MSAR retains 9th place for most ‘free economy’ in Asia-Pacific

Macau is amongst the group of countries and regions with a “mostly free” economy, according to the latest economic freedom report from U.S. organization the Heritage Foundation.

Macau’s ranking has remained almost unchanged for the past three years, scoring 71 points (out of 100), just 0.1 up from the 2018 report. According to the report, it is in the 34th position overall and ninth amongst the Asia-Pacific countries.

As the report, released last Friday, states, Macau’s results are mostly due to “monetary freedom and tax burden exceeding a decline in the score for government integrity.” From the report, it is also possible to conclude that Macau’s overall score is considered “above the regional and world averages.”

Despite having a positive outcome, the same report also highlights challenges relating to the casino industry that the region must stay up to date with, which include “money-laundering risks and the need to diversify the economy and reduce dependence on gaming revenues.”
The organization also notes that Macau shares several factors contributing to its favourable result with its neighbor Hong Kong, which tops the 2019 index of the organization as the most free economy in the world for the twenty-fifth consecutive year, followed by Singapore and New Zealand.
One of the similarities is that each region has a free port, resulting in the regions benefiting “from global trade and investment. Other growth areas include finance, insurance, and real estate,” with the Heritage Foundation classifying the entrepreneurial environment as “generally efficient and streamlined.”
The rights of property were also a factor taken into account, which according to the report are “generally respected,” followed by a relatively efficient and low taxation system.

This year, there was a decrease in macau in the category of “Government Integrity” scoring only 33.2 points, a drop of 3.2 points from the 36.4 achieved in 2018.

In fact, the government integrity is one of the few categories in which Macau’s results have been dropping continuously ever since its inclusion in the report in 2009. Ten years ago, Macau scored 57 points. The biggest decrease registered was in 2017, when the government integrity dropped 12.6 percent (from 49.7 to 37.1), failing to recover ever since.

Factors contributing to these results include “the rapid economic expansion [that] has left the judiciary understaffed,” as well as “public protests against a range of issues such as corruption, favoritism, and nepotism have increased in recent years.”

Macau also scored low in the category of “Labor Freedom”, in which Macau has been scoring 50 points for the past four years after dropping from 55 in 2014 and 60 points in 2012.

The Heritage Foundation notes that “the economy lacks a dynamic and broad-based labor market,” with the government setting “minimum standards for the terms and conditions of employment.”

On a more positive note, factors such as Monetary, Trade, Investment and Financial Freedom as well as Fiscal Health pulled up Macau’s scores, achieving the maximum score of 100 points.

Regarding these categories, the report states that the overall regulatory environment is “relatively transparent and efficient, with license requirements varying by type of economic activity.”
The Heritage Foundation noted that monetary stability in the region has been relatively well maintained, although in many cases this related to “generous government subsidies to households, students, and the elderly,” which increased in 2018.

It was also noted that Macau is relatively open to foreign investment and that the “small financial system functions without undue government influence.”

China ranks 100th (scoring 58.4 points) on the 2019 list, which includes a total of 180 countries and regions.

Although China is still considered under the “mostly unfree” group, the country’s result this year constitutes a rise by 0.6 points when compared to 2018, performing well for the fourth consecutive year.

On behalf of the Macau government, the Monetary Authority of Macau released a statement acknowledging the results of the region and highlighting the praise made to the areas performing best.