MALAYSIA, which has seen its economic freedom ratings slip over the past decade, could be paying for it in lower gross domestic product (GDP) growth rates over the longer term, a prominent economist said yesterday.
Wolfgang Kasper, professor emeritus at Australia’s University of New South Wales and a proponent of greater economic freedom that includes an open economy and free market with minimal restrictions and government intervention, coupled with secure private property rights, said it was time for Malaysia to study the situation and arrest the decline.
“It’s never too late,” he said.
Otherwise, he said, the country’s medium to long-term growth prospects could be less rosy than previously.
Kasper was speaking to reporters after delivering a lecture at the Malaysian Institute of Economic Research in Kuala Lumpur.
“Countries that have reached the level of income that Malaysia has find it very hard to have future economic growth and be attractive to international capital.
“The only way to keep growing is to liberalise ? and work hard at creating more economic freedom,” he said.
According to a recent Gwartney-Lawson study, Malaysia has become less free economically over the 11 years from 1990 to 2001. Its economic freedom ratings had slipped faster than Japan and Thailand and matched Indonesia’s fall of 0.9 points as among the worst performers. In contrast, Hong Kong, Singapore, Taiwan, South Korea and China had become economically free over the same period.
A Heritage Foundation report recently has also reaffirmed Malaysia’s poorer showing in the economic freedom indices.
Kasper said economic freedom measures were often positively correlated with per-capita income, real GDP growth rates and eradication of poverty, and hence a good gauge of how the economy would perform in the future.
He said that countries which had protected private property rights, fostered free markets and ensured the equality of all citizens before the law had invariably achieved good economic growth.
Governments, he said, should a play the role of the enabler, and be “pro-competition” – which gives a level playing field for all.
Heavy bureaucratic regulation, meanwhile, should be minimised, he said. Quoting a study, Kasper said “85% of the differences in material living standards between the richest and poorest countries on earth can be ‘explained’ by differences in measures of economic and political freedom”.