Vietnam scores low in global economic freedom ranking

The Hanoitimes – Vietnam’s economic freedom score stands at 53.1, making its economy the 141st freest in the Heritage Foundation’s 2018 Index of Economic Freedom report.
Vietnam is ranked 35th among 43 countries in the Asia–Pacific region, with its overall score below the regional and world averages.
Its overall score has increased by a mere 0.7 point, with improvements in fiscal health, government integrity, and judicial effectiveness offsetting lower scores for trade freedom, property rights, and labor freedom indicators, according to the report.
Despite its low score, Vietnam is transforming itself into a more market-oriented economy and has improved its score in the 2018 Index, capitalizing on its gradual integration into the global trade and investment system.
The economy has registered annual growth rates averaging about 6% over the past five years. However, to maintain such high growth rate, Vietnam has to step up reform efforts in partial privatization of state-owned enterprise (SOEs), reduce red tape, increase business-sector transparency, reduce the level of nonperforming loans in the banking sector, increase financial-sector transparency, liberalize the trade regime, and increase recognition of private property rights.
The Heritage Foundation also stresses that “strengthening institutions to make the regulatory regime more efficient, shrinking and making more transparent the bloated and opaque bureaucracy, and bolstering the weak judicial system would also promote economic freedom in Vietnam.”
Four groups of criteria – each containing several criteria – are used to assess the economic freedom, namely rule of law, government size, regulatory efficiency, and open markets.
Specifically, in the group of Regulatory Efficiency, Vietnam earned high scores, at 60.4 for Labor Freedom, 63.2 for Business Freedom, and 75.4 for Monetary Freedom. Meanwhile, in the Government Size group, the Fiscal Health criteria gets a low score of 27.3, while in the Open Markets group, the criteria of Investment Freedom is also low, with a score of 25.0.
The Heritage Foundation’s index put Hong Kong at the top position as the freest economy globally, followed by Singapore and New Zealand.
Economic freedom is closely related to openness and limited government, as well as advancing entrepreneurial activity. Given this relationship, it should be apparent that a government’s most effective stimulus activity is not increasing its own spending or putting in place more layers of regulation, both of which reduce economic freedom. The best results are often achieved instead through policy reforms that limit the size of government and create greater economic dynamism in the private sector.
There is a robust relationship between improvements in economic freedom and levels of economic growth per capita. Whether long-term (20 years), medium-term (10 years), or short-term (five years), the relationship between positive changes in economic freedom and rates of economic growth is consistent. This relationship holds over all levels of development.
Improvements in economic freedom are a vital determinant of whether or not countries will achieve rates of economic growth sufficient to reduce poverty. As the global economy has moved toward greater economic freedom over the life of the Index, the world economy has nearly doubled in size. This progress has lifted hundreds of millions of people out of poverty and cut the global poverty rate in half.
The link between economic freedom and overall human development is clear and strong. People in economically free societies live longer, have better health, are able to be better stewards of the environment, and push forward the frontiers of human achievement in science and technology through greater innovation.
Economically freer countries that open their societies to new ideas, products, and innovations have largely achieved high levels of social progress. It is not massive redistribution of wealth or government dictates that produce the most positive social outcomes. Instead, mobility and progress require lower barriers to market entry, freedom to engage with the world, and less government intrusion.