2010 Index of Economic Freedom

2010 Index of Economic Freedom
Ambassador Terry Miller Kim R. Holmes, Ph.D.
with Anthony B. Kim, Daniella Markheim, James M. Roberts, and Caroline Walsh

Copyright © 2010 by The Heritage Foundation and Dow Jones & Company, Inc. The Heritage Foundation 214 Massachusetts Avenue, NE Washington, DC 20002 (202) 546-4400 heritage.org Cover images by Dreamstime and iStockphoto ISBN: 978-0-89195-281-7 ISSN: 1095-7308 The Wall Street Journal Dow Jones & Company, Inc. 200 Liberty Street New York, NY 10281 (212) 416-2000 www.wsj.com

Table of Contents

Foreword ................................................................................................................................................ ix Paul A. Gigot Preface ..................................................................................................................................................... xi Edwin J. Feulner, Ph.D. Acknowledgments .............................................................................................................................. xiii Ambassador Terry Miller and Kim R. Holmes, Ph.D. Executive Highlights ..............................................................................................................................1 Chapter 1: Economic Freedom in Uncertain Times ............................................................................9 Ambassador Terry Miller Chapter 2: Trading for Prosperity .......................................................................................................21 The Honorable Elaine L. Chao Chapter 3: Economic Freedom and Crisis Performance in Asia .....................................................31 Derek Scissors, Ph.D. Chapter 4: Access to Information: Vital for Efficient Markets and Economic Reform .................43 James M. Roberts Chapter 5: Defining Economic Freedom ............................................................................................57 Ambassador Terry Miller and Anthony B. Kim Chapter 6: Economic Freedom: Regional Patterns ...........................................................................63 Anthony B. Kim Chapter 7: The Countries .....................................................................................................................79
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Afghanistan ...................................................... 83 Albania.............................................................. 85 Algeria .............................................................. 87 Angola...............................................................89 Argentina.......................................................... 91 Armenia ............................................................ 93 Australia ........................................................... 95 Austria .............................................................. 97 Azerbaijan ........................................................ 99 The Bahamas .................................................. 101 Bahrain ............................................................ 103 Bangladesh ..................................................... 105 Barbados ......................................................... 107 Belarus ............................................................ 109 Belgium ........................................................... 111 Belize ............................................................... 113 Benin ............................................................... 115 Bhutan ............................................................. 117 Bolivia ............................................................. 119 Bosnia and Herzegovina .............................. 121 Botswana ........................................................ 123 Brazil ............................................................... 125 Bulgaria........................................................... 127 Burkina Faso .................................................. 129 Burma.............................................................. 131 Burundi ........................................................... 133 Cambodia ....................................................... 135 Cameroon ....................................................... 137 Canada ............................................................ 139 Cape Verde ..................................................... 141 Central African Republic .............................. 143 Chad ................................................................ 145 Chile ................................................................ 147 China, People’s Republic of ......................... 149 Colombia ........................................................ 151 Comoros ......................................................... 153 Congo, Democratic Republic of .................. 155 Congo, Republic of ........................................ 157 Costa Rica ....................................................... 159 Côte d’Ivoire .................................................. 161 Croatia............................................................. 163 Cuba ................................................................ 165 Cyprus ............................................................ 167 Czech Republic .............................................. 169 Denmark ......................................................... 171 Djibouti ........................................................... 173 Dominica ........................................................ 175 Dominican Republic ..................................... 177
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Ecuador ........................................................... 179 Egypt ............................................................... 181 El Salvador ..................................................... 183 Equatorial Guinea ......................................... 185 Eritrea.............................................................. 187 Estonia ............................................................ 189 Ethiopia........................................................... 191 Fiji .................................................................... 193 Finland ............................................................ 195 France .............................................................. 197 Gabon .............................................................. 199 The Gambia .................................................... 201 Georgia ........................................................... 203 Germany ......................................................... 205 Ghana .............................................................. 207 Greece ............................................................. 209 Guatemala ...................................................... 211 Guinea ............................................................. 213 Guinea–Bissau ............................................... 215 Guyana............................................................217 Haiti................................................................. 219 Honduras........................................................ 221 Hong Kong ..................................................... 223 Hungary ......................................................... 225 Iceland............................................................. 227 India ................................................................ 229 Indonesia ........................................................ 231 Iran .................................................................. 233 Iraq .................................................................. 235 Ireland ............................................................. 237 Israel ................................................................ 239 Italy..................................................................241 Jamaica ............................................................ 243 Japan ............................................................... 245 Jordan .............................................................. 247 Kazakhstan ..................................................... 249 Kenya .............................................................. 251 Kiribati ............................................................ 253 Korea, Democratic People’s Republic of (North Korea) ............................................. 255 Korea, Republic of (South Korea) ................ 257 Kuwait ............................................................ 259 Kyrgyz Republic ............................................ 261 Laos ................................................................. 263 Latvia .............................................................. 265 Lebanon .......................................................... 267 Lesotho ........................................................... 269 Liberia ............................................................. 271

2010 Index of Economic Freedom

Libya ............................................................... 273 Liechtenstein .................................................. 275 Lithuania ........................................................ 277 Luxembourg................................................... 279 Macau.............................................................. 281 Macedonia ...................................................... 283 Madagascar .................................................... 285 Malawi ............................................................ 287 Malaysia..........................................................289 Maldives ......................................................... 291 Mali ................................................................. 293 Malta ............................................................... 295 Mauritania ...................................................... 297 Mauritius ........................................................ 299 Mexico............................................................. 301 Micronesia ...................................................... 303 Moldova..........................................................305 Mongolia.........................................................307 Montenegro .................................................... 309 Morocco .......................................................... 311 Mozambique .................................................. 313 Namibia .......................................................... 315 Nepal ............................................................... 317 The Netherlands ............................................ 319 New Zealand.................................................. 321 Nicaragua ....................................................... 323 Niger ............................................................... 325 Nigeria ............................................................ 327 Norway ........................................................... 329 Oman...............................................................331 Pakistan .......................................................... 333 Panama ........................................................... 335 Papua New Guinea ....................................... 337 Paraguay ......................................................... 339 Peru ................................................................. 341 The Philippines .............................................. 343 Poland ............................................................. 345 Portugal .......................................................... 347 Qatar................................................................349 Romania.......................................................... 351 Russia .............................................................. 353 Rwanda ........................................................... 355 Saint Lucia ...................................................... 357 Saint Vincent and the Grenadines ............... 359 Samoa .............................................................. 361 São Tomé and Príncipe ................................. 363 Saudi Arabia................................................... 365 Senegal ............................................................ 367

Serbia............................................................... 369 Seychelles ....................................................... 371 Sierra Leone....................................................373 Singapore ........................................................ 375 Slovakia .......................................................... 377 Slovenia .......................................................... 379 Solomon Islands ............................................ 381 South Africa ................................................... 383 Spain................................................................ 385 Sri Lanka ......................................................... 387 Sudan .............................................................. 389 Suriname.........................................................391 Swaziland ....................................................... 393 Sweden............................................................395 Switzerland .................................................... 397 Syria ................................................................ 399 Taiwan............................................................. 401 Tajikistan......................................................... 403 Tanzania.......................................................... 405 Thailand.......................................................... 407 Timor-Leste .................................................... 409 Togo ................................................................. 411 Tonga ............................................................... 413 Trinidad and Tobago ..................................... 415 Tunisia ............................................................. 417 Turkey ............................................................. 419 Turkmenistan ................................................. 421 Uganda ........................................................... 423 Ukraine ........................................................... 425 United Arab Emirates ................................... 427 United Kingdom............................................ 429 United States .................................................. 431 Uruguay.......................................................... 433 Uzbekistan...................................................... 435 Vanuatu........................................................... 437 Venezuela ....................................................... 439 Vietnam........................................................... 441 Yemen.............................................................. 443 Zambia ............................................................ 445 Zimbabwe.......................................................447 Appendix ........................................................ 449 Index of Economic Freedom Scores, 1995–2010 ...............................................450 Methodology ............................................. 457 Major Works Cited .................................... 469

Table of Contents

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Foreword

T

here’s no avoiding the truth: The year 2009 will go down as the worst for global economic freedom since the inflation and wage and price controls of the 1970s, and maybe since the industrial policy and monetary chaos of the 1930s. Many governments and their political agents have used the financial panic and recession as an opportunity to reassert control across the private economy. As I write this in November 2009, the damage is still unfolding, though there are some signs that a backlash on behalf of liberty may be building. The political assault began with the Panic of ’08 that frightened voters and created a clamor for governments to do something. Many have responded around the world with a reflation binge, both monetary and fiscal, among other interventions. The monetary stimulus in particular has helped to stem the financial panic and encouraged an incipient recovery. But the very magnitude of the stimulus, and its eventual cost in higher taxes or perhaps inflation, raises doubts about whether the current recovery can become a durable expansion.

The most striking fact of this year is how many governments are repeating policy mistakes from previous eras. The spending spree is rooted in the so-called Keynesian multiplier, which asserts that one dollar of government outlays stimulates 1.5 times that amount in greater output. Harvard’s Robert Barro, among others, demolished this claim a generation ago, but here we go again. Britain’s Labour government has little growth to show for its historic reflation campaign, and with a jobless rate of 10.2 percent amid a tepid U.S. recovery, so far Mr. Barro seems more right than the Keynesians. Meanwhile, the Federal Reserve’s extraordinary and continuing monetary stimulus is causing commodity prices to climb and is giving heartburn to world finance ministers who see their currencies rising sharply against the dollar. A whiff of “beggar thy neighbor” competitive devaluation is in the air, the kind of policy the U.S. last tried in the 1970s to destructive effect. The danger is that the entire U.S. establishment, from the Treasury Secretary to

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The Index of Economic Freedom exists to provide a map for that revival. law and institutions. it is surprising that the U. Gigot Editorial Page Editor The Wall Street Journal November 2009 x 2010 Index of Economic Freedom . It is too soon to know how this will play out. and Margaret Thatcher’s gift for explaining economic liberty to the common man must be relearned by new political leaders. new rules to expand union membership.” In this sense. The Chi- nese can’t afford stagnation.S. The world’s investors can move at the flip of an electronic switch.S. a populist reaction is forming against the willy-nilly expansion of state power. a gigantic new tax on carbon energy. Already in the U. But if a nation could devalue its way to prosperity. The Fed will eventually have to defend the dollar. is also tempting slower growth with its policies across the microeconomy: a de facto government takeover of health care. Milton Friedman must be reread.. nationalization of the mortgage market.S. The U. and much higher taxes to pay for it all. My guess is that this reeducation will become easier as the consequences of the current wave of government intervention become clearer to voters around the world. the very global free-market revolution that America did so much to promote over the past 30 years may be a barrier against a repeat of the 1930s or 1970s. appears to want a weaker dollar in the name of boosting exports.S. the political allocation of capital in energy and autos and so much else. The larger lesson of this painful year is that old economic lessons must be retaught to a new generation. Paul A. But another lesson of Argentina is that a nation’s prosperity must be continually earned and that the rest of the world may not join America if it insists on weakening itself. All of these either had already occurred or were possible at year end. “Decline is a choice.S. prosperity over time. and all impose burdens on private risk-taking and investment that will reduce U. and they have seen the fruits of greater economic freedom.Wall Street. a hostility to freer trade. has fallen only two places in this year’s Index of Economic Freedom. As columnist Charles Krauthammer has put it. India continues to shake off its socialist past and wants no part of Western Europe’s malaise. This reflects the fact that other nations have made similar policy mistakes and perhaps is testimony to the residual strength of U. Amid all of this. but a recurring theme of American history has been resilience and revival. The reality of global competition and instant capital flows means that wise policy decisions will be rewarded faster than ever before. Argentina would be paradise. and its purpose has never been more vital.

there has been little global demand for a shift to central planning or extensive state ownership of private businesses in the name of recovery and stability. It might surprise readers in the United States to know that proposals for greater government control of economic activity have not taken the world by storm. coupled with government bailouts or takeovers of financial firms and auto manufacturers. coming to understand that good objectives can be perverted by bad means. Even in the United States. that the American people were waking up. many have wondered whether the global system of free enterprise could survive what has turned out to be the deepest recession of the post–World War II era. We are again recognizing the dangers of an overgoverned society. The 2010 Index of Economic Freedom documents a pattern of countries around the world holding true to the course of economic liberalization. the late Milton and Rose Friedman were optimistic that freedom would prevail: Fortunately. Though published in 1980. both economic and political. we are waking up. it was clear by the end of 2009. Proposals for nationalization of health care and an energy cap-and-trade program put the United States on a path that diverges sharply from its historical leadership in the quest for greater freedom. They understand the costs of big government and have no intention of giving up economic freedoms only recently won. that reliance on the freedom of people to control their own lives in accordance with their own values is the surest way to achieve the full potential of a great society. Certainly. could be forgiven for doubting the future of capitalism in America.Preface I n the concluding chapter of their book Free to Choose. xi . Too many people in too many countries have lived under such systems too recently. with opposition to big-government programs in health care and climate change increasing. In fact. anyone looking at the massive stimulus spending undertaken in the United States. this observation is astonishingly relevant today. Over the past year.

also positions a country for a quicker and more positive response to short-term stresses. • In chapter 4.D. our free-market system and capitalism are not at the edge of catastrophic breakdown. Political authorities have found themselves increasingly held accountable by those they govern. the 2010 Index contains three extraordinary chapters that examine facets of economic freedom that are particularly relevant to today’s policy debates. The surer path to prosperity and a greater society is the path of freedom: letting individuals decide for themselves how best to achieve their dreams and aspirations and those of their families. now a Heritage Foundation Distinguished Fellow. looks into xii crisis performance among Asian countries and empirically documents that economic freedom. Experience teaches that even the best efforts of central planners and bureaucrats do not lead to sustainable growth. in the worst cases. • In chapter 2. Feulner. Ph.” The 2010 Index of Economic Freedom. “once the idea gets around that we are in a profound crisis and that only ‘drastic action’ by Washington can save us—then it will be time to head for the storm cellars. James Roberts. opening the gates of prosperity to ever more people around the world. Leaders who have not joined the march of freedom have left their citizens lagging behind and even. No other systems that have been tried have come close in terms of providing broad-based prosperity. Research Fellow for Economic Freedom and Growth in The Heritage Foundation’s Center for International Trade and Economics. Chao. President The Heritage Foundation November 2009 2010 Index of Economic Freedom . People in economically free societies live longer and healthier lives. Edwin J. • In chapter 3. countries that have tried that approach have failed economically as well as politically. both to individuals and to societies. Economic freedom reduces poverty. As the late Irving Kristol noted. Such failures are inexcusable—and preventable. They enjoy greater political freedom and can better defend their human rights. Dr. It is that path whose course we map in the Index of Economic Freedom. It is.. As the 20th anniversary of the fall of the Berlin Wall reminds all of us. By dispersing economic power and decision-making throughout an economy. our 16th edition. It represents instead the rejection of dogma and the embrace of diverse and even competing strategies for economic advancement. The Index began to record the worldwide march of freedom and free exchange shortly after the fall of the Berlin Wall. Our confidence in economic freedom is being tested. vital to long-term economic stability and growth. however. provides ample evidence of the benefits of economic freedom. highlights the importance of free trade in fostering economic recovery. Over the past 16 years. But a revitalized commitment to economic freedom is essential to our well-being in the future. and economies with more openness have led the world in a startling burst of innovation and economic growth. Derek Scissors. The Index has witnessed profound advances as the cause of freedom has swept the globe. offers a good starting place from which to reflect on the fundamental principles of capitalism and recommit ourselves to economic freedom. economic freedom empowers ordinary people with greater opportunity and more choices. Economic freedom is not a dogmatic ideology. Economies that have risen up the Index rankings have achieved levels of prosperity far higher than are found in countries where economic freedoms are constrained by the heavy hand of government. explores the critical relationship between economic freedom and the free flow of information. Senior Economic Research Fellow in The Heritage Foundation’s Asian Studies Center.Despite the past year’s follies in responding to the global economic slowdown. stuck in poverty or destitution. like its predecessors. The 2010 Index of Economic Freedom. it has evolved into an essential policy guide that empirically analyzes and demonstrates the link between economic freedom and prosperity in countries around the world. revolutionary in intent and result. In addition to the rankings and analysis of the results. former Secretary of Labor Elaine L.

Daniella Markheim. provided important production assistance. James Roberts. and Ray Walser of the Douglas and Sarah Allison Center for Foreign Policy Studies wrote country background paragraphs and contributed their regional expertise. Under the vision and leadership of Dr. and this 2010 edition. and Amber Schwartz. countless individuals have contributed to the excellence and vitality of the Index. The CITE team of Anthony Kim. Lauren Salz. especially those at The Heritage Foundation. Presiresident of The Heritage Foundation. is the product of collaborative effort and continuing support from people and organizations around the world. Peter Neville. Jin Sun. like its predecessors. In the Kathryn and Shelby Cullom Davis Institute for International Studies. Special Assistant and Policy Coordinator for the Vice President.Acknowledgments T he Index of Economic Freedom is now in its 16th year of publication. Smith. James Phillips. Stephan Isaac. Joshua Robbins. analyzing the results. Feulner. Derek Scissors. and Allison Turbiville also contributed substantial research. and Director Walter Lohman of the Asian Studies Center and Sally McNamara and Brett Schaefer of the Margaret Thatcher Center for Freedom. The Heritage Foundation’s Center for International Trade and Economics (CITE) produces the Index. Interns Charlotte Cannon. Others at The Heritage Foundation also made valuable contributions to this year’s Index. and producing the country reports included in this edition. and Caroline Walsh were responsible for grad- ing the 10 components of economic freedom. Elizabeth Hamrick. the Index has evolved into a key economic policy guide for various readers. Ariel Cohen. While it is impossible to mention them all. we wish to express our profound gratitude to the many individuals. who have made such valuable contributions to this 16th edition of the Index of Economic Freedom. Janice A. xiii . Since 1995. Assistant to the Vice President. as did Lisa Curtis. Bruce Klingner. Edwin J.

Becky Norton Dunlop. Vice President. and Martha Galante for placing the entire Index on the Heritage Web site. Very special thanks go to Paul Gigot and Mary Anastasia O’Grady at The Wall Street Journal. Finally. project coordinator of Online Strategy. and other organizations again cooperated by providing us with the data used in the Index. Vice President. We are likewise grateful to Senior Data Graphics Editor John Fleming. who carefully reviewed every one of the many charts and tables included in the book. year after year. businesses. Ambassador Terry Miller Kim R. most important. Government Relations. and tables. who originally encouraged us to undertake such a study of global economic freedom. foreign embassies.The professionalism of Vice President of Information Technology Michael Spiller and his team helped enormously. and Teresa Matous were responsible for all aspects of the production process. Steve Sharman. commitment. Poole. Mike Franc. With an emphasis on reader accessibility. we acknowledge our enduring debt to Heritage Trustee Ambassador J. Elizabeth Brewer. Executive Vice President of The Heritage Foun- dation. A particular debt is owed to Director of Online Communications Tim McGovern. William Middendorf II. handling design and layout for the Index and each subsidiary product. This year. they developed and formatted world and country maps. all of which bring to life the quantitative data underpinning the 2010 Index findings. and Senior Copy Editor William T. Director Therese Pennefather. we wish to express our deepest appreciation to Senior Editor Richard Odermatt. We hope this year’s effort meets the expectations of our supporters as well as the thoughtful critics who so often have provided the insights that enable us to continue to improve the Index. Center for Data Analysis Director William Beach. and Roger Spurzem. November 2009 xiv 2010 Index of Economic Freedom . Jim Lawruk. is sincerely appreciated. Communications.D. the Heritage IT staff worked tirelessly to revamp the contents and design of the Index Web site and. to increase user access to the raw data behind our assessments through the “Explore the Data” function. We also thank Director of Coalition Relations Bridgett Wagner. who is responsible for final review of the completed text. Holmes. Maria Sousa. and Michael Gonzalez. we would like to express our appreciation to the many people who respond so enthusiastically. Countless individuals serving with various accounting firms. and Deputy Director of Government Relations James Dean for their insightful contributions to the Index. Vice President. Ph. armed with valuable Web traffic input from Isabel Isidro. Once again. to the Index of Economic Freedom. Joel Smith. government agencies. who bears the primary responsibility for editing the entire book. U. Ralph Buglass. As always. whose partnership and support we truly cherish. research organizations. charts. The support and encouragement of people in all parts of the world continue to inspire The Heritage Foundation and The Wall Street Journal in their ongoing collaboration on this important work. and attention to detail are essential to maintaining consistency of tone and making the Index a reality. The continuing support from Phil Truluck. Their assistance is much appreciated.S. In Creative Services. Every year. External Relations. their professionalism.

equitable treatment. with Switzerland moving in and the United States dropping out. and Bahrain (Middle East/North Africa region). Switzerland. regulatory efficiency. Mauritius (Sub-Saharan Africa region). ranked as the world’s second freest economy. and Denmark. Nine of the 20 freest economies are European. The basic principles of economic freedom emphasized in the Index are individual empowerment. a total of seven economies have attained “free” status in the Index rankings. while Switzerland moved up three places to 6th place. the rule of law. and competitiveness. The other regions are represented by one country each: Chile (South and Central America/Caribbean region). Hong Kong maintains its position as the world’s freest economy. although the composition of this group has changed a bit.Executive Highlights T he 2010 Index of Economic Freedom covers 183 countries around the world. The results of the 2010 Index include the following: • Four Asia–Pacific economies continue to lead the world in economic freedom. 1 . have solidified their position at the top of the rankings.S. a distinction it has enjoyed for 16 consecutive years. As in 2009. Singapore remains close. Mauritius recorded impressive progress and is now ranked as the world’s 12th freest economy. The United Kingdom is now out of the top 10. With its economic freedom score dropping by 2. The U. dropped two spots in the rankings and now trails Canada. ranking 179 of them with an economic freedom score based on 10 measures of economic openness. but there has been noticeable reshuffling within this highly ranked group. ranked 3rd and 4th this year. and two are from North America. • Every region continues to maintain at least one of the top 20 freest economies. and the promotion of competition. Iceland’s ranking slid to near the bottom of the top 20. Six of the top 20 are from the Asia–Pacific region. led by Ireland. Australia and New Zealand.2 points.

Comoros. down 0. Holmes.heritage.2 1. Saint Vincent and the Grenadines.to some degree through various interventionable social indicators. Inc. 2010). Perhaps more significant for the and environmental sustainability. Liechtenstein. World Development Indicators Online. The positive relationship holds true at all levels of $1. Exactly half of the human development. Dollars (Logarithmic Scale) confirmed yet again in the $100. attacks on the free market.000 that score well in the Index.000 economic freedom but becomes even more dramatic as economic freedom $100 ine increases. With respect to the economic crisis of 2008– • As a result of increasing government 2009. the other half did not. quality of life.that average scores for countries measured in cal appeal of quick interventionist remedies. successive years have declined. and supports enviChart 1 heritage. others did not.major economies curtailed economic freedom lates with poverty reduction.000 Each dot represents a 2010 Index. Gross domesnation in the Index of tic product per capita is Economic Freedom much higher in countries $10. democratic governance..1 point from 2009. political and social progress. World Bank. Liberia.org/index.C. at http://publications. Economic freedom corre. Eritrea. overall progress toward greater • Countries diverged sharply in their economic freedom has been interrupted.67 dL en R2 = 0.org/WDI (November 10. The 2009 Index expanded its coverage to 183 countries.4489 Tr strong positive relationship between the level of $10 economic freedom and 10 30 50 70 90 GDP per capita. promotes at www. Micronesia. Macau. Kiribati. in Constant 2000 U. long-term progress of economic freedom. 2010 Index of Economic Freedom Score • Economic freedom improves the overall Sources: Terry Miller and Kim R. including for the first time Afghanistan. It thus captures only the early effects of the global financial crisis and recession and some of the policy responses by governments. D.gained strong momentum in some countries— reaching positive impacts on various aspects of and with far-reaching effects. Samoa.: The Heritage Foundation and Dow Jones & Company. Maldives. 2. 2009). and 2 2010 Index of Economic Freedom . Chart 1 shows a Correlation = 0. the evidence in the Index supports several interference in economic activity in many preliminary conclusions:1 countries. fueled only the second time in the history of the Index by the economic slowdown and the politi. Papua New Guinea. This is Regrettably. São Tomé and Príncipe. Future editions of the Index should provide a more complete picture. The 2010 Index is based primarily on data covering the period from July 2008 through June 2009.org ronmental protection.worldbank. Saint Lucia. 2010 Index of Economic Freedom (Washington. Index is 59. Timor-Leste. ist measures.S. Seychelles.4.• The positive relationEconomic Freedom Promotes Greater Prosperity ship between economic freedom and prosperity is GDP per Capita. The response to the global crisis: Many continued average economic freedom score for the 2010 to promote economic freedom. The 2010 Index provides strong evidence that economic freedom has far. Dominica. Bhutan. a variety of desir. Tonga.

5 ia: – Br 0. at www.imf.org/external/pubs/ft/weo/2009/02/weodata/index. Sources: Terry Miller and Kim R. which covered 161 countries. Organisation for Economic Co-operation and Development. average scores increased. International Monetary Fund...org/document/ 61/0.StatExtract.oecd. at www. at http://www. volume. 2010 Index of Economic Freedom (Washington.0% Trend Line Correlation = –0.org/index.071 R2 = 0. 2010).3343.9 d: lan Po Chart 2 heritage. 85 Annex Tables. 2.0% 5.5% Change in GDP –9. 2009).0% –5. 2010). The early evidence is that such spending has not worked. Vanuatu.org 3 .C.: –2 .2 y rke . The expansion of the country coverage resulted in a noticeable decline of the overall economic freedom score for the 2009 Index.6 Jap ny: a rm 9 Ge e: 0.0 Ch ethe ina rla n : U.0% 10. D. ain 5 : Ind –0. OECD Economic Outlook No. nc Fra . Inc.heritage.2 ds: K.How the Largest Economies Fared One-year changes in Index of Economic Freedom scores for the 20 largest economies Source: Terry Miller and Kim R. Organisation for Economic Co-operation and Development. compared to the 2008 Index. • Increased government spending did not improve economic crisis performance. –2.0% 20.org % Change in Government Expenditure (2007 to 2008) 0.1 : an 0.: –2 .0% 15.C. For countries covered in both the 2008 and 2009 editions of the Index. 2009). Inc.005 Chart 3 heritage. Holmes. OECD.aspx (November 19. Executive Highlights Ca na d Ru a: –0 ssi a .0% 30. at http://www.en_2649_34573_2483901_1_1_1_1.: The Heritage Foundation and Dow Jones & Company.org/index.1 lgi u Th m: – e N 2.8 a: ly: Ita Kore 1 h ut : 2.html (November 19.: The Heritage Foundation and Dow Jones & Company.5 Tu o: 2 ic ex M 2. figures are based on the 28 OECD countries for which data are available. many advanced economies’ governments have stepped up spending to promote growth and employment.oecd.00. 2010 Index of Economic Freedom (Washington.heritage.1 Sp : –0. Holmes. In light of the global financial and economic storm. So esia on Ind : 2.6 az il: Be –1. World Economic Outlook Database.org/index.0% –5.3 1 1. D.5 S.0% 25.5% –2.aspx (November 19.7 0 a: ali str Au 0. Fiscal Stimulus: No Impact on Growth Each dot represents a nation in the OECD –10. 2009). at http://stats.0% Notes: GDP changes are from Q2 2008 to Q2 2009. Quarterly National Accounts: Quarterly Growth Rates of GDP.0% 1.0 – U. June 2009.

2 76.6 45.1 83.8 92.8 73.9 64.4 44.7 83.0 60.0 85.8 73.0 85.2 76.4 40.9 0.5 76.4 72.0 90.5 87.2 71.8 75.0 90.0 40.3 75.5 87.3 75.4 90.8 69.1 95.4 0.0 39.2 80.4 60.0 90.2 79.0 80.0 90.0 57.0 77.0 80.0 80.1 65.0 80.3 88.0 80.0 30.4 78.6 0.0 90.0 95.0 90.9 69.3 79.1 78.0 80.1 72.0 75.7 73.0 92.0 70.2 17.0 45.3 70.0 75.7 –1.5 79.0 70.0 55.0 50.5 88.0 70.1 75.8 68.1 47.0 75.6 64.8 81.0 50.5 30.0 52.1 –2.0 60.5 82.5 99.0 65.5 89.0 4 2010 Index of Economic Freedom .9 83.0 81.0 68.2 73.3 90.1 81.1 1.0 95.0 75.0 70.5 67.1 84.0 75.4 78.6 75.2 65.1 80.7 81.2 72.5 91.9 73.4 59.9 51.5 87.6 69.5 2.9 52.5 87.7 95.0 80.0 70.3 28.0 60.9 72.2 96.9 91.0 80.1 0.5 87.3 97.5 70.5 61.0 90.0 65.9 79.2010 Index of Economic Freedom World Rankings Investment Freedom Monetary Freedom Change from 2009 Financial Freedom Business Freedom Property Rights Labor Freedom 87.0 84.0 65.0 79.7 86.9 1.0 95.8 71.2 69.4 73.0 81.4 74.0 Overall Score Government Spending 93.5 72.2 58.0 70.0 1.7 75.5 90.0 90.9 54.1 47.0 89.0 74.0 80.9 65.8 88.0 90.0 70.6 71.5 87.0 70.8 –0.5 67.0 93.0 70.5 1.7 0.2 98.0 22.5 87.0 1.0 65.0 90.0 80.0 80.5 84.0 80.8 93.8 83.8 58.0 90.7 80.0 90.3 99.1 85.1 –0.5 87.0 93.9 73.0 70.7 –1.1 82.9 82.4 75.4 70.6 78.0 71.8 61.0 60.8 83.0 70.8 82.0 73.6 82.0 66.0 80.7 71.2 –3.2 76.5 82.1 86.0 70.4 67.0 88.4 63.3 47.8 49.0 70.0 54.9 82.1 86.0 40.7 73.3 –2.0 60.0 89.0 69.0 58.4 65.8 87.0 70.1 64.5 94.0 30.2 77.0 69.4 71.2 77.0 85.0 70.1 69.0 55.0 43.8 82.0 90.0 83.2 60.6 83.2 –2.4 87.3 75.0 79.5 0.3 61.4 65.8 79.0 64.0 46.0 90.9 89.0 65.3 72.0 50.9 61.9 69.0 90.9 65.8 69.0 90.4 80.7 47.0 73.4 0.9 69.0 87.1 70.0 93.9 88.1 70.0 60.0 80.6 89.0 81.8 0.7 51.2 0.4 62.2 90.1 79.5 71.9 82.0 29.5 85.0 65.0 90.0 75.0 71.1 50.0 90.1 68.7 98.5 38.0 70.5 72.4 69.6 71.0 80.3 –0.3 70.0 70.2 77.0 90.5 60.0 89.2 72.0 90.0 70.0 92.0 90.8 60.0 50.0 70.0 56.6 0.8 78.9 87.5 87.9 70.4 63.8 90.0 93.0 60.0 0.0 65.0 80.0 90.0 80.1 84.0 80.5 76.9 87.5 82.9 0.0 73.7 –2.2 32.1 90.8 94.4 98.0 73.1 47.0 87.2 89.3 –0.0 70.1 79.0 90.0 80.5 54.9 89.0 90.0 60.7 –0.9 45.5 73.8 81.9 94.6 82.6 0.0 70.3 76.0 90.6 41.8 77.4 70.9 70.1 0.9 83.0 55.0 80.9 77.0 50.6 42.0 87.6 80.5 70.0 80.9 80.9 67.1 80.3 64.9 82.9 87.0 77.3 –1.6 World Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 Hong Kong Singapore Australia New Zealand Ireland Switzerland Canada United States Denmark Chile United Kingdom Mauritius Bahrain Luxembourg The Netherlands Estonia Finland Iceland Japan Macau Sweden Austria Germany Cyprus Saint Lucia Georgia Taiwan Botswana Lithuania Belgium South Korea El Salvador Uruguay Czech Republic Slovakia Spain Norway Armenia Qatar Barbados Country 89.5 93.1 39.3 81.0 95.0 50.0 85.0 74.0 80.0 85.0 75.0 Trade Freedom Fiscal Freedom Freedom from Corruption 81.7 61.0 75.0 70.7 74.0 90.7 0.0 0.0 85.9 77.0 85.0 70.1 82.1 95.0 80.0 80.3 68.9 74.0 60.0 58.9 81.0 70.5 89.3 73.7 67.8 36.0 77.5 –0.0 54.8 58.0 55.7 70.6 69.7 72.7 3.5 35.0 80.1 85.8 77.5 79.0 75.8 70.0 39.0 80.7 69.9 88.0 87.3 99.0 80.0 45.2 93.9 92.8 41.1 –2.7 –0.0 87.7 90.0 80.0 95.1 63.5 89.0 –1.9 77.1 70.0 75.0 54.7 54.1 80.4 75.4 78.0 65.1 58.

5 87.7 68.0 48.0 65.0 60.0 36.0 75.5 72.7 0.0 79.5 87.0 70.1 64.5 2.5 75.7 71.0 55.0 60.5 65.4 70.6 –0.0 70.6 74.5 –2.8 72.7 62.0 60.4 1.5 1.0 45.2 87.0 60.0 65.0 72.9 83.6 68.0 55.8 76.0 73.0 61.0 61.6 83.8 61.2 61.6 70.0 80.0 60.3 87.3 –2.0 50.3 92.7 67.0 55.0 60.1 71.5 99.6 68.0 51.3 85.8 57.0 46.0 55.0 30.0 50.0 70.0 50.2 77.0 51.4 64.0 85.0 73.0 31.4 73.7 74.5 37.9 54.9 55.0 50.9 88.2 87.0 50.0 70.0 69.2 87.0 49.9 76.8 87.0 65.3 80.0 60.8 78.0 50.0 50.1 66.3 43.8 41.2 64.0 38.0 60.2 75.2 52.5 87.0 69.0 50.0 65.9 66.1 70.9 83.9 61.7 68.5 87.5 72.5 83.0 83.8 51.8 89.7 62.4 41.0 80.5 78.4 79.2 0.0 51.1 59.2 73.1 81.1 87.3 79.1 87.0 60.0 65.6 82.2 63.0 60.0 36.2 81.4 72.4 80.9 80.0 46.9 70.8 82.0 50.6 57.0 45.8 17.0 70.0 58.0 65.0 50.1 58.0 50.1 66.2 0.3 74.0 45.3 74.3 87.0 60.8 42.0 43.4 80.6 5 Trade Freedom Fiscal Freedom Freedom from Corruption 36.4 83.1 0.3 81.0 45.1 89.0 50.2 48.7 65.9 75.0 40.0 82.4 73.7 67.0 46.0 70.9 95.0 60.0 72.0 55.1 70.3 67.6 82.2 65.7 73.0 34.3 67.2 48.0 45.3 –0.4 64.0 70.1 90.5 58.0 45.1 79.3 3.2010 Index of Economic Freedom World Rankings Investment Freedom Monetary Freedom Change from 2009 Financial Freedom Business Freedom Property Rights Labor Freedom 61.8 65.0 35.3 84.2 64.6 74.0 92.8 81.0 40.8 49.0 78.3 4.3 –0.5 87.0 59.2 62.4 74.9 65.0 2.0 60.0 50.6 67.4 35.0 60.0 82.2 72.0 35.5 78.3 79.8 82.1 88.0 55.0 78.0 70.8 65.6 68.0 35.2 73.2 World Rank 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 Mexico Kuwait Oman Israel Peru United Arab Emirates The Bahamas Malta Saint Vincent and the Grenadines Latvia Hungary Jordan Albania Costa Rica Trinidad and Tobago Macedonia Jamaica Colombia Malaysia Panama Slovenia Portugal Romania France Saudi Arabia Thailand Turkey Montenegro Madagascar Dominica Poland South Africa Greece Italy Bulgaria Uganda Namibia Cape Verde Belize Kyrgyz Republic Country 68.5 75.5 81.9 99.5 59.2 62.0 50.3 82.0 55.7 2.4 92.2 1.3 65.0 50.5 61.0 34.3 66.2 78.8 69.3 67.0 50.3 67.4 88.0 75.3 –1.0 55.7 83.0 50.0 50.0 70.4 62.6 69.3 66.5 75.5 65.6 –3.0 Executive Highlights .9 55.2 78.2 76.0 60.9 65.5 73.0 82.0 60.0 60.0 65.1 86.0 60.3 62.4 65.1 2.0 77.0 40.1 37.8 64.9 76.3 65.8 67.0 55.0 60.0 67.3 80.0 1.0 40.0 51.7 78.6 41.6 63.0 85.0 45.8 74.6 45.0 60.0 35.0 60.0 30.9 98.3 74.5 82.0 70.1 65.0 40.0 83.0 36.7 67.4 77.0 0.0 34.4 66.4 65.0 50.8 85.0 50.0 65.0 29.8 –0.6 64.0 1.8 74.9 86.0 60.8 85.0 85.8 66.4 –0.7 65.0 74.0 50.9 77.0 34.0 76.0 74.1 1.1 73.0 87.3 63.0 55.4 70.0 30.9 75.0 60.5 99.8 64.0 70.5 86.5 82.0 51.1 76.9 68.0 65.2 61.0 50.1 63.0 79.6 64.0 30.9 1.0 70.6 2.5 78.2 5.0 40.0 70.2 62.0 60.5 69.4 87.4 46.0 50.0 68.3 59.7 62.9 –1.0 70.1 71.1 57.0 65.0 26.0 40.0 60.7 67.0 47.0 35.5 0.7 73.9 83.5 71.7 82.0 60.3 80.0 50.0 80.5 –0.6 62.0 40.2 86.0 30.0 70.0 50.0 55.0 55.0 77.1 0.1 59.0 65.0 Overall Score Government Spending 85.0 50.2 63.1 67.0 36.0 30.8 62.0 25.9 66.0 70.1 3.7 74.9 –0.0 86.1 74.7 75.0 50.2 66.0 75.0 55.5 82.5 –1.0 60.0 38.0 60.5 68.7 64.8 63.6 0.2 74.0 70.9 31.5 76.6 59.5 83.8 46.2 66.6 79.4 54.1 71.0 59.2 0.3 90.4 25.2 76.7 78.1 2.3 84.0 50.9 72.9 69.3 2.5 64.0 18.3 72.3 67.0 40.0 70.

0 60.8 83.0 50.1 72.0 –1.0 60.7 –1.0 50.4 68.0 31.0 63.8 66.0 50.0 20.1 77.6 56.2 56.0 45.2 55.7 82.2 74.0 30.0 60.0 50.5 81.6 70.8 0.1 50.0 30.8 73.0 94.8 –0.0 56.4 59.7 85.4 79.0 55.9 66.0 Overall Score Government Spending 91.0 78.3 58.3 80.2 86.6 69.8 56.0 55.8 80.0 0.0 50.1 67.4 55.0 50.0 50.0 60.7 48.4 75.0 30.0 50.7 74.6 78.5 82.0 –0.3 56.2 59.0 30.0 76.8 58.8 74.0 55.4 82.0 30.8 47.9 71.7 0.5 83.2 70.0 25.0 10.4 21.7 –1.8 73.0 40.6 67.3 83.5 80.0 65.4 88.4 68.0 57.5 70.5 76.4 56.2 77.6 80.2 76.5 59.9 67.4 91.5 84.4 –1.0 45.0 45.6 75.5 47.7 63.0 27.5 73.6 73.0 35.8 64.5 73.0 40.0 26.3 77.4 85.0 60.0 35.0 70.9 78.1 93.1 71.8 89.0 44.0 62.1 70.5 80.2 53.4 74.0 50.0 31.0 50.0 30.0 40.0 30.0 60.0 31.0 34.5 55.4 85.9 64.2 58.1 75.5 60.8 84.0 59.0 60.7 67.4 63.4 84.4 78.7 79.8 63.0 25.2 55.6 90.7 43.8 75.5 62.4 Trade Freedom Fiscal Freedom Freedom from Corruption 24.2 60.0 40.0 50.5 80.0 65.4 3.9 64.0 30.0 30.0 50.2 68.2 76.8 83.5 52.3 61.3 71.7 40.5 62.7 68.0 40.9 56.5 65.0 32.7 72.5 82.8 65.0 30.5 58.9 57.0 –2.7 73.6 57.0 25.0 55.0 25.9 79.6 55.0 40.0 30.5 85.5 71.0 26.0 35.0 32.9 61.0 19.7 92.0 70.1 84.0 60.0 55.4 78.6 60.1 59.8 57.4 73.0 80.5 50.9 51.3 58.0 60.4 81.0 50.7 70.4 73.1 70.0 45.0 35.0 40.0 30.6 55.0 28.7 74.2 59.9 73.0 44.0 81.9 –0.0 30.0 34.1 65.9 75.7 47.0 32.5 58.5 63.0 60.2 60.0 40.4 75.0 23.9 56.9 67.0 30.0 51.0 71.0 30.0 28.0 40.4 49.0 52.0 30.0 40.0 30.0 30.0 30.1 4.4 60.0 30.3 31.5 77.0 30.0 30.8 74.5 82.8 71.9 61.0 58.0 30.9 1.8 80.8 70.0 40.5 54.5 69.2 39.2 28.3 41.0 39.1 –2.4 56.4 67.9 73.1 81.6 83.3 58.5 53.0 66.0 30.1 61.0 60.0 2010 Index of Economic Freedom .2 83.4 55.0 40.0 67.5 4.3 60.5 77.1 0.2 70.1 85.0 25.3 World Rank 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100 101 102 103 104 105 106 107 108 109 110 111 112 113 114 115 116 117 118 119 120 121 6 Paraguay Kazakhstan Guatemala Samoa Fiji Dominican Republic Ghana Mongolia Lebanon Burkina Faso Morocco Croatia Rwanda Egypt Tunisia Azerbaijan Tanzania Nicaragua Honduras Zambia Kenya Swaziland Bhutan Serbia Algeria Nigeria Cambodia Vanuatu The Philippines Bosnia and Herzegovina Mozambique Mali Brazil Indonesia Benin Gabon Pakistan The Gambia Senegal Sri Lanka Yemen Country 61.0 18.4 64.5 71.0 50.8 65.3 58.7 1.5 –0.8 80.0 15.6 75.0 55.0 35.0 36.0 50.5 71.0 30.2 42.3 0.0 45.6 54.0 50.0 60.0 21.7 58.0 59.9 52.0 55.9 1.0 40.0 –1.6 45.0 40.1 55.3 89.4 83.1 1.8 72.4 71.0 50.0 64.7 68.5 55.0 30.4 64.9 57.0 50.3 58.9 56.2 73.0 45.0 50.0 40.9 58.0 1.0 60.0 40.0 20.8 74.0 35.3 0.9 68.9 74.0 60.3 79.0 30.9 84.5 57.0 30.4 70.0 60.0 56.8 69.0 40.6 0.3 77.0 30.0 50.0 30.1 96.0 40.6 87.0 35.4 –1.6 54.0 50.2 56.4 –0.0 35.0 65.0 44.0 55.1 54.2 –1.3 0.0 50.8 83.3 78.1 0.0 75.3 72.1 2.1 83.0 40.4 1.0 53.0 50.9 84.0 22.0 23.1 42.3 1.1 89.1 63.7 –0.6 70.7 62.0 40.2 63.4 65.0 26.5 77.4 0.0 45.2 77.7 62.2 75.8 76.1 61.0 19.0 40.9 91.5 74.3 91.9 70.4 57.0 30.0 30.2 56.8 67.6 60.0 50.6 55.3 79.0 31.1 83.6 71.7 74.1 2.0 40.6 57.0 30.0 80.8 75.2 87.0 65.0 15.3 60.7 0.2010 Index of Economic Freedom World Rankings Investment Freedom Monetary Freedom Change from 2009 Financial Freedom Business Freedom Property Rights Labor Freedom 26.0 29.0 30.4 –2.9 57.8 1.4 69.7 65.0 40.0 50.1 54.2 75.0 0.5 58.0 60.6 69.0 60.2 63.0 61.8 41.0 55.

4 64.9 47.2 75.9 0.1 47.0 20.0 40.6 48.0 20.7 49.0 68.0 20.0 40.6 64.0 67.1 65.5 47.1 59.0 30.0 20.0 60.4 37.1 54.0 50.4 49.1 26.7 53.0 19.7 84.3 71.2 56.6 50.0 21.0 25.0 1.6 58.0 20.6 80.0 57.7 –1.3 95.0 Executive Highlights .4 –0.0 20.0 64.4 53.0 20.0 27.0 20.5 70.0 40.9 52.9 –0.5 77.0 20.0 36.3 63.5 47.0 50.0 35.0 10.0 20.0 30.5 52.0 50.3 5.0 50.5 82.2 69.2 82.5 0.4 35.4 61.0 21.2010 Index of Economic Freedom World Rankings Investment Freedom Monetary Freedom Change from 2009 Financial Freedom Business Freedom Property Rights Labor Freedom 59.0 20.9 71.5 55.0 40.7 39.0 20.0 50.0 28.4 68.4 93.7 42.0 40.0 30.1 52.0 76.2 45.0 63.9 78.7 65.4 48.2 51.0 45.9 66.3 49.0 24.0 85.0 20.8 49.9 85.0 19.8 39.3 76.3 56.6 77.0 26.0 35.3 58.6 –0.0 17.8 71.7 0.0 30.2 63.2 79.9 58.0 30.1 75.6 78.0 40.0 30.0 50.4 85.0 14.4 50.2 75.0 40.7 72.0 25.0 30.2 42.0 52.0 16.1 0.7 52.7 –2.1 86.1 81.5 72.0 25.2 51.0 30.1 53.3 73.1 71.0 30.0 25.1 57.1 92.9 72.4 48.0 30.8 30.6 73.0 20.9 78.6 84.0 20.0 20.0 20.6 –1.8 32.8 67.1 66.7 50.9 82.8 –1.0 51.0 10.0 50.0 15.0 45.9 –4.0 23.5 –1.0 25.2 62.8 92.8 75.4 77.6 –1.0 10.0 20.3 –0.0 20.0 30.0 15.2 81.0 20.6 0.8 66.5 65.2 0.0 40.8 65.9 90.1 63.7 37.1 51.0 82.1 46.0 30.7 59.0 32.6 –0.0 59.8 80.0 30.4 43.7 62.0 84.0 0.0 16.5 53.3 0.0 40.2 71.1 87.0 25.2 66.0 10.4 59.0 40.0 37.9 86.3 47.0 20.5 33.9 58.0 40.1 –0.3 79.1 44.2 48.0 52.2 60.3 52.0 10.5 75.8 51.0 45.9 7 Trade Freedom Fiscal Freedom Freedom from Corruption 28.1 –1.8 50.0 34.0 30.4 80.0 40.7 62.5 66.0 50.9 88.0 66.1 0.8 87.6 80.1 –3.2 –3.1 76.5 72.3 –1.0 20.0 50.4 –1.3 49.9 71.7 83.0 30.4 66.0 62.0 30.2 59.6 82.2 81.0 29.0 26.0 51.5 77.3 58.9 79.6 66.0 76.9 47.0 3.4 80.0 15.0 15.2 59.5 78.0 30.0 27.4 40.0 19.0 69.0 35.0 60.0 40.0 20.0 30.0 30.4 62.4 68.2 60.1 69.0 30.2 67.9 54.3 59.0 30.0 20.0 50.0 20.5 87.0 9.0 50.4 42.9 –0.8 37.0 20.7 62.7 59.2 57.0 15.0 30.8 78.2 57.9 65.0 –1.5 67.4 62.4 31.0 30.9 94.0 45.3 70.1 85.8 43.0 40.2 70.6 70.3 77.0 20.8 59.3 53.7 36.0 48.7 –0.0 30.8 88.3 43.8 44.0 50.0 40.8 3.0 48.3 52.3 80.3 93.0 40.3 44.0 25.0 28.0 35.0 25.0 20.0 30.0 20.0 25.2 52.8 48.0 29.0 20.2 54.3 70.6 67.5 72.0 27.8 50.9 60.8 58.5 52.7 54.4 76.0 25.1 78.0 25.8 53.0 10.5 70.0 Overall Score Government Spending 45.0 25.0 30.0 45.0 36.6 67.2 –1.7 48.4 49.3 67.2 –1.4 48.1 76.1 52.4 41.8 68.3 57.0 35.6 68.5 32.3 43.7 World Rank 122 123 124 125 126 127 128 129 130 131 132 133 134 135 136 137 138 139 140 141 142 143 144 145 146 147 148 149 150 151 152 153 154 155 156 157 158 159 160 Malawi Côte d’Ivoire India Moldova Papua New Guinea Tonga Tajikistan Niger Nepal Suriname Cameroon Mauritania Guinea Argentina Ethiopia Bangladesh Laos Djibouti China Haiti Micronesia Russia Vietnam Syria Bolivia Ecuador Maldives São Tomé and Príncipe Belarus Equatorial Guinea Central African Republic Guyana Angola Lesotho Seychelles Sierra Leone Uzbekistan Chad Burundi Country 54.1 51.7 44.7 62.0 83.5 61.7 69.1 91.0 61.5 0.1 43.6 0.7 58.0 20.0 18.9 93.5 72.0 21.5 63.9 88.0 35.4 63.0 20.6 63.0 30.5 –1.9 69.9 55.5 73.6 89.2 –2.5 53.0 28.0 35.0 62.7 36.0 40.3 70.5 97.2 –2.0 68.9 71.9 68.0 35.0 40.9 69.7 73.0 30.4 59.5 58.1 58.1 78.1 61.8 44.0 76.

0 0.0 10.0 30.9 42.3 26.0 0.0 0.2 0.0 24.7 0.6 53.0 30.3 67.0 10.2 50.0 13.7 1.0 0.7 90.0 0.1 48.0 5.5 –2.6 43.0 10.0 30.2010 Index of Economic Freedom World Rankings Investment Freedom Monetary Freedom Change from 2009 Financial Freedom Business Freedom Property Rights Labor Freedom 43.0 10.2 88.0 23.0 20.3 54.0 0.3 69.0 66.0 –3.7 21.2 –1.0 47.1 85.6 –2.0 n/a n/a n/a n/a 30.4 20.0 0.4 86.1 82.0 25.0 0.4 0.0 10.0 20.2 79.0 20.0 33.0 25.0 n/a n/a n/a n/a 74.5 55.5 59.2 37.3 20.2 42.0 18.7 52.0 19.7 65.1 –1.7 63.7 66.0 25.0 5.4 43.6 31.3 –1.2 –1.0 25.8 38.7 70.7 85.0 20.2 20.0 n/a n/a n/a n/a 25.0 10.8 0.0 81.2 –3.0 33.4 46.8 65.2 30.0 20.3 79.0 65.9 43.2 61.0 70.0 10.1 52.3 –2.0 50.7 74.0 10.9 0.0 0.7 44.0 81.0 26.0 0.0 54.0 5.0 30.8 98.0 17.5 62.1 36.1 60.1 0.9 90.4 71.0 20.2 72.0 0.0 94.9 58.7 –1.1 46.0 18.0 n/a n/a n/a n/a 8 2010 Index of Economic Freedom .6 81.0 20.2 45.2 43.0 10.9 67.4 47.7 43.6 23.0 20.0 n/a n/a n/a n/a 36.0 –1.5 61.7 46.0 15.0 n/a n/a n/a n/a 30.0 45.5 41.0 10.0 29.0 19.0 0.0 57.0 n/a n/a n/a n/a 56.0 n/a n/a n/a n/a World Rank 161 162 163 164 165 166 167 168 169 170 171 172 173 174 175 176 177 178 179 n/a n/a n/a n/a Togo Ukraine Liberia Timor-Leste Comoros Kiribati Guinea–Bissau Iran Republic of Congo Solomon Islands Turkmenistan Democratic Republic of Congo Libya Venezuela Burma Eritrea Cuba Zimbabwe North Korea Afghanistan Iraq Liechtenstein Sudan Country 47.0 18.0 30.4 72.0 30.0 10.0 0.0 30.0 42.4 40.2 65.0 20.8 58.0 10.0 41.0 5.8 73.8 –1.0 30.0 43.8 20.7 35.0 48.8 82.8 46.4 30.9 73.0 30.0 31.4 –1.6 69.7 65.0 36.5 62.9 67.2 61.0 20.5 76.2 74.8 61.0 10.2 –2.0 10.0 n/a n/a n/a n/a Overall Score Government Spending 86.7 51.0 15.4 69.3 57.4 55.0 20.0 5.0 10.0 22.3 0.4 58.8 –1.0 26.0 10.9 48.0 62.0 n/a n/a n/a n/a 62.1 68.0 n/a n/a n/a n/a –1.4 6.8 64.9 –4.1 61.5 20.2 77.4 1.8 44.0 19.0 20.4 –3.3 65.0 30.0 30.0 n/a n/a n/a n/a Trade Freedom Fiscal Freedom Freedom from Corruption 27.

9 . After five years in which economic freedom had shown modest but steady advances throughout the world. the world economy has been undergoing a period of uncertainty and slowing economic growth. and particularly those that are most dependent on export-oriented growth. which spread through the financial system. the free market system has.1 The recession of 2008–2009 was the first major worldwide economic disruption of the age of globalization. Policy choices made at this critical juncture of the global recovery will unquestionably shape the growth trajectory for the world economy in the years ahead. demonstrated an impressive level of resilience during 2009 and now shows vital signs of an economic upturn.Chapter 1 Economic Freedom in Uncertain Times Ambassador Terry Miller S ince the second half of 2008. Countries on Diverging Paths The financial crisis and recession that afflicted the world economy in 2008 and 2009 resulted in. While some proclaimed the death of capitalism. For countries covered in both the 2008 and 2009 editions. significant reductions in economic freedom in a number of countries around the world. the 2010 Index has measured a small decline—onetenth of a point (0. and may even have been caused by. Many of the most economically free were among the first to feel the effects of the crisis. At the same time.1 point)—in the world average economic freedom score. many other countries have held firm on the path to greater economic freedom and the greater prosperity that it brings. in fact. the average overall economic freedom score increased by onetenth of a point in 2009. Those that are most open to trade. were among the most 1. Economically free countries are typically more open and engaged with the world economy than their more repressive counterparts. The average score in the Index declined from 2008 to 2009 because of the addition in 2009 of a substantial number of countries with below average freedom scores.

despite the economic difficulties they may be experiencing. Though the Biggest Gainers and Losers in 2010 Nations that gained or lost at least 2. have declined.2 3.5 Source: Terry Miller and Kim R.3 –3.9 4. such as the inflationary impact of expansionary monetary policy and various governments’ stimulus programs. Thus. Many of the countries whose scores have dropped have responded to the economic crisis with policy moves that. borrowing that crowds out private investment. On the other hand.7 –2. and protectionist measures to reduce trade. Table 1 heritage. we would expect to see less harmful permanent impact from the crisis and recession in the economically free countries.0 –3. and sometimes after a delay.4 5.7 –2. whether intended or not.9 2. policies or proposals have included Losers Timor-Leste Bolivia Libya Barbados Ecuador Eritrea Solomon Islands The Bahamas Uzbekistan Mongolia Venezuela Equatorial Guinea United States United Kingdom Yemen –4. with effects that in some cases will show up immediately. more diversified economies. were in a better position to withstand a temporary downturn. at www.C. government takeovers of businesses. The economically free have more durable and transparent economic institutions. tax increases. Regrettably.2 –3. more countries than usual show significant movements either up or down in the Index rankings.1 –3.5 4.2 –3. which over the years have grown faster and accumulated more wealth than their repressed counterparts.5 –2.6 2.8 –2. the full effect of some of the policies undertaken by governments.1 3. Holmes. Eightyone countries—almost half of all those ranked in the Index—showed improvements in their overall economic freedom scores this year. and more flexibility in responding to a crisis.: The Heritage Foundation and Dow Jones & Company. (See “Can Trade Protectionism Save Jobs?”) Interventionist measures that harm economic freedom are detrimental to economic growth. the economically free countries. With countries diverging so strongly in their policy responses to the crisis.6 3.8 –2. loose monetary policy. the levels of economic freedom in 90 other countries.2 –3.0 –2. have held true to the principles of economic freedom and have continued to adopt measures to liberalize and deregulate economic activity. 2010 Index of Economic Freedom (Washington..2 3. add up to a fundamental assault on economic freedom. Inc.0 4. In the United States.0 2. the impact on the overall economy quickly turns negative as governments have to finance spending through increased taxation.6 2. but in all cases can endure for years to come.heritage. the effects of the recession and the policies through which governments have tried to respond are not fully captured in the rankings.7 3.vulnerable to economic downturns in other countries.1 3. government subsidies and bailouts of private firms.org/index. D.7 –4. Indeed. more intrusive regulations. The 2010 Index of Economic Freedom is based on data reflecting conditions from July 2008 through June 2009 (and sometimes earlier years when later data are not available).5 Diverging eConomiC FreeDom sCores Many countries. Thus. Though bailouts and subsidies may provide short-term relief for some chosen firms. or monetary expansion that fuels inflation. may not show up for several years.org 10 2010 Index of Economic Freedom . for example.2 –3. We also would expect to see faster and more pronounced recovery from the negative effects that do occur.5 points in their Index of Economic Freedom score Gainers Montenegro São Tomé and Príncipe Rwanda Macedonia Croatia Belarus Bangladesh Colombia Qatar Bosnia and Herzegovina Peru Poland Saint Vincent and the Grenadines United Arab Emirates Mexico 5. 2010). as measured in the 2010 Index.

1992.888 employees to its payroll between 1992 and 1993. There were 15 countries this year whose scores deteriorated by at least 2.5 points in their economic freedom scores. while growing prosperity depends on embracing the new production and commercial possibilities of the future.S.mspx (November 9. (See Table 1. and perhaps of most concern. Keith Bradsher.000 jobs. change in the global average economic freedom score in the 2010 Index is small. By 2009.html?pag (November 9. Other European countries that did notably well included Macedonia. 2009).000 of which were in the United States. at http://www. Microsoft had created over 92. For example. “Smith Corona Plant Mexico Bound. including Bolivia. Bangladesh topped the list of gainers in Asia.Can Trade Protectionism Save Jobs? Trade protectionism is simultaneously one of the most popular and least effective measures in response to a recession.com/1992/07/22/business/ smith-corona-plant-mexico-bound. 30 countries gained or lost at least 2. 2009). New York.) Montenegro improved the most. Mongolia. perennial Top 10 performers the United States Chapter 1 11 . but it is clear that protectionism is always about protecting the status quo.2 Those new jobs. more than 55.com/presspass/ inside_ms.4 points on the economic freedom scale. Libya and Yemen lost significant amounts of economic freedom.nytimes. Smith Corona’s closing of its last U.7 points. typewriter plant in 1992. and Mexico in Latin America. but they are the lifeblood of our increasing wealth and well-being. which had introduced the Windows 3.5 points. • Five Latin American or Caribbean countries. “fanned concerns in Congress and organized labor about the loss of jobs to foreign competition.0 operating system in 1990 and had added 2. as did Colombia. gaining 5. • Finally. “Facts About Microsoft. costing 875 jobs in Cortland. Saint Vincent and the Grenadines was the biggest gainer in the Caribbean. lost significant amounts of economic freedom. as did Eritrea and Equatorial Guinea in Sub-Saharan Africa. fly below the radar screen in the public and political debates on trade.” The New York Times. Belarus. as did São Tomé and Príncipe and Rwanda in Africa.” 1 No notice was taken of emerging corporate giant Micro1. Barbados. We cannot know what would have happened had the protectionists in Congress succeeded in 1992 in protecting Smith Corona’s typewriter business. Uzbekistan. and Poland. Bosnia and Herzegovina. and the Solomon Islands were the only other Asia–Pacific countries to lose so much freedom. Ecuador. down 4. Qatar and the United Arab Emirates made significant gains in the Middle East. Few things in economics are as well established as the idea that trade increases prosperity and that the freer the trade. It is easy to focus on those whose jobs are lost when economies grow and develop and harder to see the new jobs that are created in a dynamic environment.microsoft. Peru. • In the Middle East and North Africa. the greater the benefits to all parties. Sadly. and Venezuela. soft.” at http://www. • Timor-Leste lost the most economic freedom in the 2010 Index. few ideas are also less well understood among members of the general public and even among politicians. which epitomize the value to society of economic freedom that permits and promotes rapid economic evolution and growth. July 22. 2. the Bahamas. Croatia.

and the United Kingdom Progressing and Regressing Nations both lost at least 2.for the countries that are members of the Organi- 12 2010 Index of Economic Freedom . many countries have adopted poli.6% Moderately Free Barbados.heritage. at http://www. • Over 45 percent of countries—84 in all—reduced government cies that limit economic freedom. The Bahamas their economies.org/ external/ns/cs. Moderately Free • 51 countries improved Dominican Republic business freedom this year. yet another Table 2 heritage. but 114 increased regulaREGRESSING tory pressures on firms. Sources: Terry Miller and Kim R.effect of these policies on future growth rates is nately..Index of Economic Freedom scores. but 107 contin2007 2008 5 Years Mostly Free to Spain.predictable and certain. Samoa. Botswana to Mostly Free 2007 2008 5 Years significantly. Mostly Unfree to Guatemala. Ghana. ued the process of opening 2. 2009).C. The negative spending as a percentage of GDP.: The Heritage Foundation and Dow Jones & Company. 2010). Inc. standable in a time of stress.this year’s Index. However. Crisis: government The impact of government fiscal stimulus on intervention hurts growth rates will be fully measurable only in In their responses to the financial crisis and future years. ning to be manifest in the data and in countries’ Such policy divergence may be under.7% 5. with the U. another 84 increased govern. 15 will tell whether we are seeing the leading countries moved from a higher to a lower catedge of a fundamental realignment of coun. International Monetary Fund. countries continued to at www. As shown in Table 2.3% 2.org/index. dropchanged since the 2009 Index of Economic Freedom ping out of the Top 10 in the Index for the first time PROGRESSING ever. Category Change Countries Countries’ policy choices in the various areas of ecoMostly Free to Free Switzerland nomic freedom that are GDP Growth Rate Saint Lucia. 2010 Index of Economic Freedom • About 40 percent of (Washington. however. Holmes. Countries that slipped from dom or whether the breaks in progress in some one economic freedom category to another countries are just short-term manifestations of (such as from “mostly free” to “moderately a loss of confidence or even temporary panic. Moderately Free rated in the Index diverged Taiwan. 6.egory of economic freedom or vice versa in tries along the continuum of economic free.aspx?id=28 (November 9. and it is already beginment spending. Norway.3% 3.5% Montenegro.org 40 percent increased rates or tax collections. but it represents a The recession’s impact was muted in counslowing of the worldwide momentum toward tries that moved to a higher category of ecogreater economic freedom and a sharp turn nomic freedom and exacerbated in countries away from freedom in certain countries. • 60 countries imposed Category Change Countries new levels or types of trade GDP Growth Rate Free to Mostly Free United States restrictions.imf.K. Georgia. free”) experienced considerably lower economic growth than did their counterparts that resPonDing to moved up to the next higher category. D. Time that moved lower.2% 0. Unfortu. the early data available recession.5 points in overall economic freeA comparison of nations whose economic freedom categories dom. lower tax rates.

2010). financial freedom.9% –5.Higher Government Spending. and the crowdingout effects of government spending on private-sector demand and investment combine to make fiscal stimulus a poor policy choice in a recession.C. Inc. and labor freedom. Organisation for Economic Co-operation and Development. trade freedom. Numerical grading was not possible for Chart 2 heritage. the various burdens associated with financing government deficits. 2. freedom from corruption.: The Heritage Foundation and Dow Jones & Company. D.heritage. Inc. Iraq. The largest average gain was in trade freedom. at www. at www.org Afghanistan. Sources: Terry Miller and Kim R. at http://stats. Economic freedom increased on average in the areas of business freedom. 2010 Index of Economic Freedom (Washington.1 point over the past year.4.org sation for Economic Cooperation and Development (OECD) show that countries with higher levels of government spending continued to grow more slowly during the crisis. 2010).: The Heritage Foundation and Dow Jones & Company. and Sudan due to the limited availability of relevant data. –3. Iraq. Global Distribution of Economic Freedom Number of nations in each category of the 2010 Index of Economic Freedom 58 55 36 23 7 Free Mostly Free Moderately Free Mostly Unfree Repressed Source: Terry Miller and Kim R.3% GDP Growth. 2009). Numerical grading was not possible for Afghanistan. and respect for property rights. and Sudan due to the limited availability of relevant data. Liechtenstein.oecd.) Of the 179 economies that are numerically graded in the 2010 Index.” next page. Average scores also fell in the areas of government spending.heritage. 2010 Index of Economic Freedom (Washington. with inflation rates increasing in most countries around the world in 2008 as a result of increasing commodity prices. This represents a drop of 0.C.aspx (November 11. investment freedom.org/index. Chart 1 heritage. (See “The 10 Economic Freedoms: A Global Look. GDP growth data are based on OECD members with 2008 and 2009 data available. OECD. Liechtenstein.org/index.3% –3. with many countries continuing to resist the protectionist pressure to which a few have succumbed. Quarterly National Accounts: Quarterly Growth Rates of GDP. Holmes.org/index. D. 13 Chapter 1 .. volume.. fiscal freedom.StatExtract. This would seem to confirm the view of many economists that the deadweight loss from government inefficiency.2 only seven have very 2. The loss of economic freedom was most pronounced in the area of monetary freedom. Holmes. Q2 2008 to Q2 2009 Notes: Spending figures are averages from 2008 to 2009. Lower Growth For OECD member nations Government Spending as a Percentage of GDP More than Less than 50% 40% 40%–50% DeClining monetary FreeDom hurts average sCores The average economic freedom score for 2010 is 59.

average tariffs fell by one-half of a percentage point over the past year to 6.The 10 Economic Freedoms: A Global Look BUSINESS FREEDOM — 64. Underlying factors included strong demand in emerging economies such as China and India.org/external/np/ speeches/2008/050808. 2. Most resorted instead to a variety of restrictions. Only India recorded a double-digit drop on this component. “Commodity Prices and Global Inflation.3 point.8 percent. GOVERNMENT SPENDING — 65 The average score for government spending decreased by 0. sometimes quite significantly. have launched various stimulus measures and have increased spending. with improved scores in 107 countries throughout the world. International Monetary Fund.3 percent. “OECD in Figures 2009.htm (November 5. particularly in advanced economies. with scores off 3.1 percent. many governments around the world. quotas.2 1.2 For the world as a whole. reflecting a disturbing trend for countries to resort to more subtle forms of protectionism. 2009).” remarks by John Lipsky.6 The 2010 Index registered a sharp decline in monetary freedom. 2009). New York City. and price distortions by governments in some key commodity-producing economies. non-tariff barriers increased. 80. First Deputy Managing Director. at http://browse.1 point in the 2010 Index. biofuels policies that restricted food supplies. The average business freedom score increased slightly by 0. or subsidies that interfered with the free flow of goods or services.imf. 2008. Only a few of the 60 countries whose scores fell actually increased tariffs.PDF (November 5. p. 32 countries have introduced reforms in direct taxes or have implemented tax cuts as previously planned. Globally.” OECD Observer 2009/Supplement 1.6 Business freedom improved.4 Overall fiscal freedom improved by 0.oecdbookshop. while getting necessary licenses takes an average of about 218 days. Since July 2008. at http://www. The average top tax rate on individual income is now 29. In response to the global financial and economic turmoil. Organisation for Economic Co-operation and Development.1 The average level of government spending as a portion of GDP is 32. The average trade freedom score rose by 1. 14 2010 Index of Economic Freedom . MONETARY FREEDOM — 70. a level that is likely to increase in future years. despite the challenging economic and political environment caused by the global economic slowdown.0 point. Much of the acceleration of consumer price inflation in early 2008 was the result of higher energy and commodity prices. in 52 countries this year. FISCAL FREEDOM — 75. and the average top tax rate on corporate income is 25. TRADE FREEDOM — 74. Bankruptcy proceedings take three years on average.2 percent. The average total tax burden as a percentage of GDP is 23. May 8.4 points on average as a result of inflationary pressures that began to build in mid-2007 and continued though much of 2008. at the Council on Foreign Relations.5 point in the 2010 Index. starting a business takes an average of 35 days.org/oecd/pdfs/browseit/ 0109061E.8 percent. By contrast. regulations. This spending is severely worsening deficits and debt levels: The average level of public debt as a percentage of GDP in advanced economies has risen sharply to around 80 percent.

Some governments sought to justify expropriations and INVESTMENT FREEDOM — 48. Governments that tance of labor market flexibility in enhancing quickly reversed interventionist actions were productivity and better job growth.unctad. includgrowth. while 126 countries score Only a few countries’ financial freedom scores below 50.2 point in the 2010 Index. from Corruption Labor Freedom The gradual worldwide improvement in property rights was interrupted 0 50 100 this year.9 48.5 Undermining the overall investment environment.6 on this component. including bailout programs and even nationalizations In light of growing recognition of the imporof financial institutions.8 point in the 2010 2009: Transnational Corporations. lost 10 points in the rankings as LABOR FREEDOM — 62. A total of 16 countries.1 not penalized. p. World Development Report dom score increased by 0. and Iceland. at http://www.6 43.4 65.9 nationalizations on the basis of the global The average investment freedom score financial turmoil.2 point in the 2010 Index.3 FREEDOM FROM CORRUPTION — 40.TEN ECONOMIC FREEDOMS: WORLD AVERAGES Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. the United Kingdom. Agricultural Index. average score among the 10 economic freedoms. government expropriations increased The average score for freedom from corrupin some countries in Latin America and parts tion improved by 0. 85 encouraged foreign direct investment. 64. 2009). initiated in various countries during 2008. with 44 countries recording gains of Production and Development.1 a result of various interventions. 2. the average financial freedom score dropped 0. United Nations Conference on Trade labor regulations. xxii.8 40. High levels of persistent corrupchanged in the 2010 Index. PROPERTY RIGHTS — 43. Overall.2 75. Only 13 countries score 80 or higher FINANCIAL FREEDOM — 48. proimproved by 0.pdf (November 5.6 48.6 point in the 2010 Index.6 74. and most of those tion in many of the less developed counchanges reflected responses to the global tries continue to severely retard economic financial crisis. many economies have implemented more flexible 3. Overview. Of tection of property rights improved in 27 the 110 investment-related policy measures countries. Six countries continued financial liberalization during the year. but this component still records the lowest of Central Asia.5 points or more.org/en/docs/wir2009overview_ en. and the average least free most free score on this component declined 0.5 62.2 point in the 2010 Index.0 70.8 Chapter 1 15 . The overall labor freeand Development. ing the United States. On the positive side.

at http:// viewswire. (See Chart 3. Economist Intelligence Unit. (See Table 3. at www. security.prosperity. Chart 3 heritage.) Economic freedom is a revolutionary coneconomic and social indicators. placing them in the “mostly free” category.org 4.796 Repressed Sources: Terry Miller and Kim R. and 55 economies are “mostly unfree” (scores of 50–60). This year. Holmes.4 category of the 2010 Index of Economic Freedom. For more information on the EIU Political Instability Index. Economic freedom is also strongly correlated to overall well-being.com/ downloads/2009Legatum ProsperityIndexReport. taking into account other factors such as health.pdf (November 9. World Bank.heritage.org/WDI (November 10. asp?info_name=social_unrest_ table&page=noads&rf=0 (November 9. $6.C. 2009). have economic systems in which individuals enjoy substantial levels of freedom.org/index. Not only are higher levels of economic freedom associated with higher per capita incomes and higher GDP growth rates.3 (See Chart 4. World Development Indicators Online. the countries with greater improvements in economic freedom eConomiC FreeDom matters achieved higher reductions in poverty as meaThere are clear relationships between eco. 2010). 2009). The next 23 countries have scores between 70 and 80.253 constant 2000 U. The largest portion of the countries graded—113 economies—have freedom scores between 50 and 70. at http://www. For more information on this wealth and wellbeing measure. the most prominent being the strong relationship between cept that promotes rapid change without social the level of economic freedom and the level of unrest or violence.worldbank. 2010 Index of Economic Freedom (Washington. putting them in the “free” category (the highest). triggering faster poverty reduction and further improvements in economic freedom. The 2009 Legatum Prosperity Index: An Inquiry into Global Wealth and Wellbeing. or about one-sixth of all countries graded.091 GDP per capita for each Political Instability Index. D. Inc. see “Social Unrest. 16 2010 Index of Economic Freedom . 36 countries have “repressed economies” with scores below 50. 2009). 58 economies are “moderately free” (scores of 60–70).high freedom scores of 80 or more.) Previous editions of the Index have confirmed the tangible benefits of living in freer societies. Over the decade.” Views Wire. in $23. see Legatum Institute.478 Free Mostly Free Moderately Free Mostly Unfree $1. bucking the worldwide decline. Chart 5 shows the relationship between economic freedom and social unrest Economic Freedom and Standard of Living as measured by the Economist Intelligence Unit’s $28. Thus. Countries in every region gained and lost economic freedom.) Economies rated “free” or “mostly free” in the 2010 Index enjoy incomes that are more than three times the average levels in all other countries and more than 10 times higher than the incomes of “repressed” economies. education. prosperity in a given country. dollars 3.com/site_info.: The Heritage Foundation and Dow Jones & Company. Of those..S. and political governance. a total of only 30 countries. at http://publications. Average freedom went up in Europe and the Middle East and North Africa.819 $1.sured by the United Nations Human Poverty nomic freedom and numerous other positive Index. but those higher growth rates seem to create a virtuous cycle.eiu.

5 –3. Holmes.: The Heritage Foundation and Dow Jones & Company. education.org/en/reports (November 9.62 20 0 0 20 40 60 80 100 120 140 160 180 2010 Index of Economic Freedom Rank Sources: Terry Miller and Kim R.C. at www.Economic Freedom Is Key to Overall Well-Being Prosperity Index Rank 100 Each dot represents a nation in the 2010 Index of Economic Freedom 80 nd Tre 60 Lin e 40 Correlation = 0.org/index.pdf (November 9. literacy.4 Note: Data from the Index of Economic Freedom (2000 to 2010) and the Human Poverty Index (1999 to 2009). at http://hdr.79 R2 = 0.. 2010 Index of Economic Freedom (Washington. Chart 4 heritage. Inc. 2010 Index of Economic Freedom (Washington.6 –5. thereby encouraging the creation of more pluralistic societies. 2009).org By empowering people to exercise greater control of their daily lives.undp.com/downloads/2009LegatumProsperityIndexReport. United Nations Human Development Programme. D.: The Heritage Foundation and Dow Jones & Company..org/index. and Human Development Reports.heritage. which measures life expectancy.heritage. and the stanChapter 1 17 . 2010). Holmes. economic freedom increases their options for economic progress and lets people decide for themselves how best to improve their lives. D. at http://www. Table 3 heritage.org Economic Freedom and Poverty The Ten-Year Record Change in Poverty Levels All countries Countries gaining economic freedom Countries losing economic freedom –4. Inc.prosperity.C. Greater economic freedom is also strongly correlated with overall human development as measured by the United Nations Human Development Index. Economic freedom ultimately nurtures political reform as well by making it possible for individuals to gain the economic resources necessary to challenge entrenched interests or compete for political power. 2009). Sources: Terry Miller and Kim R. 2009 Legatum Prosperity Index: An Inquiry into Global Wealth and Wellbeing. at www. 2010).

Economist Intelligence Unit.org/en/statistics (November 9. and V. at http://viewswire. increased access to higherquality health care and food supplies. The Economist Intelligence Unit's Political Instability Index. Kim. 18 tion Network (CIESIN). and longer life expectancy.org dard of living in countries worldwide. see United Nations Development Programme.3025 6 4 Less Social Unrest 2 Each dot represents a nation in the Index of Economic Freedom 0 0 20 40 60 80 100 2010 Index of Economic Freedom Score Sources: Terry Miller and Kim R. the World Economic Forum. 2010). 2009). Ibid.C. Mara.55 R2 = 0.org/index. and the Yale Center for Environmental Law and Policy published an Environmental Performance Index (EPI). C. Inc. T. economically free countries do a better job of protecting the environment.eiu.. at http://hdr. Esty.undp. 2008. 2010 Index of Economic Freedom (Washington. at http://epi. Human Development Reports.) The prosperity that flows from economic freedom results in greater access to education.5 (See Chart 6. See Daniel C. providing “a composite index of current national environmental protection efforts. 2009).Economic Freedom and Social Instability Economist Intelligence Unit’s Political Instability Index 10 More Social Unrest 8 Tre nd Line Correlation = –0.asp?info_name=social_unrest_table&page=noads&rf=0 (November 9. Holmes.com/site_info. H. de Sherbinin. In January 2008.edu/Framework (November 9. Chart 5 heritage. reduced illiteracy. A. The relationship between certain economic 6.”7 There is a strong positive relationship between economic freedom scores and the EPI. the Center for International Earth Science Informa5.6 The EPI shows a country’s performance in coping with environmental challenges.heritage. 7. A. 2010 Index of Economic Freedom . Yale Center for Environmental Law and Policy. 2008 Environmental Performance Index. D. at www. Srebotnjak. Levy.yale. 2009). In addition. For more information on the United Nations Human Development Index.: The Heritage Foundation and Dow Jones & Company. M.

Daniel C. Mara. There are strong positive correlations between the Environmental Performance Index (EPI) and economic freedom.N.8 Correlation = 0.heritage. 2009). H.: The Heritage Foundation and Dow Jones & Company. de Sherbinin. 2010 Index of Economic Freedom (Washington.8 Least Free Most Free Trade Freedom Sources: Terry Miller and Kim R. Human Development Index 1.. Human Development Reports. Chart 6 heritage. Inc. Holmes.6 0.60 and 0.55. T. C.heritage.63 R2 = 0. 2008).62. Inc. The correlation between the EPI and overall economic freedom is 0.yale.org freedom factors and environmental performance is even stronger.: The Heritage Foundation and Dow Jones & Company.. Chart 7 heritage.org Chapter 1 19 .8 63. 2010). at www. and V.Economic Freedom and Human Development U. D.3969 0. Kim. 2010 Index of Economic Freedom (Washington.) For example. Holmes. Trade Freedom and Environmental Performance Average score of the Environmental Performance Index 84. A. M. 2010). 2009).C. at www.1 64.2 20 40 60 80 100 2010 Index of Economic Freedom Score Sources: Terry Miller and Kim R. respectively. at http://epi. A.0 76. Environmentalists who see in govern8.org/index. Esty.org/en/statistics (November 9. at http://hdr. United Nations Human Development Programme.undp. D. 2008 Environmental Performance Index (New Haven: Yale Center for Environmental Law and Policy. countries with high levels of protection for private property rights and low tolerance for corruption do a much better job of protecting the environment.org/index.0 0.4 nd Tre Lin e Each dot represents a nation in the Index of Economic Freedom 0.9 70.edu/Framework (November 9. Srebotnjak.C.8 (See Chart 7. Levy. The correlations between the EPI and property rights and freedom from corruption are 0.

Such freedom has proven over and over. There is a clear divergence in the 2010 Index between countries that are hesitating in the promotion of economic freedom. to be the best way to encourage entrepreneurship. By contrast. and a dependable means of dispersing economic power and decision-making throughout an economy so that all have a fair and equitable shot at economic gain and prosperity. governments that embrace economic freedom for their citizens liberate individuals to find for themselves their most likely paths to greater economic well-being. for generations. In these uncertain times. in general. and spread prosperity more widely throughout their populations. freer countries grow more surely. 20 2010 Index of Economic Freedom . Similarly. and those that are holding confidently to the path of liberalization. countries with more open trade and less protectionism have much better levels of environmental protection or sustainability. that is a result to which we all should aspire. countries are seriously reexamining the role of economic freedom in fostering economic growth and prosperity.ment control of land or resources the panacea for environmental sustainability will find no support in the data. but also for the progressive values and public goods that people seek for society as a whole. The lesson from the 2010 Index of Economic Freedom is clear: Economic freedom is good not only for growth and individual economic advancement. along pathways that historically have led to stagnation and societal decline. Governments that turn away from the principles of economic freedom are embarking on an uncertain journey in which their citizens will be guided by government intervention. Those are hallmarks of a society that is healthy and prosperous. more than at any time since the first edition of the Index of Economic Freedom appeared in 1995. or even turning away. recover from setbacks more quickly. The evidence adduced in the 2010 Index of Economic Freedom demonstrates clearly that. In 2010. under increasing state control.

1 percent annually. The baker bakes bread. Chao H istory has proven that trade freedom is the best economic strategy for all of the world’s peoples. GDP growth has been impressive. jumping from $4. specialization extends much further.023. When individuals specialize and trade. access to cheap capital. both within a nation and across countries. The relationship between trade and economic growth is clear. construction. and human capital in sufficient quantity and quality to realize the standard of living to which developed nations have become accustomed and to which developing nations aspire. their products are exchanged.3 trillion in 2008. Gross domestic product (GDP) for the world as a whole. No single nation has the natural resources. History has also shown that we are prone to ignore history. the economic advantages of the resulting increased skills and improved allocation of resources are enormous. And so we trade. both in theory and in practice. measured in constant 2000 U. Even on a per capita basis. and the tailor sews shirts. In a modern economy. The process of producing bread involves dozens or hundreds of specialists in various tasks related to agriculture.002 to $6. ener- 21 .Chapter 2 Trading for Prosperity The Honorable Elaine L. and other fundamental variables all play a role in determining what comparative advantage one country has over another in the global marketplace.S. Low wage costs. During that same period. the value of world exports has risen by an average of 7. sPreaDing ProsPerity to all The major economic benefits of free trade derive from the differences among trading partners. which allow any country a chance to compete in the global market according to its fundamental economic strengths. infrastructure. a highly skilled workforce. and both are better fed and better clothed. has risen from $17.5 trillion in 1979 to $40. world income has skyrocketed. Since 1979. dollars.

000 1960 60% 50% 40% 30% 20% 10% 1960 Merchandise Trade (Percentage of GDP) 1970 1980 1990 2000 2008 1970 1980 1990 2000 2008 Source: World Bank. 1947–March 24.N.000 $3. 2009).000 $5.pdf (September 23. the United States announced that it would not ratify the charter. Trade allows individuals and nations to prosper from natural resources. The trading process. there emerged the basis for the modern international 22 trading system.wto. p. GATT was a less formal structure than the ITO and offered an easier.000 $4. transportation. including the World Bank and the International Monetary Fund (IMF). 1948. As a part of that process.worldbank.int/english/docs_e/legal_e/havana_e. marketing. Dollars) $7. November 21. developed and developing. more than 50 nations drafted a charter for an International Trade Organization (ITO).org/WDI (October 19. With the hard-learned lessons of the Great Depression behind them. Chart 1 heritage.1 However. and myriad other skills. accounting. at http://publications. Few would doubt the relationship between increased trade flows and the rapid worldwide economic growth at the end of the 20th century. and initiative.Global Trade and World GDP Per Capita GDP Per Capita (in Constant 2000 U. 2010 Index of Economic Freedom . at http://www. World Development Indicators Online. after repeated attempts to gain congressional approval had failed. is at the root of all productivity gains—truly the basis for the wealth of nations. Trade is as old as human civilization. and integrating communities and nations in a global marketplace. ingenuity. This left the ITO without a critical member and effectively killed the nascent organization. 2009). countries launched a host of new multilateral institutions dedicated to international economic cooperation. From the ruins of World War II. 14. rich and poor. in 1950.S. and is an added incentive for us to seek a stable world that is safe from upheaval and strife. it was the result of visionary political leadership in the United States and other major economies that sustained a 50-year commitment to lowering barriers that separated the peoples of the world.000 $2. Final Act and Related Documents. Conference on Trade and Employment. more gradual route to reducing tariffs and opening markets among 1. Havana Charter for an International Trade Organization. in U.org gy. along with technological advancement that is itself largely spurred by the dynamics of trade. The effects of this failure were eased by promising results under a parallel effort known as the General Agreement on Tariffs and Trade.000 $6. This growth in trade did not come about by accident. Trade increases the standard of living of all nations.

The establishment of the WTO continued the rush of new members. Over the course of several decades..4 and (3) the trade barriers are eliminated within a reasonable amount of time. Member countries of a free trade area agree to eliminate tariffs between themselves but maintain independent external tariffs on imports from nonFTA member countries. “Regional Trade Agreements. Ibid. corporations. GATT membership increased from 89 countries in 1985 to 128 countries in 1994.wto.org/ english/thewto_e/whatis_e/tif_e/fact4_e. as so clearly illustrated by the current round of trade negotiations. Legally. and importers conduct business. determined negotiators around the world have built a comprehensive structure of trade agreements that promote trade and provide the assurances that trading partners need in terms of transparency and predictability. The first reductions and rules entered into force in January 1948. including trade in services. 6. 5. the process can take time. Member countries of a customs union agree to eliminate tariffs between themselves and set a common external tariff on imports from non-member countries. demonstrating that the multilateral trading system had been recognized as an anchor for development and an instrument of economic and trade reform. was launched in 1986 in Uruguay. intellectual property rights. 2009). which prevents countries from discriminating between different trading partners. quotas. Successive negotiating rounds under GATT widened and deepened international trade liberalization.7 3.3 (2) the agreements eliminate duties and other trade barriers on a substantial amount of all trade in products originating in countries participating in an agreement. and rules governing trade in agriculture and textiles. and subsidies. Section 4. Free trade agreements between countries can exist in harmony with the WTO. A key concept enshrined under GATT is the most-favorednation (MFN) principle.interested member nations. and predictable so that individuals. but also led to the creation of the World Trade Organization in 1995. The Uruguay Round.wto. The mission is to help producers of goods and services. and governments can know what they are dealing with and be confident that trade policy will not be subject to sudden changes. are currently in force. “The GATT Years: From Havana to Marrakesh. Rather than create an organization that regulated trade and traderelated aspects of the international economy. more difficult negotiating areas. During the Uruguay Round. and 400 agreements could be in force by 2010.htm (September 23. the eighth and final round under GATT. GATT was a treaty that focused more explicitly on reducing and eliminating specific tariffs. Section 8.6 Some 421 regional trade areas had been notified to the WTO as of December 2008. Article XXIV.org/english/tratop_e/ region_e/region_e. Part III. It not only extended GATT rules for the trading system into several new. By 2009. The WTO is a forum for negotiating agreements aimed at reducing obstacles to international trade and ensuring a level playing field for all. including NAFTA and the European Union (EU). Section 5. Ibid.” at http://www. World Trade Organization.. 7. 2009). thereby contributing to economic growth and development around the world. including every major trading nation and most developing countries. preferential trade agreements are permitted under the multilateral auspices of the WTO provided (1) that the agreements do not result in higher overall trade barriers for WTO members outside of an agreement. exporters. General Agreement on Tariffs and Trade 1947. the WTO had 153 members. Bilateral and regional free trade agreements allow nations the option of pursuing binding trade arrangements with countries that are willing to liberalize their foreign trade policies more quickly than multilateral negotiations allow.htm (September 23. Critical to that mission is ensuring that trade rules are transparent 2. 23 Chapter 2 .” at http://www. 4.2 GATT provided the context for significant trade liberalization among member countries from 1948 to 1994.5 More than 200 trade agreements and customs unions. However. World Trade Organization.

thailandwto.org/ Doc/News/6712. In February 2009.9 In fact. Pascal Lamy. July 13. Japan’s automobile exports to the United States dropped by 30 percent in the fourth quarter of 2008. including that caused by trade. Those politics are never harder than when times are hard. Trade slowed significantly more in the fourth quarter of 2008 and throughout 2009 than it had in previous economic downturns. and America’s automobile sales were 41 percent lower.wto. The automobile industry has been among the more dramatic examples of a sector that is heavily dependent on international trade and has been hit very hard by the worldwide economic crisis. “Third Monitoring Report to the Trade Policy Review Body: Introductory Remarks. There are a number of postulations as to why this is the case. People tend to think in terms of zero sum transactions in which gains for one party imply a loss for the other. The new EU member states of Eastern Europe experienced a 30 percent drop.9 percent drop in 2009 in the overall global economy. overall.htm (October 9. can insulate itself from global downturn when most of its main trading partners are in recession. Germany’s automobile exports were 51 percent lower than a year earlier. world economic activity in 2009 will have subsided by at least 1 percent. with multiple components for a single product often 9. All of these trading partners are currently experiencing economic contraction or slowdown and are likely to exhibit weak import demand for some time. The WTO has observed that: 8. 2009). 2009. Developed countries have seen a larger percentage decline in exports than developing countries. With so many nations’ economies reeling.the harD PolitiCs oF traDe Visionary leadership and sustained commitment were required to achieve this progress because the concepts that underlie the gains from trade. international trade is inevitably and profoundly affected. is highly concentrated and thus politically visible. wideness and global impact. so the decline could cause even more hardship in those countries. exports will have dropped by approximately 9 percent in terms of volume compared to 2008. 2009.”8 No country is immune from harm when so many countries are experiencing a severe recession.5 percent lower in July 2009 than they were in July 2008.” World Trade Organization. 2009. with its dynamic economy. The World Bank forecasts a 2. The IMF projects that.” March 23. p. WTO economists estimate that in 2009. 24 2010 Index of Economic Freedom . at http://www. The pain of jobs lost to economic restructuring. Every region slowed nearly simultaneously and in dramatic fashion.org/english/news_e/news09_e/ tpr_13jul09_e. particularly the economic principle of comparative advantage. in terms of value. 3. that “this crisis is unprecedented in its deepness. at http://www. 2009). the gains to any individual are not large enough to inspire acute feelings or political action. are not intuitively obvious. “WTO Sees 9% Global Trade Decline in 2009 as Recession Strikes. Not even China. This would be the largest decline since World War II. The precipitous decline in trade prompted WTO Director-General Pascal Lamy to observe on July 13. which caused the decline in demand for trade to be far more widespread than in the past. World Trade Organization. while the gains tend to be diffused throughout society in such a way that while everyone gains. the deep and widespread contraction in credit available to finance trade transactions impeded trade globally. 2009 witnessed a dramatic downturn in the world economy and trade. China’s exports.pdf (October 9. China’s exports to its top six trading partners (treating the EU as a single partner) represented 70% of the country’s total exports in 2007. were 23. and times have been hard during the past two years. In the fall of 2008. Other major exporting economies had comparable declines. The European Automobile Manufacturers Association reported that passenger car registrations in Europe in February 2009 dropped 18 percent compared to the previous year. but developing countries are more dependent on trade for economic growth. Global supply chains are increasingly integrated.

foresight. By 1932. garners widespread popular support. World trade overall fell two-thirds in the first few years of the Great Depression. it is even more difficult for political leaders to advance trade freedom or even to keep markets as open as they were at the outset of the economic crisis. making markets freer and more open requires that political leaders demonstrate courage. and the world learned a painful lesson. exports to Europe were just one-third of what they had been in 1929. and there was an escalating pattern of retaliation and counterretaliation. export subsidies were increased. Diminishing traDe FreeDom In the best of times in developed countries. at http://publications. and sustained commitment. such as many of the world’s economies experienced in 2008–2009. That lesson has not been forgotten.Evolution of Trade Trade Volume Index (1960=100) 600 500 East Asia and Pacific 400 300 World OECD Latin America and Caribbean Sub-Saharan Africa Middle East and North Africa 1965 1970 1975 1980 1985 1990 1995 2000 2005 2008 200 100 0 1960 Source: World Bank. currencies were depreciated. if ever.000 products to an average of 60 percent. Other countries responded accordingly. Chart 2 heritage. U. Nations retreat on trade freedom at their own peril and to the detriment of all trading nations. which raised tariffs on over 20. History shows that defending and advancing trade freedom is never more important than during an economic downturn. and there are usually near-term costs in terms of the displacement of workers in industries affected by increased competition. The most often-cited evidence of the dangers of retreating on trade is the Depression-era enactment in the United States of the Smoot–Hawley Tariff Act of 1930. 2009).S. And protectionism has increased. but whether it will be sufficiently heeded to avoid protracting and deepening the current economic crisis remains to be seen. World Development Indicators Online.org sourced in multiple countries. In the worst of times. Opening a domestic economy to increased competition rarely. and the toxic stew of protectionism proved devastating to economies around the world.worldbank.org/WDI (October 19. Chapter 2 25 . Along with tariffs.

2010 Index of Economic Freedom . 12. as necessary. Approaches to protectionism vary.8 percent in the 2010 Index. Further.com/ crunch/0811g20declaration. 37. 22. Nanto.” He said that the WTO had found 85 verified trade measures put forth by 23 countries from September 2008 to March 2009 and that the large majority were trade-restrictive. at http://siteresources. 26 restricting measures took effect.pdf (October 9. In this regard. at http://74. “Trade Protection: Incipient but Worrisome Trends. The study found that since the outset of the financial crisis. 2009). Press release. 2009. imposing new export restrictions.mil/100. 2008.” Congressional Research Service Report for Congress R40496.12 The slow rise of protectionism is confirmed by the trade freedom rankings in the 2010 Index of Economic Freedom.10 The G-20 pledge notwithstanding. November 15. We also agree that our countries have the largest stake in the global trading system and therefore each must make the positive contributions necessary to achieve such an outcome. Blatantly protectionist or “beggar-thy-neighbor” policies by WTO members are subject to limi11.dtic. Elisa Gamberoni and Richard Newfarmer.7 in the 2009 Index to 11. policymakers in the G-20 had proposed and/or implemented 78 trade measures. 47 trade10. but generally capturing only the earliest policy responses by governments—the rankings are starting to reflect the impact of rising trade barriers on some countries’ scores. on March 17. finance ministers and central bank governors of the Group of 20 (G-20) nations issued a statement at the Summit on Financial Markets and the World Economy pledging to resist resorting to protectionist measures: We underscore the critical importance of rejecting protectionism and not turning inward in times of financial uncertainty. From the 2009 Index to the 2010 Index. While average tariff rates fell.3 percent in the 2009 Index to 6.125. The rankings show that for the world as a whole. we shall strive to reach agreement this year on modalities that leads to a successful conclusion to the WTO’s Doha Development Agenda with an ambitious and balanced outcome. worldbank. at http://www. “The Global Financial Crisis: Foreign and Trade Policy Effects.9 in the 2010 Index.2/ ADA497762+wto+worrying+tendency+toward+ increased+trade+protectionism+as+a+result+of+the+ deepening+global+economic+crisis&cd=1&hl=en&ct= clnk&gl=us (October 9. Using tariff data through 2008 and non-tariff barrier data covering the period from July 2008 through June 2009—the period coinciding with the beginning of the worldwide recession in most countries. p. April 7. on November 15. 2008. average tariffs fell 0. p. 2009). “Declaration of the Summit on Financial Markets and the World Economy.” Office of the Press Secretary.org/NEWS/Resources/Trade_Note_37.11 World Trade Organization Director-General Pascal Lamy stated in that same month that WTO members were exhibiting a “worrying tendency toward increased trade protectionism as a result of the deepening global economic crisis.5 percentage point from 7. 2009. or implementing World Trade Organization (WTO) inconsistent measures to stimulate exports.132/ search?q=cache:m4B58zj-7FEJ:handle. March 2. The White House.113.pdf (October 9. 66 of them containing trade restrictions. 1. 37 countries experienced a decrease in trade freedom of at least one point. we will refrain from raising new barriers to investment or to trade in goods and services. Dick K.iasplus. within the next 12 months.2 point from 11.trying (anD Failing) to holD the line Mindful of the dangers of nations retreating on trade freedom during an economic downturn. the World Bank issued a study showing that these same G-20 nations had implemented 47 measures that restrict trade at the expense of other countries. the average penalty for non-tariff barriers to trade rose 0. 2009).” World Trade Organization Trade Note No. and three countries scored at least 10 points lower. We instruct our Trade Ministers to achieve this objective and stand ready to assist directly. 2009.

