Government White Paper and Parliamentary debate on the damning 2001
Index of Economic Freedom where Malaysia dropped 57 places in past six
years and slipped from "mostly free" to "mostly unfree" category
by Lim Kit Siang
(Petaling Jaya, Sunday): The Government
should present a White Paper in the current meeting of Parliament to respond
to the damning 2001 Index of Economic Freedom released in Hong Kong on
Wednesday (November 1, 2000) where Malaysia dropped 57 places in the past
six years from the 18th position in the 1995 index to the 75th position
in the 2001 Index and slipped from "mostly free" to "mostly unfree"
category. This should be followed by a full parliamentary debate
as to whether apart from being politically "mostly unfree", Malaysia
has also joined the ranks of the "economically mostly unfree".
The Government should also lift the local and mainstream mass
media blackout of the 2001 Index of Economic Freedom, which ironically,
drives home the point that apart from the damning judgment of the 2001
Index of Economic Freedom that Malaysia has joined the ranks of "mostly
unfree" economies, it is certainly one of the politically "mostly
So far, the only mainstream mass media reference to the damning 2001
Index of Economic Freedom is the Friday editorial (3rd November 2000) by
the UMNO mouthpiece, New Straits Times, denouncing it as another product
of evil Western conspiracy against Malaysia while Malaysians are kept completely
in the dark about the index.
The NST editorial, entitled "AWSJ Should Display Fair Play" (the
index of economic freedom is jointly published by the Wall Street Journal
and the Heritage Foundation, a Washington think thank) was being
disingenous or downright sloppy when it complained that there were no details
about the 10 standard gauges utilised by the index to assess "the
economic health - or sickness - of the world’s economies".
One can agree or disagree with the definition, the gauges, weightage
and rankings of the 2001 Index of Economic Freedom, but no one can seriously
dispute the index on the ground that there were no details about
the 10 standard gauges utilised to arrive at the index.
This is because the 2001 Index of Economic Freedom gave the fullest
details about the 10 standard gauges it utilised to measure "economic
freedom", which it defined as "the absence of government coercion
or constraint on the production, distribution, or consumption of goods
and services beyond the extent necessary for citizens to protect
and maintain liberty itself".
"When government employs coercion beyond that minimalist standard,
however, it risks trampling on freedom. When it interferes in the market
to effect ends other than the protection of person and property, it undermines
economic freedom. Exactly where that line is crossed is open to reasoned
debate. Only a standard achievable by imperfect human beings—neither
anarchy nor utopia—is envisioned in the scoring of economic freedom."
To measure economic freedom and rate each country, the authors of the Index
study 50 independent economic variables. These variables fall into 10 broad
categories, or factors, of economic freedom:
Each country receives its overall economic freedom score based on the average
of the 10 individual factor scores. Each factor is scored according to
a grading scale that is unique for that factor. The scales run from 1 to
5: A score of 1 signifies an institutional or consistent set of policies
that are most conducive to economic freedom, while a score of 5 signifies
a set of policies that are least conducive.
Fiscal burden of government,
Government intervention in the economy,
Capital flows and foreign investment,
Banking and finance,
Wages and prices,
Black market activity.
The four broad categories of economic freedom in the Index are:
Free—countries with an average
overall score of 1.95 or less;
Mostly Free—countries with
an average overall score of 2.00 to 2.95;
with an average overall score of 3.00 to 3.95; and
an average overall score of 4.00 or higher.
According to the 2001 Index, Malaysia’s economic freedom has become
more and more restrictive in the past six years as to slip into the "mostly
unfree" category when for the previous five years it was in the "mostly
Malaysia’s overall scores and ranking for the past six years are:
Year - Overall Score Ranking
1995 - 2.40 18
1996 - 2.70 40
1997 - 2.80 53
1998 - 2.60 39
1999 - 2.60 40
2000 - 2.70 46
2001 - 3.00 75
Undoubtedly, among the major factors why Malaysia’s has dropped 57 places
in the past six years from the 18th position in the 1995 index to
the 75th position in the 2001 Index and slipped from "mostly free"
to "mostly unfree" category are the multiple crisis of confidence
surrounding the judiciary, the rule of law and the integrity of government,
and in particular, the persecution and prosecution of former Deputy Prime
Minister, Datuk Seri Anwar Ibrahim.
This is because there is overlapping coverage in the Index of
Economic Freedom which includes the broadest array of institutional factors
determining economic freedom such as "Corruption in the judiciary, customs
service, and government bureaucracy" and "the rule of law, efficiency
within the judiciary, and the ability to enforce contracts".
The NST editorial was very sore with the Asian Wall Street Journal editorial
on the Index, which said:
"The combination of political strangulation and economic protectionism
espoused by Prime Minister Mahathir Mohamed has seriously undermined the
country's reputation among investors. This is no small blip on the radar
screen: trade barriers, property rights protections, banking and finance
restrictions and bizarre ethnic preference regulations have all gotten
worse. Unfortunately, we can’t see any rapid improvements from Kuala Lumpur
on the horizon."
But Malaysian MPs and the nation are entitled to an official government
response to the damning 2001 Index on Economic Freedom, and in particular
on its equally damning country commentary on Malaysia, which states:
"Malaysia is entering the new millennium on a trend of increased
government control of both the economy and political discourse. To stabilize
his regime, Prime Minister Mahathir Mohamad prosecuted and jailed his political
rival Anwar Ibrahim. He also imposed capital controls on the economy; the
subsequent economic recovery has been generated largely by generous public
spending and the global demand for electronics. But Mahathir’s prescriptions,
although successful in the short term, may have succeeded only in postponing
necessary adjustments in Malaysia’s political and economic structures.
His crusade against Anwar and subsequent hounding of "traitors" within
his party have politicized Malaysia’s judiciary, and his political coalition,
the United Malay National Organization (UMNO), has been shaken by an election
that, while victorious, came at the cost of alienating ethnic Malays, who
form the party’s political base. This victory could lead to the eventual
dissolution of Mahathir’s coalition, and the politicization of the judiciary
could erode the rule of law. The institution of government control of the
economy has worried many foreign investors, and economists note that other
countries in the region have attracted more foreign investment. Through
his brutal tactics, Mahathir has assured his personal political survival,
but most likely at the long-term expense of the country. Government consumption
has been decreasing; however, the average tariff rate has been increasing,
and the country’s banking and finance, property rights, and regulation
scores are all 1 point worse this year. As a result, Malaysia’s overall
score is 0.30 point worse this year. Malaysia is now a mostly unfree economy."
The Malaysian Parliament would be remiss in its constitutional and national
responsibilities if it ignores the damning 2001 Index of Economic Freedom,
declaring that Malaysia is not only politically but also economically "mostly
unfree" by not conducting a full debate.
*Lim Kit Siang - DAP National Chairman