Singapore 2nd freest economy, 1st in labour freedom

Singapore remains the second freest economy in the world but ranks first in labour freedom in the 2010 Index of Economic Freedom compiled by the conservative Heritage Foundation and the Wall Street Journal. Labour freedom is used by the index to mean freedom to hire and fire workers. Singapore, described as "a nominally democratic state" in the report, scored 98.9 out of 100 for labour freedom and got an overall score of 86.1.

Hong Kong remained the world's freest economy with an overall score of 89.7 but only 87.4 for labour freedom. Australia is ranked third followed by New Zealand, Ireland, Switzerland, Canada, America, Denmark and Chile. You can download the full report here.

Singapore was ranked the second least corrupt country in the world, with a score of 92 out of 100, just one place behind New Zealand, which scored 93.

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Singapore got its lowest marks for financial freedom, scoring only 50 out of 100, as "the government seeks to maintain the domestic bank share of deposits above 50 percent".

What the Index of Economic Freedom stands for is freedom for companies and investors to do business as they please — within the rule of law. The less the government regulation, the greater the economic freedom, according to the index, which supports limited government and freedom from corruption. It does not support heavy government spending. That is one reason why America dropped from sixth to eighth place — because of the economic bailouts by the Obama administration. The report says:

The U.S. government’s interventionist responses to the financial and economic crisis that began in 2008 have significantly undermined economic freedom and long-term prospects for economic growth.

Total government expenditures… are relatively high and rising rapidly. In the most recent year, government spending equalled 37.4 percent of GDP.

That is why America got a low score of 58 out of 100 for government spending.

Singapore, in contrast, with government spending equalling just 12.5 percent of the GDP, according to the report, got 95.3 out of 100.

The index gives each country a score of 0 to 100 on 10 counts — business freedom, trade freedom, fiscal freedom, government size, monetary freedom, investment freedom, financial freedom, property rights, freedom from corruption and labour freedom. The 10 component scores are then averaged to give an overall economic freedom score for each country.

Here is the full report on Singapore:

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Hope over fear, Singapore!

There is every reason to believe the Singapore government will choose hope over fear when it unveils this year's budget tomorrow.

The rose-coloured spectacles have fallen off at last that induced officials to think the economy might still grow this year, despite the global downturn.

Now the economy is expected to shrink sharply, by two to five percent, this year, says the Ministry of Trade and Industry, which only two weeks ago was predicting between one percent growth and a two percent decline in the economy.

It is astonishing how a smart government like Singapore's with a reputation for economic acumen could get things so wrong that it had to change its annual economic forecast only two weeks after making the prediction.

But the government has come out of denial now — and prepared to confront whatever the future holds, no matter how dark and uncertain it seems.

The hope now

And that gives hope. Bloomberg reports today:

Singapore said its economy may shrink an unprecedented five percent this year, fanning speculation the government will announce record spending in its budget tomorrow to help companies hurt by the global recession.

Finance Minister Tharman Shanmugaratnam may outlay as much as 20 billion Singapore dollars ($13.3 billion), or eight percent of the gross domestic product, to help households and businesses survive the slump, Macquarie Capital Securities predicts. The government may also say it plans to tap into its reserves for the first time to fund its expenditure.

As Franklin Delano Roosevelt said long ago: "The only thing we have to fear is fear itself."

Singapore's leaders, who include scholars and meritocrats, will be familiar with the quote — and know, from experience, that it's the truth.

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