Italian brandy. an 8 percent reduction in world trade. which are binding on WTO members. Germany.. but members generally may still enter into plurilateral agreements that affect government procurement. Sweden. TVs. • WTO rules also permit the imposition of countervailing duties on unfairly subsidized imports and other responses against imports that are deemed to be “dumped” (i. The 1947 General Agreement on Tariffs and Trade excluded government procurement. the United Kingdom. Subsidies can constitute a form of protectionism. cheese. For instance. The Uruguay Round of the GATT negotiations (1986–1993). covered government procurement insofar as it relates to antidumping and subsidies in its mandatory agreements. In the following decades. China. and beverages) would be allowed in only a few ports and airports. most notably in countries in which entire sectors of the economy were nationalized. and leather goods and Indonesia’s stipulation that five categories of goods (including garments. The United States. suffers from excess capacity. British sauce. and milk powder. which created the WTO.. such as steel and airlines. • For example. The government procurement provision was the only code from the GATT Tokyo Round not to be made a mandatory requirement for membership in the World Trade Organization. Dutch eggs. The World Bank found that by March 2009. Non-tariff protectionism included Argentina’s imposition of non-automatic licensing requirements on auto parts. and Brazil have not joined the Agreement on Government Procurement. government spending became an increasingly large factor in many nations’ GDP. Russia raised tariffs on used automobiles. • WTO rules allow nations to favor domestic industries through relief or subsidy programs.S. Some nations tightened standards to slow import entry. if all WTO members raised tariffs to previously agreed maximum or “bound” rates. and the effect on the flow of goods and services between nations would be profound: according to WTO estimates. The World Bank study found that about onethird of the trade-related actions that it identified involved tariff increases. toys. which members had the option of joining. For instance. textiles. The World Bank study noted that such subsidies skew needed adjustments in an industry that. The American Recovery and Investment Act of 2009—the so-called stimulus legislation in the U. India banned Chinese toys. Argentina. India. shoes.e. nations with such carbon-reduction systems will suffer reduced competitiveness compared to countries with few or no restrictions on carbon emissions. Canada. Australia provided support to domestic car dealers. currency depreciation. on a worldwide level. The European Union announced that it would be implementing new export subsidies on butter. efforts to address global warming by implementing government programs that require permits to emit carbon will significantly increase costs for manufacturing and other industry sectors. toys. stimulus efforts. and Ecuador raised tariffs on more than 600 items. electronics. but WTO rules and obligations do allow for considerable restraints on trade. and they have proliferated in many countries to benefit domestic auto industries. Brazil. tariffs would double worldwide. footwear. France. Examples include China’s import prohibition on Irish pork and some Belgian chocolate. which contains a “Buy American” provision—is emblematic of the historic sensitivities related to protectionism in government procurement. these subsidies to auto industries already totaled $48 billion worldwide. food. Protectionism can also stem from legislation that is apparently entirely unrelated to international trade or the current economic downturn. The 1979 Tokyo Round of GATT negotiations resulted in an Agreement on Government Procurement. 27 Chapter 2 . that cost less than their fair value). and Italy provided direct or indirect subsidies to avoid layoffs of automobile industry workers. and Spanish dairy products. and program stipulations requiring the purchase of domestically produced or sourced goods. thereby unfairly undercutting an importing nation’s domestic industry. As a consequence. China.tation. and South Korea and Portugal directed aid to automobile component suppliers.

protectionism in its various forms always has been and likely always will be appealing in both good and bad times. reasons For oPtimism The current economic downturn is occurring in a worldwide economy and an international system of trade rules that are not entirely analogous to the 1930s. a few proposed restrictions have been rejected or not enacted. Moreover. thereby allowing the crisis to worsen and delaying recovery. imported inputs. the U. industries. which averaged about 50 percent in the 1930s and 25 percent in the 1980s. the bureaucracy attempted to impose widespread licensing arrangements and import controls reminiscent of the 1970s. nations were able to increase trade barriers without running afoul of international agreements. in 1933. While the automobile industries in Asia. Similarly. and corporations are exponentially more reliant on world trade than they were in the 1930s. when automobile manufacturing dropped 90 percent. WTO members can utilize WTO dispute resolution mechanisms. International diversification and joint ventures with foreign partners lessen the desire for protectionism.000 savings and loan institutions in the U. In addition. reversing its harmful effects takes valuable time. it is not nearly as serious as the decline in 1932. Producers for the domestic market are more reliant on imported inputs. an indicator of supply chains. Export interests are far more powerful than before relative to pure import-competing industries. There are other contrasts with the Great Depression era. and labor organizations. the period of widespread and severe economic distress known as the Great Depression. has more than doubled as a proportion of total trade. Dramatic tariff increases today would be devastating were they to occur. Trade tariffs. are a fraction of the 10. Today. treacherous. such as the one that the world is experiencing today. Meanwhile. while disturbing. or even the failure of over 3. and even services.. instead of instantly retaliating. Protectionism is never more alluring. The current downturn began in a world economy that is far more open than that of the 1930s. successive GATT/ WTO agreements have provided much greater legal stability of trading relations. For governments. about 10 of the 77 proposed and implemented changes in trade policies involved steps 28 2010 Index of Economic Freedom . and production chains link global markets through a web of trade in parts and components. as the experience of the 1930s demonstrates. average around 10 percent today. and Europe declined precipitously in 2008–2009. as does the increased presence of foreign companies with production facilities in domestic markets. Because of this quite different political economy today.S.S.S. In the 1930s. and destructive than it is in the most severe economic crises. The simple average of trade-to-GDP is today 96 percent compared to 55 percent in 1970—and parts and components trade. for example. only to provoke a response of outrage from the private sector that led to immediate reversal. The World Bank’s March 2009 study found several structural impediments to protectionism that did not exist in the 1930s and that may serve as effective firewalls against destructive anti-trade measures: Countries are far more interdependent through supply chains. a tremendously consequential fact that tempers demands for protectionism in the 21st century economy. The world’s economies. and there is wider recognition of the perils of protectionism and the benefits of freer trade.000 bank failures in the U. industries. In Brazil. The bank failures of 2008–2009.It is inevitable that there will be domestic pressure to impose import tariffs to offset the competitive advantage enjoyed by countries that do not impose such expensive restrictions. in the late 1980s. there is far more latitude today for freer trade to help lift the world’s economies. Moreover. the more egregious forms of the Buy America provision appear to have been circumvented.

2009..S. The WTO recognizes that the contingency measures in trade agreements are not harmless if implemented and that their consequences can be serious.13 WTO agreements are binding legal documents that cover a wide range of activities and deal with a range of issues involving agriculture. These defensive measures were included in trade agreements to make the costs and risks palatable to signatories.worldbank. to allow for temporary relief from import competition…. current account deficit dropped to 2 percent or 3 percent of GDP in 2009. down from 6 percent in 2006.” World Trade Organization. 2009. they can act as a means of helping to maintain the rule of law in international trade. 2009)..S. and other nations. investments. Japan. There is ample reason to hope that the existence of these contingency-defensive provisions will deter some protectionist actions. and transfers. “Protectionist Measures Show Worrisome Rise Since Beginning of Financial Crisis: Study Shows 17 of G-20 Countries Have Implemented Trade-Restricting Measures. telecommunications. The U. March 17. • It has been estimated that to offset the decline in U. Americans suddenly became savers. where trade-restraining options are referred to as “contingency” or “defensive” trade measures and may include tariff increases and countervailing and antidumping duties levied on imports. To sustain their own economic growth. The collapse of the housing and credit markets.contentMDK:22105847~menuPK:34463~ pagePK:34370~piPK:34424~theSitePK:4607. the U. and the U. textiles and clothing. China would have to boost domestic consumption by 40 percent.00. If implemented. This will not be easy for a variety of reasons. and protectionist provisions can be found in the trade agreements of the World Trade Organization. that distinction goes to China. government purchases.” The World Bank. treating foreigners and locals equally. in that they channel otherwise arbitrary protectionist actions into prescribed and predictable policy measures. The press release announcing its 2009 World Trade Report observes that: [C]ontingency measures can be seen as an instrument of adjustment policy. Press release. and intellectual property. food sanitation regulations.S. some of them rooted in differing national cultures.wto. rapidly rising unemployment.S. Press release.org/WBSITE/EXTERNAL/ NEWS/0.S. including trade in goods. 14. Chapter 2 29 . but that may be beyond the capacity of the Chinese government to do on its own. July 22. and negotiating to reduce barriers to trade.org/ english/news_e/pres09_e/pr565_e. was the world’s largest current account surplus country. mostly related to free trade agreements. The world’s current account surpluses in 2008 were estimated to total about $2 trillion. the declining stock market.htm (October 9. was chief among those nations that were only too happy to oblige through huge amounts of consumption of imported goods and borrowing from overseas. and plunging consumer confidence all contributed to a dramatic contraction in domestic spending and investment in the U.14 Boosting international traDe anD DomestiC ConsumPtion In the 1930s. Today. they could exacerbate a decline in world merchandise trade that the WTO predicts could total 10 percent. Protectionism is sometimes in the eye of the beholder. Overriding principles in the WTO include treating trading partners equally. Moreover. industrial standards and product safety. banking. including China. High-saving countries. “World Trade Report: Keeping Trade Open in Times of Crisis. The “current account” measures a nation’s international transactions. deter certain trade actions employed by trading partners.toward greater liberalization. and Germany. at http://www. 2009). the current account surplus countries must generate more economic activity within their own borders.html (October 9. They can also serve to 13. have been dependent on exports to generate economic growth. consumption alone. services. being in recent years a non-saving nation in which consumer spending has accounted for 70 percent of the economy. at http://web.

German citizens are also prodigious savers. will surely be met with protectionist backlash. Temptations to gain short-term advantages through the protectionist tactics of higher tariffs. Alternatives such as protectionism. and services.com/ article/BT-CO-20090901-713439. instead. 2009. Such tactics.”15 staying on Course World trade is and should be a constantly evolving phenomenon. and never more so than in an economic downturn such as the world has experienced since 2008. renewed economic growth and the trade that flows from and underpins it will surely follow. Societies undertaking such protectionist measures impose costs on themselves that include higher prices on goods and services for consumers and producers and lower productivity and wages for workers. is that no country and no region can go it alone and prosper for long.S. with post–World War I hyperinflation in mind. That expansion has come to a stop during the recession of 2008–2009. 15. are doomed to fail. • Germany has been the world’s largest exporter of manufactured goods. As U. 2010 Index of Economic Freedom . 2009). each trade agreement a segue to the next. Meena Thiruvengadam. If. What became abundantly clear in the 1930s after protectionism exploded and trade collapsed. September 1. “Completion of the Doha round can be a key element of helping the world recover from this global economic crisis. Changing these behaviors will be difficult. and economic stagnation replaces growth in societies that doom themselves to underdevelopment.” Dow Jones Newswires. leaders remain true to the vision of world integration and interdependence that inspired their predecessors. which began in 2001 and would achieve important breakthroughs on trade in agricultural products. and encourage worldwide confidence in future trade freedom and prosperity. is accustomed to export-led growth. the world has reaped the benefits of rapidly expanding trade. “USTR Kirk Expresses Optimism Over Doha Round Potential. • The Japanese people historically also have saved a higher proportion of their income. The new jobs that would have been created in an open and rapidly evolving economy never materialize. however. at http://online. provide more deterrence against protectionism. industrial goods. That is why it is so important for WTO member countries to reaffirm their commitment to more open markets for trading. but they will do so only for a short time. got in the habit of stability in its fiscal policy. and is even clearer today. It is true that they may protect a non-competitive industry or save a few specific jobs. with ever greater trade freedom the result. Success in the Doha Round of WTO negotiations would boost specific trade sectors. but it must be done both to sustain growth in these countries and to make growth possible in others. a protectionist response could turn a temporary setback into a long-term change of course that would harm world economic growth for decades. But trade is highly competitive and complex. If governments succumb to political pressure or panic. subsidies. The post–World War II GATT negotiations and the subsequent creation of the World Trade Organization and numerous regional and bilateral trade agreements are testament to this fundamental truth. For six decades.html#articleTabs_ article (October 9. and at an extremely high cost. which seeks to further insulate domestic markets and unfairly advantage exports to other nations that have their own problems. and the entire nation—poor in natural resources but rich in productive workers—has been geared toward exporting since the end of World War II. and. especially in this worldwide economic environment.wsj. Trade Representative Ron30 ald Kirk stated in advance of a meeting of WTO ministers in New Delhi in July of 2009. and other devices abound.To spur greatly increased consumer spending by China’s households would require changing the behavior of a citizenry accustomed to saving up to 25 percent of their income. The current economic crisis should underscore the urgency of completing the WTO’s Doha Development Agenda of multilateral trade negotiations.

rapid growth.org/ external/pubs/ft/wp/2004/wp0477. It was initially able to mobilize resources from agriculture to bolster industry. Ph. 31 . of course. at http://www. both technological innovation and organizational efficiency stagnated because of misunderstanding and misapplication of incentives. May 2004. E conomic freedom has moral and practical dimensions. a government regulator or manager may be able to respond quickly and even effectively to a particular problem. The practical argument for economic freedom is that the state will inevitably make ugly mistakes. The practical side is famously more complicated. In a crisis.imf. A centrally managed economy can thereby actually suffer more from unexpected turbulence.pdf. and every term in between. long term. There are obvious historical examples where planned economies do well for a time. 1. WP/04/77. This may even be true when only part of the economy is managed if it turns out to be a pivotal part. India’s socialist experiment started to crumble in the early 1980s with pro-business reforms and ended altogether in 1990 after a balance of payments crisis resulting from central planners being unable to match their pricesetting and quantity-setting with actual supply and demand.” International Monetary Fund Working Paper No. In Asia. The moral side—that it is better for people to enjoy liberty in their economic lives—applies in the short term. “From ‘Hindu Growth’ to Productivity Surge: The Mystery of the Indian Growth Transition. However. The classic case. thought to be the sole path to modernization.Chapter 3 Economic Freedom and Crisis Performance in Asia Derek Scissors. Dani Rodrik and Arvind Subramanian.D. but they are likely to do a poor job in adjusting all of the myriad production decisions facing individual firms across an entire economy.1 The pro-market reforms that followed led to sustained. partly because of our incapacity to control systems as complex as national economies. is the Soviet Union.

but now is when it is most important. A wealth of data. freer and more flexible economies should survive better.3 2. and Uzbekistan. investment.The Index of Economic Freedom is based on the idea that freer economies perform better over the long run. Per capita income can thus be simplified to sustained improvement in national income. Asian economies were weakening throughout 2008. so the remaining sample is biased toward a higher level of economic freedom. 3. backs the idea that economic freedom promotes long-term prosperity and that advancing economic freedom generates higher economic growth. we rate crisis performance by measuring the change in GDP growth rates in 2008 from those in 2005–2007. employment creation. the Index freedom score may be somewhat incomplete on two counts. with multiple economies within each category ranging from free to unfree. These economies are grouped in Chart 1 by Index aggregate scores (2009 scores based on data covering July 2007 through June 2008 are used). production. and Turkmenistan. the study does not assess the level of economic freedom in Asia. so the bias may be benign. An assessment of 2009 cannot be comprehensive. In terms of economic freedom. However. and there are insurmountable data problems with eight others. Data for the crisis period are as yet wildly inconsistent for Azerbaijan.2 The remaining 22 economies offer comparatively credible gross domestic product of nearly $5 billion or more and generate almost all of Asia’s GDP. At this point. there are not enough data on either policy measures or performance in the present crisis for a final assessment. A more complete evaluation will be possible next year at this time. both from this Index and from independent research. but it is universal. Measuring crisis performance is somewhat subjective. In addition. however. For many Asian economies. population will change only slightly. Twelve are too small to chart even 32 2010 Index of Economic Freedom . Papua New Guinea. more flexible economies withstand economic turmoil better? Asian economies provide a good test for this hypothesis. Taking into consideration two distinctive policy measures not covered by the Index—reserve accumulation and interest rate change—this chapter provides an expanded view of Asian economies’ economic freedom and crisis performance. a nominally independent policy course. Do freer. That wide variation should make for a wide variation in crisis performance. pre-crisis GDP trend must factor into the measuring eConomiC FreeDom in a Crisis The Heritage Foundation/Wall Street Journal Index of Economic Freedom includes 42 Asian economies. it turns out that these Asian economies appear to represent global patterns well: The same number of countries lies above and below the global mean. The chief goal of economic development is sustainable improvement in per capita incomes. Economic freedom should help predict performance in the present crisis: Holding everything else constant. Basic data for this study are not available for Afghanistan. but weakness became acute in September in some countries and November in others. The latter is necessary for the sample to be useful. In light of the recent global financial and economic turbulence. GDP data from 2009 are incomplete for all countries and not available for some. The second is that the Index scores do not yet fully capture the wide range of policy steps taken in response to the global crisis. The sample also shows wide variation. and into the future. North Korea. The excluded countries range from the middle to the bottom in economic freedom. Evaluating performance during the downturn suffers from a standard trade-off: Later is when the evaluation will be clearest. GDP is not an ideal measure of national income. this chapter examines a different and timely question: whether economic freedom predicts performance in a crisis. by necessity a short-term analysis. Unfortunately. partial results tentatively affirm that policies which permit greater economic freedom would have served Asia better in the past. the Kyrgyz Republic. and trade by dollar value. The first is that some economies were consciously distorted by intervention aimed at building official stockpiles of foreign exchange reserves. They top the rankings in economic freedom but are also represented at the very bottom. the crisis did not occur in a vacuum. However. in the present. and the reduction of poverty. Since the duration of the crisis has to this point been short. Burma. In this study.

the results may clash with conventional views of the crisis.18 2008 segment of the recent Kazakhstan 60. at http://www.79 Asian countries.. ously achieved.1 -2. any –7% –6% –5% –4% –3% –2% –1% 0 1% downturn during a crisis Sources: Terry Miller and Kim R.These figures are also shown in Chart 1.: The Heritage Foundation and Dow Jones & Company. Holmes.0 -0. 2010 Index of Economic Freedom must be evaluated against (Washington. not static. on the other hand. those with Korea 68.18 less economic freedom sufThailand 63.78 ations in short-term GDP growth is actually negative.22 China 53. This trend will vary by development have an important impact on a country’s crisis Economic Crisis and Reduced Growth stage as well as by level of economic freedom. China does worse than perhaps expected because its still-considerable GDP growth has dropped by a substantial amount. 33 Chapter 3 .0 -4.73 Obviously.4 0.67 Philippines 56.4 -0. given the small portion of the crisis captured by 2008 data.imf. International Monetary the higher growth previFund.6 -1.6 -0. Inc.0 -2.0 -2. 2009). an extended GDP trend may be appropriate. the correNew Zealand 82. feature. 4.1 -6.22 fered a bit less during the Mongolia 62.8 -1. 2010).97 crisis? In Chart 1.org/index.62 parative performance before Vietnam 51. A smaller base and more unexploited opportunities to enhance either efficiency or resource mobilization make it generally easier for less-developed economies to boast high rates of GDP growth.5 -4.37 are less engaged with the Sri Lanka 56.8 0.4 -2.org Equally important is that economic freedom is a dynamic.org/external/ns/cs. Tajikistan 54. Because of the comparison to trend.23 a crisis as well as during a Laos 50.6 -5.5 -0. When 2009 results are available. at www.heritage. and World Economic Outlook.2 -2. on average.07 take into consideration comIndonesia 53. Moderately Free At least among the selected Taiwan 69. Pakistan’s earlier economic struggles.6 0.21 with less economic freedom Cambodia 56. a narrower trend measurement better conveys the extent of instability. Since countries with greater economic freedom Repressed have. changes in economic freedom also evaluation.15 lation between the level of Mostly Free economic freedom and variJapan 72.1 -6. make for only a small decline in growth during the crisis.8 -2. Chart 1 heritage.aspx?id=28 (October 20.0 -2.57 global downturn. This is perhaps not surprising.4 With economic freedom 2009 Index scores and a measure of of Economic Freedom Score GDP Growth Rate Deviation in 2008 short-term crisis perforFree mance in hand.35 Did freer Asian economies Singapore 87.0 -0.58 respond better in the recent Australia 82. That is.54 Malaysia 64. Mostly Unfree given the fact that countries Pakistan 57.C. one wants to India 54. D.95 world economy as a whole. we can ask: Hong Kong 90. Here. much betBangladesh 47.75 ter long-term growth rates than less free countries.47 crisis.

International Monetary Fund. In light of superficially excellent macroeconomic performance.00 Correlation: 0. 2010). many Asian states intervened in their economies to mobilize capital and other resources. -6. decision-makers dismissed critics of this intervention. They touted an “Asian” path to prosperity that combined private enterprise’s 34 2010 Index of Economic Freedom .0 -2.00 performance and resilience.: The Heritage Foundation and Dow Jones & Company. Fortunately.imf.Boosting Economic Freedom Lessened Economic Slowdown Each dot represents an Asian nation. 2010 Index of Economic Freedom (Washington. The Index provides a comprehensive picture of economic freedom. yet it cannot be claimed that it is measuring every relevant variable. at www. In determining what information might be most valuable.org -8. 2. It turns out that a strong case can be made for the latter explanation. there are available data relevant to economic freedom that enhance understanding of its effects on crisis performance.19 Sources: Terry Miller and Kim R.0 4. at least for Asian countries. 2009). It represents a compromise between the ideal and the possible. the lack of correlation between the level of economic freedom and short-term crisis performance suggests either that economic freedom does not necessarily promote superior crisis performance or that something important has been missed.aspx?id=28 (October 20.0 2.0 -4. The Index of Economic Freedom ranks a notably large number of countries from every region of the world.org/external/ns/ cs.00 GDP Growth Rate Deviation in 2008 Chart 2 heritage. the correlation between changes in economic freedom and the variation of GDP growth rates is positive. or even necessarily all of the most important variables. in the case of the larger Asian economies. indicating that advancing economic freedom has enabled some countries to perform better than others during the recent economic turmoil.00 Trend line -4.00 Change in Economic Freedom (the 2008 Index score compared to the 2009 Index score) -2. and World Economic Outlook.org/index. Holmes.. it is helpful to consider the recent history of government policies and crises in Asia.heritage. at http://www. Still. As shown in Chart 2.C. The inclusion of so many countries constrains the number of comparable data sets that can be used to measure economic freedom. D. Inc. the asian FinanCial Crisis In the early and mid-1990s.

largely due to government influence over interest rates and the financial system.org/External/np/exr/facts/asia.-Style Free Market. (See Table 1. Beatriz Pont.9 5.pdf.” Economic and Social Commission for Asia and the Pacific.” Foreign Affairs. In this case. and Thailand—the four countries hit directly—from 1996 to 1998. 1998. November/December 1994. Andrew Berg. these reserves are so large as to become the sinMonetary Fund Working Paper No. 7.ucm.htm. 8.” International An academic debate continues to this day over whether the harshness of the regional crisis was due primarily to fundamental structural problems or to panic and information distortions associated with the currency runs. “The Financial Crisis in East Asia: The Cases of Japan. A value of 0. at http://www. The interventions in Asia may have started as minor distortions in 1998. which inevitably is distorting to some extent. the process is twice inefficient. October 1999. hence. Chapter 3 35 . The proximate cause of the attacks was even more government intervention.7 that proved to be the main reason for the attacks on regional currencies in 1997. Paul Krugman. South Korea and Southeast Asia. “The Asia Crisis: Causes. at http://www. in Korea. at http://www. 11.” The New York Times. China.imf. the state’s economic policy was focused on contemporary rapid growth.” International Monetary Fund Factsheet. More specifically.com/articles/50550/ paul-krugman/the-myth-of-asias-miracle. 9. The conventional wisdom in Asia became not that state intervention contained hidden and painful costs. This resource misallocation incorporated. This debate overlooks the policy lessons actually drawn. “A Note on Unemployment in the Wake of the Asian Economic crisis and Some Responses. January 1999. the concentration of short-term foreign capital flows in specific sectors. 6. but was not limited to. Bulletin on Asia–Pacific Perspectives. as the value moves higher and higher. On some accounts. Working Paper No.pursuit of profit with an activist state’s pursuit of national development goals. January 17.S. Kristof. 10. October 1998. but they have since pushed foreign reserves in certain economies to unprecedented levels. “The IMF’s Response to the Asian Crisis. this time in the currency market in the form of incorrect exchange rate valuation and restrictions on foreign currency trading.fas. is unnaturally and perilously low. 2002/03. at http://www. of course.) This required another flawed round of state action. reserve accumulation represents a fundamental imbalance caused by the state and. and the average unemployment rate nearly doubled. Some financial-sector reform was undertaken to address structural weakness.imf.foreignaffairs. Policy Responses.html.org/external/pubs/ft/ wp/1999/wp99138. When excessive reserve accumulation is forced by government action.” Congressional Research Service Report for Congress.org/ man/crs/crs-asia2.es/info/eid/pb/ICEIwp11-4.” Complutense Institute for International Studies.com/1998/01/17/world/ international-business-crisis-pushing-asiancapitalism-closer-us-style-free. at http://www. Dick K.pdf. Indonesia. but that the state should intervene to accumulate foreign exchange reserves and deter currency attacks. “The 1997–98 Asian Financial Crisis. “The Myth of Asia’s Miracle.htm.8 The devastating nature of the ensuing shock is well known. Clara García. On the other side.6 This seemed to work until the Asian financial crisis erupted in 1997. Francisco García-Blanch. For example.pdf. and Outcomes. Malaysia.10 but the chief reaction among many policymakers was to move to better protect their exchange rates in the future by accumulating foreign reserves.nytimes. at http://www. Complutense University of Madrid. Nanto.9 percent. Reserves as a percentage of GDP captures the extent of exchange rate “protection” being purchased by a government. ignoring the absence of productivity gains that would make growth rates sustainable indefinitely.5 The invisible hand needed to be guided by an all too visible government brain. it begins to seem wasteful and eventually harmful. GDP fell an average of 8. It was inefficient resource allocation.org/ drpad/publication/bulletin%202002/ch3. WP/99/138. February 6. Nicholas D. 1998. at http://www. and Iliana Olivié. “Crisis Pushing Asian Capitalism Closer to U.unescap. Liu Lan. a sharp deviation from economic freedom.

477 High Thailand Vietnam Mongolia Korea Above Average India Japan Cambodia Philippines 0. at www.304 0. Yung the sample economies have less freedom than Chul Park. from ideal. Bernanke.twnside.: The Heritage Foundation and Dow Jones & Company.concerning the unsustainable nature of their ment of how much freedom has been lost in policy course. Vol. 1 (2009).org/Documents/ Periodicals/ADR/pdf/ADR-Vol26-1-Adams. “Remarks by Governor Ben S.Foreign Reserves and GDP in Asia Ratio of Foreign Reserves to GDP Extremely High Singapore 1. Holmes. The imbal. at http://www.03 scores with the lost freedom signified by reserves/ GDP provides a more comprehensive version of true economic freedom in the region than is provided by Index scores alone.12 If the distortions implied by high reserves/GDP reduce economic freedom.737 Taiwan 0.127 0.081 0. and these warnings were again Asian economies for the sake of accumulating ignored. 26. Charles Adams and Donghyun Park. “The Global Financial Turmoil and Asian Developing Countries. This also has the seeming extra advantoward exports (or supply of exporters) because tage of making exports more competitive. Official Reserves the Index would indicate.227 0.217 0. 2010). Hans Genberg. many countries in the sample are far 14. online database. 2010 Index of Economic Freedom (Washington. McCauley. Asian Development Review. Inc. 2008. 2005. Virginia Association of Economics. The easiest way to accugle most important global economic force. See World Bank.were again praised for their macroeconomic sary weakness in domestic consumption.11 mulate large quantities of foreign exchange This dubious accomplishment was made over time is to defend an undervalued curpossible by sharply skewing resource allocation rency. Richmond.gov/boarddocs/ speeches/2005/200503102. at http://www. 2010 Index of Economic Freedom . government intervention with lasting ConsequenCes The policies implemented in response to the 1997 crisis did not end with its resolution. 11.org an impact during the current crisis as well. 36 Development Bank. warnings were again raised Table 1 thus provides an indirect measure.. Combining Index Sources: Terry Miller and Kim R. It therefore became standard policy in much as the tool for building up reserves. having intervened to accumulate “Causes and Consequences of Global Imbalances: Perspective from Developing Asia. and Avinash Persaud.21 Average Kazakhstan Laos Indonesia Global Mean Below Average New Zealand Sri Lanka Pakistan Tajikistan Bangladesh Australia 0.098 0. 12.117 0.and the Future (Geneva: International Center for lation. No. and individual countries’ central banks’ Web sites. April 29. Bangkok. World Development Indicators 2009.heritage.htm.109 0.” paper presented at meeting of Economic and Social Commission for Asia and the Pacific.13 0. often by forcefully depressed exchange rates.27 0.pdf.15 0.org/index. The Average group and Currency Management in Asia: Myth. March 10.14 reserves.” Asian seriously excessive reserves. Yilmaz Akyuz.216 0. then 13.13 From the time ances caused by the distortion have principally of their recovery after the regional crisis until taken the form of unnecessary dependence on the global financial crisis.347 0.sg/title2/finance/ twninfofinance20080506. Asia economies foreign demand and corresponding unneces.” Sandridge Lecture. 2005).541 0. temporarily boosting employment and GDP. They have had Table 1 heritage. Robert N. D. Reality lies above the global mean in reserve accumu.01 Hong Kong 0. thus returns to exporting were artificially enhanced.adb.702 Very High Malaysia China 0. at http://www. If average levels are taken to be close Monetary and Banking Studies.342 0.org.127 0.federalreserve.076 0. Virginia. Thailand.C. performance. to ideal.of Asia for almost a decade.

however.com. “Hong Kong May Use Foreign Reserves to Prevent Financial Crisis.S. all of these should be assessed. crisis-driven state intervention obviously harmed economic freedom across the region. Dow Jones. Savings Rate Hits Highest Mark Since 1993. “IMF Chief Economist: Ctrl-Bk Reserves Haven’t Influenced Growth Rates.wsj. though. however. at http://www.” The Economist.html. 2008. was addressing the symptom of currency weakness rather than the disease of structural weakness.org/newshour/ updates/business/jan-june09/savingsrate_06-26. One mistake made by Asian policymakers was fighting the last war.html. For instance. To measure the impact of economic freedom on crisis performance accurately. Asia’s dependence on the U. some Asian governments are again intervening. June 26.” The Wall Street Journal. Chapter 3 37 . at http:// online. Asian governments have utilized fiscal outlays.18 Asian economies may now be forced to do what they should have done voluntarily over the past decade: restructure in sustainable fashion. undervalued. U.bloomberg. Eventually.com/article/BT-CO-20090901-704885. reserve-accumulating exchange rates fomented Asian dependence on external consumption. In particular. A year later. and GDP growth. but rath15.S. curbed economic freedom in the period covered by this study. accepting or ignoring long-term costs. “Amid Recession. The argument for economic freedom. 2009. means that it suffered for its own policy mistakes and then for America’s. January 29. but to a different extent in different countries. “Asian Economies: Troubled Tigers.” Bloomberg. 2009.17 In protecting against an external blow through currencies. reliant primarily on hyperactive American consumers. governments chose policies with immediate. financial regulation.”16 The principal mistake. With the collapse of the American financial house of cards and rise in private U. saving. trade barriers. A very considerable portion of Asia’s recovery from its financial crisis was not effective state intervention. Only those actions chosen and implemented very quickly. those guiding the state’s hands were themselves misguided. in fact.15 Instead. is that state actions are a double-edged sword and that a third intervention will also have a high price. 16. much fiscal expansion promised in late 2008 did not occur until well into 2009. at http:// www.economist. believing that the next crisis would look very much like the previous one and foreign reserves would prove decisive. The superiority of economic freedom is compatible with short-run benefits from state intervention. 17. the mountains of reserves proved irrelevant when the financial system shuddered in September 2008.” Online NewsHour. Wendy Leung. The assessment presents two timing problems.com/businessfinance/ displayStory. Reorientation of economies to accumulate reserves led to greater than necessary dependence on exports and foreign consumption. Alternatively. Asian governments engendered vulnerability to an external blow through basic demand and supply. as often claimed. and interest rates and money supply.S. and IMF chief economist Oliver Blanchard called reserve accumulation “incredibly inefficient” and “very expensive. 2009. October 12. investment. This unnecessary dependence turned intensely harmful when external demand slumped in the fall of 2008. er playing to the seeds of a similar American financial crisis. In the crisis. As in 1997 and its aftermath.com/apps/news?pid= 20601080&sid=alfYZgGWdOqM&refer=asia. September 1. this was an artificial construct. but these benefits will come with short-run and long-run costs from reduced 18.pbs. this time to temporarily boost employment and growth. this variance must be assessed.As inevitably happens with government intervention. Competitive exports appeared to be the ideal engine for economic expansion when. the gloBal reCession The financial turmoil that started in the U.S. in 2008 led quickly to a worldwide crisis that saw significant drops in trade. To respond to the slump. at http://www. positive impacts. the International Monetary Fund found no connection between reserves and economic growth.cfm?story_id=13022067. twice confirmed already.

only pre-crisis freedom scores are available.19 The data are limited but instructive..45 4. Further. interest rate measures are supplemented by changes in broad money supply to 38 Policy Intervention in Asia Change in Interest Rate Minimal Considerable Bangladesh 0. At the other end. Monetary variables with the same label are not entirely identical across countries. therefore. Whatever its perceived or actual value as stimulus. and individual countries’ central banks’ Web sites. compared to their costs.50 China New Zealand 2.00 Australia Japan 1.25 Mongolia Korea 2. which were chosen for immediate impact. Table 3 represents the GDP growth change from Chart 1 alongside an economic freedom score that is now revised to take into account 19.00 5.heritage.20 Tajikistan Singapore 2. there is a pro-intervention bias in this first evaluation of Asian economies in the crisis. at www.00 4. Fortunately. The Index is beginning to capture crisis policy in the current volume. are not likely to affect GDP growth in the period under study. even in the minority of cases (insample) where the central bank is supposed to be independent. which is welcome. It unavoidably distorts private financial decisions and typically harms existing asset holders. For this study. strident government intervention in the money market curbs economic freedom.80 3. monetary policy is telegraphed and has effects through expectations. policy stances adopted during the crisis must be identified and measured in some fashion that is independent of the Index. but the full extent of government interventions will be revealed only in future years. as a result. The extent of interest rate changes made in response to the crisis can thus be used to rank policy as more or less free. Vietnam does not track money supply and. 2010).C. Interest rate changes alter prices immediately. Japanese interest rates were so low at the start of the crisis that Japan’s crisis behavior appears responsible almost by default.org/index. performance data for the full set of countries are available only through the end of 2008. 2010 Index of Economic Freedom . though. In contrast. sheDDing new light on asian eConomiC FreeDom Crisis performance in Asia can now be measured against an economic freedom score augmented with measures of forced reserve accumulation and monetary easing. fiscal or regulatory policies.30 India Philippines Minor Malaysia 1. The second problem is more difficult. and sharp departures in money supply can influence financial market transactions in just a few days. Currently. even if announced or adopted in 2008. Holmes. It will dissipate in future work. In Table 2.00 4.25 Thailand Pakistan 1. There are also individual idiosyncrasies. Since government policy plainly cannot be excluded.50 4. Inc. In all cases.00 4. 2010 Index of Economic Freedom (Washington. As with other measures in this study.50 Kazakhstan Moderate Cambodia Laos Sri Lanka 2. Table 2 heritage.: The Heritage Foundation and Dow Jones & Company. Monetary policy is also a proxy for broader government response to the crisis. D.90 Heavy Indonesia 2. and all governments have tools available to affect interest rates.25 4. higher taxes. uses interest rate changes as a blunt instrument. and/or financial disintermediation.org give an overall measure of government policy infringement in the recent crisis.00 3.90 5. data are available for Asian economies that can serve as an adequate proxy for overall policy intervention for 2008. in many cases.10 Maximal Taiwan Hong Kong Vietnam 3. interest rates are a price for capital.competition. there is a broad distribution of scores.30 4. They will therefore undervalue economic freedom. At the time of this writing.50 Sources: Terry Miller and Kim R. The policy steps with the fastest effect are monetary. These data are likely to capture a larger portion of the benefits of state actions.75 4.

21 It is important to note that the inclusion of policy intervention and currently limited data means that this measure of freedom applies best only from the onset of the crisis late in the summer of 2008 through the end of that year.0 49..8 62.21 -2. At the other end. 21.aspx?id=28 (October 20. The data from Tables 1 and 2 were converted to a 0–100 scale by the standard maximumminimum-value–based conversion. These shifts may be more about capacity than intention to preserve economic freedom.73 0. That superiority was not borne out in the regional downturn of the late 1990s. The adjusted freedom scores show a natural correlation with the 2009 Index results. It may have a negative effect on growth. Bangladesh rises noticeably. Sources: Terry Miller and Kim R. Chapter 3 .4 39. at www. though at a modest level. For almost two decades.1 55.18 -1. has it been borne out thus far in this current and broader slump? The answer.8 56. 2010). D. but there are also notable changes. What will not change is the importance of measuring the efficacy of economic freedom with periods of intense economic stress as a crucial measuring stick.3 60. DiD FreeDom work? While the limitations of the data are stark. 2009). The coefficient of correlation is 0. Hong Kong falls far from its lofty perch as freest Asian economy.58 crisis performance is now positive and predictive. 39 Table 3 heritage. intervention has no predictive power with respect to changes in growth rates. they are also temporary.0 42.39 * With foreign reserves and interest rate changes. These scores were then averaged with the economic freedom score to give the revised and augmented economic freedom score presented in Table 3.62 -2.57 -6. Bangladesh does not have the same ability to distort the economy and reduce economic freedom. The correlation between economic freedom and 20.4 37.37 -6.7 52.7 68.23 -2.35 -4.54 -2. For example.78 -4.7 62. whether the government wished to or not.22 -2.org/ external/ns/cs. International Monetary Fund. due to both excess reserve accumulation and sharp monetary intervention.07 -2.75 -0. is no.20 The economic freedom scores that take into account monetary easing and foreign reserve accumulation do a better job than the original scores in predicting crisis performance.imf. confident in the superiority of state action.67 -0. at http://www.7 0.2 75.389.95 -0.15 -2. clearly. 2010 Index of Economic Freedom (Washington. and World Economic Outlook.47 -0.1 42.3 54. Holmes.6 78.22 0. In the best case.5 78.5 67.org the reserve accumulation data from Table 1 and the policy infringement data from Table 2.1 79.4 54.8 65. Adjusted Economic Freedom Score* 57.org/index. many Asian policymakers have intervened in their economies.18 -0. The contortions that many Asian governments have engaged in—the warping of their economies to accumulate foreign exchange reserves and the hundreds of billions of dollars now being spent in response to the financial shock—either have no measurable effect on economic performance or may actually undermine it.C. Hong Kong has the technical and financial ability to conduct intervention to accumulate reserves or attempt to preserve jobs and acted accordingly.heritage. Inc.4 70.97 -1.GDP and Economic Freedom GDP Growth Rate Deviation in 2008 Tajikistan Indonesia Mongolia Laos Pakistan Bangladesh Sri Lanka Australia Malaysia Philippines India New Zealand Thailand Vietnam Korea China Japan Hong Kong Taiwan Cambodia Kazakhstan Singapore Correlation: 0.: The Heritage Foundation and Dow Jones & Company.79 -5.

“Corners Hypothesis and the Proposals on Foreign Exchange System for East Asia: A Perspective from the Incompatible Trinity. “Indonesia Financial Statistics: Monetary Sector/Government Finance Sector/Real Sector/External Sector. but at the same time.bi.1 and is close to the global average in reserves as a proportion of GDP. at http://www.edu.pdf. performed very well in the crisis. People’s Bank of China.” OANDA Corporation.” The Jakarta Post.nytimes. three quarters of which was tax cuts. Tokyo. Tajikistan. to by far the world’s largest stash of foreign reserves. Mongolia. China has more than four times the global average for reserves as a proportion to GDP. 2009. Jittima Tongurai and Kazuo Toritani. the global crisis was not as dire threat to Indonesia as it was to some of its neighbors.com/convert/fxhistory. the original fiscal stimulus proposed was only 1. through purchases by the People’s Bank to contain the RMB. 4 though spending did not commence until mid-November. Ostensible stimulus was expanded moderately in 2009. at http://www.” paper presented at Asia–Pacific Economic and Business History Conference. 2. and indirectly. reveals striking differences.” The New York Times.thejakartapost.gov. Also. 2009.4 percent of GDP. Iyanatul Islam and Anis Chowdhury.asp?col= 6400&id=1413.au/ commerce/econ/ehsanz/Tokyo%20Conference%20 2009/Papers/Tongurai_Toritani. do much less well when their scores are adjusted for reserve accumulation and interest rate changes. Bank Indonesia. This made it easier for policymakers to remain restrained.id/web/en/Statistik/Statistik+ Ekonomi+dan+Keuangan+Indonesia/Versi+HTML/ Sektor+Eksternal.pbc.The impact of economic freedom is noticeable and significant in certain countries. at http://www. at http://www.” August 14. singled out in the 2009 Index as the Asian economy that has gained the most economic freedom over the life of the Index. Hong Kong and Singapore. “Global Economic Crisis and Indonesia.5 billion and GDPs of nearly $5 trillion. the government budget deficit was rolled back. 2009. however. In contrast. and they wind up near the bottom on our measure of crisis performance. and Indonesian monetary policy loosened only modestly. “China Unveils Sweeping Plan for Economy. It is worth repeating that the limited period of China Versus Indonesia Two important illustrations of the connection between economic performance and freedom are provided by China and Indonesia.” at http://www.html. 2008. and were ranked right next to each other at the low end in the 2009 Index.oanda. Due the absence of policy skewing the economy to serving external demand.2 This has led both directly. 5. China has conducted persistent and powerful monetary intervention to depress its exchange rates. Monetary stimulus was just as sharp and much faster.5 3.com/2008/11/10/world/ asia/10china. Japan.uow. “FX History®: Historical Currency Exchange Rates. 40 2010 Index of Economic Freedom . David Barboza.cn/english/detail. the top performers in the Index of Economic Freedom. these two countries have populations of over 1. at http://www. Indonesia has eschewed the extreme exchange rate manipulations of many of its neighbors. “Money Supply Continues Rapid Growth. among the most powerful in the region in 2008 and intensifying through the first half of 2009 in the form of wildly fast bank lending and money growth. has tolerated current account deficits.go.html.com/ news/2009/05/05/global-economic-crisis-andindonesia. larger trade surplus. May 5.3 China is again sharply dissimilar. by encouraging a 1. 4. Its announced fiscal program came to about 7 percent of GDP annually. most recently repegging the RMB (renminbi) to the dollar for at least 16 months starting in June 2008. another big gainer of economic freedom. Together. November 9. February 18–20. This study. tops the perfor- mance rankings.

com/weekly_en/ article/show. Peterson Institute for International Economics Policy Brief No.study introduces a performance bias against economic freedom. it lagged. Indonesia did not distort its economy accumulating foreign exchange and therefore was less harmed by declining global demand. When it has moved away. both materially and morally. 8. Instead. The financial market repression behind the exchange rate controls that accumulated reserves suppressed domestic consumption. “China’s Housing Reform of 10 Years. August 26. China’s mountain of foreign exchange reserves was of little use.html (originally published by China Daily). at http://www. January 21. Chapter 3 41 . its muted monetary response and fisCHINA cal responses will neither embed serious inflation nor force crushing taxes. then-Premier Zhu Rongji responded to the Asian financial crisis by vigorously adopting reform in order to win accession to the WTO. at http://www.pdf. 2009.com. leaving China unnecessarily reliant on foreign consumers.8 When China has moved toward economic freedom. In the future. Zhou Xin and Jason Subler. Deng Xiaoping believed— and events proved him to be entirely correct— that more economic freedom was the only solution.” Reuters. economic freedom was completely lacking in China in 1978 and largely lacking in 1991. The data to demonstrate that latter point are not yet available. An obvious rejoinder is to point to China’s economic success before the crisis as justifying statist policies. 2009. but economic freedom is also free. as with reserves and the present crisis.com/ article/idUKPEK16072820090826.6 The shortterm steps taken to try to offset this reliance are savaging the banking system and worsening long-term overcapacity. If intense government action was the proper antidote to the crisis. In 1999. It is reasonable to expect that countries that are highly integrated into the world economy might suffer more quickly and profoundly from a global downturn. “UPDATE 1—China Says to Curb Industrial Overcapacity.peopledaily. China should INDONESIA have responded better than nearly every other country in the region and far better than most.reuters. “China Goes House Hunting to Rev Up Economy.iie. at http://www.com/publications/pb/pb08-8.” Peter G. September 2008. Lardy.php?itemid=169. it has wasted resources to no good effect. One of the high points of Zhu’s reform was liberalizing urban housing. 2008.com/article/reutersEdge/ idUSTRE57H0Z020090818.” Reuters.” World Chinese Weekly. “China’s Bank Loan Total Exceeds Full-Year Target. 7.7 6. the same sector now viewed by some as the best hope for leading a sustainable recovery. Economic freedom correctly predicts Indonesia’s superior crisis performance. In the data available for this study. While a proper debate on this point is far beyond the scope of this study. July 9. Nicholas R. at http://uk. August 18. it has succeeded in stunning fashion. Simon Rabinovitch. “Financial Repression in China. economic freedom is only modestly correlated with success in the crisis.reuters. 2009. In both cases.cn/90001/90778/ 90857/90859/6696563. PG08-8.worldchineseweekly.” People’s Daily Online. at http://english. but it is also reasonable to expect that they might recover more quickly and strongly when conditions improve.

leaving them more vulnerable to the global demand slump. Nor is statism proving to be any sort of solution to the crisis. It is widely proclaimed that too much economic freedom caused this crisis or at least made it more severe than it otherwise would have been. There must first be an assessment of the comparative efficacy. A number of Asian governments are accepted to have followed statist paths to disastrous effect before the Asian financial crisis in the late 1990s. Freer economies were better situated to survive the crisis. Even undistorted economies with strong internal consumption were hurt by the financial shock. avowed statism did. Identifying the most valuable internal reforms must wait. those who make this claim have it absolutely backward. the value oF eConomiC FreeDom Neither the Asian financial crisis nor the especially sharp downturn in some Asian economies in the global financial crisis a decade later surprised advocates of economic freedom. including lower taxes and the unrestricted movement of individual savings. The crisis interventions are still in category one but were adopted explicitly for short-term benefit. The events of the past few years may well make enough of an impression that this will happen—the positive legacy of a difficult time. The two possible outcomes of public-sector leadership appear to be either accomplishing nothing or actively harming the economy.Governments can permit their citizens freer and less distorted economic choices. Then. and explicitly higher tax burdens. Another set of policymakers repeatedly and unapologetically intervened again after the regional crisis to build up foreign reserves and. they are also wasting fewer resources and creating fewer long-term problems. economic freedom did not lead to this point. On the external side. in Asia and through the outset of the present crisis. The overwhelming reaction to the global crisis has been to call for more government: more spending (implicitly more taxation). and still be no worse off and perhaps slightly better prepared than their interventionist counterparts for the sharp downturns Asia has suffered in each of the past two decades. more regulation. countries that have intervened less have done slightly better than those that have intervened more. so they may yet move into category two. if any. more trade management. The most important changes in freeing an economy will obviously vary from nation to nation. Both flowed all too predictably from mistaken government intervention to mobilize resources or to orient the economy toward external demand. Economic freedom cannot prevent painful slumps. 42 2010 Index of Economic Freedom . but it does reduce their impact by permitting individuals and firms to make choices that are not warped by misguided state priorities. This study indicates that. and more ominous. there must a be a longer-term assessment of the inevitable undesired consequences of those actions. of particular utility in Asia would be to end the obsession with reserves and the ensuing promotion of undervalued exchange rates and high export growth. In Asia. Economic freedom is not a panacea. avoid a repeat. it was thought. While the data are limited. of the various fiscal and monetary actions taken around the region in 2009. These actions distorted many regional economies. By avoiding mindless economic stimulus. such as corruption. asset bubbles.

weather forecasts. quantifiable opportunity costs. Hayek created a sensation in 1945 (an era when many put their faith in economies planned centrally by socialist bureaucrats) when he pointed this out in his seminal paper. Consumers and producers depend on knowledge of them to optimize their resource allocations to the highest and best uses. and truthful information. Although it seems obvious to us today. A. The health and growth of the globalized. E-mails. Freely available and unrestricted prices. and a million other bits of information generated daily around the world allows markets to function more efficiently. Twitter. Since knowledge is dispersed among millions of people in an economy: [P]rices can act to coordinate the separate actions of different people. and YouTube videos—each new day brings another advance in communications. inexpensive. Yet we often forget or take for granted the immense benefits that we receive every day from access to information. competitive world economy depend upon the continuing free flow of transparent. interest rates. or expressed as wages. “The Use of Knowledge in Society. The world seems to be drowning in it. timely. cannot possibly have knowledge of all the relevant facts at any given moment. whether at the wholesale or retail level. Roberts S ometimes it seems to those of us who are fortunate enough to live in the modern economies of the 21st century that our lives have been inundated by a never-ending tsunami of information. The most 43 . Facebook. Hayek described the real world where one person or small group.” Refuting the central planners. or in many other forms. Knowledge of domestic and foreign political and economic developments. no matter how brilliant. text messages. are the single most important signals sent in a healthy economy. Professor F.Chapter 4 Access to Information: Vital for Efficient Markets and Economic Reform James M. Prices are the purest and most important form of information in any economy. foreign currency cross-rates.

Vol.washingtonexaminer.com/ opinion/Stop-stalling-and-show-us-the-bailoutbooks-43088037. 2009. technology.g. lawmakers later should have permitted the bankruptcy of General Motors and Chrysler). in developing countries is a major obstacle to attaining economic freedom. More than one year later. 2009). “Bailout or Bankruptcy?” Cato Journal.S. 1 (Winter 2009). Unfortunately. “The Use of Knowledge in Society. or how little the individual participants need to know in order to be able to take the right action. such as the advent of cell phones. are still pursuing some dubious business practices.org/?option=com_staticxt& staticfile=show. at http://oll.1 Hayek’s paper continues to inspire economists’ work on tacit knowledge and dispersed. “Stop Stalling and Show Us the Bailout Books. Editorial.significant fact about this system is the economy of knowledge with which it operates. though advances in technology.org/pubs/journal/cj29n1/ cj29n1-1. this morally hazardous policy harmed both good and bad banks because the public was not fully informed as to their condition. The U.php%3Ftitle=92 (October 28. No. Jeffrey A.”3 As it is. low education levels. No. and limited participation of workers in the formal economy can reduce access to and limit the search for information. and prosperity.reuters. at http://www. 2. August 24. Miron. growth. the Internet). Federal Reserve blocked “disclosure of companies that participated in and securities covered by a series of emergency funding programs as the global credit crisis began to intensify. 2009). Improving these factors can be a slow process. networked information (e.S. secretly funneled billions in borrowed.. 44 2010 Index of Economic Freedom . 4 (September 1945). 2009. and access is an integral and understandable part of the development process. the bad banks have not yet dealt with the bulk of their toxic assets. can sometimes contribute to leaps ahead.cato. The scarcity of access to modern information resources 1.libertyfund.2 The authorities should have permitted the bad banks to fail (just as U. newspapers still had not received details of the secret transactions that they had requested under the federal Freedom of 1. Vol. and still represent a large threat to the future health of the U. taxpayerbacked funds to them in hopes of preventing a run on all banks.html (November 1. concerned that “too-big-to-fail” banks would fail.” Washington Examiner.”1 In retrospect.pdf (November 1. much of the world still suffers in the dark poverty of ignorance. Harvard Professor of Economics Jeffrey Miron asserts that the great bailout was unjustified and reminds us that failure “is an essential aspect of capitalism. “Federal Reserve Loses Suit Demanding Transparency.” American Economic Review. and it releases resources from bad projects to more productive ones. at http://www.S. Information Act. several U. April 16. 2009). Things like inadequate infrastructure. What are less understandable (and Lack of Transparency by Monetary Authorities Hampers Global Economic Recovery The U.com/article/wtUSInvestingNews/ idUSTRE57O03P20090825 (November 1. some obstacles to the free flow of information derive from the low levels of development to which they also contribute. The authorities. 2009). 35.S. 29. The process of improving information infrastructure. It provides information about good and bad investments. In what may seem a vicious cycle.-led response by monetary authorities in developed countries to the 2008 financial crash is perhaps the ultimate case study in how the lack of transparency and information flow can harm monetary freedom. economy.S. Friedrich August von Hayek. 3.” Reuters. at http://www.

forcing them to fluctuate only within a predetermined band. Under U.” What such controls actually do is cut off the flow of accurate market information.g. Their success hinges not just on their hard work. both the supply of and demand for labor and goods are distorted. the information must be available to all participants at minimum cost. When artificial constraints are imposed on wages and prices. but also on the public and private institutional frameworks within which they operate. If these entrepreneurs can access reliable information at low cost. For maximum efficiency and competitiveness. game theory. In classical liberal economics. and profits will be higher for the entrepreneur. but also serves as a warning to other companies so that they might take steps to avoid the same fate. That efficient use is the key to productivity growth. and the firm owner’s comprehensive grasp of the size of market demand for the product so that just the right amount of production is planned. and fellow Nobel Prize winner Kenneth Arrow. normal bankruptcy proceedings reveal a great deal of information to the public about the debts. It is especially distressing in times of crisis to see the reflexive use by governments of price controls to provide “stability.S.S. obligations. labor and materials) from potential suppliers. almost any economic analysis has as a starting point the supposition that correct and timely information is available to economic entrepreneurs to enable them to make decisions to maximize the efficient use of all factors of production. Advancements in the study of information economics were led by Hayek as well as by famed Chicago School economist Dr. and managerial missteps of the failed company. markets will function better. law. price signals will encourage efficient levels of production and innovation. a great friend of economic freedom who focused on “search” issues. When politicians 45 Chapter 4 . Important information could include the customer’s knowledge of the prices of the product produced by the firm and comparable products on the market. Fields that often focus on the lack of perfect information include economic law. The role of information restrictions in retarding economic growth and development is illustrated in entire disciplines within economics that are dedicated to studying the effects of imperfect knowledge or information. the producer’s awareness of the costs of inputs needed to produce the product (e.. Information is a vital commodity for every participant in an economy: owners who are manufacturing and selling a product or service as well as consumers considering a purchase. government’s intervention in the bankruptcy of General Motors and Chrysler to benefit the powerful United Auto Workers union in 2009 is another egregious illustration of how artificially imposed constraints on information hurt the cause of economic liberty. Prices will be lower for consumers.certainly inexcusable) in the midst of today’s deluge of data are the increasing attempts by governments around the world to control or even censor information. Free-flowing and accurate information is a core element of that competitive world. In fact. thereby avoiding underinvestment or overinvestment. miCro level: suCCessFul entrePreneurs must Be well-inFormeD Economic freedom and prosperity depend on the daily efforts of millions of entrepreneurs who risk their capital and invest their time and energy to supply the high-quality goods and services demanded by the market. George Stigler. This not only helps the market to reprice assets. finance. and public choice. Intervening in Bankruptcy Proceedings Denies Public Needed Information The U. consumer preferences will be better matched. the microeconomic theory of the firm rests on the basic assumption that the firm is operating in a competitive marketplace. The predictable results are shortages and surpluses in markets.

job creation. Accurate information about economic variables such as interest rates. There are several others.int/ITU-D/ ict/publications/idi/2009/index.html (August 25.int/ITU-D/ict/publications/idi/2009/index. access to and 2. 2009). 2009. See International Telecommunication Union. Table 1 heritage. March.itu. however.html (November 16. manipulate currency valuations. however. a comparatively lucky few benefit.Methodology of the ICT Development Index The Information and Communication Technology (ICT) Development Index is broken into three sections—Access. The measurement of such variables and the factors 46 that influence them is a key responsibility of governments and international economic institutions. Measuring the Information Society: The ICT Development Index. 40% 40% 20% Source: International Telecommunication Union. and growth rates are fundamental to macroeconomic policymaking. March 16. that focus more directly on infrastructure or policy questions related to access to information. Reference Value 60 150 100.org legislate minimum wages. The Index of Economic Freedom is one contribution to this quest for more—and more accurate—information. 2009. The rest of us. and use taxpayer subsidies to bail out politically well-connected “too-big-to-fail” companies and powerful labor unions. face the prospect of living with (and paying for) the consequences of these restrictions on information.itu. Measuring the Information Society: The ICT Development Index. which was used in the normalization step. maCro level: inaDequate inFrastruCture imPeDes aCCess to inFormation Well-functioning markets at the microeconomic level depend on a supportive economic environment at the macroeconomic level. at http://www. The Information and Communication Technology (ICT) Development Index (IDI) prepared by the International Telecommunication Union covers 154 of the 183 countries that are included in the Index of Economic Freedom. the money supply. impose interest rate caps on private banks. 16. 2010 Index of Economic Freedom . The Reference Value for each indicator is the ideal value that could be reached.000* 100 100 100 60 100 100 100 100 Percent of Section’s Score 20% 20% 20% 20% 20% 33% 33% 33% 33% 33% 33% Percent of Total Index Score Section 1: ICT Access Fixed telephone lines per 100 inhabitants Mobile cellular telephone subscriptions per 100 inhabitants International Internet bandwith (bits/second) per Internet user Proportion of housholds with a computer Proportion of households with Internet access at home Section 2: ICT Use Internet users per 100 inhabitants Fixed broadband Internet subscribers per 100 inhabitants Mobile broadband subscribers per 100 inhabitants Section 3: ICT Skills Adult literacy rate Secondary gross enrollment ratio Tertiary gross enrollment ratio * Corresponds to a log value of 5.2 The building blocks of the IDI (see Table 1) are teledensity (the number of fixed telephone landlines and cellular telephone service subscriptions per 100 inhabitants). 2009). credit. at http://www. and Skills—each containing several weighted indicators. Use.

most measures of information infrastructure will be tied to development. at www..) 3. Although we can theorize from this correlation that higher levels of information infrastructure are associated with ever-greater degrees of economic freedom.00. Measuring the Information Society: The ICT Development Index.org/index.C. International Telecommunication Union.72 R2 = 0. The World Bank.3 such as the percentage of the population and land area in the country covered by cellular telephone service networks or other information measures such as percentage of households with televisions/radios or daily newspapers per 1. at http://www.int/ITU-D/ict/publications/idi/2009/index. there is also a strong positive correlation 47 Chapter 4 . 2009). Inc.000 people.org/WBSITE/ EXTERNAL/DATASTATISTICS/0. at http://web. we cannot state that more access to information provided by greater development of infrastructure (as reflected by the IDI) causes better scores on the Index.: The Heritage Foundation and Dow Jones & Company. (See Chart 1.org usage of the Internet. 16. and literacy rates. Chart 1 heritage. Inevitably. 2009.worldbank. 2009). it is the best and most comprehensive measure of the level of information infrastructure development in the countries that it covers.contentMDK: 21725423~pagePK:64133150~piPK:64133175~ theSitePK:239419..html (November 16. as well as economic development and information infrastructure. and that development is spurred both by the principles of economic freedom and by improvements in information infrastructure. Holmes.heritage. There appears to be a strong link between economic freedom and information infrastructure. 2010 Index of Economic Freedom (Washington. There is a strong positive correlation between IDI scores and the Index of Economic Freedom. The IDI does not include other data points found in the World Bank’s World Development Indicators. but we must also consider the relationships between economic freedom and economic development. D. March. While the IDI and the Index of Economic Freedom are strongly and positively correlated.Economic Freedom and Information Infrastructure Development ICT Development Index 9 8 7 6 5 4 3 2 1 0 0 20 40 60 80 100 Each dot represents a nation in the Index of Economic Freedom Trend Line Correlation = 0.itu. Nor does it include a measure of Internet censorship.html (October 5.52 2010 Index of Economic Freedom Score Sources: Terry Miller and Kim R. Nonetheless. 2010). World Development Indicators 2009.

“South Korea Leads the Way. 2004.worldbank.000 $40. Chart 2 heritage. The most likely answer may be that there is a feedback loop between information access and economic freedom.com/South-Korea-leads-theway/2009-1034_3-5261393. World Development Indicators Online.85 R2 = 0. at http://news. particularly through the mechanism of increased economic growth. a state-owned monopoly (Korea Telecom) was allowed to privatize on 48 the condition that it provide broadband to all villages in the country. Atkinson. July 28. Explaining International Broadband Leadership.int/ITU-D/ict/publications/idi/2009/index. 5.org/WDI (November 16. (See Charts 2 and 3. the dominant telecommunications company. and Julie A. as well as between Index scores and GDP per capita (0.4 • In Sweden. and World Bank. the government owns a significant portion of the high-speed network infrastructure (78 percent as of 2003) and is a large shareholder (45. For example: • In South Korea. 2009). John Borland and Michael Kanellos. Measuring the Information Society: The ICT Development Index.” in Robert D. 2009). “Appendix G: Sweden. at http://www.000 Line Correlation = 0. 16.) It may well be that it is the higher levels of economic freedom recorded in the Index that are causing improvements in information infrastructure.” CNET News. The Swedish government also used mandates and subsidies to achieve the highly developed telecommunications infrastructure that its citizens enjoy.000 Each dot represents a nation in the Index of Economic Freedom $30. with better information contributing to economic freedom and economic freedom providing greater access to information. Increases in the availability of information are so important to economic functioning that governments historically have treated many improvements in information infrastructure as public goods.html (October 28.000 $10. 2009. Daniel K. Correa. 2009). Information Technology & Innovation 2010 Index of Economic Freedom Tren d $50.000 $0 0 1 2 3 4 5 6 7 8 Development of Information Infrastructure (Information and Communication Technology Development Index) Sources: International Telecommunication Union. March. at http://publications.851).72 .org between IDI scores and GDP per capita (0.5 4.itu.3 percent) in TeliaSonera.html (November 16. policymaking included deregulation and competition to bring down prices of information access.000 $20.Information Infrastructure Development and GDP per Capita GDP per Capita $60.cnet. Hedlund.702). However.

000 Each dot represents a nation in the Index of Economic Freedom Correlation = 0.org/index. History is replete with examples of deliberate efforts to keep people uninformed about the actions of their governments.. Technology and Industry.000 $10. 2009). India. 16–19.000 $20.itif. Chart 3 heritage. these governments also make significant financial investments to develop information infrastructure. Organisation for Economic Co-operation and Development.worldbank. Inc. Holmes. 2009).000 $50. at http://www. Directorate for Science.oecd. but it has also invested significant amounts of taxpayers’ money in research and infrastructure. May 2008. They have increased the number of telecommunications licenses granted to private operators. at http://publications. 6.pdf (October 28. 2010).67 R2 = 0. at www.45 $40. have learned that freer and more competitive markets can improve information access and affordability.7 more than eConomiC FreeDom at risk Information’s importance both to the efficiency of the marketplace and to economic freedom is but one aspect of the importance of information in preserving liberty itself. 10. governments use free-market principles of deregulation and competition to lower costs and provide greater access to information technology. Sri Lanka. Global Opportunities for Internet Access Developments.6 In many cases. It has been said. pp. February 4. 2008. at http://www.000 0 20 40 e 100 2010 Index of Economic Freedom Score Sources: Terry Miller and Kim R.: The Heritage Foundation and Dow Jones & Company. and Pakistan) Foundation.000 $30. However. Kenya. World Bank. 49 Chapter 4 .Economic Freedom Promotes Greater Prosperity GDP per Capita Trend Lin 60 80 $60.org • The government of the Netherlands encouraged competition by lowering barriers to entry in the broadband market. D. many developing countries in Africa (Ghana.C.org/dataoecd/17/53/40596368. 2009). Nigeria.org/ files/2008BBAppendixG. for exam7.heritage.pdf (October 28.org/WDI/ (November 16. and Uganda) and South Asia (Bangladesh. Ibid. Although more than 70 countries retain state-owned monopolies that control international telecommunications gateway services. 2010 Index of Economic Freedom (Washington. World Development Indicators Online.

50 2010 Index of Economic Freedom . Statistical data may be withheld or altered to encourage support for selected policies or to hide subsidies or other diversions of funds. 2008. that this was the de facto official policy in Francisco Franco’s Spain and Antonio Salazar’s Portugal in the mid-20th century. it is a transfer of resources from those who are denied information to those who retain access to it.org/ template. at –0.nytimes. Access to reliable and useful information is certainly not always treated by governments as an inalienable right.63. even basic commercial data on commodity supplies or prices may be withheld. as seen in Chart 4. “2008 Freedom of the Press World Ranking.9 The same scenario had played out in Greece in 1948. it has not been uncommon to uncover evidence of better. dictatorial regimes typically exert control over information flows to maintain their political power.10 Dictatorial governments’ use and misuse of information follows familiar patterns.” Victims of Communism Memorial Foundation. Erna Paris.org/media/ article. 2009). which usually means the state and its cronies. 2009). as well as in contributing to greater accountability. They need wide-ranging knowledge of political and economic developments. inFormation anD the Index of economIc freedom The importance of access to information in the maintenance of freedom and the promotion of prosperity is seen clearly in many of the indicators that make up the Index of Economic Freedom.” at http://www. Most importantly. 2009). 9.pdf (November 1. Freedom House. 2009). On the one hand. Countries that earn the highest scores in the Index have benefited from allowing the free flow of labor. Freedom House publishes an index that measures this aspect of information freedom: the annual “Table of Global Press Freedom Rankings.” The Globe and Mail (Toronto). is endless. at http://www.com/2007/08/26/ magazine/26saramago-t. November 2.” The New York Times. 2009). The trend line slopes down because lower numerical scores from Freedom House indicate higher levels of press freedom. good government. 2009. “Global Press Freedom 2008.theglobeandmail. more valuable information being withheld from the people by ruling elites.php?article=4121 (September 4.ple.html?pagewanted=all (September 4. music and fashion trends—the list 8.victimsofcommunism. Freedom House. “Greek Americans Offer Tribute to Greek Victims of Communism. Salazar reportedly said that keeping people illiterate would ensure a happy and productive peasantry.com/books/to-mock-abook-banner/article1268084/ (September 4. 2007. More than that. If the government attempts to manipulate information to gain political or economic advantage. Such data are fundamental to the functioning of a market. In the worst cases. but producers and consumers require more than just commercial information to compete efficiently.freedomhouse. at http://www.8 What he got instead were people who could easily be misled by the Communist Party. it will have a negative effect on investor and consumer confidence.cfm?page=442&year=2008 (August 25. They must be aware of the latest technological innovations.” at http://www. 10. See. Fernanda Eberstadt.org/uploads/ fop08/FOTP2008Tables. “The Unexpected Fantasist. which nearly succeeded in taking power in the 1970s. fads that drive consumer choices. August 26. at http://www.freedomhouse. for example. capital. Throughout history. August 28. rulers use control of economic information to enrich themselves. goods—and information. Beyond enriching themselves. 12.12 The correlation between the Freedom House index scores and those of the Index of Economic Freedom is predictably strong. restrictions on media are often an early indicator that governments intend to assault other democratic institutions. “To Mock a Book-Banner. Countries that have an information11. both within their own country and around the world. and economic development.” 11 As Freedom House notes: A free press plays a key role in sustaining and monitoring a healthy democracy. Press release.

Knowledge of the relative prices and quality of those products— of recent innovations. Inc. Business Freedom The transparency of the regulatory environment for business is an important element in promoting efficiency and reducing bribery. but also through customized information channels that can target specific markets for products and services. For example.cfm?page=442&year=2008 (November 16. safety testing. Holmes.org/index. 2010 Index of Economic Freedom (Washington. Freedom House.” at http://www.: The Heritage Foundation and Dow Jones & Company. can also impede the flow of information between businesses and consumers. Through the prism of the economic freedom indicators.39 80 Trend Line 60 40 20 Each dot represents a nation in the Index of Economic Freedom 0 0 20 40 60 80 100 2008 Freedom of the Press World Rating Most Free Least Free Sources: Terry Miller and Kim R. marketing campaigns.63 R2 = 0. trade Freedom Knowledge of the marketplace must not be artificially limited only to market conditions within a country’s borders. at www..heritage. 2010). “2008 Freedom of the Press World Ranking. Regulations that interfere with advertising are one way by which governments interfere with the flow of information between buyers and sellers. Chart 4 heritage. and an endless list of other fac51 Chapter 4 . however. we can see some of the damage that is done when public policy restricts the free flow of information. D.C.Freedom of Press Promotes Economic Freedom 2010 Index of Economic Freedom Score 100 Correlation = –0. Regulations themselves. modern businesses cannot operate successfully without advertising: not just through mass marketing. 2009). Entrepreneurs need correct and user-friendly information about compliance and where they are in the regulatory process. Protectionism cuts off information to producers and consumers alike about competing goods and services made in other countries.freedomhouse.org poor environment put their entrepreneurs at a disadvantage.org/template.

It results in inferior goods and services. exerting tight control of commercial information. at http://www. some of the least developed countries in the world receive artificially high scores for fiscal freedom and government spending in the Index of Economic Freedom. 2009. 53–58. June 4.tors—could help entrepreneurs in the protectionist country to manufacture and sell better products. and information-rich competitors. For example. benefit adopted in 2003 “were hidden from both Congress and the people. for example. 2009). the Soviet Union was unsuccessful in increasing its exports of manufactured goods. 2009). “off balance sheet obligations associated with Social Security and Medicare put us in a $56 trillion financial hole. Federal Research Division.edu/ webfiles/treml/collapse.html (September 29. labor (the wage). and causes any country adopting such measures to be industrially crippled and likely to be left in the dust by its more agile. Professor of Economics at Duke University. # 43. reprinted as ‘Dve pozitsii. 2. # 11. capital (the 13. as well as higher costs. data as of May 1989. “A Country Study of the Soviet Union. com/article/SB100014240529702035850045743926206 93542630. including controls on the prices of goods.” November 1996. at http://econ.duke. “Warning: The Deficits Are Coming! The Former Head of the Government Accountability Office Is on a Crusade to Alert Taxpayers to Their True Obligations. This version specifies as follows: “Originally published in RFE–RL Research Report. 2009). According to Vladimir G.” The Wall Street Journal. at http://online. Vladimir G. Treml.”13 Countries with large numbers of stateowned enterprises often go even further.” 14 A Library of Congress study notes that because “of the inferior quality of Soviet goods.” and the true costs of the Medicare drug entitlement 52 2010 Index of Economic Freedom .” 15. “Why Did the Soviet Economic System Collapse? Two Schools of Thought. the lack of accurate and timely information conveyed through supply-and-demand price signals contributed to a steady deterioration in product quality. This is a hallmark of totalitarian states and one of the principal causes of the economic inefficiency and stagnation that characterize them. 14.html (September 5. pp. Knowledge of available inputs aids domestic manufacturers in planning the most effective production processes to maximize productivity. Information provides the vital link between taxpayers and tax collectors. Vol. 1993.293 (November 1. September 4. Zickel. ed. who formerly served as the nation’s “Auditor in Chief” as head of the U. government spending Governments that wish to increase spending may resort to restrictions on information or the manipulation of statistics in order to hide their intentions from the public. both in communicating what government services are needed and in identifying who has the ability and responsibility to pay for them. Raymond E. David Walker.S.country-data. Fiscal Freedom Countries that lack the institutional infrastructure to collect taxes efficiently usually lack information infrastructure. the “quality of manufactured goods continued to be inferior by world standards because of the absence of demand pressures on producers isolated from buyers by the centralized supply system. Government Accountability Office. adaptable. protectionism reduces consumer choice and exempts producers from the need to adapt and evolve to improve consumer satisfaction.wsj.” Library of Congress. In 1987 only 18 percent of Soviet manufactured goods met world technical standards.. John Fund.’ VOPROSY EKONOMIKI. While propping up inefficient industries. 1993. In the Soviet Union. Revised and expanded.com/cgi-bin/query/ r-12794. Treml. According to Walker. has warned of a “fiscal cancer” that is threatening America’s future economic viability. 90–95. not because of any particular restraint or virtue by their governments. pp. but rather because they lack the basic information about who is earning income at what levels.”15 monetary Freedom Countries that maintain distortionary price controls of any sort. Perversely.

com/global_edge. “Case Studies: The Opacity Index 2009.kurtzmangroup. The Kurtzman Group.” at http://www. 2010 Index of Economic Freedom (Washington. 2. • The government’s economic policy and its impact on business.1 Opacity in these areas obstructs the availability of perfect information. send incorrect signals to domestic producers and consumers. at www.php (August 24.php (November 16. As Opacity Index authors Joel Kurtzman and Glenn Yago point out: [S]mall-scale. 20 Opacity Index Sources: Terry Miller and Kim R. These risks interfere with commerce. The Kurtzman Group. 2009). 2009). slow growth and make the future even more difficult to predict.C. markets and business in general. They also deter investment.com/ global_edge. D. Chart 5 heritage.” at http://www. 2010). the Opacity Index and the Index of Economic Freedom are strongly correlated.62 with what’s really going on.interest rate). add to costs. Subsidies have similar effects in warping the information contained in prices. “Case Studies: The Opacity Index 2009. Opaque Institutions Obstruct Economic Freedom Another private-sector index measures hazards to investors and traders that are posed by a country’s opaque institutions.org/index. • The legal system—its protection (or lack thereof) of critical rights and its ability to quickly settle disputes.: The Heritage Foundation and Dow Jones & Company. and • The regulatory structure of the financial system. Inc.. and foreign money (the exchange rate).2 80 60 40 Each dot represents a nation in the Opacity Index 0 10 20 30 40 50 60 70 Not unexpectedly.79 R2 = 0. The Opacity Index looks at risks “associated with the lack of transparency in five areas that can confound global investment and commerce” in 48 countries and the strategies and tactics that foreign firms must use to deal with them successfully. The key to any good investEconomic Freedom and Opacity ment relationship is clarity—the ability 2010 Index of Economic Freedom Score to see and even be 100 in communication Correlation = –0. kurtzmangroup. often creating inflationary pressures they sought to avoid and always harming consumers and putting businesses in their country at a disadvantage.heritage. • Accounting standards and governance rules. Ibid. high-frequency risks of operating globally present the real costs to business. The five areas are: • Corruption in business and government. 1.org Chapter 4 53 . Holmes.

procedures.worldbank.org/template. extortion. Freedom from Corruption This is one of the most important freedoms from the standpoint of access to information.internationalpropertyrightsindex. 17. As just one example. A free press is vital. at http://www. and graft.cfm?page= 383&report=79 (August 26. and other burdensome regulations— restrict and distort the price signals vital to firms operating in the economy. Property rights Publicly available records of land and real estate transactions provide transparency about market conditions for the entrepreneur or investor—and especially for land and home owners. embezzlement. it is impossible to protect property. basis and often taken for granted by those that are afforded the chance to prosper from their investments. May 19. both to expose political corruption and to guard against bribery. and it lies at the very heart of the definition of transparency. interest rate caps. International Property Rights Index (IPRI) 2009 Report. monitor or limit the access to internet. which permitted a bubble in their price that ultimately burst when better information about the risks became known. and government institutions to protect both the right to possess property and the right to acquire more of it have more economic freedom. currency manipulation. Vietnam.”17 16. In his introduction to the 2009 International Property Rights Index. “When Blogging Becomes an Issue: Worst Places to be a Blogger. “Freedom on the Net: A Global Assessment of Internet and Digital Media. Countries with transparent rules. Regulatory transparency is another vital information-related factor in determining investment levels. at http://blogs. there have been many disturbing acts of censorship. Cuba.” March 30. Financial Freedom Entrepreneurs and investors need timely information about interest rates and credit terms offered by the banking sector. There is an inverse relationship between the level of information available and the level of risk of an investment.pdf (September 4. Tunisia. [as well as] control mechanisms to filter. Alfredo Gonzalez Briseno. Anne Chandima Dedigama. At the root of the global financial crisis was the lack of accurate information about the level of risk associated with certain widely traded financial assets. through subsidized state-owned banks. Recently. China. Syria. attacks on press freedom. Saudi Arabia. cronyism. Governments that impose artificial constraints on the private banking sector for political purposes— for example. patronage. 2009). and Egypt are harassed and sometimes imprisoned by government censors who use “regulations and laws that censor bloggers.freedomhouse. It is no accident that we speak of having “clear” title to a piece of property.investment Freedom Potential foreign investors need information about industry and market conditions in the countries in which they are considering investing.org/governance/ when-blogging-becomes-an-issue-worst-placesto-be-a-blogger (August 26. 2009).” Governance Matters. and countries in which information is readily available have a large competitive advantage. bloggers in Burma. 2009.org/ atr_Final1. Hernando de Soto champions the protection of both physical and intellectual property. de Soto reminds us that: [A]n environment where both forms of property are safe and legally enforceable contributes to increased levels of stability and encourages the free exchange of goods and ideas. This is done on a daily 54 2010 Index of Economic Freedom . 2009. nepotism. Iran. Turkmenistan. “Clouded” titles end up in courtroom disputes.16 Without clarity of information. according to a recent World Bank report. See also Freedom House. Property Rights Alliance. at http://www. Noting that people in the developing world often lack this protection. 2009). The World Bank. and denials of Internet access around the world.

heritage. for example. at other times subtly—in many of the indicators measured in the Index of Economic Freedom. 2135.” Heritage Foundation Backgrounder No. James M. May 13. but the economic stagnation that has resulted from these structural distortions of the economy has forced 40 percent of Mexico’s workers into the informal sector. One of the primary goals of the Index of Economic Freedom is to shed some light on the pathway to prosperity. Gains will be biggest in those countries that are the farthest behind when they begin. intended or not. unions have had a stranglehold on the labor sector since the 1930s.org/Research/LatinAmerica/ at http://www. caused by a scarcity of information resources in developing countries and the consequence 18.cfm.heritage. enabling entrepreneurs and policymakers to make the best choices for the future. restrict knowledge vital to economic efficiency are reflected—sometimes bluntly. Chapter 4 55 . this arrangement has been great for those who are on the inside.S.cfm. The greater the availability of information—commercial. Investments in information infrastructure can pay big dividends in many areas of economic freedom and economic well-being. In Mexico. merit-based labor market creates a more efficient and prosperous economy. There is also an increasing tendency by governments around the world to intervene in markets with intrusive regulatory and fiscal measures that restrict the ability of the price system to inform consumers and producers about the most efficient ways to spend or invest their resources. Through rigid labor laws enacted by friendly politicians. Those unions have worked handin-glove with state-owned and private corporate monopolies. and mandatory dues without transparency. Roberts. Of course.18 ConCLusion The dark poverty of ignorance. “How Reforms in Mexico Could Make the U. and prosperity. and political—the greater will be the overall illumination of that path. 2135. leadership elections by acclamation. at http://www. Roberts.S. Powerful unions that impose “closed shop” rules on employers cut off information about jobs from potential applicants and information about potential applicants from employers. More Secure. growth. 2008. May 13. Foundation the U. benefits are easily undone when government officials repress information for personal economic or political gain. of government censorship in all countries. “How Reforms in Mexico 18. macroeconomic. More Secure.Labor Freedom A competitive. 2008. bg2135. they enjoy immense leverage in workplaces. The threats to freedom of information from the lack of infrastructure and from government actions that.” Heritage Could MakeBackgrounder No. as well as tremendous resources. Unfortunately. is a major obstacle to attaining economic freedom. James M.org/Research/LatinAmerica/ bg2135. closed-shop hiring and firing prerogatives.

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non-discrimination. One is central direction involving the use of coercion—the technique of the army and of the modern totalitarian state. the power of economic decision-making is widely dispersed. or any other factor unrelated to individual merit. each person controls the fruits of his or her own labor and initiative. ethnic background. and the allocation of resources for production and consumption is on the basis of free and open competition so that every individual or firm has a fair chance to succeed. Capitalism and Freedom (Chicago: University of Chicago Press. The other is voluntary co-operation of individuals—the technique of the market place.1 1. not anarChy The discussion of economic freedom has at its heart consideration of the relationship between the individual and the state. In an economically free society. 1982). They have the right to own property and dispose of it as they choose. 57 . family connections. 13. individuals succeed or fail based on their individual effort and ability. Milton Friedman. entitled—to decide for themselves where to live and work. and the light of opportunity replaces the shadows where discrimination can be most insidious. state action or control that interferes with individual autonomy limits economic freedom. gender. class. In general. —Milton Friedman1 I n an economically free society. and open competition—underpin and inform every measurement in the Index of Economic Freedom. In an economically free society. eConomiC FreeDom: autonomy. there are only two ways of co-ordinating the economic activities of millions. p. The institutions of society do not discriminate against—or in favor of— individuals based on their race. These three fundamental principles of economic freedom—empowerment of the individual. Government decision-making is characterized by transparency and openness.Chapter 5 Defining Economic Freedom Ambassador Terry Miller and Anthony B. Individuals are empowered— indeed. Kim Fundamentally.

Some aspects of economic freedom are external in nature. that have undertaken the arduous task of data collection in their various areas of focus and have shared their data with us. first published in 1776. measuring eConomiC FreeDom The measurement of economic freedom in countries as different as Hong Kong and North Korea. Throughout history. The Index looks at economic freedom from 10 different viewpoints. This Lockean idea is embodied in the U. such as 2. pp. inevitably. is reduced growth. citizens are taxed to provide revenue for the protection of person and property as well as for the common defense. and goods. 2010 Index of Economic Freedom . The goal of economic freedom is not simply an absence of government coercion or constraint.2 The overall result. governments have imposed a wide array of constraints on economic activity. of course. both governmental and non-governmental. distribution. declining prosperity. Most political theorists also accept that certain goods—what economists call “public goods”— can be supplied more efficiently by government than through private means. The Index of Economic Freedom is comprehensive in its view of economic freedom as well as in its worldwide coverage of countries. The highest form of economic freedom should provide an absolute right of property ownership. has been recognized for centuries by the great philosophers of liberty. Some public goods. consume. however. Governments are instituted to create basic protections against the ravages of nature or the predations of one citizen over another so that positive economic rights such as property and contracts are given societal as well as individual defense against the destructive tendencies of others. it can become corrosive to freedom—and the first 58 freedom affected is often economic freedom. We are indebted to the various international organizations. so it is the most sacred and inviolable. it has become ever more difficult to find consistent and reliable data. or Australia and Cuba presents formidable challenges. labor services). 121–122. however. For example. fully realized freedoms of movement for labor. Some government action is necessary for the citizens of a community or nation to defend themselves. promote the peaceful evolution of civil society. produce. As the number and variety of countries included in the Index have increased.The Index of Economic Freedom is not. capital. and an absolute absence of coercion or constraint of economic liberty beyond the extent necessary for citizens to protect and maintain liberty itself. Zimbabwe and Singapore. and an impartial judiciary to enforce contracts among parties. a call for anarchy. and economic stagnation. such as the maintenance of a police force to protect property rights. are themselves vital ingredients of an economically free society. When government action rises beyond the minimal level. 1937). individuals in an economically free society would be free and entitled to work. distribution. Most are internal in nature. As individuals enjoy the blessings of economic freedom.S. but the creation and maintenance of a sense of liberty for all.” Adam Smith. such constraints are most often imposed for the benefit of societal elites or special interests. and invest in any way they choose under a rule of law. and enjoy the fruits of their labor. for example. or consumption of goods and services. and consumption of goods and services (including. measuring the extent of an economy’s openness to global investment or trade. a monetary authority to maintain a sound currency. Constitution. as it is the original foundation of all other property. The fundamental right of property. A comprehensive definition of economic freedom should encompass all liberties and rights of production. with their freedom at once both protected and respected by the state. and they come with a high cost to society as a whole. they in turn have a responsibility to respect the economic rights and freedoms of others. “The property which every man has in his own labor. Though often imposed in the name of equality or some other noble societal purpose. Each is vital to the development of personal and national prosperity. In other words. An Inquiry into the Nature and Causes of the Wealth of Nations (New York: The Modern Library. assessing the liberty of individuals to use their labor or finances without restraint and government interference. Constraining economic choice distorts and diminishes the production.

including free trade. for example. as well as many states in the United States. the procedure for obtaining a business license can be as simple as mailing in a registration form with a minimal fee. non-discrimination. Interestingly. If one country. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms. the most inhibiting to entrepreneurship are those associated with licensing new businesses. If the other applies regulations inconsistently. providing disincentives for entrepreneurs to start businesses in the first place. FreeDom #2: traDe FreeDom Trade freedom reflects the openness of an economy to imports of goods and services from around the world and the ability of citizens to interact freely as buyers and sellers in the international marketplace. the process of obtaining a business license can take much longer. regulations that make bankruptcy procedures onerous are also distortionary. and lower taxation. as a bulwark of free people. for instance. but they also distort production incentives for local producers. However. Each one illuminates some aspect of the relationship between the individual and the state. stable money. it raises the regulatory burden by creating an unpredictable business environment. such as India and parts of South America. Finally. trade limitations also put advanced-technology products and services beyond the reach of local entrepreneurs. Burdensome and redundant regulatory rules are the most common barriers to the free conduct of entrepreneurial activities. In many cases. Although many regulations hinder business productivity and profitability. trade restrictions also appear in more subtle ways. it lowers the regulatory burden by enabling businesses to make long-term plans more easily. This impedes overall economic efficiency and growth. FreeDom #3: FisCal FreeDom Fiscal freedom is a direct measure of the extent to which individuals and businesses are permitted by government to keep and control 59 Chapter 5 . and open competition—outlined above. Once a business is open. government regulation may interfere with the normal decisionmaking or price-setting process. By increasing the costs of production. Over time. regulations can make it difficult for entrepreneurs to succeed in the marketplace. The degree to which government hinders the free flow of foreign commerce has a direct bearing on the ability of individuals to pursue their economic goals and to maximize their productivity and well-being. FreeDom #1: Business FreeDom Business freedom is about an individual’s right to establish and run an enterprise without interference from the state. Trade restrictions can manifest themselves in the form of taxes on imports and exports and quotas or outright bans on trade. causing them to produce either a good in which they lack a comparative advantage or more of a protected good than is economically efficient. involving endless trips to government offices and repeated encounters with officious and sometimes corrupt bureaucrats. for example. obtaining a business license requires filling out a single form. directly increase the prices that local consumers pay for foreign imports. The 10 specific economic freedoms measured in the Index of Economic Freedom are discussed below. two countries with the same set of regulations can impose different regulatory burdens. Detailed information about the methodology used to score each component is contained in the appendix. the right to work. In some countries. control of government spending. Tariffs. scholars and practitioners have recognized many other pillars of economic liberty.Locke and Montesquieu. applies its regulations evenly and transparently. Each of the freedoms is individually scored on a 0 to 100 scale. and all should be viewed in light of the fundamental principles of economic liberty— individual empowerment. In Hong Kong. particularly in the form of regulatory barriers. and the process can be completed in a few hours. limiting their own productive development. In other economies.

whatever remains after the tax is subtracted is the individual’s actual reward for the effort. Higher tax rates interfere with the ability of individuals and firms to pursue their goals in the marketplace and reduce. and the value-added tax (VAT). FreeDom #4: government sPenDing The burden of excessive government is a central issue in economic freedom. The value of a country’s currency is controlled largely by the monetary policy of its government. and store of value. All government spending. tariffs. Even worse. In the Index of Economic Freedom. the gold standard enjoyed widespread support. such as providing infrastructure or funding research or even improvements in human capital. and waste. leads to inefficiency. In other words. 2010 Index of Economic Freedom . The marginal tax rate confronting an individual is. There is no single accepted theory of the right monetary policy for a free society. may be thought of as investments. and other longerterm plans can be made more confidently. sales. by contrast. both in terms of generating revenue (see fiscal freedom) and in terms of spending.their income and wealth for their own benefit and use. bureaucracy. they are not a comprehensive measure of the tax burden. productivity increases. The higher the government’s cut. Investments. FreeDom #5: monetary FreeDom Monetary freedom. thereby thwarting the choices of individuals. At one time. Even if a state-managed economy achieves fast growth through heavy expenditure. is to an economy what free speech is to democracy. in effect. A government can impose fiscal burdens on economic activity through taxation. reflected in a stable currency and market-determined prices. the government’s cut of the profit from his or her next unit of work or engagement in a new entrepreneurial venture. but also to society as a whole. maintain price stability. the burden of these taxes is captured by measuring total government revenues from all forms of taxation as a percentage of total GDP. and job creation. and raises the cost of doing business. people can rely on market prices for the foreseeable future. confiscates wealth like an invisible tax and also distorts prices. a government’s insulation from market discipline often 60 FreeDom #6: investment FreeDom A free and open investment environment provides maximum entrepreneurial opportunities and incentives for expanded economic activity. and excise taxes. the lower the individual’s reward—and the lower the incentive to undertake the work at all. unit of account. however. on average. entails an opportunity cost equal to the value of the private consumption or investment that would have occurred had the resources involved been left in the private sector. Without monetary freedom. While individual and corporate income tax rates are important to economic freedom. Free people need a steady and reliable currency as a medium of exchange. however. but it also does so when it incurs debt that ultimately must be paid off through taxation. savings. Governments impose many other indirect taxes. There is also now widespread recognition that price controls corrupt market efficiency and lead to shortages or surpluses. An inflationary policy. Some government spending. and preserve the nation’s wealth. including payroll. is support for low inflation and an independent central bank. There are public goods whose benefits accrue broadly to society in ways that markets cannot appropriately price. What characterizes almost all monetary theories today. The benefits of such an environment flow not only to the individual companies that take the entrepreneurial risk in expectation of greater return. misallocates resources. With a monetary policy that endeavors to fight inflation. The government’s appetite for private resources affects both economic freedom and economic growth. it is difficult to create long-term value or amass capital. their willingness to work or invest. it diminishes economic freedom in the process and can create long-term damage to a country’s growth potential. excessive government spending runs a great risk of crowding out private consumption. lower productivity.

markets provide realtime information on prices and immediate discipline for those who have made bad decisions. increase the costs of financing entrepreneurial activity. FreeDom #8: ProPerty rights The ability to accumulate private property and wealth is understood to be a central motivating force for workers and investors in a market economy. and limit competition. As with the banking system. Restrictions on the movement of capital. the useful role for government in regulating these institutions lies in ensuring transparency. liabilities. Equity markets measure. ensures both. FreeDom #7: FinanCial FreeDom A transparent and open financial system ensures fairness in access to financing and promotes entrepreneurship. both domestic and international. the marketplace is the primary source of protection for all parties involved in a financial transaction. Increasingly. Such a system is also vital to the maintenance 61 Chapter 5 . supporting all types of firms rather than just large or strategically important companies. An open and free banking environment encourages competition to provide the most efficient financial intermediation between households and firms and between investors and entrepreneurs. disclosure of assets. Banking and financial regulation by the state that goes beyond the assurance of transparency and honesty in financial markets can impede efficiency. the expected profits and losses in publicly held companies. the central role played by banks is being complemented by other finan- cial services that offer alternative means for raising capital or diversifying risk. This measurement is essential in allocating capital resources to their highest-valued uses and thereby satisfying consumers’ most urgent requirements. The more restrictions a country imposes on investment. and effectiveness of the judicial system have proven to be key determinants of a country’s prospects for long-term economic growth. and will encourage rather than discourage innovation and competition. on a continual basis. the lower its level of entrepreneurial activity. government ownership or intervention in the insurance sector undermines the ability of providers to make that service available at prices that are based on risk and market conditions. Through a process driven by supply and demand. through disclosure requirements and independent auditing. In an efficient banking environment that facilitates open and transparent access to financing. is a vital feature of a fully functioning market economy. Similarly. The independence. equally and without discrimination. State action to redirect the flow of capital and limit choice is an imposition on the freedom of both the investor and the person seeking capital. with sufficient rule of law to protect them. capital will flow to its best use: to the sectors and activities where it is most needed and the returns are greatest. An effective regulatory system. savings. save their income. and property (both real and intellectual) are safe from unfair expropriation or theft. it contravenes the choices of millions of individuals by interfering with the pricing of capital—the most critical function of a market economy. In an environment in which individuals and companies are free to choose where and how to invest. and risks. undermine the efficient allocation of resources and reduce productivity. Restrictions on cross-border investment can limit both inflows and outflows of capital. transparency. distorting economic decisionmaking. for instance. and ensuring integrity. Secure property rights give citizens the confidence to undertake entrepreneurial activities. The protection of private property requires an effective and honest judicial system that is available to all.An effective investment framework will be characterized by transparency and equity. If the government intervenes in the stock market. and make long-term plans because they know that their income. shrinking markets and reducing opportunities for growth. The recognition of private property rights. This process depends on transparency in the market and the integrity of the information being made available.

most commonly. Almost any government regulation can provide an opportunity for bribery or graft. and particularly economic freedom. FreeDom #9: FreeDom From CorruPtion Corruption is defined as dishonesty or decay. picture of economic freedom. may be either a force for greater freedom or an impediment to the efficient functioning of labor markets. the lower the rate of unemployment in an economy. Transparency is the best weapon against corruption. a country with high barriers to trade may have laws that protect its domestic market and prevent the import of foreign goods. we will continue to refine the measures to provide the most complete picture possible. depending on the nature of their activity. whereby public officials steal or profit illegitimately from public funds. and. By the same token. FreeDom #10: laBor FreeDom The ability of individuals to work as much as they want and wherever they want is a key component of economic freedom. a government regulation or restriction in one area may create an informal market in another. gains from commercial exchange. both in individual countries and in the world as a whole. and health and safety restrictions. and trade among nations. but these barriers create incentives for smuggling and a black market for the restricted products. hiring and firing restrictions.of peace and security and the protection of human rights. For example. cronyism. In general. A key aspect of property rights protection is the enforcement of contracts.3 As data become more readily available. the ability of businesses to contract freely 62 2010 Index of Economic Freedom . The voluntary undertaking of contractual obligations is the foundation of the market system and the basis for economic specialization. unions play an important role in regulating labor freedom and. That is as true in the labor market as it is in the market for goods. these 10 economic freedoms provide a comprehensive. State intervention generates the same problems in the labor market that it produces in any other market. 3. including wage controls. Chapter 3 for an augmented view of economic freedom in Asia during the recent crisis. Even-handed government enforcement of private contracts is essential to ensuring equity and integrity in the marketplace. Political corruption manifests itself in many forms such as bribery. our understanding of economic freedom has outpaced the availability of data on a worldwide basis. In the context of governance. See. embezzlement. albeit imperfect. there is a direct relationship between the extent of government regulation or other government intervention in economic activity and the amount of corruption. the greater the degree of labor freedom. patronage. nepotism. it can be defined as the failure of integrity in the system. extortion. as a fundamental and inalienable human right. the Index: an evolving measure oF DuraBle values Taken together. for labor and dismiss redundant workers when they are no longer needed is a vital mechanism for enhancing productivity and sustaining overall economic growth. voluntary exchange. Openness in regulatory procedures and processes can promote equitable treatment and greater regulatory efficiency and speed. for example. Similar advances may occur in our understanding of the ideal relationship between individuals and society and—critically—of the role that government may play in bolstering equitable competition. What will not change is our commitment to freedom. At present. graft. In addition. for example. a distortion by which individuals are able to gain personally at the expense of the whole. that our understanding of discrimination has broadened in recent decades. Government regulations take a variety of forms. The core principle of any market is free. Corruption can infect all parts of an economy. In many countries. There is no question. It may well be also that our understanding of various facets of economic freedom will improve or evolve over time.

or an unfair international economic system. It has been popular to blame lagging economic performance in certain parts of the world on poor endowments of natural resources. and there are some stark differences in regional economic performance. countries often do share certain characteristics—cultural. however. Nonetheless. vary widely among the regions. the whole idea of economic freedom is to empower people with more opportunity to pursue and fulfill their dreams in a manner of their individual choosing. Those who are looking for excuses find in such subjects rich fodder for endless analysis and the shifting of responsibility for failure. with varied endowments and varied histories. The country profiles of economic freedom revealed in these pages are unique and diverse. geographical disadvantages. Those who are looking for solutions rather than excuses will find in this Index the economic policies and actions that can promote entrepreneurship and long-term economic growth irrespective of history. or level of development. geographical. The Index provides little ammunition for such arguments. Kim he diversity of the world’s peoples and cultures implies that there will be many paths to economic development and prosperity. 63 Chapter X . resources. Indeed. a lack of foreign aid. The Index of Economic Freedom looks at 10 aspects of economic freedom in which entrepreneurial activity may be amplified or constrained. or others—with their regional neighbors that may help shed light on the particular challenges to economic freedom that they face. historical. This brief chapter looks at economic freedom in the six regions covered by the Index. Each of the world’s regions has at least one country that is ranked among the top 20 freest T economies in the 2010 Index of Economic Freedom. a history of colonialism. Average levels of economic freedom. finding top performers among countries in all regions. not through a cookiecutter approach decided by their government or an international organization.Chapter 6 Economic Freedom: Regional Patterns Anthony B.

worldbank.imf. at http://www.. 2010 Index of Economic Freedom (Washington.org/index.077 $9.heritage.3 55. at www.C. 2010).1 5.607 $6. levels of prosperity are far higher in those two regions than in other areas. at www.0 North America 75.org 64 2010 Index of Economic Freedom . D.) The world’s two freest regions have more than twice the populationweighted average per capita income found in the other four regions. International Monetary Fund. The freest regions also enjoy higher levels of price stability.823 813.596 333.9* 8. Holmes. with inhabitants of North America and Europe enjoying far greater levels of economic freedom than are found among those who live in other regions of the world..907 768.5 6.heritage.000 percent would distort the regional and the world average.9 59.819.9 8.084 $2. World Bank.imf. 2009).716.org/external/ ns/cs. Holmes.org/index. economic freedom varies noticeably across regions.6 66.org/data (November 9.6 443 million people 70.: The Heritage Foundation and Dow Jones & Company.4 53.org As shown in Chart 1. Economic Freedom and Performance by Region     North America Average Economic   Freedom 2010 Score Population  Simple   Weighted  Average Average 75.1 12.8 63.9 13.7* Population 443. Inc.0 768 million people Source: Terry Miller and Kim R. Source: Terry Miller and Kim R.7 Asia– Pacific 57.967.3 5.8 60.75 billion people Sub-Saharan Africa 52.8 54. World Bank. 2009).222 $24.572. World Development Indicators Online.4 6.909.721.759 3.org/ external/ns/cs. at http://www.C.543 $10.7 Population Weighted Average GDP 5-Year  GDP per  Growth   Capita (PPP) Rate Inflation $38.559.2 56.9 4 7. 2010).aspx?id=28. D.521 2.0 334 million people 460 million people 3.aspx?id=28.5 4.Economic Freedom by Region Economic Freedom Score 80. (See Table 1.5 8.240. Inc. Not surprisingly.4 75.122 $10.9 50.247 6. Table 1 heritage.4 South and Central America/ Caribbean 59.813 Europe Middle East/ North Africa South and Central America/Caribbean Asia–Pacific Sub-Saharan Africa World *Excluding Zimbabwe.worldbank. at http://www.org/data (November 9. International Monetary Fund.1 56.0 52. 2010 Index of Economic Freedom (Washington.: The Heritage Foundation and Dow Jones & Company.4 8. at http://www.8 813 million people 60. World Development Indicators Online.0 Middle East/ North Africa 60. Chart 1 heritage.752.7 57. whose hyperinflation that is estimated at over 10.4 59.0 Europe 66.481 460.

and labor freedom. with negative results for job creation and employment growth. the Asia–Pacific region is behind in seven. North America’s three countries have been linked by a regional trade agreement. Rigid labor regulations also continue to hamper the region’s overall labor freedom.heritage.Each Region’s Ten Economic Freedoms in Comparison to the World Average Investment Freedom Monetary Freedom Financial Freedom Business Freedom Property Rights Labor Freedom Trade Freedom Fiscal Freedom Freedom from Corruption Region North America Europe South and Central America/Caribbean Middle East/North Africa Asia–Pacific Sub-Saharan Africa + + – + – – + + + + – – + – + + + – Government Spending + – + + + + + + – – – – + + + – – – + + – – – – + + – – – – + + – – – – + – – + + – Source: Terry Miller and Kim R. particularly freedom from corruption and property rights. Only the North America region has scores in every component of economic freedom that exceed the world average. Inc. South and Central America/Caribbean countries lag behind world averages in six components of economic freedom.org Table 2 shows components of economic freedom in which regions perform better or worse than the world averages. NAFTA has been a positive force. enhancing economic freedom in the North America region and connecting more than 400 million people in an economic area with about one-third of the world’s total GDP. Weaknesses remain in investment freedom and freedom from corruption. as Mexico lags behind its two 65 Chapter X 6 . D. The Middle East/North Africa region has lower than average scores in five economic freedoms. 2010). trade freedom.: The Heritage Foundation and Dow Jones & Company. Each of the other regions has one or more components in which the average level of economic freedom falls below the world average. the North American Free Trade Agreement (NAFTA).org/index. The following analyses provide overviews of economic freedom in each of the six regions covered in the Index. north ameriCa The North America region has benefited from its openness to international trade and investment. at www. Enjoying the highest degree of economic freedom among the six regions. Chart 2 shows North America’s overall economic freedom and 10 economic freedoms in comparison to world averages. since 1994. It has high levels of business freedom. monetary freedom. Table 2 heritage. 2010 Index of Economic Freedom (Washington. European countries fall over four points below the world average in fiscal freedom and 17 points below the world average in government spending—a reflection of their bloated govern—a ment budgets that fund high levels of welfare spending that reduce economic dynamism and opportunities for growth. and Sub-Saharan Africa lags in nine. Holmes.C. The region scores at or above the world average in every area of economic freedom..

