N. Korea has lowest economic freedom among 177 countries–report
The Heritage Foundation releases the 2022 Index of Economic Freedom (The Heritage Foundation’s official website via The Korea Herald/Asia News Network)
SEOUL — North Korea has the lowest economic freedom among 177 countries surveyed around the world, a Washington-based think tank said in an annual report on Monday.
The Heritage Foundation released the “2022 Index of Economic Freedom,” which comprehensively estimates a country’s economic freedom by using 12 indicators across four broad pillars comprising rule of law, government size, regulatory efficiency and market openness.
“North Korea’s economic freedom score is 3.0, making its economy the 177th freest in the 2022 Index. North Korea is ranked 39th among 39 countries in the Asia–Pacific region,” the report said.
“Commercial and business activity is severely repressed, and the country has been ranked lowest in the world every year since the inception of the Index in 1995.”
North Korea’s score is far below the world and Asia-Pacific regional averages, which respectively logged 60 and 58.5 this year.
Article continues after this advertisementIn addition, there was a decline in the country’s economic freedom as the score decreased by 2.2 points from last year’s report.
Article continues after this advertisementThe countries’ economic freedom was classified into five categories: free, mostly free, moderately free, mostly unfree, and repressed.
North Korea is one of the 32 countries, including China and Iran, which are in the economically “repressed” category, while the world economy remains “moderately free” on average.
But Pyongyang’s economic freedom score is far behind others on the list. Venezuela, which was ranked one spot above North Korea for its economic freedom, earned 24.8 points. There is a 21.8 point gap between Venezuela and North Korea.
In the report, Pyongyang scored zero out of 100 points in seven indicators assessing the level of economic freedom. The seven are tax burden, government spending, fiscal health, monetary freedom, trade freedom, investment freedom, and financial freedom.
The Heritage Foundation elucidated that “chronic structural problems beset one of the world’s most centrally commanded and least open economies.”
The report pointed out the North Korean government “commands and dictates almost every part of the economy” and “sets production levels for most products, and state-owned industries account for nearly all GDP.”
The government’s “decades of rigid central planning have ruined industries and left most business equipment in permanent disrepair” and its complete control of the monetary system also “leads to price distortions.”
For instance, the ruling Workers’ Party of Korea, the Korean People’s Army, and members of the North Korean cabinet exclusively operate foreign exchange companies. North Korea’s “large military spending” also depletes the country’s deficient resources.
The report also pointed to the absence of an effective tax system and functioning judiciary, weak rule of law, rampant corruption and bribery, opaque state institutions, growing black markets, and the government’s control of “chattel property” as the major structural problems.
Other obstacles to ensure economic freedom include government-controlled trade and investment flows and highly limited access to financing.
The report underscored the importance of economic freedom as it is highly correlated with a country’s standard of living, income level, and overall well-being.
The average income of the countries which have “free” or “mostly free” economies in the 2022 Index was almost seven times higher than the average incomes of “repressed” economies.
Against that backdrop, the report pointed out the “huge gap in living standard” between the two Koreas “illustrates the benefits of economic freedom versus its absence.”
South Korea was ranked 19th and categorized into having a “mostly free” economy in the report.
This year, Singapore came out on top, followed by Switzerland, Ireland, New Zealand, Luxembourg, Taiwan, and Estonia. The seven countries scored 80 points or more, placing them in the ranks of economically “free.”
The 2022 report was written after examining the countries’ economic policies and conditions between July 2020 through June 2021.
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