AsiaPundit hopes to respond to Michael Turton’s rebuttal to the assertion that Taiwan’s KMT is more market oriented than the DPP. However, AsiaPundit will concede immediately that the Heritage Institute’s economic freedom rankings do have significant flaws. It is useful for providing a basic snapshot of economic liberties in relation to what it claims to measure, but by ignoring more unique elements of each market it does provide a distorted view.
Simon has a takedown on Hong Kong’s ranking by the SCMP’s Jake van der Camp here. But Singapore’s ranking as the No.2 freest economy also needs some review.:
In Singapore, it is the government itself that stands in the way of the unfettered private enterprise that the Heritage Foundation’s criteria are supposed to favor. The major real estate, banking, transport, manufacturing and utility companies listed on the stock market are all government-controlled entities. They may be efficient, but is this an economy free of government intervention? The index also claims that "the market sets almost all wages." But actually "wages are based on annual recommendations made by the tripartite National Wages Council."
Tax rates and revenue as a percentage of gross domestic product are low in both cities. But governments control land supply and use it not just to raise money but to redistribute income in an off-the-books manner through publicly developed and managed housing provided with low-cost land, in which 83 percent of Singaporeans and 40 percent of Hong Kong citizens live. In Hong Kong, land prices for the rest are kept especially high, with the result that living space per inhabitant remains very low compared with countries with similar income levels. Land in Hong Kong is sometimes used for subsidizing favored industries and in Singapore tax subsidies - which by definition are discriminatory - are common.
Tax levels in Singapore look quite low. But how free of official imposts are its citizens when compulsory contributions to its Central Provident Fund take 33 percent of wages and are invested largely as the government sees fit, through nontransparent official vehicles such as the Government Investment Corporation? Compulsory savings help toward the accumulation of foreign-exchange reserves and a very high investment ratio. But the rate of return on those assets has been low.
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