1 58.S.age in seven of the 10 economic freedoms. 2010 Index of Economic Freedom (Washington.5 points from the business freedom and trade freedom lead 2009 Index.9 82. has enabled its economy Europe’s overall economic freedom.0 60.S.org cant erosion of their economic freedom. and Iceland.3.7 2.0 88.9 Trade Freedom Fiscal Freedom Freedom from Corruption 87. 2010).0 85.0 50.7 67.0 75. are among the 10 fre.4 78.5 96.economic Freedom in north america overall eco. By contrast.0 80.5 75. Inc.2 Region Rank World Rank Country 7 8 41 1 2 3 Canada United States Mexico 80.5 83.3 83.1 76. spending. The economic slowdown have been far-reaching burdensome labor regulations that are in place 75. In many ways. The U.3 75. is still hampered by weak scores in labor unscathed.6 90. and government the “free” to the “mostly free” category. By contrast.5 91. taken as a whole.6 71.0 90. and freedom from corruption. led by the United Kingdom.0 73. Canada’s high level of world averages by slightly more than 10 points. at www.0 85. dropped from freedom. Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm.0 68.0 65.1 86. allow the region to score above the world averCanada and the U. It est economies in the 2010 Index. fdm.0 80%–100% Free 70%–79. is enjoying economic prosperity and stability.) prudent banking sector..S. fiscal freedom.0 75.9% Moderately Free Table 3 2010 Index of Economic Freedom heritage. coupled with its sound and (See Chart 3. while Mexico is over 15 points ahead in both property rights remains “moderately free” with a score of 68. from Corruption Labor Freedom and implemented at the cost of curtailing economic freedom.4 euroPe Economic Freedom in North American Countries Investment Freedom Monetary Freedom Change from 2009 Financial Freedom Business Freedom Property Rights Labor Freedom 81. The region’s which is an improvement of 2. The region has continued to maintain a high level of economic freedom in the 2010 Index. howto emerge from the global downturn relatively ever. Holmes.4 78.9% Mostly Free 60%–69. Overall. Ireland.0 76.7 75. economic freedom. the U. The Europe region consists of 43 countries and.8 61. Jones & Company.9 65. such policy improvements as tax cuts 0 50 100 and other structural reforms have resulted 0 20 40 60 80most free 100 least free = world average in overall score improvements in 24 small but reform-minded economies. D.3 –0.0 Overall Score Government Spending 54.0 70.org/index.0 36. extensive and long-established free-market institutions in most countries northern neighbors in these two areas. Despite the recent global financial and economic turmoil.5 94.7 70.8 76. have recorded signifiChart 2 heritage. reflecting the price of welfare states government’s policy responses to the crisis and that consume a large percentage of GDP.0 65.1 –2.C. Source: Terry Miller and Kim R.heritage.org 66 .3 79.3 85.: The Heritage Foundation and Dow 18 economies.

5 87. at www. the Netherlands.org/index.0 80–100 Free 70–79.6 83.1 95. 2010 Index of Economic tory regime and an independent judiciary.9 76.0 71.0 77.3 79.0 80.2 65.1 82.2 32. Holmes. LuxemMonetary Freedom 74. whose global petition over the past decades in the aftermath ranking has fallen to 5th.0 has taken place since late 2008.3 73.0 83. improving its score by 5.0 95.1 68.0 41.0 93.4 62.5 90.6 Switzerland’s overall score is 1. lowed by Macedonia and Croatia. Property Rights 61.4 75.8 Region Rank World Rank Country 5 6 9 11 14 15 16 17 18 1 2 3 4 5 6 7 8 9 Ireland Switzerland Denmark United Kingdom Luxembourg The Netherlands Estonia Finland Iceland 81.0 90.9 52.) Ireland.7 and Iceland all score in the top 20.0 65.7 –0.3 bourg.3 81.8 73.7 78.0 81.9 58.7 73.0 89.9 75.5 38.0 80.9 a dramatic expansion of state ownership Government Spending 48.0 90.5 87.biggest gain in economic freedom in the Europe dering both productivity growth and more region.9 94.9 global financial and economic turmoil.United Kingdom now stands at 11th.1 78. fdm.0 90.5 0.4 79.7 –2.0 80.0 90. Montenegro enjoyed the to protect traditional sectors are plainly hin.0 43. 2010).9 Mostly Free (continued on next page) Table 4 Chapter X 6 heritage.1 77.4 59. from Corruption 56.7 72. and Trade Freedom 85.heritage.7 –1. D.0 90.8 93.0 93.0 87.5 Labor Freedom 61.4 points.0 80.0 60. foldynamic job creation. Around 80 Switzerland at 6th and Denmark at 9th.: The Heritage Foundation and Dow Impressively for a post-Communist state.5 87.0 80.7 points Fdm.5 87.9 22.0 85.0 74.org .0 90.2 –2.9 95.0 80.0 80.5 87.0 Overall Score Government Spending 61.org freedom and fiscal freedom because of a combination of low taxes and a highly flexible labor market.8 65.8 higher than last year.0 81.0 90.8 far-reaching adjustments in reaction to the Business Freedom 76.4 75.8 81.9 45.0 66. Inc.8 68.5 87.0 90.0 89. the 0 20 40 60 80most free 100 least free = world average Swiss economy boasts an efficient regulaSource: Terry Miller and Kim R.0 80..8 60.0 87.0 90. Jones & Company.0 90. Financial Freedom 63. (See Table 4.9 71.5 Fiscal Freedom 70.9 1.C.0 –1.0 90. Georgia continues to be a leader in labor Chart 3 heritage.7 –2.1 47.0 90.2 92.9 81.7 –0. 66.5 75.0 80. Estonia. Freedom (Washington.2 97. falling out of the top 10 in the Index for the first time.8 40.0 90.9 61.0 90.0 80. Finland. In addition to high 0 50 100 transparency and low corruption. The percent of the 43 European countries score economic Freedom in europe Economic Freedom in European Countries Investment Freedom Monetary Freedom Change from 2009 Financial Freedom Business Freedom Property Rights Labor Freedom 79.8 Investment Freedom 68.8 67 Trade Freedom Fiscal Freedom Freedom from Corruption 77. Nine of the world’s 20 freest countries are Europe has benefited from economic comin Europe.2 35.0 75.9 69. The British economy has undergone overall eco. is closely followed by of the opening of the Berlin Wall.

9 1.8 64.0 21.0 47.0 50.0 90.5 87.5 55.7 46.3 64.0 85.3 72.4 70.0 65.0 34.5 86.3 70.8 41.2 53.1 70.4 2.0 30.0 50.1 76.0 80.8 90.0 50.0 41.3 70.0 36.0 46.6 64.7 69.7 68.9 31.2 66.1 70.0 n/a 80.0 75.4 n/a 1.0 73.4 65.1 0.7 58.5 3.7 59.2 80.0 79.0 58.1 0.8 61.6 42.1 67.2 87.0 50.0 74.0 59.5 37.0 50.5 72.6 69.2 58.0 60.0 35.8 –0.4 25.0 65.0 60.6 57.0 80.7 89.0 50.4 77.0 20.5 58.0 70.1 37.2 83.5 87.0 75.8 –0.8 79.7 62.0 58.6 0.9 61.1 77.9 55.8 65.6 92.1 83.0 25.9 82.5 79.0 40.3 –2.0 n/a 95.0 50.1 84.2 48.9 78.4 44.0 65.5 82.9 75.1 78.7 64.9 65.0 70.5 82.8 57.0 20.0 69.6 89.4 0.2 –0.3 4.0 70.0 29.0 36.6 61.0 50.0 52.7 79.0 75.0 80.2 62.9 0.5 67.6 0.0 60.3 80.0 48.4 54.3 79.9 82.5 87.5 1.0 60.0 65.5 87.0 70.Economic Freedom in European Countries (continued) Investment Freedom Monetary Freedom Change from 2009 Financial Freedom Business Freedom Property Rights Labor Freedom 54.0 69.8 41.0 60.1 82.2 65.7 51.5 87.0 40.0 80.6 84.0 40.0 55.0 60.9 70.9 74.1 39.9 2.0 70.0 67.0 44.3 68.0 76.0 79.3 47.4 0.0 40.org 68 2010 Index of Economic Freedom .0 72.0 20.5 82.2 64.2 n/a 85.0 60.9 79.0 70.0 80.6 2.8 83.0 70.2 77.7 41.0 20.4 n/a 95.1 87.3 28.0 80.5 74.1 50.0 70.9 76.5 54.0 50.0 30.4 80.6 63.0 30.0 70.3 70.2 86.9% Mostly Free 60%–69.0 n/a n/a n/a 70%–79.2 52.0 60.0 50.7 –2.9 68.2 67.6 71.0 73.0 50.5 89.1 86.0 65.2 66.0 10.9% Repressed Table 4 heritage.0 79.0 80.0 30.5 1.1 40.2 78.2 70.0 60.3 –0.9% Moderately Free 50%–59.0 55.0 38.0 50.0 65.5 87.6 n/a 36.8 83.8 63.4 87.9% Mostly Unfree 0%–49.0 70.9 56.3 87.0 25.6 75.5 89.3 48.0 64.5 30.2 63.8 43.7 64.8 68.4 46.4 –0.6 62.9 70.7 73.0 61.0 55.0 60.0 29.3 47.0 80.3 –2.0 40.6 79.9 54.0 60.8 72.2 83.0 60.4 83.9 77.1 62.4 28.3 62.0 60.8 69.1 66.8 75.0 45.1 43.0 60.2 56.3 4.1 –1.1 67.3 3.5 73.0 60.0 34.9 78.1 59.6 60.0 55.6 52.1 38.5 62.0 70.2 80.0 81.5 86.5 87.4 69.0 80.5 75.4 64.9 70.0 70.0 65.5 87.0 70.2 77.9 65.4 71.7 50.1 58.0 66.7 74.5 72.6 80.0 39.5 87.8 51.8 77.5 82.9 61.5 93.0 60.5 87.0 55.7 62.6 78.0 60.0 30.8 17.0 70.8 88.1 47.6 89.0 55.0 25.0 70.0 75.0 32.7 1.2 72.5 89.0 90.7 67.0 60.1 84.0 65.0 n/a Overall Score Government Spending 17.5 –0.2 77.1 n/a Region Rank World Rank Country 21 22 23 24 26 29 30 34 35 36 37 38 48 50 51 53 56 61 62 63 64 67 68 71 73 74 75 92 104 110 125 143 150 162 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 Sweden Austria Germany Cyprus Georgia Lithuania Belgium Czech Republic Slovakia Spain Norway Armenia Malta Latvia Hungary Albania Macedonia Slovenia Portugal Romania France Turkey Montenegro Poland Greece Italy Bulgaria Croatia Serbia Bosnia and Herzegovina Moldova Russia Belarus Ukraine Liechtenstein 72.3 82.5 87.2 5.5 87.7 70.5 32.3 79.7 n/a 87.0 92.0 70.0 34.0 35.1 90.0 51.1 69.0 74.0 90.5 87.0 75.9 82.0 0.0 85.3 85.9 46.1 –0.0 61.3 83.0 46.2 85.4 70.0 70.9 1.5 85.2 61.9 45.0 50.0 75.8 49.0 40.2 72.3 87.1 41.7 n/a Trade Freedom Fiscal Freedom Freedom from Corruption 93.0 0.9 n/a 79.4 61.0 46.0 10.2 80.0 70.2 78.3 63.0 70.2 42.3 59.0 80.0 40.

) Corruption and a lack of protecThe countries of the South and Central tion for property rights are the major problem America/Caribbean region range from pros. almost like a bell Source: Terry Miller and Kim R. reflecting long-standing issues of poor perous Chile and the developing economic governance and weak rule of law. that econom. Bolivia has recorded the smaller islands of the Caribbean. from Corruption 39. increases the risk.3 Central America/Caribbean region ranks Fiscal Freedom 76. and invest is slightly better protected than in Despite strong economic progress in many other parts of the developing world. and 16 countries fall in the middle category of “moderately free.org/index. The region has maintained an overall level governments and even electorates in some of economic freedom that is slightly higher countries have been turning away from free.) cronyism that characterized the region before It has become one of South America’s most the outbreak of democracy in the 1980s and stable economies.9 among the top 20 in the world: Chile (10th). Monetary Freedom 70. All but seven countries receive an Jones & Company. Improvements in its entre1990s.” Only Ukraine and Belarus remain “repressed” with scores below 50.2 have facilitated steady economic growth.4. The freedom to trade diverse.org 70.preneurial environment. have led to revenue of an increasingly anti-democratic steady economic growth. sacrificed for short-term payoffs and political expediency.C. Fdm. at www. Central america/Caribbean Bolivia’s overall economic development has been uneven.the most improved country in the region. ameriCa/CariBBean (See Chart 4. This newly packaged but really old. Inc.2 points in the 2010 Index.hemisphere’s worst performance this year. D.positively in terms of limited taxation and govsists of 29 economies. 2010). economic freedom score between 50 and Chart 4 heritage. and poverty remains a daunting challenge. is one of the world’s most ernment expenditures. colossus of Brazil to the small island economies The typical country in the region stands out of the Caribbean Sea.areas. 2010 Index of Economic Freedom (Washington.4 Government Spending 71. Holmes. The region. Recent reforms have Venezuela.” Chapter X 6 69 . Colombia is market policies and embracing a new popu.than the global average of 59.9 ic freedom and its dynamic private sector Property Rights 42.. achieving the status of either “moderately free” or “mostly free.between 60 and 80. the region’s countries are Labor Freedom 61. 59. gainlism that looks very much like the old corrupt ing 3. (See Table 5.7 Business Freedom 63.3 0 50 100 distributed throughout the rankings in a 0 20 40 60 80most free 100 least free = world average more balanced fashion than are the countries of any other region. especially in the focused on improving regulation and fostering poorer countries of Central America or the a strong private sector.7 Financial Freedom 47.1 One of the 29 countries in the South and Trade Freedom 74.4 Chile’s continuing commitment to economInvestment Freedom 49. losic freedom and long-term prosperity could be ing about four points in overall economic freedom. facilitated by openfashioned authoritarianism. economically as well as politically.heritage. The countries in the South and Central America/Caribbean region perform better than the world average in four of the 10 components south anD Central of economic freedom measured in the Index. Half-measures of privatization and liberalization have resulted in marginal economic Freedom in south and investments and slow economic growth. fdm. backed by the oil ness to trade and investment. which con.3 Noticeably. overall eco.: The Heritage Foundation and Dow curve. countries as the result of policy liberalization.

3 85.0 35.0 60.1 63.0 40.0 85.7 63.0 31.0 –3.0 69.1 76.4 84.3 66.4 89.2 70.0 55.0 60.5 77.9 63.0 65.0 60.9 65.0 5.3 77.1 79.1 72.0 60.2 20.9 71.1 0.4 50.3 61.4 –1.7 77.0 70.0 30.2 80.0 70.0 29.8 71.8 64.0 70%–79.3 96.0 0.2 63.0 10.6 52.9% Moderately Free 50%–59.0 35.6 71.0 30.0 78.8 74.4 84.5 81.0 77.0 75.7 69.6 –1.3 58.5 81.6 67.5 69.1 90.0 55.6 79.0 40.0 19.3 52.0 Trade Freedom Fiscal Freedom Freedom from Corruption 69.2 73.6 67.0 88.0 72.2 61.0 50.0 80.0 30.2 36.8 88.5 –2.0 30.7 –3.4 69.0 65.0 30.3 67.9 91.1 54.3 –4.7 68.8 82.1 0.2 64.4 66.0 25.0 50.0 50.0 55.0 29.7 0.0 45.0 15.8 0.5 64.1 87.2 66.5 85.2 61.3 68.2 81.1 69.9% Repressed Table 5 heritage.5 62.1 70.0 50.0 62.2 50.0 65.7 71.3 79.5 –0.3 55.1 81.0 35.3 61.5 51.5 84.3 10.7 68.5 83.2 72.3 57.1 –1.5 26.0 45.6 75.Economic Freedom in South and Central America/ Caribbean Countries Investment Freedom Monetary Freedom Change from 2009 Financial Freedom Business Freedom Property Rights Labor Freedom 75.5 84.4 55.3 82.0 20.0 43.0 36.3 1.0 20.0 10.2 78.6 92.0 2.0 40.2 70.0 80.5 73.0 45.0 51.6 54.0 36.5 50.9 74.3 67.0 40.0 70.0 75.0 70.9 59.0 40.0 55.1 0.2 0.0 40.8 83.1 36.0 66.5 50.2 72.7 80.7 70.0 60.0 40.8 49.4 49.0 50.5 95.0 10.6 –0.8 73.6 72.8 68.0 30.0 60.3 59.0 70.0 50.0 50.6 –1.9% Mostly Free 60%–69.4 63.0 50.7 41.0 34.0 75.5 84.3 73.9 75.1 1.3 0.4 74.2 61.9 69.0 71.5 65.0 65.0 15.0 Overall Score Government Spending 89.0 50.0 73.4 37.0 57.4 70.9 65.2 39.1 81.0 60.4 67.0 30.0 65.0 70.0 45.org 70 2010 Index of Economic Freedom .6 57.0 70.0 72.8 74.6 59.0 85.6 75.7 65.0 70.2 75.3 71.2 3.0 83.8 74.4 74.3 82.0 54.0 30.8 74.5 82.0 10.0 65.0 47.3 58.2 –3.0 55.2 80.0 36.1 74.0 70.9 90.0 70.5 79.0 60.0 38.0 20.3 83.0 30.0 40.0 26.0 82.0 42.5 73.3 31.0 60.4 80.5 0.0 60.7 72.9 69.0 39.2 85.0 70.0 87.2 64.2 0.9% Mostly Unfree 0%–49.8 74.0 25.6 64.4 79.8 75.0 60.0 14.0 70.8 –1.0 40.8 61.7 26.3 67.8 90.3 59.0 –2.0 30.0 75.1 26.9 73.0 24.0 55.0 45.3 65.8 67.0 0.0 25.5 76.0 26.3 55.0 49.3 78.6 68.0 30.9 83.3 48.8 63.0 71.7 66.8 69.2 72.0 20.6 1.9 52.9 71.5 75.0 50.0 30.1 –1.0 80.5 41.7 –1.0 50.0 30.2 65.6 91.0 50.7 81.4 42.5 61.0 Region Rank World Rank Country 10 25 32 33 40 45 47 49 54 55 57 58 60 70 79 81 83 86 98 99 113 131 135 141 146 147 153 174 177 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 Chile Saint Lucia El Salvador Uruguay Barbados Peru The Bahamas Saint Vincent and The Grenadines Costa Rica Trinidad and Tobago Jamaica Colombia Panama Dominica Belize Paraguay Guatemala Dominican Republic Nicaragua Honduras Brazil Suriname Argentina Haiti Bolivia Ecuador Guyana Venezuela Cuba 77.0 31.8 60.7 93.3 3.2 67.1 60.

= world average The lowest-ranking countries in the Source: Terry Miller and Kim R.: The Heritage Foundation and Dow Jones & Company.9 capital and foreign investment. Inc. Investment freedom. Qatar and the United Arab crude oil.8. People need freedom has made Qatar and the United Arab Emirates. Structural reforms and openness to global commerce have made Baheconomic Freedom in rain a financial hub and the regional leader middle east and north africa in economic freedom. to be productive. The oil indusImproving the entrepreneurial environment try requires very little investment in labor or and broadening the economic base beyond human capital and only a marginal amount of the energy sector. but oil does not generate respectively. and Israel may pave the way tural problems clearly abound.5 while politically very different—share a Fdm. it has a overall eco. point since the 2009 Index. from Corruption 40. strucKuwait.3 ranging from Israel to Saudi Arabia— Financial Freedom 45. holding down unfree. at www. Encompassing porate tax rates. D.1 dom that is significantly greater than that 0 50 100 0 20 40 60 80most free 100 least free of other countries in the region. a series of economic reforms investment in the land. most of the local populaeconomic potential. 60.miDDle east/north aFriCa nomic freedom score is slightly above the world average of 59. and freedom from corruption mies remain only “moderately free” or “mostly all score below world averages. financial freedom. Qatar. and reform-oriented states like Bahrain. tions still suffer from extreme concentrations of The ongoing transformation of innovative wealth and poverty. openness. One of the region’s least oil-dependent economies.0 Government Spending 68. problems pose serious impediments to creating it consists of 17 countries.org world. Despite some progress in recent years.2 financial sector that facilitates the flow of Fiscal Freedom 87. Oman. an abundance of oil Bahrain. bonded together by economic freedom scores that are among the worst in the Chart 5 heritage. mainly due to a high degree of The Middle East/North Africa region fiscal freedom that reflects low income and corremains central to world affairs.org/index. scores for most of the and is most pronounced among younger mem17 countries in the region are concentrated bers of the labor force. Holmes. Chapter X 6 71 .4 Business Freedom 67. lack of economic dynamism.4 omies. nomic freedom score of 74. Freedom (Washington.heritage.” Cursed in some ways by enormous the region’s overall economic freedom and its natural oil resources. the actual trade flows of the region’s Emirates made the biggest leaps forward with countries remain relatively low.9 Property Rights 41.C.4. 2010 Index of Economic region continue to be Iran and Libya.. The regional for more robust and dynamic regional economunemployment rate. the region’s overall ecoEastern country among the world’s 20 freest economies. Monetary Freedom 68. many of its econoproperty rights.9 Seven “moderately free” economies Investment Freedom 45. the 10th and 14th most improved the incentives needed for societies to embrace economies in the 2010 Index. is the only Middle As shown in Chart 5. is among the highest in the world As Table 6 shows. fdm. 10 percent. Despite the outflow of between 50 and 70. 2010). other institutional some of the world’s most ancient civilizations. which averages more than ic growth.1 competitive tax regime and sophisticated Trade Freedom 75. Although the region’s more dynamic private sectors and diverse econoverall economic freedom has increased by 0. indicating a gains of over four points in economic freedom. To the contrary. ranked 13th globally with an ecoseems most often to inspire repression.2 common commitment to economic freeLabor Freedom 64. However.

4 n/a 65.8 73.7 67. (See Chart 6.2 69.5 83.0 21.4 83.5 71.7 0.4 64. Singapore.0 25.0 20.5 3.2 82.0 50.0 50.0 32.0 23.0 70.4 65.4 65.3 74.7 66.5 73.2 59.9% Repressed Table 6 heritage.7 55.8 66.0 86.5 80.9 98.2 2.0 55.2 62.0 20.0 30. The Asia–Pacific region.1 64.0 35.4 65.0 n/a n/a n/a 70%–79.0 85.7 74.0 40.0 58.0 28.0 30.0 81.7 65.0 50.4 99.0 44.0 50.8 81.9 82.0 65.6 91.4 40.2 74.0 60.3 80.4 49.0 0.0 1.5 83. and New Zealand—are in this region.2 –3.0 35.0 45.6 67.4 64.2 68. both in the region and in the world.5 58.9 99.0 50.3 69.4 57.2 87.4 1. India.0 60.0 n/a Trade Freedom Fiscal Freedom Freedom from Corruption 54. The region’s labor freedom score is also better than the world average by four points.9 56.0 67.0 n/a 82.4 51.4 80.0 35.8 n/a Region Rank World Rank Country 13 39 42 43 44 46 52 65 89 91 94 95 105 121 145 168 173 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Bahrain Qatar Kuwait Oman Israel United Arab Emirates Jordan Saudi Arabia Lebanon Morocco Egypt Tunisia Algeria Yemen Syria Iran Libya Iraq 76.1 59. and Burma have economies that are “repressed.2 n/a 1.3 n/a 77.6 57. The region has achieved an average annual economic growth rate of around 8 percent over the past five years.6 56.0 53.0 10.9 54.0 n/a 80.6 0. What sets the Asia–Pacific region apart from other regions is the extraordinary disparity in levels of economic freedom.0 35.0 45. which consists of 41 economies.0 50.0 70. and labor freedom.9 83.2 65. Bangladesh.2 74.0 50.0 60.8 82.6 68.Economic Freedom in Middle East/North African Countries Investment Freedom Monetary Freedom Change from 2009 Financial Freedom Business Freedom Property Rights Labor Freedom 89.0 30.0 45.9% Mostly Free 60%–69.5 70.0 26.4 78.0 23.0 50.0 55.0 30.org asia–PaCiFiC With 3.7 n/a 73.0 30.1 65. although many small Pacific 2010 Index of Economic Freedom .) Lower government expenditures result in a regional government spending score that is about five points better than the world average.1 81.9 66.0 65.2 85.9 –1.0 60.0 20. Four of the world’s 10 freest economies—Hong Kong.4 35.5 –1.0 50.0 50.2 71.0 55. government spending.0 40.1 68.5 59.0 10.7 76.0 21.9% Moderately Free 50%–59.0 40.4 69. and other export-oriented economies.3 –2.1 88.8 73.0 n/a 99. The region’s overall economic freedom score is below the world average of 59.1 54.0 99.9 55.8 73.0 60.9% Mostly Unfree 0%–49.0 59.4.3 54.5 73.5 89.7 67.6 62.5 1.1 63.” Countries such as Turkmenistan.3 71.0 30.2 79.7 76.1 20.6 84.0 55.8 78.9 66.2 74.0 45.7 55.0 n/a 60.7 billion inhabitants.0 10. scores higher than the world average in three of the 10 economic freedoms: fiscal freedom.5 77.8 82.0 55.0 0. largely driven by China.0 80. Australia.6 76.9 99.9 20.4 78.7 67.8 78.4 67.4 79.1 0. the Asia–Pacific region contains over half of the world’s population: one-third in China and nearly another third in India.7 –0.4 64.3 66.1 62.4 56.0 65.0 10.0 30.4 65.4 43.1 2. yet most of its other countries remain 72 “mostly unfree.2 76.4 59.0 51.0 50.0 n/a Overall Score Government Spending 80.4 87.0 60.2 1.” North Korea remains the least free economy.0 43.

propFiscal Freedom 77.9 Fdm.1 transparency and corporate governance.1 86.2 Asian countries could make the most progMonetary Freedom 69.5 60.9 82.0 57.org grants private firms the most flexibility in hiring and firing workers.0 47.0 Overall Score Government Spending 93.9 71.0 90.5 0. in the region and in the world.3 61. The typical Asian country has notably overall eco.9 70.island economies still lack fully developed economic Freedom in asia–Pacific formal labor markets.1 98.1 80.0 80%–100% Free 70%–79.6 67.7 83.0 70.3 77. D.0 73.0 55.9 72.1 84.0 90.0 70.0 80.4 63.0 80.0 65. and freedom from corruption.7 61.8 0.0 90..4 98. Inc.0 82.0 50.1 82.1 95.1 0.) Singapore is the top country Freedom (Washington.0 54.3 89. from Corruption 36. remaining either government and benefits significantly from “mostly unfree” or “repressed.0 80.1 71.0 lower scores in four components: investBusiness Freedom 64.4 90.: The Heritage Foundation and Dow in labor freedom and second overall.9% Moderately Free (continued on next page) Table 7 heritage.0 75.2 erty rights.7 98.0 85.0 90.0 80.0 91.0 87. 2010 Index of Economic (See Table 7.7 83.0 60. at www. Timor-Leste and the Economic Freedom in Asia–Pacific Countries Investment Freedom Monetary Freedom Change from 2009 Financial Freedom Business Freedom Property Rights Labor Freedom 87.6 73 Trade Freedom Fiscal Freedom Freedom from Corruption 81.2 90.7 75.0 85.7 90.0 50.7 66.4 60.4 69.8 Region Rank World Rank Country 1 2 3 4 19 20 27 31 59 66 1 2 3 4 5 6 7 8 9 10 Hong Kong Singapore Australia New Zealand Japan Macau Taiwan South Korea Malaysia Thailand 89.5 Trade Freedom 71. corruption-free the economic freedom scale.0 93.5 70.5 74.0 51.0 40.0 Investment Freedom 36. Singapore Chart 6 heritage.8 77.0 ment freedom.0 70.0 With the top scores in four of the 10 eco0 50 100 0 20 40 60 80most free 100 least free nomic freedoms. financial freedom.0 56.9% Mostly Free 60%–69.org/index.0 90. About two-thirds of the 41 countries in the Bangladesh and Indonesia are the region’s Asia–Pacific region score between 40 and 60 on most improved countries.1 72.0 0.3 99. Source: Terry Miller and Kim R.9 1.1 0.0 70. both Jones & Company.” In the 2010 its transparent and straightforward business Index.9 84.7 86.0 83.2 77.org Chapter X 6 . Hong Kong once again = world average is the freest economy in the 2010 Index.0 70. Government Spending 70.1 ress by strengthening their banking and Financial Freedom 41.0 90.0 90.5 79. while those of 27 are worse.2 1. 57.0 70. Labor Freedom 66.8 78.1 88.8 64.8 75.2 investment institutions and by enhancing Property Rights 38. New Zealand sets the standard for clean.9 51. Holmes. 2010).9 88.9 64.8 70.0 95.7 95. have improved.0 50.3 64.7 47.0 80.4 90.4 73.9 93.0 0.3 74.C.6 82.2 90.0 50.0 45.9 81.9 69.heritage.9 94. fdm.3 –1.8 82. the scores of 13 countries in the region environment.1 –0.4 76.0 60.0 35.0 92.0 30.

0 40.5 53.0 30.4 77.1 53.7 42.6 76.9 65.1 68.0 30.0 13.5 80.0 n/a 92.5 58.0 25.0 35.6 75.2 72.1 60.2 67.7 0.1 80.0 30.3 70.1 51.8 49.0 0.1 71.4 65.2 97.0 20.8 73.0 72.0 15.8 88.0 25.0 30.0 20.0 50.0 20.4 75.3 91.0 30.0 –0.0 30.0 20.7 –2.0 68.0 10.0 30.8 43.0 20.0 50.0 20.7 –2.1 73.0 45.0 –3.7 98.8 46.6 53.0 18.1 0.8 58.4 0.0 30.4 30.9 50.2 54.4 65.0 20.0 n/a 76.9 86.0 60.7 57.6 83.1 88.5 69.6 73.9% Moderately Free 50%–59.9 87.2 89.5 58.8 78.9 90.8 57.0 25.0 26.6 73.7 59.0 27.4 53.8 67.0 10.9 90.6 63.5 62.0 30.0 40.3 61.0 21.0 n/a Overall Score Government Spending 80.0 31.8 66.4 72.0 40.9% Mostly Unfree 0%–49.0 35.8 80.1 65.Economic Freedom in Asia–Pacific Countries (continued) Investment Freedom Monetary Freedom Change from 2009 Financial Freedom Business Freedom Property Rights Labor Freedom 82.1 78.0 0.3 59.8 70.7 83.0 36.0 30.0 50.0 40.org 74 2010 Index of Economic Freedom .5 0.9 85.1 –1.2 63.2 79.6 –1.7 81.0 n/a n/a n/a 60%–69.0 15.0 15.8 58.0 22.0 27.3 88.9 84.0 30.0 25.7 –1.0 10.9 78.0 30.2 81.5 39.3 0.0 60.6 60.4 72.0 n/a 75.6 73.6 56.2 67.3 93.0 15.4 49.0 60.0 20.7 62.0 55.5 73.9 53.7 54.0 40.5 85.3 –3.0 51.0 75.0 30.2 65.8 83.0 55.0 10.5 55.0 30.0 29.3 55.7 73.4 59.0 40.5 3.9 42.0 56.2 30.5 70.8 –0.0 30.5 45.6 –0.0 34.0 n/a Trade Freedom Fiscal Freedom Freedom from Corruption 18.8 69.2 56.0 20.0 23.0 20.7 48.0 50.6 86.3 93.0 40.8 53.9 79.0 40.0 30.5 72.7 71.0 79.9 0.0 25.5 84.3 92.9 44.6 56.7 42.0 20.0 62.8 77.1 52.0 0.7 51.4 56.4 70.6 63.0 40.6 72.0 30.0 20.9 0.0 68.8 68.6 55.0 35.0 18.5 73.0 5.0 20.2 82.0 –1.0 25.0 28.4 56.5 62.1 –1.0 94.0 30.0 0.4 0.1 70.7 –2.0 29.1 43.1 51.8 49.5 36.8 –1.0 55.0 74.0 52.0 50.0 0.0 n/a 109 20 –0.6 66.0 20.1 95.0 20.0 24.0 50.0 n/a 62.0 40.0 –4.7 1.0 20.0 20.0 60.1 91.5 58.8 0.0 60.2 81.2 81.5 76.0 10.7 53.1 69.3 61.0 55.0 73.0 20.0 30.0 82.0 20.6 0.9% Repressed Table 7 heritage.0 0.8 46.0 44.0 58.4 2.0 20.2 65.8 84.7 –1.0 n/a 50.5 73.0 47.0 35.0 0.4 44.0 –2.9 82.0 32.0 10.0 35.3 –0.4 59.0 30.0 n/a 50.2 –2.0 30.3 67.0 94.1 67.2 57.4 60.1 –1.5 76.0 n/a 25.0 30.4 –0.5 0.9 86.0 15.5 71.0 70.0 92.0 22.0 5.0 52.2 82.6 54.2 –1.8 77.0 40.0 30.9 79.9 –0.4 64.0 n/a Region Rank World Rank Country 80 82 84 85 88 96 103 107 108 114 117 120 124 126 127 128 130 137 138 140 142 144 148 158 164 166 170 171 175 179 11 12 13 14 15 16 17 18 19 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 Kyrgyz Republic Kazakhstan Samoa Fiji Mongolia Azerbaijan Bhutan Cambodia Vanuatu The Philippines Indonesia Pakistan Sri Lanka India Papua New Guinea Tonga Tajikistan Nepal Bangladesh Laos China Micronesia Vietnam Maldives Uzbekistan Timor-Leste Kiribati Solomon Islands Turkmenistan Burma North Korea Afghanistan 61.0 5.8 36.0 30.6 49.4 59.8 81.7 82.9 80.7 70.7 77.3 60.0 20.0 30.0 71.0 19.9 70.9 76.5 88.9 68.5 65.0 18.9 67.1 77.1 0.7 58.8 72.0 30.0 25.1 63.

Eritrea’s institutional capacity and support overall eco. Some of the gaps between Sub-Saharan Africa’s scores and world averages are especially striking. Eritrea recorded the economic Freedom in sub-saharan africa region’s biggest overall score reduction. there can be no denying that the winds of change are still blowing in Asia. Holmes. (See Chart 7.heritage. instability. All Source: Terry Miller and Kim R. severely Monetary Freedom 68.3. it should be noted that economic freedom has been improving gradually in India and China over the years. 2010). 0 50 100 Zimbabwe’s economy has also contin0 20 40 60 80most free 100 least free = world average ued to crumble under the tyrannical and oppressive rule of Robert Mugabe. Mauritius has also demonAIDS is a continuing burden.. HIV/ fiscal freedom. below or far below world averages. A majority of nations in the components of economic freedom and performs region are ranked either “mostly unfree” with especially poorly in terms of property rights scores between 50 and 60 or “repressed” with and freedom from corruption. D.8 Labor Freedom 57. freest economy.9 for economic freedom have deteriorated Business Freedom 51.org ing caused one of the worst periods of hyperinflation in world history. freedom from corruption. With its economic freedom continuing to deteriorate. Inc.” Despite these seemingly low scores. (See Table 8.5 and investment climates. 2010 Index of Economic Freedom (Washington. Botswana remains the region’s second ran Africa receives more absolute foreign aid.5 impedes overall economic development.strated its strong commitment to enhancing ment is common. Sub.Solomon Islands. however.org/index. coupled with political Fiscal Freedom 72. with just a economic freedom by accelerating major tax fraction of the population of Asia.4 vasive corruption undermine the business Fdm. Labor freedom is restricted.) With an economic freedom score of 76. by contrast. and the Horn of Africa to the Atlantic Coast.7 Financial Freedom 41. 52. investment freedom. Notwithstanding very slow progress. Poor management of macroTrade Freedom 65. Unlike other regions that have a more Africa’s overall level of economic freedom diverse range of “free” economies. HavChart 7 heritage. particularly in these two economic leviathans. Investment Freedom 41. the govChapter X 6 75 . it is both the 12th freest economy in the world and the leader in ecosuB-saharan aFriCa nomic freedom in the region.) scores below 50.2 economic policies.1 A harsh regulatory environment and perProperty Rights 31. in Sub-Sahais weaker than that of any other region. Thankfully. than any other South Africa. It scores above The Sub-Saharan Africa region continues the global average in eight economic freedoms. Sub-Saha. Mass unemploy. Unsurprisingly.5 significantly. and both remain “mostly unfree. there are only distinctions among Saharan Africa is ranked last in seven of the 10 less free economies. fdm. India and China are ranked 24th and 31st. respectively. in the region. Mauritius remains among the world’s 20 freest economies. from Corruption 28.C. there are some success stories.9 Government Spending 70.3 instability over the past decade. It lags by over 10 points in business freedom and by about 12 points in both property rights and freedom from corruption.ran Africa.reforms. region. at www. Civil wars flare sporadically from property rights. to be characterized primarily by poverty and including trade freedom. followed by Madagascar and both multilateral and bilateral.: The Heritage Foundation and Dow components of economic freedom score Jones & Company. reflecting in part the region’s lack of progress in developing modern and efficient labor markets. lost the most economic freedom.

5 68.0 80.1 69.2 37.2 62.6 64.0 62.0 35.0 45.2 74.7 68.0 74.0 26.2 Trade Freedom Fiscal Freedom Freedom from Corruption 55.9 67.5 42.8 37.4 2.0 35.0 35.6 83.0 20.0 67.6 48.0 26.6 44.1 87.8 Region Rank World Rank Country 12 28 69 72 76 77 78 87 90 93 97 100 101 102 106 111 112 115 116 118 119 122 123 129 132 133 134 136 139 149 151 152 154 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 Mauritius Botswana Madagascar South Africa Uganda Namibia Cape Verde Ghana Burkina Faso Rwanda Tanzania Zambia Kenya Swaziland Nigeria Mozambique Mali Benin Gabon The Gambia Senegal Malawi Côte d’Ivoire Niger Cameroon Mauritania Guinea Ethiopia Djibouti São Tomé and Príncipe Equatorial Guinea Central African Republic Angola 76.3 63.0 60.0 20.0 35.6 55.2 53.9% Mostly Unfree 0%–49.8 –1.1 71.5 71.4 75.9% Repressed (continued on next page) Table 8 heritage.1 52.2 68.0 49.8 74.0 Overall Score Government Spending 83.0 50.9 52.0 19.9 –0.8 63.2 52.6 83.4 89.7 68.2 48.1 –0.0 70.2 58.0 40.9 78.5 2.6 82.1 57.0 39.7 37.3 52.3 67.8 58.1 58.9 58.7 76.4 48.2 86.0 30.5 65.4 92.0 60.2 62.4 –0.3 63.8 57.8 75.3 58.0 55.3 58.6 73.0 28.1 92.2 76.0 35.0 20.0 35.0 40.5 43.8 75.1 84.8 41.7 43.0 30.1 55.0 30.4 64.9 74.8 –0.1 54.0 28.5 59.0 50.0 45.0 40.8 48.0 30.9 70.8 65.4 –0.3 69.8 50.9 78.9 77.0 31.0 30.7 78.0 55.3 35.7 66.0 50.2 5.5 45.4 74.0 30.0 –1.0 50.0 58.5 55.5 74.0 40.0 57.3 71.0 40.0 40.3 65.4 –1.0 1.0 30.5 78.3 75.8 76.0 61.0 50.3 65.9 73.0 74.9 73.6 82.0 19.0 40.4 55.0 50.5 80.Economic Freedom in Sub-Saharan Africa Countries Investment Freedom Monetary Freedom Change from 2009 Financial Freedom Business Freedom Property Rights Labor Freedom 78.1 1.0 45.5 83.0 20.2 70.2 48.5 63.1 85.6 60.0 27.0 60.2 –1.0 40.0 60.3 –0.0 26.7 69.4 55.0 63.org 76 2010 Index of Economic Freedom .6 1.0 40.0 45.0 40.4 60.0 40.0 51.0 30.4 93.0 60.5 69.9 73.0 60.7 42.1 87.5 85.0 50.1 4.9 64.0 30.0 16.9 66.5 70.1 88.2 61.5 71.8 51.3 70.0 50.9 47.4 63.2 0.7 0.9 31.0 45.0 30.0 72.8 45.9 59.9 94.0 40.0 25.9 0.1 81.1 63.0 70%–79.6 54.6 75.2 87.0 0.0 50.0 30.6 –1.0 76.4 59.3 56.7 68.9 –0.1 62.0 30.0 40.2 78.0 40.4 67.0 25.5 65.3 58.9 59.8 56.0 30.0 45.7 –1.2 75.0 50.0 30.0 65.0 34.3 47.4 70.0 30.1 –1.2 51.8 43.1 71.9 67.4 67.0 31.5 79.4 57.5 65.0 –2.8 60.0 50.4 71.1 85.4 70.0 30.8 75.0 40.1 87.0 17.0 20.3 72.7 59.0 65.9 80.8 60.1 40.0 27.9 73.0 0.6 71.4 78.8 85.4 82.0 40.0 57.0 60.0 50.0 55.3 56.0 73.1 82.7 45.0 21.0 60.0 60.7 1.0 88.6 69.0 80.0 48.6 85.1 80.3 0.0 45.9 52.9% Moderately Free 50%–59.5 57.0 45.0 50.0 30.0 50.0 77.0 50.8 87.0 0.1 70.0 50.5 69.9% Mostly Free 60%–69.5 64.0 51.1 44.1 80.4 56.0 30.4 77.0 45.0 30.9 68.0 66.0 20.0 23.6 71.4 85.5 65.0 61.9 0.0 60.7 52.5 66.3 62.9 60.0 50.0 70.1 75.5 44.0 40.2 58.3 72.0 70.6 58.7 78.2 71.0 57.0 50.8 62.0 28.4 63.0 50.0 45.7 0.7 0.1 60.1 54.0 20.0 30.7 73.0 75.0 25.0 30.9 58.0 20.9 61.1 71.3 43.0 30.4 85.0 36.2 59.3 77.0 50.8 46.0 34.0 31.4 77.7 47.4 70.0 28.0 65.6 57.

0 30.0 19.0 82.7 37.0 58.2 67. Wise policymakers.4 n/a 70.5 48.3 n/a 62.0 25.org ernment’s continuing control of the economy has put the population at great risk.0 25.5 89.3 31. will defend progress in economic freedom not only in their own countries.0 20.0 20. Bad policy choices that hurt economic freedom and retard economic performance in one country may have profoundly negative effects in others.0 0.0 24.0 n/a 40.4 80.1 59.7 23.7 86.0 18.0 27. The recent financial and economic turmoil vividly illustrates the interdependence of economies in different regions.0 26.0 30.0 50.0 64.4 76.5 72.0 10.2 41.3 21.2 –1.0 61.7 69.8 65.8 48.0 15.5 –1.0 n/a 25.4 52.9 43.8 62.0 19.9 47. but in others as well.9 66.0 0.8 58.0 25.0 30. of Congo Demo.3 –1.0 30.5 6. Chapter X 6 .0 15.3 85.3 80.0 30.4 48.4 n/a –1. therefore.1 44.0 88.0 –1.4 –3.1 46.0 48. of Congo Eritrea Zimbabwe Sudan 48.0 30.0 10.0 n/a 63.2 54.0 30.0 45.0 76.0 10.0 n/a Overall Score Government Spending 30.9 1.4 67.0 70.5 47.2 –1.0 16.8 53.9 47.0 20.8 –2.8 36.4 70.0 20.0 50.9 0.3 74. With a renewed commitment to the principles of economic freedom.6 0.0 20.0 n/a 0%–49.3 57.8 39. Economic freedom is the indispensable link between economic opportunity and prosperity.2 n/a 77 Trade Freedom Fiscal Freedom Freedom from Corruption 32.5 18.0 17.8 n/a 52.0 30.2 44.8 52.9% Repressed Table 8 heritage.0 n/a Region Rank World Rank Country 155 156 157 159 160 161 163 165 167 169 172 176 178 n/a 34 35 36 37 38 39 40 41 42 43 44 45 46 n/a Lesotho Seychelles Sierra Leone Chad Burundi Togo Liberia Comoros Guinea–Bissau Rep.2 42.5 65. Abruptly halting the long-standing commitment to economic freedom will only prolong the current economic downturn and weaken the foundation for solid economic growth.0 25. the global economy can emerge quickly with institutions better-equipped to foster growth and provide the resources to deal more effectively both with today’s challenges and with those of the future.8 58.0 30.6 60.0 50.0 20. economies in every region have shown some vital signs of economic recovery after the turbulence of the previous two years.3 51.5 47.0 0.0 20.0 19. PRESERVING ECONOMIC FREEDOM In recent months. That challenge will require strong commitment and political leadership.7 33.3 90.0 5.2 56.6 62.0 73. Today’s world economy can emerge stronger if the right policy choices are made at this critical juncture.0 40.1 0. Rep.Economic Freedom in Sub-Saharan Africa Countries (continued) Investment Freedom Monetary Freedom Change from 2009 Financial Freedom Business Freedom Property Rights Labor Freedom 66.7 74.1 47.4 68.2 61.9 50.4 62.9 71.6 43.0 19.9 43.0 10.1 33.4 58.0 10.8 43.4 35.7 62.0 20.1 47.0 46.3 69.7 76.0 n/a 40.7 59.0 10.6 –1.5 33.0 40.6 32.1 0.0 9.

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from 0 to 100. These statistics and their sources are outlined in detail below. and Liechtenstein—are covered without numerical grading. and these scores are then averaged (using equal weights) to get the country’s final Index of Economic Freedom score. The range of scores. and a pointer indicates the country’s exact score. Sudan. as well as a statistical profile giving the country’s main economic indicators. Albania’s Overall 2010 Economic Freedom Score Economic Freedom Score 25 Least free 50 75 100 free Most 0 66. the remaining four—Afghanistan.org The second shows a time series of the country’s overall economic freedom score for each year from 1995 (or the earliest year for which 79 . In addition to these scores.Chapter 7 The Countries T his chapter reports data on economic freedom in each of the 183 countries covered in the Index of Economic Freedom. Of these 183 countries. Each graded country is given a score ranging from 0 to 100 for all 10 components of overall economic freedom. 179 are fully scored and ranked.0 Chart 1 heritage. the country pages include a brief introduction describing economic strengths and weaknesses and the political and economic background influencing a country’s performance.) The first indicates the total economic freedom score earned in the 2010 Index. Three charts are included for each country. Iraq. is displayed on a 180 degree arc. Because of data constraints. (The charts for Albania presented here are examples of what the reader will see on each country page.

The few cases in which no reliable statistical data were available are indicated by “n/a. every effort has been made to use the same source consistently for all countries. another source is the country’s statistical agency and/or central bank.8 using horizontal bars. The third chart graphs the country’s ALBANIA’S TEN ECONOMIC FREEDOMS 10 freedom component scores for 2010 Business Freedom 68. 60 60 World average 40 40 albania 20 20 00 Least free 1995 1998 2001 2004 Chart 2 2007 2010 heritage. up or down arrows are Labor Freedom 52. GDP: Gross domestic product—total production of goods and services—adjusted to reflect purchasing power parity (PPP). Property Rights 35. Unless otherwise indicated. making continuous scoring 2010 economic Freedom score impossible.org data are available) through 2010.0 parative strengths and weaknesses of Financial Freedom 70. (See appendix. or natural disaster has resulted in a lack of reliable inforten Components of albania’s mation. compared to the world average.0 economic freedom in each country.”) 80 80 DeFining the “quiCk FaCts” Each country page includes “Quick Facts” with eight different categories of information.” Definitions and sources for each category of information are as follows.2 that one can quickly identify the comMonetary Freedom 78. The primary source for GDP data is World Bank. World Development Indicators Online.0 Fdm. a country is not graded continuously for all 16 years. political instability. A hash mark is Fiscal Freedom 92. In some cases. The major secondary source is International Monetary Fund. “Methodology for the 10 Economic Freedoms. from Corruption 34.S. secondary sources are used.7 Investment Freedom 70.albania’s economic Freedom score over time 100 100 Most free the countries are graded. World Economic Outlook Database April 2009. Other sources include a country’s statistical agency and/or central bank.0 Trade Freedom 85.org To assure consistency and reliability for each of the 10 components on which 80 2010 Index of Economic Freedom . For some countries.6 included to show the world average so Government Spending 74. often because grading did not begin in the 1995 edition and frequently because violence. the data in each country’s profile are for 2008 (the year for which the most recent data are widely available) and in current 2008 U. Chart 3 heritage. Population: 2008 data from World Bank. when data are unavailable from the primary source.0 Additionally. World Development Indicators Online 2009. dollars (also the most recent available).1 placed to illustrate the direction of 0 50 60 100 0 20 40 80 100 least free most free score changes from the 2009 Index to = world average the 2010 Index.

Central Intelligence Agency. comprised of Antigua and Barbuda. Kitts and Nevis. International Monetary Fund. Estonia. dollars. Vincent and the Grenadines. Asian Development Bank. World Investment Report 2009. The primary sources are U. World Economic Outlook Database. The World Factbook 2009. Georgia. Denmark. which includes Cameroon. The primary source for 2008 data is International Monetary Fund. Portugal. International Monetary Fund. Latvia. reinvestment of earnings.S. based on real GDP expressed in constant national currency units. the Kyrgyz Republic. Chad. Slovenia. consisting of Azerbaijan. Ireland. Country Reports. Lithuania. Asian Development Outlook 2009. 2007–2009. Country Reports. and Country Profiles.S. consisting of Austria. FDI flows are defined as investments that acquire a lasting management interest (10 percent or more of voting stock) in a local enterprise by an investor operating in another country. EU: European Union. Foreign direct investment (FDI) inward flow: This series indicates the total annual inward flow of FDI. and a country’s statistical agency. Spain. St. Belgium. Cyprus. Suriname. and a country’s statistical agency and/or central bank. Tajikistan. 2007–2009. Annual percent changes are year-on-year. Asian Development Outlook 2009. The compound annual growth rate is measured using data from 2003 to 2008. and Country Profiles. GDP five-year compound annual growth: The geometric average growth rate measured over a specified period of time. Moldova. Ukraine. CEMAC: Central African Economic and Monetary Community. based on country-specific years. Unemployment rate: A measure of the portion of the workforce that is not employed but is actively seeking work. Asian Development Bank. where n is the number of years in the period being considered. April 2009. other long-term capital. Italy. Luxembourg. U. GDP per capita: Gross domestic product (adjusted for PPP) divided by total population. the Netherlands. Asian Development Outlook 2009. Finland. The primary source is International Monetary Fund. Belize. Such investment is the sum of equity capital. and Economist Intelligence Unit. 2008–2009. the Republic of Congo. and the United Kingdom. Haiti. Secondary sources are Economist Intelligence Unit. based on country-specific years. and Asian Development Bank. World Economic Outlook Database. Greece. Economist Intelligence Unit. Guyana. Data are in current 2008 U. Secondary sources are World Bank. and a country’s statistical agency and/or central bank. Grenada. Romania. Article IV Staff Reports. Secondary sources include World Bank. Poland. Equatorial Guinea. Dominica. Kazakhstan. April 2009. St.S. 81 Chapter 7 . Sweden. the Czech Republic. Hungary. Belarus. Data are from United Nations Conference on Trade and Development.GDP growth rate: Annual percentage growth rate of real GDP derived from constant national currency units. and a country’s statistical agency and/or central bank. World Development Indicators Online 2009. 2008–2009. Malta. Inflation: The annual percent change in consumer prices as measured for 2008 (or the most recent available year). It is calculated by taking the nth root of the total percentage growth rate. World Development Indicators Online 2009. Russia. and Uzbekistan. the Central African Republic. Bulgaria. Jamaica. CIS: Commonwealth of Independent States. The sources for these data are World Bank. 2008–2009. Country Reports. Central Intelligence Agency. reported in millions. Armenia. Country Reports. Commonly useD aCronyms CARICOM: Caribbean Community and Common Market. and Country Profiles. The World Factbook 2009. World Economic Outlook Database April 2009. and Gabon. Slovakia. and short-term capital as shown in the balance of payments and both short-term and longterm international loans. Montserrat. 2008–2009. Germany. Turkmenistan. 2008–2009. Economist Intelligence Unit. Saint Lucia. the Bahamas. World Development Indicators Online 2009. Barbados. World Economic Outlook Database April 2009. 2008–2009. The primary source is International Monetary Fund. France. and Trinidad and Tobago.

Lesotho.IMF: International Monetary Fund. Uruguay. WTO: World Trade Organization. and Swaziland. Paraguay. 82 2010 Index of Economic Freedom . MERCOSUR: Customs union that includes Argentina. SACU: Southern African Customs Union. OECD: Organisation for Economic Cooperation and Development. and Venezuela. consisting of Botswana. Brazil. South Africa. found- ed in 1948. an international organization of developed countries. that now includes 30 member countries. founded in 1995 as the central organization dealing with the rules of trade between nations and based on signed agreements among 153 member countries. established in 1945 to help stabilize countries during crises. Namibia. that now includes 186 member countries.

it remains too small and informal to provide real impetus for more vibrant entrepreneurial activity. 100 100 Country’s Score Over Time Most free 80 80 60 60 World average 40 40 afghanistan’s economy is not graded 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 27. and the government’s inability to extend the rule of law to many rural areas. Although progress has been made in developing the private sector. and social transformation since the fall of the Taliban regime in late 2001. microfinance. How Do We Measure Economic Freedom? 83 . the economy lacks the overall capacity to enhance productivity as well as to improve the standard of living. However. Background: Afghanistan.org/index. largely as a result of foreign aid. and public finance management.4 million gdP (PPP): $30. a Taliban insurgency. education. but the economy remains hobbled by poor infrastructure. and the government’s periodic compilations of official economic data have been inadequate. Political uncertainty and security challenges remain considerable. which has been roiled by conflict since the 1978 Communist coup. is one of the world’s poorest countries. Afghanistan has achieved rapid economic growth averaging close to 10 percent over the past five years.-sponsored conference established a framework that led to a new constitution and successful elections for a president in 2004 and parliament in 2005.N.8% 5-year compound annual growth unemployment: 40. GDP grew by more than 7 percent in 2008.2% FdI Inflow: $300 million 2008 data unless otherwise noted Data compiled as of September 2009 See page 457 for an explanation of the methodology or visit the Index Web site at heritage.6 billion 12. Facilitated by economic development. there also have been noticeable improvements in such areas as health.AfghAnistAn Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: Not ranked Regional Rank: Not ranked The economy is not graded A fghanistan’s economic freedom cannot be fully assessed because of a lack of reliable data. After an American-led coalition ousted the Taliban government in 2001.1% growth in 2007 9. The construction sector has been the key contributor to growth because of its close link to the economic reconstruction process. a U. The economic dominance of illegal opium production is a major impediment to political stability and sustainable development.0% (2007) Inflation (cPI): 27. Undergoing substantial political. economic. The country will receive an economic freedom score and ranking in future editions when more reliable information becomes available.

inefficient bureaucracy. Corruption permeates all sectors and levels of government and poses a serious risk to the rebuilding of state institutions. Foreign investors may not own land but LABOR fREEDOM — nOt gRADED Political and security instability prevent the development of a modern labor market. Most bank credit is short-term. bread. Commercial laws to lay the foundation for further privatization have yet to be implemented. If Afghanistan were being graded. milk. cheese. 84 2010 Index of Economic Freedom . telecommunications. Afghanistan ranks 176th out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008. and vegetable prices vary by municipality. meat. and health and education facilities. and there are no capital or currency controls.7 percent. Price controls exist in major cities. natural resources. sewage. fruit. 15 points would be deducted from its trade freedom score to account for non-tariff barriers. Restructuring of state-owned enterprises has been slow and uneven. The banking sector now consists of two stateowned commercial banks. waste treatment. The top income and corporate tax rates are 20 percent. remains weak and a key impediment to private-sector development. inadequate economic and physical infrastructure. government spending equaled 19. the financial sector. Business reform has been too weak to spark sustainable business activity. and controls on egg. but other structural barriers and political instability persist. power. corruption. finAnCiAL fREEDOM — nOt gRADED Afghanistan’s financial sector has undergone two phases of major development since 2001. with its lack of adequate management and irregularities concerning insider lending. No seizures of foreign-owned assets have been reported. including consumption and transfer payments. The state can expropriate an investment or asset for the purpose of public interest and on a nondiscriminatory basis.9 percent of GDP. The bankruptcy law is ineffective. Authorities are working to improve and automate the tax system. PROPERtY Rights — nOt gRADED Afghanistan’s judicial system is severely underdeveloped. Nevertheless. MOnEtARY fREEDOM — nOt gRADED Inflation spiked in 2008 as a result of dramatically increased costs for food and fuel. Inefficient customs administration.BUsinEss fREEDOM — nOt gRADED The overall freedom to start. and close a business remains constrained by an underdeveloped regulatory environment. the first laying the foundation for a basic legal framework for modern banking and the second encouraging the establishment of formal financial services. and five branches of foreign commercial banks. tRADE fREEDOM — nOt gRADED Afghanistan’s weighted average tariff rate in 2008 was 7. If Afghanistan were being graded. There is also a 2 percent to 5 percent sales tax. but foreign investment in certain sectors. and corruption delay trade and increase costs. bringing the average between 2006 and 2008 to a very high 21. may lease parcels for up to 50 years. The very large opium economy is the most significant source of corruption. lack of capacity by commercial courts. inadequate regulations. insurance. undeveloped regulatory administration. Foreigners may own 100 percent of a company. and domestic private banks account for around half of total assets. fisCAL fREEDOM — nOt gRADED Afghanistan has relatively low tax rates. are low. and widespread corruption. Afghanistan has no legislation on intellectual property rights and does not belong to any international IPR-protection organizations. Starting a business and obtaining a business license have been relatively streamlined. such as nonbanking financial activities. inVEstMEnt fREEDOM — nOt gRADED Foreign and domestic firms are treated equally under the law. and regulatory inefficiency has undermined development.2 percent. The prevalence of opium-related activities and a large informal economy further dampen development of a functioning labor market. receives special scrutiny. 15 points would be deducted from its monetary freedom score to adjust for price controls. Laws and regulations concerning wage rates and work hours are inconsequential. airports. In the most recent year. fREEDOM fROM CORRUPtiOn — nOt gRADED Corruption is perceived as rampant. Property rights protection is weak due to a lack of property registries or a land titling database. but governance and security issues impede tax collection. Restructuring of state-owned banks has progressed. In the most recent year.7 percent. and slow privatization of the many state-owned enterprises. Investment is discouraged by security concerns. overall tax revenue as a percentage of GDP was 5. gOVERnMEnt sPEnDing — nOt gRADED Total government expenditures. A business receipts tax on imports was implemented as of March 2009. operate. lack of financial capacity. water. 10 private commercial banks. disputed land titles. especially at the regional level.

as well as a substantially reduced poverty rate. Albania now has a flat rate of 10 percent for individual and corporate taxes. Albania signed a Stabilization and Association Agreement with the European Union as the first step toward EU membership. making its economy the 53rd freest in the 2010 Index.715 per capita unemployment: 12. and structural reforms to foster private-sector growth have led to increased production and consumption. and its overall score is above the world average.0% growth in 2008 6. due primarily to increases in trade freedom. Background: Albania is one of Europe’s poorest countries despite some economic and political reform since 1992. It has acted to enhance its business and investment environment.0 million 2008 data unless otherwise noted Data compiled as of September 2009 See page 457 for an explanation of the methodology or visit the Index Web site at heritage. Albania’s overall score is reduced by weak property rights and pervasive corruption. How Do We Measure Economic Freedom? 85 . Albania is ranked 25th freest among the 43 countries in the Europe region. Despite the global economic slowdown. In June 2006. it also achieved full membership in NATO. Albania has been able to maintain relatively sound macroeconomic stability. and labor freedom.1% 5-year compound annual growth $7. as well as a free trade agreement giving Albanians duty-free access to key EU markets and opening the country to imports. when nearly 50 years of Communist rule ended.ALBAniA Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 53 Regional Rank: 25 66.org/index.3 billion 6. and its agricultural sector remains the largest source of employment. Its level of economic freedom increased by 2. However.0 100 100 A lbania’s economic freedom score is 66. Fiscal freedom. Albania’s transportation and energy infrastructure are poor by European standards. property rights. Country’s Score Over Time Most free 80 80 60 60 World average 40 40 albania 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 3. Money laundering remains a significant problem in the cash-based economy.3 points during the past year. In April 2009.5% (2007) Inflation (cPI): 3.0.1 million gdP (PPP): $24.4% FdI Inflow: $656. and financial freedom rate significantly higher than typical levels. The government has been pursuing greater integration into the Euro–Atlantic community for several years. The low property rights score is largely a result of political interference in the judiciary. freedom from corruption. investment freedom. Albania’s economic freedom is comparable to that of other developing Balkan states like Croatia and Macedonia.

weak rule of law. Personal income and corporate tax rates are a flat 10 percent. Residents and non-residents may hold foreign exchange accounts. and organized crime are obstacles to the effective administration of justice. Obtaining a business license requires 24 procedures. Import taxes may be based on a government-determined fair market price. inefficient bureaucracy. PROPERtY Rights — 35 Albania’s constitution provides for an independent judiciary.3 percent of GDP. With little or no direct exposure to recently troubled international financial assets. There are no restrictions on foreign ownership of other property. limited resources. fREEDOM fROM CORRUPtiOn — 34 Corruption is perceived as widespread. Banking is increasingly dominated by foreign banks. Although the fiscal deficit has been under control. The high cost of laying off workers is a disincentive for companies that would otherwise increase employment.6 Albania’s tax rates are low. inadequate trade capacity.0 52. Ten points were deducted from Albania’s monetary freedom score to account for wage and price interventions. a significant improvement over 2007.0 85. The state can expropriate an investment or asset for the purpose of public interest. Other taxes include a valueadded tax (VAT). The non-salary cost of employing a worker is high. Foreigners may own 100 percent of Albanian companies. compared to the world average of 18. the Bank of Albania has acted to increase liquidity and maintain public confidence. and business registration. tRADE fREEDOM — 85. Privatization in the strategic sectors of energy and insurance has been completed. intimidation.0 35. Regulatory agencies continue to oversee prices.2 Total government expenditures. averaging 3. Starting a business takes five days.0 34.1 0 0 20 least free 40 50 60 80 = world average 100 100 most free BUsinEss fREEDOM — 68 Despite some improvement. finAnCiAL fREEDOM — 70 Albania’s financial sector has grown rapidly. but political pressure. and an excise tax. although there has been some progress with respect to industrial property and trademarks. Foreigners may not purchase agricultural land but may rent it for up to 99 years.3 percent. Albania ranks 85th out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008. public debt has increased and amounts to around 56 percent of GDP. which account for about 90 percent of total assets. In the most recent year. and dismissing a redundant employee is relatively costly.ALBAniA’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. This has led to more competition and better availability of services. but the security of land rights remains a problem in coastal areas where there is potential for tourism development. and nearly all sectors are open to foreign investment. Property registration has improved. In response to the global financial crisis. compared to the world average of 35. poorly defined property rights. Albania’s business freedom remains constrained by a burdensome regulatory environment. They also may purchase commercial property if the proposed investment is worth three times the price of the land. including consumption and transfer payments. but planned divestment of water utilities and telecommunications has stalled.7 70.1 Rigid employment regulations hinder productivity growth.8 Albania’s weighted average tariff rate in 2008 was 2. and almost 100 more days than the world average of 218.7 Inflation has been relatively low. Albania’s banking system has been able to withstand the global financial shock with little disruption. regardless of the actual price paid. a property tax. but there are legal provisions for compensation. In the most recent year. LABOR fREEDOM — 52. and administrative bureaucracy delay trade and increase costs.2 78. widespread corruption. Supervisory regulations have been strengthened to preserve financial stability. Inadequate infrastructure. 86 2010 Index of Economic Freedom . Ten points were deducted from Albania’s trade freedom score to account for non-tariff barriers. government spending equaled 29. 68. overall tax revenue as a percentage of GDP was 23. fisCAL fREEDOM — 92.8 92. due to the work of the Government Corruption and Organized Crime Task Force and reforms in tax administration. lack of reliable power.0 70. and monetary expatriation is legal. procurement.2 percent between 2006 and 2008. are moderate. from Corruption Labor Freedom inVEstMEnt fREEDOM — 70 Foreign and domestic firms are treated equally under the law. MOnEtARY fREEDOM — 78. and the government raised pensions and public-sector wages in May 2009 against the advice of the IMF.1 percent. Albania is a major transit country for human trafficking and illegal arms and narcotics. Overall protection of intellectual property rights is weak. gOVERnMEnt sPEnDing — 74. Weak enforcement of intellectual property rights. and corruption discourage foreign investment.6 74. and credit is generally allocated on market terms.

4 million gdP (PPP): $276. Structural reforms to diversify the economic base have achieved only marginal success.5% FdI Inflow: $1.000 lives.0 billion 3.3 point higher than last year due to improved fiscal freedom and small gains in trade freedom. but Algeria still faces critical challenges in fostering a more dynamic economic environment. and its score remains below both the regional and world averages.9. Algeria has recorded several years of strong economic growth. and the inefficient business environment impedes the development of the non-hydrocarbon sector and more job creation.org/index.3% 5-year compound annual growth $8. The government hopes to diversify the economy by attracting foreign and domestic private investment in non-energy sectors. and political interference in the judiciary. corruption. Its overall score is 0. but some Islamist militants merged with al-Qaeda in 2006 and remain a threat. Violent conflict in the 1990s between Islamist militants and the government claimed more than 100. Algeria performs below world averages. How Do We Measure Economic Freedom? 87 . Government revenue from hydrocarbons has allowed reductions in external debt.9 100 100 A lgeria’s economic freedom score is 56. making its economy the 105th freest in the 2010 Index. Background: After Algeria gained its independence from France in 1962 following eight years of civil war.033 per capita unemployment: 12.5% (2007) Inflation (cPI): 4. Country’s Score Over Time Most free 80 80 60 60 World average 40 40 algeria 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 34.ALgERiA Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 105 Regional Rank: 13 56.0% growth in 2008 3. Persistent problems include an underdeveloped financial sector. largely because of its hydrocarbon sector. President Abdelaziz Bouteflika negotiated a peace accord in 1999 that delivered greater political stability. The government also needs to strengthen fiscal governance and modernize budget management. Algeria is the world’s fourth-largest exporter of natural gas and has the world’s eighth-largest natural gas reserves and 15th-largest oil reserves. freedom from corruption. and labor freedom.7 billion 2008 data unless otherwise noted Data compiled as of September 2009 See page 457 for an explanation of the methodology or visit the Index Web site at heritage. Algeria is ranked 13th among the 17 countries in the Middle East and North Africa region. A broader economic base would be facilitated by more flexibility in a labor market that is burdened with high youth unemployment. the new revolutionary government adopted a socialist economic model that held back economic development. In six of the 10 economic freedoms.

including the excessive use of private agreements. and restrictive labeling.4 Restrictive labor regulations hinder employment and productivity growth. import and export controls.7 Algeria’s weighted average tariff rate in 2008 was 9.5 73. Privatization of the CPA has since been suspended indefinitely. LABOR fREEDOM — 56. although dismissing a redundant employee is relatively easy and inexpensive. overall tax revenue as a percentage of GDP was 7. Ten points were deducted from Algeria’s monetary freedom score to account for price-control measures. established in 1999. tRADE fREEDOM — 70.2 Inflation averaged 4.2 45. The investment code is transparent. a slight improvement from 2007. The stock exchange. 71. and most of the economy is open to foreign investment. MOnEtARY fREEDOM — 77.5 The top income tax rate has been reduced from 40 percent to 35 percent. Other reform efforts have centered on improving collection of non-hydrocarbon taxes. Most real property is government-owned.1 percent between 2006 and 2008. Six state-owned firms dominate the small insurance sector. Residents and non-residents may hold foreign exchange. 88 2010 Index of Economic Freedom . The banking sector is dominated by state-owned banks. ostensibly a goal since 1999. The global financial crisis has put bank privatization on hold. Public procurement is often tainted with irregularities. Customs clearance procedures. subject to restrictions. but the legal system functions inefficiently.0 30. In the most recent year. PROPERtY Rights — 30 The constitution provides for an independent judiciary.0 32. but administration and bureaucracy can be burdensome. Obtaining a business license requires slightly more than the global average of 18 procedures and 218 days. Better prioritization of large public spending projects is necessary to keep a growing wage bill and non-hydrocarbon debt from undermining long-term fiscal stability. energy. The government has acted on several high-profile cases of official corruption. finAnCiAL fREEDOM — 30 The financial sector remains subject to considerable government interference. inconsistent enforcement of property rights. which account for around 90 percent of assets.8 percent of GDP.7 83. Privatization has stalled due to limited interest among foreign investors and the government’s lack of confidence in privatization.0 30. and conflicting title claims make buying and financing real estate difficult.4 Algeria’s economy is dominated by the public sector. Starting a business takes an average of 24 days. gOVERnMEnt sPEnDing — 73. Distortionary subsidies and direct price controls on some essential commodities including water. The tax law was modified in August 2008 to require companies to reinvest within four years the value of any tax incentives received or face a 30-percent penalty. remains undeveloped with only three companies listed.4 0 0 20 least free 40 50 60 80 = world average 100 100 most free BUsinEss fREEDOM — 71.ALgERiA’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. government spending equaled 29.7 percent. and close a business is relatively well protected by Algeria’s regulatory environment. from Corruption Labor Freedom inVEstMEnt fREEDOM — 45 Foreign and domestic firms are treated equally under the law. sanitary. Foreign ownership is limited to joint-venture relationships in hydrocarbons and some other sectors. The top corporate tax rate has been lowered to 19 percent from 25 percent. The non-salary cost of employing a worker is high. Algeria ranks 92nd out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008. operate. has been uneven and slow. Ten points were deducted from Algeria’s trade freedom score to adjust for non-tariff barriers. which is still the largest employer. Credit Populaire d’Algerie.2 The overall freedom to start.0 56.2 70. Foreign investors may repatriate profits. the government delayed the privatization of one of the state-owned banks. and the executive branch influences judicial actions.4 77. and phytosanitary regulations continue to delay trade and increase costs. In the most recent year. Delays in modernizing the banking sector and reducing state involvement have led to inefficient credit allocation and have kept the non-hydrocarbon sector from developing. The government incurred large fiscal deficits in the wake of the global financial crisis as it expanded civil service wages and government subsidies. fisCAL fREEDOM — 83. In late 2007. compared to the world average of 35 days. and agricultural products remain in place. citing the slowdown of global financial markets. fREEDOM fROM CORRUPtiOn — 32 Corruption is perceived as widespread. Other major taxes include a value-added tax (VAT) and a withholding tax on dividends. subject to some restrictions.9 percent. and a 15 percent tax was imposed on foreign companies transferring profits out of Algeria. although it was able to use significant savings accumulated during years of high energy prices to fund these increases. Banking and financial reform. value-added taxes.

Country’s Score Over Time Most free 80 80 60 60 World average 40 40 angola 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 18. diamonds. and rich agricultural land. Inconsistent and confusing regulations make entrepreneurial activity costly and difficult. Angola is ranked 33rd out of 46 countries in the Sub-Saharan Africa region. and his Popular Movement for the Liberation of Angola (MPLA) won a strong victory in the 2008 parliamentary elections. Background: Since the end of a 27-year civil war in 2002. 95 percent of exports. particularly in the oil sector. Angola scores poorly in most of the 10 economic freedoms. hydroelectric potential.0 million gdP (PPP): $106.4.AngOLA Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 154 Regional Rank: 33 48. Monopolies and quasi-monopolies still dominate the leading sectors of the economy. and the judiciary is politically influenced.899 per capita unemployment: n/a Inflation (cPI): 12.8% growth in 2008 18.org/index.5% 5-year compound annual growth $5. and 80 percent of government revenue. In recent years. Structural reforms have progressed in public financial management and trade liberalization. The recent decline in international oil prices has depressed economic growth and strained the budget. making its economy the 154th freest in the 2010 Index. President José Eduardo dos Santos has ruled since 1979. Angola has been repairing and improving ravaged infrastructure and weakened political and social institutions. Despite extensive oil and gas resources. Despite the government’s plan to diversify its economic base away from oil and diamonds. progress in stimulating the development of the non-oil private sector has been sluggish.5 billion 2008 data unless otherwise noted Data compiled as of September 2009 See page 457 for an explanation of the methodology or visit the Index Web site at heritage.4 100 100 A ngola’s economic freedom score is 48.3 billion 14. Corruption and public-sector mismanagement are pervasive. A long-delayed presidential election is supposed to be held in late 2009 or 2010. robust economic growth facilitated by the booming oil industry has allowed Angola to sustain macroeconomic stability in rebuilding its post–civil war economy. Monetary stability remains fragile.5% FdI Inflow: –$1. which accounts for approximately 60 percent of GDP. many Angolans remain poor and dependent on subsistence agriculture. How Do We Measure Economic Freedom? 89 .4 points. Its overall score has improved 1. Pervasive corruption and a lack of institutional capacity continue to undermine the implementation of other important reform policies. primarily because of increased investment freedom. regulation chokes private business investment.

Despite progress in trade reform. and issues involving enforcement of intellectual property rights add to the cost of trade.5 percent between 2006 and 2008. including fuel and electricity. and repatriation of profits for officially approved foreign investment is guaranteed.AngOLA’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. but investment in certain sectors is restricted. but an expanded wage bill and higher fuel subsidies have increased the fiscal deficit. Fifteen points were deducted from Angola’s monetary freedom score to adjust for price-control measures. are moderate. in part due to foreign banks. the regulatory environment. overall tax revenue as a percentage of GDP was 6.000 and investments that require a concession (such as oil and mining) or involve participation by a parastatal require approval.2 Restrictive labor regulations hinder employment and productivity growth. government import authorizations. variable and high customs fees and taxes. but three major banks (two of them governmentowned) still dominate the system. Starting a business takes an average of 68 days. and price controls are pervasive in many sectors. fREEDOM fROM CORRUPtiOn — 19 Corruption is perceived as rampant. a decline from 2007. subsidies. which have driven growth. there were 18 commercial banks. and most businesses avoid taking commercial disputes to court. All land is ultimately state-owned but can be leased to private entities. 90 2010 Index of Economic Freedom . Property registration is lengthy and expensive.0 45. The regulatory system is non-transparent and time-consuming. finAnCiAL fREEDOM — 40 Liberalization and privatization of the previously statecontrolled banking system has progressed. especially among government officials at all levels. Other taxes include a fuel tax and a consumption tax. In the most recent year.6 35. but the government still needs to improve fiscal management and deal with excess liquidity. In 2008. The state owns all land. subject to some restrictions. Fewer than 10 percent of Angolans have bank accounts. but long-term renewable leases are available for most urban and some non-urban land. Banking. non-transparent government procurement. but dismissing a redundant employee is relatively costly. though high at an average rate of 12. operate. and is subject to corruption. largely due to central bank intervention in foreign-exchange markets. the opening of the Luanda Stock Exchange has been further postponed. from Corruption Labor Freedom inVEstMEnt fREEDOM — 35 Foreign investors receive equal treatment. compared to the world average of 35 days. There are few specific performance requirements on foreign investments. The high cost of laying off workers creates a disincentive for employment expansion. Angola is ranked 114th out of 115 countries in the 2009 International Property Rights Index. MOnEtARY fREEDOM — 62. fisCAL fREEDOM — 85.1 62. restrictions on some imports. Angola ranks 158th out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008. tRADE fREEDOM — 70.1 Angola has a relatively low income tax rate but a burdensome corporate tax rate. and ministry regulations can take precedence over the law. gOVERnMEnt sPEnDing — 62. LABOR fREEDOM — 45. PROPERtY Rights — 20 Angola’s legal and judicial system is inefficient and subject to executive influence. After years of delays. In the most recent year.4 85. deposits rose by around 45 percent. and the top corporate tax rate is 35 percent.6 Inflation. Key sectors remain government-owned.0 19. The top income tax rate is 15 percent.8 Total government expenditures.0 40.4 The overall freedom to start. The granting of credit to the private sector has increased sharply. inadequate customs capacity.2 0 0 20 least free 40 50 60 80 = world average 100 100 most free BUsinEss fREEDOM — 43.3 percent in 2008. remains rudimentary. Legal fees are high.4 70. and loans expanded by over 80 percent. The non-salary cost of employing a worker is low.2 percent. import licensing. government spending equaled 35. lacks capacity. including consumption and transfer payments. Fifteen points were deducted from Angola’s trade freedom score to account for non-tariff barriers. The transparency of government fiscal accounts and government budgetary management is somewhat improved. Reforms have improved local access to foreign exchange. Foreign investments exceeding $100. Banking is relatively well capitalized.4 Angola’s weighted average tariff rate was 7. and investigations and prosecutions of government officials are practically nonexistent. has moderated somewhat. Obtaining a business license requires more than the global average of 218 days. Direct expropriation of foreign investors’ assets is relatively unlikely.8 62. but “Angolanization” of companies and greater use of Angolan suppliers are encouraged. and close a business is constrained by Angola’s regulatory environment. 43.2 percent of GDP.0 20. In 2008. Companies familiar with the business environment’s bureaucratic and legal complexities often hold an advantage. however.

Ten years of structural change have encouraged investment and diversified Argentina’s productive structure. corruption.9 billion 2008 data unless otherwise noted Data compiled as of September 2009 See page 457 for an explanation of the methodology or visit the Index Web site at heritage. including onerous regulations. petrochemicals.2 100 100 A rgentina’s economic freedom score is 51. Its overall score has declined 1.0% growth in 2008 8. The state’s role in the economy has grown. and three democratically elected presidents in the past quarter-century have left office early.9% Inflation (cPI): 8. Country’s Score Over Time Most free 80 80 60 60 World average 40 40 argentina 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 39. Despite efforts to reform labor regulations.333 per capita unemployment: 7.6% FdI Inflow: $8. and a weak judiciary. The global economic downturn later in the year added to resentment of heavy-handed government interventionism.1 points from the 2009 Index. food and beverage processing. and automotive manufacturing are the most important industrial sectors. and there are reports of official and informal obstructions to due process. chemicals. However. Argentina is South America’s second-largest country and has vast agricultural and mineral resources. political interference with an inefficient judiciary hinders foreign investment. The tax burden is relatively low.2. primarily because of avoidance and evasion. non-wage costs limit flexibility. making its economy the 135th freest in the 2010 Index. Her popularity began a steady decline in early 2008 after attempts to impose steep export taxes on soybeans and other commodities.5 billion 7. Cristina Fernandez de Kirchner succeeded her husband as president in late 2007 and retained most of his cabinet. How Do We Measure Economic Freedom? 91 .3% 5-year compound annual growth $14. and its overall score is below the regional and world averages. Financial freedom remains constrained by government influence. institutional weaknesses. Public external debt has fallen to around 40 percent of GDP from 140 percent in 2003. could make the high growth rate unsustainable.ARgEntinA Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 135 Regional Rank: 23 51. illustrated by the seizure of more than $25 billion in private pension funds to replenish the public treasury.org/index.9 million gdP (PPP): $571. Despite a contraction in 2009. Argentina is ranked 23rd out of 29 countries in the South and Central America/Caribbean region. the economy has grown by around 8 percent annually for five years. Agriculture accounts for more than half of exports. Background: Argentina has been politically unstable since World War II.

The government subsidizes or regulates prices of electricity. import and export taxes and fees. but foreign investment is prohibited in a few sectors. fisCAL fREEDOM — 69. and not fully transparent. Money laundering. Since the 2001–2002 debt default and banking crisis. are moderate. and property rights are serious deterrents to investment.1 0 0 20 least free 40 50 60 80 = world average 100 100 most free BUsinEss fREEDOM — 62. Twenty points were deducted from Argentina’s trade freedom score to account for non-tariff barriers. The stock exchange is active. The top income and flat corporate tax rates are 35 percent.1 69. In the most recent year. and uncertain creditor. The banking sector has expanded faster than the overall economy since 2005 but is struggling to regain confidence and stability. Foreign companies may send profits abroad. compared to the world average of 35 days. LABOR fREEDOM — 50. trafficking in narcotics and contraband. regulation and supervision have become more prudential. 92 2010 Index of Economic Freedom . inefficient. Government manipulation of inflation statistics has caused foreign and domestic bondholders to lose billions in interest payments. In November 2008. and dismissing a redundant employee can be costly. Foreign and domestic institutional investors are restricted to total currency transactions of $2 million per month. regulations and licensing provisions. Starting a business takes an average of 27 days.1 Inflexible labor regulations continue to hinder employment creation and productivity growth. tariff escalation. and issues involving enforcement of intellectual property rights add to the cost of trade. Import and export bans and controls. export proceeds must be repatriated to Argentina.0 20.5 69.ARgEntinA’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. The courts are notoriously slow. Argentina ranks 109th out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008. Corruption.2 Government statistics show inflation to be relatively high. MOnEtARY fREEDOM — 61. restrictions on trade in services. 62. Nationalization of private pension funds in late 2008 triggered widespread outrage. contract.0 29.9 percent between 2006 and 2008. but the investor base is small.5 Argentina has relatively high tax rates.5 75. water. Investments may be expropriated or nationalized only for public purpose and upon prompt payment of compensation at fair market value. including consumption and transfer payments. Mortgages and personal loans are increasing. and many foreign investors resort to international arbitration. private measures put the annual rate as of mid-2009 even higher.6 Total government expenditures. and corrupt. Twenty points were deducted from Argentina’s monetary freedom score to adjust for measures that distort prices. Patent protection is problematic. transactions by institutions acting as intermediaries do not count against this limit. and non-performing bank loans are declining. subsidies.5 percent. at 10 percent–15 percent.1 Argentina’s regulatory environment remains burdensome. PROPERtY Rights — 20 The executive branch influences Argentina’s judiciary. Obtaining a business license requires more that the global average of 18 procedures and 218 days. In the most recent year. Foreign investors complain about government and private-sector corruption. Inflows of foreign funds from certain private-sector debt. minimum and reference pricing. gOVERnMEnt sPEnDing — 75. from Corruption Labor Freedom inVEstMEnt fREEDOM — 45 Foreign and domestic investors have equal rights to establish and own businesses. the private pension system was nationalized. the government seized more than $25 billion in private pension funds to replenish the public treasury.5 percent of GDP. overall tax revenue as a percentage of GDP was 24. restrictions on ports of entry. averaging 8.2 45.0 30. In November 2008. and tax evasion plague the financial system. fREEDOM fROM CORRUPtiOn — 29 Corruption is perceived as widespread. Foreign exchange and capital flows are subject to restrictions.3 percent in 2008.6 61. sanitary and phytosanitary rules. and pirated copies of copyrighted products are widely available. retail-level gas distribution. and local telephone services. but some subsidies have been eased because of growing public debt and shrinking revenues. inconsistent. domestic preference in government procurement.0 50. and investments in public-sector securities purchased in the secondary market are restricted. finAnCiAL fREEDOM — 30 Argentina’s largest bank is state-owned and the sole financial institution in some areas.5 Argentina’s weighted average tariff rate was 5. Other taxes include a value-added tax (VAT) and a wealth tax. government spending equaled 28. Price setting still prevails in energy and transportation. It also pressures companies to fix prices and wages to contain rising inflationary pressures. weak institutions. tRADE fREEDOM — 69. Capital controls remain in place. International banks that have returned have not recovered their former prominence. secretive. The non-salary cost of employing a worker is high. urban transport. inflows for most fiduciary funds.

9% 5-year compound annual growth $6.org/index.1% (2007) Inflation (cPI): 9. The 21-year dispute with Azerbaijan over the Nagorno– Karabakh region remains unresolved. Most sectors are in recession.ARMEniA Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 38 Regional Rank: 21 69. the International Monetary Fund. a weakening economy. Country’s Score Over Time Most free 80 80 60 60 World average 40 40 armenia 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 3. Armenia’s economy relies on manufacturing. and Russia and is running a large budget deficit. remittances. and its score puts it above the world and regional averages.000 Azeris still live as refugees in Azerbaijan. In April 2009. services.1 million gdP (PPP): $18. Low tax rates and moderate government spending contribute to an impressive degree of fiscal freedom. Although a cease-fire has been in effect since 1994 and most ethnic Armenians displaced by the conflict have returned home.0 million 2008 data unless otherwise noted Data compiled as of September 2009 See page 457 for an explanation of the methodology or visit the Index Web site at heritage.2. Armenia and Turkey signed a “road map” for gradual normalization of relations. Sluggish structural reforms also keep the Armenian economy from diversifying its productive base. President Serge Sargsyan’s government still faces domestic unrest stemming from the disputed February 2008 election.070 per capita unemployment: 7. and borders with Azerbaijan and Turkey remain closed. Burdensome bureaucratic procedures and discretionary decisions by individual officials encourage petty corruption.8% growth in 2008 11.2 100 100 A rmenia’s economic freedom score is 69. more than 500. and opposition to proposed normalization of relations with Turkey.0% FdI Inflow: $661. and agriculture. widespread corruption and weak protection of property rights continue to reduce Armenia’s overall level of economic freedom.7 billion 6. Armenia has implemented substantial economic reforms in many parts of its economy over the past decade.7 point from last year. Its overall score decreased by 0. making its economy the 38th freest in the 2010 Index. making considerable gains in income growth and poverty reduction while maintaining macroeconomic stability. The government relies on financial assistance and loans from the World Bank. Background: Armenia gained its independence from the Soviet Union in 1991. How Do We Measure Economic Freedom? 93 . Armenia is ranked 21st freest among the 43 countries in the Europe region. However.

and some sectors are uncompetitive. and all 22 are privately owned.4 percent of GDP. and corruption add to the cost of trade.3 90. In the most recent year. such as public transportation. electricity.5 percent. foreign investments cannot be expropriated except in extreme cases of a natural or state emergency. However. Authorities have been forced to limit nonessential spending but are still not meeting expenditure targets.6 Armenia’s somewhat rigid labor regulations remain barriers to employment and productivity growth. from Corruption Labor Freedom inVEstMEnt fREEDOM — 75 Officially. No legislation had been put forth as of July 2009. including consumption and transfer payments. and there are no repatriation requirements.9 Inflation has increased. The state no longer has a stake in any bank. gOVERnMEnt sPEnDing — 90. Its score on the component of the IPRI concerned with intellectual property rights was the lowest in the world.9 75. Armenia ranks 109th out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008. and their administration is inefficient and prone to corruption. Investment regulations can be burdensome and lack transparency. Ten points were deducted from Armenia’s monetary freedom score to adjust for measures that distort domestic prices. Financial-sector infrastructure has been enhanced through improved market transparency. MOnEtARY fREEDOM — 72. Fifteen points were deducted from Armenia’s trade freedom score to account for non-tariff barriers. the global financial turmoil has not had a direct adverse impact on the financial system’s stability.3 Armenia has relatively low tax rates. overall tax revenue as a percentage of GDP was 16. inefficient customs administration. Demands for bribes by government officials are routine.5 Armenia’s weighted average tariff rate was 2. Privatization.5 89. though generally successful and legally open to all bidders. operate. the banking sector. LABOR fREEDOM — 70. In response to a dramatic shortfall in tax revenue in early 2009 (due in large part to low collection of VAT and profit taxes). compared to the world average of 35 days. upon a decision by the courts. The securities market has a legal framework in place but remains small. dominated by a few domestic firms. By law. tRADE fREEDOM — 80. Non-residents may lease but not own land. In the most recent year. The top income and corporate tax rates are 20 percent. and many banks have closed or merged. Excise taxes and fees. still suffers from insufficient long-term funding and market segmentation. and dismissing a redundant employee is relatively inexpensive. are low. and close a business is well protected under Armenia’s regulatory environment. averaging 7.0 70. unpredictable customs valuation.3 percent between 2006 and 2008. fisCAL fREEDOM — 89. which accounts for over 90 percent of total financialsector assets. authorities announced intentions to improve tax administration through major policy changes in 2010. Starting a business takes an average of 15 days. has not been transparent. 94 2010 Index of Economic Freedom . invisible transactions. PROPERtY Rights — 30 Armenia ranks 98th out of 115 countries in the 2009 International Property Rights Index (IPRI). The non-salary cost of employing a worker is moderate. The judicial system is still recovering from underdevelopment and corruption— legacies of the Soviet era that substantially impede the enforcement of contracts.9 72. and with compensation. Government-connected businesses hold monopolies on the importation of numerous vital products. a decline from 2007. Government subsidies and regulations distort prices in some sectors. Other taxes include a value-added tax (VAT) and excise taxes. fREEDOM fROM CORRUPtiOn — 29 Corruption is perceived as widespread on all levels and in all sectors.4 The freedom to start.6 0 0 20 least free 40 50 60 80 = world average 100 100 most free BUsinEss fREEDOM — 83. import monopolies.3 percent in 2008. inadequate infrastructure. or current transfers.ARMEniA’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. There are no restrictions or controls on foreign exchange accounts. There are no limitations on conversion and transfer of money or repatriation of capital and earnings.0 29.9 Total government expenditures. The government has embarked on privatization and regulatory reform that includes adopting international accounting standards. Due to the limited external exposure of local banks. weak enforcement of property rights. Capital markets and insurance are not fully developed. and gas. government spending equaled 17. 83.0 70. Obtaining a business license requires about the world average of 18 procedures and less than the world average of 218 days. foreign and domestic investors are treated equally and have the same right to establish businesses in nearly all sectors.0 30.4 80. finAnCiAL fREEDOM — 70 Armenia has accelerated the pace of legal and regulatory reform in order to restructure its financial sector.

Now in its 18th year of uninterrupted economic expansion.677 per capita unemployment: 4. Both foreign and domestically owned businesses enjoy considerable flexibility under licensing and regulatory schemes and in their employment practices. Sound macroeconomic policies and well-implemented structural reforms have allowed the Australian economy to weather the recent global financial and economic crisis better than many other advanced economies.7% growth in 2008 2. Facilitated by robust supervision and sound regulation. Country’s Score Over Time Most free 80 80 60 60 World average 40 40 australia 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 21 million gdP (PPP): $762.9% 5-year compound annual growth $35. Its overall score is unchanged from last year. the Australian economy is well equipped in terms of its structural strength.4% FdI Inflow: $46.AUstRALiA Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 3 Regional Rank: 3 82. Australia’s banks have coped well with the financial turmoil. Monetary stability and openness to global commerce continue to facilitate a competitive financial and investment environment based on market principles. technologies. Background: Australia is one of the Asia–Pacific’s richest countries. successive Labor and Liberal governments have deregulated financial and labor markets and reduced trade barriers. and corruption is perceived as minimal.6 billion 3. Measures to enhance public finance and maintain long-term fiscal sustainability are focused on achieving better efficiency and effectiveness. Overall.2% Inflation (cPI): 4. Its export sector remains heavily focused on mining and agriculture. and its score is well above the regional and world averages. With growth recovering. Over a period of more than three decades.6 100 100 A ustralia’s economic freedom score is 82. A strong rule of law protects property rights.8 billion 2008 data unless otherwise noted Data compiled as of September 2009 See page 457 for an explanation of the methodology or visit the Index Web site at heritage.6. Australia is an internationally competitive producer of services. Unemployment has been rising since the start of 2009 but remains well below the OECD average. Australia is ranked 3rd out of 41 countries in the Asia–Pacific region. the government’s temporary stimulus measures are scheduled to phase out in 2010. How Do We Measure Economic Freedom? 95 .org/index. making its economy the 3rd freest in the 2010 Index. and high-value-added manufactured goods.

As of June 2009. averaging 3.7 80. fisCAL fREEDOM — 61. finAnCiAL fREEDOM — 90 Australia’s well-developed and highly competitive financial sector includes banking. from Corruption Labor Freedom inVEstMEnt fREEDOM — 80 Foreign and domestic investors receive equal treatment. including consumption and transfer payments. The corporate tax rate is a flat 30 percent. takeovers of offshore companies with Australian subsidiaries valued at A$200 million or more. but competition reforms are reducing the range of goods subject to control. 90. The rule of law is seen as fundamental.1 Australia’s weighted average tariff rate was 2. and prudential behavior. subject to approval and a number of restrictions.7 Inflation has been moderate.4 Australia has a high income tax rate and a moderately high corporate tax rate. Private property can be expropriated for public purposes in accordance with international law.AUstRALiA’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. Australia ranks 9th out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008.4 64. The government generally must be notified about proposals to start new businesses in sensitive sectors. The government respects the independence of the judiciary. Obtaining a business license requires less than the global average of 18 procedures. The government can impose price controls.9 0 0 20 least free 40 50 60 80 = world average 100 100 most free BUsinEss fREEDOM — 90.3 85. PROPERtY Rights — 90 Property rights are well protected. offer a full range of services. solvency. acquisitions of substantial interests in existing businesses.0 87. government spending equaled 34. causing five points to be deducted from Australia’s monetary freedom score.1 61.8 percent between 2006 and 2008. LABOR fREEDOM — 94. and equity industries. The non-salary cost of employing a worker is moderate. All banks are privately owned. overall tax revenue as a percentage of GDP was 30. Other taxes include a goods and services tax (GST) and a tax on the transfer of real property (applied at the state level). Retail gas and electricity prices are regulated. Exports of bulk wheat and containerized wheat have been liberalized.9 Total government expenditures. helped to avert a sharp credit contraction during the global financial crisis. fREEDOM fROM CORRUPtiOn — 87 Corruption is perceived as minimal. licensed as branches or subsidiaries. In the most recent year.6 percent. coupled with banks’ limited exposure to securitized assets. and enforcement is even-handed.3 The overall freedom to start. Bankruptcy procedures are straightforward and not burdensome. and compensation is paid. State corporations increased public investment spending.” Foreign investors may own land. compared to the world average of 35 days.0 94. The government may reject proposals deemed inconsistent with the “national interest. and foreign banks. Protection of intellectual property rights meets or exceeds world standards.2 percent of GDP.9 82. A large stimulus package of transfers to households and increased infrastructure spending shifted the fiscal balance into deficit. gOVERnMEnt sPEnDing — 64. 96 2010 Index of Economic Freedom . but foreign investments may be screened. Government regulation is minimal. Starting a business takes two days. Residents and non-residents have access to foreign exchange and may conduct international payments and capital transactions. MOnEtARY fREEDOM — 82. insurance. and expropriation is highly unusual. subsidies and other support programs for agriculture and manufacturing products. Contracts are secure. a quarantine regime. The government generally follows a hands-off approach to sectors dominated by small businesses. plans to establish new businesses involving a total investment of A$10 million or more. Relatively low leverage and a high ratio of capital adequacy. there were 58 licensed banks: 14 Australianowned and 44 foreign-owned. and certain acquisitions of interests in urban land. There are no controls on capital repatriation. Import restrictions and bans. direct investments by foreign governments or their agencies. In the most recent year. are moderate.0 90. tRADE fREEDOM — 85.0 90. significant portfolio investments and all nonportfolio investments in the media.5 percent). Foreign insurance companies are permitted.5 percent in 2008. The sector is dominated by four major Australian banks that are not allowed to merge. and barriers to trade in services raise the cost of trade. but bulk exports still require a license before shipment.9 Highly flexible employment regulations enhance employment and productivity growth. stringent sanitary and biotechnology measures. The top income tax rate is 45 percent (plus a Medicare levy of 1. and close a business is strongly protected under Australia’s regulatory environment. and dismissing a redundant employee is costless. operate. and regulation is focused on capital adequacy. Ten points were deducted from Australia’s trade freedom score to account for non-tariff barriers. and the government actively promotes international efforts to curb the bribing of foreign officials.

