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Politics

Hong Kong risks loss of leadership in 'economic freedom'

Weakened judiciary opens way for Singapore in Heritage Foundation ranking

HONG KONG -- Hong Kong's long run at the top of the Heritage Foundation's annual "Index of Economic Freedom" appears in jeopardy as perceptions of the city's judiciary sour.

Hong Kong's lead position in the rankings, starting from the first version published in 1995 by Heritage, an influential conservative think tank based in Washington, is a perpetual feature of the city's marketing campaigns to attract foreign businesses. While Hong Kong retained the No. 1 spot in the 2019 edition published over the weekend, its lead over eternal rival Singapore narrowed significantly.

What nearly cost Hong Kong the crown this time was a steep fall in its scoring for "judicial effectiveness." While the city finished at or near the top in "fiscal health," "business freedom" and many of the other nine criteria Heritage uses in its rankings, the score for its courts was almost level with that of China after a surprising jump in Beijing's rating.

"It would seem to indicate there is a blurring in people's minds about whether you can differentiate between China and Hong Kong on an indicator like this," said Terry Miller, a former U.S. diplomat who now serves as director of both Heritage's data analysis and its trade and economics units.

Speaking at a briefing in Hong Kong, Miller added: "It is very important that the Hong Kong government and businesses and really everyone in Hong Kong make sure that they are making clear the differences between this economy, this regulatory environment, this judicial environment and that which prevails on the mainland."

Later Monday, after meeting with Miller and Heritage Founder Edwin Feulner, Hong Kong Chief Executive Carrie Lam issued a statement saying that "independent judicial power" is protected under the city's constitution. "The fairness and impartiality of the judiciary, which is free from any interference, are beyond doubt," the statement said.

Beyond Hong Kong and Singapore, the Asia-Pacific region was well-represented in the top 10 of Heritage's rankings, with New Zealand coming in third, Australia fifth and Taiwan tenth. China was No. 100.

North Korea, however, was dead last at No. 180, well behind its nearest competitor, while East Timor was No. 172.

Heritage gives equal weight to the 12 criteria it uses to evaluate economic freedom, with each measured on a scale of zero to 100. Judicial effectiveness in turn is evaluated across three measures: judicial independence, "quality of the judicial process" and "favoritism in decision of government officials."

The scores are derived from surveys of businesspeople and other observers, with Heritage citing the World Economic Forum's "World Competitiveness Report" and the World Bank's "Doing Business" surveys as key sources for judicial assessments.

Hong Kong received a 75.3 in judicial effectiveness, down 9 points from last year. Singapore's score edged up slightly to 92.4. China was awarded a 75.2, up 9.8 points even though Heritage's report noted that its "judicial system is heavily influenced by government agencies and the Chinese Communist Party."

Singapore also trumped Hong Kong on the related category of "government integrity," with a 95.1 to its northern rival's 83.8. China received a 49.1 for this.

The Heritage Foundation said Hong Kong's autonomy "has been strained by [Beijing's] political interference in recent years."   © Reuters

Saying that the results "reflect perceptions of business people," Miller said, "What's happened during the period we were measuring was that the perception people have about Hong Kong's judicial effectiveness declined."

Neither he nor his colleagues referred to specific incidents, but Heritage's report itself noted that Beijing curbs the role of Hong Kong's courts by asserting the right to make final interpretations on legal issues. The report said that Hong Kong's autonomy "has been strained by [Beijing's] political interference in recent years" and it highlighted the government's move to ban a pro-independence political party last year.

The judicial scores for Hong Kong and China were stable last year in the surveys by the World Bank and World Economic Forum.

Though this was not a change from the previous survey, the "Doing Business 2019" report was especially positive about the ability of companies to enforce contracts in China, with the country ranking sixth in the world in that area while Hong Kong was only No. 30. The forum, on the other hand, in its latest report ranked Hong Kong far above China on various legal criteria including judicial independence and the efficiency of challenging regulations and settling disputes.

Jack Lange, a corporate partner with U.S. law firm Paul Weiss who served as chairman of the American Chamber of Commerce in Hong Kong last year and attended Heritage's presentation on Monday, expressed surprise at the group's findings.

"Heritage may need to refine its methodology in this area because there is no question that Hong Kong is still head and shoulders above the mainland in judicial effectiveness," he said.

Asked to forecast whether Singapore will top the 2020 economic freedom chart, Anthony Kim, the index report's editor, said, "It would be very hard for us to predict what is going to happen next year."

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