Hong Kong and Singapore hold first and second spot respectively for being the freest places to do business, according to the Index of Economic Freedom published by the Heritage Institute, a Washington DC-based think tank, and Dow Jones & Co, the publisher.

In third place is Australia, followed by New Zealand, Switzerland, Canada, Ireland, Denmark, the US, and Bahrain. Other Asian region jurisdictions in the top 20 rankings are Macau (19) and Japan (20). Taiwan is ranked twenty-fifth, and in thirty-fifth place is South Korea.

The 2011 Index of Economic Freedom report is based on policy developments since the second half of 2009, a period that covers a rising tide of regulations in countries such as the UK, US and continental Europe. The index is weighted for characteristics such as respect for private property rights, freedom of contract, competitiveness, the rule of law and openness. It does not cover, however, political or social freedoms, such as issues to do with censorship and voting rights.

The global average economic freedom score for the latest index is 59.7, a 0.3 point rise from the year before, but below the peak level of 60.2 earlier in the previous decade.

“In fact, economic freedom has taken an upturn in the majority of the economies that are assessed in the in the 2011 Index. Those gains are particularly welcome and significant given the fact that the biggest improvements have been achieved in developing and emerging economies where poverty reduction is a top priority,” according to a note on the report.

The largest gainer in economic freedom in the period covered by the report was Rwanda, at +3.6, to 62.7.

The heaviest loser, meanwhile, was Iceland (-5.5), reflecting the turmoil of its banking industry after the financial storms of 2008; other big declines were registered by Kuwait, Ireland, and the UK. In the UK’s case, the country witnessed a large increase in taxes and regulatory activity. For example, the country has imposed an annual levy on non-domiciled residents and increased taxes on the high paid.

The report noted that all regions of the world, apart from north America and Europe, enjoyed rises in economic freedom.

The world’s least free country, in economic terms, is North Korea, with a grade of 1.0. The second-worst country for economic freedom is Zimbabwe, at 22.1.