business freedom, investment freedom, financial freedom, monetary freedom, property rights, and freedom from corruption.
Entrepreneurship is made easy in Ireland because Government has a "light regulatory hand". It also notes that "distortionary EU agricultural subsidies" are undermining the country's monetary score.