Malaysia Achieves Record Economic Freedom Score but Drops to 35th Globally

Malaysia has achieved a record economic freedom score of 7.57 out of 10, according to the Center for Market Education (CME). This marks the highest score since the inception of the Economic Freedom of the World report in 1970. However, the country slipped two places to 35th out of 165 countries, as other nations implemented reforms at a faster pace, the CME reported.

The score improvement from 7.55 last year reflects significant progress since the early 2000s, when Malaysia's score fell to a low of 6.12 in 2002 following the Asian financial crisis. At that time, capital controls and policy shocks severely impacted the economy. In 2009, Malaysia was ranked 97th but has steadily climbed since then, becoming the second-freest economy in ASEAN, trailing only Singapore, which ranks third globally.

“Malaysia's monetary stability and relatively flexible labour market are real assets.”Carmelo Ferlito, CEO, Center for Market Education

According to CME CEO Carmelo Ferlito, while the record score is a positive development, it should not lead to complacency. He noted that Malaysia's monetary stability and flexible labor market are advantages, but the heavy involvement of government-linked companies and state-owned banks in the economy remains a concern. “If Malaysia wants to join the top 20, it must reduce state ownership, keep the civil service rules-based and impartial, simplify its tariff structure, and open its markets to competition,” Ferlito stated.

“If Malaysia wants to join the top 20, it must reduce state ownership and open its markets to competition.”Carmelo Ferlito, CEO, Center for Market Education

In comparison to its regional peers, Malaysia's score exceeds the ASEAN average of 6.99. Other countries in the region include Thailand at 57th, Brunei and the Philippines at 61st, and Indonesia at 72nd. This positioning highlights Malaysia's relative economic freedom within Southeast Asia, although it faces challenges from faster reforming nations.

The Heritage Foundation's index also reflects Malaysia's economic landscape, ranking it 45th globally with an overall score of 65.7, indicating a moderately free economy. This index assesses various aspects of economic freedom, including rule of law, government size, regulatory efficiency, and market openness. Malaysia's property rights and business freedom scored relatively well, but government integrity remains a significant area for improvement.