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

(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 unfree" nations.

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".

It said:

"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."

• Trade policy,
• Fiscal burden of government,
• Government intervention in the economy,
• Monetary policy,
• Capital flows and foreign investment,
• Banking and finance,
• Wages and prices,
• Property rights,
• Regulation, and
• 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;
        Mostly Unfree—countries with an average overall score of 3.00 to 3.95; and
        Repressed—countries with 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 free" category.

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."

"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."

(5/11/2000)