2% FdI Inflow: $13.6. Austrian banks. although individuals still face high rates and an onerous overall tax burden. and a comprehensive legal framework promotes competition. and the financial market facilitates entrepreneurial activity. although the contraction has not been as severe as in other advanced economies.4 billion 1.org/index. Austria’s international orientation and traditions of property rights and clean government are the backbone of its economic growth.152 per capita unemployment: 3. but Social Democrat Werner Faymann was able to form a center-right coalition government with the People’s Party. Background: During the Cold War. Foreign investment requirements are not particularly stringent. steel.8% growth in 2008 2. The corporate tax regime is competitive.6 100 100 A ustria’s economic freedom score is 71. In the September 2008 parliamentary elections. and its overall score is well above the regional and world averages. How Do We Measure Economic Freedom? 97 . Country’s Score Over Time Most free 80 80 60 60 World average 40 40 austria 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 8. far-right anti-immigrant parties made significant gains.6 billion 2008 data unless otherwise noted Data compiled as of September 2009 See page 457 for an explanation of the methodology or visit the Index Web site at heritage. Government spending has been close to 50 percent of GDP in recent years. Austria’s affinity for the West was apparent in its adherence to democratic government and increasingly market-oriented economic policies. The subsequent coalition government of Social Democrat Alfred Gusenbauer dissolved after 18 months.8% 5-year compound annual growth $38. Austria joined the European Union in 1995. gas. The government has gradually relinquished control of formerly nationalized oil. have been under considerable strain. and engineering companies and has deregulated telecommunications and electricity.AUstRiA Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 22 Regional Rank: 11 71. with their large exposure to Central and Eastern European countries that have been hit hard by the global financial crisis. Austria is ranked 11th out of 43 countries in the Europe region. People’s Party Chancellor Wolfgang Schüssel accelerated market reform and significantly limited government intervention in the economy.8% Inflation (cPI): 3. 2009 marked Austria’s first major recession since the early 1980s. making its economy the 22nd freest in the 2010 Index. From 2000–2007. and other EU member states now account for more than 80 percent of trade.3 million gdP (PPP): $318. The government has streamlined time-consuming regulations. Its score is slightly improved from last year. Monetary stability is well established.

However. and bankruptcy procedures are straightforward. Austria ranks 12th out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008. tRADE fREEDOM — 87. Obtaining a business license involves less than the global average of 18 procedures.6 87. Starting a business takes an average of 28 days. Foreign exchange is fully liberalized. fREEDOM fROM CORRUPtiOn — 81 Corruption is perceived as minimal. and a tax on real estate transfers. and domestic and foreign investors enjoy unrestricted access to capital markets. Financial regulations are consistent with international norms.3 Austria is a member of the euro zone. From 2006 to 2008. It also subsidizes rail transportation and operates some state-owned firms.0 81. access to foreign exchange. the EU has high or escalating tariffs for agricultural and manufacturing products.6 The overall freedom to start. PROPERtY Rights — 90 Private property is very secure. Austrian banks have been stressed by their considerable exposure to troubled assets in Central and Eastern Europe. non-transparent and restrictive regulations and standards. Austria maintains additional restrictions on biotechnology and certain service sectors.8 percent. However. and many industries fall under a greenhouse-gas emissions trading system. The common EU weighted average tariff rate was 1.3 percent in 2008.0 70. or repatriation of profits. and the top corporate tax rate is 25 percent. The government has responded with a deposit guarantee and capital injections. The government has tightened corruption regulations and is establishing a central public prosecution department for corruption cases. regulatory. finAnCiAL fREEDOM — 70 Banks provide a wide range of credit and financial services. and non-residents must appoint a representative in Austria. and accounting systems are transparent. Ten points were deducted from Austria’s trade freedom score to account for non-tariff barriers. The rule of law is respected. at least one manager must meet residency and other legal qualifications. 98 2010 Index of Economic Freedom . from Corruption Labor Freedom 73. overall tax revenue as a percentage of GDP was 41. There is no nationally mandated minimum wage. Foreign and domestic private enterprises may establish. acquire. and dispose of business interests. The top income tax rate is 50 percent. gOVERnMEnt sPEnDing — 28. credit is allocated at market terms.8 Total government expenditures. import restrictions and bans on some goods and services. Ten points were deducted from Austria’s monetary freedom score to account for policies that distort domestic prices. and inconsistent regulatory and customs administration. Real estate transactions are subject to approval by local authorities. and close a business is relatively well protected under Austria’s regulatory environment. a tax on insurance contracts. Bribery of an Austrian or foreign government official is subject to criminal penalties.2 28.8 79. In the most recent year. Sustained wage increases have been implemented. In the most recent year.3 75. and its MFN tariff code is complex.1 Austria’s relatively flexible labor regulations enhance employment and productivity growth. There are no controls or requirements on current transfers. are very high. Expropriation is rare and requires special legal authorization. Companies may employ workers on short working hours for up to 24 months.1 0 0 20 least free 40 distorting the prices of agricultural products. 50 60 80 = world average 100 100 most free BUsinEss fREEDOM — 73. Austria’s five largest banking groups account for around 60 percent of total assets. compared to the world average of 35 days. and the cost of fringe benefits per employee is among the EU’s highest. inVEstMEnt fREEDOM — 75 For foreign investors. Contractual agreements are enforced. As a participant in the EU’s Common Agricultural Policy.AUstRiA’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. fisCAL fREEDOM — 51. Legal.9 percent. the government subsidizes agricultural production. operate. and services. and the judiciary is independent. and a stimulus package passed in 2009 will further drive up public-sector debt. government spending equaled 48.7 percent of GDP. and the protection of intellectual property is well established.2 Austria has a high income tax rate and a moderate corporate tax rate. but bureaucracy can be cumbersome and unpredictable.5 51. except in some infrastructure areas and utilities and a few state monopolies. LABOR fREEDOM — 79. market access restrictions in some services sectors. its weighted average annual rate of inflation was 2. including consumption and transfer payments. the nonsalary cost of employing a worker is high. Other taxes include a value-added tax (VAT). and there are no limitations on cross-border transactions. quotas. EU-wide non-tariff barriers include agricultural and manufacturing subsidies.5 Austria’s trade policy is the same as that of other members of the European Union.0 90. Environmental restrictions are strict.0 79. utilities. MOnEtARY fREEDOM — 79.

AZERBAiJAn Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 96 Regional Rank: 16 58. Openness to global trade. relatively moderate taxation. over 500. Its overall score is 0. and its overall score is above the regional average but just below the world average. Despite a cease-fire since 1994. A constitutional amendment to abolish presidential term limits.000 Azeris from the disputed territory still live as refugees in Azerbaijan. and government interference and control hurt overall monetary stability and foreign investment.1% (2008) Inflation (cPI): 20. making its economy the 96th freest in the 2010 Index. particularly in implementing more institutional and systemic reforms.7 million gdP (PPP): $76. both to capitalize on Azerbaijan’s welleducated labor force and tradition of entrepreneurship and to diversify production. It also has suspended in-country foreign radio broadcasts. and tensions with Turkey have increased because of Ankara’s rapprochement with Armenia. Azerbaijan is exploring Russian mediation of the conflict with Armenia and Moscow’s offers to buy and ship more of its natural gas to Europe.1 billion 10. streamlined business processes.8 100 100 A zerbaijan’s economic freedom score is 58.8% growth in 2008 22. Property rights and freedom from corruption remain weak. Continued transformation and restructuring are needed. substantial challenges remain. Falling oil and gas revenues and shrinking foreign direct investment because of the 2009 global crisis have led to a budget deficit. Background: Oil-rich Azerbaijan’s dispute with Armenia over Nagorno–Karabakh has cost thousands of lives and much territory.org/index. will allow President Ilham Aliyev to seek a third term.3% 5-year compound annual growth $8. passed by national referendum in 2009. and improved public-sector management have aided the transition to a market-based system.8% FdI Inflow: $11 million 2008 data unless otherwise noted Data compiled as of September 2009 See page 457 for an explanation of the methodology or visit the Index Web site at heritage.8.8 point higher than last year. reflecting a significant improvement in investment freedom offset by modest declines in several other factors. Azerbaijan is ranked 16th out of 41 countries in the Asia–Pacific region.765 per capita unemployment: 6. The government has implemented wide-ranging reforms to improve economic freedom. Azerbaijan’s impressive economic growth has been driven mainly by oil and gas. How Do We Measure Economic Freedom? 99 . Country’s Score Over Time Most free 80 80 60 60 World average 40 40 azerbaijan 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 8. Despite considerable gains in regulatory reform and economic diversification led by the services sectors.

and transparency of governance. Azerbaijan ranks 158th out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008. epidemic. The law provides that foreign investors be “not less favored” than local investors and allows repatriation of profits. and flexible employment regulations have been implemented as a result of recent reforms.1 79.4 percent. such as energy and communications.5 77. finAnCiAL fREEDOM — 40 Azerbaijan’s banking sector has been growing rapidly. there are few restrictions on converting or transferring investment-associated funds into freely tradable currency.5 62. or other extraordinary situation. weak legal institutions. Ten points were deducted from Azerbaijan’s monetary freedom score to adjust for price-control policies. as well as regulatory abuse and poor contract enforcement.0 82. arbitrary customs administration. fREEDOM fROM CORRUPtiOn — 19 Corruption is perceived as rampant. and customs corruption add to the cost of trade. gOVERnMEnt sPEnDing — 77. inVEstMEnt fREEDOM — 55 Foreign direct investment is allowed in most sectors. Obtaining a business license involves more than the global average of 18 procedures.1 Azerbaijan’s weighted average tariff rate was 3.6 Azerbaijan’s overall regulatory environment has improved.5 0 0 20 least free 40 50 60 80 = world average 100 100 most free BUsinEss fREEDOM — 74. and foreign investors are entitled to adequate compensation. Arbitrary tax and customs administration create opportunities for graft.5 Azerbaijan’s labor market is relatively free. In the most recent year.5 Azerbaijan has a relatively high income tax rate and a moderate corporate tax rate. The market for government and corporate bonds remains small and illiquid. government spending was 27. regulatory conflicts of interest.7 Inflation has accelerated rapidly. Starting a business takes less than half the world average of 35 days. MOnEtARY fREEDOM — 62. PROPERtY Rights — 20 Azerbaijan’s judicial system. Power supply and water companies remain in state hands. 100 2010 Index of Economic Freedom . availability of long-term financial instruments remains limited. The state-owned International Bank of Azerbaijan still dominates the banking sector. tRADE fREEDOM — 77. weak enforcement of property rights. A weak legal regime. corruption. is relatively low.0 40. The non-salary cost of employing a worker is moderate.5 Total government spending. and informal bureaucratic control impede application of laws and regulations and hinder competition. The exchange system is generally liberal. does not function independently of the executive. filled with bureaucratic requirements and generally seen as corrupt and inefficient. Monopolist importers in many sectors prevent declines in commodity prices from being fully passed on to consumers. politically connected monopoly interests. Private banks have grown faster than state-owned banks and account for around 60 percent of total assets. from Corruption Labor Freedom 74. and other investment-related funds as long as applicable taxes are paid. Fifteen points were deducted from Azerbaijan’s trade freedom score to account for non-tariff barriers. The government controls prices on most energy products and operates several state-owned enterprises. and dismissing a redundant employee is not burdensome. and some international banks have opened representative offices. However. Foreign citizens and enterprises may lease but not own land.0 20. regulatory practices favor monopolies. Expropriation may occur in the event of natural disaster. overall tax revenue as a percentage of GDP was 18.4 percent of GDP. the top income tax rate of 35 percent will be lowered to 30 percent.AZERBAiJAn’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. including consumption and transfer payments. and the top corporate tax rate of 22 percent will be lowered to 20 percent. The regulatory sys- LABOR fREEDOM — 82. and the government controls other key sectors. Bank credit has expanded by more than 50 percent per year since 2004. but non-transparency. and corruption appears at all levels. revenues. The government sold a 50 percent stake in the state-owned Kapital Bank in 2007 and further privatized the bank in 2008. reliability.6 77. fisCAL fREEDOM — 79. import and export controls and restrictions. Prudential regulation and supervision have been the central bank’s priority to contain potential risks from the rapid expansion. On January 1. Investment in areas related to national security and defense is prohibited. Judicial and police corruption are widespread.7 55. subsidies.0 19. Politically connected businesses seem to have benefited from government regulatory and other decisions and have achieved control of several lucrative sectors of the economy.6 percent between 2006 and 2008. 2010. In the most recent year. The poor quality. significantly impede the ability of many companies to do business. Other taxes include a value-added tax (VAT) and a property tax. There are no limits on foreign ownership of domestic banks. tem has been improved.9 percent in 2008. averaging 18. but closing a business is relatively easy.

Burdensome tariff and non-tariff barriers remain an area that needs proactive reform. and the Bahamas is one of 34 secrecy jurisdictions that would be subject to the Stop Tax Haven Abuse Act.2 billion –1. primarily due to lower scores in trade freedom. The Bahamas archipelago is a way station for drug smugglers and illegal aliens seeking to enter the United States.3% 5-year compound annual growth $27. making its economy the 47th freest in the 2010 Index. The labor market is very flexible.2% growth in 2008 2. Congress.org/index. investment freedom. A relatively high degree of economic freedom has made the Bahamas one of the most prosperous countries in the Caribbean region. corporate tax. and property rights. Aggressive anti–money laundering efforts have caused some offshore banks to incur losses and leave the country. There is no personal income tax.3 100 100 t he Bahamas’ economic freedom score is 67.5% FdI Inflow: $700 million 2008 data unless otherwise noted Data compiled as of September 2009 See page 457 for an explanation of the methodology or visit the Index Web site at heritage.thE BAhAMAs Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 47 Regional Rank: 7 67. The Bahamas is ranked 7th out of 29 countries in the South and Central America/Caribbean region.6% (2006) Inflation (cPI): 4. introduced in the U. Banking and international financial services also have contracted. The financial services sector’s domestic and offshore activities contribute around 15 percent of GDP. Its overall score is 3 points lower than last year. How Do We Measure Economic Freedom? 101 . The economy has a very competitive tax regime. Country’s Score Over Time Most free 80 80 60 60 World average 40 40 The Bahamas 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 337. or value-added tax (VAT). A poor investment climate characterized by government interference and lingering corruption also undermines the Bahamas’ overall economic freedom score. Tourism generates about half of all jobs. and the overall regulatory environment is relatively efficient.470 per capita unemployment: 7. the Free National Movement and the Progressive Liberal Party.S. Background: The Bahamas is a parliamentary democracy with two main parties. It is also one of the Caribbean’s most prosperous nations and a prime tourist destination. but the number of visitors has dropped significantly since the beginning of the global economic downturn during the last quarter of 2008. and its overall score is higher than the regional and world averages.000 gdP (PPP): $9.3.

inVEstMEnt fREEDOM — 30 Activities reserved exclusively for Bahamians include wholesale and retail operations. and further banking and finance reforms are in progress. All outward capital transfers and inward transfers by non-residents require approval. and videos is a problem. and officials have considerable discretionary power. and stamp taxes but no income tax. distribution and building supplies. The Bahamas International Securities Exchange currently consists of 19 listed public companies. and public transportation. including the Central Bank of the Bahamas (CBB) and the Securities and Exchange Commission. including consumption and transfer payments. fREEDOM fROM CORRUPtiOn — 55 The law provides criminal penalties for official corruption. fisCAL fREEDOM — 95. the regulatory environment is conducive to development of the private sector. In the most recent year. and the CBB administers exchange controls. are often used.4 42. tRADE fREEDOM — 42. The government imposes national insurance. and the government generally implements these laws effectively. averaging 3. Authorities are committed to improving the transparency of budget planning.6 Total government spending. To buy real estate for commercial purposes or to buy more than five acres.4 Overall.7 percent between 2006 and 2008. government spending equaled 23. capital gains tax. Central government debt rose in the first half of 2009 as government turned to international loans to compensate for revenue shortfalls. though not mandatory.2 The Bahamas’ tax burden is one of the world’s lowest. overall tax revenue as a percentage of GDP was 21. and some import licensing and permits add to the cost of trade. Employment contracts. nightclubs and certain restaurants.2 95. The Bahamas has neither signed nor ratified the U. gOVERnMEnt sPEnDing — 83. commission import– export agencies. gasoline. occasional import bans.0 70. is relatively low. There is no legal entitlement to notice of termination. the Bahamas’ weighted average tariff rate was a high 23. coast guard. and petroleum gas. and there is widespread piracy of video and music recordings and broadcasts. diesel oil. The judicial process tends to be very slow.8 percent. finAnCiAL fREEDOM — 70 The financial sector is the economy’s second most important sector.0 0 0 20 least free 40 50 60 80 = world average 100 100 most free BUsinEss fREEDOM — 73. In the most recent year. All other foreign direct investment must be approved by the government. and other government employees. newspaper and magazine publication. The government plans to merge the regulatory functions of key financial institutions. security services. but the process for obtaining a business license is not fully transparent. The government has adopted incentives to encourage foreign financial business.7 30. property. Even though Internet gambling is illegal. The development of local capital markets has accelerated.6 72. New foreign ventures perceived as competing with existing Bahamian businesses may face loss or refusal of business licenses.0 55.2 83. more than 10 online gambling sites are reportedly based in the Bahamas. 102 2010 Index of Economic Freedom . Authorities are trying to increase tax compliance and collection in the wake of the global crisis. Ten points were deducted from the Bahamas’ trade freedom score to account for nontariff barriers. Reflecting the relative soundness of the banking system. certain fishing operations. Convention Against Corruption. Violent crimes have escalated sharply. certain construction.0 70. music. Restrictions and controls on capital and money market instruments exist. Illegal drug trafficking and money laundering reportedly involve police. Piracy of software. The judiciary is independent. Fifteen points were deducted from the Bahamas’ monetary freedom score to adjust for measures that distort domestic prices for such “breadbasket” items as medicines.thE BAhAMAs’ tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. MOnEtARY fREEDOM — 72.2 According to the World Bank. or wealth tax.0 81. real estate and property management. accounting for around 20 percent of GDP.9 percent in 2006. the impact of the global financial crisis on the financial sector has been limited. and some investors have complained of malfeasance by court officials. corporate income tax. advertising and public relations firms. value-added tax (VAT). High tariffs and a “stamp” tax on certain imports. PROPERtY Rights — 70 The Bahamas has an efficient legal system based on British common law. LABOR fREEDOM — 81 Flexible employment regulations generally enhance overall productivity growth and job creation. Copyright laws are widely ignored. from Corruption Labor Freedom 73.7 Inflation has been moderate.4 percent of GDP. but exchange controls are not known to hamper repatriation of approved investment capital.N. auto and appliance service operations. foreigners must obtain a permit from the Investments Board. personal cosmetics and beauty services. high duties that protect a few agricultural items and consumer goods.

Bahrain has maintained monetary stability despite inflationary pressure. Background: Bahrain has developed one of the Persian Gulf’s most advanced economies and most progressive political systems since gaining its independence from Great Britain in 1971. Despite more flexible employment regulations.org/index.S. Bahrain is home to many multinational firms that do business in the region. Structural reforms and openness to global commerce have made Bahrain a financial hub and the regional leader in economic freedom.3.8 million gdP (PPP): $26.605 per capita unemployment: 15. How Do We Measure Economic Freedom? 103 . a reliable regulatory structure.8 billion 2008 data unless otherwise noted Data compiled as of September 2009 See page 457 for an explanation of the methodology or visit the Index Web site at heritage. Country’s Score Over Time Most free 80 80 60 60 World average 40 40 Bahrain 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 0. the country became a constitutional monarchy in 2002. The government has modernized the regulatory framework and continues to focus on diversifying the productive base. making its economy the 13th freest in the 2010 Index. and the government has sought to reduce dependence on declining oil reserves and encourage foreign investment by diversifying the economy. Its overall score is 1.5 points higher than last year. Bahrain is ranked 1st out of 17 countries in the Middle East/North Africa region.3 100 100 B ahrain’s economic freedom score is 76. investment freedom. it has a competitive tax regime and a sophisticated financial sector that facilitates the flow of capital and foreign investment. labor freedom. Under a constitution promulgated by Sheikh Hamad bin Isa al-Khalifa. the U. One of the region’s least oil-dependent economies.0% (2007) Inflation (cPI): 3. and its economic freedom score is well above the world average.9 billion 6. There has been no severe liquidity contraction. with improvements in trade freedom. Overall economic growth has slowed. and Bahrain implemented the first free trade agreement between the U.2% 5-year compound annual growth $34. and a cosmopolitan outlook.1% growth in 2008 7. and a Persian Gulf state. and the financial sector’s resilience has helped to minimize any adverse effects on the economy. and freedom from corruption. but the impact of the global financial crisis on banking has been relatively muted.BAhRAin Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 13 Regional Rank: 1 76.5% FdI Inflow: $1. In 2006.S. unemployment remains a serious problem. It has a modern communications and transportation infrastructure.

but a limited number of products are subject to import and export prohibitions or restrictions. Bahrain has a modern and competitive financial sector. There are no restrictions on the repatriation of profits or capital. water. the Cabinet passed an edict opening ownership of “free hold” properties being constructed throughout the kingdom and allowing all nationalities to own commercial or investment (but not residential) properties.0 60. overall tax revenue as a percentage of GDP was 2.BAhRAin’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm.3 percent between 2006 and 2008. A small stamp duty is collected on property transfers. government spending equaled 25.8 Bahrain’s commercial law system is relatively straightforward. tRADE fREEDOM — 82.0 89. The king has the right to appoint judges and amend the constitution. While improving. There is no nationally mandated minimum wage. Bahrain ranks 43rd out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008. Most companies are not subject to corporate tax. but a 46 percent corporate tax is levied on oil companies. Fifteen points were deducted from Bahrain’s monetary freedom score to account for extensive price controls and subsidies that distort domestic prices for many food products. and foreign firms can resolve disputes satisfactorily through the local courts. from Corruption Labor Freedom inVEstMEnt fREEDOM — 65 The government generally welcomes foreign investment. fisCAL fREEDOM — 99.0 80. There are no prohibitions on the use of international arbitration to safeguard contracts. gOVERnMEnt sPEnDing — 80. fREEDOM fROM CORRUPtiOn — 54 Corruption is perceived as present. the enforcement of intellectual property rights can be a problem. and petroleum. non-GCC nationals are limited to 49 percent. averaging 3.7 percent. are relatively low. and expropriation is unlikely. In the most recent year.4 Bahrain needs more flexible labor regulations to establish a more dynamic labor market. Privatization has slowed in recent years and is expected to stall further in 2010. Gulf Cooperation Council nationals may own 100 percent of the shares of firms listed on the stock exchange. 104 2010 Index of Economic Freedom . Bahrain was ranked 44th out of 115 countries in the 2009 International Property Rights Index. The impact of the global financial turmoil on the banking sector has been relatively muted. The banking system provides a wide range of financial services for foreign and domestic investors. Bahrain has imposed no taxes on personal income. There are few non-tariff barriers.8 73. no exchange controls.0 54.4 65. In the most recent year. and the government has launched a four-pillar labor reform process to enhance productivity and create more private-sector job opportunities. 77.9 Historically.4 Inflation has been relatively low. whether associated with an investment or not. Ten points were deducted from Bahrain’s trade freedom score to account for non-tariff barriers. including consumption and transfer payments. With passage of the Central Bank of Bahrain and Financial Institutions Law in 2006. but certain sectors are restricted. electricity.5 percent in 2008.8 82. LABOR fREEDOM — 89. but establishing and running a business can be slowed by the uncoordinated regulatory environment.9 99.3 percent of GDP. With more than 400 banks and financial institutions in 2008. The government is working to streamline regulations and create the necessary infrastructure in partnership with the private sector.9 Bahrain’s weighted average tariff rate was 3. Wholly foreign-owned companies may be established for regional distribution services and may operate within the domestic market if they do not pursue domestic commercial sales exclusively. the government levies a 1 percent tax on the salaries of Bahraini nationals and 3 percent on the salaries of expatriate employees working for companies with more than 50 employees as a way to fund job training. PROPERtY Rights — 60 Property ownership is secure. However. finAnCiAL fREEDOM — 80 As a regional financial hub. the financial sector accounts for over 25 percent of GDP.9 80. with more enforcement powers and operational independence. In 2006.8 Total government expenditures. and standards can be inconsistent. and significant areas of government activity lack transparency. the CBB became a single regulator of the financial services industry. MOnEtARY fREEDOM — 73. but the legal system is well regarded. Corruption affects the management of scarce water resources. Financial regulation has become more flexible and comprehensive. Bahrain permits 100 percent foreign ownership of new industrial entities and the establishment of representative offices or branches of foreign companies without local sponsors. Foreign and local individuals and companies enjoy access to credit on market terms. and no restrictions on converting or transferring funds.4 0 0 20 least free 40 50 60 80 = world average 100 100 most free BUsinEss fREEDOM — 77.

and the majority of its people work in agriculture. Further. driven mainly by its limited but growing services and industrial sectors. which accounts for almost 20 percent of GDP and employs more than half of the labor force. and inadequate infrastructure discourages investment. including those that are usually dominated by the private sector in other economies.1 billion 2008 data unless otherwise noted Data compiled as of September 2009 See page 457 for an explanation of the methodology or visit the Index Web site at heritage.334 per capita unemployment: 4.5 billion 6. The secular Awami League party won over two-thirds of the 300 parliamentary seats. How Do We Measure Economic Freedom? 105 . the weak regulatory regime is often heavily politicized. Structural and institutional weaknesses remain serious impediments to sustaining such high economic growth rates. Corruption. the People’s Republic of Bangladesh returned to democracy after successful elections in December 2008. coupled with onerous bureaucracy. returning Sheikh Hasina Wajed as prime minister.1 100 100 B angladesh’s economic freedom score is 51. Country’s Score Over Time Most free 80 80 60 60 World average 40 40 Bangladesh 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 160 million gdP (PPP): $213. and SOEs tend to crowd out private investment.6 points higher than last year. as does a haphazard and politicized approach to the rule of law.2% (2006) Inflation (cPI): 8. Bangladesh is ranked 29th out of 41 countries in the Asia– Pacific region.1. Background: After nearly two years of military-backed rule. Bangladesh’s economy remains overly dependent on agriculture. a post she had held from 1996–2001.2% 5-year compound annual growth $1.2% growth in 2008 6. The formal financial system remains weak. Its overall score is 3.4% FdI Inflow: $1. Bangladesh has enjoyed impressive economic growth of around 6 percent per year over the past five years. mainly reflecting improvements in trade freedom and investment freedom. is still perceived as pervasive. Bangladesh is one of the world’s poorest and most densely populated nations. State-owned enterprises (SOEs) are a significant presence in most productive sectors.org/index. though service industries now account for around half of GDP.BAngLADEsh Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 137 Regional Rank: 29 51. and the underdeveloped financial sector impedes the growth of a more dynamic private sector. making its economy the 137th freest in the 2010 Index. Weak institutions continue to undermine economic development and fuel corruption.

9 66.4 The overall freedom to start. finAnCiAL fREEDOM — 20 The financial sector is underdeveloped and provides a limited range of banking services. 106 2010 Index of Economic Freedom .8 0 0 20 least free 40 50 60 80 = world average 100 100 most free BUsinEss fREEDOM — 59. complex and non-transparent government procurement. compared to the world average of 35 days. a slight improvement from 2007. facilitates trafficking in persons.4 percent. and dispute settlement is further hampered by shortcomings in accounting practices and real property registration. and weak enforcement of intellectual property rights also add to the cost of trade. created to enhance transparency and to help authorities encourage tax compliance. An extensive microfinance presence remains largely unsupervised. five government-owned specialized banks. The financial system consists of the central Bangladesh Bank. capital gains. Although the constitution provides for an independent judiciary.0 53. Expenditures on social safety nets are increasing as a response to the global crisis. Twenty points were deducted from Bangladesh’s trade freedom score to account for non-tariff barriers. fisCAL fREEDOM — 72. and potential investors face a host of challenges: delays in project approvals. and goods produced in state-owned enterprises. Other taxes include a value-added tax (VAT) and a tax on interest. 30 domestic private banks. MOnEtARY fREEDOM — 66. Contract enforcement is weak. fraudulent transactions. Given that corruption blights all other economic freedoms. tRADE fREEDOM — 58 Bangladesh’s weighted average tariff rate was 11 percent in 2007. fREEDOM fROM CORRUPtiOn — 21 Corruption is perceived as pervasive. foreign investment is welcomed. There are controls and limits on transactions regarding money market instruments. operate. 59. Fifteen points were deducted from Bangladesh’s monetary freedom score to adjust for price-control measures that distort domestic prices for petroleum products. averaging 8. The Foreign Investment Act of 1980 guarantees the right of repatriation of invested capital. The Administration Capacity and Taxpayer Services (TACTS) program. but market capitalization is low. 10 foreign banks.9 Total government expenditures.3 percent of GDP. Import and export restrictions.6 45. Behind the high level of non-performing loans often stand weak financial supervision. Bangladesh ranks 147th out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008. Foreign firms are able to repatriate funds without much difficulty. burdensome import licensing rules. has been implemented successfully. and uncertainty about contract and regulatory enforcement. are low. government monopolies and state trading boards. There are two stock exchanges. export subsidies and other support programs. Subsidies and other government assistance to the agriculture sector have doubled since 2005. gOVERnMEnt sPEnDing — 93. but dismissing a redundant employee can be difficult.4 58. numerous border taxes and fees.8 Bangladesh has a moderate income tax rate and a high corporate tax rate. In the most recent year. who engage in corrupt practices with impunity. post-tax dividends. and approved royalties and fees. and political influence in lending practices. but certain sectors are restricted.8 93. PROPERtY Rights — 20 Bangladesh has a civil court system based on the British model. Widespread and severe corruption among government officials and police.0 72. particularly those of state-owned commercial banks.BAngLADEsh’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. four nationalized commercial banks. and the top corporate tax rate is 45 percent. government spending equaled 14. inefficient and corrupt customs administration. Bangladesh’s state-owned commercial banks account for more than 30 percent of total banking system assets. Obtaining a business license requires less than the world average of 18 procedures.0 21. overall tax revenue as a percentage of GDP was 8. The top income tax rate is 25 percent. undermining the sector ’s efficiency. Starting a business takes an average of 44 days.4 percent between 2006 and 2008. the lower courts are considered to be part of the executive branch and suffer from serious corruption. In general.0 20. and close a business is limited by Bangladesh’s regulatory environment. and 28 non-bank financial institutions. this is a key area for improvement.0 20.6 Inflation is accelerating.8 Inflexible employment regulations hinder job creation and productivity growth. Bangladesh has made modest progress in recent years in its banking sector. government laws and regulations and their implementation create rather than reduce distortions or impediments to investment. from Corruption Labor Freedom inVEstMEnt fREEDOM — 45 Officially. restrictive labeling requirements. The non-salary cost of employing a worker is low. including consumption and transfer payments. some pharmaceuticals. LABOR fREEDOM — 53. profits. high levels of corruption. provided the appropriate documentation is in order. mismanagement. In the most recent year. burdensome bureaucratic procedures. There has been noticeable credit and deposit growth as well as a reduction in non-performing loans.

Despite its size.8% 5-year compound annual growth $19. Its score is 3. though smaller than others in the Caribbean. though declining.3 100 100 B arbados’s economic freedom score is 68. and transparency levels the playing field for domestic and foreign businesses.3. remains an important employer and exporter. and the overall macroeconomic situation remains stable. Barbados has slipped from 2nd to 5th out of 29 countries in the South and Central America/Caribbean region. and stimulate job creation as the government copes with declining tax revenues. Informatics and light manufacturing are also important. which accounts for more than 15 percent of GDP and has been hurt by the global downturn. Labor policies are relatively flexible. The legal system adjudicates business disputes effectively and encourages a relatively low level of corruption.2 points lower than last year because of significant declines in its property rights and government spending scores.025 per capita unemployment: n/a Inflation (cPI): 8. and the offshore financial sector. ousting the business-friendly Barbados Labor Party after 14 years in power.org/index. earns significant foreign exchange and is generally well regulated. despite certain restrictions on foreign investment. The Central Bank of Barbados has loosened monetary policy in response to decelerating economic growth. making its economy the 40th freest in the 2010 Index.3% FdI Inflow: $133 million 2008 data unless otherwise noted Data compiled as of September 2009 See page 457 for an explanation of the methodology or visit the Index Web site at heritage.2 billion 0. Background: The Democratic Labor Party won the 2008 elections. Many construction jobs depend on tourism.BARBADOs Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 40 Regional Rank: 5 68. Barbados is one of the Caribbean region’s most prosperous economies. Country’s Score Over Time Most free 80 80 60 60 World average 40 40 Barbados 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 0. Overall. Prime Minister David Thompson is struggling to fulfill promises to increase spending on social services. How Do We Measure Economic Freedom? 107 . fight crime.27 million gdP (PPP): $5.6% growth in 2006 2. laid out in commercial laws and evenly applied. Business regulations. The sugar industry. and there are concerns about the country’s credit rating. government economic policies are focused on attracting international companies. Offshore finance and tourism are important sources of economic growth. facilitate private-sector growth. The financial sector has been little affected by the global financial turmoil. but its overall score remains well above global and regional averages.

or permission before importation. gOVERnMEnt sPEnDing — 54. overall tax revenue as a percentage of GDP was 33. Ten points were deducted from Barbados’s trade freedom score to account for non-tariff barriers. licenses. and fuel. and the government generally implements these laws effectively. There are criminal penalties for official corruption. 108 2010 Index of Economic Freedom . fisCAL fREEDOM — 70.5 Barbados’s weighted average tariff rate was 14.1 percent between 2006 and 2008.6 Total government expenditures. MOnEtARY fREEDOM — 73.1 Inflation has been up. Efforts to reform budget management and overhaul the pension system were halted in 2009. Transparent policies and effective laws enhance competition. State trading is limited to imports of chicken and turkey wings. Exchange controls are being eased. requirements for permits. and phytosanitary policies. transportation. The securities markets are illiquid and lack depth. from Corruption Labor Freedom 90. CARICOM-related exchange controls have been abolished. and restrictions on non-CARICOM transactions are to be removed eventually. Revised guidelines have further refined controls on money laundering. The Caribbean Court of Justice is the court of final appeal for Barbados and other CARICOM member states. bureaucracy can be cumbersome. There are few monopolies other than utilities and some state trad- LABOR fREEDOM — 80 Flexible employment regulations enhance overall productivity growth and job creation. and earnings must be repatriated and surrendered to an authorized dealer. tRADE fREEDOM — 60. Although prices are generally set by the market. foreign currency funds may be freely repatriated for current transactions. Barbados is a narcotics trafficking transit country and attracts drug money–laundering operations. Companies can freely repatriate profits and capital from foreign direct investment if they registered with the central bank at the time of investment.0 70. Acquisition of real estate by foreigners requires permission from the central bank. and the top corporate tax rate is 25 percent. if substantial capital gains have been realized. Employees are guaranteed a minimum of two weeks of annual leave and are covered by unemployment benefits and national insurance legislation. The banking sector has grown rapidly and provides a wide range of services for domestic and foreign investors. inVEstMEnt fREEDOM — 45 Barbados is generally open to foreign investors. The government can acquire property for public use upon prompt payment of compensation at fair market value. travel agents. finAnCiAL fREEDOM — 60 Barbados’s six commercial banks are dominated by Caribbean Community and Common Market and Canadian institutions. In general. Central bank approval is required for residents and non-residents to hold and transact in foreign exchange accounts. and direct and indirect export subsidies add to the cost of trade. labeling.1 45. Purchases of securities abroad by residents require exchange control approval. including consumption and transfer payments.0 0 0 20 least free 40 50 60 80 = world average 100 100 most free BUsinEss fREEDOM — 90 The overall process for obtaining licenses and starting a business is straightforward. The top income tax rate is 35 percent. Tour operators. Private property is well protected. Public-sector debt is rising. Other taxes include a value-added tax (VAT) and a property tax.5 70.1 54. Import levies and fees.6 73.BARBADOs’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. Employers are not legally obligated to recognize unions. 10 points were deducted from Barbados’s monetary freedom score to adjust for measures that distort domestic prices for basic food items.0 60. PROPERtY Rights — 80 Barbados has an efficient legal system based on British common law. Despite transparent policies and effective laws.8 percent in 2007.8 percent.0 60. repatriation must generally be phased over a period determined by the central bank. fREEDOM fROM CORRUPtiOn — 70 Corruption is perceived as present.0 80. Credit operations and direct investments also require exchange control approval. partly because of restrictions on capital movements. In the most recent year.1 Barbados has a relatively high income tax rate and a moderate corporate tax rate. sanitary. certain ground transport. and food retail services are reserved for locally domiciled firms.0 80. the police and courts are efficient and unbiased. the government also seeks to expand product offerings in other financial services. While maintaining strong regulatory standards. In the most recent year. Barbados ranks 22nd out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008. Compliance with international supervisory standards is high for offshore and onshore banking institutions. government spending equaled 38.9 percent of GDP. are relatively high. By regional standards. The central bank regulates investment transfers and capital remittances. Certain state companies are de facto sole traders. averaging 7. ing enterprises. The Company Act ensures flexibility and simplicity in establishing and operating companies.

and China have not improved economic prospects. Financial freedom.7 100 100 B elarus’s economic freedom score is 48. Regulations are confusing and applied unevenly. investment freedom.7. The International Monetary Fund approved a $2. are considerably lower than world averages. How Do We Measure Economic Freedom? 109 . Restructuring is very slow.BELARUs Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 150 Regional Rank: 42 48.8% FdI Inflow: $2. Russia extended a $2 billion loan to Belarus that was linked to the creation of a single currency between the two countries.2 billion 2008 data unless otherwise noted Data compiled as of September 2009 See page 457 for an explanation of the methodology or visit the Index Web site at heritage. The persistence of Soviet-era policies and practices continues to deny Belarus the benefits of economic freedom enjoyed in most other former Soviet republics.5% 5-year compound annual growth $12. he vowed to guide Belarus toward “market socialism. Venezuela. Belarus is ranked 42nd among the 43 countries in the Europe region. and freedom from corruption are 20–40 points below world averages. Country’s Score Over Time Most free 80 80 60 60 World average 40 40 20 20 Belarus 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 9. directly or partially. Though tax rates are moderate. In 2008.7 billion 10.org/index.” and the economy has been deteriorating ever since. and GDP is expected to contract by 4 percent in 2009. changed the constitution. there is no comprehensive tax code. and the small private sector remains marginalized. nor has Belarus’s effort to move toward a customs union with Russia and Kazakhstan as a part of the Eurasian Economic Community. In 2005. Reforms undertaken to reduce regulatory costs and enhance the business and investment climate have led to improved business freedom and labor freedom scores. Belarus’s economy is still characterized by pervasive state involvement and control.7 points after four years of decline. foreign investment faces restrictions and bureaucratic inefficiency. although its low score has improved by 3. Besides insecure property rights and corruption. however. Growing ties with Iran.46 billion loan in January 2009.261 per capita unemployment: n/a Inflation (cPI): 14.7 million gdP (PPP): $118. effectively becoming president for life. The government controls many financial institutions. making its economy the 150th freest in the 2010 Index. Industry and state-controlled agriculture are uncompetitive. in power since 1994. Most of Belarus’s 10 economic freedom scores. Background: In October 2004.0% growth in 2008 9. President Alexander Lukashenko. property rights.

The small non-bank financial sector is inhibited by state intervention and irregular regulatory enforcement. assessment.0 62.5 percent. finAnCiAL fREEDOM — 10 Belarus’s banking system remains heavily governmentinfluenced. Owners of import– export businesses in particular complain of corruption at every point in a transaction. but privatization has stagnated.BELARUs’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. including consumption and transfer payments. Businesses have access to various credit mechanisms. but the procedures are still highly bureaucratic and time-consuming. from Corruption Labor Freedom 72. and purchases of property somewhat less cumbersome. LABOR fREEDOM — 84.0 84.6 Inflation has been very high. In the most recent year. corruption.2 32. domestic preference in government procurement. According to independent polls. MOnEtARY fREEDOM — 62. and inefficient courts do not enforce contracts consistently. resident and nonresident accounts.3 85. corruption is most pervasive among local government officials. The non-salary cost of employing a worker remains high. Fifteen points were deducted from Belarus’s trade freedom score to account for non-tariff barriers. weak enforcement of property rights.2 Belarus has a relatively low income tax rate and a moderate corporate tax rate.8 Relatively flexible labor market regulations promote more job creation and productivity growth. The judiciary is neither independent nor objective by international standards.0 20. Foreign investments undergo additional screening and are allowed only case-by-case.0 10. non-transparent and arbitrary regulations. The government has wide scope to interfere in commercial transactions. lack of respect for law. The government openly states that it wants to control all economic activity. The top corporate tax rate is 24 percent. government spending equaled 47. overall tax revenue as a percentage of GDP was 27. Starting a business now requires about six days. compared to the world average of 35 days.8 0 0 20 least free 40 50 60 80 = world average 100 100 most free BUsinEss fREEDOM — 72. Capital transactions. In 2008. In 2008. tRADE fREEDOM — 80.6 20. Other taxes include a value-added tax (VAT). The legal system does not fully protect private property. controls wages. and official resistance to the private sector hinder foreign investment. Numerous industries remain the exclusive domain of the state. and obtaining a business license takes less than the global average of 218 days. The government subsidizes many basic goods and services. The government is seeking buyers for state-owned enterprises in energy and telecommunications. Independent lawyers cannot practice without a special license from the Ministry of Justice. the top income tax rate dropped to a flat 12 percent from 30 percent. Foreigners and businesses may not own land.3 percent in 2008. When expropriating property. averaging 12.1 80. and teachers. Fifteen points were deducted from Belarus’s monetary freedom score to adjust for measures that distort domestic prices. eign private parties in favor of state-owned businesses. the four largest state-owned banks account for more than 70 percent of total assets. Excise taxes on alcohol and tobacco were raised as of July 1. with state ownership of land and government-controlled collective and state farms.3 Belarus’s weighted average tariff rate was 2. Although 14 banks have been sold to foreign investors since 2006. Foreign banks face major impediments. licensing requirements. contradictory enforcement of regulations. Extensive import restrictions and quotas. sales.0 20. but dismissing a redundant employee is relatively easy. with commercial banks’ lending practices subject to state pressure. and barriers to credit remain high. police. the government generally alleges breaches of business law and offers no compensation. 2009. gOVERnMEnt sPEnDing — 32 Belarus’s economy is highly centralized. Inefficient bureaucracy. and government subsidies add to the cost of trade.6 percent between 2006 and 2008. the government made registration. inVEstMEnt fREEDOM — 20 The government discriminates against domestic and for- 110 2010 Index of Economic Freedom . Total government expenditures.6 percent of GDP. In the most recent year. and regulates retail-sector prices. directors of large state enterprises. and an environmental tax for legal entities. The stock market is small and largely dormant. are high. fisCAL fREEDOM — 85. Protection of intellectual property is weak. Belarus ranks 151st out of 179 countries in Transparency International’s Corruption Perceptions Index for 2007. PROPERtY Rights — 20 The structure of property rights is unchanged since the Soviet period.1 Recent reforms have somewhat enhanced the overall freedom to establish and run a business. a turnover tax on production of goods and provision of services. and current transfers are subject to restrictions. doctors. sets prices of products made by state-owned enterprises. and profitable and strategic sectors are often under de facto government control. fREEDOM fROM CORRUPtiOn — 20 Corruption is perceived as pervasive. but long bureaucratic delays discourage smaller companies.

and its overall score is above the regional and global averages. and the capital city of Brussels.7 million gdP (PPP): $369. Leading exports are electrical equipment.1% growth in 2008 2. there are lingering structural weaknesses that hinder reforms to enhance economic freedom and competitiveness.org/index.1. became prime minister on January 5. The global financial crisis has sparked a sharp economic slowdown in Belgium. How Do We Measure Economic Freedom? 111 . Christian Democrat Yves Leterme took over as premier. Guy Verhofstadt and his Liberal Party lost the 2007 general election.0 points from last year. Wallonia. and individual and corporate income tax rates are burdensome. The tax system still relies too much on relatively growth-distorting taxes. In response to the turmoil in the banking sector and the subsequent contraction in overall economic activity.493 per capita unemployment: 7. Although Belgium’s economy has benefited from a longstanding commitment to economic freedom. Services account for 75 percent of economic activity.2 billion 1. Belgium is ranked 16th freest among the 43 countries in the Europe region. After eight years in office.7 billion 2008 data unless otherwise noted Data compiled as of September 2009 See page 457 for an explanation of the methodology or visit the Index Web site at heritage. but his government resigned en masse in the wake of a bank scandal in December 2008. the government has intervened to support the financial system and implement a moderate-sized fiscal stimulus package. which houses the headquarters of NATO and the European Union. 2009. although they remained in office until March 2008 because of political deadlock. and chemicals. Country’s Score Over Time Most free 80 80 60 60 World average 40 40 Belgium 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 10. Christian Democrat Herman van Rompuy. formerly president of the Chamber of Representatives. Background: Belgium is a federal state consisting of three culturally different regions: Flanders.1 100 100 B elgium’s economic freedom score is 70. vehicles.BELgiUM Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 30 Regional Rank: 16 70.0% Inflation (cPI): 4. and labor market rigidities remain a considerable barrier to facilitating productivity and job growth.2% 5-year compound annual growth $34. Its overall score has decreased 2. primarily due to reductions in investment freedom and financial freedom. Belgium’s extensive welfare state is supported by exceptionally high government spending. diamonds. making its economy the 30th freest in the 2010 Index.5% FdI Inflow: $59.

BELgiUM’s tEn ECOnOMiC fREEDOMs
Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. from Corruption Labor Freedom

92.9 87.5 42.2 30.0 77.9 80.0 70.0 80.0 73.0 67.1
0 0 20 least free
40

to 3.6 percent. As a participant in the EU’s Common Agricultural Policy, the government subsidizes agricultural production, distorting the prices of agricultural products. Price-control policies affect water supply, waste handling, homes for the elderly, medicines and implantable medical devices, certain cars, compulsory insurance, fire insurance, petroleum products, cable television, and certain types of bread. Ten points were deducted from Belgium’s monetary freedom score to account for these policies.
60 80

50

= world average

100 100 most free

inVEstMEnt fREEDOM — 80
Foreign investors may enter into joint ventures and partnerships on the same basis as domestic parties, except for such professions as doctors, lawyers, accountants, and architects. Permission is required to open department stores, provide transportation and security services, produce and sell certain food items, cut and polish diamonds, or sell firearms and ammunition. Bureaucracy can be cumbersome. There are no restrictions on the purchase of real estate, resident and non-resident foreign exchange accounts, repatriation of profit, or transfer of capital. If the government acquires property for a public purpose, adequate compensation is paid.

BUsinEss fREEDOM — 92.9
The overall freedom to establish and run a business is strongly protected under Belgium’s regulatory environment. Starting a business takes an average of four days, compared to the world average of 35 days. Obtaining a business license requires less than the world average of 18 procedures and 218 days.

tRADE fREEDOM — 87.5
Belgium’s trade policy is the same as that of other members of the European Union. The common EU weighted average tariff rate was 1.3 percent in 2008. However, the EU has high or escalating tariffs for agricultural and manufacturing products, and its MFN tariff code is complex. Nontariff barriers reflected in EU and Belgian policy include agricultural and manufacturing subsidies, quotas, import restrictions and bans for some goods and services, market access restrictions in some services sectors, non-transparent and restrictive regulations and standards, and inconsistent regulatory and customs administration among EU members. Ten points were deducted from Belgium’s trade freedom score to account for non-tariff barriers.

finAnCiAL fREEDOM — 70
Belgium’s five largest banks account for around 85 percent of deposits, but domestic and foreign banks operate in a very competitive environment. Credit is allocated at market terms, but regional authorities may subsidize mediumand long-term borrowing. The insurance sector is smaller than the banking sector. Capital markets are integrated into Euronext, a broader European exchange. Responding to the global financial crisis, the government has bailed out several major banks. Other financial groups have received additional recapitalization, and the government has offered inter-bank loan guarantees.

fisCAL fREEDOM — 42.2
Belgium’s income tax rate is one of the world’s highest, and its corporate tax rate is moderately high. The top income tax rate is 50 percent, and the top corporate tax rate is effectively 34 percent (33 percent plus a 3 percent austerity tax charged on the income tax due). Other taxes include a value-added tax (VAT), a real property tax, and an estate tax. Rates of the latter two vary by region. In the most recent year, overall tax revenue as a percentage of GDP was 46.1 percent.

PROPERtY Rights — 80
Property ownership is protected, and contracts are secure. Laws are codified, and the judiciary and civil service, while often slow, are of high quality. Intellectual property rights are protected, but implementation of relevant EU directives is slow.

fREEDOM fROM CORRUPtiOn — 73
Corruption is perceived as minimal. Belgium ranks 18th out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008. Belgium outlaws both active bribery and “passive bribery,” whereby officials request or accept bribes to benefit themselves or others in exchange for certain behavior.

gOVERnMEnt sPEnDing — 30
Total government expenditures, including consumption and transfer payments, are very high. In the most recent year, government spending equaled 48.3 percent of GDP. A stimulus package includes utility subsidies, reduced social security contributions, and higher unemployment benefits.

LABOR fREEDOM — 67.1
Employment regulations are relatively flexible, but further reform would foster job creation and productivity growth. The non-salary cost of employing a worker remains high, and dismissing a redundant employee is relatively costly.

MOnEtARY fREEDOM — 77.9
Belgium is a member of the euro zone. Between 2006 and 2008, the weighted average annual rate of inflation rose

112

2010 Index of Economic Freedom

BELiZE
Economic Freedom Score
25
Least free

50

75 100 free
Most

0

World Rank: 79

Regional Rank: 15

61.5
100 100

B

elize’s economic freedom score is 61.5, making its economy the 79th freest in the 2010 Index. Its overall score has declined 1.5 points from last year, primarily as a result of problems with respect for property rights and the rule of law. Belize is ranked 15th out of 29 countries in the South and Central America/Caribbean region. Belize’s macroeconomic performance has been uneven, and growth is affected by structural weaknesses in the economy. Burdensome tariff and non-tariff barriers, together with the high cost of domestic financing, hinder private-sector development. Infrastructure is inadequate and raises the cost of conducting entrepreneurial activity. Belize’s overall economic freedom remains constrained by other institutional weaknesses. Special licensing requirements discourage foreign investment in many sectors, and foreign exchange regulations are inconsistent and nontransparent. The judicial system remains vulnerable to political interference, and corruption is common. Despite a high top income tax rate, corporate taxes are relatively low, and the tax burden is not particularly large as a percentage of GDP. The government has explored the idea of tax reform to enhance competitiveness. Background: Belize is a parliamentary democracy and member of the British Commonwealth. In February 2008, the United Democratic Party defeated the incumbent People’s United Party amid allegations of corruption, mismanagement of state-owned enterprises, botched telecommunications privatization, and extensive social problems. Prime Minister Dean Barrow has worked to restore confidence in government, but high public-sector debt leaves him little fiscal room to maneuver. Tourism and agriculture contribute significantly to the economy, but the growth of tourism and remittances has slowed. Output of sugar, the principal export, is falling, and reduced export demand has hurt citrus and shrimp production and depressed prices. Belize is plagued by crime, money-laundering, and one of the region’s highest murder rates. International relations are dominated by a longrunning territorial dispute with Guatemala and membership in CARICOM.

Country’s Score Over Time
Most free

80 80

60 60

World average

40 40

Belize
20 20

00

Least free

1995

1998

2001

2004

2007

2010

Quick Facts
Population: 0.3 million gdP (PPP): $2.2 billion 3.0% growth in 2008 3.0% 5-year compound annual growth $6,941 per capita unemployment: 8.1% (2007) Inflation (cPI): 6.4% FdI Inflow: $179 million
2008 data unless otherwise noted Data compiled as of September 2009

See page 457 for an explanation of the methodology or visit the Index Web site at heritage.org/index.

How Do We Measure Economic Freedom?

113

BELiZE’s tEn ECOnOMiC fREEDOMs
Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. from Corruption Labor Freedom

74.1 71.5 68.3 74.9 75.6 50.0 50.0 40.0 29.0 81.7
0 0 20 least free
40

50

60

80

= world average

100 100 most free

BUsinEss fREEDOM — 74.1
The overall freedom to start, operate, and close a business is relatively well protected under Belize’s regulatory environment. Obtaining a business license takes less than the world average of 18 procedures and 218 days. The process for closing a business is relatively easy.

ernment encourages local partnerships. Laws and regulations do not significantly distort or impede investment, but bureaucracy can be non-transparent, and dispute resolution can be time-consuming. Residents and non-residents may hold foreign exchange accounts subject to government approval. Officially, no person other than authorized dealers and depositories may retain any foreign currency without the consent of the central bank. All capital transactions must be notified to or approved by the central bank. Applications to buy more than 10 acres of land require approval by the Ministerial Cabinet, and non-residents must obtain approval for the transfer of any land or buildings. The government must assess and pay appropriate compensation if it expropriates an asset.

finAnCiAL fREEDOM — 50
Belize’s financial system is small but growing, and obtaining credit is relatively straightforward. Bank credit to the private sector reached approximately 70 percent of GDP in 2008. There are five commercial banks, eight international banks, and several quasi-government banks. Over the past decade, government policy has fostered development of offshore financial activities. Subsidiaries of foreign banks are competitive, but approval is required to secure a foreign currency loan from outside Belize, and only authorized dealers may retain foreign currency. The government influences the allocation of credit through the quasi-government banks. Although the financial system has remained largely insulated from the global financial crisis, non-performing loans increased considerably in 2008.

tRADE fREEDOM — 71.5
Belize’s weighted average tariff rate was 9.3 percent in 2008. Import restrictions, import licensing rules for some products, customs corruption, and weak enforcement of intellectual property rights add to the cost of trade. Ten points were deducted from Belize’s trade freedom score to account for non-tariff barriers.

fisCAL fREEDOM — 68.3
Belize has high income tax rates and a moderate corporate tax rate. The top income tax rate is 45 percent, and the top corporate tax rate is 25 percent. Other taxes include a goods and services tax (GST) and a stamp duty. In the most recent year, overall tax revenue as a percentage of GDP was 22.7 percent.

PROPERtY Rights — 40
The judiciary, though constitutionally independent, is subject to political influence. There is a severe lack of trained prosecutors, and police officers often assume that role in the magistrates’ courts. There are lengthy trial backlogs. Expropriation of personal property is relatively rare. Many property disputes involve foreign investors and landowners, and it is often difficult to trace the ownership history or specific borders of land holdings. Protection of intellectual property rights is lax.

gOVERnMEnt sPEnDing — 74.9
Total government expenditures, including consumption and transfer payments, are moderate. In the most recent year, government spending equaled 28.9 percent of GDP. Public debt is high, but continued and transparent fiscal consolidation should help to achieve the long-term debt strategy.

MOnEtARY fREEDOM — 75.6
Inflation is increasing, averaging 5.2 percent between 2006 and 2008. The government maintains the prices of some basic commodities, such as rice, flour, beans, sugar, bread, butane gas, and fuel, and controls the retail price of electricity. Price controls are enforced only with respect to a handful of goods, although regulations define administrative prices or mark-ups for several other products. Ten points were deducted from Belize’s monetary freedom score to adjust for measures that distort domestic prices.

fREEDOM fROM CORRUPtiOn — 29
Corruption is perceived as widespread. Belize ranks 109th out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008, a decline from 2007. Money laundering, primarily related to narcotics trafficking and contraband smuggling, occurs through banks operating in Belize. The former prime minister and former minister of home affairs were arrested in 2008 and charged with theft of $10 million, the proceeds of a grant from Venezuela.

inVEstMEnt fREEDOM — 50
Belize generally is non-discriminatory toward foreign investment, but there are restrictions in certain sectors. Full foreign ownership of businesses is legal, although the gov-

LABOR fREEDOM — 81.7
Flexible employment regulations enhance employment and productivity growth. The non-salary cost of employing a worker is low, and dismissing a redundant employee can be costless.

114

2010 Index of Economic Freedom

BEnin
Economic Freedom Score
25
Least free

50

75 100 free
Most

0

World Rank: 115

Regional Rank: 18

55.4
100 100

B

enin’s economic freedom score is 55.4, making its economy the 115th freest in the 2010 Index. Its overall score is unchanged from last year because improved scores in fiscal freedom and investment freedom were largely countered by reductions in trade freedom and financial freedom. Benin is ranked 18th out of 46 countries in the Sub-Saharan Africa region, and its overall score is slightly higher than the regional average. Although the economy is not very diversified, Benin’s entrepreneurial environment benefits from a relatively stable political and macroeconomic situation. The government has introduced structural reforms to revitalize the economy, and privatization of state-owned enterprises has continued. Inefficient regulation and the lack of institutional capacity to fully implement necessary reforms are the main obstacles to greater economic freedom. The most visible constraints on private-sector development are related to fiscal pressure, administrative complexities, and lack of respect for contracts. Bureaucratic inefficiency and corruption affect much of the economy. Court enforcement of property rights remains vulnerable to political interference. High individual and corporate income tax rates impede entrepreneurial activity and fuel the growth of the informal sector. Background: President Mathieu Kérékou, who ruled in Marxist–Leninist fashion for almost 20 years following a military coup, stepped down following a democratic transition in the early 1990s and later served two five-year elected terms. Current President Boni Yayi, former head of the West African Development Bank, came to power in 2006 in elections that were generally regarded as free and fair. Benin remains underdeveloped and dependent on subsistence agriculture and cotton, which is the main commercial crop and accounts for over 40 percent of foreign exchange earnings, 17 percent of exports, and about 7 percent of GDP. Trade with neighboring countries, particularly re-export of goods to Nigeria, is extensive, though much economic activity, including trade, is in the informal sector.

Country’s Score Over Time
Most free

80 80

60 60

World average

40 40

Benin
20 20

00

Least free

1995

1998

2001

2004

2007

2010

Quick Facts
Population: 8.7 million gdP (PPP): $12.7 billion 5.1% growth in 2008 4.1% 5-year compound annual growth $1,468 per capita unemployment: n/a Inflation (cPI): 8.0% FdI Inflow: $120 million
2008 data unless otherwise noted Data compiled as of September 2009

See page 457 for an explanation of the methodology or visit the Index Web site at heritage.org/index.

How Do We Measure Economic Freedom?

115

BEnin’s tEn ECOnOMiC fREEDOMs
Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. from Corruption Labor Freedom

inVEstMEnt fREEDOM — 60
Benin officially encourages foreign investment, and foreign investors have taken advantage of opportunities linked to the privatization of state-owned enterprises, which have been reduced from 130 in 1980 to four today. Bureaucracy is inefficient and subject to corruption. Judicial resolution of civil disputes is time-consuming. International intellectual property agreements are not adequately enforced. Transfers exceeding 300,000 FCFA (approximately $600) to a Western country other than France require central bank and government approval. There are no restrictions on remittance of profits by companies, but remittances by individual resident investors can be restricted. There are no controls on the purchase of land by non-residents, except for investments in enterprises, branches, or corporations. The government can seize property by eminent domain but is required to pay compensation to the owners.

42.3 57.0 75.9 85.2 74.6 60.0 50.0 30.0 31.0 47.8
0 0 20 least free
40

50

60

80

= world average

100 100 most free

BUsinEss fREEDOM — 42.3
The overall freedom to start, operate, and close a business is significantly limited by Benin’s regulatory environment. Starting a business takes an average of 31 days, compared to the world average of 35 days. Obtaining a business license takes more than the world average of 218 days. Closing a business can be burdensome.

finAnCiAL fREEDOM — 50
Benin’s financial sector has been expanding. Enforcement of contracts, transparency, and fraud prevention are weak. The Central Bank of West African States governs Benin’s financial institutions, and regulatory oversight can be unwieldy. Banking is predominantly private, and foreign ownership in banking and insurance is allowed. Credit is allocated on market terms and available without discrimination. Banks experience difficulty with non-performing loans and recovering collateral on those loans. There has been noticeable development of microfinance institutions, but bank penetration remains low. The government has pursued the National Microfinance Development Strategy and taken steps to support activities in the financial sector.

tRADE fREEDOM — 57
Benin’s weighted average tariff rate was 16.5 percent in 2008. Customs inefficiency and corruption, restrictions on some imports, and import taxes add to the cost of trade, and the enforcement of intellectual property rights is inadequate. Ten points were deducted from Benin’s trade freedom score to account for non-tariff barriers.

fisCAL fREEDOM — 75.9
Benin has relatively high tax rates. The top income tax rate is 35 percent, and the top corporate tax rate is 30 percent. Oil companies are subject to a special rate of 45 percent. Other taxes include a value-added tax (VAT), a property tax, and a tax on insurance contracts. In the most recent year, overall tax revenue as a percentage of GDP was 16.9 percent.

PROPERtY Rights — 30
Benin’s legal system is weak and subject to corruption. Businesses and other litigants routinely complain that corruption is particularly widespread at the trial court level and in administrative hearings. There are no separate commercial courts, and backlogs of civil cases cause long delays. International donor assistance projects aim to improve the judiciary by training staff and expanding physical capacity.

gOVERnMEnt sPEnDing — 85.2
Total government expenditures, including consumption and transfer payments, are relatively low. In the most recent year, government spending equaled 22.2 percent of GDP. In 2008, partial privatization of the state-owned Sonapra cotton company and Continental Bank–Benin was completed. Energy shortages and high electricity costs cripple the private sector.

fREEDOM fROM CORRUPtiOn — 31
Corruption is perceived as widespread. Benin ranks 96th out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008, an improvement over 2007. Despite prosecution of several high-profile cases against corrupt officials, government corruption continues to blight economic growth and deter investment.

MOnEtARY fREEDOM — 74.6
As a member of the West African Economic and Monetary Union, Benin uses the CFA franc, which is pegged to the euro. Inflation is moderate but rising, averaging 5.9 percent between 2006 and 2008. The government regulates prices in the state-owned water, telecommunications, and electricity sectors, and the parastatal cotton sector benefits from government subsidies and price supports. State subsidies to the troubled electricity sector have jumped, as have public-sector wages. Ten points were deducted from Benin’s monetary freedom score to adjust for measures that distort domestic prices.

LABOR fREEDOM — 47.8
Restrictive employment regulations hinder job creation and productivity growth. Restrictions on increasing or contracting the number of working hours are rigid. The nonsalary cost of employing a worker is high, but dismissing a redundant employee can be relatively inexpensive.

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2010 Index of Economic Freedom

BhUtAn
Economic Freedom Score
25
Least free

50

75 100 free
Most

0

World Rank: 103

Regional Rank: 17

57.0
100 100

B

hutan’s economic freedom score is 57.0, making its economy the 103rd freest in the 2010 Index. Its score has declined 0.7 point from last year, primarily because of a reduction in investment freedom that was only partially offset by a gain in trade freedom. Bhutan is ranked 17th freest among the 41 countries in the Asia–Pacific region, and its overall score is slightly below the global average. Despite strong economic growth over the past five years, driven largely by hydropower, Bhutan remains an underdeveloped economy with a poverty rate of around 30 percent. The public sector has long been the main source of economic growth, but the government now recognizes that developing the private sector is critical. The government has placed a higher priority on efforts to diversify the economy, particularly in light of demographic shifts that will bring more young people into the labor market. Key constraints on private-sector development include inefficient and arbitrary regulation, limited access to financing, and an underdeveloped investment code. The financial sector remains small and without adequate regulation or supervision. Bhutan scores above the world average in fiscal freedom, monetary freedom, freedom from corruption, and labor freedom. Taxation of personal and corporate income is moderate, and flexible employment regulations and stable labor relations are potential advantages for private-sector development. Background: Bhutan, a small Himalayan constitutional monarchy that made the transition from absolute monarchy to parliamentary democracy in March 2008, has one of the world’s smallest and least-developed economies. Until a few decades ago, this still largely agrarian country had no roads, electricity, or hospitals. Rugged terrain makes the development of infrastructure difficult, but recent interregional economic cooperation, particularly the development of trade with Bangladesh and India, is helping to spur economic growth. Bhutan’s international trade has long been dominated by India, and connections to global markets are limited.

Country’s Score Over Time
Most free

80 80

60 60

World average

40 40

Bhutan
20 20

00

Least free

1995

1998

2001

2004

2007

2010

Quick Facts
Population: 0.7 million gdP (PPP): $3.3 billion 13.8% growth in 2008 10.0% 5-year compound annual growth $4,755 per capita unemployment: 3.7% (2007) Inflation (cPI): 7.7% FdI Inflow: $30 million
2008 data unless otherwise noted Data compiled as of September 2009

See page 457 for an explanation of the methodology or visit the Index Web site at heritage.org/index.

How Do We Measure Economic Freedom?

117

BhUtAn’s tEn ECOnOMiC fREEDOMs
Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. from Corruption Labor Freedom

60.5 52.0 84.1 58.3 73.4 15.0 30.0 60.0 52.0 85.1
0 0 20 least free
40

basis, and no firm has had majority foreign ownership until recently. Foreign direct investment has been a sensitive issue, largely because of concerns about its effect on culture and traditions and possibly because of the domestic private sector’s unwillingness to lose the benefits that restrictions provide. Foreign exchange and capital transactions are subject to government controls. Foreign investors may not purchase land.

finAnCiAL fREEDOM — 30
50
60

= world average

100 80 100 most free

BUsinEss fREEDOM — 60.5
The overall freedom to establish and run a business is constrained by Bhutan’s regulatory environment. Starting a business takes an average of 46 days, compared to the world average of 35 days. Obtaining a business license requires 25 procedures, compared to the world average of 18.

tRADE fREEDOM — 52
Bhutan’s weighted average tariff rate in 2007 was 16.5 percent. Import and export restrictions, services market access restrictions, inadequate infrastructure and trade capacity, underdeveloped markets, and non-transparent and arbitrary regulation add to the cost of trade. Fifteen points were deducted from Bhutan’s trade freedom score to account for non-tariff barriers.

fisCAL fREEDOM — 84.1
Bhutan has moderate income and corporate tax rates. The top income tax rate is 25 percent, and the corporate tax rate is 30 percent. Other taxes include a motor vehicle tax, a property tax, and an excise tax. In the most recent year, overall tax revenue as a percentage of GDP was 7.9 percent. A longterm economic development policy under consideration is expected to include criteria for broad tax exemptions.

Bhutan’s financial sector is small, and an underdeveloped regulatory framework limits access to capital for local entrepreneurs. Two state-owned commercial banks have branches around the country. The Bank of Bhutan enjoyed a monopoly for many years, but competition has improved with the establishment of the Bhutan National Bank and the opening of the sector to more foreign partnerships. There has been rapid expansion of bank credit to the private sector, with private credit reaching about 20 percent of GDP. The government owns the Bhutan Development Finance Corporation and the Royal Insurance Corporation of Bhutan; both have high levels of non-performing loans. Credit is not always allocated on market terms. Foreign exchange is tightly regulated, and the currency is not convertible. The four state-owned financial institutions dominate the Royal Securities Exchange. Bhutan needs a more efficient and competitive financial sector to mobilize savings and channel long-term capital to facilitate development of the private sector.

PROPERtY Rights — 60
In trying to integrate its small economy into the world, Bhutan has taken steps to facilitate development of the private sector. Protections of intellectual property rights are stipulated in the Industrial Property Act of the Kingdom of Bhutan and the Copyright Act of the Kingdom of Bhutan. The Ministry of Trade and Industry’s Intellectual Property Division is responsible for implementing intellectual property policies. Property rights are more equally protected than in most of South Asia, with women rather than men inheriting and owning property in some areas.

gOVERnMEnt sPEnDing — 58.3
Total government expenditures, including consumption and transfer payments, are relatively high. In the most recent year, government spending equaled 37.3 percent of GDP. The tenth five-year development plan (2008–2013) advocates tightened fiscal management. Public spending is targeted toward transportation infrastructure and hydropower.

fREEDOM fROM CORRUPtiOn — 52
Corruption is perceived as present. Bhutan ranks 45th out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008. The government’s Anti-Corruption Commission has identified misuse of resources, bribery and collusion, and nepotism as major forms of corruption.

MOnEtARY fREEDOM — 73.4
Inflation has been high, averaging 6.8 percent between 2006 and 2008. The government maintains an effective monopoly on imports of rationed goods such as fertilizer, kerosene, and liquefied petroleum gas, providing these goods to domestic users at subsidized prices. Ten points were deducted from Bhutan’s monetary freedom score to adjust for the lack of competition and broad-based ownership in the economy.

LABOR fREEDOM — 85.1
Flexible employment regulations facilitate overall productivity growth. The non-salary cost of employing a worker is moderate, and dismissing a redundant employee is relatively easy. However, the formal labor market is not fully developed, and a more dynamic private sector is critical to correcting the imbalance between labor supply and demand.

inVEstMEnt fREEDOM — 15
All foreign investments are approved on a case-by-case

118

2010 Index of Economic Freedom

BOLiViA
Economic Freedom Score
25
Least free

50

75 100 free
Most

0

World Rank: 146

Regional Rank: 25

49.4
100 100

B

olivia’s economic freedom score is 49.4, making its economy the 146th freest in the 2010 Index. Its overall score is 4.2 points worse than last year, with declines in nine of the 10 economic freedoms. Bolivia is ranked 25th out of 29 countries in the South and Central America/Caribbean region, and its overall score is below the world and regional averages. Privatization and liberalization half-measures have led to marginal investment and economic growth. The hydrocarbon sector has been the major source of relatively high income growth in the past five years. Overall economic development has been uneven, and poverty remains daunting. Improving the investment and business climate remains an urgent priority. Persistent institutional weaknesses impede creation of a more vibrant private sector. Pervasive corruption and onerous regulation are major hurdles for foreign and domestic investment. Rule of law is weak, and private property is vulnerable to bureaucratic interference or even expropriation. Restrictive labor laws hamper employment and productivity growth. More than half of the workforce is estimated to work in the shadow economy. Background: Almost two-thirds of Bolivia’s people live in poverty, engaged primarily in subsistence agriculture. From the mid-1980s until 2005, successive elected governments pursued economic and social reform. The government of President Sanchez de Lozada (1993–1997) reduced government intervention through partial privatization and lower taxes and tariffs. A 1999 economic downturn created fiscal pressures, and proposed tax hikes sparked social unrest. Mobs removed two presidents from office in 2003 and 2005, and anti-market populist Evo Morales took office in 2006. Morales engineered a new constitution that expanded executive power, land redistribution, and state control of key natural resources and industries. His concentration of power has been somewhat contained by the opposition-controlled Senate and state governors seeking greater autonomy. Internal divisions led to a serious outbreak of violence in September 2008.

Country’s Score Over Time
Most free

80 80

60 60

World average

40 40

Bolivia
20 20

00

Least free

1995

1998

2001

2004

2007

2010

Quick Facts
Population: 9.7 million gdP (PPP): $41.4 billion 6.1% growth in 2008 4.9% 5-year compound annual growth $4,278 per capita unemployment: 7.5% (2007) Inflation (cPI): 14.0% FdI Inflow: $513 million
2008 data unless otherwise noted Data compiled as of September 2009

See page 457 for an explanation of the methodology or visit the Index Web site at heritage.org/index.

How Do We Measure Economic Freedom?

119

BOLiViA’s tEn ECOnOMiC fREEDOMs
Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. from Corruption Labor Freedom

57.3 76.9 84.3 67.5 63.2 15.0 50.0 10.0 30.0 39.4
0 0 20 least free
40

50

60

80

= world average

100 100 most free

BUsinEss fREEDOM — 57.3
The overall freedom to establish and run a business is restricted by Bolivia’s regulatory environment. Starting a business takes an average of 50 days, compared to the world average of 35 days. Obtaining a business license requires about the world average of 18 procedures and more than the world average of 218 days.

the hydrocarbons industry (forcing companies to negotiate new contracts and offering the state-owned oil company majority control of five firms) and telecommunications, with mining, forestry, electricity, and transportation as other possible targets. Under the 2009 constitution, all hydrocarbon deposits belong to the government. Despite a relatively transparent investment code, private investment is hindered by arbitrary implementation, cumbersome bureaucracy, pervasive corruption, uncertainty about future nationalizations, and social unrest. There are minimal restrictions on currency transfers or remittances. The government can expropriate property, and competing claims to land titles and the absence of reliable dispute resolution create risk and uncertainty in real property acquisition.

finAnCiAL fREEDOM — 50
Bolivia’s financial system remains generally weak and poorly supervised, but it has grown and become more open. There are 12 commercial banks, of which three are foreign-owned, and 45 non-bank financial institutions. Credit is generally allocated on market terms, but domestic collateral is required. Credit to the private sector has expanded very slowly. The development of a modern securities exchange is undermined by political and social unrest. Capital markets are focused on trading in government bonds, although corporate debt and mutual funds have grown. There are no restrictions on remittances or currency transfers.

tRADE fREEDOM — 76.9
Bolivia’s weighted average tariff rate was 4.1 percent in 2008. Inconsistent customs valuation, import bans and restrictions, domestic preference in government procurement, inconsistent sanitary and phytosanitary rules, export subsidies, customs corruption, weak infrastructure, and issues related to the enforcement and protection of intellectual property rights add to the costs of trade. Fifteen points were deducted from Bolivia’s trade freedom score to account for non-tariff barriers.

PROPERtY Rights — 10
Article 308 of a new constitution promulgated in 2009 states that “the private accumulation of economic power” will not be permitted to “endanger the economic sovereignty of the State” and that the “the right to own private property either individually or collectively [must] fulfill a social function” and “not harm the collective interest.” Although other statutes guarantee property rights, the judicial process is subject to political influence and corruption. Enforcement of intellectual property rights is erratic and largely ineffective. Competing claims to land titles and the absence of reliable dispute resolution make acquisition of real property risky. Expropriation is a real possibility, as is illegal squatting on rural private property.

fisCAL fREEDOM — 84.3
Bolivia has a relatively low income tax and a moderate corporate tax. The top income tax rate is 13 percent, and the corporate tax rate is 25 percent. Other taxes include a value-added tax (VAT) and a transaction tax. In the most recent year, overall tax revenue as a percentage of GDP was 27.8 percent.

gOVERnMEnt sPEnDing — 67.5
Total government expenditures, including consumption and transfer payments, are moderate. In the most recent year, government spending equaled 32.9 percent of GDP. Strategic sectors (hydrocarbons and telecommunications) are nationalized, public spending is on the rise, and budgetary management is weak.

fREEDOM fROM CORRUPtiOn — 30
Corruption is perceived as pervasive. Bolivia ranks 102nd out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008. Officials accused of corruption are rarely prosecuted or convicted. A government report has rated the national police, customs, and justice system as the most corrupt institutions.

MOnEtARY fREEDOM — 63.2
Inflation has accelerated rapidly, averaging 11.8 percent between 2006 and 2008. Regulations control prices for most public utilities, petroleum products, and potable water. Fifteen points were deducted from Bolivia’s monetary freedom score to adjust for measures that distort domestic prices.

LABOR fREEDOM — 39.4
Restrictive employment regulations hinder job creation and productivity growth. The government has established minimum wages for the public and private sectors. The non-salary cost of employing a worker is moderate, but overall rigidity in hiring and firing is quite high.

inVEstMEnt fREEDOM — 15
The law provides for equal treatment of foreign and domestic firms. Residents and non-residents may hold foreign exchange accounts. President Morales has “nationalized”

120

2010 Index of Economic Freedom

partly because of the global economic crisis and the generally slow pace of transition to greater economic freedom. investment freedom. with significant improvements in fiscal freedom. the economy of Bosnia and Herzegovina deteriorated markedly in 2009. Bosnia and Herzegovina is ranked 39th freest among the 43 countries in the Europe region. Without significant progress in revitalizing the privatization of large-scale enterprises.2 B osnia and Herzegovina’s economic freedom score is 56. World average Bosnia and Herzegovina 1995 1995 1998 1998 2001 2001 Least free 2004 2004 2007 2007 2010 2010 Quick Facts Population: 3. After several years of robust growth and monetary stability. The European Union signed a Stabilization and Association Agreement with Bosnia and Herzegovina in June 2008. Under a loose central government.390 per capita unemployment: 29. the encouraging growth of previous years is unlikely to resume. Background: The 1995 Dayton Agreement ended three years of fighting and finalized Bosnia and Herzegovina’s secession from the former Yugoslavia.org/index. Its overall score is 3. reforming the judicial system.8 million gdP (PPP): $31.0 billion Data compiled as of September 2009 2008 data unless otherwise noted Data compiled as of September 2009 See page 457 for an explanation of the methodology or visit the Index Web site at heritage.1 points higher than last year. two separate entities exist along ethnic lines: the Republika Srpska (Serbian) and the Federation of Bosnia and Herzegovina (Muslim/Croat). making its economy the 110th freest in the 2010 Index.8% 5-year compound annual growth $8.BOsniA AnD hERZEgOVinA 25 75 Economic Freedom Score Least free Least free 50 50 0 25 0 75 100 Most free 100 free Most World Rank: 110 Regional Rank: 39 100 100 100 80 80 80 60 60 60 40 40 40 20 20 20 0 00 Country’s Score Over Time Country’s Score Over Time Most free 56. How Do We Measure Economic Freedom? 121 . and its overall score remains well below the regional average. Progress toward membership in NATO slowed somewhat in 2009 because of member countries’ concerns about the lack of progress on needed reform. Intrusive bureaucracy and costly registration procedures reflect a history of central planning.0% (2007) Inflation (cPI): 7. Further reforms are needed to tackle bureaucracy and reduce petty corruption. The entrepreneurial environment has been improving but remains one of the region’s most difficult and inefficient. The economy relies heavily on agriculture. and labor freedom. and local courts are subject to substantial political interference and lack the resources to prosecute complex crimes.0% growth in 2008 5. leaving much of the country mired in poverty and high unemployment. and improving the enforcement of laws on competition and bankruptcy procedures.4% 2008 data unless otherwise noted FdI Inflow: $1. moving closer to EU membership.7 billion 6. The rule of law is weak.2.

where foreign control is limited to 49 percent.8 Total government expenditures.0 61. Myriad state and municipal administrations result in a non-transparent bureaucratic system that creates opportunities for corruption. from Corruption Labor Freedom 61. Bosnia and Herzegovina ranks 92nd out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008. and telecommunications services. The judicial system does not cover commercial activities adequately. nontransparent regulations and government procurement.6 percent in 2008. Capital markets remain underdeveloped.BOsniA & hERZEgOVinA’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. The central bank has attempted to consolidate financial oversight. Other taxes include a value-added tax (VAT). With the exception of armaments and media. Ten points were deducted from Bosnia and Herzegovina’s trade freedom score to account for non-tariff barriers. additional import duties on agriculture products. Court decisions are difficult to enforce. The nonsalary cost of employing a worker is moderate. compared to the world average of 35 days.2 28.0 32. Starting a business takes an average of 60 days.0 60. MOnEtARY fREEDOM — 74. including consumption and transfer payments. Judges typically request bribes and respond to pressure from public officials. except under special circumstances and with due compensation. Business registration and licensing are particularly vulnerable to corruption. PROPERtY Rights — 10 Property registers are largely unreliable. there are no 122 2010 Index of Economic Freedom . but an inflexible wage-determination system hinders job creation and mobility. and local and foreign companies may hold accounts in one or more banks that are authorized to initiate or receive payments in foreign currency. The right to transfer and repatriate profits and remittances immediately is guaranteed. inVEstMEnt fREEDOM — 70 The law accords foreign investors the same rights as domestic investors.2 0 0 20 least free 40 50 60 80 = world average 100 100 most free BUsinEss fREEDOM — 61. Enforcement of intellectual property rights remains problematic.3 The overall freedom to establish and run a business is limited by Bosnia and Herzegovina’s national regulatory environment. gas. Long-term lending is still hindered by insufficient enforcement of contracts and the poor regulatory environment. down from 15 percent. Corruption remains prevalent in many political and economic institutions. The presence of foreign-owned banks is strong. and a weak judiciary. LABOR fREEDOM — 61.7 Inflation is rising. overall tax revenue as a percentage of GDP was 38. restrictions on investment. A multi-tiered and divided twoentity government creates a confusing array of regulations. accounting for over 90 percent of total banking assets. Each region has a slowly growing non-bank financial sector and a small stock exchange.8 Bosnia and Herzegovina’s weighted average tariff rate was 4. finAnCiAL fREEDOM — 60 More reform has taken place in the financial sector than in any other area of economic activity. averaging 5.5 percent.8 83. government spending equaled 48. There are few restrictions on capital transactions and foreign exchange accounts. There are no restrictions on payments and transfers related to international current and capital transactions.3 80. Price controls apply to electricity. down from 30 percent. a sales tax.7 percent of GDP. leaving property transfers open to dispute. are high. Contracts are almost unenforceable. accounting for more than 80 percent of banking capital.2 Bosnia and Herzegovina’s various governing entities have different tax policies. The top income tax rate is 10 percent. fees. and consolidation and privatization have followed. In the most recent year.2 Relatively inflexible employment regulations hinder employment creation and productivity growth.8 74. and numerous border fees add to the cost of trade. Privatization of state-owned enterprises has lagged behind the other countries in the region. and the implementation of laws protecting intellectual property rights is inadequate. and a property tax. and standards requirements.0 10.7 70. fisCAL fREEDOM — 83. Import and export restrictions. fREEDOM fROM CORRUPtiOn — 32 Corruption is perceived as widespread. tRADE fREEDOM — 80. Foreign investors continue to face serious obstacles. gOVERnMEnt sPEnDing — 28. Ten points were deducted from Bosnia and Herzegovina’s monetary freedom score to adjust for measures that distort domestic prices. including a complex legal and regulatory framework. non-transparent business procedures. There is easy access to capital and a wide range of services. In the most recent year. The law prohibits expropriation and nationalization of assets. taxation. but the process has stalled. The banking system has expanded quickly in recent years.8 percent between 2006 and 2008. A Fiscal Council was established in 2008 to address problems with national fiscal coordination. The top corporate tax rate is also 10 percent. Most banks are in private hands. Obtaining a business license takes more than the world average of 218 days. Privatization efforts have had mixed success.

org/index. Botswana has worked with other countries in the Southern African Development Community to address the political turmoil in neighboring Zimbabwe and the influx of Zimbabwean refugees. Another priority has been to enhance business profitability and regional competitiveness with a more efficient investment code. With significant natural resources and a market-oriented economy that encourages private enterprise. and relatively flexible employment regulations. and its overall score is well above the regional and world averages. Botswana has Africa’s highest sovereign credit rating. openness to foreign investment and trade. The independent judiciary provides strong protection of property rights.5% (2007) Inflation (cPI): 12. The financial sector remains relatively well developed. The country has one of the world’s highest HIV/AIDS infection rates.BOtsWAnA Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 28 Regional Rank: 2 70. making its economy the 28th freest in the 2010 Index.5 billion –1. particularly of minerals. Monetary stability has deteriorated as well.6 point better than last year. Country’s Score Over Time Most free 80 80 60 60 World average 40 40 Botswana 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 1.0% growth in 2008 3.392 per capita unemployment: 7. and has contracted because of the global recession. Competitiveness and flexibility are promoted by a sensible business regulatory environment. The economy depends heavily on exports. and committed to increased transparency.5% 5-year compound annual growth $13. In an effort to move away from dependence on diamond production. How Do We Measure Economic Freedom? 123 . streamlined the application process for business ventures. Botswana is ranked 2nd out of 46 countries in the Sub-Saharan Africa region. Its overall score is 0.6% FdI Inflow: –$4 million 2008 data unless otherwise noted Data compiled as of September 2009 See page 457 for an explanation of the methodology or visit the Index Web site at heritage. Ian Khama assumed the presidency in 2008 as hand-picked successor to former President Festus Mogae. Despite efforts to diversify the economy. Botswana is a regional leader in economic freedom. Background: The Botswana Democratic Party has governed this multi-party democracy since the achievement of independence in 1966. minerals (principally diamonds) accounted for 75 percent of exports in 2006 and 42 percent of GDP and 50 percent of government revenue in 2006–2007.9 million gdP (PPP): $25. the government has instituted competitive corporate tax rates.3. with an independent central bank and little government intervention.3 100 100 B otswana’s economic freedom score is 70.

The government is involved in banking through state-owned financial institutions and a special financial incentives program that is aimed at increasing Botswana’s status as a financial center. Both the top income tax rate and the top corporate tax rate are 25 percent.1 68. import taxes. The legal system is sufficient to conduct secure commercial dealings. the Botswana Stock Exchange is growing. Botswana ranks 36th out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008 and remains Africa’s least corrupt country. and weak enforcement of intellectual property rights add to the cost of trade. finAnCiAL fREEDOM — 70 Botswana’s competitive banking system is one of Africa’s most advanced. returns on intellectual property. including consumption and transfer payments.5 The overall freedom to establish and run a business is relatively well protected under Botswana’s regulatory environment. The government has abolished exchange controls.8 Botswana’s employment regulations are relatively flexible. and dismissing a redundant employee can be almost costless. and the government respects this in practice. and with the resulting creation of new portfolio investment options.5 73. domestic bias in government procurement. The constitution prohibits the nationalization of private property. Investment returns such as profits and dividends. LABOR fREEDOM — 70. tRADE fREEDOM — 73.BOtsWAnA’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. In the most recent year. The protection of intellectual property rights has improved significantly. and the process for closing a business is easy and straightforward.9 Botswana’s weighted average tariff rate was 8 percent in 2008. Increased foreign investment plays a significant role in the privatization of state-owned enterprises.0 70. although the government provides subsidized loans.1 Total government expenditures. In the most recent year. Foreign exchange is not difficult to obtain. It is ahead of many European and Asian countries and has a proven record of honest economic governance. Parliament began a review of the draft National Development Plan in 2009. Other taxes include a value-added tax (VAT). a property tax. Credit is allocated on market terms. fisCAL fREEDOM — 74. There are very few non-tariff barriers. import licensing. but the government maintains price policies for some agricultural and livestock goods and is able to influence prices through numerous state-owned enterprises and service providers. and an inheritance tax. BUsinEss fREEDOM — 70. royalties.6 percent.1 Botswana’s tax rates remain among the lowest in Southern Africa.8 0 0 20 least free 40 50 60 80 = world average 100 100 most free omy. debt service. but import bans and restrictions on some products.1 percent of GDP. and bureaucratic procedures are streamlined and open.0 70. MOnEtARY fREEDOM — 68. and there are no restrictions on foreign exchange accounts or international transfers. averaging 11.1 67. government spending equaled 33. overall tax revenue as a percentage of GDP was 36. franchise fees. fREEDOM fROM CORRUPtiOn — 58 Corruption is perceived as present. notably through the establishment of a single financial regulatory agency that provides more effective supervision. Reform of non-bank financial institutions has continued in recent years. and unemployment insurance contributions. capital gains. Botswana is ranked second only to South Africa among sub-Saharan Africa countries in the 2009 International Property Rights Index. PROPERtY Rights — 70 The constitution prohibits the nationalization of private property and provides for an independent judiciary. The opening of Capital Bank in 2008 brought the total number of licensed banks to eight. and service fees can be repatriated without limits.0 70.0 58.2 percent between 2006 and 2008. although a serious and growing backlog of cases prevents timely trials.8 80. inVEstMEnt fREEDOM — 80 While generally open to foreign participation in its econ- 124 2010 Index of Economic Freedom .9 74. Obtaining a business license takes less than the world average of 218 days. Ten points were deducted from Botswana’s monetary freedom score to adjust for measures that distort domestic prices. are moderate. but implementation is expected to be put off until mid-2010 at the earliest. The non-salary cost of employing a worker is very low. Ten points were deducted from Botswana’s trade freedom score to account for non-tariff barriers. Investment regulations are transparent. from Corruption Labor Freedom 70. Generally adhering to global standards in the transparency of financial policies and banking supervision. Botswana reserves a number of sectors for citizen participation. health insurance. the financial sector provides ample access to credit for entrepreneurs. The government has established a one-stop shop for investors. gOVERnMEnt sPEnDing — 67.8 Inflation has been high. Employers are not required to make pension. Most prices are set by the market. although somewhat slow.

and despite his socialist rhetoric. Its almost 200 million people are heavily concentrated on the coast.5% 5-year compound annual growth $10. Other barriers to entrepreneurial activity and job creation include a heavy overall tax burden. he has operated as a pragmatist.9% Inflation (cPI): 5. and monetary stability has been maintained. and the middle class is growing.1 points lower than last year as a result of declines in investment freedom and labor freedom. inefficient regulation.0 trillion 5.6. In addition to its large agricultural and industrial base.6 100 100 B razil’s economic freedom score is 55.0 million gdP (PPP): $2. The judicial system remains vulnerable to political influence and corruption. making its economy the 113th freest in the 2010 Index.org/index. A strong currency regime has contributed to rising living standards. and Brazil has benefited from surging prices for its booming exports of commodities. How Do We Measure Economic Freedom? 125 . Workers’ Party President Luiz Inacio “Lula” da Silva was elected in 2002 and re-elected in 2006.296 per capita unemployment: 7. the relatively high cost of credit. Its score is 1. Brazil is the world’s fifth-largest country and is dominated geographically by the Amazon River basin and the world’s largest rain forest. He and his economic team have implemented prudent fiscal and monetary policies and pursued microeconomic reforms. The global financial and economic turmoil’s impact on the financial sector has been moderate. Background: Brazil’s democratic constitution dates from 1988. Country’s Score Over Time Most free 80 80 60 60 World average 40 40 Brazil 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 192.BRAZiL Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 113 Regional Rank: 21 55. and its overall score is below the regional and world averages.1 billion 2008 data unless otherwise noted Data compiled as of September 2009 See page 457 for an explanation of the methodology or visit the Index Web site at heritage. Brazil’s economy is driven by a growing services sector that has accounted for over 60 percent of GDP in recent years. where a dozen major metropolitan areas offer direct access to the Atlantic Ocean.7% FdI Inflow: $45.1% growth in 2008 4. The state presence in many areas of the economy is heavy. and the efficiency and overall quality of government services remain poor despite high government spending as a percentage of GDP. Brazil is ranked 21st out of 29 countries in the South and Central America/Caribbean region. and a rigid labor market.

3 75. overall tax revenue as a percentage of GDP was 35. aviation.3 percent. from Corruption Labor Freedom 54. fishing.BRAZiL’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. Bureaucracy and administration are non-transparent. and obtaining a business license takes much longer than the global average of 218 days. Businesses bidding on government procurement contracts can encounter corruption. In the most recent year. Prudent fiscal and monetary policies are credited with helping Brazil to avoid the worst of the global financial crisis of 2008 and 2009.8 45. inVEstMEnt fREEDOM — 45 Foreign investors are granted national treatment.0 35.0 57.5 0 0 20 least free 40 etary freedom score to account for the presence of price controls. but Brazil’s judiciary is inefficient. transfers to local governments. and close a business is limited by Brazil’s regulatory environment. Ten points were deducted from Brazil’s mon- LABOR fREEDOM — 57. Brazilian nationals must constitute at least two-thirds of all employees and receive at least two-thirds of total payroll in firms employing three or more persons. The non-salary cost of employing a worker is high.3 Total government expenditures. are relatively high. media. and dismissing a redundant employee can be costly.0 50. Import bans and restrictions. gOVERnMEnt sPEnDing — 50. Decisions can take years. and the reinsurance market was opened to private-sector competition in 2008. and competitive. The government currently is allowed to take shares in struggling banks through the two largest state-owned banks. but piracy of copyrighted material persists. dynamic. complex. and a Credit Guarantee Fund introduced in March 2009 provides state guarantees on bank certificates of deposit.2 68. and judgments by the Supreme Federal Tribunal are not automatically binding on lower courts. Brazil’s insurance sector is now the region’s largest. Protection of intellectual property rights has improved. and bureaucracy. high tariffs. The standard corporate tax rate is 15 percent.5 percent. upon registering their investments with the central bank.8 Inflation has been better controlled in recent years. capital (including capital gains). and electricity have been privatized. Besides debt service. 50 60 80 = world average 100 100 most free BUsinEss fREEDOM — 54.5 The overall freedom to start. fREEDOM fROM CORRUPtiOn — 35 Corruption is perceived as significant.7 percent of GDP.5 Inflexible labor regulations hinder employment and productivity growth. finAnCiAL fREEDOM — 50 Banking and capital markets are increasingly diversified. The 10 largest domestic banks account for more than 60 percent of total assets. complex customs procedures. In the most recent year. burdensome. regulatory agencies oversee prices.4 Brazil’s top income tax rate is 27. and royalties. Although such public services as railways. and aerospace. which is also a problem in the lower courts. Starting a business takes more than three times the world average of 35 days. averaging 5. fisCAL fREEDOM — 68. The two largest stateowned banks control about 25 percent of total assets. There are few restrictions on foreign exchange transactions. Mandated benefits amplify overall labor costs. is subject to political and economic influence. restrictive regulatory and licensing rules. Foreign investors. and subject to corruption. In general. and problematic protection of intellectual property rights add to the cost of trade. including transfers and remittances. Legal disputes can be time-consuming.4 50. mail and telegraph services. and lacks resources and staff training. border taxes and fees. but a surtax of 10 percent and a 9 percent social contribution on net profit paid by most industries bring the effective rate to 34 percent. MOnEtARY fREEDOM — 75.9 percent in 2008. Fifteen points were deducted from Brazil’s trade freedom score to account for non-tariff barriers. may remit dividends.2 Brazil’s weighted average tariff rate was 7. Public debt is just below 50 percent of GDP. tRADE fREEDOM — 69. 126 2010 Index of Economic Freedom .5 69.0 percent between 2006 and 2008. market access barriers in services. Foreign investors must obtain specific authorization to purchase land along borders.0 50. The state requires banks to channel loans to preferred sectors. including consumption and transfer payments. government spending equaled 40. operate. rural and border property. telecommunications. but foreign investment is restricted in nuclear energy. government spending is focused mainly on pensions. There is also a real estate transfer tax. subsidies. Privatization efforts have been unremarkable in the past year. Brazil ranks 80th out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008. health services. The central bank regulates outward direct investment in some cases. The National Petroleum Agency fixes the wholesale price of fuel. Three of the top 10 banks are foreign-owned. PROPERtY Rights — 50 Contracts are generally considered secure. and the government controls airfares.

Bulgaria is ranked 36th freest among the 43 countries in the Europe region. Since the signing of an EU accession agreement in 2004.0% FdI Inflow: $9.6% Inflation (cPI): 12. making its economy the 75th freest in the 2010 Index. Competitive flat tax rates facilitate dynamic entrepreneurial activity.0% growth in 2008 6. but the governing coalition survived three no-confidence votes in 2008. there are some institutional weaknesses that could hamper macroeconomic stability and retard growth. Comprehensive economic reform and trade liberalization have led to annual growth of over 6 percent over the past five years. Bulgaria has made substantial progress toward long-term stability and sustained growth.6 million gdP (PPP): $94. Tourism. Sergei Stanishev of the Bulgarian Socialist Party (BSP) has been prime minister since 2005. and burdensome bureaucracy continue to reduce economic freedom. Scandals involving the handling of EU funds have hurt the ruling parties. Its overall score is 2. Weak property rights. reflecting losses in investment freedom and freedom from corruption and growth in government spending. copper. are important to the economy.3 points lower than last year.BULgARiA Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 75 Regional Rank: 36 62.2% 5-year compound annual growth $12. and natural resource exports. Relations between the BSP and its main coalition partner.5 billion 6. Bulgaria has experienced a vast inflow of capital and high rates of growth.393 per capita unemployment: 5.3 100 100 B ulgaria’s economic freedom score is 62. Country’s Score Over Time Most free 80 80 60 60 World average 40 40 Bulgaria 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 7. and zinc.3.org/index. Background: Bulgaria held its first multi-party election since World War II in 1990 and joined the European Union in January 2007. agriculture. and its overall score is above the world average but below the regional average. including exports of coal. and developing a more independent judicial system would appear to be a key area for reform.2 billion 2008 data unless otherwise noted Data compiled as of September 2009 See page 457 for an explanation of the methodology or visit the Index Web site at heritage. remain troubled. However. supporting considerable increases in investment and job creation. How Do We Measure Economic Freedom? 127 . lingering corruption. Bulgaria’s substantially reduced public debt (less than 20 percent of GDP in recent years) is a result of prudent public financial management. though the economy was contracting in 2009. the National Movement for Stability and Progress (NMSP).

1 Relatively flexible labor regulations enhance employment and productivity growth. market access restrictions in some services sectors.5 50. but regulation affects the prices of electricity. and pharmaceuticals.3 69. is private and expanding. Foreign exchange and capital transactions may be subject to restrictions and require prior registration with the central bank. Other taxes include a value-added tax (VAT). The three largest banks account for more than 30 percent of assets. and tighter prudential rules have helped to transform Bulgaria’s banking sector. Insurance. 128 2010 Index of Economic Freedom . and the market determines most prices.0 36. tRADE fREEDOM — 87. with strong foreign participation. In the most recent year. including consumption and transfer payments. fREEDOM fROM CORRUPtiOn — 36 Corruption is perceived as widespread. regulation.5 Inflation has been high. the government subsidizes agricultural production. averaging 10. The constitution provides for an independent judiciary. Ten points were deducted from Bulgaria’s monetary freedom score to adjust for measures that distort domestic prices.3 percent in 2008. and inconsistent regulatory and customs administration among EU members. Foreign ownership of land is permitted if the owners are from EU countries or countries with an international agreement permitting such purchases. quotas.2 percent. Strong banking supervision and prudential regulations are likely to lesson the impact of global financial turmoil.BULgARiA’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. as do pervasive corruption. Government approval is required for majority foreign ownership in some sectors.0 78. import restrictions and bans for some goods and services. fisCAL fREEDOM — 86. provided that the owner is adequately compensated. natural gas. stronger supervision. and a vehicle tax. a slow-moving judiciary. There are no legal restrictions on acquisition of land by locally registered companies with majority foreign participation. Nontariff barriers reflected in EU and Bulgarian policy include agricultural and manufacturing subsidies. but the dismissal cost is moderate. Privatization of state-owned firms has progressed. and its MFN tariff code is complex. but ineffective rule of law limits investor confidence in the enforcement of contracts. the judicial system does not solve commercial disputes. from Corruption Labor Freedom 77. are relatively high. Authorities are trying to keep spending 10 percent below levels set in the 2009 budget. or enforce judgments effectively.0 60. the EU has high or escalating tariffs for agricultural and manufacturing products. Combined assets of the 30 commercial banks exceed 100 percent of GDP. organized crime and government and judicial corruption persist. an estate tax. gOVERnMEnt sPEnDing — 48. Corruption’s threat to the security of the common border is a matter of great concern to the EU. MOnEtARY fREEDOM — 69. If public needs cannot be met by other means. and the influence of organized crime in some sectors of the economy. In the domestic credit market. government spending equaled 41.3 Total government expenditures. and privatization of state-owned banks is complete. Licensing. Consolidation began in 2004. LABOR fREEDOM — 78. Enforcement of intellectual property rights and nontransparent government procurement remain problematic. finAnCiAL fREEDOM — 60 Introduction of a currency board. Despite advances in laws and legal instruments. register businesses. PROPERtY Rights — 30 Although the law protects the acquisition and disposition of property.4 Bulgaria’s trade policy is the same as that of other members of the European Union.4 86. non-transparent and restrictive regulations and standards. water.0 30. Ten points were deducted from Bulgaria’s trade freedom score to account for non-tariff barriers.1 0 0 20 least free 40 distorting the prices of agricultural products. In the most recent year. ownership and shareholders rights.5 percent of GDP. Bulgaria ranks 72nd out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008. inVEstMEnt fREEDOM — 50 Foreign and domestic investors are treated equally. Credit is generally allocated on market terms.8 The overall freedom to establish and run a business is relatively well protected under Bulgaria’s regulatory environment. The common EU weighted average tariff rate was 1.3 48. and arbitrary bureaucracy deter investment. The non-salary cost of employing a worker is high. foreign banks account for more than 80 percent of total assets. expropriation may be undertaken. The corporate and income tax rates are a flat 10 percent.8 87. overall tax revenue as a percentage of GDP was 34. 50 60 80 = world average 100 100 most free BUsinEss fREEDOM — 77. However. Obtaining a business license takes less than the world average of 218 days. Starting a business takes about half the world average of 35 days. and intellectual property rights. As a participant in the EU’s Common Agricultural Policy.3 Bulgaria has low tax rates.5 percent between 2006 and 2008. although there is room for further reforms.

