The organisation, which promotes low taxes and limited government regulation, said on Tuesday the US was tied for 12th place with Switzerland in the 2005 Index of Economic Freedom.

Hong Kong retained its top ranking in the survey, followed by Singapore, Luxembourg and Estonia. Ireland and New Zealand tied for fifth place, followed by Britain, Denmark, Iceland and Australia in the top 10. Chile ranked 11th.

"Perhaps the greatest surprise in this year's index is the failure, for the first time, of the United States to make the top 10," the Washington-based research group said.

Hong Kong and Singapore remain
the world's two freest economies

"Although its score remains unchanged from last year, and it is still classified as free, the United States - now in a tie for 12th place with Switzerland - has been 'treading water'," according to the editors, "and hence has been surpassed by countries willing to open their economies still further".

The report, compiled with The Wall Street Journal, "demonstrates that the countries with the greatest degrees of economic freedom also enjoy the highest living standards", Heritage said.

"During the last nine years, countries that have done the most to improve their scores on the index's 10 measures of economic freedom have, in general, experienced the highest rates of economic growth. Iceland, for example, has improved steadily, producing a compound growth rate of 3.5%."

Increased freedom

The report showed "a net increase in global economic freedom" overall in the global economy, with 86 scoring better this year than last year and 57 countries getting lower scores.

The report "demonstrates that
the countries with the greatest degrees of economic freedom
also enjoy the highest living standards"

The Heritage Foundation

Overall, 17 countries are classified as having "free" economies, 56 as "mostly free," 70 as "mostly unfree" and 12 as "repressed".

The criteria used include free trade; taxes; government intervention in the economy; monetary policy; capital flows and foreign investment; property rights; and informal market activity.

Among European nations outside the top 10, Germany ranked 18th, Italy 26th and France 44th.

Japan, the world's second-largest economy, ranked 39th in the survey.

The Asia-Pacific region offered sharp contrasts, with the two highest-ranked economies but also the two lowest-rated countries in the world, Myanmar and North Korea.