CME: Malaysia ranks 56 out of 165 jurisdictions in the Economic Freedom of the World: 2023 Annual Report
Tuesday, 19 September 2023: Malaysia ranks 56 out of 165 countries and territories included in the Economic Freedom of the World: 2023 Annual Report, released (with an attachment to this message) by the Center for Market Education in conjunction with Canada’s Fraser Institute. The rating and rank refer to data in the year 2021.
The report measures the economic freedom of individuals—their ability to make their own economic decisions—by analyzing the policies and institutions of 165 jurisdictions. The policies examined include regulation, freedom to trade internationally, size of government, legal system and property rights, and sound monetary policy. The 2023 report is based on data from 2021, the last year with available comparable statistics across jurisdictions.
The year before – in 2020 – Malaysia ranked 53. The 2021 score thus represented a deterioration in Malaysia’s ranking, with the overall Economic Freedom rating for Malaysia dropping from 7.28 in 2020 to 7.19 in 2021. Shifts in Malaysia’s ranking come amidst larger changes in the methodology utilized in compiling this index. These adjustments alongside data updates saw a downgrade in Malaysia’s 2020 ranking from 49 (7.23) to 53.
Malaysia recorded a deterioration in almost all the components of the score measuring economic freedom. Here below the details for each component (from 1 to 10, where a higher value indicates a higher level of economic freedom):
- Size of government: changed to 7.27 from 7.12 in the last year’s report
- Legal system and property rights: changed to 5.70 from 5.81
- Access to sound money: changed to 8.16 from 8.34
- Freedom to trade internationally: changed to 7.26 from 7.40
- Regulation of credit, labour and business: changed to 7.54 from 7.70
“Similar to Malaysia’s overall downgrade in this year’s report, these figures indicate a deterioration in Malaysia’s overall economic freedom”, noted Dr. Carmelo Ferlito, CEO of the Center for Market Education. “While there was an improvement in the size of government, we observed a deterioration in the legal system, access to sound money, freedom to trade, and regulations”.
He adds, “Malaysia’s deteriorated scenario in this year’s report should serve as a warning to policymakers on the deterioration of economic freedom in this country. Thankfully, the Ekonomi Madani framework recently laid out by this government signals in part a commitment towards institutional reforms and pro-market policies. In particular, the framework’s commitment towards promoting free trade (including more bilateral and multilateral agreements), improving ease of doing business, and rebuilding fiscal discipline should help improve Malaysia’s showing in future reports. Hopefully, the government will build its future policies more on the Madani framework than on the statist approach shown with the revision of the 12th Malaysia plan”.
Launched in 1996, the Economic Freedom of the World report measures economic freedom, defined as the ability of individuals to make their own economic decisions. The Fraser Institute lists the cornerstones of economic freedom as being personal choice, voluntary exchange, open markets, and clearly defined and protected property rights. The report measures economic freedom by analyzing five major areas, including the size of government, the legal structure and security of property rights, access to sound money, freedom to trade internationally, and regulation of credit, labour, and business.
The latest iteration of the Economic Freedom of the World report observes that the global average for economic freedom increased from 6.58 to 6.94 from 2000 to 2019. In 2020, the average rating fell to 6.77 in 2020 due to the global pandemic, where it remained in 2021. The last time the global average economic freedom rating was this low was 2009.
Singapore and Hong Kong once again topped the index at 1st and 2nd position respectively, with Hong Kong slipping from the top position for the first time in the history of the index. Switzerland, New Zealand, the United States, Ireland, Denmark, Australia, the United Kingdom, and Canada would round up the remaining top ten.
Conversely, the lowest-ranked countries were the Republic of Congo, Algeria, Argentina, Libya, Iran, Yemen, Sudan, Syria, and Zimbabwe, with Venezuela ranked at last place.
As argued by the report, there is a positive correlation between a high level of economic freedom and societal well-being. Nations in the top quartile of economic freedom had an average per-capita GDP of US$48,569 in 2021 compared to US$6,324 for nations in the bottom quartile. As well, in the top quartile, the average income of the poorest 10% was US$14,091, compared to US$1,740 in the bottom quartile. Life expectancy is also higher, measuring 80.8 years in the top quartile compared to 65.0 years in the bottom quartile.
About CME: The Center for Market Education (CME) is a boutique think-tank based in Kuala Lumpur, Malaysia, and Jakarta, Indonesia.
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