Many Burkinabé live and work abroad.7% 2008 data unless otherwise noted 2008 compiled as of September 2009 Data data unless otherwise noted Data compiled as of September 2009 FdI Inflow: $137 million See page 457 for an explanation of the methodology or visit the Index Web site at heritage. investment freedom. Inadequate communications.5% growth in 2008 5. There are systemic weaknesses in business freedom.7 billion 4. diversifying the production base. Burkina Faso is ranked 9th out of 46 countries in the Sub-Saharan Africa region. and the weak judicial system fuels corruption. Over 80 percent of the population is engaged in subsistence agriculture. and monetary freedom. and privatization has been resumed. and freedom from corruption. who seized power in a 1987 coup and executed his predecessor.4. Its overall score is almost identical to last year. The overall tax burden is low. with as many as 4 million living in or migrating annually to neighboring Côte d’Ivoire for seasonal agricultural work. poor infrastructure.161 per capita unemployment: estimated to be over 20% Inflation (cPI): 10.3% 5-year compound annual growth $1. Remittances are a substantial source of income.2 million gdP (PPP): $17. though a constitutional amendment that entered into force that same year should limit the presidency to two terms in the future. and continuing the transition to greater economic freedom.BURKinA fAsO Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 90 Regional Rank: 9 59. Country’s Score Over Time Most free 80 80 60 60 World average 40 40 Burkina Faso 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 15. Compaoré won a third term as president in November 2005.org/index. How Do We Measure Economic Freedom? 129 . Deeper structural and institutional reforms remain critical to maintaining stable growth. making its economy the 90th freest in the 2010 Index. government spending. Progress in opening the economy and developing the private sector has promoted relatively sound macroeconomic performance with an annual growth rate of over 5 percent over the past five years. Burkina Faso is a very poor agrarian country that is beset by frequent drought. Background: Burkina Faso has been ruled for over two decades by former army officer Blaise Compaoré. Burkina Faso scores relatively well in fiscal freedom. property rights.4 100 100 B urkina Faso’s economic freedom score is 59. and its overall score is equal to the world average. and a high rate of illiteracy have slowed development. with a loss of monetary freedom offset by a gain in investment freedom. Extensive regulations hinder the development of a more entrepreneurial environment.

The banking sector consists of 11 commercial subsidiaries of major multinational banks. Other taxes include a value-added tax (VAT) and a tax on insurance contracts.0 50. 60. The market determines most prices.5 percent. Despite steps to reform the trade regime. a lack of financial and human resources. driven by sharp increases in the prices of food and imported oil. Persistent deficiencies include a weak judiciary. operate. a substantial improvement over 2007.3 Burkina Faso’s weighted average tariff rate was 9. Payments and transfers over a specified amount require supporting documents.8 percent of GDP. and corruption remain deterrents to investment. government spending equaled 25. If property is expropriated. Burkina Faso ranks 80th out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008. Investments are screened to determine eligibility for incentives. misappropriation of public funds. including consumption and transfer payments. Reforms aimed at tightening supervision and improving credit access are ongoing. fREEDOM fROM CORRUPtiOn — 35 Corruption is perceived as pervasive. Almost half reported that they had been directly affected by corrupt practices. The process for closing a business can be lengthy. from Corruption Labor Freedom inVEstMEnt fREEDOM — 50 The law guarantees equal treatment of foreign and domestic investors.3 percent in 2008. the impact of the global financial crisis on banking has not been significant. and salaries. Ten points were deducted from Burkina Faso’s trade freedom score to account for non-tariff barriers. The top income and corporate tax rates are 30 percent.0 71. and weak enforcement of intellectual property rights add to the cost of trade. the government held around 20 percent of total banking capital. fisCAL fREEDOM — 80. but inadequate infrastructure. The regional Banque Centrale des Etats de l’Afrique de l’Ouest maintains the CFA franc’s peg to the euro. limited enforcement powers of anti-corruption institutions. supplementary taxes on imports.3 80. Due to limited exposure to international financial markets. including dividends. and a lack of separation of powers.4 0 0 20 least free 40 50 60 80 = world average 100 100 most free BUsinEss fREEDOM — 60 The overall freedom to start.0 35. outdated legal codes. MOnEtARY fREEDOM — 73 Inflation rose dramatically in 2008 and averaged 7. 130 2010 Index of Economic Freedom . gOVERnMEnt sPEnDing — 80 Burkina Faso’s total government expenditures. but the government still influences lending. In the most recent year. are moderate.4 Relatively flexible employment regulations enhance employment and productivity growth. The executive has extensive appointment and other judicial powers. The non-salary cost of employing a worker is high. Ten points were deducted from Burkina Faso’s monetary freedom score to adjust for measures that distort domestic prices. The government has pursued banking liberalization and restructuring since the 1990s and limits its direct participation. The financial sector remains hampered by difficulties in mobilizing long-term resources. Villagers have their own customary or traditional courts.4 80. The national telephone company was privatized in March 2009.0 50. and excessive legal costs. and obtaining a business license requires less than the world average of 18 procedures. According to a June 2009 poll. customs corruption.4 Burkina Faso has moderate tax rates. The government is liberalizing most monopolies and adopting transparent laws to foster competition.0 64. but the government maintains price supports for cotton and influences prices through the public sector. tRADE fREEDOM — 71. Microfinance has expanded rapidly. A record cereal harvest and lower international oil prices are expected to reduce inflation in 2009.0 30. Business registration is more streamlined. In the most recent year. Systemic weaknesses include arbitrary removal of judges. Credit is generally allocated on market terms. receipts from liquidation.0 73. the government must compensate the property holder in advance. assets. but dismissing a redundant employee is generally costless. Foreign investors are guaranteed the right to transfer abroad any investment-associated funds. and proceeds from non–West African Economic and Monetary Union countries must be surrendered to an authorized dealer. a weak legal system.3 percent between 2006 and 2008. finAnCiAL fREEDOM — 50 Burkina Faso’s financial system is small and underdeveloped. import fees and bans. and close a business remains constrained by Burkina Faso’s regulatory environment. The government remains committed to reforming the corporate tax and the VAT. import authorization for certain products. overall tax revenue as a percentage of GDP was 12. PROPERtY Rights — 30 Burkina Faso’s judicial system is weak.BURKinA fAsO’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. Full introduction of the new tax management system should simplify tax collection. two-thirds of the population believes that corruption is becoming more prevalent. LABOR fREEDOM — 64. In 2008. except in the event of an emergency. too few courts.

Burma is ranked 40th out of 41 countries in the Asia– Pacific region. Historically scoring far below the world average.8 million gdP (PPP): $67. the junta redoubled its efforts to crack down on dissent. Its score is one point lower than last year as a result of worsened investment freedom. and its overall score is much lower than the regional average. Investment freedom.org/index. After the opposition National League for Democracy won a large majority in the 1990 legislative elections. Burma’s economic freedom has deteriorated even more in recent years.4% FdI Inflow: $283 million 2008 data unless otherwise noted Data compiled as of September 2009 See page 457 for an explanation of the methodology or visit the Index Web site at heritage. and freedom from corruption are extraordinarily weak.9 billion 4. The junta’s woeful response in the aftermath of the May 2008 cyclone—the country’s worst-ever humanitarian crisis—showed callous disregard for the welfare of the country’s people. and underdeveloped legal and regulatory frameworks. and inflation is very high.156 per capita unemployment: 9. which struck in May 2008.BURMA Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 175 Regional Rank: 40 36.000 people. A new constitution approved by referendum in 2008 is regarded by international observers as deeply flawed. continuing losses by state-owned enterprises.7 100 100 B urma’s economic freedom score is 36. property rights. Monetary stability remains fragile.8% 5-year compound annual growth $1.7. making its economy the 5th worst in the 2010 Index. Country’s Score Over Time Most free 80 80 60 60 World average 40 40 Burma 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 58. Background: Burma has been ruled by a military junta since 1962. The efficiency and overall quality of government services remain very poor. largely reflecting excessive money creation to fund fiscal deficits. and Cyclone Nargis. Political instability continues. financial freedom. Repressive governance interferes heavily with economic activity. Long-standing structural problems include a wide fiscal deficit due to poor public finance management.0% growth in 2008 10. and the United Nations estimates that the violent government response to pro-democracy demonstrations in September 2007 resulted in over 30 fatalities.5% Inflation (cPI): 26. How Do We Measure Economic Freedom? 131 . but government intervention in the economy has made it one of the world’s poorest countries. is estimated to have killed well over 100. Burma is richly endowed with natural resources. An estimated one million Burmese have sought refuge in neighboring countries.

All official trade in goods. fisCAL fREEDOM — 81. cooking oil.5 0. Burma ranks 178th out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008.BURMA’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. The government tightly controls banking. inVEstMEnt fREEDOM — 0 Foreign and domestic private investment is approved case by case. The state is heavily engaged in mining and power.4 46. Foreign investors who have conflicts with the local government or whose businesses are illegally expropriated have little success in obtaining compensation. Soaring deficits are driven by military spending.0 72. 132 2010 Index of Economic Freedom . Private and foreign companies are at a disadvantage in disputes with governmental and quasi-governmental organizations. extractive industries. Inconsistent enforcement of laws and bureaucratic red tape severely hinder the development of a critically needed private sector. propane. The government uses price controls and subsidies to maintain below-market prices for such staples as gasoline. from Corruption Labor Freedom 20. poor intellectual property rights protection. fREEDOM fROM CORRUPtiOn — 13 Corruption is perceived as pervasive. overall tax revenue as a percentage of GDP was 3. so retailers often sell on the black market. investment permission. although it slowed somewhat in 2009 due to falling fuel and food prices and continuing recovery from the May 2008 cyclone. import and export licenses. complex and capricious regulation. sources of capital. which are rarely granted. but there are several private banks and 13 foreign banks. energy. Banking is dominated by five state-owned banks. and the government favors state-owned banks over the few private banks. non-transparent and outdated regulations and standards.0 0 0 20 least free 40 were deducted from Burma’s monetary freedom score to adjust for measures that distort domestic prices. Burma is a major source of opium. political intervention. including consumption and transfer payments. no rule of law. are low. and soap. MOnEtARY fREEDOM — 46. averaging 26 percent between 2006 and 2008.0 13. arbitrary policy changes. The government is relying primarily on international donors to rebuild the transportation. trade. Conversion and repatriation of foreign exchange are ripe for corruption due to the multiple exchange rate system. Such products are strictly rationed. Once permission is granted. finAnCiAL fREEDOM — 10 The government directs loans to government projects. 50 60 80 = world average 100 100 most free BUsinEss fREEDOM — 20 Entrepreneurial activity is restricted by a lack of legal and regulatory transparency. The government restricts foreign exchange accounts and current transfers and controls all capital transactions.4 Total government expenditures. Manufacturing and services remain undeveloped. customs corruption. state trading. Regulations regarding wage rates and maximum work hours are not uniformly observed.0 5. Twenty points LABOR fREEDOM — 20 Burma’s formal labor market remains distorted by state intervention. gOVERnMEnt sPEnDing — 98. government spending equaled only 7.9 Burma has moderately high tax rates. cronyism.9 98. The government sets public-sector wages and influences wage-setting in the private sector.3 81. high import and export taxes and fees.2 percent of GDP. corruption. and state-owned firms are prominent in transport. The state uses forced labor to construct military buildings and commercial enterprises.0 percent. but the resulting high score reflects a lack of government capacity rather than policy restraint. Opaque regulatory and legal institutions add to a fairly hostile financial climate. non-transparent import and export permit and licensing rules. tRADE fREEDOM — 72. Only three state banks are permitted to deal with foreign exchange transactions. movement of labor. and land and real estate lease approvals. and access to information are government-controlled. and manufacturing. and most Burmese view corruption as necessary for survival. The top income and corporate tax rates are 30 percent. Twenty points were deducted from Burma’s trade freedom score to account for non-tariff barriers. Money laundering continues to grow.0 10. Many sectors are reserved for domestic and government-controlled activity. Foreign firms may not own land but may lease it from the government. Multiple exchange rates make conversion and repatriation of foreign exchange complex and prone to corruption. In the most recent year. and poor infrastructure. In the most recent year. and entrepreneurs’ access to credit is highly constrained. Access to capital is very limited.0 20.5 Inflation continues to be extremely high. and health infrastructures damaged by the May 2008 cyclone. Investors complain of official corruption in taxation.3 Burma’s weighted average tariff rate was 3. and inefficient regulatory and customs bureaucracy add to the cost of trade. Import and export bans and restrictions. foreign investors need business licenses.9 percent in 2007. Investment is severely limited by government design. PROPERtY Rights — 5 Private real property and intellectual property are not protected.

Its overall score is 1.1 million gdP (PPP): $3. How Do We Measure Economic Freedom? 133 . and the last active rebel group signed a cease-fire in 2008. Background: Since becoming fully independent in 1962. Burundi scores significantly below world averages in many of the 10 economic freedoms. Country’s Score Over Time Most free 80 80 60 60 World average 40 40 Burundi 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 8.5 100 100 B urundi’s economic freedom score is 47. Negotiations mediated by South Africa resulted in a power-sharing government in 2001. A majority of the population depends on subsistence agriculture. Burundi faces major challenges. sparked a civil war. The lack of institutional capacity still delays reforms needed to restructure and modernize the economy. are subject to intrusive and inefficient regulations. making its economy the 160th freest in the 2010 Index.5% 5-year compound annual growth $383 per capita unemployment: n/a Inflation (cPI): 24. In 2005. Burundi has suffered from tension between the dominant Tutsi minority and the Hutu majority.4% FdI Inflow: $1 million 2008 data unless otherwise noted Data compiled as of September 2009 See page 457 for an explanation of the methodology or visit the Index Web site at heritage. The 1993 assassination of the first Hutu president. reflecting lower scores for government spending and monetary freedom that are only partly offset by an increase in investment freedom. The weak judiciary fuels corruption. Melchior Ndadaye. Burundi remains very poor. a new constitution was adopted by referendum and the National Assembly elected Pierre Nkurunziza president. and the violence following the death of his successor. and agriculture accounted for 34 percent of GDP in 2007.5. Many aspects of doing business.1 billion 4. Cyprien Ntayamira. Law enforcement is weak and vulnerable to political influence. the principal source of jobs for 80 percent of the population.BURUNDI Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 160 Regional Rank: 38 47. Following years of political instability. Burundi is ranked 38th out of 46 countries in the Sub-Saharan Africa region and scores much worse than the world average. from obtaining licenses to attracting foreign investment.000 deaths and the beginnings of the Rwandan genocide.3 points lower than last year. and Rwandan President Juvenal Habyarimana in a 1994 plane crash led to an estimated 300.org/index. Economic expansion averaging 3 percent per year for the past five years is at risk due to over-reliance on the widely fluctuating agricultural sector.5% growth in 2008 3.

6 Burundi’s weighted average tariff rate was 10. tRADE fREEDOM — 68. geographic isolation. The many loans made to the government and to stateowned enterprises have resulted in non-performing loans that have reached around 19 percent of gross total lending. gOVERnMEnt sPEnDing — 42.7 percent of GDP.9 Rigid employment regulations and an underdeveloped labor market hinder productivity growth and job creation. there are no significant foreign enterprises to test the effectiveness of this policy.2 42. fisCAL fREEDOM — 72.0 19.7 Total government expenditures in Burundi. It is not easy for small enterprises to get credit. and agriculture-support programs. In theory. the state of post-conflict infrastructure. capital gains. debt service. finAnCiAL fREEDOM — 30 Burundi’s small financial sector provides a very limited range of services. From senior government officials demanding large kickbacks on procurement tenders to low-level civil servants demanding petty bribes for services. have shown increasing signs of independence under Hutu presidents. where the purchase and sale of government property frequently leads to allegations of bribery and cronyism.0 25. corrupt bureaucracy make it difficult to conduct entrepreneurial activity. corruption is present in every area of life. In the most recent year. underdeveloped markets. MOnEtARY fREEDOM — 62.3 percent.2 Burundi has relatively high tax rates. inadequate administrative capacity. The government influences prices through state-owned enterprises. predominantly Tutsi.9 0 0 20 least free 40 50 60 80 = world average 100 100 most free ment. detentions without trial. A large number of refugees and internally displaced persons are blocked from resettlement by weak land tenure and property rights systems and by the lack of ownership records. overall tax revenue as a percentage of GDP was 18. a significant deterioration from 2007. government spending equaled 43. returns on intellectual property. and even torture against political adversaries. The government may expropriate property for “exceptional and state-approved reasons. are high.7 percent in 2008. is vague and dependent on further tax and customs reform. Despite new regulations. fREEDOM fROM CORRUPtiOn — 19 Corruption is perceived as pervasive. Ten points were deducted from Burundi’s monetary freedom score to adjust for measures that distort domestic prices. but falling international food and fuel prices helped to ease pressure in 2009. capital. 134 2010 Index of Economic Freedom .6 percent between 2006 and 2008. Retail and corporate banking are at a relatively early stage of development. The state dominates the two largest commercial banks.BURUnDi’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. Many people still rely on microcredit or informal lending. Burundi ranks 158th out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008.8 The overall freedom to establish and run a business is constrained by Burundi’s regulatory environment.8 68. poor infrastructure. or permits. Banking regulation is bureaucratic and arduous.7 Inflation has been high. Corruption. The government has adopted a relatively open trade regime.6 72. or imported inputs. but judges are appointed by the executive branch and subject to political pressure. licenses. The ruling party has been accused of using arbitrary arrests. Obtaining a business license requires more than the world average of 18 procedures. continuing instability and a massive.0 30. Corruption is most pervasive in government procurement. and customs corruption add to the cost of trade. 2009. limitations depend on the availability of hard currency.” BUsinEss fREEDOM — 37. there are no restrictions on converting or transferring funds associated with foreign investment. Judicial personnel. The non-salary cost of employing a worker is low.” but “a just and prior compensatory allowance is required. but import restrictions. The top income and corporate tax rates are 35 percent.0 66. but the difficulty of dismissing a worker creates a disincentive for companies that would otherwise hire more people. from Corruption Labor Freedom 37. in practice. In principle. established to attract and reassure investors. The constitution guarantees the independence of the judiciary. Ten points were deducted from Burundi’s trade freedom score to account for non-tariff barriers. averaging 18. there are no limitations on the flow of funds for remittance of profits. inVEstMEnt fREEDOM — 50 Foreign investment receives equal treatment. In the most recent year. and the lack of domestic investment opportunity also hinders bank development. including consumption and transfer payments. however. Much-needed privatization of the coffee industry remains stalled. PROPERtY Rights — 25 Private property is subject to government expropriation and armed banditry. The 2008 investment code.7 62. and proximity to regional conflicts discourage large foreign invest- LABOR fREEDOM — 66.7 50. Other difficulties include the largely inadequate availability of longterm capital and an undeveloped payments system. A value-added tax (VAT) replaced the general sales tax on July 1. subsidies.

and Hun Sen was re-elected prime minister. Background: Cambodia’s multigenerational effort to recover from war and the brutal Khmer Rouge regime of Pol Pot continues. How Do We Measure Economic Freedom? 135 . The rigidity of the formal labor market is partly responsible for the existence of an underground dual labor market. however. An estimated 3 million people were killed by the government or died as a result of the forced evacuation of cities. torture.905 per capita unemployment: 3. Pervasive corruption and weak rule of law further constrain entrepreneurial activity and increase its cost.0 billion 5. considerably reducing poverty.org/index.0% 5-year compound annual growth $1. Its overall score is almost the same as last year. Cambodia has been ruled either formally or de facto by Prime Minister Hun Sen since 1993. Cambodia is ranked 18th out of 41 countries in the Asia– Pacific region. A tribunal established under an agreement with the United Nations to try senior officials involved in the atrocities held its first trial in 2009.6. with improvements in trade freedom and investment freedom balanced by declines in monetary freedom and several other factors.2% growth in 2008 10.6 100 100 C ambodia’s economic freedom score is 56.7 million gdP (PPP): $28. Monetary stability has been in decline.5% (2007) Inflation (cPI): 19. The former Khmer Rouge leader’s Cambodian People’s Party won a renewed mandate in mid-2008.7% FdI Inflow: $815 million 2008 data unless otherwise noted Data compiled as of September 2009 See page 457 for an explanation of the methodology or visit the Index Web site at heritage. There is. and its overall score is slightly lower than the regional average. taking a large majority of the seats in the National Assembly.CAMBODiA Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 107 Regional Rank: 18 56. Cambodia’s economic growth has averaged about 10 percent over the past five years. and the business environment is not conducive to private-sector development. a lack of reform in other areas that are indispensable to sustaining high economic growth. Though nominally a democracy. and the trade regime is more open and transparent. Cambodia’s economy is heavily dependent on tourism and garment exports. Country’s Score Over Time Most free 80 80 60 60 World average 40 40 cambodia 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 14. There has been notable progress in the management of public finance. or starvation between 1975 and 1979. making its economy the 107th freest in the 2010 Index.

Efficiency has gradually improved as a result of some privatization and consolidation since 2000.0 30. Efforts to improve tax administration and budget management are ongoing. have identified corruption.0 18. The market determines most prices. or prior authorization from authorities. The privatization of state enterprises and transactions involving state property have not always been carried out in a transparent manner.4 percent of GDP. weak enforcement of intellectual property rights. In addition to the National Bank of Cambodia. Corruption hampers economic opportunity and competitiveness. Five points were deducted from Cambodia’s monetary freedom score to adjust for measures that distort domestic prices. gOVERnMEnt sPEnDing — 92.5 60. 136 2010 Index of Economic Freedom . Inconsistent judicial rulings and outright corruption are common. Pervasive corruption makes Cambodia highly vulnerable to penetration by drug traffickers and foreign crime syndicates. but the government influences lending decisions. finAnCiAL fREEDOM — 50 Cambodia’s financial system is segmented. Other taxes include an excise tax and a value-added tax (VAT). two representative offices of foreign banks. There are no restrictions or controls on the holding of foreign exchange accounts by residents or non-residents. The land titling system is not fully functional. and inconsistent and cumbersome customs administration add to the cost of trade. In a few sectors. The effectiveness of monetary policy is limited.6 Inflexible employment regulations impede job creation and productivity growth. averaging 15 percent between 2006 and 2008 and reaching 25 percent in 2008 as a result of rapid growth in the money supply and high global prices for food and fuel. 39. PROPERtY Rights — 30 Cambodia’s legal system does not protect private property effectively. Obtaining a business license requires more than the world average of 18 procedures and 218 days. but the government attempts to maintain stable retail prices for fuel through subsidies. In the most recent year. particularly within the judiciary.5 Inflation has been very high.9 70. discretionary tax levies. The non-salary cost of employing a worker is low.0 43. 17 licensed and 26 registered microfinance institutions.9 70.CAMBODiA’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. Business people. government spending equaled 15. Investment can be limited by regulatory inconsistencies. are low. non-transparent government procurement. nonautomatic import licensing.2 percent of GDP. but work hours are regulated rigidly. and arbitration. and subject to government influence. The government may expropriate property only in the public interest and with advance compensation. fisCAL fREEDOM — 91 Cambodia’s tax rates are relatively low.6 0 0 20 least free 40 50 60 80 = world average 100 100 most free BUsinEss fREEDOM — 39. Cambodia continues to improve its trade regime. which may be broadened in 2009. The top income and corporate tax rates are 20 percent. tRADE fREEDOM — 70 Cambodia’s weighted average tariff rate was 10 percent in 2007. MOnEtARY fREEDOM — 70. but import bans and restrictions. Non-residents may lease but not own land.9 Total government expenditures. as the single biggest deterrent to investment in Cambodia. with eight commercial banks majority owned by foreign investors. and a non-transparent court system. The banking sector is market-oriented. overall tax revenue was 10. local equity participation. Starting a business takes more than twice the world average of 35 days.0 92. including consumption and transfer payments. foreign investment is subject to conditions. LABOR fREEDOM — 43. and there are many gaps in company law. owing to the high degree of dollarization of the economy. and most property owners do not have documentation to prove their ownership. underdeveloped. bankruptcy procedures. from Corruption Labor Freedom inVEstMEnt fREEDOM — 60 Foreign capital and domestic capital are treated equally in most sectors. The foreign presence has been growing. and six insurance companies. corruption. Credit is allocated on market terms. and demands for petty bribes are common. fREEDOM fROM CORRUPtiOn — 18 Corruption is perceived as rampant. both local and foreign.0 91. The executive branch usually dominates the legislature and the judiciary.9 The overall freedom to establish and run a business is constrained significantly by Cambodia’s regulatory environment. In the most recent year.0 50. and credit to the private sector has increased to over 10 percent of GDP from 6 percent in 2001. Cambodia ranks 166th out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008. There are no bond or securities markets. the financial system consists of 16 commercial banks. which is solely a regulatory and supervisory agency. Ten points were deducted from Cambodia’s trade freedom score to account for nontariff barriers. seven specialized financial institutions.

6 point lower than last year. Despite progress in privatizing management of the national water company. Cameroon has struggled with reduced exports.3 100 100 C ameroon’s economic freedom score is 52.CAMEROOn Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 132 Regional Rank: 25 52. Cameroon is ranked 25th out of 46 countries in the SubSaharan Africa region. Restrictive regulations hurt employment and productivity growth.9 million gdP (PPP): $41. with international oil prices declining. Despite abundant natural resources. and poor infrastructure. the government has tried to improve transparency while further developing non-oil sources of revenue. Restrictions on trade are common. an unreliable legal system. economic growth is expected to decline.3.org/index. primarily as a result of worsened investment freedom and monetary freedom. In 2008. and the weak judicial system allows pervasive corruption and erodes the potential for long-term economic growth. making its economy the 132nd freest in the 2010 Index. and its overall score is slightly lower than the regional average. How Do We Measure Economic Freedom? 137 . The transparency of oil-related public finances is improved. Cameroon faces challenges common to developing African nations: inefficient bureaucracy. other important enterprises remain statecontrolled. over half of the population depends on agriculture. but economic mismanagement continues to inhibit development. Because of the recent global financial turmoil.9 billion 3. In response to a potential fiscal deficit.1% 5-year compound annual growth $2.9% growth in 2008 3. passed constitutional amendments granting the president immunity for acts committed while in office and enabling Biya to run for a third term in 2011. and the National Statistics Office estimates that the informal sector accounts for over 90 percent of employment and over 60 percent of economic output. Rising oil prices have added to GDP growth and government revenues. Progress on access to financial services has been sluggish. and investment projects have been delayed by difficulties in obtaining financing. Biya’s supporters in parliament. having won a strong majority in 2007. Background: President Paul Biya has held office since 1982.215 per capita unemployment: estimated to be over 10% Inflation (cPI): 5. Country’s Score Over Time Most free 80 80 60 60 World average 40 40 cameroon 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 18. Its overall score is 0. and political reforms have been largely ignored or overturned.3% 2008 data unless otherwise noted 2008 compiled as of September 2009 Data data unless otherwise noted Data compiled as of September 2009 FdI Inflow: $260 million See page 457 for an explanation of the methodology or visit the Index Web site at heritage.

Other taxes include a value-added tax (VAT). telecommunications. but the government provides subsidies and controls prices for such “strategic” goods and services as rice. Four companies account for about 60 percent of the insurance market. import and export taxes and fees. are subject to controls and generally require the approval of or declaration to the government. pharmaceuticals.6 percent of GDP. The top income tax rate is 35 percent. electricity. In the most recent year. foreign direct investment. arbitrary arrests. Fifteen points were deducted from Cameroon’s trade freedom score to account for non-tariff barriers. Many capital transactions. The stock exchange remains small.7 percent in 2007.8 percent. enhancing supervision of microfinance.2 0 0 20 least free 40 50 60 80 = world average 100 100 most free BUsinEss fREEDOM — 37. Courts and administrative agencies often favor domestic firms and have been accused of corruption. The government generally holds at least 30 percent–45 percent shares of “privatized” companies. Cameroon is ranked 96th out of 115 countries in the 2009 International Property Rights Index. fREEDOM fROM CORRUPtiOn — 23 Corruption is perceived as pervasive. from Corruption Labor Freedom inVEstMEnt fREEDOM — 35 The government permits 100 percent foreign equity ownership. lease payments. The regional Banque des Etats de l’Afrique Centrale (BEAC) prioritizes the control of inflation and maintenance of the CFA franc’s peg to the euro.7 Cameroon’s weighted average tariff rate was 12. 37. and an inheritance tax.7 71. are low. Surcharges and inconsistent customs valuation. interest and principal on foreign debt. though labor legislation mandates retraining or replacement before firing a worker. tRADE fREEDOM — 59. gOVERnMEnt sPEnDing — 92. All investments face government screening.9 35.0 23.0 52. Bankruptcy procedures remain onerous and costly. consumer goods. import and export restrictions. royalties and management fees. government spending equaled 15. and there continue to be reports of beatings of detainees. The largest insurer is foreign-owned. and expanding access to banking services.7 71. cumbersome bureaucracy. and software piracy is widespread. The non-salary cost of employing a worker is moderate. and decision-making delays burden investment. liquidation. is weak. and illegal searches. including consumption and transfer payments. The market determines most prices. agriculture inputs.0 50. Obtaining a business license requires 15 procedures.7 Total government expenditures. Fifteen points were deducted from Cameroon’s monetary freedom score to adjust for measures that distort domestic prices. capital returns. and returns on liquidation can be freely remitted abroad. Residents may open foreign exchange accounts with central bank and Ministry of Finance approval. Corruption. Cameroon ranks 141st out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008. averaging 4. In the most recent year. and dismissing a redundant employee is relatively easy. Liquidation of foreign direct investment must be declared at the Ministry of Finance and the central bank. Some foreign companies allege that unfavorable judgments are obtained through fraud or frivolous lawsuits. and the top corporate tax rate is 38. cooking gas. fisCAL fREEDOM — 71. corruption.5 percent (35 percent plus a 10 percent council tax). overall tax revenue as a percentage of GDP was 10. The government has continued its efforts to shore up financial intermediation by setting up a regional market in government bonds. import registration and licensing.3 percent between 2006 and 2008. water. Local ownership of land is not required.9 Inflation has been moderate. including foreign borrowing. a property tax. Dividends. compared to the global average of 18. 138 2010 Index of Economic Freedom .2 The overall freedom to establish and run a business is seriously limited by Cameroon’s regulatory environment. There is a wide network of microfinance institutions. Three banks control two-thirds of all assets.2 59. Courts and government agencies have been accused of corrupt practices. but Cameroonian ownership is increasing. and access to credit is very limited in rural areas. and cotton. LABOR fREEDOM — 52.0 30.8 Cameroon has relatively high tax rates. The cost of financing is high. domestic preference in government procurement. flour. a transfer tax on businesses sold. Budget management. and foreign securities. especially in the non-oil sector.CAMEROOn’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. PROPERtY Rights — 30 Corruption and legal uncertainty can lead to confiscation of private property. and inadequate enforcement of intellectual property rights add to the cost of trade. petroleum products. MOnEtARY fREEDOM — 71. finAnCiAL fREEDOM — 50 Cameroon’s financial system is not fully developed. Trademarks and copyrights are routinely violated. Delay and corruption are encountered in resolving commercial disputes.8 92.2 Relatively inflexible employment regulations hinder job creation and productivity growth. but takes much longer than the world average of 218 days.

and fishing among all Organisation for Economic Co-operation and Development countries.3 million gdP (PPP): $1. Elaborate social and welfare state programs swell overall government expenditures. Canada is ranked 1st out of three countries in the North America region. In May and June 2008. However. Government spending has also increased slightly due to implementation of a significant stimulus package. making its economy the 7th freest in the 2010 Index.444 per capita unemployment: 6.1% Inflation (cPI): 2. regulation is thorough but essentially transparent. and freedom from corruption. Canada performs particularly well in business freedom.CAnADA Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 7 Regional Rank: 1 80. publishing. A high level of economic freedom. Scoring high in many of the 10 economic freedoms. Canada strengthened its commitment to become a more active economic partner in the Americas by concluding free trade negotiations with Colombia and signing a similar agreement with Peru. manufactured goods.7 billion 2008 data unless otherwise noted Data compiled as of September 2009 See page 457 for an explanation of the methodology or visit the Index Web site at heritage. Background: Canada has a strong and stable democratic political system that has proven itself capable of handling occasional ethnic tensions. has enabled Canada to emerge from the global downturn relatively unscathed. Overall. good fiscal management and federal budget surpluses have enabled the economy to undertake stimulus measures without undermining fiscal soundness and long-term economic competitiveness. financial freedom.4% FdI Inflow: $44.2 trillion 0. minerals. aviation. Country’s Score Over Time Most free 80 80 60 60 World average 40 40 canada 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 33. Its overall score is almost unchanged from last year. Over 75 percent of its exports are to the United States. A strong rule of law ensures property rights and equitable application of the commercial code. macroeconomic fundamentals remain strong.4 100 100 C anada’s economic freedom score is 80. and forest products. property rights.4. automobiles. How Do We Measure Economic Freedom? 139 . Straightforward regulations facilitate entrepreneurial activity.4% growth in 2008 2. broadcasting. Canada’s economic freedom trails the world average only in government spending. coupled with a sound and prudent banking sector.3% 5-year compound annual growth $36.org/index. mining. Despite one of the most restrictive foreign ownership policies in telecommunications. It is also one of the world’s leading free-market economies and a major exporter of oil.

In the most recent year. Starting a business takes an average of five days. or access to foreign exchange. A federal agency must approve all direct foreign investment. but the regulatory system is fragmented. Canada has signed the U. and Nova Scotia all limit real estate sales to out-of-province parties.1 percent of GDP. PROPERtY Rights — 90 Private property is well protected.3 percent.5 0 0 20 least free 40 tory “single-payer” nationalized program. gOVERnMEnt sPEnDing — 54.5 88. repatriation of profits. inVEstMEnt fREEDOM — 75 Canada treats foreign and domestic capital equally in almost all situations. and large banks may not buy large insurance companies.1 Total government expenditures.0 80. Banking has weathered the recent financial crisis with no need for an injection of state funds. MOnEtARY fREEDOM — 75.N.0 81. The non-salary cost of employing a worker is moderate. fishing. Canada remains one of the few OECD countries to require such approval (which is usually granted). Other taxes include a value-added tax (VAT) and a property tax.4 75. and dismissing a redundant employee is relatively inexpensive. fisCAL fREEDOM — 76.5 percent.7 54. With the lowest debt-to-GDP ratio in the G-7.0 87. export-support programs for industry and agriculture producers. and the government encourages competition even in sectors formerly operated by government or privately owned monopolies. Canada ranks 9th out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008. import taxes. telecommunications. The government controls virtually all prices for health care services through its manda- LABOR fREEDOM — 81. Prince Edward Island.4 Inflation has been low. around 8 percent. Restricted sectors include media. from Corruption Labor Freedom 96.5 Flexible labor regulations enhance employment and productivity growth. There are no restrictions on current transfers. restrictions on imports of domestic “supply managed” agricultural products. and aviation. The general corporate tax rate is 19. restricted access to certain service industries. The “big six” domestic banks account for around 90 percent of total assets. which it signed in 1997. finAnCiAL fREEDOM — 80 Canada’s financial system provides many options for businesses and competitive services for investors. controls prices for some agricultural products. Canada was well positioned to finance a significant stimulus plan in the wake of the global downturn. mining. Enforcement against counterfeiting and piracy is reportedly cumbersome and ineffective. 140 2010 Index of Economic Freedom . The market determines most prices. foreign banks. but the government regulates the prices of some utilities. Mergers between large banks are restricted. In the most recent year. and judges and civil servants are generally honest. Obtaining a business license requires less than the world average of 18 procedures and 218 days. and their regulatory burden has been reduced.7 Canada has moderate tax rates. overall tax revenue as a percentage of GDP was 33.1 76. government spending equaled 39.CAnADA’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. and provincial rates range from 10 percent to 24 percent. Convention Against Corruption.1 75. and state trading boards for some agriculture products add to the cost of trade. The judiciary is independent. Foreign investors have full access to the legal system. Securities markets are well developed. Ten points were deducted from Canada’s trade freedom score to account for non-tariff barriers.0 90. tRADE fREEDOM — 88. 50 60 80 = world average 100 100 most free BUsinEss fREEDOM — 96. compared to the world average of 35 days. Fifteen points were deducted from Canada’s monetary freedom score to account for measures that distort domestic prices.5 The overall freedom to establish and run a business is strongly protected under Canada’s regulatory environment. Canada has yet to ratify the World Intellectual Property Organization’s Internet Treaties. Revisions of the Bank Act in 2007 focused on streamlining regulation and enhancing consumer protection. and influences prices through state-owned enterprises. including consumption and transfer payments. The Montreal and Toronto exchanges merged in May 2008 while maintaining areas of specialization. The largest insurance companies conduct more than half of their business overseas. Bribery and other forms of corruption are rare. Rules on work hours are flexible. are relatively high. The top federal income tax rate is 29 percent. Credit is allocated on market terms.1 Canada’s weighted average tariff rate was 1 percent in 2008. subsidizes industry and agriculture producers. Federal and provincial non-tariff barriers. fREEDOM fROM CORRUPtiOn — 87 Corruption is perceived as minimal.3 percent between 2006 and 2008. It has become easier for foreign banks to enter the market. averaging 2. Saskatchewan. Privatization is widespread. cumbersome standards and import licensing. and private property rights are limited only by the rights of governments to establish monopolies and expropriate for public purposes.

and its overall score is much higher than the regional average.5 point higher than last year. How Do We Measure Economic Freedom? 141 . Background: Cape Verde. and a rigid labor market impede private investment and entrepreneurship and risk undermining long-term competitiveness. and its currency is pegged to the euro. A number of challenges remain in the ongoing transition to greater economic freedom. the entrepreneurial environment has gradually improved and become more streamlined. The country has few natural resources and is subject to frequent droughts and serious water shortages.8 100 100 C ape Verde’s economic freedom score is 61. making its economy the 78th freest in the 2010 Index. The World Bank notes that remittances from the many Cape Verdeans who live abroad declined in 2007 and 2008. agriculture. Its overall score is 0.7% 5-year compound annual growth $3. Cape Verde has close economic and political ties to the European Union. under which Cape Verde and the EU cooperate to improve governance. inefficient stateowned enterprises. Country’s Score Over Time Most free 80 80 60 60 World average 40 40 cape Verde 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 0. Cape Verde scores relatively well in monetary freedom. Cape Verde is ranked 7th out of 46 countries in the Sub-Saharan Africa region.7 billion 6. Political power has changed hands peacefully since 1991.org/index.5 million gdP (PPP): $1. The EU has granted Cape Verde special partnership status. As a result of strong investments in infrastructure and ongoing trade liberalization. and antipoverty efforts. and fishing employ a majority of the workforce. mainly as a result of enhanced business freedom. Cape Verde joined the World Trade Organization in 2007. Property rights are strongly protected by the rule of law in comparison to other countries in the region. security and stability.0% growth in 2008 7. High tax rates.8. but light industry.CAPE VERDE Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 78 Regional Rank: 7 61.8% 2008 data unless otherwise noted 2008 compiled as of September 2009 Data data unless otherwise noted Data compiled as of September 2009 FdI Inflow: $209 million See page 457 for an explanation of the methodology or visit the Index Web site at heritage. regional integration. and especially property rights. Monetary stability is well maintained. is a multi-party parliamentary democracy. a West African archipelago. investment freedom. The economy is dominated by services. Cape Verde has achieved an annual growth rate of close to 8 percent over the past five years.504 per capita unemployment: estimated to be over 15% Inflation (cPI): 6.

behind Botswana and South Africa. fREEDOM fROM CORRUPtiOn — 51 Corruption is perceived as significant. Legislation implemented in 2002 gave more independence to the central bank.3 Total government expenditures. and the financial sector has been strengthened by improved regulations and monetary policy autonomy.0 48. subject to some restrictions. The government remains active in financial institutions that handle public investment and international aid. and two dominant commercial banks account for around 90 percent of assets and deposits. promoting its financial intermediary role. and import restrictions. and inefficient.5 Inflation has been moderately high.3 65. LABOR fREEDOM — 48. non-transparent sanitary and phytosanitary regulations. Residents and non-residents may hold foreign exchange accounts. In the most recent year. Credit is allocated on market terms and is available to foreign and domestic investors without discrimination. weak enforcement of intellectual property rights. MOnEtARY fREEDOM — 74.1 Employment regulations are relatively rigid. tax revenue as a percentage of GDP was 22. inefficient regulatory and customs processes. The market determines most prices. The non-performing loan ratio has improved significantly. fisCAL fREEDOM — 65. including those for petroleum products and basic food items. and export incentives still add to the cost of trade. The constitutional provision for an independent judiciary is generally respected by the government. import fees.5 65.1 0 0 20 least free 40 50 60 80 = world average 100 100 most free BUsinEss fREEDOM — 63.6 Cape Verde has a high income tax rate and a moderate corporate tax rate. Credit to the private sector has climbed to around 50 percent of GDP. Starting a business takes less than the world average of 35 days.0 65. 63. The sector is highly concentrated. but the government controls the prices of water and electricity and regulates some others. gOVERnMEnt sPEnDing — 65. PROPERtY Rights — 65 Private property is fairly well protected. Cape Verde ranks 47th out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008. Several recently signed treaties provide protection for intellectual property. Reform has progressed slowly. and nationalized companies are poorly run. Other taxes include a value-added tax (VAT) and a special consumption tax. The top income tax rate is 45 percent.2 percent in 2008. but the judicial system is overburdened. government spending equaled 34 percent of GDP. understaffed. The nonsalary cost of employing a worker is moderate. The government now plans to re-structure rather than completely divest the national airline and electric companies. Ten points were deducted from Cape Verde’s monetary freedom score to adjust for measures that distort domestic prices. but the cost of dismissing a worker is relatively high.8 percent. Ten points were deducted from Cape Verde’s trade freedom score to account for non-tariff barriers. Cumbersome and time-consuming bureaucracy and inadequate institutional capacity and infrastructure undermine investment. The economy is about 40 percent informal. The case backlog leads to delays of six months or more. from Corruption Labor Freedom inVEstMEnt fREEDOM — 60 Foreign investment is officially encouraged and receives equal treatment. albeit from a low base. Most sectors are open. state trade in certain products. The effect of a 2008 labor reform aimed at increasing flexibility and competitiveness has been mixed. and the top corporate tax rate is 30 percent. In the most recent year. State ownership is high. including consumption and transfer payments. are moderate. The government has adopted laws and regulations to make customs corruption criminally punishable. finAnCiAL fREEDOM — 60 Cape Verde’s financial sector has been growing. The stamp duty on sales and checks was abolished in 2009. services market access restrictions. 142 2010 Index of Economic Freedom .3 The efficiency of Cape Verde’s business environment has been improved. but all foreign investment requires prior authorization.0 percent between 2006 and 2008.5 Cape Verde’s weighted average tariff rate was 12.0 51. Obtaining a business license requires less than the world average of 218 days. New financial instruments including tax-free government bonds have been introduced. The government has simplified and expedited registration.CAPE VERDE’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. Most capital transactions are permitted but are also subject to advance approval by the central bank or other controls. opening most privatization to foreign investors. and the stock market has been reinvigorated with increasing market capitalization equivalent to around 25 percent of GDP. Its political and economic governance is generally regarded as Africa’s third best. tRADE fREEDOM — 65.6 65. but bankruptcy procedures are not fully developed. averaging 6.5 60.3 74.0 60. The legal and institutional framework for the Cape Verde Stock Exchange has been strengthened.

N. The CAR is ranked 32nd out of 46 countries in the Sub-Saharan Africa region. Other rebel groups remain active.4. The protection of property rights remains weak. How Do We Measure Economic Freedom? 143 . A December 2008 agreement between Bozizé. Infrastructure is poor. Regulation is burdensome.4 t he Central African Republic’s economic freedom score is 48.3% 2008 data unless otherwise noted FdI Inflow: $121 million Data compiled as of September 2009 2008 data unless otherwise noted Data compiled as of September 2009 See page 457 for an explanation of the methodology or visit the Index Web site at heritage. Rigid labor regulations and an underdeveloped labor market impose additional costs on establishing and expanding businesses. Monetary stability has been affected by inflationary pressures. and presidential elections are scheduled for 2010. mission in the CAR and Chad. opposition leaders. Most of its people are subsistence farmers. and corruption is rampant. institutions are weak.1 point higher than last year. largely because of a decrease in the country’s principal exports. the CAR is one of the world’s least-developed countries. In March 2009. an enhanced debt management plan. Medium-term structural reforms include a government financial management information system. World average central african republic 1995 1995 1998 1998 2001 2001 Least free 2004 2004 2007 2007 2010 2010 Quick Facts Population: 4. The recent financial and economic crisis has led to reduced growth prospects. Access to financing is limited. primarily because of improving trade freedom. The overall efficiency and quality of government remain poor. gold.CEntRAL AfRiCAn REPUBLiC 25 75 Economic Freedom Score Least free Least free 50 50 0 25 0 75 100 Most free 100 free Most World Rank: 152 Regional Rank: 32 100 100 100 80 80 80 60 60 60 40 40 40 20 20 20 0 00 Country’s Score Over Time Country’s Score Over Time Most free 48. and uranium. and its overall score is lower than the regional average. Despite abundant timber. Its overall score is 0. and agriculture and forestry account for over half of GDP. and business operations remain constrained by government interference and bureaucratic delays.org/index. and corruption is prevalent.3 billion 2. General François Bozizé overthrew the civilian government in 2003 and won the 2005 election. and systematic tax audits. Background: The Central African Republic (CAR) has a history of political instability. and government interference with market prices is extensive. diamonds. an EU peacekeeping force was replaced by the U. Fighting between rebels and government troops in the North has displaced tens of thousands of people. making its economy the 152nd freest in the 2010 Index. and some rebel groups established a consensus government.0% 5-year compound annual growth $736 per capita unemployment: n/a Inflation (cPI): 9.8% growth in 2008 3.4 million gdP (PPP): $3.

CEntRAL AfRiCAn REP.7 Rigid labor regulations hinder employment and productivity growth. The excise tax on fuel was increased in 2008.3 percent. LABOR fREEDOM — 50. The government influences most prices through the public sector.0 50. 50 60 80 = world average 100 100 most free finAnCiAL fREEDOM — 30 The CAR’s financial sector is underdeveloped. and the judiciary is subject to executive interference. The top income tax rate is 50 percent. Fifteen points were deducted from the CAR’s monetary freedom score to account for measures that distort domestic prices. and payments to countries other than certain regional nations.1 68.3 Inflation has jumped.5 94. overall tax revenue as a percentage of GDP was 7. The banking sector is used to finance government expenditures. non-transparent and corrupt bureaucracy. and a large part of the population works informally. the courts are barely functioning. Fifteen points were deducted from the CAR’s trade freedom score to account for non-tariff barriers.7 0 0 20 least free 40 several sectors are closed to private investment. government spending equaled 14. Limits on imports of sugar and coffee. inVEstMEnt fREEDOM — 40 Foreign and domestic investors are treated equally. but the Banque Populaire Maroco-Centrafricaine is still partly governmentowned. cotton.5 percent in 2007.0 20. Informal market activity and smuggling. Because of inefficient administration.1 The Central African Republic’s weighted average tariff rate was 13. The non-salary cost of employing a worker is moderate. and close a business is impeded by the Central African Republic’s regulatory environment. and access to financing for businesses remains limited. A weak security environment.0 percent of GDP. subsidies.5 The Central African Republic has a high income tax rate and a moderate corporate tax rate. tRADE fREEDOM — 58. In addition to a branch of the regional central bank. The Central African Republic ranks 151st out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008. All capital transactions. Judges are appointed by the president. Misappropriation of public funds and corruption are widespread. Regulations on the number of work hours are rigid. inadequate infrastructure.3 40. and inadequate infrastructure are significant deterrents.5 58. weak regulatory and customs administration. growing salary arrears. PROPERtY Rights — 20 Protection of property rights is weak. Starting a business takes less than the world average of 35 days. The two largest commercial banks. although inflationary pressures are expected to decrease in 2009–2010 because of falling international energy and food prices and rising production of food crops. In the most recent year. In the most recent year. France. fisCAL fREEDOM — 65. Since the state borrows at the maximum possible interest rate. commercial banks have little incentive to lend to the private sector. are extensive.’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. averaging 7. operate. from Corruption Labor Freedom 37. and dismissing a redundant employee is relatively difficult. Other taxes include a value-added tax (VAT). Less than 1 percent of the population has access to banking services.5 The overall freedom to start. are low. gOVERnMEnt sPEnDing — 94. and Monaco are subject to government approval and reporting requirements. and the accumulation of state debt and lack of promised credits have undermined the system. Residents may hold foreign exchange accounts. Sale or issue of capital market securities and commercial credits likewise require government approval.1 65. and a lack of material resources. especially in diamonds. allowing the president to rule by decree. The constitution has been suspended. inappropriate customs valuation for certain imports. transfers. and government officials engage in corrupt practices with impunity. The regional Central African Economic and Monetary Community countries share a common central bank and a common currency pegged to the euro. including consumption and transfer payments.0 20. Fiscal management needs improvement. a shortage of trained personnel.1 Total government expenditures. BUsinEss fREEDOM — 37. coffee. and price controls on 17 food staples. and customs fraud and inefficiency add to the cost of trade. Banque Internationale pour le Centrafrique and Commercial Bank Centrafrique. The formal sector has contracted significantly because of regulation and corruption.0 percent between 2006 and 2008. water.0 30. and two postal financial institutions. have been privatized. fREEDOM fROM CORRUPtiOn — 20 Corruption is perceived as pervasive. electricity. and energy remains under state control. import and export taxes. two microfinance institutions. Regulation and supervision are inadequate. there are three commercial banks. but obtaining a business license requires slightly more than the world average of 18 procedures and 218 days. and the top corporate tax rate is 30 percent. but 144 2010 Index of Economic Freedom . MOnEtARY fREEDOM — 68. and petroleum. The police and the judiciary are among the country’s most corrupt institutions.

labor market flexibility.ChAD Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 159 Regional Rank: 37 47.4% growth in 2008 1.org/index. Taxes are burdensome. Only the informal economy offers a large number of jobs to relatively unskilled labor. Chad is thinly populated.N.3% Inflation (cPI): 8. Its overall score is virtually unchanged from last year. and taxation. Investments in the oil sector since 2001 and receipts of oil revenues since 2003 have encouraged economic growth.3% FdI Inflow: $834 million 2008 data unless otherwise noted Data compiled as of September 2009 See page 457 for an explanation of the methodology or visit the Index Web site at heritage. Chad scores very poorly on such institutional factors as the business and investment climate. herding. but the government still intervenes in the prices of certain goods.1 billion –0. making its economy the 159th freest in the 2010 Index. In March 2009. and impoverished. Improving fiscal governance and the efficiency of government services is critical to stabilizing an economy that is strained by security expenditures and overly reliant on oil revenues. unstable. landlocked. and both licensing and closing a business remain time-consuming and costly. and each country has accused the other of supporting rebels in its territory.1 million gdP (PPP): $16. Country’s Score Over Time Most free 80 80 60 60 World average 40 40 chad 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 11. mission in the Central African Republic and Chad. Background: President Idriss Deby seized power in 1990 and in 2006 won a third term in an election that was boycotted by the main opposition parties. How Do We Measure Economic Freedom? 145 .5 100 100 C had’s economic freedom score is 47. and its overall score is lower than the regional average. Chad is ranked 37th out of 46 countries in the Sub-Saharan Africa region. Conflict with rebels in eastern Chad and unrest in Sudan’s Darfur region have resulted in hundreds of thousands of Chadian and Sudanese refugees.5. Development of a more dynamic climate for investment and entrepreneurship has stalled. an EU peacekeeping force was replaced by the U.9% 5-year compound annual growth $1. The weak rule of law and rampant corruption seriously impede economic development. starting a business takes over two months. and fishing. Inflation has been contained. and over 70 percent of its people depend on subsistence agriculture. and oil now accounts for about half of GDP.455 per capita unemployment: 8.

Chad is ranked 109th out of 115 countries in the 2009 International Property Rights Index. Investment is inhibited by inadequate infrastructure and technical expertise.0 46. and an apprenticeship tax. The top income tax rate is 60 percent. water.9 0 0 20 least free 40 50 60 80 = world average 100 100 most free BUsinEss fREEDOM — 32. Small and medium enterprises rely mainly on self-financing or mutual aid systems. including consumption and transfer payments. Chad and the five other countries in the Central African Economic and Monetary Community share a common central bank and a common currency pegged to the euro. overall tax revenue as a percentage of GDP was 4. The small insurance sector is dominated by the formerly state-owned Star Nationale.7 45. The government actively obstructs the work of domestic human rights organizations through arrest. Most prices are determined in the market. However. Bureaucracy is burdensome and non-transparent and can be arbitrary. In the most recent year. Fifteen points were deducted from Chad’s trade freedom score to account for non-tariff barriers.5 Chad has very high tax rates.4 Chad’s weighted average tariff rate was 13. weak dispute mechanisms.3 percent in 2007. tRADE fREEDOM — 58.0 16. weak enforcement of intellectual property rights. MOnEtARY fREEDOM — 76. corruption exists at all levels of government. There are no capital or money markets. subject to certain bureaucratic requirements and restrictions in some sectors. The non-salary cost of employing a worker is high. and there are now five commercial banks. Chad ranks 173rd out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008.5 89. non-transparent government procurement. Privatization has slowed. are low. It is widely felt that the courts should be avoided at all costs. averaging 4 percent between 2006 and 2008. The non-oil deficit has climbed to nearly 25 percent of GDP. Starting a business takes almost twice the world average of 35 days. operate.2 percent. 146 2010 Index of Economic Freedom . and the cost of establishing a business remains quite high. a non-transparent customs code. import fees. finAnCiAL fREEDOM — 40 The financial system is small and suffers from weak market infrastructure and legal and judicial frameworks. and most disputes are settled privately. Difficult access to credit and its high cost hinder private-sector development.0 20. LABOR fREEDOM — 46.9 Burdensome employment regulations hinder job creation and productivity growth. but most key judicial officials are named by the president and assumed to be subject to political influence. The constitution guarantees judicial independence. inappropriate customs valuation for some products.4 50. government spending equaled 19. and intimidation of their members. Although Chad has a “Ministry of Morality” that is responsible for fighting corruption and conducts anti-corruption seminars for government employees. and dismissing a redundant employee is relatively costly. It may be most pervasive in the customs and tax enforcement services.7 Inflation has been moderate. and energy. a property tax. and inefficient customs administration add to the cost of trade. Chad’s economy is highly vulnerable to changes in the price of oil. but it is notable in the judiciary and the government procurement office as well. and the top corporate tax rate is 40 percent. gOVERnMEnt sPEnDing — 89. PROPERtY Rights — 20 Protection of private property is weak. Residents and non-residents may hold foreign exchange accounts with government approval. Ten points were deducted from Chad’s monetary freedom score to adjust for measures that distort domestic prices. and corruption. In the most recent year. telecommunications. 32. fREEDOM fROM CORRUPtiOn — 16 Corruption is perceived as rampant. and electricity.ChAD’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. but the government influences prices through state-owned enterprises and regulation of such key goods and services as cotton. informal financial services are common. payments. road transportation. and transfers to certain countries are subject to some controls and restrictions. The Banque des Etats de l’Afrique Centrale maintains the CFA franc’s peg to the euro. Other taxes include a value-added tax (VAT). underdeveloped markets. and the state retains control of cotton. Capital transactions. and close a business is seriously limited under Chad’s regulatory environment. water.7 The overall freedom to start. Legal clerks often obstruct procedures in order to elicit bribes.0 40. fisCAL fREEDOM — 50. detention. Import and export restrictions.0 percent of GDP. burdensome taxes.2 76. subsidies.7 58. corruption. Significant banking privatization has been completed. from Corruption Labor Freedom inVEstMEnt fREEDOM — 45 Chad allows foreign ownership and provides equal treatment to foreign investors.2 Total government expenditures. and supervision and regulation are insufficient.

7% FdI Inflow: $16. Chile has pursued free trade agreements with countries around the world.5% 5-year compound annual growth $14. Its overall score is 1. How Do We Measure Economic Freedom? 147 . Background: Since 1990. bankruptcy procedures remain cumbersome and costly. Although overall regulatory licensing is easy. Openness to global trade and investment and a dynamic private sector have facilitated steady economic growth. fruit. although her rhetoric emphasizes income equality over freedom. and labor freedom. Socialist President Michele Bachelet’s coalition government has done so as well. The financial sector is diversified and stable compared to other regional economies.8% Inflation (cPI): 8. Other institutional strengths include transparent and stable public finance management and strong protection of property rights. Income taxes on individuals remain burdensome. and prudent lending and regulations have allowed the banking sector to withstand the global financial crisis with little disruption. Chile belongs to the Asia–Pacific Economic Cooperation forum and has signed or is negotiating trade agreements with China and other Pacific Rim countries to supplement its agreement with the U.8 million gdP (PPP): $242. reflecting small declines in six of the 10 economic freedoms.ChiLE Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 10 Regional Rank: 1 77. seafood. though left-of-center.1 points lower than last year. Chile trails behind other comparable economies in business freedom. An Economic and Social Stabilization Fund manages taxes on copper revenues to maintain social spending during downturns. making its economy the 10th freest in the 2010 Index. wood. although protection of intellectual property rights still needs to be strengthened. fiscal freedom.4 billion 3.org/index.2% growth in 2008 4. successive governments. have largely maintained the market-based institutions and policies established under the 17-year rule of General Augusto Pinochet.2 100 100 C hile’s economic freedom score is 77. Chile is the world’s leading producer of copper. and wine drive GDP growth. It also is on track to become the first South American country to join the Organisation for Economic Co-operation and Development. Chile enjoys the highest degree of economic freedom in the South and Central America/ Caribbean region.2. Country’s Score Over Time Most free 80 80 60 60 World average 40 40 chile 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 16.465 per capita unemployment: 7.S. and exports of minerals.8 billion 2008 data unless otherwise noted Data compiled as of September 2009 See page 457 for an explanation of the methodology or visit the Index Web site at heritage.

and courts are transparent and efficient. finAnCiAL fREEDOM — 70 Chile’s financial system is among the region’s and the world’s most stable and developed. Chile’s liberal capital market is the region’s largest. but dismissing a redundant employee is relatively costly. The government can expropriate property for public or national interests.0 75.0 70.8 The overall freedom to establish and run a business is relatively well protected under Chile’s regulatory environment. Bankruptcy procedures can be burdensome and lengthy. from Corruption Labor Freedom 64. import taxes. overall tax revenue as a percentage of GDP was 18. Chile has ratified the Organization of American States Convention Against Corruption and the OECD Convention on Combating Bribery. fisCAL fREEDOM — 77. In the most recent year.2 percent between 2006 and 2008.0 85. fREEDOM fROM CORRUPtiOn — 69 Corruption is perceived as minimal. The banking system has withstood the global financial turmoil well because of prudential lending and sound regulations. inVEstMEnt fREEDOM — 80 Foreign and domestic investments generally receive equal treatment. Twelve foreign banks and 13 domestic banks compete on an equal footing. and sugar. and owners receive compensation. government spending equaled 18. flour. but approval requirements and stringent sanitary and phytosanitary regulations on imports of agricultural products and processed food. Principal concerns involve protection of pharmaceutical patents and test data and copyright piracy of movies. Reforms that include capitalization requirements and shareholder obligations have increased competition and widened the range of operations. but the government controls prices for utilities.0 80. Contractual agreements are the most secure in Latin America. Intellectual property rights laws and regulations are substantively deficient.4 0 0 20 least free 40 50 60 80 = world average 100 100 most free involving foreign direct investment. and issues related to the protection of intellectual property rights add to the cost of trade. BUsinEss fREEDOM — 64. Residents and non-residents may hold foreign exchange accounts.0 69.6 percent of GDP.ChiLE’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. on a non-discriminatory basis and in accordance with the due process of law. The labor market has become more rigid as regulations and minimum wage increases have exceeded overall productivity growth. Domestic and foreign banking and insurance companies receive equal treatment. import bans.8 88. The top income tax rate is 40 percent. but its corporate tax rate is well below average. Ten points were deducted from Chile’s trade freedom score to account for non-tariff barriers. and price bands for certain agricultural products remain in effect.5 89. In 2008. Nevertheless. Ten points were deducted from Chile’s monetary freedom score to adjust for measures that distort domestic prices. music. Chile is phasing out price bands for wheat. Expropriation is rare.6 Total government expenditures. Credit is issued on market terms.6 73. MOnEtARY fREEDOM — 73 Inflation has been high.9 percent. LABOR fREEDOM — 75. Legislation to enhance access to financing for individuals and firms was passed in April 2009. Many prices are determined in the market. tRADE fREEDOM — 88 Chile’s weighted average tariff rate was 1 percent in 2008. and IPR enforcement is inadequate. and the top standard corporate tax rate is 17 percent. Obtaining a business license takes the world average of 18 procedures and less than the world average of 218 days.5 Chile’s income tax rate is well above average. gOVERnMEnt sPEnDing — 89. Starting a business takes an average of 27 days. The four largest banks control about 65 percent of total assets. and there are no restrictions on repatriation. are low. In the most recent year.4 The non-salary cost of employing a worker is low. the ruling coalition is increasingly accused of corruption. Other taxes include a value-added tax (VAT) and a property tax. compared to the world average of 35 days. averaging 7. PROPERtY Rights — 85 Private property is well protected.0 77. export subsidies for some sectors. Judicial corruption is rare. Regulation tends to be transparent and efficient. and software. There are few controls on current transfers and capital transactions. the government created the National Industrial Property Institute to streamline IPR procedures. The state-owned Banco Estado is Chile’s third largest bank and accounts for about 15 percent of assets. The Ministry of Economy reviews foreign investment and sets the terms and conditions for contracts 148 2010 Index of Economic Freedom . Foreigners may invest in fishing companies and media only if their countries have reciprocity arrangements with Chile. including consumption and transfer payments. Chile ranks 23rd out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008. and local public administration is generally considered honest. Contracts are secure.

and the judicial system is highly vulnerable to political influence. World average china 1995 1995 1998 1998 2001 2001 Least free 2004 2004 2007 2007 2010 2010 Quick Facts Population: 1.9% See page 457 for an explanation of the methodology or visit the Index Web site at heritage. China remains a one-party state in which the Communist Party maintains tight control of political expression. The government is struggling to manage environmental degradation. but overall progress has been modest. How Do We Measure Economic Freedom? 149 .2% (urban area) Substantial unemployment and underemployment in rural areas FdI Inflow: $108.2 points lower than last year. Its overall score is 2. with significant declines recorded in investment freedom and labor freedom. At the same time. as are many individual dissidents. and assembly.3 billion 2008 data unless otherwise noted Data compiled as of September 2009 2008 data unless otherwise noted Inflation (cPI): of September 2009 Data compiled as 5.0% 5-year compound annual growth $5. and its overall score is lower than the global and regional averages. Rapid development of coastal cities has resulted in increasing disparities in economic freedom and standards of living across the country. and the world’s largest-ever migration from rural to urban areas. demographic pressure.org/index. making its economy the 140th freest in the 2010 Index. Background: China has liberalized parts of its economy to a notable degree since the early 1980s. The state still directs most economic activity.PEOPLE’S REPUBLIC OF Least free Least free ChinA 50 50 75 100 free 100 free Most Most 25 75 Economic Freedom Score 0 25 0 World Rank: 140 Regional Rank: 31 100 100 100 80 80 80 60 60 60 40 40 40 20 20 20 0 00 51.3 billion gdP (PPP): $7.9 trillion 9. and its industrial and manufacturing sector is now second in size only to that of the United States. Any social group that can organize on a large scale is deemed a threat. speech. and the Communist Party. The world’s most populous economy has benefited from global trade and investment and periodic bursts of reform for three decades. Foreign investment is controlled and regulated. Efforts to embrace market principles have been made from time to time.962 per capita unemployment: 4. while allowing some response to market forces. The state maintains tight control of the financial sector and directly or indirectly owns all banks. religion. China is ranked 31st out of 41 countries in the Asia–Pacific region.0 Country’s Score Over Time Country’s Score Over Time Most free C hina’s economic freedom score is 51. however. all of which contribute to social unrest.0% growth in 2008 11. China’s transition to greater economic freedom has been sluggish over the life of the Index. still maintains ultimate authority over economic decisions. It joined the World Trade Organization in 2001.

complex regulations and standards. but capital account transactions are tightly regulated. 150 2010 Index of Economic Freedom . Subsidies allow LABOR fREEDOM — 53. gOVERnMEnt sPEnDing — 88. electricity.7 72. and the big four state banks lend primarily to state-owned enterprises. The China Banking Regulatory Commission supervised roughly 5. All land is state-owned. The government encourages new-technology businesses with a reduced corporate rate of 15 percent. as well as such specific restrictions as caps on foreign ownership and permissible types of investment. Fifteen points were deducted from China’s monetary freedom score to adjust for measures that distort domestic prices. Starting a business takes about the world average of 35 days. and other “essential” goods. China lacks legal and regulatory transparency.3 percent. state trading in certain goods. four state-owned banks account for over 50 percent of total assets. Other taxes include a value-added tax (VAT) and a real estate tax. industrial policies protecting local firms. but individuals and firms may own and transfer long-term leases (subject to many restrictions) as well as structures and personal property.0 20. and trade secrets are routinely stolen.9 percent of GDP. agricultural products. Local officials can ignore court decision with impunity. issues involving the protection of intellectual property rights. The non-salary cost of employing a worker is high.600 financial institutions in 2008. pharmaceuticals.7 The overall freedom to establish and run a business is constrained by China’s regulatory environment. corruption. Foreign banks account for only about 2 percent of total assets. permitted. complex and inconsistently enforced laws and regulations. Foreign investors may access foreign exchange for current account transactions like repatriating profits. non-transparent tariff classifications. China has gradually removed barriers to foreign banks. Despite lower non-tariff barriers pursuant to World Trade Organization requirements.2 88. coal. subsidies.0 53. Foreign participation in capital markets remains limited. State ownership of enterprises persists in most sectors. and construction most severely. and the top corporate tax rate is 25 percent. and there is a lack of independent investigative bodies and courts.1 Government expenditures.0 36. patents. Since joining the WTO. trademarks. weak protection of intellectual property rights. individual income tax is no longer paid on interest on bank deposits.6 Inflation has been moderate.6 20. The market determines the prices of most traded products. but obtaining a business license requires more than the world average of 18 procedures and 218 days. restricted. fREEDOM fROM CORRUPtiOn — 36 Corruption is perceived as widespread. Corruption affects banking. The state directs the allocation of credit. brand names. Twenty points were deducted from China’s trade freedom score to account for non-tariff barriers. finance. China ranks 72nd out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008. China has only two private banks. and a legal system that cannot guarantee the sanctity of contracts.2 70. inVEstMEnt fREEDOM — 20 China’s Foreign Investment Catalogue delineates sectors in which foreign investment is encouraged. The first antimonopoly law was enacted in August 2008. but the government maintains prices for petroleum. and inconsistent and corruption-prone customs administration add to the cost of trade. and prohibited. services market restrictions. PROPERtY Rights — 20 China’s judicial system is weak. from Corruption Labor Freedom 49. central government spending equaled 19. As of October 2008.9 percent in 2008. MOnEtARY fREEDOM — 70.0 30. finAnCiAL fREEDOM — 30 China’s complex financial system is tightly controlled by the government. Copyrights.2 percent between 2006 and 2008. 50 60 80 = world average 100 100 most free BUsinEss fREEDOM — 49. are low. Intellectual property rights are not enforced effectively. Investors face regulatory non-transparency.ChinA’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. Expanding access to financial services still remains a challenge.2 0 0 20 least free 40 state-owned enterprises to produce and sell goods to wholesalers and retailers at artificially low prices. overall tax revenue as a percentage of GDP was 18. In the most recent year. but cumbersome regulations remain. Mergers have been more frequent than divestments. In the most recent year. averaging 5. including consumption and transfer payments. and many companies resort to arbitration. tRADE fREEDOM — 72. import and export bans and restrictions. Chinese law prohibits nationalization of foreign investment except under “special” circumstances. The top income tax rate is 45 percent.2 China’s weighted average tariff rate was 3. fisCAL fREEDOM — 70.1 70. government procurement.2 China has a high income tax rate and a moderate corporate tax rate.2 China’s labor regulations hinder overall employment and productivity growth. Dismissing an employee may require prior consultation with the local labor bureau and labor union. import and export licensing.

6 billion 2008 data unless otherwise noted Data compiled as of September 2009 See page 457 for an explanation of the methodology or visit the Index Web site at heritage.7 billion 2. Colombia’s overall economic freedom remains obstructed by persistent institutional weaknesses. A trade agreement with the U.COLOMBiA Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 58 Regional Rank: 12 65.0% FdI Inflow: $10. The economy depends heavily on exports of petroleum. reflecting improved business and labor freedom.5. making its economy the 58th freest in the 2010 Index.org/index. Business contracts are generally respected. Colombia was buffeted by global economic turbulence in 2008–2009. The quality of life has improved substantially. He has also waged a vigorous war on narcotics trafficking.5% growth in 2008 5.S. Its overall score is 3. Despite nominal openness to foreign investment.S. and cut flowers. Colombia continues its transition to greater economic freedom. have led to steady economic growth. How Do We Measure Economic Freedom? 151 . but public expenditure is high because of large transfers to regional state-owned enterprises. President Alvaro Uribe. facilitated by openness to trade and investment. better protection of property rights. coffee. Background: Colombia is one of South America’s oldest continuous democracies.5 million gdP (PPP): $395. and reduced corruption. that would encourage economic diversification and stimulate further growth was submitted to the U. As one of South America’s most stable economies. State ownership is limited to a few utilities.7% 5-year compound annual growth $8. re-elected by a landslide in 2006.2 points higher than last year. Congress in 2008 but is still awaiting action. Recent reforms have focused on improving regulation and fostering a strong private sector. and unemployment has dropped significantly. but judicial corruption undermines legal transparency and efficiency. Uribe has been seeking constitutional changes to allow him to run for a third consecutive term. regulations are complex and uncertain.3% Inflation (cPI): 7. has restored security by enforcing the law against both the Revolutionary Armed Forces of Colombia and its anti-Communist paramilitary nemesis.885 per capita unemployment: 11. and its overall score is higher than the regional average. Improvements in its entrepreneurial environment.5 100 100 C olombia’s economic freedom score is 65. The rule of law remains problematic. Colombia is ranked 12th out of 29 countries in the South and Central America/Caribbean region. Country’s Score Over Time Most free 80 80 60 60 World average 40 40 colombia 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 44. Like all of Latin America.

7 Labor regulations have become more flexible.5 74. The law guarantees indemnification in expropriation cases. Enforcement of intellectual property rights remains erratic.4 percent between 2006 and 2008. concerns remain over the influence of criminal organizations on the police. maritime agencies. though on the decline. and the Agriculture Ministry may intervene temporarily to freeze prices of basic foodstuffs through agreements with regional wholesalers. The government has strengthened regulations and seized some banks for falling below solvency requirements. and shipping companies is limited to minority stakes. In the most recent year. The market is heavily concentrated in government bonds. are common. averaging 6. Import bans and restrictions. overall tax revenue as a percentage of GDP was 19. Tax evasion. Residents who work in certain internationally related companies may hold foreign exchange accounts. PROPERtY Rights — 50 Colombia’s constitution explicitly protects the right to private property. Foreign companies are prominent in the insurance sector. national airlines. inVEstMEnt fREEDOM — 55 Foreign investment receives national treatment. issues involving the enforcement of intellectual property rights. Foreign investments must be registered with the central bank to allow repatriation of profits and remittances and to access foreign exchange. Despite notable improvements in fighting corruption and narcotics trafficking. operate. some petrochemicals. and competition has intensified since 2003.0 72. restrictive standards and regulations. restrictive import licensing. and close a business is relatively well protected under Colombia’s regulatory environment.3 The top income and corporate tax rates are 33 percent. Assets expropriated by eminent domain will be compensated. MOnEtARY fREEDOM — 74 Inflation has been relatively moderate. natural gas. no more than 10 percent of the general workforce and 20 percent of specialists can be foreign nationals. Ten points were deducted from Colombia’s trade freedom score to account for non-tariff barriers. and school tuition. schoolbooks. For firms with more than 10 employees. Accounting for only 5 percent of total trading. and lower levels of the judiciary and civil service.6 The overall freedom to start.0 50. the military. Two private financial groups account for about 45 percent of bank assets. and corruption add to the cost of trade. wide private television operators. Credit is allocated on market terms. Contracts are generally respected. are moderate. Obtaining a business license takes much less than the world average of 18 procedures and 218 days. Banking has undergone significant consolidation and privatization since early 2000. compared to the world average of 35 days. In the most recent year.7 0 0 20 least free 40 50 60 80 = world average 100 100 most free BUsinEss fREEDOM — 83. movie production. tRADE fREEDOM — 72. but dismissing a redundant employee can be relatively inexpensive. especially unauthorized use of trademarks.3 74. Arbitration is complex and dilatory.8 Total government expenditures. including consumption and transfer payments.0 38. Colombia’s small capital market provides limited access to long-term credit. Ten points were deducted from Colombia’s monetary freedom score to adjust for measures that distort domestic prices. fisCAL fREEDOM — 74. residential rents. petroleum derivatives. public utility services. Infringements. the government retained 15 percent of total banking assets. from Corruption Labor Freedom 83. is still relatively high. and 100 percent foreign ownership is permitted in most sectors. government spending equaled 29.8 percent.7 percent in 2008.0 55. especially with regard to the enforcement of awards. fREEDOM fROM CORRUPtiOn — 38 Corruption is perceived as significant. Foreign investment in television concessions and nation- 152 2010 Index of Economic Freedom . some pharmaceutical products. Regulations controlling work hours are relatively flexible. In areas still controlled by terrorist groups. Colombia ranks 70th out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008. Other taxes include a value-added tax (VAT) and a financial transactions tax. non-transparent customs administration and valuation. finAnCiAL fREEDOM — 60 Colombia’s relatively large financial sector has become more stable and modern.8 74.0 percent of GDP. Starting a business takes 20 days. LABOR fREEDOM — 72. export-promotion programs. The government controls prices for ground and air transport. The nonsalary cost of employing a worker remains somewhat burdensome. radio broadcasting.0 60. property rights cannot be guaranteed. Frequent changes in business rules and a burdensome judiciary impede investment. Foreign banks accounted for less than 20 percent of total assets in 2008. services market access limits. import price bands for certain goods. The legal and regulatory systems are generally transparent and consistent with international norms.5 Colombia’s weighted average tariff rate was 8. As of early 2008.6 72. equity trading is dominated by a few listed companies.COLOMBiA’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. Seven of the 17 commercial banks are foreign-owned. gOVERnMEnt sPEnDing — 74.

The public sector is inefficient and lacks capacity to support or provide such basic public goods as secure property rights.COMOROs Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 165 Regional Rank: 41 44. Remittances by Comorans living abroad are an important source of income and were estimated to have equaled 18 percent of GDP in 2006.9 100 100 C omoros’s economic freedom score is 44. Country’s Score Over Time Most free 80 80 60 60 World average 40 40 comoros 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 0. Fishing. Basic infrastructure.6 million gdP (PPP): $0. driving a large portion of the workforce into the small retail services sector. Its overall score improved 1. The presidency rotates among the three islands. and vanilla. and Moheli increased autonomy provided some stability.9.8% FdI Inflow: $8 million 2008 data unless otherwise noted Data compiled as of September 2009 See page 457 for an explanation of the methodology or visit the Index Web site at heritage.8 billion 1. Comoros is ranked 41st out of 46 countries in the Sub-Saharan Africa region. has hindered overall economic development. such as ports and roads. is severely underdeveloped.org/index. A 2001 constitution granting the islands of Grande Comore. a sound legal system. Though much of the terrain is not suitable for agriculture. How Do We Measure Economic Freedom? 153 . Background: After declaring its independence from France in 1975. and forestry employ approximately 80 percent of the population and provide over 50 percent of GDP. cloves. Poor access to credit and the high costs of financing for entrepreneurial activity severely limit the development of a vibrant private sector. Comoros is among the world’s leading producers of ylang-ylang (a perfume ingredient). Economic freedom remains severely constrained in Comoros. Anjouan. Comoros experienced political instability and numerous coups. President Ahmed Abdallah Sambi’s 2006 election was the country’s first democratic transition of leadership. efficient infrastructure. making its economy the 165th freest in the 2010 Index. and transparent regulations. coupled with political crises over the past decade.0% growth in 2008 1.6 points as a result of a large improvement in trade freedom. agriculture. and its overall score is lower than the regional average.169 per capita unemployment: n/a Inflation (cPI): 4.7% 5-year compound annual growth $1. Poor management of macroeconomic policies. The economy remains highly dependent on foreign aid and remittances.

inadequate infrastructure and trade capacity. Capital transfers are subject to prior approval. fisCAL fREEDOM — 65 Comoros has a moderate income tax rate and a high corporate tax rate.4 0 0 20 least free 40 freedom score to adjust for measures that distort domestic prices.0 percent. Comoros’s membership in the Franc Zone has a restraining effect on inflation. 154 2010 Index of Economic Freedom . The central bank controls foreign exchange. Although women do not have the same legal protections as men. the government lacks the capacity to enforce copyright violations. less than half the rate in 2006. which is vulnerable to adverse weather conditions. from Corruption Labor Freedom 43. The banking system consists mainly of the central bank.7 62. and capital transfers need prior authorization from various government agencies.0 25. The wage bill accounts for the majority of government spending. traditional custom grants women favorable inheritance and property rights. and Investments monitors and facilitates investment in Comoros. and underdeveloped markets inhibit investment. The law provides criminal penalties for official corruption. Other taxes include a value-added tax (VAT). fragmented and non-transparent customs administration.0 31. government spending equaled 22.4 Inflation has been moderate. Comoros ranks 134th out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008. the Banque de Développement des Comores. gOVERnMEnt sPEnDing — 85. import fees. an underperforming agricultural sector.4 65. However. Despite an adequate legal regime for the protection of intellectual property rights. Ten points were deducted from Comoros’s monetary LABOR fREEDOM — 31. but the government does not implement the law effectively. MOnEtARY fREEDOM — 76.3 percent in 2008.1 76. and officials engage in corrupt practices with impunity. tRADE fREEDOM — 62. are relatively low. Budget. including consumption and transfer payments. The top income tax rate is 30 percent. Overall. and foreign exchange is controlled by the central bank. and the top corporate tax rate is 50 percent. an insurance tax. Economy. and increases in global prices for oil and food added to inflationary pressures in 2008. Per a September 2008 policy aimed at increasing transparency. political instability.4 Inflexible employment regulations hinder overall productivity growth.4 10.0 20. Fifteen points were deducted from Comoros’s trade freedom score to account for non-tariff barriers. 50 60 80 = world average 100 100 most free BUsinEss fREEDOM — 43. Commerce. a decline from 2007. which focuses on development lending.6 percent between 2006 and 2008. The non-salary cost of employing a worker is very high.3 percent of GDP. Import bans and restrictions. Non-transparent investment regulations. and the Banque pour l’Industrie et le Commerce des Comores. Comoros has no capital market.4 Comoros’s simple average tariff rate was 11. corruption. but regulations can be inconsistent. operate.0 30. and dismissing a redundant employee is relatively costly. contracts are weakly enforced. compared to the world average of 35 days.0 85. state trading. The high cost of laying off workers creates a serious disincentive for companies that might hire additional staff. fREEDOM fROM CORRUPtiOn — 25 Corruption is perceived as pervasive. limiting the government’s ability to print money to finance deficits and curtailing growth of the money supply. The judicial system is ineffective. Investments are reviewed by the government. the financial system lacks an effective regulatory structure that can facilitate dynamic business investment. Starting a business takes only 24 days. and courts are relatively inexperienced in commercial litigation. and registration of real property is time-consuming and expensive. averaging 4.1 Total government expenditures. weak enforcement of contracts. Access to credit for entrepreneurial activities is limited. Bank penetration is low.COMOROs’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. inVEstMEnt fREEDOM — 10 The Investment Division of the Ministry of Finance. Obtaining a business license requires about the world average of 18 procedures. and a tax on real estate transactions. and many people still rely on informal lending and have no bank account. which provides full banking services as well as international trade finance. and underdeveloped markets add to the cost of trade. without adequate regulation or supervision. Microfinance institutions account for around 20 percent of lending.7 The overall freedom to start. inefficient regulation. a vehicle tax. overall tax revenue as a percentage of GDP was 10. In the most recent year. In the most recent year. finAnCiAL fREEDOM — 20 Comoros’s financial sector remains small. PROPERtY Rights — 30 Protection of property rights is weak. inadequate infrastructure. and close a business is constrained by Comoros’s regulatory environment. authorities from each island have been conducting monthly budget execution reports and meeting quarterly.

World average democratic republic of congo 1995 1995 1998 1998 2001 2001 Least free 2004 2004 2007 2007 2010 2010 Quick Facts Population: 64. The DRC has been emerging from a long period of instability and violence.4. which accounts for more than 80 percent of economic activity. marginal enforcement of property rights. reflecting a decline particularly in investment freedom. mission has struggled to address the resulting instability. Economic activity is curtailed by an underdeveloped regulatory environment and the absence of institutional capacity or apparent desire to facilitate private-sector development.6 billion 6. making it the 172nd freest economy in the 2010 Index. and Uganda. The government’s failure to provide basic public goods further reduces citizens’ economic opportunities.2 million gdP (PPP): $20. Rwanda.4 points lower than last year.DEMOCRATIC REPUBLIC OF Least free Least free COngO 50 50 0 25 0 75 100 Most free 100 free Most 25 75 Economic Freedom Score World Rank: 172 Regional Rank: 44 100 100 100 80 80 80 60 60 60 40 40 40 20 20 20 0 00 Country’s Score Over Time Country’s Score Over Time Most free 41.N.2% growth in 2008 6. Sudan. a five-year conflict between government forces supported by Angola. and a U.org/index. seem to have fueled conflict as much as development. and weak rule of law have driven many people and enterprises into the informal sector.5% 5-year compound annual growth $321 per capita unemployment: n/a Inflation (cPI): 18. Rebel groups remain active in the eastern region bordering Burundi. and its score is far below the regional average. Kabila was assassinated in 2001. Its overall score is 1. and infrastructure is virtually nonexistent in many areas. His son Joseph assumed power and in 2006 won the first multiparty election in 40 years. has severely hindered economic development and constrained economic freedom. The DRC’s immense natural resources. The DRC is ranked 44th out of 46 countries in the Sub-Saharan Africa region. worsened by repeated political crises.4 t he Democratic Republic of Congo (DRC) has an economic freedom score of 41. Poor economic management. and Zimbabwe and rebels backed by Rwanda and Uganda claimed an estimated 3 million lives. poor infrastructure. including copper. cobalt. Corruption and mismanagement have driven much economic activity into the informal sector. Namibia. and diamonds. Agriculture and forestry account for just under half of GDP. Arbitrary taxation.0% 2008 data unless otherwise noted FdI Inflow: $1 billion Data compiled as of September 2009 2008 data unless otherwise noted Data compiled as of September 2009 See page 457 for an explanation of the methodology or visit the Index Web site at heritage. Background: After Laurent Kabila overthrew Mobutu Sese Seko in 1997. How Do We Measure Economic Freedom? 155 .

physical insecurity. fREEDOM fROM CORRUPtiOn — 17 Corruption is perceived as rampant. and close a business is heavily restricted by the Democratic Republic of Congo’s regulatory environment.0 percent. Starting a business takes an average of 149 days. Informal lending is an important source of finance. Of COngO’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. The central bank is also maintaining a tight monetary stance. In the most recent year. but dismissing an employee is costly.6 percent in 2008.2 percent between 2006 and 2008.7 74. All investors are subject to audits by government agencies seeking evidence of violations of tax laws or price controls.5 58. and the top corporate tax rate is 40 percent.0 20. from Corruption Labor Freedom inVEstMEnt fREEDOM — 15 Regulations do not generally discriminate against foreign investors. 33.5 Total government expenditures. The non-salary cost of employing a worker is low.DEMO. fisCAL fREEDOM — 74 The Democratic Republic of Congo has a moderate income tax rate and a relatively high corporate tax rate. Import restrictions. inefficient customs administration.0 33. Access to financing for entrepreneurial activity remains poor. and microfinance is beginning to emerge. and there is substantial unrecorded trade.8 percent of GDP. The top income tax rate is 30 percent. public administration is unreliable. and corruption add to the cost of trade. inadequate infrastructure. inadequate contract enforcement. LABOR fREEDOM — 33. small public transport firms. compared to the world average of 218 days and 18 procedures. Fifteen points were deducted from the DRC’s trade freedom score to account for non-tariff barriers. lack of property rights.0 90. protection of property rights remains weak and dependent on a dysfunctional public administration and judicial system. There are no formal limits on foreign ownership of businesses. Larger banks are mostly subsidiaries of foreign banks. Most banks act as financial agents for the government or extend credit to international institutions operating in the country. limited access to credit.7 The DRC’s weighted average tariff rate was 11. The government retains shares in two of the 11 commercial banks.5 61. PROPERtY Rights — 10 Despite a new constitution and enhanced attempts at enforcement. 156 2010 Index of Economic Freedom . Highly restrictive employment regulations hinder job growth and reduce productivity. tRADE fREEDOM — 61. Fighting. operate. The granting of permits and licenses is often subject to corruption. Fifteen points were deducted from the Democratic Republic of Congo’s monetary freedom score to adjust for pricecontrol measures. Underdeveloped infrastructure. REP. overall tax revenue as a percentage of GDP was 10.4 Formal-sector employment is negligible. Financial intermediation is minimal. finAnCiAL fREEDOM — 20 The financial system is small and provides a minimal range of banking services. compared to the world average of 35 days. Obtaining a business license takes about 322 days and involves 14 procedures. but there are restrictions in retail commerce.7 15. small restaurants. The Democratic Republic of Congo ranks 171st out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008. and corruption constrain private-sector development.0 17. banditry. Restructuring of approximately 60 state-owned enterprises is slow. including consumption and transfer payments. averaging 17. More than 80 percent of the money supply is held outside the banking system. In the most recent year. import taxes. bureaucracy. non-transparent bureaucracy. Despite partial liberalization. MOnEtARY fREEDOM — 58. artisanal production.7 Inflation has been very high. gOVERnMEnt sPEnDing — 90. and abuses of human rights threaten property rights and deter economic activity. Credit to the private sector accounts for less than 3 percent of GDP. Other taxes include a sales tax and a tax on vehicles. some prices are still controlled through the public sector. Courts suffer from widespread corruption. Import price controls can be significant because nearly all manufactured goods and many food items are imported. government spending equaled 17.5 The overall freedom to start. which dropped 45 percent between the third quarter of 2008 and the first quarter of 2009. Official channels often do not provide recourse in the event of property seizure. There is no stock exchange. complex regulations. are low. Corruption and government policies have given rise to a parallel economy. and hotels with fewer than 10 beds. and individuals are subject to selective application of a complex legal code. Foreign businessmen often cite corruption as a principal obstacle to doing business. The DRC has turned to the IMF for help in restoring value to the Congolese franc. International transfers of funds take place freely when transacted through a local commercial bank.0 10.4 0 0 20 least free 40 50 60 80 = world average 100 100 most free BUsinEss fREEDOM — 33. services market restrictions.

Its overall score has dropped 2. backed by Angolan troops. and an inflexible labor market create a hostile business climate. The worst barrier to economic development is a profound lack of property rights. due largely to declining scores for government spending and investment freedom. but many of the rebels have turned to banditry and criminality. President Denis Sassou-Nguesso governed the country as a Marxist–Leninist state before moderating economic policy and making the transition to multi-party democracy in 1992. lags in productivity growth. and 85 percent of government revenue in 2008. won a flawed 2002 election. financial freedom. After seizing power in 1979.946 per capita unemployment: n/a Inflation (cPI): 6.6 billion 2008 data unless otherwise noted Data compiled as of September 2009 See page 457 for an explanation of the methodology or visit the Index Web site at heritage. oil accounted for about 65 percent of GDP.REPUBLIC OF Least free COngO 25 0 50 75 100 free Most Economic Freedom Score World Rank: 169 Regional Rank: 43 43. The Congolese economy.6 million gdP (PPP): $14. At the same time. and labor freedom.0% FdI Inflow: $2. the government has failed to provide basic public goods and infrastructure.2 100 100 t he Republic of Congo’s economic freedom score is 43. Then.2 points from last year. The economy achieved marginal improvement in trade freedom. property rights. and its overall score is much lower than the global and regional averages. Foreign investment restrictions.4% 5-year compound annual growth $3. Sassou-Nguesso lost the 1992 election to Pascal Lissouba. he again seized power following a 1997 civil war. Congo is ranked 43rd out of 46 countries in the Sub-Saharan Africa region. exacerbated by pervasive corruption. making its economy the 169th freest in the 2010 Index.org/index. How Do We Measure Economic Freedom? 157 . long afflicted with structural problems that severely undermine the development of a more dynamic private sector. Entrepreneurs face extensive state controls that persist from the country’s period of state socialism. Although most Congolese are engaged in agriculture. but it scores poorly in investment freedom. and was re-elected in July 2009.6% growth in 2008 4.2. The 2003 and 2007 peace agreements with rebel groups have curtailed unrest in the Pool region.3 billion 5. Country’s Score Over Time Most free 80 80 60 60 World average 40 40 republic of congo 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 3. Background: Congo has endured internal conflict and coups since becoming independent in 1960. over 90 percent of exports. domestic regulations.

including consumption and transfer payments. fREEDOM fROM CORRUPtiOn — 19 Corruption is perceived as pervasive. Bureaucracy and corruption are significant impediments to investment. but retail and bakery trades and urban and long-haul transport are limited to Congolese nationals. and government interference.1 percent between 2006 and 2008. bad loans. Banking-sector weakness limits access to credit for business and investment.8 Inflation has been moderate. from Corruption Labor Freedom 48. more transparent fiscal management.3 70.3 Total government expenditures.7 61.0 60. Low-level corruption among security personnel and customs and immigrations officials is widespread. and other goods and services are affected by government ownership and subsidization of the large public sector. Congo shares a common central bank with the other five members of the Central African Economic and Monetary Community.5 percent in 2007. gOVERnMEnt sPEnDing — 69. inVEstMEnt fREEDOM — 15 Congo does not generally discriminate against foreign 158 2010 Index of Economic Freedom . companies may hold such accounts with special approval. government export-promotion programs. traditional courts handle many local disputes.3 69. Privatization has been slow. but microfinance has been expanding rapidly. PROPERtY Rights — 10 The 1997–2003 civil war left the judiciary corrupt. The banking system dominates Congo’s financial sector.8 15. Bank accounts are held by less than 3 percent of the population.0 10. averaging 5. Corruption is seen as permeating the government. electricity. and almost without records. The few state-owned enterprises have a disproportionate influence on economic performance and business conditions.1 Burdensome employment regulations restrict job opportunities and productivity growth. are moderate. burdensome and non-transparent bureaucracy. water. overburdened. and financial non-transparency. The top income tax rate is 50 percent. The prices of rail transport. Investments of over CFAF100 million require Ministry of Economy. Bank development has been stunted by poor management. Security of contracts and the enforcement of justice cannot be guaranteed. Ten points were deducted from Congo’s trade freedom score to adjust for non-tariff barriers. investors. and protection of intellectual property is virtually nonexistent.0 48.0 19. and the top corporate tax rate is 38 percent. operate. Payments and transfers to most countries are subject to documentation requirements. Bank credit to the private sector represents around 3 percent of GDP. The cost of launching a business is high. The regional Banque des Etats de l’Afrique Centrale (BEAC) prioritizes the control of inflation and the maintenance of the CFA franc’s peg to the euro. In the most recent year. underfinanced. The government has agreed to implement public-sector reforms aimed at stronger. subject to political influence and bribery.3 Congo has high tax rates. and close a business is seriously limited by Congo’s regulatory environment. MOnEtARY fREEDOM — 70. Starting a business takes about the world average of 35 days. finAnCiAL fREEDOM — 30 Congo’s underdeveloped financial sector remains significantly hindered by instability and poor regulation.7 The overall freedom to start. and closing a business is relatively easy but costly. Residents may not hold foreign exchange accounts. government spending equaled 32. Finance. Import and export quotas.1 0 0 20 least free 40 50 60 80 = world average 100 100 most free BUsinEss fREEDOM — 48. a tax on rental values. fisCAL fREEDOM — 60. dismissing an employee can be difficult and inexpensive. especially those involving inheritance and property. telecommunications. and corruption add to the cost of trade. The Republic of Congo ranks 158th out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008. and an apprenticeship tax. an inefficient customs service. and there are six banks that are privately owned. and Budget approval within 30 days unless they involve creation of an enterprise with public– private ownership. restrictive import licensing rules.REPUBLiC Of COngO’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm.0 percent of GDP. Non-residents may hold foreign exchange accounts subject to government approval. tRADE fREEDOM — 61 Congo’s weighted average tariff rate was 14. many of whom still face high financing costs due to limited competition and poor financial infrastructure. and the administrative capacity needed to implement reforms is lacking. overall tax revenue as a percentage of GDP was 5. Fifteen points were deducted from Congo’s monetary freedom score to adjust for measures that distort domestic prices. inadequate internal controls and accounting systems. LABOR fREEDOM — 48. In the most recent year. In rural areas. Other taxes include a value-added tax (VAT).0 30. Rigid restrictions control hours worked. and conflicts of interest in the state-owned oil company’s marketing of oil are concerns.4 percent. Capital transactions require approval. The non-salary cost of employing a worker is high. but political pressure has held up such reforms in the past.

Background: With a strong tradition of democracy and respect for human rights. Country’s Score Over Time Most free 80 80 60 60 World average 40 40 costa rica 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 4. Costa Rica is ranked 9th out of 29 countries in the South and Central America/ Caribbean region. reflecting small decreases in five of the 10 economic freedoms. especially in telecommunications and insurance. but unions have resisted his gradual approach to privatization.241 per capita unemployment: 4. and its overall score is higher than the global and regional averages.5 point lower than last year. The trade regime is more open. How Do We Measure Economic Freedom? 159 . is inefficient. and per capita income is high by regional standards. Bureaucratic procedures continue to discourage dynamic entrepreneurial activity.9% growth in 2008 6. and management of public finance is sound. easing procedures for foreign banks’ operations. which entered into force on January 1. Costa Rica’s average annual growth rate has been over 6 percent for the past five years.org/index. pineapples. 2009.9 100 100 C osta Rica’s economic freedom score is 65. An important producer of bananas. and coffee.9% Inflation (cPI): 13.9 billion 2. and with no standing army.4% FdI Inflow: $2 billion 2008 data unless otherwise noted Data compiled as of September 2009 See page 457 for an explanation of the methodology or visit the Index Web site at heritage. making its economy the 54th freest in the 2010 Index.9. Inflation has been hovering at around 12 percent due to rising commodity prices. a slender majority of Costa Ricans voted for the Central America–Dominican Republic–United States Free Trade Agreement. The court system. Personal and corporate tax rates are moderate.3% 5-year compound annual growth $11. In October 2007. Costa Rica has benefited from industrialization in electronics and health care.5 million gdP (PPP): $50. and the overall burden is not high.COstA RiCA Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 54 Regional Rank: 9 65. Costa Rica has avoided the political violence that has afflicted other Central American countries over the past half-century. Costa Rica has been working to improve financial-sector freedom by consolidating private banks. and privatization and fiscal reform have slowed. and introducing a new development bank structure. while transparent and not corrupt. Former President Oscar Arias (1986–1990) was elected for a second time in 2006 on a pledge to break up state monopolies. Its overall score is 0. and enforcement is weak.

