Malaysia’s economic freedom rank improves

The annual global economic freedom report ranks Malaysia in 71st place out of 144 countries, and sees improvement in all aspects measured by the economic freedom index.

PETALING JAYA: Malaysia is ranked 71 out of 144 countries in an international annual report on global economic freedom that was released today – a marked improvement from its 78th place in last year’s report.

According to The Economic Freedom of the World: 2012 Annual Report, produced by Canadian think tank Fraser Institute in partnership with 86 other institutes, higher economic freedom is linked to higher income per capita, increased economic growth and a higher level of income among the poorest.

In this year’s report, Malaysia has improved in all the categories measured by the index: size of government; legal system and property rights; access to sound money; freedom to trade internationally; regulation of credit, labour and business.

“Our improvement in the ranking shows that the government’s economic agenda has successfully halted our ranking decline for the last few decades,” said Wan Saiful Wan Jan, chief executive of Malaysian think tank the Institute for Democracy and Economic Affairs (IDEAS).

“I believe the NEM (New Economic Model) and ETP (Economic Transformation Programme) has produced a positive impact on the level of our economic freedom, and this has helped us improve our position in the global ranking,” he said in a statement.

Wan Saiful explained that the Economic Freedom Index has a lag of two years, and the report that IDEAS released today measured Malaysia’s performance in 2010 – just after Prime Minister Najib Tun Razak had announced the NEM and ETP.

“Therefore, based on our performance in the first year of the NEM and ETP as measured in this index, I believe we are on the right track.

“I hope the government will remain committed to the liberalisation spirit of the NEM,” said Wan Saiful.

The results of the report could help boost support for Najib’s administration in the coming general election, as it lends credence to his repeated claims that transformation is possible under the current Barisan Nasional government.

In his opening speech during the Umno general assembly last Thursday, the premier had highlighted the economic reforms he had spear-headed since he took power, saying that this proved the rakyat need not change the government to experience change.

Najib even took a jab at Pakatan Rakyat and the “forked tongue” opposition leader Anwar Ibrahim, claiming that the latter would destroy the economy by running up debt and would turn Malaysia into an Asian version of Greece within three years.

Flaws in the system

But Wan Saiful said today that Najib’s economic decisions also had its flaws, pointing to subsidies and the slew of cash handouts such as the Bantuan Rakyat 1 Malaysia (BR1M) scheme, which many detractors have accused as being “vote buying”.

The first BR1M scheme provided one-off cash handouts of RM 500 to households earning less than RM3,000 a month.

A second round of handouts, for which the government has allocated RM3 billion, is expected to be disbursed starting Jan 15 under the name BR1M 2.0.

Meanwhile, the Malaysian government continues to subsidise and control prices on many essential items such as palm oil, cooking oil, petrol, rice and sugar, although it has promised to cut subsidies gradually over a longer period of time.

According to a World Bank report published this year, the total government expenditure on subsidies and other transfers in Malaysia was last reported at 41.72% in 2010.

“The government must avoid the tendencies to offer populist handouts and subsidies as we come closer to the general elections because this will have a negative impact on our standing globally,” said Wan Saiful today.

According to the economic freedom report, Hong Kong has the highest level of economic freedom worldwide, with a score of 8.90 out of 10, compared to Malaysia’s 6.96. (Malaysia is tied with Ghana.)

At second place is neighbouring country Singapore (8.69), followed by New Zealand (8.36), Switzerland (8.24), and Australia and Canada tied in fifth place at 7.97.

The rankings and scores of other large economies include: United States (18th), Japan (20th), Germany (31st), Korea (37th), France (47th), Italy (83rd), Mexico (91st), Russia (95th), Brazil (105th), China (107th), and India (111th).