Still a long way to go

US think tank, Heritage Foundation and The Wall Street Journal team up for the 2004 Economic Index, but results show that the Middle East still lags behind.

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By  John Irish Published  January 12, 2004

Middle East governments will need to look carefully in the mirror in 2004. The annual Economic Freedom Index recently published by US think tank Heritage Foundation in conjunction with the Wall Street Journal claims that economic freedom across the Middle East and North Africa (MENA) in 2003 showed little change over the previous years. Although eight nations improved nominally, a further eight saw their ratings drop. Of the 18 MENA countries polled, none were classified as free. “A country’s level of economic freedom is critical,” said Marc Miles, editor of the survey and director of the Center for International Trade and Economics, Heritage Foundation. “Countries with the highest levels of economic freedom also have the highest living standards.” Top of the MENA tree was Bahrain, which has seen its financial sector eclipse oil as the main source of income, although its overall score declined from the 2003 index. The report puts its lofty position down to maintaining “a pro-business environment to attract foreign investment and [also having] strong property rights, low regulation and a low level of activity in the informal market.” Nevertheless, the report adds that Bahrain could improve by privatising more industry to further encourage foreign investment. As a whole the region’s highest climber was Israel, which moved into second place, highlighting Finance Minister, Benjamin Netanyahu’s increased privatisation and less public sector growth as key factors for the rise. In what will appear a blow to the United Arab Emirates’ aspirations to become the region’s financial centre, its economic freedom worsened by the third largest margin worldwide. The study places the blame on a fall in the UAE’s ratings in the fiscal burden of government, banking and finance, wages and prices and informal market categories. Meanwhile Lebanon ranked not only below most Arab and Gulf states, but was classified as one of “most unfree’ nations globally, coming just above Iran, Syria, Algeria, Egypt and Libya in the MENA region. “Lebanon maintains the most liberal banking regime, but its government significantly influences the judiciary,” said the index. Recent developments in Libya’s international politicals could well see a reversal in fortunes for 2004. The North African state propped up the entire table as the least free nation across the world. Despite a low inflation rate, Tripoli’s economy is considered “repressed” with the fiscal burden of government worse than in 2002. The index ranks nations according to ten factors, including trade policy, government intervention in the economy, monetary policy, capital flows and foreign investment, banking and finance, wages and prices, property rights regulation and informal market. One drawback in the survey is that only in five factors does the study take into account sources such as the World Bank and Economic Intelligence Unit. All in all, worldwide, the Index shows that economic freedom has improved in 75 countries, declined in 69 countries and remained the same in 11. Of the 155 countries observed, 16 are now classified as “free,” 55 are “mostly free,” 72 are “mostly unfree,” while 12 remain “repressed.” The world’s freest economies were Hong Kong, Singapore and New Zealand. North America and Europe boasted seven of the top ten mostly economic free nations, while sub-Saharan Africa had no free economies. “Smaller countries are the innovative countries and are showing the larger [nations] the way to go,” said Marc Miller.

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