5 Costa Rica’s weighted average tariff rate was 3. The government controls the prices of goods on a basic consumption list. especially when land is rural and not actively worked. The banking sector has little exposure to structured financial products. and petroleum are reserved for state companies or require participation of a certain percentage of Costa Rican citizens or residents.8 percent in 2007. enforcement of intellectual property rights is often ineffective.3 82. bureaucratic customs administration. and issues involving the enforcement of intellectual property rights add to the cost of trade.0 50. but it takes an average of more than 1.3 percent between 2006 and 2008. Starting a business takes an average of 60 days. wholesale distribution. telecommunications. The top income tax rate is 25 percent. Contracts are generally upheld. and water. A new development bank structure draws in private and public banks. Costa Rica ranks 47th out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008. Procedures for operation of foreign banks have been simplified and streamlined. but reporting requirements are mandatory for some transactions. and penalties. Prudent fiscal management allowed some leeway with stimulus spending. and the top corporate tax rate is 30 percent.0 59.2 percent. and practices are generally transparent. Credit is generally available on market terms. The government does not emphasize enforcement of anti-corruption laws.0 50. but some land owned by foreign investors has been expropriated. sanitary and phytosanitary requirements.3 The overall freedom to start. and the combined assets of the 11 private commercial banks represent about 25 percent of the country’s total. Ten points were deducted from Costa Rica’s trade freedom score to account for non-tariff barriers. energy generation and distribution. LABOR fREEDOM — 59 Employment regulations are relatively flexible. Government intervention is highest in utilities. overall tax revenue as a percentage of GDP was 15. In the most recent year. In the most recent year.0 67. although bureaucratic procedures are often burdensome. Laws. There are no controls on capital flows. services.5 years to resolve a contract-related legal complaint. Other taxes include a general sales tax and a real property tax. averaging 12. but dismissing an employee is relatively inexpensive. Though privatization has been successful in some sugar production and transportation. government spending equaled 20. petroleum. The nonsalary cost of employing a worker is high. regulations. Accounting has become more transparent and consistent with international norms. including energy. fixed-line telecommunications.4 87. Three state-owned banks account for about 50 percent of the financial system’s assets. finAnCiAL fREEDOM — 50 Costa Rica’s small but growing financial sector functions relatively well. Some consolidation of private banks has occurred. are low. from Corruption Labor Freedom 59. particularly in banking and insurance. MOnEtARY fREEDOM — 67. the government injected capital into the six largest institutions. In late 2008. which are readily transferable and available at market rates. although the government retains some influence over lending. fREEDOM fROM CORRUPtiOn — 51 Corruption is perceived as present. and hydrocarbons. but electrical power generation.5 82.8 percent of GDP. services market access restrictions. Allegations of lower-level corruption are common. Ten points were deducted from Costa Rica’s monetary freedom score to adjust for measures that distort domestic prices. There are no restrictions or controls on the holding of foreign exchange accounts. including consumption and transfer payments. and close a business is limited by Costa Rica’s regulatory environment.8 70. The system quickly recognizes rights acquired by squatters. Rules on work hours are flexible. tRADE fREEDOM — 82.COstA RiCA’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. state ownership persists.8 Inflation has been high. professional 160 2010 Index of Economic Freedom .0 0 0 20 least free 40 50 60 80 = world average 100 100 most free BUsinEss fREEDOM — 59.4 Costa Rica has moderate tax rates. education. regulations. inVEstMEnt fREEDOM — 70 Costa Rica treats foreign and domestic investors equally. and the impact of the global financial turmoil has been relatively muted. operate. import and export controls. Peak tariffs. and some prosecutions have resulted. transportation. Despite a legal framework. fisCAL fREEDOM — 82. gOVERnMEnt sPEnDing — 87 Total government expenditures. PROPERtY Rights — 50 The judicial system can be slow and complicated. import taxes. including the three state-owned banks. Earlier financial reforms have liberalized Costa Rica’s capital account and guarantee the free exchange of foreign currency.0 51. Some foreign firms complain of corruption in the administration of public tenders. broadcasting. although obtaining a business license requires less than the world average of 218 days. There are no restrictions on land purchases. and investments are secure. compared to the world average of 35 days.

and U. Despite improvements in tax administration.N. hurt especially by political instability. Background: In 2002. Côte d’Ivoire is the world’s leading cocoa producer.6 million gdP (PPP): $34.651 per capita unemployment: n/a Inflation (cPI): 6. respectively.2% growth in 2008 1. peacekeepers are still present. Côte d’Ivoire is trying to promote much-delayed economic reform and development. has moved to the informal sector. Property rights are undermined by an inefficient judiciary. How Do We Measure Economic Freedom? 161 .1 100 100 C ôte d’Ivoire’s economic freedom score is 54.1. and corruption is debilitating.0 billion 2. Much economic activity. reflecting moderate decreases in eight of the 10 economic freedoms that are partially offset by a significant gain in fiscal freedom. the government has maintained its policy of divesting state-owned enterprises. and most businesses are operating at far below capacity. Commercial regulations and bureaucratic red tape are burdensome.N. making its economy the 123rd freest in the 2010 Index. Despite slow progress in publicsector reform.CÔtE D’iVOiRE Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 123 Regional Rank: 23 54. Côte d’Ivoire is ranked 23rd out of 46 countries in the Sub-Saharan Africa region. whose five-year term expired in 2005. budget management has been strained by higher electricity subsidies and delayed tax collection from the national oil company. Its score is 0.org/index. One of the region’s largest economies. including regional trade. Security Council resolutions have extended the mandate of President Laurent Gbagbo. and the agricultural sector employs roughly half of the labor force and accounted for 26 percent of GDP in 2005. The overall business climate. remains unfavorable to private investment and productivity growth. and presidential and legislative elections were scheduled for 2009 and 2010. Despite the 2007 Ouagadougou Accord. the country remains divided.3% FdI Inflow: $353 million 2008 data unless otherwise noted Data compiled as of September 2009 See page 457 for an explanation of the methodology or visit the Index Web site at heritage. civil war split Côte d’Ivoire between a rebel-controlled North and a government-controlled South. with rebel leader Guillaume Soro as prime minister and Gbagbo as president. U. and its overall score is above the regional average. Significant tax relief is intended to foster a more dynamic private sector. was formed in 2007. A transition government. Country’s Score Over Time Most free 80 80 60 60 World average 40 40 côte d’Ivoire 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 20.6% 5-year compound annual growth $1.9 point lower than last year.

and subject to executive branch. Residents may hold foreign exchange accounts with government and BCEAO approval.7 The overall freedom to start.7 percent of GDP. gOVERnMEnt sPEnDing — 87. and close a business is seriously restricted by Côte d’Ivoire’s regulatory environment. and cocoa and coffee prices and quotas are part of a price stabilization program. and some are open to bribery. Social and political instability have prevented meaningful progress in privatization. Other taxes include a value-added tax (VAT) and a tax on interest.7 percent. If international food and oil prices remain depressed. Côte d’Ivoire ranks 151st out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008. and most businesses opt for long-term leases. The non-salary cost of employing a worker is relatively low.1 Burdensome labor regulations hinder employment opportunities and productivity growth.0 56.0 20. In the most recent year. run.0 50. import authorization requirements for certain goods. are low.0 35. and weak enforcement of intellectual property rights add to the cost of trade. and authorization. minimum price floors for some imports. 50 60 80 = world average 100 100 most free BUsinEss fREEDOM — 43. customs and tax issues. Regulations on work hours are rigid. and majority foreign ownership is not permitted in these sectors. and certain regional countries require government approval. from Corruption Labor Freedom 43. The government has sold its shares in smaller banks. Approval is required for investment in the health sector. inefficient. Trading on the Côte d’Ivoire–based regional stock market is minimal despite 45 company listings. The largest banks include foreign ownership and are regarded as more reliable in the unstable climate. but dismissing an employee is costly. Despite some bank modernization and restructuring since 2004.3 Côte d’Ivoire has a relatively high income tax rate and a moderate corporate tax rate. and other influences. average annual inflation is expected to drop to around 2 percent by the end of 2009. and the top corporate tax rate has been reduced to 25 percent.3 Côte d’Ivoire’s weighted average tariff rate was 10. Import prohibitions and restrictions. Despite land reform. averaging 4. overall tax revenue as a percentage of GDP was 15. MOnEtARY fREEDOM — 76 Inflation has been moderate. including consumption and transfer payments.1 76. foreign and domestic investors are treated equally.3 percent in 2008. The government regulates prices of pharmaceuticals. corruption. corruption in customs and government procurement. Government corruption and lack of transparency affect judicial proceedings. and burdensome contract enforcement inhibit investment.9 percent between 2006 and 2008. There are also over 100 active microfinance institutions. it lacks the capacity to support development of the private sector and economic diversification. services market access restrictions. Transfers to countries other than France. petroleum products. compared to the world average of 35 days. contract awards. The regional Banque Centrale des Etats de l’Afrique de l’Ouest (BCEAO) prioritizes control of inflation and maintenance of the CFA franc’s peg to the euro. The top income tax rate is 36 percent. Many capital transactions require government authorization. Judges serve at the discretion of the executive.3 78. fREEDOM fROM CORRUPtiOn — 20 Corruption is perceived as pervasive. inVEstMEnt fREEDOM — 35 In general. dominated by banking. and public-sector goods and services. 162 2010 Index of Economic Freedom . travel agencies. is small and underdeveloped. freehold tenure outside of urban areas is difficult. Ten points were LABOR fREEDOM — 56.3 87.1 0 0 20 least free 40 deducted from Côte d’Ivoire’s monetary freedom score to account for policies that distort domestic prices. Bureaucracy.1 Total government expenditures. government spending equaled 20. Starting a business takes an average of 40 days. Obtaining a business license requires more than the world average of 18 procedures and 218 days. traditional property rights of villages and ethnic groups prevent the sale of land. and law and accounting firms. PROPERtY Rights — 30 The judiciary is constitutionally independent but slow. Some other transfers are subject to requirements. tRADE fREEDOM — 64. import fees and taxes.CÔtE D’iVOiRE’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. Outside of urban areas. and the accountability of security forces. controls. In the most recent year. but has minority holdings in several larger institutions. military.7 64. Monaco. The banking system consists of 19 banks and two other financial institutions. finAnCiAL fREEDOM — 50 The financial sector. ad hoc tax policy. fisCAL fREEDOM — 78.0 30. Proposed investment is not screened. Domestic laws and regulations to combat corruption are neither generally nor effectively enforced. non-residents may hold them with BCEAO approval. Fifteen points were deducted from Côte d’Ivoire’s trade freedom score to account for non-tariff barriers.

Background: Rapid industrialization in the years following World War II made Croatia the most prosperous area of the former Yugoslavia.7% Inflation (cPI): 6. Croatia’s overall weakness stems from excessive government interference that erodes the economy’s efficiency and flexibility.6 billion 2. It became a full member of NATO in April 2009 and hopes to join the European Union in 2011. especially with regard to the judiciary.4 million gdP (PPP): $84. As Communism collapsed throughout Eastern Europe and Yugoslavia began to unravel along ethnic and religious lines.2 100 100 C roatia’s economic freedom score is 59. making its economy the 92nd freest in the 2010 Index.4 billion 2008 data unless otherwise noted Data compiled as of September 2009 See page 457 for an explanation of the methodology or visit the Index Web site at heritage. Country’s Score Over Time Most free 80 80 60 60 World average 40 40 croatia 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 4.org/index. Croatia has actively pursued greater integration into the Euro– Atlantic community. reflecting significantly improved scores for government spending. its overall score is still below the regional and world averages. investment freedom. although political violence and allegations of government corruption may slow the process.4% growth in 2008 4.084 per capita unemployment: 13. Burdensome and non-transparent administrative regulations. resulting in lower levels of productivity and job growth. particularly at the local level. also restrict economic freedom.2. How Do We Measure Economic Freedom? 163 . Croatia has moved up 24 places in the world rankings and from 38th to 37th out of 43 countries in the Europe region. and protection of property rights. Croatia declared its independence in 1991. Its overall score is 4.2% 5-year compound annual growth $19. Croatia has also created a more competitive financial system by implementing efficient regulatory frameworks and privatization.CROAtiA Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 92 Regional Rank: 37 59. Corruption and political interference. Management of public finance has been enhanced. Croatia has made notable improvements that have affected its overall economic freedom score and scores above the world average in trade freedom.1% FdI Inflow: $4. government intervention in other key areas of the economy is considerable. and monetary freedom.1 points higher than last year. Years of ensuing conflict between Croats and Serbs ended formally in 1995 with the Dayton Peace Accords. investment freedom. continue to challenge entrepreneurs. and regulation is more streamlined. In addition to high levels of government spending.

The labor code mandates retraining or replacement before firing a worker. are subject to government conditions. Despite intellectual property rights legislation. burdensome regulations and standards. Some additional customs duties. Starting a business takes 22 days. The constitution guarantees the free transfer and repatriation of profits and invested capital for foreign investments.0 40. PROPERtY Rights — 40 The right to ownership of private property is established in the constitution and protected by numerous acts and regulations. Ten points were deducted from Croatia’s trade freedom score to account for non-tariff barriers. Ten points were deducted from Croatia’s monetary freedom score to adjust for measures that distort domestic prices. there are fewer than 35 banks. and foreign banks own the majority of total assets. The top income tax rate is 45 percent. inefficient customs administration. The non-salary cost of employing a worker is high.8 Inflation has been moderate. In the most recent year. and backlogs cause business disputes to drag on for years.4 percent. and economic agencies. foreign investors need Ministry of Justice approval. inVEstMEnt fREEDOM — 65 Foreign investors receive national treatment. 60 80 50 = world average 100 100 most free finAnCiAL fREEDOM — 60 Undergoing restructuring and modernization. Observers view the judicial system as most affected by corruption.8 Croatia’s weighted average tariff rate was 1. piracy of digital media and counterfeiting continue. and securities markets are open to foreign investors. The court system is cumbersome and inefficient. Croatia’s financial system has become more efficient and competitive. LABOR fREEDOM — 40. Croatia’s overall regulatory environment remains burdensome and inefficient. and dismissing an employee can be difficult and costly. After significant market consolidation. with more than 200 companies now listed.0 44.3 Croatia has a high income tax rate but a low corporate tax rate. overall tax revenue as a percentage of GDP was 23. and access to financing for entrepreneurial activity is not difficult. and the top corporate tax rate is 20 percent. fREEDOM fROM CORRUPtiOn — 44 Corruption is perceived as significant.0 percent between 2006 and 2008. There is also a value-added tax (VAT). Croatia is ranked 60th out of 115 countries in the 2009 International Property Rights Index. There is steady pressure to increase transparency and fulfill commitments to adopt EU laws.1 percent in 2008. Two national commercial banks are majority foreign-owned and control almost half of all assets. Despite economic and administrative reforms.8 70. reciprocity.8 Burdensome labor regulations limit employment and productivity growth. and practices. In the most recent year. local governments. are relatively high. Some capital transactions. an inefficient bureaucracy can inhibit economic activity. but proposed price changes on some 30 products require Ministry of Economy approval. Obtaining a business license takes much longer than the world average of 218 days. including consumption and transfer payments.5 Despite some progress. Supervisory and regulatory frameworks for the financial sector are more efficient. or as an incorporated Croatian legal entity. Privatization and regulatory improvements have done much to re-establish confidence in banking. Corruption remains 164 2010 Index of Economic Freedom . BUsinEss fREEDOM — 61. The government also influences prices through state-owned enterprises. The Capital Market Act. fisCAL fREEDOM — 70.0 40. Many price supports and subsidies have been eliminated. The government has initiated a process to overhaul areas particularly afflicted by corruption: the judicial and health systems.5 87. averaging 5.8 0 0 20 least free 40 a problem. The government is committed to judicial reform. gOVERnMEnt sPEnDing — 47. MOnEtARY fREEDOM — 75. import licensing for certain goods. which aims to strengthen securities regulation and transparency. Citizens continue to cite corruption as one of Croatia’s most important problems. Closing a business is relatively simple. such as inward portfolio investment. less than the world average of 35 days. Some investors insist that contract arbitration take place outside of Croatia.1 75. tRADE fREEDOM — 87.0 60. from Corruption Labor Freedom 61. To acquire property by means other than inheritance. The government’s total debt is around 35 percent of GDP. public administration.CROAtiA’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. The state still controls a significant part of the economy. and credit is allocated on market terms. Croatia ranks 62nd out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008. government spending equaled 42 percent of GDP.8 65. norms. but much remains to be done. came into force in January 2009.3 47. The stock exchange has been growing rapidly. and weak enforcement of intellectual property rights add to the cost of trade. political party financing.1 Total government expenditures.

2 points lower than last year.org/index. The regime refuses to allow free elections. Cuba has a moderate average tariff rate but maintains very restrictive non-tariff barriers. Damage from hurricanes in 2008. In February 2008. entrepreneurship is impeded. many aspects of economic activity are tightly controlled by the state. Cuba’s overall economic freedom remains severely hampered by institutional constraints. reflecting primarily a worsened score in investment freedom. ahead of only Zimbabwe and North Korea. falling revenue from tourism and commodity sales. In an effort to court foreign investment. making its economy one of the world’s least free. Little reliable economic information is available.6% (estimate) Inflation (cPI): 3.3% growth in 2008 5-year compound annual growth n/a $9.4% FdI Inflow: $36 million 2008 data unless otherwise noted Data compiled as of September 2009 See page 457 for an explanation of the methodology or visit the Index Web site at heritage. Fidel Castro’s 75-year-old brother Raul became head of state. Background: A one-party Communist state with a command economy. and official figures on per capita GDP may not reflect actual incomes. and other basic rights. Its overall score is 1. and holds hundreds of political prisoners. Cuba is ranked at the bottom of 29 countries in the South and Central America/Caribbean region. and its overall score is less than half of the regional average. No courts are free of political interference. but an ailing Fidel reportedly still influences the Communist Party and decision-making from behind the scenes. and private property is strictly regulated. Country’s Score Over Time Most free 80 80 60 60 World average 40 40 20 20 cuba 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 11. Lack of transparency and excessive regulations limit trade and investment. restricts freedom of expression. The economy performs relatively well in terms of trade and monetary freedom.7 100 100 C uba’s economic freedom score is 26. Because the government dictates most economic policies.7. Cuba continues to depend heavily on external assistance (chiefly oil provided by Venezuela’s Hugo Chávez and remittances from Cubans overseas) and a captive labor force. Cuba has been building closer ties with China and Venezuela. How Do We Measure Economic Freedom? 165 . and an unwillingness to introduce meaningful economic reform have further weakened economic performance.500 per capita unemployment: 1. property ownership. and the private sector is very limited.2 billion 4. Inflation is also moderate.2 million gdP (PPP): $108.CUBA Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 177 Regional Rank: 29 26.

Credit and insurance markets remain governmentcontrolled. Central bank authority was enhanced in 2005 to allow closer control of the use of hard currency and convertible pesos. fREEDOM fROM CORRUPtiOn — 43 Corruption is perceived as significant. Twenty points were deducted from Cuba’s trade freedom score to account for non-tariff barriers. Only limited private entrepreneurship exists. Twenty points were deducted from Cuba’s monetary freedom score to adjust for measures that distort domestic prices. Inconsistent and non-transparent application of regulations impedes entrepreneurial activity. arbitrary and non-transparent regulation. MOnEtARY fREEDOM — 66. There is no foreign ownership of land. Customs officials reportedly have requested unauthorized fees or have confiscated the belongings of citizens legally residing overseas who were returning to Cuba after visiting relatives. and imports and exports are dominated by the government.0 10. Cuba ranks 65th out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008. The Cuban peso is the domestic currency. The top corporate tax rate is 30 percent (35 percent for companies with entirely foreign capital). bans expropriation without compensation. The trade regime remains largely non-transparent. the government remains firmly in control. The NAPP and its lowerlevel counterparts choose all judges. which reflects the underlying trend in market prices over the year.7 45.0 43.8 percent in 2008 was achieved by imposing price caps in agricultural markets to suppress real food costs. Expansive government employment commitments are an obstacle to sound fiscal management. and senior officials in large state-run tourism organizations have been jailed for corruption. fisCAL fREEDOM — 45. a separate convertible peso is required for foreign exchange and nonessential retail purchases. although some private and informal market retail activity is not government-controlled.9 Cuba has a high income tax rate of 50 percent. Despite a decade of incremental changes. Some restrictions have been loosened to permit investment commitments and credit lines from China and Venezuela.0 0 0 20 least free 40 50 60 80 = world average 100 100 most free BUsinEss fREEDOM — 10 The overall freedom to start. LABOR fREEDOM — 20 Rigid labor regulations hinder employment and productivity growth. New products.1 percent in 2008.CUBA’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm.0 61.8 percent. tRADE fREEDOM — 61. A labor code aimed at improving the efficiency of entrepreneurial activities and providing strict penalties for the use of work time for personal benefit took effect in 2007. gOVERnMEnt sPEnDing — 0 Total government expenditures. customs corruption is common. investment is inhibited by a lack of business policy. finAnCiAL fREEDOM — 10 Cuba’s financial sector remains underdeveloped. Official year-end inflation of only 0. In practice.7 Cuba’s weighted average tariff rate was 9. The formal labor market is not fully developed.9 0.2 percent of GDP. are very high.4 percent between 2006 and 2008. The government is aggressively pursuing recentralization of economic activity and maintains strict capital and exchange controls. tax revenue as a percentage of GDP was 44. discrimination against foreign and private domestic investment. are being introduced. allows transfer of ownership 166 2010 Index of Economic Freedom . and the government-controlled labor market has helped to create a large informal economy. and close a business remains constrained by the state. and totally foreign-owned companies. rules and regulations are burdensome. and state control of the economy.4 percent. The government determines prices for most goods and services and subsidizes much of the economy. inVEstMEnt fREEDOM — 0 The Foreign Investment Act theoretically guarantees transferability of profits to foreign countries.0 20. average inflation.7 0.7 Inflation has been moderate. Other taxes include a tax on property transfers and a sales tax. joint ventures. averaging 4. from Corruption Labor Freedom 10. and permits three types of foreign investment: international association contracts. including consumption and transfer payments. The government established a central bank in 1997 and converted the Banco Nacional de Cuba into one of a new set of state banks. such as travel and medical insurance and personal pensions. The constitution subordinates the courts to the National Assembly of People’s Power and the Council of State. and credit for entrepreneurial activity is seriously impeded by inefficient regulation and bureaucracy. In the most recent year. The law and trial practices do not meet international standards for fair public trials. Private-sector opportunities are limited.0 10. PROPERtY Rights — 10 Cuban citizens may own land and productive capital for farming and self-employment. to other foreign investors. was 3.0 66. Over a dozen foreign banks have opened offices but are not allowed to operate freely. government spending equaled 68. In the most recent year. operate.

A high level of government spending is the primary weakness that holds down Cyprus’s overall economic freedom. but telecommunications and utilities are still not privatized or deregulated. How Do We Measure Economic Freedom? 167 . While tariff barriers are low. Economic liberalization was enhanced for Greek Cypriots in 2004 with EU membership. Background: A U. Tourism and financial services drive the Greek Cypriot economy.org/index. The financial sector has also become more open and efficient with strict but sensible supervision.CYPRUs Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 24 Regional Rank: 13 70. buffer zone divides the Greek Cypriot Republic of Cyprus (a member of the European Union) and the Turkish Republic of Northern Cyprus (not a member). there are significant non-tariff barriers.853 per capita unemployment: 3.2 billion 2008 data unless otherwise noted Data compiled as of September 2009 See page 457 for an explanation of the methodology or visit the Index Web site at heritage. and Turkish Cypriots remain heavily dependent on trade and aid from Turkey. Country’s Score Over Time Most free 80 80 60 60 World average 40 40 cyprus 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 0. making its economy the 24th freest in the 2010 Index. 2008. Monetary stability has deteriorated somewhat due to rising inflation and government price-fixing practices. Cyprus joined the euro zone on January 1. Cyprus performs well in many of the 10 economic freedoms. There is also room for improvement in trade freedom. The Republic of Cyprus acts as the island’s internationally recognized administration. and its overall score is higher than the regional and global averages. and there is deep hostility between the two sides.9 100 100 C yprus’s economic freedom score is 70.N. Cyprus is ranked 13th out of 43 countries in the Europe region.6% Inflation (cPI): 4. Formerly robust growth in the Turkish Cypriot economy has been undermined by political and legal uncertainty. and the government has taken measures to improve its public finance. and restrictions on foreign investment have been lifted.4% FdI Inflow: $2.9.6% growth in 2008 4. with significant declines in property rights and labor freedom balanced by improvements in business freedom and freedom from corruption. Greek and Turkish leaders continue to negotiate on possible reunification. Business growth is facilitated by a relatively transparent and efficient regulatory framework. Its overall score is almost unchanged from last year.7 billion 3.8 million gdP (PPP): $22.0% 5-year compound annual growth $29.

operate. The government mandates a minimum wage and minimum standards for terms and conditions of employment. market access restrictions in some services sectors.8 82.5 Relatively flexible labor regulations facilitate employment and productivity growth. The civil judiciary is independent constitutionally but not always in practice. finAnCiAL fREEDOM — 70 Cyprus’s financial sector is diverse and relatively sound. Corruption and patronage appear to continue in the Turkish Cypriot area. mass media. Cyprus has developed into a center for nonbanking offshore activity. Regulation and supervision of banking and finance are efficient. The top income tax rate is 30 percent.0 64. non-EU ownership of real property.0 70. are high. import restrictions and bans for some goods and services. In the most recent year. and access to credit is not constrained. but some have been replaced by EU-wide barriers. MOnEtARY fREEDOM — 82. Some foreign companies complain of bias and a lack of transparency in government consideration of competing bids.5 Cyprus’s trade policy is the same as that of other members of the European Union. The three dominant banks’ lending practices are prudent and conservative. The government controls LABOR fREEDOM — 61.S. facilitated by a competitive tax regime and double-taxation treaties with many countries.CYPRUs’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. government spending equaled 42. and its MFN tariff code is complex. Fifteen points were deducted from Cyprus’s trade freedom score to account for non-tariff barriers.6 percent. banking. quotas.9 percent of GDP.7 44. Weaker consumer demand and softer international commodity prices caused inflation to ease toward the end of 2008. The area administered by Turkish Cypriots has adopted more transparent regulation but still lags behind European or U. 50 60 80 = world average 100 100 most free BUsinEss fREEDOM — 80.7 Cyprus has a moderate income tax rate and a low corporate tax rate. Pharmaceutical and biotechnology regulations are more burdensome than EU policy. the EU has high or escalating tariffs for agricultural and manufacturing products. and construction. Nontariff barriers reflected in EU and Cypriot policy include agricultural and manufacturing subsidies.0 61. The absence of a political settlement poses an inherent risk for the foreign investor interested in buying or leasing property in the North. non-transparent and restrictive regulations and standards. The stock exchange is one of the smallest in Europe.8 Total government expenditures.9 Inflation has been relatively low. enforcement of intellectual property rights remains problematic. including consumption and transfer payments. EU residents may own 100 percent of local companies and any company listed on the stock exchange. In the most recent year. and there is a dichotomy between the trade regimes of Greek and Turkish areas. inVEstMEnt fREEDOM — 70 The government grants national treatment to foreign investors.9 70. However. tax revenue as a percentage of GDP was 41. 168 2010 Index of Economic Freedom .5 72.3 percent in 2008. Regulations have been streamlined. The common EU weighted average tariff rate was 1. Accession to the EU has reduced barriers to investment. In the government-controlled area. averaging 3. current transfers. Other taxes include a value-added tax (VAT) and a real estate tax. fREEDOM fROM CORRUPtiOn — 64 Corruption is perceived as present.3 The overall freedom to start. business-related procedures and regulations are generally transparent and evenly applied. Total credit to the private sector has increased. gOVERnMEnt sPEnDing — 44. PROPERtY Rights — 80 Contracts and property rights are generally enforced. fisCAL fREEDOM — 72. There are no exchange controls and no interest rate ceiling.6 percent between 2006 and 2008. and close a business is relatively well protected under Cyprus’s regulatory environment. Cypriot law restricts foreign. Cyprus’s unemployment rate is one of the EU’s lowest. and capital transactions are subject to central bank approval or restriction. tRADE fREEDOM — 82. and the flat corporate tax rate is 10 percent (25 percent for vaguely defined public corporate bodies). from Corruption Labor Freedom 80. Some payments.0 80. Five points were deducted from Cyprus’s monetary freedom score to reflect this practice. and business regulations are transparent and consistently applied. Intellectual property rights are not adequately protected in the area administered by Turkish Cypriots. services markets are further restricted. with a capitalization of around $5 billion in early 2009. administrative procedures have been simplified. Non-EU investors may not invest in tertiary education. standards. and inconsistent regulatory and customs administration among EU members.5 0 0 20 least free 40 prices of some agricultural products. Financing for domestic and foreign investors is available at market rates.3 82. Real property remains contested. Cyprus ranks 31st out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008.

bureaucracy and red tape slow entrepreneurial dynamism. An extensive banking sector includes significant foreign ownership and a well-established supervisory framework. and joined the European Union in 2004. In March 2009. Although the regulatory environment is generally consistent with a market economy. competitive taxation and openness to foreign direct investment have contributed to a strong economy. in April. Corruption is still perceived as significant. Structural reforms in the labor market are also needed.7 billion 3. primarily reflecting improved labor freedom. making its economy the 34th freest in the 2010 Index. The government has pursued reform measures to curb relatively high levels of government spending. Its overall score is 0. Czech lands have been among the world’s most industrialized.4 million gdP (PPP): $257. Jan Fischer. as evidenced by the slow pace of legislative and judicial reform.7 billion 2008 data unless otherwise noted Data compiled as of September 2009 See page 457 for an explanation of the methodology or visit the Index Web site at heritage. nonpartisan head of the Czech Statistical Office.3% FdI Inflow: $10. but industrial production and exports to the EU declined in 2009.712 per capita unemployment: 4. and GDP was projected to contract sharply. Elections scheduled for October were halted by the Constitutional Court. became an independent nation in 1993.CZECh REPUBLiC Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 34 Regional Rank: 17 69. Prime Minister Mirek Topolanek’s center-right coalition cabinet left office after a parliamentary vote of no confidence.4 point higher than last year. The Czech Republic separated from Slovakia. Country’s Score Over Time Most free 80 80 60 60 World average 40 40 czech republic 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 10. As reflected in relatively high scores for fiscal and investment freedom.4% Inflation (cPI): 6. Background: The Velvet Revolution of 1989 peacefully overthrew a Communist dictatorship and led to the election of dissident playwright Vaclav Havel as president of a democratic Czechoslovakia.8.2% growth in 2008 5. and its overall score is higher than the regional and global averages. Historically. became interim prime minister.6% 5-year compound annual growth $24. The Czech Republic is ranked 17th out of 43 countries in the Europe region.8 100 100 t he Czech Republic’s economic freedom score is 69.org/index. How Do We Measure Economic Freedom? 169 . The Czech Republic’s transition to greater economic freedom has been facilitated by structural reforms and an increasingly vibrant private sector that accounts for more than 80 percent of GDP.

170 2010 Index of Economic Freedom . Starting a business takes an average of 15 days. distorting the prices of agricultural products.4 0 0 20 least free 40 production. the government subsidizes agricultural LABOR fREEDOM — 76. but decisions vary from court to court.6 70. Most major state-owned companies have been privatized with foreign participation. PROPERtY Rights — 65 Property rights are protected by law. and defense. but prosecution of high-level corruption is infrequent. Allegations of corruption most often involve the court-controlled company registration system and the police. and rail and bus transport are subject to controls. averaging 5. non-transparent and restrictive regulations and standards. The Czech Republic has ratified the OECD’s anti-bribery convention and has signed but not ratified the U. are high.6 75.6 Inflation has been moderate.0 65. including consumption and transfer payments. Ten points were deducted from the Czech Republic’s monetary freedom score to account for these policies. Foreign-controlled banks account for over 80 percent of assets. and corruption are continuing obstacles. In the most recent year. finAnCiAL fREEDOM — 80 The Czech Republic’s financial sector is one of Central and Eastern Europe’s most advanced. Slow legislative and judicial reform. and residents and non-residents may hold foreign exchange accounts. overall tax revenue as a percentage of GDP was 36.1 The Czech Republic has relatively low tax rates. In the most recent year. Services market restrictions exceed EU policy.5 The Czech Republic’s overall regulatory environment remains somewhat inefficient. The judiciary is independent.5 80. market access restrictions in some services sectors. domestic rents. fREEDOM fROM CORRUPtiOn — 52 Corruption is perceived as significant. but dismissing an employee is relatively easy and inexpensive. Convention Against Corruption. = world average BUsinEss fREEDOM — 65. and inconsistent regulatory and customs administration among EU members. The Czech Republic ranks 45th out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008. Closing a business is burdensome.5 87. and an inheritance tax on non-family recipients.CZECh REPUBLiC’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. insurance. but regulatory bodies have been merged to streamline oversight. Convictions for bribery result in long prison terms. and non-transparent government procurement and the enforcement of intellectual property rights remain problematic. The non-salary cost of employing a worker can be high. There are no restrictions on payments or current transfers.0 76. Obtaining a business license requires twice the world average of 18 procedures. some raw materials. The flat income tax rate is 15 percent. The impact of the global financial turmoil on the banking sector has been relatively modest.6 percent of GDP.1 percent between 2006 and 2008. from Corruption Labor Freedom 65. uneven contract enforcement. where the state is a partner. gOVERnMEnt sPEnDing — 45. set minimum or maximum commercial transaction prices. fisCAL fREEDOM — 80. The government screens foreign investment projects in banking. The government has sold its remaining stakes in a telecommunications company and a petrochemicals refiner.4 Labor regulations are relatively flexible. 100 100 most free 50 60 80 inVEstMEnt fREEDOM — 70 Legally. and contracts are generally secure. However. and its MFN tariff code is complex.N. foreign and domestic investors are treated identically. Other taxes include a valueadded tax (VAT). import restrictions and bans for some goods and services. Ten points were deducted from the Czech Republic’s trade freedom score to account for non-tariff barriers. the EU has high or escalating tariffs for agricultural and manufacturing products. Capital markets are small and lack transparency. Company registration is controlled by the courts and can be slow and complicated. bureaucracy. Energy.6 Total government expenditures.9 percent. and establish periods when prices may not change.0 52. a real estate transfer tax.0 80. tRADE fREEDOM — 87. The state is controlling shareholder in two banks. Branches or offices of foreign companies may buy local real estate. quotas. The Ministry of Finance can fix prices. The common EU weighted average tariff rate was 1.5 The Czech Republic’s trade policy is the same as that of other members of the European Union. Non-tariff barriers reflected in EU and Czech policy include agricultural and manufacturing subsidies. compared to the world average of 35 days. MOnEtARY fREEDOM — 75.1 45. government spending equaled 42.3 percent in 2008. As a participant in the EU’s Common Agricultural Policy. except for farmland or woodland. Insurance companies and pension funds include significant foreign participation. Maximum prices apply to mail and telecommunications tariffs. and the top corporate tax rate has been reduced to 20 percent. Enforcing judgments and foreclosing security interests in land and personal property can still be difficult. Commercial disputes can take years to resolve. The supervisory framework is well established.

The impact of the global financial crisis on the banking sector has been relatively small. and labor freedom. and the private sector is characterized by many small and medium-size companies.2 billion –1. and the overall tax burden is significant.3% Inflation (cPI): 3. Two significant weaknesses continue to hold down Denmark’s overall economic freedom.9 100 100 D enmark’s economic freedom score is 77. Prime Minister Anders Fogh Rasmussen resigned in April 2009 to become Secretary General of NATO and was succeeded as prime minister by former Minister of Finance Lars Løkke Rasmussen.607 per capita unemployment: 3.4% FdI Inflow: $10. and its efficiency is supported by prudent lending practices and sound oversight. independent judiciary that protects property rights.6% 5-year compound annual growth $36. Its overall score is 1. While the corporate tax rate is moderate.9.9 billion 2008 data unless otherwise noted Data compiled as of September 2009 See page 457 for an explanation of the methodology or visit the Index Web site at heritage. Denmark’s modern and competitive economy performs well on many of the 10 economic freedoms.1% growth in 2008 1. The country has a strong tradition of openness to global trade and investment. Denmark is now ranked 3rd freest among the 43 countries in the European region. and transparent and efficient regulations are applied evenly in most cases. Despite a gradual decline over the past years. personal income taxes are very high. and its overall score is well above the regional average. Relations between Denmark and the Muslim world have been precarious ever since September 2005 when several cartoon caricatures of the Prophet Muhammad were printed in Danish newspapers. A large welfare state provides public education. Background: Denmark’s strong economy depends heavily on foreign trade. enhancing entrepreneurship and macroeconomic stability.7 points lower than last year. lifelong health care coverage. and the level of corruption is extraordinarily low. making its economy the 9th freest in the 2010 Index. Country’s Score Over Time Most free 80 80 60 60 World average 40 40 denmark 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 5.5 million gdP (PPP): $201. government spending remains over 50 percent of GDP. The financial sector is competitive. property rights. Denmark also boasts an efficient. and subsidized care for children and the elderly. How Do We Measure Economic Freedom? 171 . due mainly to reduced scores in monetary freedom.org/index.DEnMARK Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 9 Regional Rank: 3 77.

0 90. There are no restrictions on converting or transferring investment-associated funds into or out of Denmark. Most industries and businesses are now in private hands.0 79. As a participant in the EU’s Com- 172 2010 Index of Economic Freedom .8 percent. As a rule. Oil-for-Food scandal. tRADE fREEDOM — 87.5 percent in January 2010. Ten points were deducted from Denmark’s monetary freedom score to account for policies that distort domestic prices. State taxes vary from 5 percent to 15 percent. The investment code is relatively transparent. the EU has high or escalating tariffs for agricultural and manufacturing products. In the most recent year. No banks are state-owned. though the two largest banks account for about 75 percent of assets. foreign direct investment is not restricted or prescreened. Denmark adheres to key international conventions and treaties on the protection of intellectual property rights. As a result of relatively prudent lending in a sound regulatory framework.7 0 0 20 least free 40 mon Agricultural Policy. The global financial turmoil caused the collapse of several small and medium-sized banks. and close a business is well protected under Denmark’s regulatory environment. including consumption and transfer payments. The non-salary cost of employing a worker is low.9 22. are very high.3 percent in 2008. and the bond market is one of the world’s largest. Denmark has weathered the financial crisis with resilience.0 93.5 Denmark’s trade policy is the same as that of other members of the European Union. nontransparent and restrictive regulations and standards. County municipal taxes range from 22. a vehicle tax. However.9 percent between 2006 and 2008. MOnEtARY fREEDOM — 79. and medical services.9 Denmark has a very high income tax rate and a moderate corporate tax rate. non-EU citizens and companies not previously based in Denmark for at least five years need government permission. Denmark has signed the OECD Anti-Bribery Convention.9 87.7 Flexible labor regulations enhance employment opportunities and productivity growth. averaging 2.N. from Corruption Labor Freedom 97. In the most recent year. quotas. The securities market is highly developed. Starting a business takes an average of six days. The common EU weighted average tariff rate was 1. Incentive financing is available to foreign and domestic businesses. operate. accounting. and bureaucracy is streamlined and transparent. The Public Prosecutor for Serious Economic Crime has investigated the involvement of Danish firms in the U. Ten points were deducted from Denmark’s trade freedom score to account for nontariff barriers. import restrictions and bans for some goods and services. LABOR fREEDOM — 93. Non-tariff barriers reflected in EU and Danish policy include agricultural and manufacturing subsidies. gOVERnMEnt sPEnDing — 22 Total government expenditures. inVEstMEnt fREEDOM — 90 50 60 80 = world average 100 100 most free BUsinEss fREEDOM — 97. auditing. government spending equaled 51 percent of GDP. Medications are heavily subsidized. Supervision and regulation are based on EU legislation. and rents are generally fixed by law. market access restrictions in some services sectors. The lack of transparency in pharmaceuticals regulation exceeds EU policy. and its MFN tariff code is complex. and dismissing an employee is relatively easy and inexpensive. and secured interests in property are recognized and enforced. Other taxes include a value-added tax (VAT). finAnCiAL fREEDOM — 90 Denmark’s financial system is competitive. Commercial and bankruptcy laws are consistently applied. The top income tax rate of 59 percent is scheduled to be lowered to 51.3 Inflation has been relatively low. the government subsidizes agricultural production.3 90.5 35. overall tax revenue as a percentage of GDP was 49. and the central bank is independent. fREEDOM fROM CORRUPtiOn — 93 Denmark (along with two other countries) is ranked 1st out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008 for the second year in a row. In October 2008. PROPERtY Rights — 90 The judiciary is independent and generally fair and efficient. compared to the world average of 35 days. The top corporate tax rate is 25 percent.DEnMARK’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. and inconsistent regulatory and customs administration among EU members.5 percent. and an 8 percent health tax.7 percent to 27. the parliament passed legislation calling for a joint financing program by private banks and the government. but Denmark restricts the establishment of companies that provide legal.0 90. distorting the prices of agricultural products. EU citizens and companies from EU member states may purchase any type of real estate (except vacation properties) without prior authorization. fisCAL fREEDOM — 35. Obtaining a business license requires much less than the world average of 18 procedures and 218 days.0 93.9 The overall freedom to start.

An effort is underway to amend the constitution to permit Guelleh to run for a third term in 2011. President Ismael Omar Guelleh was elected in 1999 and re-elected in 2005.0% 2008 data unless otherwise noted Data data unless otherwise noted 2008 compiled as of September 2009 Data compiled as of September 2009 FdI Inflow: $234 million See page 457 for an explanation of the methodology or visit the Index Web site at heritage. and his multi-party. with industry accounting for less than 20 percent of GDP. and services accounted for nearly 80 percent of GDP in 2007. becoming more efficient. Tariff and non-tariff barriers are high. the railway. multi-ethnic coalition controls all levels of government. Its overall score is almost the same as last year. Country’s Score Over Time Most free 80 80 60 60 World average 40 40 djibouti 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 0. Djibouti is strategically located at the mouth of the Red Sea along the shipping route between the Mediterranean Sea and the Indian Ocean. Djibouti is ranked 29th out of 46 countries in the Sub-Saharan Africa region. Its economy is centered on port facilities. burdensome regulations. Capitalizing on its geographical advantage. and bureaucratic inefficiency.org/index.8 million gdP (PPP): $1. with new banking laws. Overall economic development is undermined by very weak business freedom and trade freedom.0 100 100 D jibouti’s economic freedom score is 51.7% 5-year compound annual growth $2. Opposition groups boycotted the 2005 presidential election and the February 2008 legislative election. making its economy the 139th freest in the 2010 Index. and telecommunications hub.DJiBOUti Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 139 Regional Rank: 29 51. widespread corruption. Djibouti is trying to transform itself into a regional trade. though a minority continues its nomadic desert existence. with small declines in five economic freedoms offset by a gain in investment freedom. Increased investment. The population is concentrated in the capital city. Limited privatization and weak infrastructure result in persistently high unemployment. Djibouti’s economy is driven mainly by services.8 billion 3. Background: Djibouti has struggled toward multi-party democracy since gaining its independence in 1977. and weak rule of law hamper many areas of the economy.140 per capita unemployment: estimated to be more than 30% Inflation (cPI): 12. How Do We Measure Economic Freedom? 173 . and foreign military bases. has led to relatively high economic growth. particularly in construction and port operations.9% growth in 2008 4. and its overall score is slightly lower than the regional average. The financial sector is growing and. finance.0.

Credit is allocated on market terms. is complex. Residents and non-residents may hold foreign exchange accounts. particularly foreign banks.9 70. and the top corporate tax rate is 25 percent. resisting calls to expand the already large wage bill with salary increases. Reforms are being introduced. Over the past year. gOVERnMEnt sPEnDing — 58. Goods and services such as medicines. MOnEtARY fREEDOM — 70. telecommunications. and a value-added tax (VAT). and there are no foreign exchange controls. Commercial and bankruptcy laws are not applied consistently.1 percent. and insufficient capacity in older port facilities add to the cost of trade. It is estimated that more than 80 percent of enterprises are within the informal sector. Commercial banks generally provide only short-term financing and lending.5 60. Corruption deters investment. postal services. government spending equaled 37 percent of GDP. power. authorities have exhibited spending restraint. Capital markets are undeveloped. the central bank has permitted more foreign banks to operate. variable and sometimes high import taxes and fees. but the private sector remains underdeveloped outside of Djibouti’s free trade zone. bread.5 Inflation has been rising. The government has acted to promote the integrity and efficiency of the banking sector and has adopted new banking laws. Since 2006. and telecommunications.9 Djibouti’s weighted average tariff rate was 29.7 Overall business freedom remains constrained by the burdensome regulatory environment. Privatization has progressed.2 58. but dismissing an employee can be relatively difficult and costly. Trials and judicial proceedings are subject to corruption. The government retains a minority stake in Banque pour le Commerce et l’Industrie-Mer Rouge. opaque. LABOR fREEDOM — 55. but licensing costs and the entry cost of launching a business are high. the largest commercial bank. and there are no restrictions on payments or transfers. 35. The government imposes no limitations on international fund conversions or transfers. fisCAL fREEDOM — 78. derived from French civil law.0 30.0 60. PROPERtY Rights — 30 Protection of private property is weak. In the most recent year. Administrative delays. The government also influences prices through its regulation of state-owned enterprises.2 Djibouti has average tax rates.1 percent in 2006. demands for petty bribes. water. such as public utilities. Djibouti ranks 102nd out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008. import licensing requirements. and slow.0 30. electricity.DJiBOUti’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. from Corruption Labor Freedom inVEstMEnt fREEDOM — 60 No major laws discriminate against foreign investment. enter the market.3 Relatively inflexible labor regulations hinder employment and productivity growth. an excise tax. In the most recent year. The sales tax and services tax are being replaced by the VAT and restructured tariffs. Pirated goods are sold openly in the informal markets. the prohibition of certain imports. Work hours are not fully flexible. are state-owned and not open. overall tax revenue as a percentage of GDP was 23. Ten points were deducted from Djibouti’s monetary freedom score to account for measures that distort domestic prices. The non-salary cost of employing a worker is moderate. averaging 9.3 0 0 20 least free 40 50 60 80 = world average 100 100 most free BUsinEss fREEDOM — 35. Anti-corruption laws are rarely enforced. market access restrictions in the services sector. and urban transport are subject to price controls. Despite some reforms. The government does not enforce laws protecting intellectual property rights. The top income tax rate is 32 percent. Other taxes include a property tax.7 31. fREEDOM fROM CORRUPtiOn — 30 Corruption is perceived as widespread. are relatively high.9 Total government expenditures. tRADE fREEDOM — 31. Certain sectors. Obtaining a business license requires slightly less than the world average of 18 procedures and 218 days. and private enterprises are hampered by weak infrastructure and the high costs of labor. including microenterprises that play a key role in the economy. One majority French-owned bank and one fully French-owned bank together still dominate banking. but access to credit for entrepreneurial activity is still limited by high costs and the lack of other available financing instruments. 174 2010 Index of Economic Freedom . and the legal system.9 78. and a non-transparent judicial system are barriers to foreign direct investment. and enforcement of contracts can be timeconsuming. Ten points were deducted from Djibouti’s trade freedom score to account for nontariff barriers. Political manipulation undermines the judicial system’s credibility. Courts are frequently overburdened. Privatization has been slow. but bureaucratic procedures are complicated. finAnCiAL fREEDOM — 60 Djibouti’s underdeveloped financial sector has been growing as more banks. weak enforcement of intellectual property rights.5 percent between 2006 and 2008. including consumption and transfer payments.0 55.

Dominica’s low score in financial freedom reflects problems with bank supervision and the regulatory framework. Banana producers continue to struggle to recover from the effects of 2007’s Hurricane Dean. and exotic fruits. Dominica’s government decided to join Venezuela’s Bolivarian Alternative for the Americas (ALBA) socialist trade scheme. and its overall score is above the world and regional averages.6 billion 3. coconut soap.696 per capita unemployment: estimated to be more than 10% Inflation (cPI): 6.9% 2008 data unless otherwise noted Data data unless otherwise noted 2008 compiled as of September 2009 Data compiled as of September 2009 FdI Inflow: $60 million See page 457 for an explanation of the methodology or visit the Index Web site at heritage. Dominica scores above the world average in six of the 10 economic freedoms. This could undermine regional economic integration under the CARICOM Single Market and Economy. Sounder and more prudent public finance management is needed to promote long-term economic growth. Country’s Score Over Time Most free 80 80 60 60 World average 40 40 dominica 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 73. cut flowers. and nearly one-third of the labor force works in agriculture.2.DOMiniCA Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 70 Regional Rank: 14 63. Two major weaknesses limit Dominica’s overall economic freedom. patchouli. and cocoa dominate the economy. although pirated materials are bought and sold without consequence.org/index.4% growth in 2008 2. In 2008. Government expenditure equals nearly 40 percent of GDP.2 100 100 D ominica’s economic freedom score is 63.6 point higher than last year.2 thousand gdP (PPP): $0. and foreign investors receive treatment generally equal to nationals. Property rights are respected. How Do We Measure Economic Freedom? 175 . aloe vera. Dominica is ranked 14th out of 29 countries in the South and Central America/ Caribbean region. with only small changes in any of the 10 economic freedoms. undermining the economy’s overall productivity. making its economy the 70th freest in the 2010 Index. Tourism is less significant than on other Eastern Caribbean islands. after Venezuela promised millions in funding for agricultural and industrial development. The government has tried to diversify agriculture by encouraging the growing of coffee. Its overall score is 0.9% 5-year compound annual growth $8. and the efficiency of government services has been poor. Bananas. although ecotourists are drawn to the rugged mountains and rain forests. Background: Dominica has a unicameral parliamentary government with a president and prime minister. coconuts. citrus. The entrepreneurial environment is relatively efficient.

0 60. In general.4 74. Obtaining a business license requires 13 procedures. Regulation of the non-bank financial sector remains uneven. Five points were deducted from Dominica’s monetary freedom score to adjust for remaining price controls on fuel. a reduction planned for January 2009 did not take place. government spending equaled 40. PROPERtY Rights — 65 Dominica has an efficient legal system based on British common law. There are criminal penalties for official corruption. and almost 40 days less than the world average of 218 days. modernize customs operations. gOVERnMEnt sPEnDing — 49. fREEDOM fROM CORRUPtiOn — 60 Corruption is perceived as significant.6 percent between 2006 and 2008. The corporate tax rate is 30 percent. non-national investors must obtain an Alien Landholding License to purchase up to one acre of land for residential use and up to three acres for trade or business purposes. but the law is not implemented effectively. Ten points were deducted from Dominica’s trade freedom score to account for non-tariff barriers. including elimination of price controls and privatization of the state banana com- LABOR fREEDOM — 65. a mixed foreign–domestic company may repatriate profits to the extent of its foreign participation. but some import and export bans and restrictions.4 The overall freedom to conduct a business is relatively well protected under Dominica’s regulatory environment. Dominica’s currency is the Eastern Caribbean Dollar. Foreign investors may hold up to 100 percent of an investment. export fees. Investment is hindered by non-transparent bureaucracy and regulation. including consumption and transfer payments. Tax reforms begun in 2008 continued in 2009 with income tax cuts for lower brackets. Dominica ranks 33rd out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008. and regulation and supervision are poor. the wife may not inherit or sell the property.7 49.7 The top income tax rate is 38 percent. Pirated copyrighted material is sold openly.0 65. inVEstMEnt fREEDOM — 65 Foreign investment is subject to little restriction.8 Total government expenditures. and inefficient contract enforcement and land registration. MOnEtARY fREEDOM — 80 Inflation has been moderate. Shallow markets and a lack of available financial instruments restrict access to credit. a regional currency.3 67.0 30. In 2003. from Corruption Labor Freedom 75. but she may live in it and pass it to her children.3 Dominica’s weighted average tariff rate was 7. tRADE fREEDOM — 74. and address inefficiencies in the clearance of goods. Prudent management of aid inflows remains central to sound fiscal management. are relatively high. and dismissing an employee is difficult or costly.0 65. Dominica is trying to improve customs efficiency. import licensing. Other taxes include a value-added tax (VAT). and limited state trading add to the cost of trade. Monitoring of non-bank financial institutions needs to be strengthened to deter money laundering.9 percent in 2007.8 percent.8 80. In the most recent year. overall tax revenue as a percentage of GDP was 29. There are no restrictions on the repatriation of dividends for totally foreign-owned firms. The judiciary is independent. Starting a business takes less than half of the world average of 35 days. restrictions on services markets.2 0 0 20 least free 40 pany. compared to the world average of 18. which are dominated by insurance companies and credit unions. underdeveloped markets. offshore financial services have expanded rapidly. fisCAL fREEDOM — 67. Dominica reserves many small-business opportunities for nationals. import taxes and fees. In the most recent year. When the male head of household dies without a will. infrastructure constraints. The government hopes that implementing its Financial Services Act will strengthen the regulatory and prudential framework for non-bank financial institutions. export subsidies. finAnCiAL fREEDOM — 30 Dominica’s underdeveloped financial sector is dominated by banking. averaging 5. One of the four banks is government-owned. Nonperforming loans have declined from over 20 percent of total assets in 2003 to around 10 percent. the government began a comprehensive restructuring of the economy.0 65. In the past few years. The Eastern Caribbean Central Bank issues the EC$. 176 2010 Index of Economic Freedom . Dominica is one of nine members of the Eastern Caribbean Central Bank. The non-salary cost of employing a worker is moderate. and public trials are generally fair. manages monetary policy. and excise taxes on food and fuel that were reduced in late 2008.DOMiniCA’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. 50 60 80 = world average 100 100 most free BUsinEss fREEDOM — 75.9 percent of GDP. an environmental tax. and regulates and supervises commercial banking in member countries. and foreign investors generally receive national treatment.2 Dominica’s employment regulations are relatively inflexible.

1 points. deal with an energy crisis. president from 1996 to 2000 and elected again in 2004. The Dominican Republic scores poorly in financial freedom and property rights. Additionally. making its economy the 86th freest in the 2010 Index. The highly politicized electricity sector is plagued by “distribution losses” (theft) of more than one-third of its output. How Do We Measure Economic Freedom? 177 . was re-elected to a third term in 2008. but a severe economic downturn in 2009 has fueled public anger about government corruption and wasteful spending.8 billion 5.6% FdI Inflow: $2. led by tourism.5% Inflation (cPI): 10. and investment freedom has been improved by provisions that strengthen investor protections and improve transparency and efficiency. and maquiladora manufacturing.org/index. hurting the investment and entrepreneurial climate. Its overall score increased 1. The government also needs to manage a fiscal adjustment. and rising world oil prices.3.3% 5-year compound annual growth $8. Government spending is low. slowed to negative growth by 2003.9 billion 2008 data unless otherwise noted Data compiled as of September 2009 See page 457 for an explanation of the methodology or visit the Index Web site at heritage.3 100 100 t he Dominican Republic’s economic freedom score is 60. The financial sector suffers from poor supervision and regulation as well as from limited access to credit. telecommunications. helped by implementation of the Central America–Dominican Republic–United States Free Trade Agreement in 2007.8 million gdP (PPP): $80. led by improvements in trade freedom.DOMiniCAn REPUBLiC Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 86 Regional Rank: 18 60. and organized crime) and poor enforcement of the rule of law are widespread. corruption (in the form of drug trafficking. investment freedom and labor freedom. Trade freedom has increased significantly in the Dominican Republic as a result of a drop in the average tariff rate. Background: Leonel Fernandez of the Dominican Liberation Party. A 1990s economic boom. The Dominican Republic is ranked 18th out of 29 countries in the South and Central America/Caribbean region. and finance trade and budget deficits. seasonal drought that reduces hydroelectric production. rebuild infrastructure.217 per capita unemployment: 15.3% growth in 2008 8. The economy rebounded somewhat. Country’s Score Over Time Most free 80 80 60 60 World average 40 40 dominican republic 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 9. violence.

0 percent.2 percent between 2006 and 2008. tRADE fREEDOM — 80 The Dominican Republic’s weighted average tariff rate was 5 percent in 2008. Dominican and foreign business leaders complain that judicial and administrative corruption affects the settlement of business disputes. The Dominican Republic has a history of problems resulting from conflicting property titles. and confidence in banking has been shaky since then. Although the government has slowly improved its patent and trademark laws. Despite reforms aimed at improving the transparency and effectiveness of laws LABOR fREEDOM — 59. activities negatively affecting public health and the environment. non-transparent and restrictive regulations and standards. PROPERtY Rights — 30 The court system is inefficient. credit to the private sector has bounced back in recent years. the private sector. Some capital transactions are subject to approval. Pension funds and insurance companies account for less than 10 percent of financial-sector assets. averaging 9. The Dominican Republic ranks 102nd out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008. overall tax revenue as a percentage of GDP was 15. gOVERnMEnt sPEnDing — 90. finAnCiAL fREEDOM — 40 The Dominican Republic’s small financial sector is poorly supervised and regulated. Ten points were deducted from the Dominican Republic’s monetary freedom score to account for policies that distort domestic prices. must be composed of Dominican nationals (the management or administrative staff of a foreign company is exempt).0 85.8 55.3 The Dominican Republic has moderate tax rates. High agriculture tariffs. Foreign investors cite a lack of clear. operate. In the most recent year. Complaints have included corruption. Foreign investors and citizens have the same rights to own property. or reporting requirements. and the production of goods directly linked to national security. non-transparent government procurement. The top income tax rate is 25 percent. from Corruption Labor Freedom 62. MOnEtARY fREEDOM — 70. Corruption remains endemic in government. Residents and non-residents may hold foreign exchange accounts.0 30. Distortions in the foreign exchange market have been gradually eliminated. but dismissing an employee can be difficult and costly. Corporations are subject to a flat rate of 25 percent. In the most recent year. and failure to honor contracts. However. government spending equaled 18. Most confiscated property has been used for infrastructure or commercial development. fREEDOM fROM CORRUPtiOn — 30 Corruption is perceived as widespread. In an effort to strengthen the regulatory framework for the banking sector. inefficient customs administration. an estate tax. unless authorized by the president. limiting access to credit. and the security forces. affecting competition. The non-salary cost of employing a worker is moderate. Payments and transfers are subject to documentation requirements. including consumption and transfer payments.2 70. Starting a business takes less than the world average of 35 days. efforts to establish the rule of law in many sectors have been impeded or soundly defeated by special interests. Ten points were deducted from the Dominican Republic’s trade freedom score to account for non-tariff barriers.3 90. are low.0 40. enforcement of intellectual property rights remains poor. inVEstMEnt fREEDOM — 55 Unlimited foreign investment is permitted in all sectors with the exception of disposal and storage of toxic or radioactive waste not produced in the country.DOMiniCAn REPUBLiC’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. delays in government payments.8 Inflation has been high. standardized rules by which to compete and a lack of enforcement. and red tape is common. requests for bribes. Assets are largely controlled by 14 multiple-service banks. and corruption add to the cost of trade. The government applies price controls to electricity and fuel and subsidizes some agricultural products and electricity generation. Restrictions on work hours are rigid. and close a business is limited by the Dominican Republic’s regulatory environment.0 30.6 Employment regulations are relatively burdensome.1 percent of GDP. The sector has achieved modest liberalization and consolidation. 178 2010 Index of Economic Freedom .2 Total government expenditures. amendments to the Monetary and Finance Law were proposed in 2008. Despite recent reforms. Eighty percent of the labor force of a foreign or national company. and a net wealth tax. including free trade zone companies.6 0 0 20 least free 40 50 60 80 = world average 100 100 most free BUsinEss fREEDOM — 62. The government can expropriate property arbitrarily. documentation.0 59. An attempt to create a new financial regulatory network was circumvented by a government bailout of several banks during a 2003 banking crisis. fisCAL fREEDOM — 85. import permit requirements.4 80.4 The overall freedom to start. Other taxes include a value-added tax (VAT). but closing a business is a lengthy and costly process.

009 per capita unemployment: 8. The judiciary rules erratically and remains vulnerable to corruption. Its overall score is 3. Ecuador is the world’s largest banana exporter. continuing a sharp downward trend with declines in eight of the 10 economic freedoms. Capital flight has soared. Ecuador performs particularly poorly in business freedom. Background: In January 2007. Correa has consolidated his political power under a new constitution and won re-election to a second term in April 2009. government interference has increased in key industries such as energy.ECUADOR Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 147 Regional Rank: 26 49.9 billion 6.3 100 100 E cuador’s economic freedom score is 49. and there is a lack of respect for the rule of law. and production is declining. the rule of law is politically influenced and inefficient. and expropriation of private property is a concern. Ecuador is ranked 26th out of 29 countries in the South and Central America/Caribbean region. He also promised to default on debt owed to international lenders and to oppose any free trade agreement with the United States.3.org/index. Ecuador’s new constitution. property rights. investment freedom. It also has ample petroleum reserves.4% FdI Inflow: $974 million 2008 data unless otherwise noted Data compiled as of September 2009 See page 457 for an explanation of the methodology or visit the Index Web site at heritage. Factions in the legislature fuel political and institutional instability. increases the state’s role in management of the economy and expands government spending. and it is estimated that the government now spends over 40 percent of GDP. and its overall score is significantly below the world and regional averages. economist Rafael Correa was elected president on a populist platform of tighter government control of banking and oil production.7% Inflation (cPI): 8. Burdensome regulations restrict business and labor flexibility. How Do We Measure Economic Freedom? 179 . making its economy the 147th freest in the 2010 Index. banking. and freedom from corruption. but the government-run oil industry is mismanaged and corrupt. Country’s Score Over Time Most free 80 80 60 60 World average 40 40 Ecuador 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 13.2 points lower than last year. approved by referendum in September 2008.5 million gdP (PPP): $107. Aligned with Venezuela’s leftist President Hugo Chávez. As a result.4% 5-year compound annual growth $8. and foreign direct investment has fallen. and telecommunications.5% growth in 2008 4.

Banking has undergone consolidation and restructuring since the late 1990s. milk. but investment in petroleum. coastal and border real estate.5 63. sugar. overall tax revenue as a percentage of GDP was 14. The government sets domestic prices for bread. Closing a business is a lengthy process. broadcast media. and capital markets remain underdeveloped.2 0 0 20 least free 40 monetary freedom score to account for measures that distort domestic prices. Local authorities often demand gratuities to issue necessary permits.5 Total government expenditures. oats. Obtaining a business license takes about the world average of 18 procedures. The U. compared to the world average of 35 days. telecommunications. Expropriation is possible.S. State-owned electricity and telecommunications enterprises remain inefficient.3 Ecuador has an above-average income tax rate and an average corporate tax rate. and industry is relatively concentrated. averaged 6. but little equity has been traded. tuna. fREEDOM fROM CORRUPtiOn — 20 Corruption is perceived as pervasive.8 Ecuador’s weighted average tariff rate was 6. rice. judgments are unpredictable and inconsistent. Fifteen points were deducted from Ecuador’s trade freedom score to account for non-tariff barriers. Government spending equaled 27. Ecuador is ranked 90th out of 115 countries in the 2009 International Property Rights Index. The financial system lacks efficiency and depth. Credit is available on market terms. There are now 25 banks. the four largest account for more than 60 percent of deposits. PROPERtY Rights — 20 The rule of law is weak.S. including consumption and transfer payments. 180 2010 Index of Economic Freedom . chicken. In some cases.4 percent between 2006 and 2008 and is climbing. and intellectual property rights are not enforced. import licenses. Other taxes include a value-added tax (VAT) and an inheritance tax.0 20. Foreign takeovers of banks and insurance companies are restricted. have been relatively low. direct investment. Laws and regulations to combat official corruption are inadequately enforced. fisCAL fREEDOM — 79. Illicit payments for official favors and theft of public funds take place frequently. Ecuador ranks 151st out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008. and the corporate tax rate is 25 percent. Starting a business takes an average of 64 days.0 40. from Corruption Labor Freedom 52. Systemic weaknesses and political pressure are significant problems. noodles.9 Inflation. 50 60 80 = world average 100 100 most free BUsinEss fREEDOM — 52. domestic fishing.6 percent in 2008. The top income tax rate is 35 percent. tRADE fREEDOM — 71. Import restrictions. gOVERnMEnt sPEnDing — 77. restrained somewhat by Ecuador’s use of the U. vegetable oil. discriminatory standards and regulations. or transfers. and issues involving the enforcement of intellectual property rights add to the cost of trade.9 The overall freedom to conduct business is limited by Ecuador’s regulatory environment. coffee. Rules are complex and non-transparent. There are no antitrust laws. bananas. dollar as its currency. import taxes against certain products.ECUADOR’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. Profit repatriation and foreign access to the credit market are allowed. and the judicial system is subject to corruption. inVEstMEnt fREEDOM — 25 Foreign investment receives national treatment.9 25.3 77. and access to credit can be costly. the judicial system has failed to provide adequate protection from unlawful expropriations or effective compensation for expropriated property. There are no restrictions on foreign exchange.0 42. MOnEtARY fREEDOM — 63.9 71. Job-tenure regulations create a disincentive for new hiring. The new constitution increases the state’s role in the economy and enshrines the government’s right to control strategic sectors such as natural resources and telecommunications. finAnCiAL fREEDOM — 40 Ecuador’s financial sector is not fully developed. mandatory pre-approval for imports of certain agriculture products. Dispute settlement procedures are complicated by the lack of transparency and inefficiency in the judicial system. dollar is the official currency.4 percent of GDP in the reference year of 2007 but has been rising rapidly since then. The state controls about 10 percent of bank assets. price bands and variable levies against certain agriculture goods. and pharmaceuticals. non-transparent government procurement. Twenty points were deducted from Ecuador’s LABOR fREEDOM — 42. There are two stock markets. and national security is subject to government approval and additional regulations. fuels.0 20. inefficient administration of tariff rate quotas. and agricultural land may be seized by squatters.2 Burdensome labor regulations hinder employment opportunities and productivity growth.8 79. Only public or mixed enterprises (with a public majority stake) may provide public services or control strategic sectors. mining. electricity. cocoa. Many employers resort to short-term outsourcing contracts.9 percent. Court delays are significant. In the most recent year. but lack of options hampers entrepreneurial activity.

7% FdI Inflow: $9. Despite incremental reforms to liberalize the socialist economic system. In 2005. the government still heavily subsidizes food. In the financial sector. the state’s presence has been gradually phased out. Trade freedom has improved significantly due to large reductions in the average tariff rate.6 billion 7. the economy has been bolstered by growing foreign investment and revenues from the production and export of oil and gas. Economic reform became a higher priority under Prime Minister Ahmed Nazif. Steady reform measures that Egypt has taken since 2004 have resulted in progress toward greater economic freedom.5 billion 2008 data unless otherwise noted Data compiled as of September 2009 See page 457 for an explanation of the methodology or visit the Index Web site at heritage. with noticeable improvements in trade freedom and government spending. Competitive tax rates are in place. energy. Country’s Score Over Time Most free 80 80 60 60 World average 40 40 Egypt 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 81. Continuing the solid track record of economic transformation now requires deeper reforms in order to sustain the country’s long-term economic growth. and its overall score is just below the world and regional averages. and restructuring is underway. Since then. having campaigned as “independents” in 2005. and other key commodities.org/index.0.4% Inflation (cPI): 11. Background: Egypt is the most populous Arab country and a major force in Middle Eastern affairs. cut energy subsidies.416 per capita unemployment: 8. How Do We Measure Economic Freedom? 181 . making its economy the 94th freest in the 2010 Index.5 million gdP (PPP): $441. and privatized several enterprises. Those reforms include strengthening the judicial system.0 100 100 E gypt’s economic freedom score is 59.1% growth in 2008 6.4% 5-year compound annual growth $5. who took office in 2004 and placed liberal reformers in key positions. President Hosni Mubarak has held power since 1981. and public finance management has become more efficient. the government reduced personal and corporate tax rates. Egypt is ranked 11th out of 17 countries in the Middle East/ North Africa region. Its overall score increased by one point over the past year. better protecting property rights. and effective eradication of corruption that is perceived to be widespread. but supporters of the radical (and illegal) Muslim Brotherhood hold 20 percent of the seats in Parliament. Egypt’s entrepreneurial environment has been enhanced by regulatory reforms.EgYPt Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 94 Regional Rank: 11 59.

finAnCiAL fREEDOM — 50 The government has moved gradually from direct intervention to indirect control of monetary aggregates through such measures as bond issues. Egypt ranks 115th out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008. but employment regulations are not flexible enough to enhance employment opportunities and productivity growth.0 40. Full private-sector ownership. The Industrial Development Authority exempted 67 items from sales tax in June 2009. There are no restrictions on repatriating capital. Reforms are increasing regulatory transparency and reducing bureaucracy. including foreign ownership. On average. gas. import licensing. overall tax revenue as a percentage of GDP was 15.2 50. mutual funds. and exploration companies. but five public banks dominate the sector. Residents and non-residents may hold foreign exchange accounts.6 The government has adopted a new labor code.4 Total government expenditures. is allowed in banking and insurance. insurance. fREEDOM fROM CORRUPtiOn — 28 Corruption is perceived as widespread. but import bans and restrictions. Judicial procedures tend to be protracted. transport. Enforcement of intellectual property rights is seriously deficient. and the stock exchange has been expanding as a key source of financing. from Corruption Labor Freedom 65. The government is using revenue from reductions in gas and fuel subsidies to increase other social spending. Fifteen points were LABOR fREEDOM — 55. Local contractual arrangements are generally secure. The top individual and corporate income tax rates are 20 percent. energy (including fuel). domestic preference in government procurement.55 percent remains in effect for oil. Foreigners may own up to 100 percent of a project.EgYPt’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. government spending equaled 29. costly. Capital markets are developing. Sale of Banque du Caire has been indefinitely delayed following the failure of the government’s attempt to sell its stake in June 2008. are moderate. 182 2010 Index of Economic Freedom . Starting a business takes an average of seven days. and weak enforcement of intellectual property rights add to the cost of trade. and there are allegations of significant corruption among high-level officials. it takes six years to decide commercial cases. services market access restrictions. gOVERnMEnt sPEnDing — 73. In the most recent year.0 89. sugar. inconsistent customs valuation. and certain sectors remain restricted.0 74. nontransparent sanitary and phytosanitary measures.2 Inflation has been high.3 percent. Many large international financial institutions in commercial and investment banking. no progress had been made as of mid-2009. Ten points were deducted from Egypt’s trade freedom score to account for non-tariff barriers. fisCAL fREEDOM — 89. but approval is easier for joint ventures with domestic partners. Despite announced plans to privatize 152 state-owned enterprises.4 64. and subject to political pressure. Restrictions on work hours are relatively flexible. however. Obtaining a business license still takes more than the world average of 18 procedures. A special tax of 40. Bribery of low-level civil servants seems to be a part of daily life. The government sold a majority stake in the Bank of Alexandria in 2006. and appeal procedures can extend cases beyond 15 years.0 50. compared to the world average of 35 days. PROPERtY Rights — 40 The government sometimes uses fast-track military courts to circumvent the judiciary.8 percent between 2006 and 2008. Other taxes include a property tax and general sales tax (GST) that functions as a value-added tax (VAT).6 0 0 20 least free 40 deducted from Egypt’s monetary freedom score to adjust for measures that distort domestic prices. 50 60 80 = world average 100 100 most free BUsinEss fREEDOM — 65 The government has established a “one-stop shop” for business investment and revamped regulation.0 28. MOnEtARY fREEDOM — 64.7 73. Customs administration is improving. Laws on real estate ownership are complex.7 Egypt has below-average personal income and corporate tax rates. regulations may be inconsistently enforced. and medicine and subsidizes basic food items. and public transportation. pharmaceuticals. including consumption and transfer payments. and securities trading now operate in Egypt. but the non-salary cost of employing a worker remains high. but there are few restrictions on foreign ownership of nonagricultural real estate. The government controls prices for some basic foods. averaging 10. and titles to real property may be difficult to establish and trace. In the most recent year. tRADE fREEDOM — 74 Egypt’s weighted average tariff rate was 8 percent in 2008. inVEstMEnt fREEDOM — 50 All investment projects must be reviewed to gain legal status and qualify for incentives. and the judicial system is slow and subject to political influence.8 percent of GDP. Real estate laws are complex.0 55.

1 point higher than last year.1 million gdP (PPP): $41. making its economy the 32nd freest in the 2010 Index. political parties have cooperated on political and economic reforms. El Salvador participates in the Central America–Dominican Republic–United States Free Trade Agreement. Background: An estimated 75. El Salvador’s overall economic freedom remains diluted by two institutional weaknesses. but the relatively weak and inefficient judicial system remains a critical area in need of reform. In March 2009.org/index. privatizations of state-owned enterprises.3% Inflation (cPI): 7. Freedom from corruption is the only economic freedom indicator where El Salvador scores below the world average.3% FdI Inflow: $784 million 2008 data unless otherwise noted Data compiled as of September 2009 See page 457 for an explanation of the methodology or visit the Index Web site at heritage. and its overall score is well above the world average.7 billion 2. with only small movements in any of the 10 economic freedoms. Coffee exports remain significant. and respect for human rights. particularly trade freedom. El Salvador is ranked 3rd out of 29 countries in the South and Central America/Caribbean region. fiscal freedom. and its economy has become more modern and service-based.9. Farabundo Marti Liberation Front (FMLN) leader Mauricio Funes became El Salvador’s first leftist president. Annual emigrants’ remittances of roughly $3 billion are also vital. El Salvador has a solid record of economic and structural reform. Steady economic growth and poverty reduction are due in part to the National Republican Alliance (ARENA) party’s free-market policies in the mid and late 1990s.6% 5-year compound annual growth $6. How Do We Measure Economic Freedom? 183 . but much growth has come from maquila industries and the services sector. Its overall score is 0. and a moderate tax regime have contributed to progress toward greater economic freedom. A poor government education system and increasing gang violence are major problems.5% growth in 2008 3. Since the 1992 peace accord.000 Salvadorans died in the 1980–1992 civil war.EL sALVADOR Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 32 Regional Rank: 3 69. the restoration of civil liberties. The economy performs well in many of the 10 economic freedoms. Country’s Score Over Time Most free 80 80 60 60 World average 40 40 El Salvador 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 6. Property rights are moderately well protected. General openness to international commerce.9 100 100 E l Salvador’s economic freedom score is 69. and investment freedom.794 per capita unemployment: 6.

and credit is easily accessible. restrictive sanitary and phytosanitary regulations. Starting a business takes about half the world average of 35 days. It is against the law to solicit. from Corruption Labor Freedom 67. The four largest banks account for over 80 percent of total assets. Judicial inefficiency and crime are among the main constraints on business. Non-bank financial institutions are limited by the lack of personal savings and low disposable income. and a few other discriminatory applications of standards add to the cost of trade. Government ministries directly subsidize water services and set the distribution-service price. access to foreign exchange. banking. which have climbed since 2006. Small-business concerns and investment in certain sectors face additional regulation or restriction.4 The overall freedom to conduct a business is relatively well protected under El Salvador’s regulatory environment.8 85. and non-performing loans. Banking regulations are open and transparent.1 75. fREEDOM fROM CORRUPtiOn — 39 Corruption is perceived as significant. but dismissing an employee is difficult. Banks are now largely foreign-owned. Investors who begin operations with 10 or fewer employees must present plans to increase employment to the Ministry of Economy. petroleum.1 percent in 2008. or accept a bribe. Bankruptcy is somewhat lengthy but not costly.7 89. Ten points were deducted from El Salvador’s trade freedom score to account for non-tariff barriers. Following a decade of liberalization and consolidation. and liquid propane gas. and excise taxes. Obtaining a business license takes less than the world average of 218 days. Ten points were deducted from El Salvador’s monetary freedom score to adjust for measures that distort domestic prices. In the most recent year. but monopolies persist in transportation. Import restrictions and bans. inflation has risen. Lawsuits move very slowly and can be costly and unproductive. No single domestic or foreign entity can own more than 245 hectares of land. Bureaucratic procedures are relatively streamlined. government spending equaled 19 percent of GDP. tRADE fREEDOM — 83.3 percent between 2006 and 2008.4 percent. Regulatory agencies are often understaffed and inexperienced. finAnCiAL fREEDOM — 70 El Salvador’s financial sector is one of Central America’s most advanced. averaging 6. El Salvador’s 1983 constitution allows the government to expropriate private property for reasons of public utility or social interest. and electricity distribution. account for about 3 percent of the total.2 Total government expenditures. a tax on insurance contracts. inVEstMEnt fREEDOM — 75 The law grants equal treatment to foreign and domestic 184 2010 Index of Economic Freedom . The government controls the price of some goods and services. gOVERnMEnt sPEnDing — 89. including consumption and transfer payments. PROPERtY Rights — 50 Private property rights are moderately well protected. Most government corruption occurs at lower levels of the bureaucracy. MOnEtARY fREEDOM — 74. but two of the 12 operating in the country are state-owned. and electricity.1 Although the economy is fully dollarized. and indemnification can take place either before or after the fact.EL sALVADOR’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. and final rulings may not be enforced. El Salvador ranks 67th out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008. although commercial law enforcement remains inefficient and inconsistent.0 50. Rural lands may not be acquired by foreigners from countries where Salvadorans do not enjoy the same right.0 70. The non-salary cost of employing a worker is low. export subsidies.0 64. fisCAL fREEDOM — 85. The government subsidizes diesel. including liquid propane gas. offer. Other taxes include a value-added tax (VAT). There have been credible complaints about judicial corruption.7 El Salvador has average tax rates. public transport.0 39. There are no controls or requirements on current transfers. The economy is largely privatized. El Salvador’s well-capitalized banking sector has not been adversely affected by the global financial turmoil. The legal system is subject to manipulation by private interests. Laws and regulations are relatively transparent and generally foster competition. The top personal and corporate income tax rates are 25 percent. LABOR fREEDOM — 64. investors. there has been robust growth in deposits and domestic assets. Banking is sound and relatively well managed.8 El Salvador’s weighted average tariff rate was 3. services market access barriers.5 0 0 20 least free 40 50 60 80 = world average 100 100 most free BUsinEss fREEDOM — 67. are low.5 Relatively flexible labor regulations enhance employment opportunities and productivity growth. or most capital transactions.2 74.4 83. A wide range of financial services are available. overall tax revenue as a percentage of GDP was 13. In the most recent year. Restrictions on work hours are not rigid.

is now sub-Saharan Africa’s third-largest oil producer and one of Africa’s fastest growing economies. Background: One-party rule ended in 1991. hunting. though small. which accounts for almost 90 percent of GDP. the economy suffers from a lack of dynamism.7 points. yet most of its people rely on subsistence farming.3 billion 2008 data unless otherwise noted Data compiled as of September 2009 See page 457 for an explanation of the methodology or visit the Index Web site at heritage. Heavily dependent on petroleum. The combination of massive oil wealth and a small population makes Equatorial Guinea one of Africa’s richest countries per capita. Oil and gas accounted for 91 percent of GDP. The judicial system is vulnerable to political interference. with the biggest declines in investment freedom and protection of property rights.9% FdI Inflow: $1.3% growth in 2008 10. Its overall score fell 2. but opposition parties have won few victories. How Do We Measure Economic Freedom? 185 . and the investment regime lacks transparency. Equatorial Guinea’s rapid economic growth has been driven mainly by oil. Equatorial Guinea. Equatorial Guinea is ranked 31st out of 46 countries in the Sub-Saharan Africa region.org/index. Government management of oil wealth is not transparent. However. The lack of access to financing precludes entrepreneurial growth.6. and corruption under the weak rule of law is prevalent in nearly all facets of the economy. Poor economic infrastructure and weak regulatory and judicial frameworks impede expansion and diversification of the productive base.3 billion 11. 91 percent of government revenue. Obiang still tightly controls the military and the government. and 99 percent of exports in 2007.6 100 100 E quatorial Guinea’s economic freedom score is 48. overall economic development remains severely hampered by structural and institutional problems. making its economy the 151st freest in the 2010 Index. President Teodoro Obiang Nguema Mbasogo seized power in a 1979 coup and won a fourth seven-year term in 2002 in severely flawed elections.873 per capita unemployment: n/a Inflation (cPI): 5. and fishing.7% 5-year compound annual growth $33. and growth has not translated into improvements in ordinary citizens’ quality of life.7 million gdP (PPP): $22. Country’s Score Over Time Most free 80 80 60 60 World average 40 40 Equatorial guinea 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 0. Equatorial Guinea’s overall economic freedom is beset by serious institutional distortions.EQUAtORiAL gUinEA Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 151 Regional Rank: 31 48.

Starting a business takes more than three times the world average of 35 days. LABOR fREEDOM — 44. In the most recent year. In the most recent year.9 20. government spending equaled 23. although additional advantages can be gained by having a national majority partner.9 Equatorial Guinea’s weighted average tariff rate was 15. Equatorial Guinea ranks 171st out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008. Ten points were deducted from Equatorial Guinea’s trade freedom score to account for non-tariff barriers. and the judicial system is open to political influence.0 percent between 2006 and 2008.EQUAtORiAL gUinEA’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. the high costs of finance and limited access to credit instruments hinder dynamic entrepreneurial activities.0 17. but complex bureaucracy and non-transparent regulation. Five points were deducted from Equatorial fREEDOM fROM CORRUPtiOn — 17 Corruption is perceived as rampant. Inflation is forecast to fall to 4 percent in 2009 because of a decline in global food and oil prices and lower government spending.7 percent. and dismissing an employee is costly. The banking sector consists of four main banks. The banking sector. a regional organization that trains judges and lawyers to help reform the enforcement of contracts. particularly in connection with the oil sector. Corruption among officials is pervasive. payments. insufficiently qualified staff. MOnEtARY fREEDOM — 80.8 0 0 20 least free 40 Guinea’s monetary freedom score to adjust for measures that distort domestic prices. Monaco. Falling oil prices have forced the government to clamp down on public spending. dominates the financial system. Restrictions on work hours are rigid. including consumption and transfer payments. gOVERnMEnt sPEnDing — 83.5 Equatorial Guinea has relatively high tax rates. but non-performing loans have declined to around 10 percent of total loans. finAnCiAL fREEDOM — 40 Equatorial Guinea’s small financial system remains underdeveloped. and lax or arbitrary enforcement of investment law are serious impediments. Other taxes include a value-added tax (VAT) and a tax on inheritance.8 Equatorial Guinea’s burdensome regulatory environment impedes the overall freedom to conduct business. which has expanded as a result of high economic growth in recent years. Capital transactions. inVEstMEnt fREEDOM — 20 The government welcomes foreign investment. Equatorial Guinea. and government subsidies of cocoa and other exports add to the cost of trade. inadequate infrastructure. Enforcement of intellectual property rights is weak. but there are restrictions on capital accounts transactions with other countries. poor data. Transparency and responsible management of oil revenues are crucial to long-term fiscal stability. Capital transfers within the CEMAC region are unrestricted. The non-salary cost of employing a worker is high.0 40. extensive and non-transparent regulations.0 44.5 percent in 2007. corruption. Compliance with banking regulations is mixed. a member of the Central African Economic and Monetary Community (CEMAC). has no stock exchange or securities market. fisCAL fREEDOM — 75. Residents and nonresidents may hold foreign exchange accounts. tRADE fREEDOM — 58. all mostly foreign-owned. Nevertheless.9 80.9 Inflation has been moderate. 50 60 80 = world average 100 100 most free BUsinEss fREEDOM — 44. and many business deals are concluded under non-transparent circumstances. consisting of three insurance companies and one reinsurance company. Some government officials have attempted to extort money from foreign companies by threatening to take away concessions. The government sets the price of electricity and subsidizes electricity and cocoa production. and regional partners are subject to restrictions. averaging 5.0 20. Equatorial Guinea is a member of OHADA (Organisation pour l’Harmonisation en Afrique du Droit des Affaires). subject to approval. are relatively low. and transfers to countries other than France.8 58. However. overall tax revenue as a percentage of GDP was 1.9 Total government expenditures. Burdensome and corrupt customs. The regional Banque des Etats de l’Afrique Centrale (BEAC) prioritizes control of inflation and maintenance of the CFA franc’s peg to the euro. export licenses for timber and cocoa. Foreign investment is not screened. Obtaining a business license takes about the world average of 18 procedures and 218 days.2 percent of GDP.5 83. The insurance sector is very small. underdeveloped markets. The top income and corporate tax rates are 35 percent.9 75. from Corruption Labor Freedom 44. Modern bankruptcy procedures have not been developed. and foreign equity ownership is not subject to limitation. Oil and gas account for more than 85 percent of total government revenue.8 Restrictive labor regulations hinder employment and productivity growth. PROPERtY Rights — 20 Application of the laws is selective. 186 2010 Index of Economic Freedom . Equatorial Guinea’s inflation has been consistently higher than in other Franc Zone countries over the past 10 years.

N.N. peacekeeping mission ended in 2008 because of Eritrean-imposed restrictions. A harsh regulatory environment and pervasive corruption undermine the business and investment climates. procedural consistency. Eritrea’s institutional capacity or support for economic freedom remains very weak. Country’s Score Over Time Most free 80 80 60 60 World average 40 40 Eritrea 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 5. trade. the fragile economy remains highly dependent on foreign aid.3. and journalists and others have been held without trial for speaking against the government. Consequently. making its economy the world’s 4th least free in the 2010 Index. It scores far below the world average in eight of 10 economic freedoms and in its overall score.2 billion 2.0% FdI Inflow: n/a 2008 data unless otherwise noted Data compiled as of September 2009 See page 457 for an explanation of the methodology or visit the Index Web site at heritage. and transparency in light of the pervasive state presence in economic activity. Investment freedom has fallen to zero because the investment sector lacks structure. A U. has hindered overall economic development. Fiscal. Eritrea is ranked 45th out of the 46 countries in the Sub-Saharan Africa region. Productivity is very low.0% growth in 2008 1. There are no private radio or television stations. Judicial independence is limited. enshrined in the 1997 constitution.0% 5-year compound annual growth $632 per capita unemployment: n/a Inflation (cPI): 11. political pluralism. How Do We Measure Economic Freedom? 187 . The government uses the judicial system as a coercive tool to promote its own interests. President Isaias Afwerki has ruled since independence. and monetary freedom are also undermined by distortions in prices. and interest rates. and relations with Ethiopia remain tense. and elections have not been held. Roughly three-quarters of Eritreans depend on small-scale agriculture and fishing. but conflict soon resumed. exchange rates. has yet to materialize.0 million gdP (PPP): $3. making the courts a biased arbiter in legal disputes.org/index.3 100 100 E ritrea’s economic freedom score is 35. and the International Monetary Fund estimates that remittances from overseas Eritreans were equivalent to 23 percent of GDP in 2007. Poor management of macroeconomic policies. Eritrea has also ignored a U.ERitREA Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 176 Regional Rank: 45 35. resolution instructing it to remove troops from a disputed region on the border with Djibouti. Background: Eritrea won independence from Ethiopia in 1993. coupled with political instability over the past decade.

Additional impediments to both domestic and foreign private investment include severe limits on the possession and exchange of foreign currency. and control of economic resources. lack of objective dispute settlement mechanisms.9 Total government expenditures. The government has selectively and narrowly courted foreign investors to explore underexploited resources. Remittances from the diaspora are the main source of income. gOVERnMEnt sPEnDing — 6.0 0. Few private enterprises remain. Twenty points were deducted from Eritrea’s trade freedom score to account for non-tariff barriers. with almost no civil liberties allowed. There is hardly a functioning economy independent of resource exports and foreign aid.0 10. operate. the country’s largest commercial bank.8 0 0 20 least free 40 50 60 80 = world average 100 100 most free BUsinEss fREEDOM — 18 The overall freedom to start. In theory. and equal property rights. the President. procedures are haphazard and irregularly enforced. and private-sector involvement in the financial system remains limited. and tourism. fisCAL fREEDOM — 73 Eritrea’s fiscal regime and tax administration lack transparency. weak protection and enforcement of intellectual property rights. corruption. Procedures for obtaining a business license are not formally established. averaging 11. and limited export activity delay trade and increase its costs. using the military and partyowned businesses to implement its development agenda. PROPERtY Rights — 10 The government exercises strict control of political. inVEstMEnt fREEDOM — 0 Eritrea remains a strict command economy. difficulty in obtaining licenses. and expropriation of private assets. Individuals requesting exit visas or passports reportedly have had to pay bribes. All banks are majority-owned by the government.0 20. Eritrea is not known to be a party to any international anticorruption agreements. High credit costs and scarce access to financing severely impede private investment and dynamic economic growth.1 Eritrea’s weighted average tariff rate was 5. fisheries. The government controls all foreign exchange. and economic systems.8 Employment regulations are flexible. The government maintains a firm grip on Eritrea’s command economy. The top income and corporate tax rates are 30 percent. The formal labor market remains severely underdeveloped.0 70. and there are no available data on tax revenue collection as a percentage of GDP. Twenty points were deducted from Eritrea’s monetary freedom score to adjust for extreme monetarycontrol measures. The independence of the judiciary is limited. and close a business is seriously limited by Eritrea’s burdensome regulatory environment. and other private property without notice. The government strictly controls the use of foreign currency. and it often reclaims successful private enterprises and property. are well above average. limiting access and availability. The Commercial Bank of Eritrea. Starting a business takes an average of 84 days.9 59.0 percent between 2006 and 2008. MOnEtARY fREEDOM — 59 Inflation has been high. The government has imposed an arbitrary and complex set of regulatory requirements that discourage investment from both foreign and domestic sources. making it virtually the only legal source of imports and creating illicit profit opportunities for smugglers (who are often high-ranking Eritrean military officers). from Corruption Labor Freedom 18. large-scale use of conscripted labor. compared to the world average of 35 days. and government interference is significant. Eritrea ranks 126th out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008. In the most recent year. Large-scale projects must be approved by the appropriate minister or the Office of LABOR fREEDOM — 70. The non-salary cost of employing a worker is moderate. Import licensing for all private imports.0 69. but very high collateral requirements for loans prohibit many small entrepreneurs from establishing and expanding their businesses.7 percent of GDP. inadequate infrastructure.ERitREA’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. but also in energy. employment. women have the legal right to equal educational opportunities. social. but dismissing an employee can be difficult and costly. tRADE fREEDOM — 69. or compensation. There is no clearly organized regulatory system. eliminating most private investment. in practice. has been chartered by the government to provide a range of financial services to the public. The government uses the judicial system to promote its own interests. finAnCiAL fREEDOM — 20 Eritrea’s small financial system remains poorly developed. making the courts a biased arbiter in legal disputes. 188 2010 Index of Economic Freedom . inefficient and cumbersome customs administration. fREEDOM fROM CORRUPtiOn — 26 Corruption is perceived as pervasive. including consumption and transfer payments. men retain privileged access to education. The government has a history of expropriating houses. primarily in mineral extraction. particularly in rural areas.0 26. businesses.1 73. government spending equaled 55.4 percent in 2006. explanation.0 6. equal pay for equal work.

The financial sector’s efficiency and competitiveness are facilitated by a sound regulatory environment and relatively prudent lending. A reform bill that facilitates insolvent firms’ restructuring and makes overall bankruptcy procedures easier and less costly has enhanced the entrepreneurial environment. Overall economic freedom has been curbed by relatively high government spending and lingering labor-market rigidity. Its overall score decreased 1.662 per capita unemployment: 5. and an independent judiciary protects property rights. Estonia has strong trade ties to Finland. and its overall score is well above the regional and world averages.3 million gdP (PPP): $27.5% Inflation (cPI): 10.5 billion 2008 data unless otherwise noted Data compiled as of September 2009 See page 457 for an explanation of the methodology or visit the Index Web site at heritage. Estonia performs well in most of the 10 economic freedoms. Estonia is ranked 7th out of 43 countries in the Europe region. Background: Since the fall of the Soviet Union.6% growth in 2008 5. the parliament implemented amendments to the Income and Value Added Tax Act and delayed the planned reduction of the corporate income tax rate to 20 percent by one year.org/index.EstOniA Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 16 Regional Rank: 7 74. Sweden. making its economy the 16th freest in the 2010 Index.4% FdI Inflow: $2. Estonia has experienced seven peaceful changes in leadership since regaining its independence in 1991. and Germany and is sensitive to any weakness in those economies. Country’s Score Over Time Most free 80 80 60 60 World average 40 40 Estonia 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 1. How Do We Measure Economic Freedom? 189 .7 points. and the economy contracted significantly in 2009.7 billion –3.7 100 100 E stonia’s economic freedom score is 74. In January 2009. The country became a member of NATO and the European Union in 2004 and aims to join the euro zone in 2010 if it can stick to the Maastricht deficit rules despite its current economic difficulties.7. as improved business freedom was offset by lower scores in monetary freedom and protection of property rights.4% 5-year compound annual growth $20. The overall investment code is simple and transparent. A credit bubble in 2005–2007 ended two decades of strong growth. Estonia has been one of the most determined reformers among the former Soviet nations and has transformed itself into one of the world’s most dynamic and modern economies. A model of stable multi-party democracy.

railroads and transport. Residents and non-residents may hold foreign exchange accounts. and the commercial code is applied consistently. 190 2010 Index of Economic Freedom . Privatization of remaining state-owned enterprises in transportation and electricity is under consideration. and its MFN tariff code is complex.0 47. import restrictions and bans for some goods and services. It also subsidizes fuel and rent. non-transparent and restrictive regulations and standards.2 percent.1 Inflation has been relatively high.0 80. from Corruption Labor Freedom 83. fisCAL fREEDOM — 80. Four banks still control over 90 percent of assets.EstOniA’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. averaging 8. finAnCiAL fREEDOM — 80 Financial regulatory and supervisory frameworks are efficient and transparent. However. Ten points LABOR fREEDOM — 47 Rigid labor regulations impede job creation and productivity growth. and foreign investors may obtain credit freely. gOVERnMEnt sPEnDing — 62. Starting a business takes an average of seven days. The corporate tax is also 21 percent. The foreign investment code is transparent. The commercial community’s small size can encourage favoritism. Licenses required for investment in banking. and no extensive state intervention in sustaining financial stability has been carried out. MOnEtARY fREEDOM — 71.9 percent between 2006 and 2008. and communications are allocated in a non-discriminatory manner. and dismissing an employee is relatively difficult and costly. transfers.2 71. In the most recent year. and foreign firms dominate the insurance sector. the EU has high or escalating tariffs for agricultural and manufacturing products. Foreigners may invest in all sectors and own real estate. The non-salary cost of employing a worker can be high.5 percent of GDP. overall tax revenue as a percentage of GDP was 33. Foreign financial institutions are welcome. compared to the world average of 35 days. tRADE fREEDOM — 87. Estonia ranks 27th out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008. As a participant in the EU’s Common Agricultural Policy. distorting the prices of agricultural products.2 Estonia has relatively low tax rates. government spending equaled 35.0 0 0 20 least free 40 were deducted from Estonia’s monetary freedom score to account for policies that distort domestic prices. including six commercial banks and 10 foreign bank branches. The common EU weighted average tariff rate was 1. mining. Obtaining a business license requires less than the world average of 18 procedures and 218 days. The small but active stock exchange is part of a network of Scandinavian and Baltic exchanges.2 62.5 80.1 The overall freedom to conduct a business is relatively well protected under Estonia’s transparent regulatory environment. The government has no financial stake in any local credit institution. the government subsidizes agricultural production.1 90. Property rights and contracts are enforced.0 66. energy. regulations. Restrictions on the number of work hours remain rigid.5 Estonia’s trade policy is the same as that of other members of the European Union. fREEDOM fROM CORRUPtiOn — 66 Corruption is perceived as present.0 80. quotas. Ten points were deducted from Estonia’s trade freedom score to reflect these factors. there were more than 50 financial institutions. but there are restrictions on land purchases exceeding 10 hectares.1 87. The financial sector weathered the global financial turmoil relatively well owing to sound regulations and supportive measures. and inconsistent regulatory and customs administration among EU members. Estonian law is in compliance with EU directives protecting intellectual property rights. Estonia is ranked 27th out of 115 countries in the 2009 International Property Rights Index.3 percent in 2008. Nonperforming loans have climbed to around 4 percent of total loans. Credit is allocated on market terms. Estonia has laws. market access restrictions in some services sectors.2 Total government expenditures. The personal income tax rate is a flat 21 percent. Nontariff barriers reflected in EU and Estonian policy include agricultural and manufacturing subsidies. are moderate. Undistributed profits are not subject to taxation. gas and water supply. including consumption and transfer payments. As of mid-2008. Other taxes include excise taxes and a value-added tax (VAT). and most capital transactions are not subject to controls. The banking sector is highly profitable and provides a wide range of financial services. and the corruption that does exist is generally not targeted at foreign investors. and penalties to combat corruption. In the most recent year. and payments. inVEstMEnt fREEDOM — 90 Foreign and domestic investments are treated equally under the law. PROPERtY Rights — 80 Estonia’s judiciary is insulated from government influence. The private sector generates more than 80 percent of GDP. 50 60 80 = world average 100 100 most free BUsinEss fREEDOM — 83. The commercial banks have remained well capitalized.

however. but relations between the two countries remain tense. a U.7 million gdP (PPP): $70. and its overall score is just below the regional average. peacekeeping mission was established on the border. The double-digit growth rate of over 10 percent. The mission was terminated in 2008. Despite frequent drought and famine. agriculture contributes over 40 percent of GDP. as demonstrated by the 2005 post-election crackdown on protestors.8% 5-year compound annual growth $868 per capita unemployment: n/a Inflation (cPI): 25. The business and investment regime is burdensome and opaque. Ethiopia invaded Somalia in support of Somalia’s transitional federal government in 2006 and withdrew in 2009 following a peace deal concluded between the Somali government and moderate Islamic factions. The overall quality and efficiency of government services have been poor and are further undermined by weak rule of law and pervasive corruption. accounts for over 70 percent of exports. Background: Ethiopia is Africa’s oldest independent country and is moving toward multi-party democracy. Privatization of state-owned enterprises has proceeded slowly. Ethiopia underperforms in many of the 10 economic freedoms. but obstacles are abundant.2 100 100 E thiopia’s economic freedom score is 51.EthiOPiA Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 136 Regional Rank: 28 51. Progress toward greater economic freedom has been uneven and sluggish. Ethiopia is ranked 28th out of 46 countries in the Sub-Saharan Africa region.3% FdI Inflow: $93 million 2008 data unless otherwise noted Data compiled as of September 2009 See page 457 for an explanation of the methodology or visit the Index Web site at heritage. is fragile due to the lack of economic dynamism. Monetary stability is hampered by state distortions in prices and interest rates.8 points as a result of deteriorating trade freedom. and employs about 80 percent of the population. and trade freedom is hurt by high tariff and nontariff barriers.org/index. and investment freedom. and the government remains involved in key sectors.3% growth in 2008 11.N. monetary freedom. driven mainly by exports of agricultural products. making its economy the 136th freest in the 2010 Index.2. How Do We Measure Economic Freedom? 191 .1 billion 11. Country’s Score Over Time Most free 80 80 60 60 World average 40 40 Ethiopia 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 80. Following war with Eritrea in the late 1990s. and the economy remains highly vulnerable to external shocks. Ethiopia has achieved considerable economic growth over the past five years. Its overall score fell 1.

