Economic Freedom

Dec 2nd, 2006, in Business & Economy, by

Indonesia is ranked 134th worst in the 2006 Index of Economic Freedom and 110th in 2007.

With an overall score of 3.71 on a five-point scale, 1 being best and 5 being worst, 2006’s performance in the rankings represents a decline on 2005’s rank of 3.59, although not quite to the level of 2004’s depths of 3.76.

The rankings broken down into sections:

  • Trade Policy – 3
  • Fiscal Burden – 4.1
  • Government Intervention – 3.5
  • Monetary Policy – 3
  • Foreign Investment – 4.0
  • Banking and Finance – 4.0
  • Wages and Prices – 3.0
  • Property Rights – 4.0
  • Regulation – 4.0
  • Informal Market – 4.5

Indonesia’s trade policy score is 0.5 points worse year on year, and its fiscal burden of government score is 0.7 points worse, these two issues combining to pull down Indonesia’s overall score by 0.12 points.

With its score of 3.71 the Indonesian economy is classed as being “Mostly Unfree” (3-3.99), but not quite at the level of “Repressed” (4-5). Of some of Indonesia’s regional peers Malaysia is ranked 2.98, Philippines is 3.23, Thailand is 2.99. Singapore is ranked the second most free economy in the world with a score of 1.56.


January 17th 2007

The 2007 Index has been released this time using a different system of ranking, a percentage score rather than a 1-5 scale.

The 2007 Index sees Indonesia at 110th position out of 157 countries with a score of 55.1%. It is classed as “Mostly Unfree”.

The report says:

ndonesia scores well in fiscal freedom, freedom from government, and labor freedom. The top income tax rate is high, but corporate tax rates are moderate. Government expenditures are fairly low, and state-owned businesses do not account for a significant portion of total revenues. The labor market operates under somewhat flexible conditions, but employing and firing workers can be costly.

Indonesia is weak in business freedom, investment freedom, financial freedom, property rights, and freedom from corruption. Starting a business takes twice as long as the world average, and regulations are onerous. Foreign investment is restricted, and judicial enforcement is both erratic and non-transparent in its treatment of foreigners. Because corruption is rampant, impartial adjudication of cases is not guaranteed.

The rankings:

  • Business Freedom – 45.7%
  • Trade Freedom – 69.0%
  • Fiscal Freedom – 85.0%
  • Freedom from Government – 90.7%
  • Monetary Freedom – 70.9%
  • Investment Freedom – 30.0%
  • Financial Freedom – 40.0%
  • Property Rights – 30.0%
  • Freedom from Corruption – 22.0%
  • Labor Freedom – 67.5%

4 Comments on “Economic Freedom”

  1. O. Bule says:

    Until Indonesia truly embraces FREE enterprise, it will remain a third world country.

    O. Bule

  2. twenty goin thirty says:

    hey, can anyone give me the full list with other countries in comparison too?

  3. Deacon says:

    An increase in economic freedom doesn’t necessarily imply that people become more free.

    Economic freedom could be increased by:
    – lowering tariffs, making it impossible for some emerging industries to develop. If tariffs were to remain, those emerging industries might become fully developed to a point where they no longer need tariffs.
    – cutting education spending, making it impossible for some families to afford to educate their children. Children who grow up without an adequate education would have fewer job prospects, be less productive and be more prone to exploitation.
    – deregulation, such as removing the minimum wage (for enforcing something that is close to a fair days pay for a fair days work) or having no restrictions on business mergers.
    – allow foreigners to buy up all productive assets and land.
    – allowing sweatshop conditions and child labour to exist.

  4. Jimmy Asmara says:

    Stop corruption and Indonesia will be well off one day but not too soon anyway, May be when the world is ending , it will probably reached the 133rd spot. Just hang in there and be patient.

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