Malaysia ranks 49 in economic freedom

Although the nation jumped 3 spots from 2019, it is not indicative of a better score rather than a relative deterioration in the ranking of other countries


MALAYSIA was placed 49 out of 165 countries and territories in economic freedom for 2020, according to the Economic Freedom of the World 2022 Annual Report.

The report was released today by the Centre for Market Education (CME) in conjunction with the Fraser Institute of Canada.

The year before, in 2019, Malaysia ranked 52.

However, the report noted that the improved ranking does not reflect a better score, but a relative deterioration in the ranking of other countries.

It added that in fact, the overall economic freedom rating for Malaysia declined to 7.35 in 2020 from 7.52 in 2019.

Fraser Institute’s Dr Michael A Walker research chair in economic freedom Fred McMahon said when jurisdictions increase taxes and regulations, the people become less economically free, which means slower economic growth and less investment.

He highlighted that Hong Kong and Singapore again top the index, continuing their streak as first and second, respectively, while Switzerland, New Zealand, Denmark, Australia, the US, Estonia, Mauritius and Ireland round out the top 10.

“The most recent comprehensive data are from 2020.

“Hong Kong is already showing a decline in freedom in 2020 and we expect the decline to continue going forward,” McMahon said in the report.

Meanwhile, CME CEO Dr Carmelo Ferlito said the same may be recorded for Malaysia in 2021, as the country was among the strictest ones in terms of lockdowns and growing role of government control over the economy.

He explained that Malaysia scores in key components of economic freedom (from one to 10 where a higher value indicates a higher level of economic freedom), where size of government changed to 7.12 from 7.04 in last year’s report, and legal system and property rights changed to 5.88 from 5.83.

Access to sound money also changed to 8.32 from 8.41, freedom to trade internationally changed to 6.97 from 7.63, and regulation of credit, labour and business changed to 8.47 from 8.67.

“The figures show — like the general rating — a trend toward deterioration in economic freedom.

“In fact, despite improvements in the size of the government and legal system, we observed deterioration in the access to sound money, freedom to trade internationally and regulation of credit, labour and business,” he said.

Ferlito expects these figures to deteriorate further next year.  

At the same time, he said such figures indicate the road of action to put Malaysia back on track in the path toward economic freedom.

“We should not forget that in 1980 Malaysia ranked 22 (rather than the current 49) and in 1990 it improved to 18,” he noted.

This year’s report, based on 2020 data (which is the most recent available), also captures the effect of Covid-19 related restrictions.

The 10 lowest-rated countries are Democratic Republic of Congo, Algeria, Republic of Congo, Iran, Libya, Argentina, Syrian Arab Republic, Zimbabwe, Sudan and Venezuela.  

Despotic countries such as North Korea and Cuba could not be ranked due to lack of data, the report stated.

The rankings of other major countries include Japan (12), Canada (14), Germany (24), Italy (43), France (54), Mexico (65), India (90), Russia (94), Brazil (114) and China (116).

Citing research in top peer-reviewed academic journals, McMahon said people living in countries with high levels of economic freedom enjoy greater prosperity, more political and civil liberties, and longer lives.

For example, he said, countries in the top quartile of economic freedom had an average per-capita GDP of US$48,251 (RM217,130) in 2020 compared to US$6,542 for bottom quartile countries.  

He added that in the top quartile, 2.02% of the population experienced extreme poverty (US$1.90 a day) compared to 31.45% in the lowest quartile.  

While, he said, life expectancy is 80.4 years in the top quartile of countries compared to 66 years in the bottom quartile.

“Where people are free to pursue their own opportunities and make their own choices, they lead more prosperous, happier and healthier lives,” McMahon noted.