South Africa's economic freedom ranking has dropped five places in the past year to 54 out of 141 countries, according to the Economic Freedom of the World: 2008 Annual Report, released on Tuesday by the Free Market Foundation.

"If we want prosperity, if we want to reduce poverty, we must have higher growth, we must have more investment and we must have economic freedom," said FMF executive director Leon Louw.

"We must climb up that economic freedom ladder, not slide down it," he said.

The report ranks Hong Kong number one, followed by Singapore and New Zealand. Zimbabwe was last, behind Angola and Myanmar.

The report was produced by Canada's Fraser Institute in co-operation with independent institutes in 75 nations and territories, including the FMF.

It uses 42 different measures to create an index ranking countries around the world based on policies that encourage economic freedom.

Freedom are personal choice

The cornerstones of economic freedom are personal choice, voluntary exchange, freedom to compete, and security of private property.

Economic freedom is measured in five areas: size of government, legal structure and security of property rights; access to sound money; freedom to trade internationally; and regulation of credit, labour and business.

Research showed that individuals living in countries with high levels of economic freedom enjoyed higher levels of prosperity, greater individual freedoms, and longer life spans.

This year's report also contained new research showing the impact of economic freedom on poverty reduction.

"Economic freedom is one of the key building blocks of the most prosperous nations around the world," said Louw.

"Countries with high levels of economic freedom are those in which people enjoy high standards of living and personal freedoms."

He said countries at the bottom of the index faced the opposite situation – their citizens were often mired in poverty, governed by totalitarian regimes and had few, if any, individual rights or freedoms.

Sapa