Hong Kong has ranked as the world’s freest economy in The Wall Street Journal and Heritage Foundation’s Index of Economic Freedom for 17 consecutive years, since the inception of the index in 1995.1Being economic free helps the successful of Hong Kong. Hong Kong is the richest region in the world. However, In World Competitiveness Yearbook 2013 published by IMD, the ranking of Hong Kong competitiveness is dropped from the top to the third.2 In the following, I will discuss and explain why it is not enough for Hong Kong to remain successful by staying at the top globally in its economic freedom by talking about the drawbacks and problems caused by the economic freedom.
How economic freedom helped Hong Kong be successfully
Hong Kong’s economic freedom score of 89.3 keeps it atop the Index rankings for the 19th consecutive year.3 Staying at the top globally in its economic freedom boosts the investment from other place including mainland China and overseas. It helps the financial sector remains highly competitive and well capitalized, serving as a leading global hub.
Problem Caused by economic freedom
Problem of Monopoly
Hong Kong is facing a problem that many century-old shops and Small and Medium Enterprises close down and Hong Kong young people finds it difficult to start an undertaking because of the high rates. The shopping malls monopolized by chain store because they are the only one which can afford the land rates. It is especially serious in the shopping malls under the management of the Link REIT. 70% of shops in shopping malls under management of the Link REIT are chain stores.It is a serious problem that the Link REIT manages the shopping malls near to the public housing estates which suppose people living in are not wealth and need the help from the government. However, the price of products in the chain stores is so high that some families are difficult to afford. Monopoly is not a healthy economic and social phenomenon which makes Hong Kong unsuccessful. The Hong Kong government may have to reference to the Antitrust Law in USA, Mainland China, European Union. So, the idea of Big Market, Small Government or staying at the top globally in its economic freedom is not the best way.
Problem of Industry homogeneity
Because of the economic freedom and positive non-interventionism, Hong Kong government ignores the importance of diversifying industry and causes Industry homogeneity in Hong Kong. Hong Kong still relies on the financial and services industry. It will have a big problem when the global business fluctuates. For example, in the Asian Financial Crisis in 1997, Hong Kong fell into economy recession. Unemployment rate rapidly increase and many Hong Kong people became negative asset because their assets especially flats were depreciate. Relying on the financial and services industries is not a good and long-term plan for Hong Kong’s future. Hong Kong free economy boosts the manufacturing industries move to the mainland or other regions that the daily necessaries and food are importing from others place that it is dangerous when Hong Kong faces a diplomacy problem. Also, many Hong Kong people work on speculating activities that bearing a huge risk to face unemployment when the economy turns bad. It is also the problem of Industrial hollowing. It is a drawback of economic freedom.
Comparing to other countries in Asian Tigers, Hong Kong is the only region that give up the industry of High-Technology but mainly relies on the financial and services industry. The level of knowledge-based economy greatly falls behind than others. Although Hong Kong government has mentioned that she want to develop the high-technology industry, high-tech industry is underdeveloped. If Hong Kong still stays at the top globally in its economic freedom and the government still adopting the positive non-interventionism which without providing vigorous helps to the high-tech and other related company, it is really impossible for Hong Kong businessmen to develop the high-tech industry themselves as it need a huge capital and there are many long-term investments. So, there will be the attendance of
In the changing world, other regions or countries keep making progress and go through the direction of development. However, seems that Hong Kong government is still losing and can not find a proper direction. However, the government has to think of the long term plan and direction of Hong Kong as fast as possible to find out that do we really need to stay at the top globally in its economic freedom. Are we going to keep relying on the financial services industry only? Or we have to boost other industries, for example, high-tech?
Free economy has drawbacks, for example, monopoly and industry homogeneity. In the society, there are some troubles caused by free economy which makes Hong Kong imperfect. If it continues, it may bring serious social problems. To be a healthy and successful city, it should balance the environment, society and economic aspects.
Finally, before the decision of the long-term plan is made, the government has to balance the wide of freedom in the economic aspect and think of some methods to avoid the negative impacts of economic freedom in Hong Kong. That’s mean it is not enough for Hong Kong to remain successful by staying at the top globally in its economic freedom only.