By Susan Fenton
HONG KONG, Jan 13 (Reuters) - Hong Kong was rated the world's freest economy on Tuesday for a 15th straight year in a ranking by the U.S.-based Heritage Foundation while the United States dropped to sixth place and is likely to fall substantially next year following its bailout of financial and car companies.
The Washington-based Heritage Foundation maintains that economies with the highest level of economic freedom generate the highest levels of prosperity and per capita income.
The 2009 Index of Economic Freedom, published by the Heritage Foundation and the Wall Street Journal, was based on data collected between July 2007 and June 2008 and so does not reflect the deepening global financial crisis since the collapse of Lehman Brothers in September.
"It is highly likely that the U.S., the UK and other countries with high levels of government intervention (during the financial crisis) will have substantially lower scores in next year's economic freedom index and will have a lower level of prosperity as well. That is something we are quite concerned about," Terry Miller of the Heritage Foundation told a news conference in Hong Kong.
The United States dropped to sixth place in this year's index from 5th place a year ago while the United Kingdom came 10th out of 179 economies that were ranked.
The foundation said it opposed Washington's decision to
bail out U.S. financial firms and carmakers hit by the
financial crisis, arguing that bankruptcy offered a better way
to financially reorganise a company without distorting the
market. General Motors
Feulner said that governments formulating fiscal stimulus packages to help companies weather the financial crisis should include exit strategies. He praised Hong Kong for putting a two-year limit on its decision to guarantee bank deposits in the territory and for not banning short selling of Hong Kong-listed stocks during the crisis.
Hong Kong has consistently been ranked the world's most free economy since the index launch 15 years ago. It is one of the easiest places to start and liquidate a business, government intervention and corruption are low, as are trade barriers and taxes, and social mobility is high, the foundation said.
An autonomous region of mainland China, Hong Kong does not have democracy but the ranking does not include political freedom.
Open, trade-dependent economies Hong Kong and Singapore, which retained second place in the index, are both in recession but the Heritage Foundation said they were likely to recover faster from the global downturn because their openness gave them flexibility.
Asia's economic powerhouses China and India still have some way to go and were ranked 132 and 123rd respectively with their scores little changed from last year. China has cut tariffs but needs to open up its financial sector and improve property rights while in India tariffs are too high and foreign investment is overly regulated.
North Korea was ranked bottom of the index. Zimbabwe saw the biggest decline in its ranking, putting it in next-to-last place following new restrictions on business and fiscal freedom and the world's worst hyper-inflation. Rank Economy Overall score (out of 100) 1 Hong Kong 90.0 2 Singapore 87.1 3 Australia 82.6 4 Ireland 82.2 5 New Zealand 82.0 6 United States 80.7 7 Canada 80.5 8 Denmark 79.6 9 Switzerland 79.4 10 United Kingdom 79.0 (Editing by Tomasz Janowski)