By Yoon Ja-young
Staff Reporter
Korea slipped to 41st from last year's 36th in the 2008 Index of Economic Freedom (IEF) announced by the Heritage Foundation, a conservative think tank in the United States, and the Wall Street Journal.
The foundation has been announcing a systematic and empirical measurement of economic freedom in countries throughout the world each year, in 10 categories including trade, business and investment freedom, and property rights. The index has been announced since 1995, and it covered 157 countries this year.
Hong Kong maintained the highest level of economic freedom for the 14th straight year, getting the highest evaluation in almost all categories. Singapore remained in close second place, followed by Ireland, Australia and the United States.
``South Korea's economy is 67.9 percent free, which makes it the world's 41st freest economy. Its overall score is 0.7 percentage points higher than last year, reflecting improvement in four of the 10 freedoms,'' the foundation said. It ranked Korea 7th out of 30 countries in the Asia-Pacific region.
It said Korea has high levels of business freedom, investment freedom and property rights. ``Both total government expenditures relative to GDP and inflation are fairly low as well, but South Korea's monetary score is hurt by government subsidies of several sectors.''
The foundation said Korea's trade, fiscal and labor freedom were relatively weak. It was rated 51 percent free from corruption, and 49 percent free in labor. ``Non-tariff barriers are common. The labor market remains rigid despite the government's efforts to enhance market flexibility in recent years,'' it said.
It also showed concern over dominancy by chaebols (large conglomerates). ``Unlike other Asian countries hit hard by the Asian financial crisis, South Korea liberalized its financial and economic sectors in the aftermath of the crisis. Yet its economy remains dominated by chaebol, and foreign investors remain wary of lingering protectionism.''
The report picked managing its increasing interaction with North Korea in light of ongoing tensions resulting from North Korea's nuclear programs as the major challenge.
North Korea ranked at the bottom, 157th. Japan ranked at 17th and Taiwan was at 25th. China was placed 126th in the freedom ranking.
``Economic freedom is strongly related to good economic performance. The world's freest countries have twice the average per capita income of the second quintile of countries and over five times the average income of the fifth quintile. The freest economies also have lower rates of unemployment and lower inflation,'' it said.