The government influences prices through its regulation of stateowned enterprises and utilities. and there is no stock market. 192 2010 Index of Economic Freedom . there were three government-owned banks. but the minimum capital investment to start a business is high. The non-salary cost of employing a worker is very low.9 percent of GDP. tRADE fREEDOM — 61.4 Inflation has skyrocketed. While government law states that no assets of a domestic investor or a foreign investor. As of 2008. including consumption and transfer payments.9 60. cumbersome customs clearance.5 Relatively rigid labor regulations hinder employment and productivity growth. The judicial system is underdeveloped. The top income tax rate is 35 percent. Starting a business takes an average of nine days. from Corruption Labor Freedom 66.0 20. Reflecting the financial system’s lack of efficiency and depth. The judicial system remains poorly staffed and inexperienced. The share of non-performing loans has decreased from over 50 percent to just under 10 percent. but foreign ownership and branch operations remain strictly barred. poorly staffed.9 Ethiopia’s weighted average tariff rate was 11. Import taxes. but judges lack an understanding of commercial issues.7 Ethiopia has above-average tax rates. capital markets are poorly developed.3 61. Restrictions on work hours are inflexible. insurance and microcredit services. Property and contractual rights are recognized. officials have been accused of manipulating the privatization process. and nine insurance firms.0 61. Other taxes include a value-added tax (VAT) and a capital gains tax. Ten points were deducted from Ethiopia’s monetary freedom score to adjust for measures that distort domestic prices. subsidizes and controls the prices of petroleum products. gOVERnMEnt sPEnDing — 82. which dominates the banking sector. import restrictions. government spending equaled 23. services market barriers.0 30. Investors may remit profits and dividends. Obtaining a business license requires less than the world average of 218 days. About 30 microfinance institutions have become major sources of financial services.EthiOPiA’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. Foreign exchange accounts. finAnCiAL fREEDOM — 20 Ethiopia’s small financial sector remains underdeveloped. there were new reports of threatened or actual property expropriation cases and business disputes involving foreign investors and the government during 2008.5 percent in 2008. principal and interest on foreign loans. Ethiopia ranks 126th out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008. In the most recent year.7 82.3 percent.0 26. All investments must be approved and certified and may be subject to additional restrictions.5 0 0 20 least free 40 50 60 80 = world average 100 100 most free BUsinEss fREEDOM — 66. PROPERtY Rights — 30 Enforcement of property rights is weak.4 percent in 2008 owing to strong increases in food and oil prices. fisCAL fREEDOM — 77. Despite legal restrictions. overall tax revenue as a percentage of GDP was 10. or expansion may be nationalized. LABOR fREEDOM — 61. MOnEtARY fREEDOM — 60. and state-owned and party-owned businesses receive preferential access to land leases and credit. Fifteen points were deducted from Ethiopia’s trade freedom score to account for non-tariff barriers. Land must be leased from the state. and controls the prices of pharmaceuticals and fertilizers. except when required by public interest and in compliance with the laws and payment of adequate compensation. non-transparent government procurement.9 Total government expenditures. import licensing. payments. All imports must be channeled through Ethiopian nationals registered as official import or distribution agents with the Ministry of Trade and Industry. enterprise. and inadequate infrastructure add to the cost of trade. inVEstMEnt fREEDOM — 25 Foreign participation is prohibited in domestic banking. fREEDOM fROM CORRUPtiOn — 26 Corruption is perceived as pervasive. and several other activities. and other capital transactions with few restrictions. and the top corporate tax rate is 30 percent. compared to the world average of 35 days. In the most recent year. All land is owned by the state and can be leased for up to 99 years. Inflation averaged 44. The ratio of domestic credit to GDP has fallen to under 40 percent. The government strongly influences lending and owns the largest bank. restrictive foreign exchange controls. An international arbitration body’s decision may not be fully accepted and implemented. The state has allowed the local private sector to participate in banking. and inexperienced.3 The overall freedom to conduct a business remains constrained by Ethiopia’s regulatory environment. A highly restrictive land-tenure policy makes it very difficult to register property. nine private banks. but firing unneeded or poorly performing employees is difficult.8 percent between 2006 and 2008. are relatively low. and current transfers are subject to tight controls and restrictions.4 25. averaging 21.9 77.

7% 5-year compound annual growth $4. Sanctions imposed by Fiji’s main trading partners. Background: The Pacific island nation of Fiji is ruled by an interim government that is backed by military forces led by Commodore Frank Bainimarama. Fiji’s investment freedom has deteriorated in light of the state’s continuing tight control. coupled with regulatory uncertainties. Fiji has recorded dismal economic performance over the past five years. prolonging the country’s lack of economic dynamism. who seized power in 2006 and dismissed the elected government. The lack of business and investment opportunities. and fishing industries. and its overall score is slightly above the world average. mostly Christian population and a large minority of Hindu or Muslim Indo–Fijians.8 million gdP (PPP): $3. in large part due to the country’s repressed entrepreneurial environment and considerable political instability. making its economy the 85th freest in the 2010 Index. Its overall score decreased by 0. Fiji is ranked 14th out of 41 countries in the Asia–Pacific region. Trade and financial freedoms have been facilitated by sluggish but ongoing modernization and liberalization. have hurt the vital agriculture. Country’s Score Over Time Most free 80 80 60 60 World average 40 40 Fiji 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 0. has led to economic stagnation. Fiji performs relatively well in only a few of the 10 economic freedoms.7 billion 0. Considerable corruption under the weak rule of law further undermines the effectiveness and productivity of the public sector. including the European Union and Australia. The overall efficiency of government is poor and distorted by the lack of transparency.7 point from last year. Monetary freedom also remains constrained by the government’s interference in the market.2% growth in 2008 –0. clothing. How Do We Measure Economic Freedom? 193 . reflecting deterioration in five of the 10 economic freedoms.3 100 100 f iji’s economic freedom score is 60.fiJi Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 85 Regional Rank: 14 60. Fiji has long suffered from ethnic tension between the indigenous. The resultant political convulsions have stunted the crucial tourism industry.382 per capita unemployment: n/a Inflation (cPI): 8.3.org/index.0% FdI Inflow: $274 million 2008 data unless otherwise noted Data compiled as of September 2009 See page 457 for an explanation of the methodology or visit the Index Web site at heritage.

import taxes. Bureaucracy and regulation can be burdensome. and lack of effective disciplinary processes pose major challenges to entrepreneurs.5 71. three other foreign banks operate freely.7 Fiji has moderately high tax rates.6 Total government expenditures. In April 2009. Leasing is the typical approach to land use. (It was not ranked in 2006. Foreign real estate ownership is technically permitted but heavily restricted. Despite some reforms. A number of areas are reserved for Fijian nationals or the state. from Corruption Labor Freedom 63. Fiji was ranked 55th out of 158 countries in Transparency International’s Corruption Perceptions Index for 2005. The government influences prices through state-owned utilities and controls the prices of various products. The devaluation will increase inflation. are relatively low. Fiji’s stock exchange has listed fewer than 20 companies but is developing. The military cited corruption in government and the civil service as a major justification for its overthrow of Fiji’s democratically elected government in 2006. In the most recent year. including food. inefficient government systems. The non-salary cost of employing a worker is low. including consumption and transfer payments. Banking accounts for about 35 percent of financial system assets and is largely private. import and export licensing.7 percent between 2006 and 2008. tRADE fREEDOM — 71 Fiji’s weighted average tariff rate was 9. averaging 6. Government actions undermine the judiciary’s independence. the central bank devalued the Fiji dollar by 20 percent and imposed capital controls.6 percent. Because of Fiji’s relatively small population and limited circles of power.4 percent of GDP. and there is a shortage of prosecutors. finAnCiAL fREEDOM — 60 Fiji’s financial system is relatively well developed. Residents may hold foreign exchange accounts subject to government approval and restrictions. though the state-owned Fiji Development Bank offers business development loans and some commercial banking services.0 40. Limited accountability for corruption. The insurance sector consists of 10 companies and is dominated by foreign firms. fisCAL fREEDOM — 75.0 60.) Credible allegations regarding misuse of government funds or abuse of public office have been raised repeatedly. and subsidies for exporters add to the cost of trade. The top income and corporate tax rates are 31 percent. Starting a business takes an average of 46 days.0 75. corrupt and inefficient customs. state trading. compared to the world average of 35 days. 2007. Bankruptcy is generally straightforward. inVEstMEnt fREEDOM — 25 Fiji restricts and requires government approval for all foreign investment. Ten points were deducted from Fiji’s trade freedom score to account for non-tariff barriers. weak enforcement of intellectual property rights. gOVERnMEnt sPEnDing — 80. PROPERtY Rights — 30 Protection of property is highly uncertain.6 73. and the independence of the judiciary has come into question. 194 2010 Index of Economic Freedom . and several judges have resigned. personal relationships often play a major role in business and government decisions. The two largest banks are Australian and account for 80 percent of the market. Public debt hovers around an unsustainable 50 percent of GDP.6 25.7 80. In the most recent year. locally owned enterprises are discouraged. and regulatory uncertainty persist. MOnEtARY fREEDOM — 73.6 Inflation has been relatively high. The government withdrew from commercial banking in 2006. inadequate technical expertise.0 30. but the labor market is not fully developed. Obtaining a business license takes about the world average of 18 procedures.0 0 0 20 least free 40 50 60 80 = world average 100 100 most free BUsinEss fREEDOM — 63. fREEDOM fROM CORRUPtiOn — 40 Corruption is perceived as significant. Import restrictions. Ten points were deducted from Fiji’s monetary freedom score to adjust for measures that distort domestic prices. Foreign participation in banking is significant.5 percent in 2008. and investors must meet certain conditions before investing in other restricted industries. Foreign acquisition of controlling interest in or takeovers of established. LABOR fREEDOM — 84 Labor regulations are flexible. a lack of transparency in government procurement. and the enforcement of intellectual property rights is inadequate. non-residents also face certain restrictions. or 2008. Restrictions on work hours have become more flexible. and dismissing an employee is straightforward. The backlog of cases is significant. government spending equaled 25. selling its minority stake in the National Bank.fiJi’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. Most payments and transfers (including capital) are subject to government approval and limitations on amounts. overall tax revenue as a percentage of GDP was 22. Obtaining land titles is difficult. Other taxes include a value-added tax (VAT) and a land sales tax.0 84.5 The overall freedom to conduct a business is relatively well protected under Fiji’s regulatory environment.

competitive. The economy remains a world leader in business freedom. faces demographic challenges in the form of an aging population and shrinking workforce that could threaten future growth and the government’s ability to maintain generous social spending programs. Previously robust economic growth slowed in 2009 due to the global recession. making its economy the 17th freest in the 2010 Index. the financial sector has weathered the global financial turbulence relatively well.9% FdI Inflow: –$4. Finland’s overall high level of economic freedom is curbed by high government spending and the rigidity of the labor market. trade freedom. The modern and competitive Finnish economy has long benefited from high levels of economic freedom. Country’s Score Over Time Most free 80 80 60 60 World average 40 40 Finland 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 5. like many other European nations.3 million gdP (PPP): $188. With prudent and sound banking practices. Finland is ranked 8th out of 43 countries in the Europe region. and freedom from corruption. Private enterprises continue to blossom and promote innovation in an efficient regulatory and legal environment. but boasts a modern. and transparent economy with vibrant information and communications technology sectors.8 100 100 f inland’s economic freedom score is 73.8. and freedom from corruption.9% growth in 2007 3.7 point as a result of modest reductions in monetary freedom. with about one-fourth of its land mass above the Arctic Circle. Background: Finland joined the European Union in 1995 and adopted the euro as its currency in 1999. Finland became a member of NATO’s Partnership for Peace program in 1994 but has not pursued full NATO membership because of its neutral military status.org/index.2 billion 0.finLAnD Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 17 Regional Rank: 8 73. How Do We Measure Economic Freedom? 195 . Its score declined by 0. Restrictive labor regulations undermine employment and productivity growth. As in many other European social democracies.2 billion 2008 data unless otherwise noted Data compiled as of September 2009 See page 457 for an explanation of the methodology or visit the Index Web site at heritage. property rights. high government spending (close to half of Finland’s GDP) supports an extensive welfare state.4% Inflation (cPI): 3. property rights. The country is sparsely populated.2% 5-year compound annual growth $35. and Finland. and its overall score is well above the world average.427 per capita unemployment: 6.

8 0 0 20 least free 40 It also imposes artificially low prices on pharmaceutical products. import restrictions and bans for some goods and services. Non–European Economic Area investors must apply for a license to invest in security. The stock exchange is part of a Baltic–Nordic exchange network. compared to the world average of 35 days. Restrictions on work hours are rigid. The government owns about 14 percent of the Sampo Group. The nonsalary cost of employing a worker is high. and residents and non-residents may hold foreign exchange accounts. and inconsistent regulatory and customs administration among EU members. Starting a business takes an average of 14 days. and the Sampo Group) dominate the system. distorting the prices of agricultural products. including consumption and transfer payments. from Corruption Labor Freedom 95. The top corporate tax rate is 26 percent.5 percent. electrical contracting. government spending equaled 47. OP Bank Group. Finland’s weighted average annual rate of inflation was 3. Capital markets determine interest rates. finAnCiAL fREEDOM — 80 Finland’s sophisticated financial system provides a wide range of services. The impact of the global financial turmoil on the banking sector has been relatively muted. the government subsidizes agricultural production. Other taxes include a value-added tax (VAT).9 75.0 43. aviation. Ten points were deducted from Finland’s monetary freedom score to account for measures that distort domestic prices. The quality of the judiciary and civil service is generally high.9 Total government expenditures. and about 60 percent of assets are foreign-owned. The common EU weighted average tariff rate was 1. MOnEtARY fREEDOM — 78. Finland is a signatory to the OECD Anti-Bribery Convention. an inheritance tax. and dismissing an employee can be costly. market access restrictions in some services sectors. Between 2006 and 2008.9 Finland uses the euro as its currency.5 percent and 20 percent.4 Finland has moderate tax rates but a relatively high level of overall taxation. the EU has high or escalating tariffs for agricultural and manufacturing products and its MFN tariff code is complex.5 Finland’s trade policy is the same as that of other members of the European Union.0 87. Merger of the Financial Supervision Authority and Insurance Supervisory Authority came into force in January 2009. In the most recent year. Obtaining a business license requires much less than the world average of 18 procedures and 218 days. Banking is open to foreign competition. There are more than 300 domestic banks. and close a business is strongly protected under Finland’s regulatory environment. and contractual agreements are strictly honored.5 65. The top income tax rate is 30. quotas. Ten points were deducted from Finland’s trade freedom score to account for non-tariff barriers.4 32. fREEDOM fROM CORRUPtiOn — 90 Corruption is perceived as almost nonexistent.0 90. but three bank groups (Nordea. operate. guided by sound regulations and prudent lending. gOVERnMEnt sPEnDing — 32. Expropriation is unlikely. telecommunications. are high. tRADE fREEDOM — 87. Finland is tied for 5th place out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008. 50 60 80 = world average 100 100 most free BUsinEss fREEDOM — 95 The overall freedom to start. Regulation is relatively transparent and efficient.0 80. In the most recent year. Bankruptcy is straightforward and not costly. Finland adheres to numerous international agreements concerning the protection of intellectual property.9 78. State ownership of productive assets is considerable.finLAnD’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm.8 Burdensome labor market regulations hamper employment opportunities and productivity growth. and credit is available to nationals and foreigners. However.1 percent.1 percent. inVEstMEnt fREEDOM — 75 Finland is open to foreign direct investment.0 90. PROPERtY Rights — 90 Property rights are well protected.3 percent in 2008. overall tax revenue as a percentage of GDP was 43. and a flat 28 percent tax on capital income. Non-tariff barriers reflected in EU and Finnish policy include agricultural and manufacturing subsidies. alcohol. Certain acquisitions of large companies may require follow-up clearance from the Ministry of Trade and Industry. Restrictions on the purchase of land apply only to non-residents purchasing land in the Aaland Islands. fisCAL fREEDOM — 65. LABOR fREEDOM — 43. non-transparent and restrictive regulations and standards. 196 2010 Index of Economic Freedom . and restaurants.3 percent of GDP. There are no exchange controls and no restrictions on current transfers or repatriation of profits. with municipal rates between 16. The Council of Europe’s Group of States against Corruption has recommended that Finland sharpen its controls over political financing and increase the transparency of donations to political parties and election candidates. As a participant in the EU’s Common Agricultural Policy.

How Do We Measure Economic Freedom? 197 . Despite recent reforms. France is ranked 30th out of 43 countries in the Europe region.2% FdI Inflow: $117.045 per capita unemployment: 7. Background: France was a founding member of the European Union. The government has pursued various reform measures to increase the competitiveness and flexibility of the economy. with institutional strengths such as strong protection of property rights and a relatively efficient legal framework.8% Inflation (cPI): 3. the Lisbon Treaty.8% 5-year compound annual growth $34. Europe was shocked when French voters rejected the European Constitution in a popular referendum in 2003. and French leaders across the political spectrum have championed European integration. Country’s Score Over Time Most free 80 80 60 60 World average 40 40 France 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 62. France has a diversified.0 million gdP (PPP): $2. France’s economic freedom remains curtailed by the pervasive presence of the state in economic activity. the labor market remains rigid. but progress has been slow. making its economy the 64th freest in the 2010 Index. and its overall score is higher than the world average. The government passed the constitution’s successor. The entrepreneurial environment is generally facilitated by a sophisticated financial sector that has demonstrated relative resilience during the recent global financial turmoil. France cohosted NATO’s 60th anniversary summit in Strasbourg and was formally reintegrated into NATO’s military command structures. without a public vote.2. Spending more than half of GDP. but overall progress has been slow. The French economy is well diversified and modern.1 trillion 0.org/index.4% growth in 2007 1.2 100 100 f rance’s economic freedom score is 64.5 billion 2008 data unless otherwise noted Data compiled as of September 2009 See page 457 for an explanation of the methodology or visit the Index Web site at heritage.fRAnCE Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 64 Regional Rank: 30 64. The government also interferes in the market as a large shareholder in many semipublic enterprises. Its overall score has increased slightly due to improvements in six of the 10 economic freedoms. with multiple restrictions that undermine productivity and employment growth. the government’s dominance continues in major sectors of the economy. modern industrial economy but remains the top recipient of market-distorting agricultural subsidies under the EU’s Common Agricultural Policy. President Nicolas Sarkozy has pledged to introduce revolutionary market reforms that were neglected in the 1990s. In April 2009.

5 France’s trade policy is the same as that of other members of the European Union. 50 60 80 = world average 100 100 most free inVEstMEnt fREEDOM — 50 There is no generalized screening of foreign investment. State-owned or state-controlled enterprises dominate such industries as postal services. BUsinEss fREEDOM — 86. Foreign companies hold around 20 percent of the insurance market. government spending equaled 52. Lack of transparency in standards and regulations. Any company defined as a national public service or natural monopoly must pass into state ownership. The non-salary cost of employing a worker is very high. However. agriculture. import restrictions and bans for some goods and services. defense.3 percent surcharge that is applicable only to companies with turnover exceeding a certain threshold).0 54. In the most recent year. transfers. Capital markets are well developed. Non-tariff barriers reflected in EU and French policy include agricultural and manufacturing subsidies. There are no foreign exchange controls. but officials have wide discretion to impose “unwritten” performance requirements. Obtaining a business license requires less than the world average of 18 procedures and 218 days.9 Total government expenditures. Between 2006 and 2008. audiovisuals. Residents and non-residents may hold foreign exchange accounts. are very high. or repatriation of profits. and inconsistent regulatory and customs administration among EU members. Inflation peaked at 3. Attitudes toward foreign investors can be negative. MOnEtARY fREEDOM — 79.7 percent. require approval. including public health. Ten points were deducted from France’s monetary policy score to adjust for measures that distort domestic prices. aircraft production. The common EU weighted average tariff rate was 1. Investments involving large stakes in firms are subject to government review. the government subsidizes agricultural production.fRAnCE’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. non-transparent and restrictive regulations and standards. market access restrictions in some services sectors. books. compared to the world average of 35 days.3 France’s regulatory environment makes it relatively easy to establish and run a business. but acquisitions in some sensitive sectors. and the judiciary is professional. but the government has established agencies to recapitalize banks and provide government guarantees for bank refinancing. Semipublic companies in which the state holds shares employ almost 4 percent of the labor force. from Corruption Labor Freedom 86.7 France is a member of the euro zone. gas. insurance. distorting the prices of agricultural products. Prices of health care. finAnCiAL fREEDOM — 70 France’s financial.0 80. Starting a business takes an average of seven days. The government owns stakes in several insurance companies. overall tax revenue as a percentage of GDP was 45 percent. air transport. the EU has high or escalating tariffs for agricultural and manufacturing products.7 0 0 20 least free 40 was 2. electricity. including consumption and transfer payments.6 percent in July 2008. France enforces the OECD Anti-Bribery Convention. Regulations are transparent. and rail transportation are regu-ated. and dismissing an employee can be difficult.9 France has relatively high tax rates. and foreign investors participate freely. The nine largest banks control more than 70 percent of assets. The top personal income tax rate is 40 percent.4 percent (33. In the most recent year. fREEDOM fROM CORRUPtiOn — 69 Corruption is perceived as present.9 17.3 percent of GDP. tRADE fREEDOM — 82. The top corporate tax rate is 34. France ranks 23rd out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008. Closing a business is relatively easy. and non-residents may purchase real estate.3 percent plus a 3. and pharmaceutical restrictions exceed EU policy. and its MFN tariff code is complex. The government still owns the Caisse des Depots et Consignations and holds minority stakes elsewhere. and accounting systems are bureaucratic but consistent with international norms.3 82. quotas. The banking sector has been relatively resilient during the global financial turmoil. Fifteen points were deducted from France’s trade freedom score to account for these factors. regulatory.5 51. electricity. The Credit Establishments Committee must grant permission for foreign branches from countries outside the European Economic Area. Protection of intellectual property rights is very strong.3 percent in 2008. There are no restrictions or controls on payments. 198 2010 Index of Economic Freedom . and rail.0 69.9 79. pharmaceuticals. PROPERtY Rights — 80 Contractual agreements are secure. and maritime transport.7 50. Other taxes include a value-added tax (VAT) and a household wealth tax.7 Burdensome regulations hamper productivity and job growth. Most loans are provided on market terms. barriers to services market access. As a participant in the EU’s Common Agricultural Policy. France’s weighted average annual rate of inflation LABOR fREEDOM — 54. fisCAL fREEDOM — 51. gOVERnMEnt sPEnDing — 17.0 70.

Oil production is declining as fields are exhausted. reflecting higher trade and investment freedom scores.9% 5-year compound annual growth $14. and minerals. Fostering a more vibrant private sector remains challenging. and over 80 percent of exports. Gabon is ranked 19th out of 46 countries in the Sub-Saharan Africa region. Bongo died in June 2009. and its overall score is lower than the world average. and Gabon needs to diversify its economy. Government efforts to promote economic diversification have met with little success. Despite its relatively minor contribution to overall economic growth.527 per capita unemployment: 21.org/index. Domestic unrest led to reforms under the 1991 constitution. Country’s Score Over Time Most free 80 80 60 60 World average 40 40 gabon 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 1.4. How Do We Measure Economic Freedom? 199 . President Omar Bongo declared Gabon to be a one-party state.0% (2006) Inflation (cPI): 5.0 billion 2. and the efficiency of government spending is severely undermined by bureaucracy and poor public finance management. and his son. but the democratic process remains deeply flawed. in large part due to Gabon’s lack of institutional capacity to facilitate development. including multi-party democracy with freedom of assembly and the press.3% FdI Inflow: $20 million 2008 data unless otherwise noted Data compiled as of September 2009 See page 457 for an explanation of the methodology or visit the Index Web site at heritage. Ali Ben Bongo. Background: In 1968. over 60 percent of government revenues. making its economy the 116th freest in the 2010 Index. The legal and regulatory environment is not conducive to entrepreneurial activity. In 2006.4 point higher than last year.4 million gdP (PPP): $21.1% growth in 2008 2. Heavy reliance on the oil sector makes the economy highly vulnerable to fluctuations in global oil prices and undermines long-term economic competiveness.gABOn Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 116 Regional Rank: 19 55. Its overall score is 0. won election to replace him and took office in October.4 100 100 g abon’s economic freedom score is 55. Gabon’s economy is driven by oil. Despite relatively high average per capita income from oil revenue. most people live in poverty. the oil sector accounts for over 50 percent of GDP. forestry. oil accounted for over 50 percent of GDP. Widespread corruption and the weak rule of law further dampen the fragile entrepreneurial environment.

corruption. Closing a business can be lengthy and costly. Domestic credit is limited and expensive. Obtaining a business license requires less than the world average of 18 procedures and 218 days. An unpredictable legal system. 50 60 80 = world average 100 100 most free finAnCiAL fREEDOM — 40 Gabon’s small financial system remains government-influenced. Residents may hold foreign exchange accounts subject to some restrictions. underdeveloped markets. and lack of customs transparency add to the cost of trade. Poorly developed capital markets cannot provide alternative financing instruments. and suspected corruption have contributed to significant arrears in domestic and external debt payments. government spending equaled 21. Ten points were deducted from Gabon’s trade freedom score to account for non-tariff barriers. and official authorization. Capital transactions are subject to reporting requirements. such as a common central bank and common currency. weak financial management.0 40.3 percent of GDP. Certain economic sectors have their own business code. inadequate administrative and trade capacity. A small regional stock exchange headquartered in Gabon began operation in 2008.0 57. and medical equipment. The banking sector includes five commercial banks and is open to foreign competition. As a member of the Central African Economic and Monetary Community and the Economic Community of Central African States. politi- LABOR fREEDOM — 57. In the most recent year. with other West African countries. which aims to provide better accounting for revenues from petroleum and mining industries. including fuel. PROPERtY Rights — 40 Private property is moderately well protected. Non-residents may hold foreign exchange accounts but must report them to the government. though many investors find it useful to have a local partner.4 45. Gabon ranks 96th out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008. inVEstMEnt fREEDOM — 45 Foreign investment and domestic capital are legally equal.gABOn’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm.4 Labor regulations hinder employment opportunities and productivity growth. The regional Banque des Etats de l’Afrique Centrale (BEAC) maintains the CFA franc’s peg to the euro.5 Gabon has high tax rates. including consumption and transfer payments.4 71.1 Gabon’s weighted average tariff rate was 14 percent in 2008. Companies have complained of a lack of transparency in customs and other government activities. 200 2010 Index of Economic Freedom . averaging 4. controls. tRADE fREEDOM — 62. Regulations on work hours remain rigid.0 40. Tariff escalation. fisCAL fREEDOM — 61. The top income tax rate is 50 percent. MOnEtARY fREEDOM — 71. and access to financing is scarce. Three banks are affiliated with French banks. import bans. overall tax revenue as a percentage of GDP was 11. Gabon shares certain financial institutions. Most banks are at least partly state-owned.8 The overall freedom to conduct a business is restricted by Gabon’s regulatory environment.8 62.6 percent between 2006 and 2008. The value-added tax (VAT) was temporarily waived on basic goods to alleviate pressure during the 2008 food crisis.4 Inflation is relatively moderate.4 0 0 20 least free 40 cal influence. In the past. Foreign investors are largely treated in the same manner as their Gabonese counterparts with regard to the purchase of real estate. Transfers and payments to most countries must be officially approved. gOVERnMEnt sPEnDing — 86. The lack of accountability and oversight that afflicts the budget process can be seen in other areas of the economy as well. BUsinEss fREEDOM — 58. Starting a business takes an average of 58 days. The non-salary cost of employing a worker is high. and another is entirely foreign-owned. though available without discrimination to foreign investors with prior authorization.1 61. a decline from 2007.4 Total government expenditures.1 percent. from Corruption Labor Freedom 58.0 31. The government influences prices through subsidies to state-owned enterprises and controls the prices of various products. pharmaceuticals.5 86. compared to the world average of 35 days. fiscal shortfalls. are low. The president influences the judiciary and parliament. and inadequate infrastructure impede investment. Gabon adheres to the standards of the African Intellectual Property Office. Gabon participates in the Extractive Industries Transparency Initiative. The government still plays a considerable role in long-term lending through the state-owned development bank. Fifteen points were deducted from Gabon’s monetary freedom score to adjust for measures that distort domestic prices. import and export taxes. Expropriation is unlikely. fREEDOM fROM CORRUPtiOn — 31 Corruption is perceived as widespread. and the top corporate tax rate is 35 percent. There is no requirement that nationals own shares in foreign investments. Credit costs are high. and competition is limited. In the most recent year. and dismissing an employee is relatively costly. All real estate transactions must be reported.

2001.1 100 100 t he Gambia’s economic freedom score is 55. and state-controlled enterprises dominate key sectors. Jammeh won flawed multi-party presidential elections in 1996. The Gambia is ranked 20th out of 46 countries in the Sub-Saharan Africa region. Background: President Sir Dawda Kairaba Jawara ruled for almost 30 years until 1994. Tourism is an important source of foreign exchange. The Gambian economy is highly concentrated in the agricultural sector. Economic growth.363 per capita unemployment: n/a Inflation (cPI): 4. accounting for over half of domestic exports. remains fragile in the absence of a vibrant private sector. when he was ousted by a military coup led by Lieutenant Yahya Jammeh.0% 5-year compound annual growth $1.7 million gdP (PPP): $2. with frequent power shortages and poor roads. Country’s Score Over Time Most free 80 80 60 60 World average 40 40 The gambia 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 1.thE gAMBiA Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 118 Regional Rank: 20 55. and 2006. Other institutional impediments to economic freedom include the inefficient protection of property rights.7 point lower than last year. Despite some progress in easing barriers to establishing and running businesses. the overall regulatory environment remains burdened by red tape and a lack of transparency. and its overall score is lower than the world average. Groundnuts are the most important agricultural crop. Agriculture employs over 70 percent of the labor force and accounted for 33 percent of GDP in 2007. though around 6 percent over the past five years.5% FdI Inflow: $63. How Do We Measure Economic Freedom? 201 .org/index. Geographically.3 billion 5. It has few natural resources. Pervasive corruption is a serious deterrent to translating economic growth into the effective reduction of poverty throughout the population. and the weak rule of law. The infrastructure is improving but remains inadequate. corruption. the country tracks the banks of the Gambia River. reflecting in particular lower scores in property rights and freedom from corruption.9% growth in 2008 6.0 million 2008 data unless otherwise noted Data compiled as of September 2009 See page 457 for an explanation of the methodology or visit the Index Web site at heritage. International rights groups have criticized the government’s restraints on civil liberties and political opponents. The government presence is pervasive. Its overall score is 0. reflecting a lack of entrepreneurial dynamism.1. and journalists have frequently been imprisoned without charge. making its economy the 118th freest in the 2010 Index.

6 55. are moderate. Obtaining a business license requires less than the world average of 18 procedures and 218 days. Corruption among senior government officials is serious. Investment is hindered by political influence in the bureaucracy. For example. PROPERtY Rights — 25 The judicial system is inefficient and. and dismissing an employee is relatively easy. LABOR fREEDOM — 63. maritime services. including consumption and transfer payments.0 63.0 percent.0 19.8 0 0 20 least free 40 There is an embargo on establishing new private security companies. Lack of judicial security is one of the main deterrents to doing business. despite non-performing loans that are estimated at slightly over 10 percent of total loans. Restrictions on work hours are fairly flexible.9 The Gambia has relatively high tax rates. overall tax revenue as a percentage of GDP was 19. inVEstMEnt fREEDOM — 55 Foreign and domestic investments generally receive equal treatment. Supervision and regulation remain deficient due to weak institutional capacity. tRADE fREEDOM — 60. but its operation has been delayed. Credit to the private sector has increased.5 60. There are 11 banks. including an Islamic development bank. a decline from 2007. but foreign investors may invest without a local partner. gOVERnMEnt sPEnDing — 75. Although the constitution and law provide for protection of most human rights. The insurance sector is small but growing. The central bank has established prudential guidelines aimed at reducing barriers to new non-bank financial institutions. Almost all commercial banks are majority-owned by foreign banks. The government influences prices through a large public sector. sanitary and phytosanitary prohibitions. and the few prosecutions of high-profile politicians have not been conducted in a way that bespeaks serious intent. which are closed to private-sector participation. Starting a business takes an average of 27 days.6 The Gambia’s weighted average tariff rate was 14. In the most recent year. 50 60 80 = world average 100 100 most free finAnCiAL fREEDOM — 50 The Gambia’s small financial system is dominated by banking. Closing a business can be burdensome and costly.5 percent between 2006 and 2008. government spending equaled 28. Capital markets consist only of government securities.3 71. Repatriation of profits is permitted. and several journalists have been murdered. and a lack of technical support severely undermine the administration of justice. and trademarks.3 Total government expenditures. subject to pressure from the executive branch. remain in government hands. especially at the lower levels. and restrictive legislation. government corruption. In the most recent year.7 percent in 2008. Nevertheless. The government restricts freedom of speech and press through intimidation.8 Labor regulations are relatively flexible. BUsinEss fREEDOM — 58.7 percent of GDP. The top income and corporate tax rates are 35 percent. Residents and non-residents may hold foreign exchange accounts.6 Inflation has been moderate but rising. public transportation. fisCAL fREEDOM — 71.6 71. MOnEtARY fREEDOM — 71. 202 2010 Index of Economic Freedom . detention. Ten points were deducted from The Gambia’s trade freedom score to account for non-tariff barriers. a lack of independence. there are problems in many areas. The Gambia ranks 158th out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008. water. compared to the world average of 35 days. are denied access to families and lawyers. and a large informal trade sector add to the cost of trade. Inefficient and sometimes corrupt regulatory administration. Intimidation of lawyers. Fifteen points were deducted from The Gambia’s monetary freedom score to adjust for measures that distort domestic prices. Joint ventures are encouraged. there is no stock exchange. patents. Other taxes include a capital gains tax and a sales tax on goods and services.9 75. and there are few restrictions on foreign exchange and capital transactions. There are no limits on foreign ownership or control of businesses except in the operations of foreign exchange bureaus and in television broadcasting and defense industries. the law provides adequate protection for intellectual property. from Corruption Labor Freedom 58. restrictive licensing.thE gAMBiA’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm.5 The overall freedom to conduct business remains limited by The Gambia’s regulatory environment. Two commercial banks have entered the microfinance industry. and limited access to financing. including those in agriculture. prisoners are held incommunicado without charge. The government has created a Credit Reference Bureau. face prolonged pretrial detention. and most leading companies. The non-salary cost of employing a worker is moderate. fREEDOM fROM CORRUPtiOn — 19 Corruption is perceived as pervasive.0 50. The banking sector is not fully developed but is relatively sound. copyrights. and are tortured and denied due process.0 25. and telecommunications. electricity. averaging 4.

and labor freedom.0% FdI Inflow: $1. and its overall score is higher than the world average. making its economy the 26th freest in the 2010 Index.gEORgiA Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 26 Regional Rank: 14 70. fiscal freedom. anti-corruption measures since 2003 have made notable progress.6 billion 2008 data unless otherwise noted Data compiled as of September 2009 See page 457 for an explanation of the methodology or visit the Index Web site at heritage. Although corruption is still a significant hindrance to overall economic freedom. Georgia is well positioned. The economy has recorded high growth rates averaging over 8 percent over the past five years but experienced a sharp contraction in 2008 due to the Russian invasion. Georgia has revitalized its historic tradition of entrepreneurship. however. Completion of the Baku–Tbilisi–Ceyhan oil pipeline from Azerbaijan to Turkey has helped the economy. but Russian economic sanctions levied since 2006.4 100 100 g eorgia’s economic freedom score is 70. independent Georgia has survived civil wars and the instability generated by secessionist movements. trade freedom. Country’s Score Over Time Most free 80 80 60 60 World average 40 40 georgia 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 4. the 2008 war with Russia.896 per capita unemployment: 16. This is particularly justified by high ratings in business freedom. growth should be facilitated by a competitive tax regime and efficient regulatory framework. President Mikheil Saakashvili and his center-right United National Movement took power in the Rose Revolution of 2003 and won presidential and parliamentary elections in 2008.4 million gdP (PPP): $21.org/index.3% 5-year compound annual growth $4. down from an annualized growth rate of 7 percent from 2000–2007. GDP growth decelerated to 2 percent in 2008 and only 1 percent in early 2009. How Do We Measure Economic Freedom? 203 . and freedom from corruption. With its strong commitment to economic reform. Georgia for the first time has achieved “mostly free” status.4 billion 2. Its overall score is 0.5 % Inflation (cPI): 10.4. to restart its economic expansion. Despite significant international assistance. Background: Since the collapse of the Soviet Union in 1991. property rights. Georgia is ranked 14th out of 43 countries in the Europe region. and Russia’s continued military presence in Abkhazia and South Ossetia contribute to political and economic instability. With impressive progress toward greater economic freedom.0% growth in 2008 8.6 point higher than last year due to improvements in trade freedom.

2009). Georgia has made progress in liberalizing trade.7 Labor regulations are very flexible. including consumption and transfer payments. air and maritime transport. 87. Significant informal transactions undermine the banking sector to some degree. import taxes.0 40. It also provides subsidies for agricultural products and energy. Restoring stability and confidence has been slowed by the global financial turmoil. averaging 9. though transparency has been an issue. Prices are generally set in the market. The corporate tax rate is 15 percent. The government does not have a financial stake in any bank. There are few limits for international payments and current transfers. There are no formal barriers to foreign bank branches and subsidiaries. the Georgian Parliament approved the Global Competitiveness of the Financial Services Sector Act to enhance the sector ’s efficiency.0 39. compared to the world average of 35 days. Loans to the private sector have increased rapidly. but legal disputes can be lengthy and susceptible to pressure from the government or other outside influences.9 The overall freedom to conduct a business is relatively well protected under Georgia’s regulatory environment.1 Georgia has relatively low taxes. import and export licensing. a tax on interest. Enforcement of laws protecting intellectual property rights is weak.3 Total government expenditures. it has fired thousands of civil servants and police. and a tax on dividends (reduced as of January 1. and inadequate infrastructure and trade capacity still add to the cost of trade.2 Inflation has been relatively high.2 70. including maritime fisheries. In the most recent year. fREEDOM fROM CORRUPtiOn — 39 Corruption is perceived as significant. and proceeds are being used to offset social welfare and defense spending increases. down from 25 percent as of January 1. With bank deposits and foreign reserves falling.0 60. LABOR fREEDOM — 93. overall tax revenue as a percentage of GDP was 21. The government has improved its performance in fighting corruption. Georgia’s financial system underwent considerable stress during the August 2008 Russian invasion. Ten points were deducted from Georgia’s trade freedom score to account for non-tariff barriers. PROPERtY Rights — 40 Judges now have to pass tests before appointment. capital transactions are not restricted but must be registered. 204 2010 Index of Economic Freedom . The non-salary cost of employing a worker can be moderate. Foreign individuals and companies may buy non-agricultural land. Starting a business takes an average of three days. and dismissing an employee is costless.1 Georgia’s weighted average tariff rate was 0. Exceptions may be made for certain sectors. weak enforcement of intellectual property rights. Agricultural land can be purchased by forming a Georgian corporation that may be up to 100 percent foreign-owned. MOnEtARY fREEDOM — 70. Other taxes include a value-added tax (VAT). Although the financial system has shown a considerable degree of resilience to the external shocks. The government continues to implement reforms.1 65. In the most recent year.7 0 0 20 least free 40 50 60 80 = world average 100 100 most free BUsinEss fREEDOM — 87. Closing a business is relatively simple. from Corruption Labor Freedom inVEstMEnt fREEDOM — 70 Foreign and domestic investments receive equal treatment. and the foreign presence is strong. Some border trade goes unreported.6 percent. agriculture subsidies. Georgia ranks 67th out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008.3 70.0 93. Ten points were deducted from Georgia’s monetary freedom score to adjust for measures that distort domestic prices. finAnCiAL fREEDOM — 60 Georgia’s financial sector has undergone substantial liberalization. Foreign firms may participate freely in privatizations. and the stock exchange is small and underdeveloped. but import restrictions. Privatization of state-owned enterprises is winding down. government spending rose to 34 percent of GDP. tRADE fREEDOM — 89.5 percent in 2008.gEORgiA’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. There are 20 banks. Obtaining a business license requires much less than the world average of 18 procedures and 218 days. non-performing loans had increased to around 13 percent at the end of 2008. but foreigners and Georgians continue to doubt the judicial system’s ability to protect private property and contracts. Residents and non-residents may hold foreign exchange accounts.7 percent between 2006 and 2008. Rules on work hours are very flexible. In March 2008. but the government may impose controls through state-owned enterprises. an improvement over 2007. 2009. and several high-level officials have been prosecuted for corruption-related offenses. Eight banks account for about 90 percent of total assets.9 89.1 89. fisCAL fREEDOM — 89. are moderate but increasing. The income tax rate is a flat 20 percent. gOVERnMEnt sPEnDing — 65. and broadcasting.

regulations are clear and evenly enforced. Chancellor Merkel. government expenditures and the tax burden remain high in support of an extensive welfare state. How Do We Measure Economic Freedom? 205 . As in many other European social democracies. The downward trend in government spending since 2003 is likely to be reversed in light of the global recession.613 per capita unemployment: 7.9 trillion 1. Reform has facilitated greater economic freedom and dynamic entrepreneurial activity. Reintegration of the East and West German economies has been difficult. With the advent of the global economic crisis in 2009. Background: Germany is Europe’s largest economy. Foreign and national investors are treated equally under the law.1. Germany is ranked 12th out of 43 countries in the Europe region. and unemployment.9 billion 2008 data unless otherwise noted Data compiled as of September 2009 See page 457 for an explanation of the methodology or visit the Index Web site at heritage. making its economy the 23rd freest in the 2010 Index. The judicial system is efficient and independent. remains high.3% Inflation (cPI): 2.9% 5-year compound annual growth $35. and tolerance for corruption is low. Although investors continue to face bureaucratic red tape.1 million gdP (PPP): $2. who is committed to non-inflationary policies.1 100 100 g ermany’s economic freedom score is 71.3% growth in 2008 1. and its overall score is significantly higher than the world average. including the United States.org/index.8% FdI Inflow: $24. Germany is home to many world-class companies and has an enormous export industry and one of the world’s highest incomes per capita. Germany’s economy has long benefited from openness to trade and investment. Germany decided not to increase stimulus spending despite pressure from other countries. Country’s Score Over Time Most free 80 80 60 60 World average 40 40 germany 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 82. particularly in the East. Government spending and fiscal freedom scores are well below the world average. but inclusion of the Social Democrats in a grand coalition seriously limited the government’s ability to carry out structural reforms. Its overall score has improved slightly due to modest improvements in freedom from corruption and government spending. won reelection in September 2009.gERMAnY Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 23 Regional Rank: 12 71. Business freedom and investment freedom are strong. The election of conservative Angela Merkel to the chancellorship in 2006 led to some economic reforms.

Wages and fringe benefits remain among the world’s highest. BUsinEss fREEDOM — 89.3 41. Private banks account for less than 30 percent of the market. and dismissing an employee is costly. Obtaining a business license requires less than the world average of 18 procedures and 218 days. The government established a financial stabilization fund for troubled banks in October 2008. overall tax revenue as a percentage of GDP was 40. the EU has high or escalating tariffs for agricultural and manufacturing products.8 percent. or access to foreign exchange. the government subsidizes agricultural production. and constitutional cases. and government-linked publicly owned banks account for nearly 50 percent. 206 2010 Index of Economic Freedom . government spending equaled 44. labor. All property is protected.3 percent in 2008. The federal corporate tax rate is 15. 89. non-transparent and restrictive regulations and standards. Starting a business takes an average of 18 days. The non-salary cost of employing a worker is high. tRADE fREEDOM — 87. including consumption and transfer payments. As a participant in the EU’s Common Agricultural Policy. but a 7 percent to 17 percent trade tax raises the effective top rate to roughly 33 percent. and foreign investors can access credit freely. Restrictions in services markets and the burden of regulations and standards exceed EU policy. its weighted average annual rate of inflation was 2.9 Germany is a member of the euro zone. Strict anti-corruption laws are enforced. compared to the world average of 35 days.0 39.gERMAnY’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. gOVERnMEnt sPEnDing — 41. New rules have helped to cut red tape. passenger transport businesses. import restrictions and bans for some goods and services. real estate purchases.4 Total government expenditures.5 percent. Germany ranks 14th out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008. repatriation of profits. but Germany’s traditional three-tiered system of private.6 The overall freedom to establish and run a business is well protected under Germany’s regulatory environment.6 87.3 Germany has a high income tax rate and a relatively low corporate tax rate. and its MFN tariff code is complex.5 Germany’s trade policy is the same as that of other members of the European Union. In the most recent year.9 0 0 20 least free 40 50 60 80 = world average 100 100 most free inVEstMEnt fREEDOM — 85 Foreign and domestic investors are treated equally. but bureaucracy remains burdensome. It also regulates prices for pharmaceuticals. distorting the prices of agricultural products. Other taxes include a value-added tax (VAT) and a flat tax of 25 percent on capital gains income (streamlined as of January 2009). tax. Regulations are generally transparent and consistent with international norms. Interest rates are market-determined. LABOR fREEDOM — 39. and inconsistent regulatory and customs administration among EU members. electricity. In the most recent year. Most of the roughly 2. require licenses.0 90. quotas. public. except for the sale of defense companies. and real estate agencies. PROPERtY Rights — 90 Contractual arrangements are secure. Nontariff barriers reflected in EU and German policy include agricultural and manufacturing subsidies. The state remains the largest employer.9 85. finAnCiAL fREEDOM — 60 Banking consolidation has accelerated dramatically. and the judiciary and civil service are highly professional. fREEDOM fROM CORRUPtiOn — 79 Corruption is perceived as minimal.5 percent solidarity tax).0 79. and Germany has ratified the OECD Anti-Bribery Convention. from Corruption Labor Freedom MOnEtARY fREEDOM — 79.4 79. Privatization of the railway company has stalled. Between 2006 and 2008. fisCAL fREEDOM — 58. and commercial law and private contracts are respected.8 percent (15 percent plus a 5. Some businesses. including certain financial institutions. The foreign presence is not strong.5 58. market access restrictions in some services sectors.2 percent of GDP. Ten points were deducted from Germany’s monetary freedom score to adjust for measures that distort domestic prices. However. The common EU weighted average tariff rate was 1.5 percent solidarity surcharge). There are no restrictions on capital transactions or current transfers.000 banks are local savings banks and cooperative institutions.9 Labor regulations are restrictive. telecommunications. and co-operative banks remains intact. Separate supreme courts deal with commercial.0 60. All types of capital are available to foreign and domestic businesses. are high. The insurance sector and capital markets are open to foreign participation. There are no permanent currency controls on foreign investments and no serious limitations on new projects. The top income tax rate is 47. and banks offer a full range of services.5 percent (45 percent plus a 5. and other public services. Ten points were deducted from Germany’s trade freedom score to account for non-tariff barriers.

The industrial sector. Ghana is ranked 8th out of 46 countries in the Sub-Saharan Africa region. macroeconomic stability. Ghana was the first Sub-Saharan African nation to achieve independence from a colonial power.4% 5-year compound annual growth $1. Many state-owned or state-controlled enterprises that the government identified for privatization in 2007 have been divested. Ghana is the world’s second-largest producer of cocoa.” Ghana’s overall economic freedom is mainly curtailed by an ineffective judicial system that remains vulnerable to political influence.4 million gdP (PPP): $33. Background: In 1957. cocoa products. including gold. and bauxite. Its overall score is 2.org/index. Long-time opposition party candidate John Atta Mills was elected president in December 2008 by the narrowest margin in African history. and timber).2.452 per capita unemployment: estimated to be over 10% Inflation (cPI): 16. making its economy the 87th freest in the 2010 Index. discovered in 2007. have yet to be fully exploited. As a result. is somewhat more developed than those of many other African countries.2 100 100 g hana’s economic freedom score is 60. It has been a stable democracy since 1992. Significant oil reserves.1 points higher than last year due to improvements in five of the 10 economic freedoms. Corruption and the weak rule of law undermine Ghana’s capacity to attract more foreign investment.2% growth in 2008 6. Ghana for the first time has achieved the status of “moderately free. 43 percent of GDP.5% 2008 data unless otherwise noted 2008 compiled as of September 2009 Data data unless otherwise noted Data compiled as of September 2009 FdI Inflow: $855. Prudent macroeconomic policies and structural reforms have enabled Ghana to achieve average growth of over 6 percent during the past five years. manganese ore. Ghana is rich in natural resources. and financial-sector reform have contributed to relatively steady expansion and poverty reduction.0 million See page 457 for an explanation of the methodology or visit the Index Web site at heritage. and 39 percent of exports (predominantly cocoa. but agriculture is the key economic pillar and in 2007 accounted for 50 percent of employment. diamonds. An expanding private sector.ghAnA Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 87 Regional Rank: 8 60. and its overall score is above the world average.9 billion 6. How Do We Measure Economic Freedom? 207 . Country’s Score Over Time Most free 80 80 60 60 World average 40 40 ghana 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 23. including freedom from corruption and trade freedom. at about 30 percent of GDP in 2007.

very few cases have been filed. are relatively high. 50 60 80 = world average 100 100 most free finAnCiAL fREEDOM — 60 Ghana’s financial system has undergone restructuring and transformation. gOVERnMEnt sPEnDing — 58. averaging 14. complicated. Residents and non-residents may hold foreign exchange accounts. Since the introduction in 2003 of a Universal Banking Business License intended to create more competition in the banking industry. and payments and current transfers are subject to few restrictions. In the most recent year. Non-transparent and burdensome bureaucracy. and the government has a majority share in the largest bank and full ownership in two others. tRADE fREEDOM — 65. Bank credit to the private sector has increased. non-banking financial insti- LABOR fREEDOM — 57. Starting a business takes about the world average of 35 days. telecommunications. Import bans and restrictions. including consumption and transfer payments. fisCAL fREEDOM — 83.3 Ghana’s weighted average tariff rate was 9. the financial system’s efficiency was enhanced by institutional changes that include the establishment of a common National Payment System Platform and full automation of the stock exchange. Despite laws to protect intellectual property rights. The courts are slow to dispose of cases and face challenges in enforcing decisions. weak enforcement of intellectual property rights.5 58.3 83. Fifteen points were deducted from Ghana’s trade freedom score to account for non-tariff barriers. from Corruption Labor Freedom 56.0 39.9 65. import fees and taxes. cumbersome and non-transparent standards and regulations. securities. and political influence. Foreigners may invest in securities listed on the stock exchange without exchange-control restrictions. Foreign investors must register with the government and satisfy minimum capital requirements. and corruption are deterrents. BUsinEss fREEDOM — 56. 208 2010 Index of Economic Freedom . the financial sector has continued to deepen its operations.4 0 0 20 least free 40 tutions. The relatively developed insurance sector is dominated by two state-owned companies. Ten points were deducted from Ghana’s trade freedom score to adjust for measures that distort domestic prices. but getting clear title to land is often difficult. including microcredit institutions. In 2008. insurance. PROPERtY Rights — 50 Ghana’s judicial system suffers from corruption. largely because of resource constraints and institutional inefficiencies. and real estate and may limit or deny foreign participation. The non-salary cost of employing a worker is moderate. In 2008.5 percent between 2006 and 2008. the Non-Bank Financial Institutions Bill was enacted to strengthen regulation and supervision of non-bank financial institutions.9 65. Sector-specific laws further regulate banking. energy.ghAnA’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. The government influences prices through its regulation of state-owned utilities and controls the prices of petroleum products. Other taxes include a value-added tax (VAT) and a capital gains tax. labor regulations remain restrictive. and lengthy. government spending equaled 37 percent of GDP. political influence. Obtaining a business license takes about the same as the world average of 18 procedures and 218 days. has achieved a 45 percent increase in market capitalization. export promotion schemes.0 60. with over 30 listed companies.0 50. Capital markets are developing. services market barriers. The legal system recognizes and enforces secured interest in property. Foreign investors may lease but not own land. and complex and corruption-prone customs procedures add to the cost of trade. inVEstMEnt fREEDOM — 65 The foreign investment code eliminates screening of foreign investment.8 The overall freedom to conduct a business remains relatively constrained. In the most recent year.8 percent in 2008. Taxes on food products have been reinstated. overall tax revenue as a percentage of GDP was 20 percent. a slight improvement for the second consecutive year.4 Despite some improvements. second only to the police. A poll measuring public trust in the government found that the courts were one of the least trusted institutions. but expenditure management is generally sound.0 57. MOnEtARY fREEDOM — 65. but dismissing an employee is costly and difficult.8 65.9 Inflation has been high.5 Ghana has moderate tax rates. non-transparent government procurement. Ghana ranks 67th out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008. fREEDOM fROM CORRUPtiOn — 39 Corruption is perceived as significant. and the stock exchange. fishing. and does not discriminate against foreign investors. albeit less than the systems in some other African countries.9 Total government expenditures. guarantees capital repatriation. The top personal and corporate tax rates are 25 percent. A bloated wage bill is largely responsible for high levels of spending. Corruption is comparatively less prevalent than in other countries in the region. There are 24 banks.

Challenges to economic freedom remain in such areas as government spending and labor freedom. Corruption is another lingering problem. tourism. making its economy the 73rd freest in the 2010 Index. More than half of Greek industry is located in the Greater Athens area and is focused on agriculture. Political life is dominated by the rivalry between the socialist PASOK party and the more centrist New Democracy party of Prime Minister Konstantinos Karamanlis. High government spending chronically causes budget deficits and places upward pressure on an already high public debt. undermining long-term competitiveness. Country’s Score Over Time Most free 80 80 60 60 World average 40 40 greece 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 11.361 per capita unemployment: 7. though not in the past decade.1 billion 2008 data unless otherwise noted Data compiled as of September 2009 See page 457 for an explanation of the methodology or visit the Index Web site at heritage. Following mergers and privatizations. and its overall score is above the world average. reflecting better scores in five of the 10 economic freedoms. The Greek economy has been gradually transforming in ways that improve flexibility and openness. focused on Cyprus but dating back to the Ottoman Empire or earlier. Privatization has reduced the state’s dominant role in the economy. but progress has been sluggish. and shipping.9 points from last year. and the overall entrepreneurial environment has been enhanced by implementation of a more competitive corporate tax rate and more efficient regulation.2 million gdP (PPP): $330. Political disputes with neighboring countries. especially Macedonia. construction.9% growth in 2007 3. How Do We Measure Economic Freedom? 209 .2% FdI Inflow: $5. Background: Greece became the 10th member of the European Union in 1981 and adopted the euro in 2002. The economy depends heavily on tourism and other services. simmer in political channels. Its overall score has improved by 1.org/index.7.6% 5-year compound annual growth $29. a more deep-rooted rivalry with Turkey.0 billion 2. the financial sector has become more open and more efficient. The rigidity of the labor market impedes productivity and job growth.7% Inflation (cPI): 4. Greece has been a member of NATO since 1952 but has enjoyed uninterrupted democratic rule only since 1974.gREECE Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 73 Regional Rank: 34 62. Greece is ranked 34th out of 43 countries in the Europe region.7 100 100 g reece’s economic freedom score is 62. has come close to armed conflict.

operate. non-transparent and restrictive regulations and standards. Fifteen points were deducted from Greece’s trade freedom score to account for non-tariff barriers. and the law provides severe penalties for infractions. There are more than 60 domestic and foreign banks along with other special credit institutions. mining. Subsidies. Foreign-owned banks are around 11 percent of the market. transfers. and holds an approximately 30 percent stake in the Postal Savings Bank. an inheritance tax. Between 2006 and 2008. and air transport must obtain licenses and other approvals that are not required of Greek and EU investors. Capital markets provide a wide range of financial instruments.4 percent.4 82. Other taxes include a value-added tax (VAT). PROPERtY Rights — 60 The judiciary is nominally nonpartisan but tends to reflect government sensibilities. and inconsistent regulatory and customs administration among EU members.0 55.0 47. indirectly controls another. regulations. government spending equaled 44. including consumption and transfer payments. 210 2010 Index of Economic Freedom .gREECE’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. MOnEtARY fREEDOM — 77. Greece’s weighted average annual rate of inflation was 3.8 percent. The non-salary cost of employing a worker is high. although employers have greater flexibility under a labor law passed in 2005. maritime. the government subsidizes agricultural production. In the most recent year. Restrictions exist on land purchases in border regions and on certain islands due to national security considerations. Residents and non-residents may hold foreign exchange accounts. Enforcement of intellectual property rights is not rigorous. tRADE fREEDOM — 82. There are no restrictions or controls on payments. quotas. inVEstMEnt fREEDOM — 60 50 60 80 = world average 100 100 most free BUsinEss fREEDOM — 77. Greece officially welcomes foreign investment but restricts investment in some utilities. The state directly controls one bank. and regulations on work hours remain rigid. and a tax on interest.9 Greece has a relatively high income tax rate and a moderate corporate tax rate. the EU has high or escalating tariffs for agricultural and manufacturing products. The government caps private investment in companies of “strategic importance” at 20 percent without special approval.0 60. Greece ranks 57th out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008. In the most recent year. Bureaucracy is non-transparent and inefficient.9 41. Nontariff barriers reflected in EU and Greek policy include agricultural and manufacturing subsidies.0 60. broadcasting. The lack of a land registry and the multiple layers of authority concerning land use and zoning permits are among the most significant disincentives to Greenfield investments. market access restrictions in some services sectors. or repatriation of profits. As a participant in the EU’s Common LABOR fREEDOM — 55.3 percent in 2008. finAnCiAL fREEDOM — 60 Privatization and mergers have considerably reduced the government’s influence in banking.9 Total government expenditures. fREEDOM fROM CORRUPtiOn — 47 Corruption is perceived as significant. and services market access restrictions exceed EU policy. Progress has been made in reforming and privatizing stateowned enterprises. and close a business is relatively well protected by Greece’s regulatory environment. Private banks account for 70 percent of assets. and the top corporate tax rate is 25 percent. are high. Obtaining a business license requires less than the world average of 18 procedures and 218 days. overall tax revenue as a percentage of GDP was 34.1 0 0 20 least free 40 Agricultural Policy. distorting the prices of agricultural products. and the enforcement of intellectual property rights is problematic. transportation.9 77. and its MFN tariff code is complex. but implementation and enforcement remain problematic. Closing a business is relatively easy.5 Greece’s trade policy is the same as that of other members of the European Union.6 Greece is a member of the euro zone. real estate transactions.6 60. and non-EU investors in banking. It also can set a ceiling on retail prices and regulates prices for pharmaceuticals. However. The common EU weighted average tariff rate was 1. and energy while setting margins for wholesalers and retailers. gOVERnMEnt sPEnDing — 41. Ten points were deducted from Greece’s monetary freedom score to account for policies that distort domestic prices.0 percent of GDP. from Corruption Labor Freedom 77. Starting a business takes about half of the world average of 35 days. Bribery is considered a criminal act. Five large commercial groups operate as private universal banks.4 The overall freedom to start. fisCAL fREEDOM — 65.1 Labor regulations are restrictive.5 65. A combination of state guarantees and participation in share capital has increased flows in financial markets. import restrictions and bans for some goods and services. Expropriation is unlikely. The top income tax rate is 40 percent.

Business licensing procedures are burdensome. cut flowers. is fully deregulated. and bureaucratic impediments persist. judicial weakness and corruption. and participation in Petrocaribe. and textiles. Public debt is among the region’s lowest. Background: President Alvaro Colom of the leftist National Unity for Hope Party was elected in 2007. Country’s Score Over Time Most free 80 80 60 60 World average 40 40 guatemala 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 13. Judicial inefficiency undermines the rule of law. property rights. sugar. Venezuela’s long-term oil loans and subsidies program. The Central America–Dominican Republic–United States Free Trade Agreement has led to greater trade and employment. improved education. The most advanced sector. winter vegetables. How Do We Measure Economic Freedom? 211 . with stable fiscal and public finance management. telecommunications.1 billion 4.gUAtEMALA Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 83 Regional Rank: 17 61. less than half of all age-appropriate youth are enrolled in secondary schools.7 million gdP (PPP): $65. Guatemala is ranked 17th out of 29 countries in the South and Central America/Caribbean region. Ongoing issues include crime.org/index. Leading exports include coffee. and its overall score is above the world average. It scores particularly well in government spending while also scoring well in trade freedom and fiscal freedom.6 points. Guatemala has regained its status as a “moderately free” economy. rising youth gang membership. including throughout the global financial crisis. Gradually advancing its economic freedom. reflecting improvements in trade freedom. and freedom from corruption. Its score has increased by 1. Personal and corporate tax rates are moderate.0 100 100 g uatemala’s economic freedom score is 61. and the overall tax burden is relatively low. making its economy the 83rd freest in the 2010 Index. accelerated rural development.0 million See page 457 for an explanation of the methodology or visit the Index Web site at heritage. About 80 percent of Guatemalans live below the poverty line. and access to health care.7% 5-year compound annual growth $4.4% 2008 data unless otherwise noted 2008 compiled as of September 2009 Data data unless otherwise noted Data compiled as of September 2009 FdI Inflow: $838. promising social democracy.0% growth in 2008 4. bananas. and nearly half of the labor force works in agriculture.760 per capita unemployment: estimated at over 40% (including underemployment) Inflation (cPI): 11. Government expenditures are effectively controlled. Guatemala’s overall economic freedom is curbed by a relative lack of business freedom and respect for property rights and widespread corruption. designed to create loyalty to and dependence on Hugo Chávez.

There are 20 banks.0 54. Residents and non-residents may hold foreign exchange accounts. The Stock Market Law.3 percent of GDP. services market access restrictions. and mining activities face additional restrictions as minerals and petroleum are the property of the state. the government has modernized regulation and strengthened supervision. averaging 9. Convention Against Corruption. Import taxes.0 50. Overall. transactions. including consumption and transfer payments. one of which is foreign-owned. BUsinEss fREEDOM — 52. but corruption remains a serious problem in customs transactions and at many levels of government. Inflation peaked at more than 14 percent on an annualized basis in July 2008 but fell below 4 percent by early 2009 as the price of commodities on global markets declined. Foreign investors may not own land immediately adjacent to rivers. Civil cases can take as long as a decade. tRADE fREEDOM — 84 Guatemala’s weighted average tariff rate was 3 percent in 2008.0 31.3 93. Bank supervision and transparency have been strengthened under a legal and regulatory framework adopted in 2002 and legislation passed in 2005 and 2006.3 Guatemala’s tax rates are moderately high. Ten points were deducted from Guatemala’s trade freedom score to account for non-tariff barriers. complex and non-transparent laws and regulations. Some profes- 212 2010 Index of Economic Freedom .3 0 0 20 least free 40 50 60 80 = world average 100 100 most free sional services may be supplied only by professionals with locally recognized academic credentials. compared to the world average of 35 days.N. are low. though not extensive. Guatemala is ranked 80th out of 115 countries in the 2009 International Property Rights Index. Foreign banks’ presence is small. Sixteen non-bank financial institutions carry out investment banking and medium-term and long-term lending. from Corruption Labor Freedom 52.9 Total government expenditures. import licensing. In the most recent year. and their market share accounts for about 8 percent of deposits.0 35. Inadequately documented titles and gaps in the public record can lead to conflicting claims of land ownership. The government maintains few price controls but subsidizes numerous economic activities and products. persists in telecommunications and port control. fisCAL fREEDOM — 79. Judicial corruption is not uncommon. Land invasions by squatters are increasingly common in rural areas. non-transparent sanitary and phytosanitary regulations. overall tax revenue as a percentage of GDP increased slightly to 12. Obtaining a business license requires less than the world average of 218 days. finAnCiAL fREEDOM — 50 Guatemala’s small financial system is dominated by bankcentered financial conglomerates. The five largest banks account for almost 80 percent of total assets. gOVERnMEnt sPEnDing— 93. Successful prosecution of intellectual property rights cases is rare. Since the banking crises of 2006 and 2007. intended to improve mechanisms to make information concerning issuing institutions more readily available. and transfers.5 84. Capital markets are small and not fully developed. was signed into law in 2008.8 percent between 2006 and 2008. Ten points were deducted from Guatemala’s monetary freedom score to adjust for measures that distort domestic prices.2 Inflation has been high. problems enforcing intellectual property rights. Guatemala ranks 96th out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008. While the government has instituted many reforms.1 percent. The top income and corporate tax rates are 31 percent. fREEDOM fROM CORRUPtiOn — 31 Corruption is perceived as widespread. but dismissing an employee is relatively costly. and corruption continue to deter investment. PROPERtY Rights — 35 Judicial resolution of disputes is time-consuming and often unreliable.9 70. Guatemala has ratified the U.5 The overall freedom to conduct a business is restricted by Guatemala’s regulatory environment. The non-salary cost of employing a worker is moderate. There are no restrictions or controls on payments.3 Labor regulations are rigid. such as fuel and housing construction.0 79. and inadequate infrastructure add to the cost of trade. In the most recent year. inconsistent customs valuation and administration. inVEstMEnt fREEDOM — 60 Foreign investors receive national treatment. LABOR fREEDOM — 54.gUAtEMALA’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. Other taxes include a value-added tax (VAT) and a tax on real estate. oceans. and banking has undergone drastic reorganization. which also makes government intervention easier. Two commercial exchanges deal almost exclusively in commercial paper and government bonds. government spending equaled 14. and evicting squatters can be difficult. Starting a business takes an average of 29 days. or international borders. reflecting efforts to improve tax administration. State ownership of enterprises. stable budgetary management has maintained Guatemala’s solid fiscal situation through the global downturn. inconsistent judicial decisions.2 60. burdensome bureaucracy. MOnEtARY fREEDOM — 70.

suspended the constitution. Guinea possesses rich mineral resources. and implementing other institutional reforms.8 billion 8. Under international and domestic pressure. establishing and running a business still requires overcoming numerous bureaucratic hurdles. reflecting improvements in labor freedom and trade freedom. diamonds. Guinea is ranked 27th out of 46 countries in the Sub-Saharan Africa region. the junta agreed to hold legislative elections in October 2009 and presidential elections in December 2009. Background: After despotic President Lansana Conté died in December 2008. Fighting and instability in Côte d’Ivoire.gUinEA Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 134 Regional Rank: 27 51.8 100 100 g uinea’s economic freedom score is 51.8% 5-year compound annual growth $1. electricity and water shortages are common. and its overall score is below the world and regional averages.8. the entrepreneurial environment is hardly encouraging. Sierra Leone. and Camara was declared president. and dissolved the parliament. and there is corruption in many parts of the economy. and much of the population depends on subsistence agriculture. The judiciary is subject to pervasive political interference. which has hosted hundreds of thousands of refugees. Its overall score is 0. These measures include reforming fiscal policies. the reforms have not been implemented effectively. but infrastructure is poor. supreme court.8 point better than last year. However. How Do We Measure Economic Freedom? 213 . including iron. Although progress has been made in streamlining bankruptcy procedures. and perhaps half of the world’s bauxite reserves.8 million gdP (PPP): $11. making its economy the 134th freest in the 2010 Index.4 billion 2008 data unless otherwise noted Data compiled as of September 2009 See page 457 for an explanation of the methodology or visit the Index Web site at heritage. and there has been little progress in terms of privatization. a military junta led by Captain Moussa Dadis Camara seized power. Guinea has undertaken much-delayed economic reforms to improve macroeconomic stability and enhance economic growth. Country’s Score Over Time Most free 80 80 60 60 World average 40 40 guinea 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 9.4% growth in 2008 2. gold. A National Council for Democracy and Development was set up. and Liberia have often spilled over into Guinea.204 per capita unemployment: n/a Inflation (cPI): 22.org/index. strengthening management of public finance. The application of commercial law is non-transparent and inconsistent. Overall. and other government institutions.9% FdI Inflow: $1.

Other taxes include a value-added tax (VAT) and an inheritance tax. however. but there are few cases to demonstrate that the system can provide effective protection of real or intellectual property rights. averaging 26. LABOR fREEDOM — 78 Labor regulations are relatively flexible. shortages. under 10 percent of GDP. fREEDOM fROM CORRUPtiOn — 16 Corruption is perceived as pervasive. About 30 percent of total loans are non-performing. PROPERtY Rights — 20 Enforcement of property rights depends on a corrupt and inefficient legal and administrative system.1 Total government expenditures. The non-salary cost of employing a worker is modest. such transactions can take place upon request. and payments and transfers are allowed with some restrictions. though individuals have found it difficult on occasion to exercise this right. foreign majority owner- 214 2010 Index of Economic Freedom . and unofficial caps on amounts exchanged. Foreigners and nationals may own property. Political instability and government interference in the provision of water and electricity have hurt fiscal management. although business owners complain of periodic delays.7 60. Barring a foreign exchange crisis. a weak and corrupt judiciary. Commercial banks are the main source of financing for private businesses. There have been no corporate issuances in the debt market.0 69. In the most recent year. Obtaining a business license requires more than the world average of 18 procedures and 218 days. The top income tax rate is 40 percent.5 percent. from Corruption Labor Freedom 43. Ten points were deducted from Guinea’s monetary freedom score to adjust for measures that distort domestic prices.0 78. and bank lending to the private sector remains. are low. Poorly trained magistrates. and corruption. Business is routinely conducted through the payment of bribes. overall tax revenue as a percentage of GDP was 13. on average. political uncertainty. and regulations on work hours are not burdensome. The banking sector.5 percent between 2006 and 2008. and five institutions operate in Guinea. Investment is deterred by bureaucratic inefficiency. Starting a business takes an average of 41 days.5 percent in 2008. non-transparent and corrupt customs administration. It also subsidizes rice importers. With fewer than 10 commercial banks. The formal labor market is not fully developed. Poor spending management and excessive reliance on the declining mining sector have contributed to fiscal deficits. inVEstMEnt fREEDOM — 40 Foreign investment and domestic investment generally receive equal treatment. Fifteen points were deducted from Guinea’s trade freedom score to account for non-tariff barriers. supervised by the Central Bank of Guinea. tRADE fREEDOM — 60 Guinea’s weighted average tariff rate was 12. water. Guinea ranks 173rd out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008.2 percent of GDP. fisCAL fREEDOM — 69.9 93.4 Inflation has been extremely high. pre-import and export authorization requirements. state-owned import and export monopolies.7 The overall freedom to conduct a business is very restricted by Guinea’s burdensome regulatory environment. a lack of foreign currency for transacting formal trade. Import taxes. and nepotism reportedly plague the administration of justice. and a very large informal economy encourage corruption. The government influences prices through the regulation of state-owned enterprises and administrative price controls for cement. corruption.4 40. Considerable economic activity remains outside the formal banking sector. The government has expressed its intention to reform the judiciary with the help of international donor agencies. and inadequate infrastructure add to the cost of trade. Regulation is inefficient and poorly enforced.0 40. petroleum products. In the most recent year. finAnCiAL fREEDOM — 40 Guinea’s small financial system is dominated by banking.0 0 0 20 least free 40 50 60 80 = world average 100 100 most free BUsinEss fREEDOM — 43. and the top corporate tax rate is 35 percent. services are largely concentrated in the capital. particularly by French financial institutions. MOnEtARY fREEDOM — 57.gUinEA’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. Microfinance has expanded rapidly.9 Guinea has high tax rates. and capital markets are underdeveloped. government spending equaled 15. and electricity. has some foreign ownership. inadequate infrastructure and regulatory capacity.0 16. subsidies. government officials commonly demand everything from money to gasoline to perform their routine duties. including consumption and transfer payments. Branches and subsidiaries of foreign or regional banks play a relatively important role in financial intermediation. ship in media and mining are subject to ad hoc government review and approval. poor formal salaries. Residents and non-residents may hold foreign exchange accounts. opaque procedures. The business and political cultures. compared to the world average of 35 days.1 57. gOVERnMEnt sPEnDing — 93. reflecting the lack of efficiency and depth in the financial system.0 20.

6. create a business environment that is not conducive to private enterprise. Guinea–Bissau has become a major transshipment point for drugs and light arms by international criminal gangs. Background: Guinea–Bissau is one of the world’s poorest countries.5% 5-year compound annual growth $538 per capita unemployment: n/a Inflation (cPI): 10. elected in 2000. Guinea-Bissau’s progress in structural reform has been undercut by political and institutional instability. Its score has declined by 1. and its overall score is well below the world and regional averages. combined with domestic regulations.gUinEA–BissAU Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 167 Regional Rank: 42 43. largely due to significant deterioration in trade freedom and monetary freedom. Restrictions on foreign investment.6 million gdP (PPP): $0. and was ousted in 1998. employs over 80 percent of the labor force. A presidential candidate and a prominent member of parliament were killed in June 2009. won the country’s first multi-party elections in 1994.7% growth in 2008 2. and comprises about 90 percent of exports.4% FdI Inflow: $15 million 2008 data unless otherwise noted Data compiled as of September 2009 See page 457 for an explanation of the methodology or visit the Index Web site at heritage. property rights. Country’s Score Over Time Most free 80 80 60 60 World average 40 40 guinea–Bissau 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 1. Economic freedom is severely constrained. including business freedom. was ousted by the military in 2003. shortly before elections won in a runoff by former interim President Malam Bacai Sanha. and state involvement in the economy is widespread and inefficient. and freedom from corruption. Agriculture accounts for over 60 percent of GDP. making its economy the 167th freest in the 2010 Index. investment freedom. An unsustainable level of public debt has long been a major impediment to development. Weak rule of law jeopardizes property rights. Cashew nuts are the primary export. The economy scores well below the world average in many of the 10 economic freedoms. and corruption is so rampant that the informal market dwarfs the legitimate market. How Do We Measure Economic Freedom? 215 .8 points.6 100 100 g uinea–Bissau’s economic freedom score is 43.8 billion 2. Joao Vieira overthrew post-independence leader Luis Cabral in 1980. Normal business operations are extremely difficult.org/index. Kumba Yala. Guinea– Bissau is ranked 42nd out of 46 countries in the Sub-Saharan Africa region. Vieira won the presidency again in 2005 and was assassinated in March 2009.

In the most recent year. Four banks were in operation as of 2007. 216 2010 Index of Economic Freedom .3 Total government expenditures.0 52.0 30. The government intervenes in the export of cashews. are the main component of the consumer price index and will continue to have the largest impact. The government.4 The overall freedom to conduct a business remains severely limited by Guinea–Bissau’s regulatory environment. are relatively high. Fifteen points were deducted from Guinea–Bissau’s monetary freedom score to adjust for measures that distort domestic prices. In the most recent year.6 47. as well as incentives and guarantees against nationalization and expropriation. fREEDOM fROM CORRUPtiOn — 19 Corruption is perceived as pervasive.0 19. The first microfinance institution opened at the end of 2005 as a subsidiary of a regional development bank. which governs banking and other financial institutions.4 58. Fiscal management is shaky and focused on meeting current-year expenditure demands without increasing domestic arrears. PROPERtY Rights — 20 Protection of property rights is extremely weak. and dismissing an employee is relatively costly. A large part of the population is still outside of the formal banking sector. the primary export LABOR fREEDOM — 52. and foreign investors participate in banking. overall tax revenue as a percentage of GDP was 10.9 percent of GDP. Trade in smuggled diamonds. The banking system has not been revitalized since the end of the civil war in the late 1990s. poorly paid. The government influences prices through state-owned utilities and controls prices for cashew nuts. Starting a business takes more than five times the world average of 35 days. and customs corruption add to the cost of trade. inVEstMEnt fREEDOM — 30 The investment code provides for national treatment of foreign investors.4 percent in 2008. difficulty tracking and monitoring goods. The regional Banque centrale des Etats de l’Afrique de l’ouest (BCEAO) maintains the CFA franc’s peg to the euro.2 Guinea–Bissau’s weighted average tariff rate was 13. inadequate infrastructure and trade capacity. averaging 8. and the top corporate tax rate is 25 percent. including consumption and transfer payments. gOVERnMEnt sPEnDing — 47. and residents may hold them with the permission of the Ministry of Finance and the BCEAO.2 88. Fifteen points were deducted from Guinea–Bissau’s trade freedom score to account for non-tariff barriers. High credit costs and scarce access to financing severely impede entrepreneurial activity. Corruption and lack of transparency pervade all levels of government. 50 60 80 = world average 100 100 most free BUsinEss fREEDOM — 23. and an unskilled workforce discourage foreign investment. The entry costs of launching a business are very high. The informal sector eclipses the formal economy.0 30.gUinEA–BissAU’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. Restrictions on work hours are not flexible. which depend on the annual harvest. regional government institutions. and fishing products is significant. Guinea–Bissau is one of eight members of the West African Economic and Monetary Union. corruption.1 percent between 2006 and 2008.5 Labor regulations are burdensome. Customs officers frequently accept bribes. The judiciary is influenced by the executive. Capital transfers to most foreign countries are restricted. Guinea–Bissau ranks 158th out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008.5 0 0 20 least free 40 and source of roughly 30 percent of GDP. food prices. political uncertainty has only exacerbated the situation. State-owned water and electricity enterprises struggle to maintain stability. fisCAL fREEDOM — 88. tRADE fREEDOM — 58. and persons who live in urban areas often bring judicial disputes to traditional counselors to avoid the official system’s costs and bureaucratic impediments. Judges are poorly trained. the principal export. Non-residents may hold foreign exchange accounts with permission of the BCEAO. food. finAnCiAL fREEDOM — 30 Guinea–Bissau’s small financial sector remains hampered by economic and institutional instability. The top income tax rate is 20 percent. and subject to corruption. government spending equaled 41. With the economy heavily dependent on foreign aid. Irregularities in import valuation. Traditional practices prevail in most rural areas. MOnEtARY fREEDOM — 67 Inflation has been high. Political and economic instability. inadequate regulatory capacity and infrastructure. Its monetary policies and the agriculture sector’s improving performance will help to control inflation.9 percent.3 67.6 Guinea–Bissau has a relatively low income tax rate but a moderate corporate tax rate. The police often resolve disputes without recourse to the courts. However. The government must approve most personal capital movements between residents and non-residents. The non-salary cost of employing a worker is high. There is no stock exchange. from Corruption Labor Freedom 23.0 20.

Although the main opposition parties accepted the election result and the risk of political violence is at its lowest since the early 1990s. The biggest barrier to development is Guyana’s oversized government. Average economic growth over the past five years has been only about 3 percent.9% 5-year compound annual growth $2. and attempts at reform have been made only under framework agreements with international organizations. Support for the two major parties is ethnically and racially polarized.8 million gdP (PPP): $1. Country’s Score Over Time Most free 80 80 60 60 World average 40 40 guyana 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 0. In August 2006.org/index. Its overall score remains the same as last year because improvements in three of the 10 economic freedoms were offset by declines in investment freedom and property rights.0% growth in 2008 2.9 billion 3. and its state-dominated economy. Guyana does not perform well in any of the 10 economic freedoms and is slightly above the world average only in labor freedom and monetary freedom.gUYAnA Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 153 Regional Rank: 27 48. Guyana is one of the poorest countries in the Western Hemisphere.4.0% (2007) Inflation (cPI): 8. making its economy the 153rd freest in the 2010 Index. Long-standing constraints on overall economic freedom include property rights protected only erratically under the weak rule of law and widespread corruption in all areas of government. Violent crime and drug trafficking are serious concerns. Background: Guyana gained its independence in 1966.4 100 100 g uyana’s economic freedom score is 48.542 per capita unemployment: 11. Guyana is ranked 27th out of 29 countries in the South and Central America/ Caribbean region. and its overall score is well below the world and regional averages. with expenditures that often exceed half of GDP. substantially depress the entrepreneurial environment. lagging behind other developing countries. Significant restrictions on foreign investment.1% FdI Inflow: $178 million 2008 data unless otherwise noted Data compiled as of September 2009 See page 457 for an explanation of the methodology or visit the Index Web site at heritage. dependent mainly on agriculture and mining. has been stagnant for many years. combined with an inefficient bureaucracy. relations between the PPP–Civic and the People’s National Congress–Reform remain hostile. President Bharrat Jagdeo of the People’s Progressive Party–Civic was returned to office in the first nonviolent elections in more than 20 years. How Do We Measure Economic Freedom? 217 .

tRADE fREEDOM — 71.0 26.9 26. Investment is hindered by crime.3 percent. The top income tax rate is 33. There are restrictions on financial transactions with nonresidents. fREEDOM fROM CORRUPtiOn — 26 Corruption is perceived as widespread. Widespread corruption undermines poverty-reduction efforts by international aid donors and discourages foreign investors.3 55. Fifteen points were deducted from Guyana’s trade freedom score to account for non-tariff barriers. barring a renewed shock to global energy prices.0 30. but has been falling steadily from a peak of nearly 12 percent in March 2008. inefficient customs administration. The approval process for investments can be burdensome and non-transparent.gUYAnA’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. Foreign exchange. inefficient and burdensome government bureaucracy. There is no enforcement mechanism to protect intellectual property rights. finAnCiAL fREEDOM — 40 Guyana’s underdeveloped financial system remains plagued by inefficiency and a poor institutional framework. but dismissing an employee is fairly costly. and capital transactions face some restrictions and controls. The non-salary cost of employing a worker is low.6 percent of GDP. poor resources. Privatization of stateowned enterprises has achieved mixed results. In the most recent year. are high. overall tax revenue as a percentage of GDP was 35. Poor management of public expenditures has led to persistent fiscal deficits.0 65.0 40. High credit costs and scarce access to financing remain barriers to more dynamic entrepreneurial activity. Law enforcement officials and prominent lawyers question the independence of the judiciary and accuse the government of intervening in some cases. but major foreign investments receive intense political scrutiny in an economy still dominated by the state. Obtaining a business license requires less than the world average of 18 procedures. Guyana ranks 126th out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008. which lists 15 companies. MOnEtARY fREEDOM — 71 Inflation has been high. weak intellectual property rights enforcement. and an inadequately educated workforce. PROPERtY Rights — 35 Guyana’s judicial system is often slow and inefficient. import taxes. from Corruption Labor Freedom inVEstMEnt fREEDOM — 30 Guyana has been moving toward a more welcoming environment for foreign investors.4 Despite some progress.9 Guyana has relatively high tax rates. but the commission had not been constituted as of mid-2009. averaging 9.9 percent in 2008. In the most recent year. 63. and the two largest are foreign-owned. and approval for investment incentives. a weak and burdensome judiciary. and the top corporate tax rate is 45 percent. It is also subject to corruption. burdensome standards and regulations.4 71. credit. Starting a business takes about the world average of 35 days. Excise taxes on fuel were temporarily suspended in 2008.3 Guyana’s weighted average tariff rate was 6. government spending equaled 49. and corruption add to the cost of trade. It was 6. corruption. Guyana has made progress in removing price controls and privatizing the large public sector.2 Total government expenditures. Import restrictions. Guyana has six insurance companies and a small stock exchange. gOVERnMEnt sPEnDing — 26.0 35. Other taxes include a property tax and a value-added tax (VAT). inadequate infrastructure. the overall freedom to conduct a business remains restricted by Guyana’s regulatory environment.7 percent. 218 2010 Index of Economic Freedom .0 percent between 2006 and 2008. but the government still influences prices through the regulation of state-owned utilities and enterprises. The percentage of loans that are considered non-performing is a relatively high 14 percent. import-licensing requirements for a relatively large number of products. access to licenses. including consumption and transfer payments.2 71. Six commercial banks operate in Guyana.2 Labor regulations are relatively flexible. There is extensive corruption at every level of law enforcement and government. Ten points were deducted from Guyana’s monetary freedom score to adjust for measures that distort domestic prices.4 percent at the end of 2008 and is expected to continue to fall in 2009. availability of land. The constitution guarantees the right of foreigners to own property or land. A shortage of trained court personnel and magistrates. While there is no mandatory screening of foreign investment. but closing a business can be costly. non-transparent regulations. Guyana is ranked 109th out of 115 countries in the 2009 International Property Rights Index. the government conducts a de facto screening of most investments to determine eligibility for special tax treatment. Public officials are required to disclose their assets to an Integrity Commission before assuming office. LABOR fREEDOM — 65.2 0 0 20 least free 40 50 60 80 = world average 100 100 most free BUsinEss fREEDOM — 63. and persistent bribery prolong the resolution of court cases unreasonably. fisCAL fREEDOM — 55.

4% FdI Inflow: $30. Haiti is ranked 24th out of 29 countries in the South and Central America/Caribbean region. maintains close ties to Cuba and Venezuela. A democratic constitution was adopted in 1986. Low tariff barriers give Haiti a relatively good score in trade freedom. Background: Haiti.N. and emigrants’ remittances have declined to about 17 percent of GDP. Rampant corruption and an inefficient judicial system are serious obstacles to entrepreneurial activity. who won a U. Stability Mission and a better trained and equipped national police force. and its infrastructure is decimated. With improvements in fiscal and labor freedoms.org/index.5 billion 1.-supervised election in 2006.8. Government spending has been largely directed toward mitigating the effects of several natural disasters. but the effectiveness of public finance is severely undermined by political volatility and corruption that exacerbate the weak rule of law.hAiti Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 141 Regional Rank: 24 50. Country’s Score Over Time Most free 80 80 60 60 World average 40 40 Haiti 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 9. but the 1990 election of President Jean-Bertrand Aristide began 13 years of intense polarization that culminated in his second exile in February 2004. and its overall score is lower than the world and regional averages. Haiti is 95 percent deforested. Secondary education is available to few children. The justice system is non-functional. most economic activity is informal.3 point higher than last year. Reforms to improve the business and investment climates have had little effect.3% growth in 2008 2. making its economy the 141st freest in the 2010 Index.8 100 100 h aiti’s economic freedom score is 50. disorder is easily sparked by paid gangs. Unemployment is very high. gang violence.2% 5-year compound annual growth $1. the Western Hemisphere’s poorest country and one of the world’s least-developed nations. and overall government expenditures are low.177 per capita unemployment: n/a Inflation (cPI): 14. its overall score is 0. and organized crime. drug trafficking. and the progress in the country’s reform efforts has been marginal. How Do We Measure Economic Freedom? 219 . is plagued by corruption. Rene Préval.N. Despite the U. but economic freedom in other areas is weak.8 million gdP (PPP): $11. Haiti’s overall economic freedom remains curtailed by a number of institutional factors.0 million 2008 data unless otherwise noted Data compiled as of September 2009 See page 457 for an explanation of the methodology or visit the Index Web site at heritage.

Laws are transparent but not consistently enforced. the weak judiciary and a lack of political will hinder enforcement. averaging 13. Real property interests are handicapped by the absence of a comprehensive civil registry. BUsinEss fREEDOM — 36 The overall freedom to conduct a business is severely impeded by Haiti’s burdensome regulatory environment. inadequate trade capacity and infrastructure.0 percent of GDP. In the most recent year. Import controls.0 10. Privatization advances slowly. inefficient port administration. and scarce access to financing severely hinders entrepreneurial activity. and contraband accounts for a large percentage of the manufactured consumables market. owing to sharp rises in international fuel and food prices. Despite statutes protecting intellectual property.1 Haiti’s weighted average tariff rate was 3 percent in 2008. but the government restricts markups of some products (retailers.5 91. but the formal labor market is not fully developed. electricity. non-residents may hold them without restriction.1 Inflation has been high. LABOR fREEDOM — 69. In the most recent year. for example.2 0 0 20 least free 40 50 60 80 = world average 100 100 most free culture. government spending equaled 17. Bona fide property titles. with around 80 percent of assets held by the three largest banks. Ten points were deducted from Haiti’s monetary freedom score to adjust for measures that distort domestic prices. account for slightly less than 10 percent of assets. a paucity of updated laws to handle modern commercial practices. natural resources are considered to be the property of the state. Political instability has made government economic and financial management weak and inconsistent. including consumption and transfer payments. and a dysfunctional and resource-poor legal system. Bureaucracy and red tape are burdensome.0 30. compared to the world average of 35 days. The two state-owned banks.5 Haiti has moderate tax rates. overall tax revenue as a percentage of GDP was 6. There are no restrictions on payments. MOnEtARY fREEDOM — 67. water. Many economic transactions are conducted outside the formal banking sector. when they exist. and customs corruption add to the cost of trade. The non-salary cost of employing a worker is moderate. transfers. gOVERnMEnt sPEnDing — 91. fREEDOM fROM CORRUPtiOn — 14 Corruption is perceived as rampant. PROPERtY Rights — 10 Protection of investors and property is severely compromised by weak enforcement. or capital transactions.hAiti’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. International donors have pushed the government to take a few steps to enforce public accountability and transparency. Widespread corruption allows disputing parties to purchase favorable outcomes. The top income and corporate tax rates are 30 percent. Customs officers often demand bribes to clear shipments. import licensing requirements. Haiti ranks 177th out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008.9 percent.3 Total government expenditures. but declined to around zero by June 2009. Obtaining a business license takes about five times longer than the world average of 218 days. In general. finAnCiAL fREEDOM — 30 Haiti’s small financial sector remains underdeveloped and fragile. Supervision and regulation of the financial system are poor and not consistent with international norms.0 14. but substantive institutional reforms are still needed. Restrictions on work hours are not flexible. privatization of which has been delayed repeatedly by political and economic crises. Residents may hold foreign exchange accounts for specified purposes. Smuggling is a major problem. Foreign ownership of land is restricted.1 percent between 2006 and 2008. and inadequate institutional capacity. Most commercial disputes are settled out of court if at all. Prices are generally determined by the market. but dismissing an employee is relatively costly. Capital markets are poorly developed. from Corruption Labor Freedom 36. Annual inflation increased rapidly in most of 2008.0 69. corruption. and political instability deter investment. Fifteen points were deducted from Haiti’s trade freedom score to account for non-tariff barriers. Other taxes include a valueadded tax (VAT) and a capital gains tax. often conflict with other titles for the same property.2 Labor regulations are relatively flexible. fisCAL fREEDOM — 81. but investment in sensitive sectors such as public health. import quotas on some food products. The banking sector is highly concentrated. inVEstMEnt fREEDOM — 30 Foreign investors are granted national treatment. and telecommunications requires special authorization. and mining activities require concessions and permits.1 30. Starting a business takes an average of 195 days. agri- 220 2010 Index of Economic Freedom .3 67. tRADE fREEDOM — 79.1 81.0 79. The legal and institutional framework is not conducive to deepening financial intermediation. may not mark up pharmaceutical products by more than 40 percent) and strictly controls the prices of petroleum products. are low.

965 per capita unemployment: 3. melons. Honduras is ranked 20th out of 29 countries in the South and Central America/Caribbean region. How Do We Measure Economic Freedom? 221 .3.3 100 100 h onduras’s economic freedom score is 58. Honduras is one of Central America’s poorest countries. and youth gangs. Fiscal freedom is facilitated by moderate personal and corporate income tax rates and a moderate overall tax burden. Background: President Jose Manuel Zelaya Rosales. It has benefited from freer trade.7 billion 4. Country’s Score Over Time Most free 80 80 60 60 World average 40 40 Honduras 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 7.hOnDURAs Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 99 Regional Rank: 20 58.4% See page 457 for an explanation of the methodology or visit the Index Web site at heritage.5% A substantial level of underemployment exists 2008 data unless otherwise noted FdI Inflow: $877. corruption and the inefficiency of the judicial system have had far-reaching effects on the overall entrepreneurial environment.2 million gdP (PPP): $28.8% 5-year compound annual growth $3. and unemployment is about 28 percent. two-thirds of its people live below the poverty line.org/index. making its economy the 99th freest in the 2010 Index. and hopes that CAFTA will expand trade and investment. especially following the implementation of the Central America– Dominican Republic–United States Free Trade Agreement (CAFTA) and other free trade agreements that have resulted in overall tariff reductions. but more than one-third of the labor force works in agriculture. partially reflecting lower scores in labor freedom and government spending. tourism. Honduras receives relatively high scores for trade freedom and fiscal freedom. The government has met targeted macroeconomic objectives. Its overall score is 0. Ongoing concerns include political instability. These agreements have also helped to enhance the investment environment. and textiles. violent crime.2% growth in 2008 5.0 million Data compiled as of September 2009 2008 data unless otherwise noted Data compiled as of September 2009 Inflation (cPI): 11. Honduras’s overall economic freedom suffers greatly from pervasive corruption and the lack of institutional capacity to protect property rights. who supports closer ties with Venezuela and Cuba. The economy has diversified beyond traditional exports of coffee and bananas to include shrimp. was removed from office in 2009 following a constitutional dispute related to lifting the prohibition on presidential re-election. Coupled with ongoing political instability. is shedding debt under World Bank and International Monetary Fund initiatives.4 point lower than last year. drug trafficking. and its overall score is lower than the world and regional averages.

fREEDOM fROM CORRUPtiOn — 26 Corruption is perceived as pervasive.0 26. The government holds monopolies in many sectors including electricity. Regulations on work hours are not flexible. In recent years. In the most recent year.7 Honduras’s weighted average tariff rate was 3. restrictive sanitary and phytosanitary regulations. from Corruption Labor Freedom 63. In the most recent year. and subsidies add to the cost of trade. limitations on market access in the services sector. often prolonging disputed cases for many years before resolution. Honduras ranks 126th out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008. including consumption and transfer payments. is in 20-year government bonds. government spending equaled 29.7 percent. Expropriation of property is possible. hunting and aquaculture. a capital gains tax. Payments and transfers are not restricted. and services from state-owned utilities and can impose price controls on other goods and services as desired.2 percent in 2008.7 Honduras has moderate tax rates. Privatization of state-owned enterprises has been stagnant since 2000. be obtained to invest in basic health services. Decades of cronyism.7 84. Three foreign-bank representative offices operate in Honduras. at least 90 percent of a company’s labor force must be Honduran. 222 2010 Index of Economic Freedom . and compensation.7 73. and the stock exchange (the Central American Stock Exchange) remains small. overall tax revenue as a percentage of GDP was 16. and land titling. a deteriorating security environment. and they have a small client base. MOnEtARY fREEDOM — 70. government permits. electricity.8 percent between 2006 and 2008. There is no title insurance in Honduras. price bands for products. air transport. The lack of judicial security.0 31. PROPERtY Rights — 30 Protection of property is weak. the judicial system is weak and inefficient. Ten points were deducted from Honduras’s monetary freedom score to adjust for measures that distort domestic prices. and endemic corruption make it difficult to resolve business disputes.2 Inflation has been high. and the lack of judicial security are deterrents to investment. secrecy. nepotism. steel. mining.” finAnCiAL fREEDOM — 60 Honduras’s financial system has undergone consolidation through mergers and closures. non-transparent government procurement. pharmaceuticals. crime. Approximately 80 percent of the privately held land in the country is untitled. red tape.0 30.6 0 0 20 least free 40 50 60 80 = world average 100 100 most free BUsinEss fREEDOM — 63 The overall freedom to conduct a business remains limited by Honduras’s regulatory environment. averaging 9. Honduran laws and practices regarding real estate differ substantially from those in more developed countries. The government regulates the prices of petroleum products. railways. inVEstMEnt fREEDOM — 60 Foreign investment is generally accorded the same rights as domestic investment. but most foreign banks’ participation has been at a regional level rather than a national level. import restrictions. Ten points were deducted from Honduras’s trade freedom score to account for non-tariff barriers. but dismissing an employee is costly. 10 of which are majority foreign-owned. are moderate. In addition. The non-salary cost of employing a worker can be low. and closing a business is relatively costly. fishing. For all investments. The entry cost of launching a business is high. Corruption. when awarded.2 60. telecommunications. and few capital transactions require approval. Capital markets are not fully developed. forestry. Some import taxes. There is no foreign ownership of land within 40 kilometers of international borders and shorelines.6 Labor regulations are burdensome. The top income and corporate tax rates are 25 percent. the government has passed five banking reform laws aimed at strengthening the nation’s financial system.5 70. Government authorization must LABOR fREEDOM — 31. Corruption appears to be most pervasive in government procurement. and prevarication have removed the stigma that once attached to corruption. Honduras has few legal and regulatory barriers to entry in the banking sector. Starting a business takes slightly more than half the world average of 35 days. and at least 85 percent of the payroll must be paid to Hondurans.hOnDURAs’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. and private education services. Other taxes include a 5 percent social contribution tax.0 83. although Honduran law now permits foreign individuals to purchase properties in designated “tourism zones. weak enforcement of intellectual property rights. tRADE fREEDOM — 83. insurance and financial services. fisCAL fREEDOM — 84. The banking sector has two state-owned banks and 17 commercial banks. and telecommunications. Residents and nonresidents may hold foreign exchange accounts. large-scale agricultural.0 60. inadequate infrastructure. gOVERnMEnt sPEnDing — 73. and a general sales tax (not applicable to food staples). and fraudulent deeds and titles are common.7 percent of GDP.5 Total government expenditures.

