Thailand ranked 75th-freest economy

Published in cooperation with The Wall Street Journal, the report ranked Thailand 12th out of 42 countries in the Asia-Pacific region. With a score of 62.4 out of 100, its economy is considered the 75th-freest among 178 economies by the conservative US think-tank.
However, Thailand’s overall score is higher than the world and regional averages, which are 60.4 and 58.8 respectively.
The report noted that Thailand’s economic-freedom score had declined for three years in a row. Since 2011, it has fallen by 2.3 points. Score declines in most of the 10 “economic freedoms” have been led by double-digit declines in investment freedom and labour freedom and a nearly double-digit drop in the control of government spending.
Compared with last year, its score has decreased by 0.9 point, with deterioration in financial freedom, property rights, and the control of government spending outweighing small improvements in six of the 10 “freedoms”, including labour freedom, fiscal freedom, and freedom from corruption.
“Political unrest and conflict between rural and urban voters have led to increased perceptions of corruption and an unsteady investment climate. A growing foreign automobile-manufacturing industry provides evidence of the benefits of increasing economic openness, but the business environment for small entrepreneurs remains difficult due to inefficient business and labour regulations,” the report said.
Hong Kong, Singapore, New Zealand, Australia and Switzerland were the top five “freest” economies in the world, while those at the bottom of the list were Venezuela, Cuba and North Korea.
Notably, Hong Kong’s overall score was as high as 89.6, while Singapore’s was 89.4. Among Asean members, Thailand also trailed Malaysia (70.8) and Brunei (68.9).
The report claimed economic freedom had a strong correlation with a country’s prosperity and could lead to positive outcomes in the areas of health and education.
The index is based on 10 indicators in four pillars – rule of law, limited government, regulatory efficiency and open markets.
Thailand’s score dropped in the first pillar, as “corruption and graft are widespread at all levels of government and society amid unprecedented levels of political instability”.
“Before a May 2014 military coup replaced the democratically elected government, the independent judiciary had been generally effective in enforcing property and contractual rights but remained vulnerable to political interference. Private property has generally been protected, but the legal process is slow,” the report said.
In the “limited government” pillar, the report suggested Thailand needed to do more in raising tax revenues, which now equate to only 15 per cent of the domestic economy. This limits the government spending to 24.9 per cent of domestic output.
Scores improved in the “regulatory efficiency” pillar, thanks to the ease in forming a business. However, the report noted that licensing requirements remained onerous. Reform of the relatively rigid labour market has also lagged.
“The new military government imposed price controls and expanded its power over state-owned enterprises (for example, in the utility, energy, telecommunications, banking, agriculture, and transport sectors) that account for more than 40 per cent of GDP.”
In the “open markets” pillar, Thailand showed an improvement in trade openness, thanks to the average tariff rate of 4.9 per cent. But the government restricts foreign investment in many sectors of the economy.
“The financial system is also under strain caused by political instability. Revisions in the Foreign Business Act, intended to open capital markets further to foreign investors, have been largely cosmetic,” the report noted.