Economic freedom in Arab world

According to the annual “Economic Freedom of the Arab World” report published by the Fraser Institute, an independent Canadian public policy think-tank, Bahrain, Jordan and the United Arab Emirates (UAE) are the most economically free nations in the Arab world. The report is published in partnership with the Friedrich Naumann Foundation for Liberty (FNF) and the International Research Foundation (IRF) of Oman.

The annual report compares and ranks Arab nations in five areas of economic freedom: size of government, including expenditures, taxes, and enterprises; commercial and economic law and security of property rights; access to sound money; freedom to trade internationally; and regulation of credit, labour, and business.

“The “Arab Spring” continues to inspire both hope and fear,” the report began, noting that it is a critical time for Arab-region economies. “Over time, economic freedom itself directly supports other freedoms, democracy, and stability by changing the way societies function,” they write.

This year enough data were available to rank 19 nations, up two from last year. However due to events in Syria, the group decided not to include the country in the rankings this year. The 18 subsequently ranked countries included Iraq and Sudan for the first time. This is the tenth report specifically on economic freedom in the Arab world.

Most economically free countries:

In this report, the Kingdom of Bahrain topped the list of the most economically free nations in the Arab world with the score of 8.0, a slight decrease from 8.1 in last year’s report. Despite limited natural resources compared with its neighbors, Bahrain is regarded as the financial hub of the region, with a large number of international banks operating for the entire Gulf region out of Bahrain.

The United Arab Emirates (UAE) shared the first place with Bahrain with a score of 8.0, keeping the same score it had in last year’s report while moving up one rank in the index this year. The UAE remains a leading destination in the Arab world for commerce and trade despite the turbulent global financial system, which has affected its financial position to an extent. The Hashemite Kingdom of Jordan shared first place with Bahrain and the UAE this year, with a score of 8.0 points, up from the second place in last year’s report.

In fourth place came the State of Kuwait with a score of 7.8, keeping the same position as last year, and in fifth place came Lebanon, which moved one place up with a score of 7.7.

At bottom of the list is Algeria, the least economically free nation in the Arab world with a score of 5.8. Mauritania and Iraq ranked 16th and 17th, with scores of 6.3 and 6.1, respectively.

Size of government and other factors:

The other main factors researched were Size of Government; Legal Structure and Security of Property Rights; Access to Sound Money; Freedom to Trade Internationally; and Credit, Labour, and Business. Bahrain placed on top for Credit, Labour, and Business again this year, with Saudi Arabia and Oman following.

In terms of Size of Government, Lebanon came in first in this report with a score of 9.0 points, the same score it had in last year’s report. Sudan came in second with a score of 8.8, a large jump from its 7.7 in last year’s index. Jordan came in third, losing its second position in last year’s index with a slight decrease in score from 8.0 to 7.9.

In terms of the Legal Structure and Security of Property Rights, Saudi Arabia, Oman, and Kuwait kept their places at first, second, and third, respectively, with scores of 8.2, 8.0, and 7.8. For Access to Sound Money, Bahrain came in first with a score of 9.3; Kuwait came in second with a score of 9.2 and the Palestinian Territories came in third with a score of 9.1, slightly better than last year’s 9.0 points.

In the field of Freedom to Trade Internationally, Bahrain came in first with a score of 8.4 points, sharing this place with Yemen after both nations kept the same scores they had in last year’s report. The United Arab Emirates came in third with a score of 8.2 points.

Overall, Bahrain, Jordan and the UAE dominated the rankings, though Bahrain and Jordan hovered and sometimes dipped from last year’s scores, and the UAE moved up. Though included in the report, Libya, Somalia, Syria, and Palestine were not included on the rankings for a variety of factors, often because data proved unavailable.

The full report, including country ranking in each of the principle five sectors as well as country overviews, can be found at freetheworld.com.

The report was met with welcome reception by the Bahraini government. “Bahrain’s ranking reflects the Kingdom’s commitment to maintaining a liberal business environment and to strengthening its core business fundamentals, offering an attractive base for accessing the wider GCC market,” H.E. Kamal bin Ahmed, Minister of Transportation and Acting Chief Executive of the EDB, said.

About: The Fraser Institute is a Canadian-based policy think tank that publishes the annual Economic Freedom report and corresponding regional reports. The Economic Freedom Network is devoted to promoting economic freedom around the world. The network has member institutes in over 80 nations. Their annual report, Economic Freedom of the World, uses 42 distinct pieces of data to measure economic freedom in 141 nations.

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