January 16, 2007
WASHINGTON, JAN. 16, 2007-Economic freedom generally advanced in the Middle East and North Africa last year. Yet the region still lags behind much of the rest of the world, according to the 2007 "Index of Economic Freedom" published annually by The Wall Street Journal and The Heritage Foundation.
This year's index provides an even more precise snapshot of economic freedom than its predecessors. Its revised methodology draws upon the best and latest information, including World Bank Data previously unavailable to outside researchers. It also uses a new rating system in which economies are ranked on a 100-point scale, with a higher score representing greater freedom.
The new report pegs the region's overall level of economic freedom at 57.2 (on 100-point scale in which a higher score represents greater freedom). That's significantly below the world average of 60.6.
Israel ranks as region's freest economy with an Index rating of 68.42. It's followed closely by Bahrain, with a score of 68.40. Both countries' economies are characterized as "moderately free" with Israel ranked 37th in the world and Bahrain ranked 39th. The Index found no "free" or "mostly free" economies in the region. The region's lack of economic freedom causes problems, the Index editors note. "The Middle East is second worst among the regions in exports and imports ($24 billion and $21 billion respectively), indicating a lack of economic dynamism," they write.
Indeed, the Index states, the region is "cursed in some ways by enormous natural oil resources. The local populations experience extreme concentrations of wealth and poverty."
The Index categorized three economies in the region-Libya, Iran and Syria-as "repressed." Five other countries-Algeria, Egypt, Yemen, Morocco and Saudi Arabia-were rated as "mostly unfree."
Twelve countries in the region saw their economic freedom scores increase, while 5 declined. Bahrain, Saudi Arabia and Syria all dropped a category. Bahrain fell from "mostly free" to the "moderately free" grouping; Saudi Arabia went from "moderately free" to "moderately unfree," and Syria slipped from "moderately unfree" to "repressed."
Three economies climbed into higher categories. Tunisia, the United Arab Emirates and Lebanon all moved from "mostly unfree" to "moderately free."
As in previous years, the Index ratings reflect an analysis of dozens of economic variables, grouped into 10 categories, although this year those categories have been somewhat modified. The Middle East led the world in only one category: fiscal freedom. But there it led by a wide margin, averaging a 90.4 score compared to the world average of 82.8.
The fiscal freedom category analyses tax burdens on individuals and corporations. The other nine categories examined in the Index are: business freedom, trade freedom, fiscal freedom, freedom from government, monetary freedom, investment freedom, financial freedom, property rights, freedom from corruption and labor freedom. Ratings in each category are averaged to produce the overall Index score.
Worldwide, the average rating for economic freedom held essentially steady, "but there is much room for improvement" the Index editors write. Of the 157 countries ranked, only seven are classified as "free" (a score of 80 or higher). Another 23 are "mostly free" (70-79.9). The bulk of countries-107 economies-are either "moderately free" (60-69.9) or "mostly unfree" (50-59.9). Some 20 countries have "repressed" economies, with total freedom scores below 50 percent.
This is the 13th consecutive year The Heritage Foundation and The Wall Street Journal have published the Index. It's edited by Tim Kane, director of Heritage's Center for International Trade and Economics, Kim Holmes, Heritage's vice president for foreign affairs, and Mary Anastasia O'Grady, a member of the Journal's editorial board and editor of the "Americas" column.
Print versions of the 2007 Index of Economic Freedom (408 pp., US$24.95) can be ordered by calling 1-800-975-8625. Additionally the full text, along with all charts and graphs, is available free via the Internet at www.heritage.org/index. A Spanish language version of the Index will be available online in March.
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