Singapore overtakes Hong Kong as world's freest economy

Hong Kong

HONG Kong lost its title as the world's freest economy to Singapore for the first time since 1995 in a global survey, as social unrest and uncertainties rattled its reputation as a global financial hub.

Hong Kong's overall economic freedom score fell primarily due to a decline in its marks for investment freedom, according to the 2020 Index of Economic Freedom published by the Heritage Foundation. Singapore, its long-time regional rival, came in first as its score held steady compared to last year.

"Hong Kong's economy was rated the freest in the world from 1995 through 2019. The ongoing political and social turmoil has begun to erode its reputation as one of the best locations from which to do business, dampening investment inflows," the report from the conservative Washington think tank said.

While large-scale pro-democracy demonstrations that began last year have died down amid the Covid-19 pandemic, trust in the Hong Kong authorities remains at a low as community groups - including medical workers - express dissatisfaction towards them for not doing enough to stem the disease in the early weeks of the outbreak.

Edward Yau, Hong Kong's Secretary for Commerce and Economic Development, told reporters on Tuesday that he expects to see a rebound in the rankings. "I can confidently say that the conditions that have long made Hong Kong a place with a high level of economic freedom won't change because of what we experienced in the past."

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The city's economy is forecast to contract for a second year after it fell into its first annual recession in a decade in 2019, facing fallout from the protests and the virus.

"Intensifying uncertainties related to security issues have undermined an otherwise favourable investment climate," the report said. "The territory remains a dynamic global financial centre with a high degree of competitiveness and openness, but the sense of risk is also heightened."

Hong Kong authorities have long taken pride in the city's reputation as a stable place to do business in Asia. After topping the Heritage Foundation's ranking for a 25th straight year last year, it said the designation reaffirmed "the government's steadfast commitment in upholding the free market principles over the years".

In December, it touted the rating in newspaper advertisements around the world to reassure investors that it remained free and resilient despite the months of violent clashes between demonstrators and police.

Meanwhile Hong Kong's jobless rate surged to the highest level in almost a decade in February as the full force of disruptions from the novel coronavirus outbreak hit the city's already struggling businesses.

The unemployment rate climbed to 3.7 per cent for the December-to-February period, the highest since January 2011 and more than the median estimate of 3.6 per cent among economists surveyed by Bloomberg.

The fifth straight month of higher unemployment extends the longest such run since 2009, which occurred in the aftermath of the global financial crisis. The underemployment rate also rose to a five-year high of 1.5 per cent, the government said in a statement.

"The labour market deteriorated sharply, as the Covid-19 epidemic caused severe disruptions to a wide range of economic activities and dampened economic sentiment," Law Chi-kwong, Secretary for Labour and Welfare, said in a government statement.

The year-on-year decline in total employment widened to 2.5 per cent, the most since the Asian financial crisis, Mr Law said in the statement. Consumption and tourism-related sectors had a surge in the jobless rate to 6.1 per cent, the highest in about a decade. Unemployment in the food and beverage service industry was even worse, climbing to 7.5 per cent. BLOOMBERG