[News] Korea's Economic Freedom Ranking Flat Over 20 Years

Korea’s economic freedom ranking has been stagnant over the past two decades, indicating that if the trend continues, the market-driven economic growth could face limits in the future, the Center for Free Enterprise (CFE) said Thursday.

The prediction is based on the latest Economic Freedom Index (EFI) ranking, issued by the Economic Freedom Network, which is composed of institutes to promote market economy in the world, including the CFE in Korea.

The 2004 EFI ranking placed South Korea 31^st among 123 countries in 2002, one notch down from 30 in 2001, scoring 7.1 out of 10.

''Despite the continued improvement in the nation’s economic freedom, a gauge for economic democracy, the nation’s ranking showed little advancement compared with 35^th place in 1980,’’ CFE research fellow Choi Sung-no said.

''That means Korea has been slow to bring more freedom in economy compared with other nations,’’ he added.

Contrary to Korea’s stagnant place, the United Kingdom’s EFI ranking surged from 21st in 1980 to 3rd in 2002.

Countries that fell in the rankings are Japan, Germany and France.

''One of key reasons for stagnation in Korea’s EFI ranking is because of failure in improving economic freedom in the local economy, while raising levels of freedom for international businesses,’’ Choi pointed out.

The index is calculated on the basis of average scores from 38 components in five areas: size of government; legal structure and protection of property rights; freedom to trade internationally; access to sound money and regulation of credit, labor and business.

The 2002 index score of Korea is relatively higher, almost scoring 10 in international exchange (9.2), size of government (7.4) and freedom to trade internationally (7.2).

However, Korea scored poorly in the regulation of credit, labor and business areas, ranking 95^th with a score of 5.3 among 123 countries.

Among sub-compartments of the regulation category, the index score for the regulation of labor fell to 3.9 in 2002 for third straight year, placing 78^th.

''The EFI survey shows that economic growth tends to be in line with the levels of economic freedom, shown in the cases of the U.K., Ireland and New Zealand,’’ Choi said, urging Korea to improve economic freedom in the local economy through a bold deregulation drive.

In the 2002 EFI rankings, Hong Kong retained the highest rating for economic freedom, 8.7 of 10, closely followed by Singapore at 8.6. New Zealand, Switzerland, the U.K., and the United States tied for third with ratings of 8.2. The other top 10 nations are Australia, Canada, Ireland, and Luxembourg. The rankings of other large economies are Germany (22), Japan and Italy (36), France (44), Mexico (58), India (68), Brazil (74), China (90) and Russia (114).

Most of the lowest-ranking nations are from Africa, Latin America or former communist states.