Ongoing concerns include cronyism in government policymaking and self-censorship in media and restrictions on the free flow of information. Major industries include financial services and shipping.7. Business regulation is straightforward. have stimulated an innovative. The government has promised to advance universal suffrage but so far has not delivered. low taxes. the Basic Law.0 million gdP (PPP): $306.5 billion 2. monetary freedom. a priority-setting exercise for which the free market would seem better suited. thanks to small government. Hong Kong’s competitive tax regime.hOng KOng Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 1 Regional Rank: 1 89. particularly trade freedom. coupled with an educated and highly motivated workforce.4% growth in 2007 5. Hong Kong boasts one of the world’s most prosperous economies. and its legal and regulatory framework for the financial sector is transparent and efficient. Hong Kong is ranked 1st out of 41 countries in the Asia–Pacific region. Though the introduction of competition legislation was postponed in April 2009. but it governs its own affairs on a day-to-day basis and enjoys a wide range of freedoms under the territory’s mini-constitution. The government has also set out strategies to promote development in six specific industrial and services sectors. and freedom from corruption. Hong Kong has maintained its status as Asia’s second-largest destination for foreign direct investment. while manufacturing has migrated largely to the mainland. and light regulation.7% 5-year compound annual growth $43. with implementation forecast for late 2010 or early 2011.7 100 100 h ong Kong’s economic freedom score is 89. attracting over $60 billion in 2008. prosperous economy. respect for property rights. Hong Kong is one of the world’s leading financial and business centers. threats to freedom can arise. reflecting increases in business and labor freedom that were offset by modest declines in several factors. How Do We Measure Economic Freedom? 223 . Country’s Score Over Time Most free 80 80 60 60 World average 40 40 Hong kong 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 7. and flexible labor market.3 point lower than last year. Even in an economy as free as Hong Kong’s. making its economy the freest in the 2010 Index.5% Inflation (cPI): 4. Despite the global economic slowdown. Its score is 0. Background: The Special Administrative Region of Hong Kong is part of the People’s Republic of China.3% FdI Inflow: $63 billion 2008 data unless otherwise noted Data compiled as of September 2009 See page 457 for an explanation of the methodology or visit the Index Web site at heritage.org/index. a minimum wage bill was introduced in June.924 per capita unemployment: 3.

Since the Hong Kong dollar maintains a fixed exchange rate with the U. and the number of successful initial public offerings decreased significantly. and its constitution strongly supports private property and freedom of exchange. There are no controls or requirements on current transfers. and obtaining necessary licenses takes less than the world average of 218 days. software.0 90. compared to the world average of 35 days. including 122 incorporated outside of Hong Kong. and designer apparel are sold openly. Bureaucracy is efficient and transparent. State ownership is mostly limited to transportation.5 percent of GDP. are low.0 93. between 2 percent and 17 percent on income adjusted for deductions and allowances.5 percent. There are no restrictions on foreign banks.0 93. Five points were deducted from Hong Kong’s monetary freedom score to adjust for measures that distort domestic prices.7 90. fREEDOM fROM CORRUPtiOn — 81 Corruption is perceived as minimal. dollar. where foreign entities may own no more than 49 percent of the local stations. Hong Kong ranks 12th out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008. grants renewable leases that are valid up to 2047. and issues involving the enforcement of intellectual property rights add to the cost of trade. access to foreign exchange. The government controls all land and. depending on which liability is lower. The non-salary cost of employing a worker is low. China’s rapid food inflation in 2008 affected Hong Kong. Starting a business takes six days. through public auctions. 224 2010 Index of Economic Freedom . MOnEtARY fREEDOM — 83. pirated and counterfeit products such as CDs. overall tax revenue as a percentage of GDP was 14. In the most recent year. At the end of 2008. Excise duties on beer and wine were removed in 2008. as the mainland is the leading source of food imports. The government regulates the prices of public transport and electricity and some residential rents. tRADE fREEDOM — 90 Hong Kong’s weighted average tariff rate was 0 percent in 2008. or at a flat 15 percent of gross income. Hong Kong has efficient clearing and settlement systems.1 Inflation has been relatively low. Disciplined fiscal management has helped Hong Kong to weather the global downturn. DVDs. PROPERtY Rights — 90 Contracts are strongly protected. Giving or accepting a bribe is a criminal act.1 90. gOVERnMEnt sPEnDing— 93. food and energy labeling regulations.0 81. the financial system has weathered the global financial turmoil relatively well. The rise in private rental prices is moderating LABOR fREEDOM — 87.0 87. The labor code is strictly enforced but not burdensome. In the most recent year. averaging 3. The top corporate income tax rate is 16. The government has made efforts to maintain a balanced budget. including consumption and transfer payments. fisCAL fREEDOM — 93 Hong Kong’s effective tax rates are among the lowest in the world.4 Labor regulations are flexible. inVEstMEnt fREEDOM — 90 Foreign capital receives domestic treatment.2 percent. restrictive pharmaceuticals regulation.7 The overall freedom to start. Overall. finAnCiAL fREEDOM — 90 Hong Kong is a global financial center with a regulatory and legal environment focused on enforcing prudent minimum standards and transparency. Ten points were deducted from Hong Kong’s trade freedom score to account for non-tariff barriers. 50 60 80 = world average 100 100 most free BUsinEss fREEDOM — 98. and foreign investment is strongly encouraged. market access restrictions for some services. from Corruption Labor Freedom 98.5 percent between 2006 and 2008. The Hang Seng Index fell almost 50 percent in 2008. and banks remain well capitalized. Individuals are taxed either progressively. but it felt the effects of the global financial crisis. there were 201 authorized banking institutions. The Hong Kong Stock Exchange is one of the world’s 10 most capitalized. or repatriation of profits.S.4 0 0 20 least free 40 because of the weakening economy. Despite government public awareness campaigns. government spending equaled 14. but dismissing an employee can be relatively costly. Credit is allocated on market terms. and close a business is well protected under Hong Kong’s regulatory environment. however. operate. Hong Kong’s legal system is based on common law.hOng KOng’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm.0 90. which are treated the same as domestic institutions. Some import taxes.7 Total government expenditures. Regulations on work hours are flexible. and certain legal services. interest rates and currency movements follow trends in the United States. There are no limits on foreign ownership and no screening or special approval procedures to set up a foreign firm except in broadcasting.7 83. Banks are overseen by the independent Hong Kong Monetary Authority.

Its score has decreased by 0. and corruption is perceived as moderate. and its overall score is well above the world average. property rights. with its already high levels of official debt. but the Socialists have continued in power as a minority government with slightly less than half of the seats in Parliament. Socialist Prime Minister Ferenc Gyurcsany resigned in May 2009. The overall business environment is aided by strong trade freedom. and economic competitiveness has declined somewhat with worsening economic fundamentals and a growing tax burden.1 100 100 h ungary’s economic freedom score is 66. reflecting declines in six of the 10 economic freedoms that offset improvements in three others. Background: Hungary emerged from 40 years of Communist rule more politically and economically open than its formerly Communist neighbors. Investing is easy.6% growth in 2008 2. business freedom. Former economy minister Gordon Bajnai took over as prime minister and has enacted spending cuts and other reforms intended to enhance competitiveness. The global financial turmoil led to immediate financing difficulties for the government. The rule of law is respected. making its economy the 51st freest in the 2010 Index. Country’s Score Over Time Most free 80 80 60 60 World average 40 40 Hungary 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 10.5 billion 2008 data unless otherwise noted Data compiled as of September 2009 See page 457 for an explanation of the methodology or visit the Index Web site at heritage. The ruling coalition of the Hungarian Socialist Party and the liberal Alliance of Free Democrats collapsed in April 2008.0 billion 0.1. Hungary needs fiscal consolidation and better management of public finance. The size of government is Hungary’s biggest weakness.8% Inflation (cPI): 6.330 per capita unemployment: 7. How Do We Measure Economic Freedom? 225 . and foreign capital and domestic capital enjoy virtually the same protections. with its score far below the world average. and investment freedom.org/index.hUngARY Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 51 Regional Rank: 24 66. Greater openness and flexibility have led to robust entrepreneurial activity and substantial inflows of foreign direct investment. The fiscal deficit is high.6 point. With Hungary hit hard by the global financial crisis and the economy contracting. It rapidly transformed itself into a market economy and in 2004 joined the European Union.1% FdI Inflow: $6. Hungary is ranked 24th out of 43 countries in the Europe region.0 million gdP (PPP): $194.4% 5-year compound annual growth $19.

6 25. telecommunications. Restrictive biotechnology regulations. and inconsistent regulatory and customs administration among EU members. Capital markets are relatively developed. The non-salary cost of employing a worker is burdensome. and railways. It also regulates prices for energy. Hungary is a party to the OECD Anti-Bribery Convention and has incorporated its provisions into the penal code. the government subsidizes agricultural production.0 67. fREEDOM fROM CORRUPtiOn — 51 Corruption is perceived as present. Regulations on work hours are not flexible.hUngARY’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. There are 29 commercial banks and eight special credit institutions. However. banking expansion has slowed considerably. and foreign companies account for a large share of manufacturing. Ten points were deducted from Hungary’s monetary freedom score to account for policies that distort domestic prices. are high.9 Total government expenditures. distorting the prices of agricultural LABOR fREEDOM — 67. among others.3 percent between 2006 and 2008. the EU has high or escalating tariffs for agricultural and manufacturing products.5 Hungary’s trade policy is the same as that of other members of the European Union. The threat of expropriation is low. Protection of intellectual property rights has improved somewhat. and this is respected in practice. Hungary ranks 47th out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008. The courts are slow and severely overburdened. gOVERnMEnt sPEnDing — 25. and close a business is relatively well protected under Hungary’s regulatory environment. 226 2010 Index of Economic Freedom . Non-tariff barriers reflected in EU and Hungarian policy include agricultural and manufacturing subsidies.6 Labor regulations are relatively inflexible. With mutual funds heavily exposed to the real estate market. Starting a business takes four days. and profitability is down. compared to the world average of 35 days.9 percent. telecommunications services. nontransparent government procurement. and the top corporate tax rate is 16 percent. inVEstMEnt fREEDOM — 75 Foreign capital receives domestic legal treatment. and a final ruling on a contract dispute can take more than a year. market access restrictions in some services sectors.5 68. and a gift tax.6 0 0 20 least free 40 products. The Budapest Stock Exchange has low volumes of trading and lists about 60 companies. but obtaining a business license requires more than the world average of 18 procedures. Residents and non-residents may hold foreign exchange accounts.1 75. others may lease it. and subsidized pharmaceutical products. a property tax. After years of robust growth.7 percent of GDP. and energy.9 74. including consumption and transfer payments. There are no restrictions or controls on current transfers or repatriation of profits and no restrictions on issues or sales of capital market instruments. and weak enforcement of intellectual property rights add to the cost of trade.0 65. The government has largely withdrawn from banking. The top income tax rate is 36 percent. finAnCiAL fREEDOM — 70 Hungary’s financial sector is dominated by banking. MOnEtARY fREEDOM — 74. tRADE fREEDOM — 87.8 87. PROPERtY Rights — 65 Secured interests in property are recognized and enforced.8 The overall freedom to start. but there is no title insurance. The government allows 100 percent foreign ownership with the exception of some defense-related industries. government spending equaled 49.0 70. There are persistent reports of corruption in government procurement. averaging 6. inadequate judicial capacity. Only private Hungarian citizens and EU citizens resident in Hungary and engaged in agricultural activity may purchase farmland. The common EU weighted average tariff rate was 1. and dismissing an employee is relatively costly. overall tax revenue as a percentage of GDP was 39. and over two-thirds of the sector is foreign-owned. from Corruption Labor Freedom 76.3 percent in 2008.1 Inflation has been relatively high. import restrictions and bans for some goods and services. and its MFN tariff code is complex. Other taxes include a value-added tax (VAT). The judiciary is constitutionally independent. there are some reporting requirements. As a participant in the EU’s Common Agricultural Policy. quotas. fisCAL fREEDOM — 68. In the most recent year. as it has with subsequent OECD and EU requirements on the prevention of bribery.6 Hungary has a relatively high income tax rate but a relatively low corporate tax rate. In the most recent year. the financial sector has been severely strained by the global financial crisis. nontransparent and restrictive regulations and standards. Ten points were deducted from Hungary’s trade freedom score to account for non-tariff barriers. and foreign investors participate freely. 50 60 80 = world average 100 100 most free BUsinEss fREEDOM — 76. The government remains directly involved in agriculture. electric power. operate. and a non-transparent investment code.0 51. Deterrents include bureaucracy.

3 million gdP (PPP): $11. making its economy the 18th freest in the 2010 Index. sparking a currency crisis. Aggressive overseas expansion of bank lending.4% 2008 data unless otherwise noted Data data unless otherwise noted 2008 compiled as of September 2009 Data compiled as of September 2009 FdI Inflow: –$2. with its financial sector severely affected by the global financial turmoil. The resulting collapse of the banking sector has increased government debt. goods. the banking sector collapsed. and the Social Democrats took over on February 2. Reversing its long-held opposition to joining the European Union. 2009.775 per capita unemployment: 7. in October 2008. and its overall score is higher than the world and regional averages. with Johanna Sigurðardóttir as prime minister. labor. curb long-term high unemployment.7 billion 0.1% (1st quarter of 2009) Inflation (cPI): 12.2 points from last year. which allows for free cross-border movement of capital. Country’s Score Over Time Most free 80 80 60 60 World average 40 40 Iceland 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 0. Iceland is ranked 9th out of 43 countries in the Europe region. but they need to be supported by further reforms in financial management and the labor market. and services with the EU. Its overall score has declined by 2. Iceland’s economy has contracted significantly. and unemployment is high. efficient business regulations.6 billion See page 457 for an explanation of the methodology or visit the Index Web site at heritage.3% growth in 2007 4. How Do We Measure Economic Freedom? 227 . Prime Minister Geir Haarde of the Independence Party and his cabinet were forced to resign.org/index.7 100 100 i celand’s economic freedom score is 73. Iceland’s overall levels of economic freedom are still relatively high. However.4% 5-year compound annual growth $36. unchecked by the domestic regulatory environment. and competitive tax rates are good foundations on which to build recovery.iCELAnD Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 18 Regional Rank: 9 73. and restore economic stability. Iceland is already a member of the European Free Trade Association and the European Economic Area. A deep recession has taken hold. Iceland’s parliament voted in July 2009 to apply for EU membership. low levels of corruption. Background: Iceland is a centuries-old democracy that traditionally has enjoyed low unemployment and a growing economy. Nevertheless. triggering a sharp surge in the fiscal deficit. caused the buildup of considerable systemic risk for such a small economy. Such institutional strengths as the strong rule of law. reflecting drops in seven of the 10 economic freedoms.7.

and sheep farmers receive direct payments based on support targets and quality-dependent LABOR fREEDOM — 60. fisCAL fREEDOM — 75. but dismissing an employee can be costly. debentures. strict sanitary and phytosanitary regulations.1 percent between 2006 and 2008. Privatization of state-owned enterprises has progressed over the past 10 years.000-year history of parliamentary government has encouraged the institutionalization of accountability and transparency. and close a business is strongly protected under Iceland’s regulatory environment. Regulatory oversight proved insufficient to deal with such an anomalous situation. Investment regulations are transparent. interest on loans. following the financial turmoil in 2008.4 Iceland has a competitive flat-tax system. Ten points were deducted from Iceland’s monetary freedom score to account for policies that distort domestic prices. The corporate tax rate is a flat 15 percent. alcohol and fuel were raised in 2009. Iceland ranks 7th out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008. The three main banks. The government subsidizes agricultural production. which has boosted import prices. collapsed in late 2008 and have been brought under the government’s control since then. foreign ownership of businesses is generally unrestricted. can rise to 35. Under the law. The constitution provides for an independent judiciary.9 65. Trials are generally public and conducted fairly. and administered prices. 228 2010 Index of Economic Freedom .8 Total government expenditures.0 89.4 percent. and the government respects this in practice. which accounted for over 80 percent of the banking system. Macroeconomic imbalances and private-sector borrowers’ high indebtedness added to the instability. inVEstMEnt fREEDOM — 65 The 1996 Act on Investment by Non-Residents in Business Enterprises grants national treatment to non-residents of the European Economic Area (EEA).0 87. 50 60 80 = world average 100 100 most free BUsinEss fREEDOM — 93 The overall freedom to start. and aviation. Until recently. tRADE fREEDOM — 87. gOVERnMEnt sPEnDing — 45.8 69. with broad wage settlements and over 80 percent unionization. rendering banks highly vulnerable to any external shock.0 60. The non-salary cost of employing a worker is moderate. has been under considerable strain. movements of capital to and from Iceland have faced new restrictions.9 Iceland’s weighted average tariff rate was 1. In the most recent year. Isolated cases of corruption are not an obstacle to foreign investment. The main income tax rate is 22. fREEDOM fROM CORRUPtiOn — 89 Corruption is perceived as minimal. A mounting fiscal deficit was projected to reach 13 percent of GDP in 2009. property rights–based fisheries management. milk is subject to production-linked direct payments. but there are limitations in fishing.9 Inflation has been high. and government support programs for the agricultural sector add to the cost of trade. mortgages. Iceland’s 1. MOnEtARY fREEDOM — 69.0 90. Starting a business takes an average of five days.72 percent). Obtaining a business license requires much less than the world average of 18 procedures and 218 days. Efforts to shore up stability and confidence have been made. The labor market remains highly centralized. although bureaucratic delays can occur.9 75. Iceland is one of the few countries with efficient. finAnCiAL fREEDOM — 60 Iceland’s financial sector. Icelandic law provided for full convertibility and transferability of dividends. government spending equaled 42. Other taxes include a value-added tax (VAT) and an estate tax. Investment income is subject to a flat 10 percent rate.0 60. overall tax revenue as a percentage of GDP was 41. production quotas. Excise taxes on tobacco. energy. lease payments.5 percent of GDP. In the most recent year. High agriculture tariffs. including consumption and transfer payments.1 percent in 2008.8 Labor regulations are relatively rigid. compared to the world average of 35 days.iCELAnD’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. but vulnerabilities linger. PROPERtY Rights — 90 Private property is well protected. import taxes.3 percent in July and would have fallen further were it not for the depreciation of the krona since March. and invested capital.75 percent (which. profits. Foreign investors from outside the EEA may purchase land or real estate in Iceland upon government approval. While undergoing rapid transformation and restructuring over the past decade. are high. Bankruptcy proceedings are straightforward. import bans and restrictions. However. Inflation fell from nearly 19 percent in January 2009 to 11.4 45. from Corruption Labor Freedom 93. averaging 10. Ten points were deducted from Iceland’s trade freedom score to account for non-tariff barriers. combined with the local government rate. mostly through aggressive expansion of overseas lending. the banking sector grew to about eight times GDP by 2007. operate. which remains dominated by banking.8 0 0 20 least free 40 payments.

Its 1991 “big bang” liberalization ended decades of cumbersome regulations and protectionism. Its score is 0. and its overall score is below the world average. continues unresolved. India’s overly restrictive regulatory environment does not facilitate entrepreneurship or realization of the economy’s full potential. Country’s Score Over Time Most free 80 80 60 60 World average 40 40 India 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 1. How Do We Measure Economic Freedom? 229 . with rigid regulations a costly impediment to further economic growth and job creation. Labor freedom is especially weak. the country has one of the world’s largest Muslim populations. The Congress Party government was re-elected to another five-year term in May 2009 on a populist platform that included a social welfare scheme that guarantees employment for rural households.1 billion gdP (PPP): $3. Background: India is the world’s most populous democracy and one of Asia’s fastest-growing economies. which has simmered since independence and twice boiled over into war.972 per capita unemployment: 6. Despite sluggish progress in reducing onerous non-tariff barriers.6 billion 2008 data unless otherwise noted Data compiled as of September 2009 See page 457 for an explanation of the methodology or visit the Index Web site at heritage. and monetary freedom.1% growth in 2008 8. Public debt is 80 percent of GDP.8 100 100 i ndia’s economic freedom score is 53.3% FdI Inflow: $41.8.8% Inflation (cPI): 8. Conflict with Pakistan over Kashmir. making its economy the 124th freest in the 2010 Index. with its average tariff rate decreasing. India continues to move forward with market-oriented economic reforms and has achieved average growth of about 9 percent over the past five years. and the economy has since grown rapidly.6 point lower than last year as a result of declines in freedom from corruption. India is ranked 24th out of 41 countries in the Asia–Pacific region. Corruption is pervasive. first in services and more recently in manufacturing. business freedom. and the judicial system remains inefficient and clogged by a large backlog of cases.4 trillion 7. The state still plays a major role in over 200 public-sector enterprises. leaving little fiscal room to react to the global downturn.org/index.inDiA Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 124 Regional Rank: 24 53. The economy has been driven by information technology and other business process sectors.9% 5-year compound annual growth $2. Though over 80 percent of the population is Hindu. the trade regime has gradually become more open.

0 57. 230 2010 Index of Economic Freedom . finAnCiAL fREEDOM — 40 Liberalization and modernization have allowed more private banks to compete. Protection of intellectual property rights is problematic. averaging 7. Foreign exchange. domestic bias in government procurement. power. gOVERnMEnt sPEnDing — 76. LABOR fREEDOM — 57.0 50. wholesale. The government subsidizes agricultural. and railways.1 Total government expenditures. security services. procedures do not discriminate against foreign companies.5 Inflation has been relatively high. export subsidies.inDiA’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm.9 India’s weighted average tariff rate was 6 percent in 2008. Bureaucracy is non-transparent and burdensome. The top income and corporate tax rates are 33. fisCAL fREEDOM — 73. but dismissing an employee is costly. especially in government procurement of telecommunications. In the most recent year. legal services. electricity. and controls the prices of 74 bulk drugs that cover 40 percent of the market. Foreign banks account for less than 10 percent of total assets. applies factory. water. gas.2 percent of GDP. The non-salary cost of employing a worker is moderate. 50 60 80 = world average 100 100 most free BUsinEss fREEDOM — 36. If licensing is required. and retail price controls on “essential” commodities.0 34. overall tax revenue as a percentage of GDP was 18. Currently. tRADE fREEDOM — 67. India ranks 85th out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008. and some credit operations are subject to approvals. but state-owned institutions continue to dominate the banking sector and capital markets. discriminatory sanitary and phytosanitary measures. services. PROPERtY Rights — 50 The legal system imposes a number of restrictions on the transfer of land. There is no reliable system for recording secured interests in property.7 percent between 2006 and 2008. inVEstMEnt fREEDOM — 35 Foreign investors generally receive national treatment. and certain types of coal. Corruption remains a major concern. Fifteen points were deducted from India’s monetary freedom score to account for policies that distort domestic prices. restrictive import licensing. government spending equaled 28. in certain consumer-goods industries. capital transactions. Large differences between bound and applied tariff rates.7 0 0 20 least free 40 apply to commodities like sugar and certain cereals. Other taxes include a dividend distribution tax. In the most recent year. services market access restrictions. problematic enforcement of intellectual property rights. restrictions. import and export restrictions. however. Foreign banks operating in India may not directly or indirectly retain more than a 5 percent equity stake in a domestic private bank. operate.4 76.1 67. High credit costs and scarce access to financing still impede private-sector development. Foreign investment is prohibited in multi-brand retailing. and close a business remains restricted by India’s regulatory environment. courts take years to reach decisions. export obligations and local content requirements are imposed.4 India’s tax rates are relatively high. compared to the world average of 35 days. some petroleum products. 28 state-owned banks control about 70 percent of commercial banking assets.3 The overall freedom to start.5 35. are relatively low. with foreign participation limited. and additional requirements.3 67. Domestic price and marketing arrangements fREEDOM fROM CORRUPtiOn — 34 Corruption is perceived as significant. MOnEtARY fREEDOM — 67. import taxes and fees. and contract enforcement can be difficult. onerous standards and certifications. inadequate infrastructure.7 India’s informal economy remains an important source of employment. including consumption and transfer payments. complex and nontransparent regulation. nuclear energy. and titling problems can make buying and selling difficult. and complex and non-transparent customs add to the cost of trade. Access to financial services varies sharply around the country. Starting a business takes an average of 30 days.8 percent. Capital markets have been developing but remain illiquid. from Corruption Labor Freedom 36. Obtaining a business license requires more than the world average of 18 procedures and 218 days. 25 crops. and foreign corporations often resort to international arbitration.99 percent (30 percent plus a 10 percent surcharge and a 3 percent education tax on that total). Because of large backlogs. a tax on interest. Foreign investment in real estate is limited to company property used to do business and the development of some types of new commercial and residential properties. Insurance is partially liberalized. Twenty points were deducted from India’s trade freedom score to account for non-tariff barriers. Another 354 drugs are to be brought under controls by a new pharmaceutical policy.0 40. and kerosene production. Proprietary test results and other data about patented products submitted to the government by foreign pharmaceutical companies have been used by domestic companies without any legal penalties. and a value-added tax (VAT).9 73. and defense contracts.

org/index.9% 5-year compound annual growth $3. impartial adjudication of cases is not guaranteed.8% FdI Inflow: $7. investment freedom remains curtailed by government interference that discourages domestic as well as foreign investment. but the weak rule of law remains a major impediment to attracting capital.3 billion 6. and political participation is high. when longstanding authoritarian ruler General Suharto stepped down. Starting a business takes more than twice as long as the world average.1% growth in 2008 5. and creating a more vibrant private sector through decentralization. however. reflecting improvements in business freedom. Management of public finance has improved. and judicial enforcement is both erratic and non-transparent. Despite some progress. continue to undermine Indonesia’s growth potential. and tariff barriers have been lowered. As a member of the G-20.4% Inflation (cPI): 9. The Indonesian economy has demonstrated a moderate degree of resilience in recent years. Recent reform measures have put greater emphasis on improving the entrepreneurial environment. In the years since 1998. Background: Indonesia is the world’s most populous Muslim-majority democracy. and regulations are onerous.5 100 100 i ndonesia’s economic freedom score is 55.5. How Do We Measure Economic Freedom? 231 . Indonesia is ranked 21st out of 41 countries in the Asia–Pacific region. making its economy the 114th freest in the 2010 Index. fiscal freedom. Lingering institutional impediments to greater economic freedom. weathering the global financial turmoil relatively well. President Susilo Bambang Yudhoyono has cracked down on corruption and tried to draw in muchneeded foreign investment.2 million gdP (PPP): $907.1 points since last year. Because of pervasive corruption. Indonesia is playing an increasingly important role in international economic policy discussions. Its score has improved by 2. Country’s Score Over Time Most free 80 80 60 60 World average 40 40 Indonesia 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 228.9 billion 2008 data unless otherwise noted Data compiled as of September 2009 See page 457 for an explanation of the methodology or visit the Index Web site at heritage.inDOnEsiA Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 114 Regional Rank: 21 55. and freedom from corruption. Indonesia’s nearly 250 million people have enjoyed the blossoming of a wide range of political freedoms. enhancing regional competitiveness. and its overall score is below the world average.975 per capita unemployment: 8.

operate. including consumption and transfer payments. State control of the economy is widespread. fisCAL fREEDOM — 81. banking supervision has been strengthened. Overall. Non-residents may not purchase real estate. cigarettes. but due to a considerable degree of market segmentation. The top individual income tax rate is 30 percent. Non-performing loans in the banking sector have declined and account for less than 5 percent of total loans. which should become operational by late 2010. and non-transparent regulations. weak contract enforcement. Fifteen points were deducted from Indonesia’s trade freedom score to account for non-tariff barriers. weak enforcement of intellectual property rights. and corruption is substantial. MOnEtARY fREEDOM — 70. city transport. import and export licensing requirements.8 35. and inadequate infrastructure add to the cost of investment. The government has taken steps to establish a new Financial Services Authority. tRADE fREEDOM — 77. cement. from Corruption Labor Freedom inVEstMEnt fREEDOM — 35 Foreign investors face significant restrictions. are low. The top corporate tax rate is 28 percent.1 Despite some progress. 232 2010 Index of Economic Freedom . Import and export bans and restrictions. an improvement over 2007. LABOR fREEDOM — 50. The impact of the global financial turmoil on the banking sector has been relatively minor. air transport. but dismissing an employee can be costly. liquefied petroleum gas. toll-road tariffs. a widespread domestic and international perception that corruption is a necessary part of daily life. and health care are subsidized. three of which are among the largest in terms of assets. the government issued a revised “Investment Negative List” that identified sectors closed to foreign investment or subject to conditions. Fuel.9 Indonesia’s weighted average tariff rate was 3. to monitor and regulate the financial system. hospital services. down from 35 percent.3 percent. inconsistent.8 0 0 20 least free 40 50 60 80 = world average 100 100 most free BUsinEss fREEDOM — 53. non-transparent and arbitrary regulations. ignoring contracts between the parties. 53. PROPERtY Rights — 30 Court rulings can be arbitrary and inconsistent. and inconsistent and corruption-prone customs valuation add to the cost of trade. telephone charges.6 percent in 2007. Closing a business is difficult and costly.1 70. smaller banks have been more adversely affected.0 26.inDOnEsiA’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. There remains. and postage are set by the government. and the previous two stock exchanges were merged into the Indonesia Stock Exchange in 2007. rice. Corruption. housing. averaging 9. Capital markets are developing. Companies cite demands for irregular fees to obtain required permits or licenses. Lack of clear land titles and the inability to own land in “fee simple” are also problems.1 77. labor market rigidities.0 40. and close a business remains hampered by Indonesia’s regulatory environment. electricity.9 Indonesia has reduced taxes to moderate levels as part of broader fiscal reform.0 50. finAnCiAL fREEDOM — 40 Indonesia’s financial system has undergone restructuring and consolidation since the late 1990s. services market access barriers. fREEDOM fROM CORRUPtiOn — 26 Corruption is perceived as pervasive. however. Subject to approvals and restrictions.9 89.9 81. and the number of banks has been reduced to less than 130. and the efficiency of the banking system has increased. and prices of gasoline. The state still owns five banks. government spending equaled 19. trains. Obtaining a business license requires about the world average of 18 procedures. state trading. unpredictable. restrictive sanitary and phytosanitary regulations. Judges have been known to rule against foreigners in commercial disputes. as well as the awarding of government contracts and concessions based on personal relationships. but relative stability in fiscal management has enabled Indonesia to weather the economic downturn. down from 30 percent. salt. potable/piped water. the overall freedom to start. In the most recent year. gOVERnMEnt sPEnDing — 89.1 Total government expenditures.0 30. overall tax revenue as a percentage of GDP was 11.8 Inflation has been high. Enforcement of intellectual property rights is weak. After approval of an Investment Law in March 2007. In the most recent year. Indonesia ranks 126th out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008. The non-salary cost of employing a worker is moderate. Other taxes include a value-added tax (VAT) and a property tax. Ten points were deducted from Indonesia’s monetary freedom score to account for policies that distort domestic prices. It is difficult to get the courts to enforce international arbitration awards.2 percent between 2006 and 2008. residents and non-residents may engage in foreign exchange and capital transactions. Starting a business takes more than the world average of 35 days.1 percent of GDP.8 Labor regulations are restrictive.

has been crippled by the 1979 Islamic revolution. More than 500 companies are state-owned. which provide about 85 percent of government revenues. costly subsidies. who was re-elected president in June 2009 in an election of questionable legitimacy.5% Inflation (cPI): 26.0 million gdP (PPP): $839. International concern about Iran’s nuclear development activities and support for terrorism remains high. chronic economic mismanagement. rising inflation.2 points from last year. High tariff rates and non-tariff barriers impede trade and foreign investment. has halted tentative efforts to reform the state-dominated economy and has greatly expanded government spending. Corruption is rampant. Mahmoud Ahmadinejad. In 2008. and privatization has been negligible in the past year. Iran is ranked 16th out of 17 countries in the Middle East/North Africa region. Background: Iran’s economy. high world oil prices significantly boosted oil export revenues.4 100 100 i ran’s economic freedom score is 43.666 per capita unemployment: 12.iRAn Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 168 Regional Rank: 16 43. The oil sector accounts for nearly 50 percent of the government budget. and an increasingly bloated and inefficient public sector. Protectionism and heavy state involvement in many aspects of economic activity have led to economic stagnation in Iran’s non-oil sector and a lack of overall economic dynamism. making its economy the 168th freest in the 2010 Index. Business licensing and closure are regulated heavily by an intrusive and inefficient bureaucracy. corruption.org/index. How Do We Measure Economic Freedom? 233 .7% 5-year compound annual growth $11. The United Nations Security Council has imposed three rounds of economic sanctions against the country. but Iran’s economy remains burdened by high unemployment.0% FdI Inflow: $1. the Iran–Iraq war. and corruption. once one of the most advanced in the Middle East.4 billion 5. driven by lower scores in freedom from corruption and monetary freedom. and fair adjudication of property rights cannot be guaranteed.6% growth in 2008 5. Its score has decreased by 1. A restrictive business and investment environment depresses development of a viable private sector. and its overall score is below the world and regional averages. The judicial system is vulnerable to political influence and lacks transparency. Country’s Score Over Time Most free 80 80 60 60 World average 40 40 20 20 Iran 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 72.4.5 million 2008 data unless otherwise noted Data compiled as of September 2009 See page 457 for an explanation of the methodology or visit the Index Web site at heritage.

Capital markets are not fully developed. Foreign companies may own property in Iran only if they are registered both in Iran and in their respective countries and make the purchase using their Iranian business identity. Most payments.1 percent of GDP. high tariffs and import taxes. burdensome customs procedures. and close a business remains limited by Iran’s regulatory environment. finAnCiAL fREEDOM — 10 Iran’s financial sector remains heavily influenced by the government. and weak enforcement of intellectual property rights add to the cost of trade.1 Labor regulations are restrictive. limiting access to financing for businesses. and gas. arbitrary changes in tariff and tax schedules. but six private banks have come into operation since then. and infringement of industrial designs. State-owned commercial banks and specialized financial institutions account for a majority of the banking sector’s total assets. telecommunications. The government directs credit allocation.0 10.3 million full-time civil servants and numerous government contractors who control most of Iran’s economy. and firing a worker requires approval of the Islamic Labor Council or the Labor Discretionary Board. state trading. provides economic subsidies.6 54. Political unrest and uncertainty over international sanctions further deter investment. Few laws protect intellectual property.6 Total government expenditures. 234 2010 Index of Economic Freedom . and the anti-corruption agency has fewer than 1. All banks were nationalized following the 1979 revolution. trademarks. restrictive sanitary and phytosanitary regulations. transport. export licensing requirements. but obtaining a business license takes 322 days.0 55.4 percent in 2008. tRADE fREEDOM — 50. These small private banks operate under strict restrictions regarding de facto interest rates and capital requirements. averaging 22. The parliament can veto projects in which foreign investors have a majority stake. The top income tax rate is 35 percent. Only legal permanent residents of Iran may purchase land. and capital transactions are subject to restrictions or approval requirements. and wheat. All property transfers are subject to a standard tax. Import bans and restrictions.1 percent. fisCAL fREEDOM — 81. compared to the world average of 218 days. Fifteen points were deducted from Iran’s trade freedom score to account for non-tariff barriers.7 0. operate. transfers.2 Iran’s weighted average tariff rate was 17. gOVERnMEnt sPEnDing — 79. finding an influential local business partner with substantial political patronage is a more effective way to protect contracts. much less than the world average of 35 days. from Corruption Labor Freedom 69. The method of calculating the maximum share that foreign-owned entities are allowed can be nontransparent. computer software piracy is extensive. Graft is extensive.iRAn’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. In the most recent year. electricity. a decline from 2007. Stringent government controls have kept the banks’ lending scope from expanding. credit operations.7 Inflation is very high. Starting a business takes an average of 9 days. fREEDOM fROM CORRUPtiOn — 23 Corruption is perceived as pervasive. and copyrights is widespread. MOnEtARY fREEDOM — 54. and official corruption is found in all three branches of government. oil. In the most recent year.1 Iran has a relatively high income tax rate and a moderate corporate tax rate. Iran ranks 141st out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008. PROPERtY Rights — 10 The constitution allows the government to confiscate property acquired either illicitly or in a manner not in conformance with Islamic law. The law provides criminal penalties for official corruption. LABOR fREEDOM — 55.1 79.9 percent between 2006 and 2008. The government controls the prices of petroleum products. water. but it is not implemented effectively. and the process is not straightforward.9 The overall freedom to start.9 50. A value-added tax (VAT) has been collected and then not collected intermittently since 2005. overall tax revenue as a percentage of GDP was 6.2 81. and the flat corporate tax rate is 25 percent. The non-banking financial sector remains dominated by state-owned companies.1 0 0 20 least free 40 50 60 80 = world average 100 100 most free BUsinEss fREEDOM — 69. The non-salary cost of employing a worker is high. though credit is often supplied by traditional money lenders in the bazaar in support of small cash-based businesses. All investments must be approved. government spending equaled 26. Resorting to the courts is often counterproductive.0 10. Fifteen points were deducted from Iran’s monetary freedom score to adjust for measures that distort domestic prices. including consumption and transfer payments. and influences prices through regulation of Iran’s many state-owned enterprises. including banking. inVEstMEnt fREEDOM — 0 Foreign investment faces considerable government hostility and is restricted or banned in many activities.0 23.000 inspectors to monitor the 2. are relatively low.

1% 5-year compound annual growth $3.S.5% growth in 2008 4. and an elected government led by Prime Minister Nuri al-Maliki took office in May 2006. including tax reforms.6. microfinance initiatives. Background: A U. Economic recovery. progress has been uneven.570 per capita unemployment: 18. new investment laws. The oil industry. The Iraqi economy has adopted institutional reforms that have been put in place since 2003. especially by hindering the creation of a stable investment and entrepreneurial climate. is hampered by ongoing insurgency and instability. Iraq’s oil industry provides more than 90 percent of hard-currency earnings but has been hurt by pipeline sabotage. when it received an overall score of 15. Economic progress rests on a fragile foundation.iRAQ Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: Not ranked Regional Rank: Not ranked The economy is not graded t he level of economic freedom in Iraq remains unrated in the 2010 Index because of the lack of sufficiently reliable data for the economy. and the country faces continuing tension among different ethnic and religious factions.-led coalition removed Saddam Hussein’s dictatorship in 2003. 100 100 Country’s Score Over Time Most free 80 80 60 60 World average 40 40 Iraq’s economy is not graded for 2010 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 29. However. undermined continuously by weak physical security and persistent corruption.6 million gdP (PPP): $105. the absence of the rule of law is impeding the development of a vibrant private sector and hurts overall economic growth.2 billion See page 457 for an explanation of the methodology or visit the Index Web site at heritage.org/index. still in government hands. The Iraqi economy has slowly recovered from the hostilities that began in 2003. is both the glue that holds Iraq’s disparate factions together and a source of ongoing tension among them. Successful provincial elections in January 2009 weakened extremist political parties and encouraged an atmosphere of political compromise. Iraq was last graded in the 2002 Index. simple and low tariffs. electricity outages.7 billion 9.5% 2008 data unless otherwise noted Data data unless otherwise noted 2008 compiled as of September 2009 Data compiled as of September 2009 FdI Inflow: $20. How Do We Measure Economic Freedom? 235 . However. though helped by relatively high oil prices and aid from the United States and other donors. and a significantly liberalized and modernized banking system. and years of neglect and postponed maintenance. Improved security and the gradual restoration of oil exports have increased the prospects for steady economic growth.2% (unofficial estimates as high as 30%) Inflation (cPI): 3.

Foreigners may only rent or lease land for up to 50 years. significant customs delays. 32 private banks. including consumption and transfer payments. have improved the rule of law but still face daunting challenges. but foreign investors are permitted renewable leases for up to 50 years. A March 2004 law liberalized and modernized the banking system. There are no restrictions on current and capital transactions involving currency exchange as long as underlying transactions are supported by valid documentation. Iraq ranks 178th out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008. tRADE fREEDOM — nOt gRADED Iraq is trying to re-establish more broad-based trade. Four specialized state-owned banks serve the agricultural. Further modernization of the tax system and introduction of a sales tax as a precursor to a value-added tax (VAT) are under consideration.S.6 percent between 2006 and 2008. allowing allocation of credit on market terms and making the central bank independent. would allow investors to bank and transfer capital inside or outside of Iraq. The Commission for the Resolution of Real Property Disputes is an independent governmental commission established to resolve claims for real property confiscated. forces. inVEstMEnt fREEDOM — nOt gRADED Iraq is open to foreign capital in principle. U. unchanged from 2007. finAnCiAL fREEDOM — nOt gRADED Iraq’s financial system remains poorly developed. and six Islamic banks. and investors still may have to contend with requests for bribes or kickbacks from government officials at all levels. Department of Commerce. The insurance sector and the new stock exchange are very small. Foreign investors may own investment portfolios in shares and securities. The National Investment Law. but leases are renewable. but the weakness of the central government limits effective reform. real estate. The legal system remains very weak. corruption was a fact of life and touched every economic transaction. provides a number of subsidies. It is estimated that unemployment and underemployment combined affect about half of the labor force. industrial. or otherwise taken for less than fair value by the former regime between 1968 and 2003 for reasons other than land reform or lawfully applied eminent domain. security concerns. as the security situation has stabilized. security concerns.BUsinEss fREEDOM — nOt gRADED Despite some progress in establishing an investmentfriendly business environment. The government maintains a large public sector. Iraq applied a flat tariff rate of 5 percent in 2004. fisCAL fREEDOM — nOt gRADED Individual and corporate income tax rates are capped at 15 percent. gOVERnMEnt sPEnDing — nOt gRADED Total government expenditures in Iraq. which is not yet implemented. especially fuel. Most private-sector jobs are informal. and some import and export bans. and imposes a number of price controls. Under Hussein. PROPERtY Rights — nOt gRADED There is very little protection of property in Iraq. Undoing this legacy will be a long process. MOnEtARY fREEDOM — nOt gRADED Inflation in Iraq has been high. fREEDOM fROM CORRUPtiOn — nOt gRADED Corruption is perceived as rampant. According to the U. LABOR fREEDOM — nOt gRADED Iraq’s formal labor market is not yet fully developed. Tax revenue as a percentage of GDP is negligible. There are seven state-owned banks. Non-tariff barriers include inadequate infrastructure and trade capacity. The oil sector accounts for over 95 percent of exports and government revenue. in large part because of improvement in the supply of basic items. The two largest state-owned banks (Al-Rafidain and Al-Rasheed) account for over 90 percent of assets. 236 2010 Index of Economic Freedom . averaging 14. and attempts to sell state-owned oil fields in the past year were not successful. It is estimated that government spending equals about 70 percent of GDP. policy uncertainty. The major activity of private banks is financial transfers from the government to local authorities or individuals. Iraq does not have adequate statutory protection for intellectual property rights. and social sectors. forcibly acquired. significant problems remain to be addressed as Iraq tries to deal with challenges to its security and stability. but inadequate regulatory capacity.S. Consumer price growth has slowed from its peaks (inflation reached 65 percent at the end of 2006). are very high. working with Iraqi military and police units. Foreigners may not own land. and the legal and institutional framework is not conducive to deepening financial intermediation. and corruption deter investment.

reflecting lower scores in monetary freedom. Though Ireland’s dynamic economy has benefited substantially from its openness and flexibility in recent years. These strengths provide solid foundations on which to build recovery and curb long-term unemployment. Ireland’s overall levels of economic freedom remain high.iRELAnD Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 5 Regional Rank: 1 81. government spending.5 million gdP (PPP): $197. Reversing the outcome of an earlier referendum. a low level of corruption.3 100 100 i reland’s economic freedom score is 81. Its score has decreased by 0.org/index. and the economy has suffered sharp economic adjustments since late 2008. making its economy the 5th freest in the 2010 Index. Sectarian violence declined in the 1990s.9% 5-year compound annual growth $44.1% FdI Inflow: –$20 billion 2008 data unless otherwise noted Data compiled as of September 2009 See page 457 for an explanation of the methodology or visit the Index Web site at heritage. estimated to be equivalent to about 45 percent of GDP. The budget deficit has been on the rise. the financial sector was affected by the global financial turmoil. Background: The Anglo–Irish Treaty of 1921 formally partitioned the Irish Free State. into Ireland. Country’s Score Over Time Most free 80 80 60 60 World average 40 40 Ireland 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 4. but the burst of a speculative housing bubble in 2008 sent the economy into a tailspin. The government plans to buy up non-performing loans. which in 1948 became the Republic of Ireland. efficient business regulations. the banking system’s health remains precarious.9 point from last year. Despite the government’s efforts at stabilization. Despite the crisis. and the Irish Republican Army formally renounced armed struggle in 2005. highly industrialized economy performed extraordinarily well throughout the 1990s. sustained by such institutional strengths as strong protection of property rights.3% growth in 2007 3.1 billion –2. which remained under British rule. putting greater pressure on balancing the government budget. Irish voters approved the Lisbon treaty in 2009. and financial freedom.200 per capita unemployment: 6% Inflation (cPI): 3.3. and Northern Ireland. and competitive tax rates. Ireland’s modern. roughly along Catholic–Protestant lines. How Do We Measure Economic Freedom? 237 . The Irish economy was able to maintain its status as freest economy in the Europe region in the 2010 Index.

fisCAL fREEDOM — 71.7 percent of GDP. Ten points were deducted from Ireland’s monetary freedom score to account for policies that distort domestic prices.5 Ireland’s trade policy is the same as that of other members of the European Union. In the most recent year. The non-salary cost of employing a worker is low.0 95. An efficient. and its MFN tariff code is complex. quotas. Corruption is not a serious problem for foreign investors in Ireland.3 percent in 2008. Residents and non-residents may own land. Government action in response to the financial crisis included the establishment of a single fully integrated regulatory institution. Other taxes include a value-added tax (VAT) and a tax on interest. both chattel and real estate. from Corruption Labor Freedom 92. The courts protect property.5 percent. Obtaining a business license requires less than the world average of 18 procedures and 218 days. and the police investigate allegations of corruption. and inconsistent regulatory and customs administration among EU members. including consumption and transfer payments. import restrictions and bans for some goods and services. inVEstMEnt fREEDOM — 95 Ireland welcomes foreign investment. and the government has taken a 25 percent stake in the Bank of Ireland. Its competitive financial system was compromised by the collapse of a property bubble in which banks were highly exposed.1 Ireland has a relatively high income tax rate but a relatively low corporate tax rate. are moderate. 238 2010 Index of Economic Freedom . The top income tax rate is 41 percent.0 0 0 20 least free 40 distorting the prices of agricultural products. non-transparent and restrictive regulations and standards.8 79.0 79.0 percent between 2006 and 2008. overall tax revenue as a percentage of GDP was 32. Ireland has one of Europe’s most comprehensive legal frameworks for the protection of intellectual property rights. The government nationalized the Anglo Irish bank in early 2009. MOnEtARY fREEDOM — 79 Ireland is a member of the euro zone. The government also restructured the financial sector. gOVERnMEnt sPEnDing — 61.5 71.1 61. averaging 3.0 77.8 87. government spending equaled 35. tRADE fREEDOM — 87. fREEDOM fROM CORRUPtiOn — 77 Corruption is perceived as minimal.0 80. It also influences prices through state-owned enterprises. compared to the world average of 35 days. The country’s two largest banks. In the most recent year. have received capital injections. LABOR fREEDOM — 79 Labor regulations are flexible.8 Total government expenditures. Bankruptcy procedures are straightforward. and dismissing an employee is relatively easy. There is no approval process for foreign investment or capital inflows unless the company is applying for incentives. Ireland has ratified the OECD Anti-Bribery Convention and is a member of the OECD Working Group on Bribery and the Group of States Against Corruption. The common EU weighted average tariff rate was 1. repatriation of profits. and contracts are secure.5 percent.8 The overall freedom to conduct a business is well protected under Ireland’s regulatory environment. Ten points were deducted from Ireland’s trade freedom score to account for non-tariff barriers. 50 60 80 = world average 100 100 most free BUsinEss fREEDOM — 92. finAnCiAL fREEDOM — 80 Ireland has suffered severe economic and financial challenges as a result of the recent financial and banking crisis. creating the National Asset Management Agency to stabilize the banking sector and restore liquidity. Bank of Ireland and Allied Irish Bank. and the top corporate tax rate is 12. the EU has high or escalating tariffs for agricultural and manufacturing products.iRELAnD’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. PROPERtY Rights — 90 Secured interests in property. Starting a business takes an average of 13 days. the government subsidizes agricultural production. non-discriminatory legal system is accessible to foreign investors to protect and facilitate acquisition and disposition of all property rights. Restrictions on work hours are flexible. As a participant in the EU’s Common Agricultural Policy. Non-tariff barriers reflected in EU and Irish policy include agricultural and manufacturing subsidies. However.0 90. The regulatory regime is generally transparent and efficient. or access to foreign exchange. Ireland ranks 16th out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008. It is illegal for public servants to accept bribes. Inflation has been relatively low. are recognized and enforced. Government procurement rules are restrictive. and domestic and foreign firms incorporated in Ireland receive equal treatment. Public expenditures on an aging population and the slowdown in overall economic activity have contributed to a growing fiscal deficit. market access restrictions in some services sectors. There are no restrictions or barriers with respect to current transfers. Expropriation is highly unlikely.

Along with its openness to global trade and investment. Israel made dramatic free-market gains in the 1990s. but implementation of further cuts in both individual and corporate income tax rates is scheduled.7. the December 2008 war against Hamas in Gaza. Its overall score has increased slightly. Israel continues to live under the threat of war and terrorist violence.9% 5-year compound annual growth $27.548 per capita unemployment: 6. Israel’s commitment to economic restructuring and development continues. reflecting improvements in fiscal freedom and investment freedom. Israel is ranked 5th out of 17 countries in the Middle East/North Africa region. Country’s Score Over Time Most free 80 80 60 60 World average 40 40 Israel 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 7. restored tourism.3 billion 4.7% FdI Inflow: $9. The collapse of the 1993 Oslo peace agreement and onset of the “Second Intifada” in 2000 depressed tourism.2% growth in 2008 4. Having moved away from the socialist economic model in the mid-1980s. Israel’s overall economic competitiveness is supported by strong protection of property rights and relatively low levels of corruption. and continued Palestinian terrorism. especially high-technology goods and services. Despite the 2006 war against Hezbollah in Lebanon. the economy has grown significantly. Background: After more than 60 years. and a greater demand for Israeli exports. making its economy the 44th freest in the 2010 Index. Income and corporate tax rates remain relatively burdensome. and there is room for improvement in implementing more effective public finance management. discouraged foreign investment. and contributed to economic recession. Prime Minister Benjamin Netanyahu leads a coalition government formed after the February 2009 elections.org/index. and its vibrant democracy is unique in the region. Government spending equals almost half of GDP. The Israeli economy has increasingly diversified its productive base and has enjoyed steady growth of close to 5 percent over the past five years.2% Inflation (cPI): 4.6 billion 2008 data unless otherwise noted Data compiled as of September 2009 See page 457 for an explanation of the methodology or visit the Index Web site at heritage.isRAEL Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 44 Regional Rank: 5 67.3 million gdP (PPP): $201. the economy rebounded by 2004 as a result of increased foreign investment. How Do We Measure Economic Freedom? 239 .7 100 100 i srael’s economic freedom score is 67.

Jurisdiction for the enforcement of intellectual property rights is problematic. Commercial law is consistent and standardized.1 percent in 2008. Expropriation occurs only if property is linked to a terrorist threat and expropriation is deemed to be in the interest of national security. Israel became a signatory to the OECD Bribery convention in November 2008.4 percent of GDP. or other transactions.isRAEL’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. Other taxes include a valueadded tax (VAT) and a capital gains tax. Ten points were deducted from Israel’s trade freedom score to account for non-tariff barriers. MOnEtARY fREEDOM — 78. Import bans and restrictions. Starting a business takes an average of 34 days. The financial market achieved a sharp recovery during the first half of 2009. Courts are independent. such as banking. but dismissing an employee is relatively costly. and there are no controls or restrictions on current transfers. Property rights and contracts are enforced effectively. The banking sector is highly concentrated. and commercial law is clear and consistently applied. The top corporate tax rate has been reduced to 26 percent from 27 percent.0 70. The 2005 Bachar Reform bars commercial banks from owning holdings in mutual funds and provident funds that resemble pension accounts. restrictive labeling requirements. Israel ranks 33rd out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008. The energy sector remains largely state-owned and heavily regulated.2 Inflation has been moderate. finAnCiAL fREEDOM — 70 Israel’s financial sector has undergone restructuring and consolidation. In the most recent year. are high.4 Labor regulations are relatively flexible. 240 2010 Index of Economic Freedom . Supervision is prudent. The non-salary cost of employing a worker is low. Commercial banks provide a full range of financial services that facilitate entrepreneurial activity and private-sector development. Privatization has accelerated in recent years. fisCAL fREEDOM — 58. import fees and taxes. Residents and non-residents may hold foreign exchange accounts. LABOR fREEDOM — 65. In the most recent year. and takeovers apply equally to foreign and domestic investors.4 0 0 20 least free 40 50 60 80 = world average 100 100 most free BUsinEss fREEDOM — 66. Both rates are scheduled for further reduction in 2010. Obtaining a business license requires slightly more than the world average of 18 procedures and 218 days. fREEDOM fROM CORRUPtiOn — 60 Corruption is perceived as present. overall tax revenue as a percentage of GDP was 37 percent. but is not screened. and financial institutions offer a wide array of financial instruments. Bribery and other forms of corruption are illegal. especially since responsibility in the West Bank and Gaza rests with the Palestinian Authority. government spending equaled 46. Ten points were deducted from Israel’s monetary freedom score to account for policies that distort domestic prices.5 percent between 2006 and 2008. offsetting most of the losses triggered by the global financial crisis in 2008.0 60.8 58. require prior government approval.4 Total government expenditures. Investments in regulated industries. averaging 3.8 Israel’s weighted average tariff rate was 1. Several nongovernmental organizations focus on public-sector ethics. PROPERtY Rights — 70 Israel has a modern legal system based on British common law. tRADE fREEDOM — 87.0 70.2 85. compared to the world average of 35 days. mergers. Years of prudent fiscal policy have reduced public debt from 100 percent of GDP in 2003 to below 80 percent. import licensing. Bankruptcy can be lengthy and costly. as does the receipt of investment incentive benefits. 66. especially for agriculture production. Bureaucracy can be complex and burdensome. such as defense. high agriculture tariffs.4 87.0 65. and international arbitration is binding in dispute settlements with the state. Regulations on acquisitions.4 The top income tax rate has been lowered from 47 percent to 46 percent. Capital markets have been largely liberalized as part of Israel’s effort to reinvent itself as a finance hub. and the government can impose price controls on vital goods and services. The government influences prices through the public sector and provides some subsidies. Restrictions on work hours are not flexible. repatriation of profits. and the five principal banking groups together hold more than 95 percent of total assets.4 35. from Corruption Labor Freedom inVEstMEnt fREEDOM — 85 Foreign investment is restricted in a few sectors. including consumption and transfer payments. and regulations conform to international norms. and non-transparent government procurement add to the cost of trade. a complex and non-transparent tariff rate quota system.4 78. Credit is available on market terms.4 The overall freedom to conduct a business is relatively well protected under Israel’s regulatory environment. gOVERnMEnt sPEnDing — 35.

and public debt still hovers around 105 percent of GDP. The regional disparities in Italy’s economic development remain distinctive.itALY Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 74 Regional Rank: 35 62. while the southern part of the country has long been dependent on the agricultural sector and government welfare. making its economy the 74th freest in the 2010 Index.756 per capita unemployment: 6.0% growth in 2008 0. Small and medium-size enterprises dominate key industries such as manufacturing and high-end design. Italy’s overall economic freedom is curbed by ineffective public finance management. Background: The volatile and vibrantly democratic Italian political landscape is dominated currently by a center-right coalition led by Silvio Berlusconi. Italy is ranked 35th out of 43 countries in the Europe region. and a high tax burden. and the long-standing imbalance between the prosperous and industrialized North and the less developed South. Persistent problems in other areas include organized crime. Country’s Score Over Time Most free 80 80 60 60 World average 40 40 Italy 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 59. Its overall score is 1. The northern part of the country has well-established traditions of private-sector entrepreneurship. considerable corruption. A considerable level of economic activity takes place outside of the formal economy. reflecting modest improvements in trade freedom and investment freedom. NATO. The informal sector still accounts for a sizeable portion of economic activity. increasing unemployment. The export market for luxury goods was hard-hit by the global economic downturn.5% FdI Inflow: $17 billion 2008 data unless otherwise noted Data compiled as of September 2009 See page 457 for an explanation of the methodology or visit the Index Web site at heritage. Government spending remains over 45 percent of GDP. and its score is slightly above the world average.9 million gdP (PPP): $1. Reduction of the chronic budget deficit has proved difficult. and the economy experienced a deep recession.3 points higher than last year.8 trillion –1.8% 5-year compound annual growth $30. The Italian economy on the whole has become increasingly dominated by the services sector.7 100 100 i taly’s economic freedom score is 62.org/index. How Do We Measure Economic Freedom? 241 . Italy is a member of the European Union. who was elected prime minister for a third time in 2008. which accounts for around 70 percent of GDP. and the G-8.7. which it hosted in July 2009.8% Inflation (cPI): 3.

The top income tax rate is 43 percent. import restrictions and bans for some goods and services. the EU has high or escalating tariffs for agricultural and manufacturing products.5 Italy’s trade policy is the same as that of other members of the European Union. operate. regulatory non-transparency. but judicial procedures are extremely slow. Items subject to price controls at the national level include drinking water. a tax on interest. Many judges are politically oriented. Italy welcomes foreign investment. National treatment is provided to foreign investors established in Italy or another EU member state. petroleum exploration and development. and shipping. banks are not free from political interference. and approval is needed to gain control of a financial institution. and corporations are subject to a regional tax of 3.9 The overall freedom to start. The government often retains a “golden share” in privatized companies.5 percent. gas. quotas. mainly in transportation and energy. Obtaining a business license requires less than the world average of 18 procedures and slightly more than the world average of 218 days. but dismissing an employee can be costless. aircraft manufacturing. and inconsistent regulatory and customs administration among EU members. averaging 3. tRADE fREEDOM — 87. Ten points were deducted from Italy’s monetary freedom score to account for policies that distort domestic prices. Only three major financial institutions remain state-controlled. highway tolls.9 percent. Regulations and prohibitions can be burdensome. gOVERnMEnt sPEnDing — 31. overall tax revenue as a percentage of GDP was 43. domestic airlines. market access restrictions in some services sectors. As a participant in the EU’s Common Agricultural Policy. The non-salary cost of employing a worker is very high.0 58. Enforcement of intellectual property rights falls below the standards of other developed Western European countries.3 percent in 2008. inVEstMEnt fREEDOM — 75 50 60 80 = world average 100 100 most free BUsinEss fREEDOM — 77. and its MFN tariff code is complex.2 Italy has a high income tax and a moderate corporate tax.0 percent between 2006 and 2008. a property transfer tax. Credit is allocated on market terms. with Italian banks less exposed to troubled financial instruments than banks in some other countries. rigid labor laws. The state still controls some strategic enterprises. and Italians regard investment-related sectors as corrupt.2 31. The five largest banks account for over 50 percent of assets. Ten points were deducted from Italy’s trade freedom score to account for non-tariff barriers. but the government can veto acquisitions involving foreign investors.itALY’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. The government has acted to reform underdeveloped capital markets. and an inheritance tax.0 55.9 percent of GDP. Foreigners may not buy land along the border. Other taxes include a value-added tax (VAT). In the most recent year. and close a business is relatively well protected under Italy’s regulatory environment. PROPERtY Rights — 55 Property rights and contracts are secure.2 Labor regulations are relatively rigid. and many companies choose to settle out of court. prescription drugs reimbursed by the national health service.0 75. Inflation is relatively low. are high.5 55. MOnEtARY fREEDOM — 79 Italy is a member of the euro zone. finAnCiAL fREEDOM — 60 The financial sector is relatively well developed and provides a wide range of services. fisCAL fREEDOM — 55. bureaucracy. electricity. 242 2010 Index of Economic Freedom . inefficient infrastructure. telecommunications. Banking has undergone consolidation. Rules on work hours are relatively inflexible. and the top corporate tax rate is 27. An inefficient judicial system. Nontariff barriers reflected in EU and Italian policy include agricultural and manufacturing subsidies. distorting agricultural prices.2 Total government expenditures. Corruption and organized crime are significant impediments to investment and economic growth in southern Italy. Starting a business takes an average of 10 days. and domestic travel. The global financial turmoil’s impact on the banking sector has been relatively modest. the LABOR fREEDOM — 58.3 percent.9 87. non-transparent and restrictive regulations and standards. including consumption and transfer payments. fREEDOM fROM CORRUPtiOn — 48 Corruption is perceived as present. government spending equaled 47.0 48. from Corruption Labor Freedom 77. The common EU weighted average tariff rate was 1. and hostile labor unions are deterrents. compared to the world average of 35 days. In the most recent year. Individuals are also subject to small regional and municipal income taxes.2 0 0 20 least free 40 government subsidizes agricultural production. the possibility of government intervention. However.0 60. Italy ranks 48th out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008. However. except in defense. There are no barriers to repatriation of profits. and foreign participation is welcome.2 79.

who took office in late 2007 with his Jamaica Labour Party holding a slim parliamentary majority. These factors.org/index. Jamaica is now a net sugar importer.JAMAiCA Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 57 Regional Rank: 11 65.0 million 2008 data unless otherwise noted Data compiled as of September 2009 See page 457 for an explanation of the methodology or visit the Index Web site at heritage. demand for Jamaica’s major exports (particularly agricultural. Efforts to restrict spending have generally fallen short.3 point better than last year. are among the challenges facing Prime Minister Bruce Golding.705 per capita unemployment: 11. making its economy the 57th freest in the 2010 Index. The economy scores very high in investment freedom and business freedom and above the world average in three other areas. The downturn in U.0% FdI Inflow: $789. Country’s Score Over Time Most free 80 80 60 60 World average 40 40 Jamaica 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 2. Background: Once a major sugar producer.5 100 100 J amaica’s economic freedom score is 65. Jamaica ranks 11th out of 29 countries in the South and Central America/Caribbean region.7 million gdP (PPP): $20.5. and services). Most foreign exchange comes from remittances. Jamaica has implemented reforms to develop its private sector. but industries need modernization and lack investment capital. and steps have been taken to enhance the regulatory environment for the financial sector. Undermining anti-corruption efforts. Procedures for conducting a business are straightforward and simple. the judicial system remains inefficient and clogged by a significant backlog of cases. The economy is diverse. reflecting improvements in four of the 10 economic freedoms.0% 5-year compound annual growth $7. and more than half of government revenue goes to debt service and recurrent expenditures. Foreign investment is welcome in many sectors. Its score is 0.3% growth in 2008 1.7 billion –1. Jamaica’s overall economic freedom is hurt by significant corruption and relatively high government spending. a decline in remittances. How Do We Measure Economic Freedom? 243 .0% Inflation (cPI): 22. Excessive public debt renders Jamaica’s fiscal situation unstable. in addition to money laundering and drug-related violence. tourism. mining. and bauxite.S. and a contraction of consumer demand led to a deep recession in 2009 with stubbornly high unemployment and underemployment. Jamaica’s public debt equals more than 120 percent of GDP.

Jamaica’s patent law is not WTO/ TRIPS-compliant.8 Total government expenditures.9 percent in 2006. overall tax revenue as a percentage of GDP was 28.8 61.8 Jamaica has a moderate income tax rate and a relatively high corporate tax rate. transfers. most of whom believe it to be one of the root causes of the high crime rate. but dismissing an employee is costly.0 0 0 20 least free 40 50 60 80 = world average 100 100 most free BUsinEss fREEDOM — 87 The overall freedom to start. government spending equaled 35. including consumption and transfer payments. Bureaucracy can cause significant delays in securing land titles. and five of the seven commercial banks are foreign-owned. import fees and taxes. but the government monitors the pricing of consumer items. Ten points were deducted from Jamaica’s trade freedom score to account for nontariff barriers. Residents and non-residents may hold foreign exchange accounts. Government efforts to strengthen supervision and regulation of banking and insurance continue. Obtaining a business license requires 10 procedures and takes less than the world average of 218 days. Regulations on work hours are flexible. MOnEtARY fREEDOM — 68.4 Inflation has been very high. media. the private sector has access to a wide range of credit instruments. fisCAL fREEDOM — 74. The government is steadily improving bureaucratic efficiency and transparency. a decline from 2007. Most prices are set by the market. including electricity. Starting a business takes eight days. Foreign and domestic investors receive equal treatment. or mining are subject to some restrictions. There are no official policies on price regulation or control. moving forward the Credit Reporting Bill and reform of the National Payments System. and trials can be delayed for years. The three largest commercial banks account for about 85 percent of commercial bank assets. or the repatriation of funds. or involve such sectors as life insurance.2 74. and weak enforcement of intellectual property rights add to the cost of trade. PROPERtY Rights — 45 Jamaica’s legal system is based on English common law. have a negative impact on the environment.0 72. In 2008. compared to the world average of 35 days. tRADE fREEDOM — 72. LABOR fREEDOM — 70 Labor regulations are relatively flexible.7 percent between 2006 and 2008. the banking sector remains relatively sound and well capitalized. 244 2010 Index of Economic Freedom . water. the government has missed two of its self-imposed divestment deadlines. An inadequate police force weakens the security of property rights. In the most recent year. and the top corporate tax rate is 33. averaging 17. Despite identifying two potential buyers for the national airline (Air Jamaica). restrictive pharmaceuticals regulations. finAnCiAL fREEDOM — 60 Jamaica’s financial sector has undergone major consolidation and restructuring.0 60. operate. Credit is generally allocated on market terms.0 70. but the government regulates utility services. import and export bans and restrictions. but some high tariffs.4 85. There are no limits on foreign control of companies.3 percent. Capital markets are underdeveloped and centered on the stock exchange. Other taxes include a value-added tax (called a general consumption tax). In the most recent year.7 percent of GDP. the government continued to enhance the regulatory framework for the financial sector. Although some financial products are still not available. The executive and legislative branches of government. Five points were deducted from Jamaica’s monetary freedom score to account for policies that distort domestic prices. The flat income tax rate is 25 percent. and bus fares. The legal system upholds the sanctity of contracts. The non-salary cost of employing a worker is moderate. but projects that affect national security. and non-residents may purchase real estate.0 31. and crime threatens foreign investment. There is no screening. Corruption may well be the single greatest concern among Jamaicans. from Corruption Labor Freedom inVEstMEnt fREEDOM — 85 Jamaica encourages foreign investment in all sectors. gOVERnMEnt sPEnDing — 61. fREEDOM fROM CORRUPtiOn — 31 Corruption is perceived as significant. and a tax on interest. and foreign investors can acquire privatized state-owned enterprises. a property transfer tax.8 68. The government has been implementing reforms of the trade regime. There are no restrictions on international transactions. Jamaica ranks 96th out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008. and close a business is relatively well protected by Jamaica’s regulatory environment. are moderately high. 87.JAMAiCA’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. Despite the global financial turmoil.2 Jamaica’s weighted average tariff rate was 8. inefficient regulatory administration.0 45.1 percent. but the judiciary lacks adequate resources. are widely regarded as subject to corruption. as well as the Jamaica Constabulary Force.

but it remains subject to government influence and a host of restrictions. The regulatory environment is efficient and facilitates overall entrepreneurial activity. Background: Japan is the world’s second-largest economy. including business freedom.7% growth in 2008 1. How Do We Measure Economic Freedom? 245 .4 trillion –0.JAPAn Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 19 Regional Rank: 5 72. Country’s Score Over Time Most free 80 80 60 60 World average 40 40 Japan 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 127. and labor freedom. capturing both houses of parliament and elevating Yukio Hatoyama to the prime ministership. Together with deflationary pressure.4% 5-year compound annual growth $34. a large and growing public debt (around 180 percent of GDP) has crowded out private-sector economic activity. which increased during the course of 2009. Market reform is now urgently needed to create domestic sources of growth.4 billion 2008 data unless otherwise noted Data compiled as of September 2009 See page 457 for an explanation of the methodology or visit the Index Web site at heritage. and corruption is perceived as minimal. The Democratic Party of Japan won a historic victory in August 2009. although non-tariff barriers linger. Disparities in productivity between different segments of the economy have continued to widen.9. Property rights are generally well respected. The export-oriented Japanese economy has long benefited from global trade. Taxation is fairly burdensome. freedom from corruption. hurting overall trade freedom. property rights. The financial sector is modern and well developed.7 million gdP (PPP): $4. The economy is smaller than it was in the first quarter of 1992.9 100 100 J apan’s economic freedom score is 72.099 per capita unemployment: 4. Japan still faces a number of challenges in trying to revitalize its stagnant economy. and Japan’s corporate tax rate is becoming increasingly uncompetitive. but its “lost decade” of the 1990s has extended well into a second decade. making its economy the 19th freest in the 2010 Index. The economy scores above the world average in many of the 10 economic freedoms.4% FdI Inflow: $24.0% Inflation (cPI): 1. Japan is ranked 5th out of 41 countries in the Asia–Pacific region.org/index. Japan’s brief period of economic expansion earlier this decade under Prime Minister Junichiro Koizumi was driven primarily by reliance on exports. Its score is almost the same as last year.

Capital markets are relatively well developed. but they are not well suited to litigation of business disputes.0 80. and an estate tax. including consumption and transfer payments. Efforts to reinvigorate the economy and the rising cost of social welfare for an aging population have put government spending on an upward trend. overregulation.4 67. from Corruption Labor Freedom 84. are relatively high. and close a business is strongly protected under Japan’s regulatory environment.0 percent between 2006 and 2008. nontransparent and burdensome regulations and standards. The nonsalary cost of employing a worker is moderate. state trade in some goods. and leather manufacturing.5 82.1 88. finAnCiAL fREEDOM — 50 Japan’s modern financial system remains subject to government influence. Five points were deducted from Japan’s monetary freedom score to account for policies that distort domestic prices. with the corporate goods price index falling at a record pace while the jobless rate rose to near an all-time high. backed by regulators. and a branch-management entity. government spending equaled 36 percent of GDP. repatriation of profits.2 61. and inefficient customs administration add to the cost of trade.4 Japan’s labor regulations are relatively flexible. Starting a business takes 23 days. 246 2010 Index of Economic Freedom . Contracts are highly respected. fREEDOM fROM CORRUPtiOn — 73 Corruption is perceived as minimal. Other product prices are also expected to drop as retailers slash prices to encourage LABOR fREEDOM — 82. Deregulation and competition have led to consolidation in an effort to create banks large enough to be major players abroad. Government approval is needed for investments in agriculture. Formal price controls apply to rice. inVEstMEnt fREEDOM — 60 Foreign investment is officially welcomed. Import and export bans and restrictions. foreign acquisition of Japanese firms is inhibited by insufficient financial disclosure and cross-holding of shares among companies in the same business grouping (keiretsu). Other taxes include a value-added tax (VAT). Fifteen points were deducted from Japan’s trade freedom score to account for non-tariff barriers. restrictions in government procurement. telecommunications. which rises to almost 50 percent when local taxes are included. water. In the most recent year. which local taxes can raise to around 41 percent. electricity. The government supports bank mergers and continues to update laws and regulations to facilitate them. compared to the world average of 35 days. import quotas and licensing.1 Total government expenditures. Further deterrents include public resistance to foreign acquisitions. operate. MOnEtARY fREEDOM — 88. Overall transparency is still weak despite gradual improvement. but major producers. services market access barriers. The top income tax rate is 40 percent. Japan ranks 18th out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008. Japan is struggling with its second round of deflation this decade. and a slow court system. and inward direct investment is subject to few restrictions. subsidies. In late 2007. fisCAL fREEDOM — 67. forestry. aerospace. and dismissing an employee is not difficult. but obtaining and protecting patents and trademarks can be time-consuming and costly. a mail-delivery service. restrictive sanitary and phytosanitary rules. gOVERnMEnt sPEnDing — 61.0 82. an insurance company. Regulations on work hours are rigid.5 The overall freedom to start. gas.9 percent. The standard corporate tax rate is 30 percent.2 Japan has a high income tax rate and a moderate corporate tax rate.0 73.4 0 0 20 least free 40 recession-wary consumers to spend.8 60. Obtaining a business license takes less than the world average of 18 procedures and 218 days. PROPERtY Rights — 80 Real and intellectual property rights are generally secure. the Japanese post office was divided into four commercial entities: a bank.JAPAn’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. The government-owned postal savings system is Japan’s biggest financial institution by assets. are able to dictate retail and wholesale prices. In the most recent year.3 percent in 2008. 50 60 80 = world average 100 100 most free BUsinEss fREEDOM — 84. a tax on interest. tRADE fREEDOM — 82. Bankruptcy proceedings are easy and straightforward.0 50. or real estate transactions by residents or nonresidents. The impact of the global financial turmoil on the Japanese banking sector has been relatively modest because of its limited exposure to troubled assets. However. averaging 1.4 Japan’s weighted average tariff rate was 1. overall tax revenue as a percentage of GDP was 27. The courts do not discriminate against foreign investors. There are few controls on the holding of foreign exchange accounts or on current transfers. under a 10-year privatization plan. petroleum.8 Inflation is minimal and falling.

Sound public finance management and privatization have been key parts of the reform agenda. reflecting improvements in three of the 10 economic freedoms. is a constitutional monarchy with a relatively well-educated population. Qualifying Industrial Zones allow duty-free exports to the United States of goods made with some content from Israel. Country’s Score Over Time Most free 80 80 60 60 World average 40 40 Jordan 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 5. it signed an association agreement with the European Union.283 per capita unemployment: 12. Overall economic freedom is curtailed by such lingering challenges as corruption and the judicial system’s vulnerability to political influence. In 2000.1. The Jordanian economy benefits from relatively high levels of trade freedom. many of whom work in the Persian Gulf oil kingdoms.JORDAn Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 52 Regional Rank: 7 66. In addition. which gained its independence from Britain in 1946.1 100 100 J ordan’s economic freedom score is 66. The economy is supported to a significant degree by foreign loans. the economy has recorded an average annual economic growth rate of over 7 percent. Background: Jordan. making its economy the 52nd freest in the 2010 Index.2% 5-year compound annual growth $5. Its score has increased by 0. and regulatory reforms since coming to power in 1999. economic. an influx of Iraqi refugees. and investment freedom. In the past five years.9 million gdP (PPP): $31.2 billion 5.7 point since last year. Economic reforms have promoted the transition to a more open and flexible economy. Well-developed and increasingly modern. Ongoing problems include high unemployment. in 2001. Total public debt has been reduced to about 60 percent of GDP in 2008 from over 80 percent in 2005. international aid.6% growth in 2008 7. Jordan joined the World Trade Organization and signed a free trade agreement with the United States. How Do We Measure Economic Freedom? 247 . King Abdullah II has undertaken political. heavy debt. and the high cost of oil imports. and its score is above the world and regional averages.org/index.9% FdI Inflow: $1. fiscal freedom. Jordan is ranked 7th out of 17 countries in the Middle East/North Africa region. and remittances from expatriate workers.6% Inflation (cPI): 14.9 billion 2008 data unless otherwise noted Data compiled as of September 2009 See page 457 for an explanation of the methodology or visit the Index Web site at heritage. the financial sector has taken steps to meet international standards.

or repatriation of profits. is difficult.6 The overall freedom to establish and run a business is somewhat restricted by Jordan’s regulatory environment. Capital markets are not fully developed but are fairly robust by regional standards.JORDAn’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. and land transportation. and inconsistent enforcement of regulations inhibit investment. a judicial system susceptible to political pressure. foreign investments may not exceed 50 percent in sectors like construction. In the most recent year. Influence peddling and a lack of transparency have been alleged in government procurement and dispute settlement. wholesale and retail trade. operate in Jordan.0 55. and other personal connections to advance personal business interests at the expense of others is endemic and seen by many Jordanians as a normal part of doing business. Starting a business takes an average of 13 days. Fiscal policy has been stable and effective. BUsinEss fREEDOM — 65. The insurance sector is small but open to foreign competition. Jordan’s record in protecting intellectual property rights has improved. import taxes and fees.7 percent of GDP.8 Jordan’s weighted average tariff rate was 5. fisCAL fREEDOM — 83 Jordan has moderate tax rates. export subsidies. The use of family. The top income and corporate tax rates are 25 percent (35 percent for banks and financial institutions). averaging 11. weak enforcement of intellectual property rights. and obtaining a business license requires less than the world average of 218 days. from Corruption Labor Freedom 65.2 Inflation has been high. compared to the world average of 35 days. enforced. and industry. but dismissing an employee is not easy. Despite efforts at reform. transactions.0 74. including nine domestic commercial banks and eight foreign banks. red tape. Closing a business.0 60. however. In the most recent year.8 83. fREEDOM fROM CORRUPtiOn — 51 Corruption is perceived as present. The legal system protects the acquisition and disposition of all property rights. Most controls have been eliminated. but the government sets prices for electricity. Along with financial-sector policies that are intended to enhance competition and efficiency. and advertising. Jordan ranks 51st out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008.1 Total government expenditures.1 percent. More than 20 banks. Some 19 companies were slated for privatization in 2008. sports clubs. There is no formal screening. transfers. Foreigners may not invest in investigative and security services. tRADE fREEDOM — 78.0 51. but the king is the ultimate authority. Import bans and restrictions.2 Labor regulations are relatively flexible. are relatively high. Ten points were deducted from Jordan’s trade freedom score to account for non-tariff barriers. overall tax revenue as a percentage of GDP was 21. accounting for about 60 percent of total assets.8 percent between 2006 and 2008. Expropriation is unlikely. stone quarrying. Expenditure reductions. finAnCiAL fREEDOM — 60 Jordan’s fairly well developed financial sector is dominated by banking. Despite a law passed in 2001 to limit its influence.1 73. business. MOnEtARY fREEDOM — 73. and recorded through reliable legal processes and registries. Five points were deducted from Jordan’s monetary freedom score to account for policies that distort domestic prices. gOVERnMEnt sPEnDing — 55. inVEstMEnt fREEDOM — 65 Foreign and domestic investments receive equal treatment. transport. The Arab Bank dominates the sector.0 55. licensing requirements. bureaucratic obstacles and delays persist. Certain real estate purchases require approval. government spending equaled 38. and inefficient customs administration add to the cost of trade. rural and urban development. the result of removing barley and fuel subsidies. and water. but there are minimum capi- 248 2010 Index of Economic Freedom . The judiciary is generally independent. LABOR fREEDOM — 74. There are no restrictions or controls on payments. customs clearance services.2 65.6 percent in 2007. including consumption and transfer payments. housing. the government has brought supervision and regulation into line with international standards. Additionally. PROPERtY Rights — 55 Interest in property (moveable and real) is recognized. telecommunications. Residents and non-residents may hold foreign exchange accounts. The non-salary cost of employing a worker is moderate. Government-encouraged consolidation among smaller banks has progressed. import and export services. Excessive bureaucracy. Other taxes include a value-added tax (VAT) and a property tax. An anti–money laundering bill went into effect in July 2007. The government owns no commercial banks but does own five specialized credit institutions focused on agricultural credit. the Ministry of Justice significantly influences judges’ careers.2 0 0 20 least free 40 50 60 80 = world average 100 100 most free tal requirements. will be offset by higher capital spending and lower tax revenues.6 78. Regulations on work hours are not rigid.

and its overall score is above the world and regional averages. making its economy the 82nd freest in the 2010 Index. Country’s Score Over Time Most free 80 80 60 60 World average 40 40 kazakhstan 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 15. The weak rule of law allows for significant corruption and insecure property rights.7 million gdP (PPP): $177.2% growth in 2008 8. Red tape and overly burdensome restrictions still hamper business freedom. Business competitiveness is up as a result. along with high oil prices. Background: Kazakhstan is an important energy and commodity producer in Central Asia and an economic development leader in the region.0 100 100 K azakhstan’s economic freedom score is 61. How Do We Measure Economic Freedom? 249 . Kazakhstan ranks 12th out of 41 countries in the Asia–Pacific region.9 point higher than last year. Challenges to economic freedom remain considerable. and commodities.1% 5-year compound annual growth $11. primarily reflecting improvements in business freedom. but resource nationalism and corruption encourage investor uncertainty. and labor freedom. allowed Kazakhstan to achieve economic growth of over 8 percent annually over the past five years. the global financial turmoil and economic slowdown have taken a considerable toll on the economy. and presidential term limits have been abolished. Its score is 0. Excessive dependence on commodity exports makes the economy particularly vulnerable to global price changes. and freedom from corruption. property rights. President Nursultan Nazarbayev’s Nur Otan party won all of the seats in the lower house of parliament in 2007. A series of economic reforms.org/index. However. property rights. but its fiscal freedom has improved as a result of reduction of the corporate tax rate to 20 percent at the beginning of 2009.315 per capita unemployment: 6.5 billion 2008 data unless otherwise noted Data compiled as of September 2009 See page 457 for an explanation of the methodology or visit the Index Web site at heritage.2% FdI Inflow: $14.6% Inflation (cPI): 17. The economy exhibits significant shortcomings in three areas: investment freedom. and the 2009 global recession has led to weakness and contraction in construction. Kazakhstan possesses an estimated 20 percent of the world’s uranium reserves.KAZAKhstAn Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 82 Regional Rank: 12 61. Oil output is projected to reach 3. banking. Kazakhstan’s financial freedom has eroded.4 billion 3.5 million barrels a day in 2020. Foreign investment is hindered by ad hoc barriers and favoritism toward domestic firms.

but government economic intervention will continue to rise under the Action Plan 2009. legislative favoritism toward Kazakh companies. and the standard corporate tax rate has been reduced to 20 percent from 30 percent. fisCAL fREEDOM — 87. and a minerals extraction tax implemented in 2009. and transfers are permitted with few restrictions.9 Kazakhstan has a low income tax rate and a relatively low corporate tax rate. excise taxes.0 22. and slow. LABOR fREEDOM — 83.9 82. The insurance sector is small. fREEDOM fROM CORRUPtiOn — 22 Corruption is perceived as pervasive. payments. Piracy of copyrighted products is widespread.KAZAKhstAn’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. though the bond market has been growing. Regulations on work hours can be rigid. In the most recent year. and the judiciary views itself more as an arm of the executive than as an enforcer of contracts or property rights. MOnEtARY fREEDOM — 65. but services market access barriers.1 percent in 2008. Domestic banks expanded rapidly on the back of foreign borrowing. compared to the world average of 35 days. 250 2010 Index of Economic Freedom . Weak risk management and overexposure to the property market have taken a severe toll on the country’s banking stability. government spending equaled 24. Subject to restrictions.6 30. foreign exchange accounts may be held by residents and non-residents. from Corruption Labor Freedom inVEstMEnt fREEDOM — 30 The government plays a large role in overseeing foreign investment. The flat income tax rate is 10 percent. tRADE fREEDOM — 85.5 85. and customs inefficiency and complexity add to the cost of trade. weak enforcement of intellectual property rights. operate. non-transparent regulations and standards. taking up to a 25 percent stake in each of the four largest troubled banks.0 30. An unclear legal code. including consumption and transfer payments. Obtaining a business license requires more than the world average of 18 procedures.7 percent.1 Kazakhstan’s labor regulations are flexible. and dismissing an employee is not costly. An investor may be obligated to use local content in production or to train local specialists and contribute to the social development of the region. Ten points were deducted from Kazakhstan’s trade freedom score to account for non-tariff barriers. and government interference in commercial operations further deter investment.9 87. The Investment Law of 2003 weakened protections related to expropriation and compensation and provides no clear guidance for either process.0 83. and foreign companies are limited to joint ventures with local companies.0 50. finAnCiAL fREEDOM — 50 Although Kazakhstan’s financial sector had experienced deeper reforms than other areas of the economy. the government stepped in. opaque government procurement. Land ownership is restricted. Some foreign investors encounter serious problems short of expropriation. gOVERnMEnt sPEnDing — 82. overall tax revenue as a percentage of GDP was 26. and law enforcement agencies occasionally pressure foreign investors to cooperate with government demands. Corruption is widespread. Non-performing loans reached about 10 percent in early 2009. averaging 14. Starting a business takes an average of 20 days. PROPERtY Rights — 30 Most legal disputes arise from breaches of contract or nonpayment by the government.9 Kazakhstan’s weighted average tariff rate was 2. inconsistent application of investment regulations.1 65. Kazakhstan ranks 145th out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008. Much of the economy is now in private hands. and in the face of systemic risk. Screening of foreign investment proposals is often non-transparent. arbitrary. 73. influences them through state-owned enterprises and manufacturing subsidies. but the government retains the right to control prices. and foreign ownership in some sectors is limited. and enforcement of intellectual property rights is weak. are relatively low.4 percent of GDP. In the most recent year. Corruption is a significant obstacle to investment.8 percent between 2006 and 2008. the global financial crisis has revealed continuing weaknesses in regulation and supervision.6 Inflation has been high. Most capital transactions. and fees are high. Other taxes include a value-added tax (VAT). import licensing requirements. property tax. Capital markets remain underdeveloped.5 The overall freedom to start. and close a business is limited by Kazakhstan’s regulatory environment. and has made little progress in promoting competition in agriculture. The market sets most prices. and much of their lending was directed to construction and real estate development. Ten points were deducted from Kazakhstan’s monetary freedom score to account for policies that distort domestic prices.1 0 0 20 least free 40 50 60 80 = world average 100 100 most free BUsinEss fREEDOM — 73.1 Total government expenditures. The non-salary cost of employing a worker is moderate. Liberalization has progressed.

Economic growth.3% 5-year compound annual growth $1. Country’s Score Over Time Most free 80 80 60 60 World average 40 40 kenya 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 38. Kenya is one of Africa’s most developed economies and has a tradition of private-sector entrepreneurial activity. though progress has been sluggish. How Do We Measure Economic Freedom? 251 .5 million gdP (PPP): $61. communication. Kenya’s judiciary is underdeveloped and subject to political influence. Corruption is perceived as pervasive. Its score has decreased by 1. monetary freedom. After months of negotiations. As in many other Sub-Saharan African nations.0 million 2008 data unless otherwise noted Data compiled as of September 2009 See page 457 for an explanation of the methodology or visit the Index Web site at heritage.2 points since last year. and rival Raila Odinga claimed victory. and financial hub of East Africa. who had won the presidency in 2002. giving Kenya one of the world’s lower scores in this vital area. and its overall score is below the world average. was improving before the instability that followed the 2007 election. Background: Kenya was a one-party state until 1992. and business freedom.3 billion 3.5. and the government employs about one-third of the formal labor force. nearly 80 percent of employment is informal. Lax property rights and extensive corruption limit Kenya’s overall economic freedom. hindered for decades by government mismanagement. and corruption. they agreed to a power-sharing arrangement. Agriculture accounts for about a quarter of GDP and employs a majority of the population. reflecting slight deterioration in trade freedom. Corruption remains commonplace despite government pledges to combat it.1% FdI Inflow: $96.org/index. Widespread violence followed the 2007 election when both Mwai Kibaki.6% growth in 2008 5. Civil service reform has been slow. and there have been a number of initial public offerings and some divestment of state-owned enterprises. According to the Kenya Bureau of Statistics. Kenya is the transportation. Non-transparent trade regulations and customs inefficiency hurt overall trade freedom.KEnYA Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 101 Regional Rank: 13 57. Kenya is ranked 13th out of 46 countries in the Sub-Saharan Africa region. Reforms in public financial management have continued.590 per capita unemployment: 40% Inflation (cPI): 13. Domestic debt as a percentage of GDP has been declining incrementally in recent years.5 100 100 K enya’s economic freedom score is 57. making its economy the 101st freest in the 2010 Index. counterproductive economic policies.

gOVERnMEnt sPEnDing — 83. Residents and non-residents may hold foreign exchange accounts. remain a problem but have been declining. weak enforcement of intellectual property rights. The process for acquiring land titles is often nontransparent and cumbersome. and infrastructure. averaging 12.7 percent. Starting a business takes an average of 34 days. The government owns or holds shares in several other domestic financial institutions and influences the allocation of credit. health.9 Kenya’s weighted average tariff rate was 8. There is a minimum foreign investment threshold.4 The overall freedom to start. PROPERtY Rights — 30 Kenya’s judicial system is modeled on the British system. but the government reserves the right to set maximum prices in certain cases and influences prices through agricultural marketing boards and state-owned utilities and enterprises. Kenya ranks 147th out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008.1 72. Most capital transactions are permitted. including consumption and transfer payments. Corruption involving food and fuel oil may have far-reaching consequences as the administration of President Kibaki tries to tackle a looming food crisis.7 percent of GDP.0 63. overall tax revenue as a percentage of GDP was 19. inVEstMEnt fREEDOM — 45 Foreign and local investors generally receive equal treatment. The non-salary cost of employing a worker is relatively low. The Microfinance Act took effect in 2008. and customs corruption add to the cost of trade.4 percent between 2006 and 2008. government spending equaled 23. Five points were deducted from Kenya’s monetary freedom score to account for policies that distort domestic prices. but the sale or issue of capital and money market instruments may require government approval. tRADE fREEDOM — 67. Enforcement of property and contractual rights is subject to long delays. import and export taxes. and crime are disincentives. Obtaining a business license requires less than the world average of 18 procedures. The 45 financial institutions include two Islamic banking institutions that came into operation in 2008. but there are exceptions. Import and export bans and restrictions. but dismissing an employee can be costly. In the most recent year. There are no controls or requirements on payments and transfers. restrictive labor laws.7 0 0 20 least free 40 50 60 80 = world average 100 100 most free BUsinEss fREEDOM — 63. Foreign investors may acquire shares in the stock market. Capital markets are relatively small. finAnCiAL fREEDOM — 50 Kenya’s financial system remains vulnerable to government influence and inadequate supervision. In the most recent year. Commercial courts deal with commercial cases. Non-performing loans. Protection of intellectual property rights is weak. and just over 50 companies are listed on the Nairobi Stock Exchange. opaque government procurement.0 21. Fifteen points were deducted from Kenya’s trade freedom score to account for non-tariff barriers.9 78. Poor infrastructure. 252 2010 Index of Economic Freedom .0 30. Price controls were officially dismantled in 1994. import and export licensing requirements. The government screens LABOR fREEDOM — 63.0 50. MOnEtARY fREEDOM — 72. subject to specified limits.KEnYA’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm.4 67. The top income and corporate tax rates are 30 percent. and close a business is relatively respected under Kenya’s regulatory environment. Corruption has led to foreign disinvestment and has drained resources needed for education. Closing a business is lengthy and costly.7 Labor regulations are relatively rigid. The five largest banks account for just over 50 percent of assets. Other taxes include a value-added tax (VAT) and a tax on interest. Courts generally do not permit sales of land by mortgage lenders to collect debts. non-transparent and restrictive regulations. inefficient bureaucracy. and foreign investors must sign an agreement defining training arrangements intended to phase out expatriates. The government has taken some halting steps to address judicial corruption. About 20 percent of the adult population has bank accounts and access to formal financial services.1 Total government expenditures.6 percent in 2008. burdensome regulation. Real estate purchases by non-residents are subject to government approval. fisCAL fREEDOM — 78. particularly from state-owned banks to state-owned enterprises.7 45. compared to the world average of 35 days. Kenyans view the police as the most corrupt public institution. are relatively low.1 83. from Corruption Labor Freedom 63. fREEDOM fROM CORRUPtiOn — 21 Corruption is perceived as pervasive. subsidies.1 Kenya has moderate income and corporate tax rates. A special panel has been formed to oversee the divestment of 16 state-owned enterprises. Private foreign and domestic investments are constrained in certain sectors to include those where state corporations have a statutory monopoly. private-sector projects to determine their viability and implications for national development. operate.7 Inflation has been high.

4% growth in 2008 1. making its economy the 166th freest in the 2010 Index. reflecting deterioration in freedom from corruption and monetary freedom.1 million gdP (PPP): $0. but progress has been very limited. How Do We Measure Economic Freedom? 253 .7. it depends on a $500 million Revenue Equalization Reserve Fund created with the profits from phosphates earnings. Country’s Score Over Time Most free 80 80 60 60 World average 40 40 kiribati 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 0. The financial sector remains underdeveloped. Today. Background: An archipelago spread across the equator in the Pacific. but deposits were exhausted in 1979. foreign assistance.2 billion 3. Kiribati gained its independence from Britain in 1979 and enjoys democratic government under a national constitution. The country has undergone a period of fiscal pressure in light of monetary instability combined with falling external income.0% FdI Inflow: $2.org/index.KiRiBAti Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 166 Regional Rank: 37 43. Only about 10 percent of the population is employed on wages or salaries. leaving a large portion of the population without formal access to banking services. Kiribati is ranked 37th out of 41 countries in the Asia–Pacific region. The government has made efforts to decentralize economic activity from the main islands. Its score has decreased by 2 points since last year. Economic growth potentials are also undermined by a glut of state-owned enterprises and regulations that hinder private-sector development.0 million 2008 data unless otherwise noted Data compiled as of September 2009 See page 457 for an explanation of the methodology or visit the Index Web site at heritage.7% 5-year compound annual growth $2. President Anote Tong was elected to a second term in 2007. and its overall score is below the world and regional averages. and geographical remoteness increases the costs of interaction with the world economy. Challenges to overall economic freedom remain daunting.7 100 100 K iribati’s economic freedom score is 43. sale of fishing licenses.484 per capita unemployment: n/a Inflation (cPI): 11. remittances from overseas. Kiribati was once rich in phosphates and highly dependent on mining. and exports of fish and coconuts. the rest work in subsistence farming or fishing. The economy relies heavily on foreign assistance and remittances. Corruption also poses considerable impediments to entrepreneurial activity. The Kiribati economy is dominated by a large public sector that accounts for two-thirds of employment and about half of GDP.

tRADE fREEDOM — 55. Certain sectors are reserved for domestic activity. Foreign investors may lease but not own land.0 71.2 0. MOnEtARY fREEDOM — 71. and significant geographic isolation add to the cost of trade. and only a small share of the total labor force participates in the formal economy. church. is the only commercial bank and has only four branches. and small markets. A large proportion of the population remains outside the formal banking system. Budget management is poor. Ten points were deducted from Kiribati’s monetary freedom score to adjust for measures that distort domestic prices. surging prices for oil and other commodities increased inflationary pressure in 2008.3 percent in 2007.1 Kiribati’s labor regulations are flexible. The government is the major source of employment. Land rights in cases of real property that is not owned by the government can be particularly complex and are subject to traditional land rights constraints. reducing the incentive to constrain spending.4 Kiribati’s simple average tariff rate was 17.9 Inflation has been relatively high. LABOR fREEDOM — 86.1 0 0 20 least free 40 50 60 80 = world average 100 100 most free ment.7 percent of GDP. government spending equaled 119. and other requirements. after which the government establishes criteria that the investor must fulfill with regard to employment. offering a very limited range of financing options for the private sector.2 Kiribati has relatively high taxes. and family ties is prevalent. limited. was equivalent to 69. averaging 8. In the most recent year. The Development Bank of Kiribati generally lends to small businesses. limited infrastructure. technology transfer. All foreign investment is screened and subject to various levels of approval. are exceedingly high. Laws providing criminal penalties for official corruption have not been implemented effectively. including consumption and transfer payments. Ten points were deducted from Kiribati’s trade freedom score to account for non-tariff barriers. in which the government has 25 percent ownership. but the entry cost of launching a business is quite high. The magistrates’ courts have original jurisdiction in all cases involving land.0 31. However. and obtaining a business license requires less than the world average of 218 days. estimated at about one-third of total loans. some import and export licensing. There are no controls on foreign exchange or capital transactions. The top income and corporate tax rates are 35 percent. and government officials sometimes engage in corrupt practices with impunity. Weak regulatory capacity. The Bank of Kiribati. inVEstMEnt fREEDOM — 25 Foreign investment is generally granted national treat- 254 2010 Index of Economic Freedom . Regulatory administration is ad hoc. depending on the size of the proposal.6 55.2 percent between 2006 and 2008. The government maintains price controls on petroleum products and other basic commodities. and state-directed lending to public enterprises remains considerable.9 25.4 percent of GDP.6 The overall freedom to establish and run a business remains constrained by Kiribati’s regulatory environment. from Corruption Labor Freedom 65. it takes two to three months for a project to be approved. In the most recent year. There are two banks operating in Kiribati. PROPERtY Rights — 30 The protection of movable property is secured by law and the courts. Appeals of land cases are heard by the High Court. On average. fREEDOM fROM CORRUPtiOn — 31 Corruption is perceived as significant. Noncitizens may not own land.4 42.0 30.0 86. including revenue from fishing licenses. fisCAL fREEDOM — 42.KiRiBAti’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. the formal labor market is not fully developed. and nontransparent. gOVERnMEnt sPEnDing — 0 Total government expenditures. limited infrastructure. finAnCiAL fREEDOM — 30 Kiribati’s small financial sector remains underdeveloped and dominated by banking. BUsinEss fREEDOM — 65. Nepotism based on tribal. High credit costs and scarce access to financing severely impede entrepreneurial activity and development of the private sector. Kiribati ranks 96th out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008. Investment is limited by Kiribati’s geographic isolation. A high level of non-performing loans. local content. The Revenue Equalization Reserve Fund (an offshore investment fund) returns investment income equal to about 33 percent of GDP and continues to underwrite government recurrent expenditure. Capital markets are underdeveloped and inefficient. overall tax revenue. The economy is burdened by a public sector that accounts for close to half of GDP. compared to the world average of 35 days.0 30. After many years of minimal inflation (partly reflecting use of the Australian dollar as the domestic currency). providing jobs in public service and state-owned enterprises. continues to distress the financial system. Starting a business takes an average of 21 days.

N. making its economy the least free in the 2010 Index. further exacerbating the country’s already poor economic situation. Since the early 1990s. No courts are independent of political interference. with China and South Korea being the most important trading partners. its Communist rulers have denied citizens basic human rights and maintained ownership of all industry. including a quest to develop nuclear weapons in violation of U.org/index. North Korea devotes a disproportionately large share of GDP to military spending.0 n orth Korea’s economic freedom score is 1.0. The government imposes grossly ineffective agricultural and industrial policies that keep consumption at subsistence levels. 2008 data unless otherwise noted Data compiled as of September 2009 See page 457 for an explanation of the methodology or visit the Index Web site at heritage.DEMOCRATIC PEOPLE’S REPUBLIC OF (NORTh KOREA) 25 75 Economic Freedom Score Least free Least free KOREA 50 50 75 100 Most free 100 free Most 0 25 0 World Rank: 179 Regional Rank: 41 100 100 100 80 80 80 60 60 60 40 40 40 20 20 20 0 00 Country’s Score Over Time Country’s Score Over Time Most free 1. Corruption is rampant but hard to distinguish from regular economic activity in a system in which arbitrary government control is the norm. have led to international sanctions that reinforce North Korea’s political and economic isolation. The Communist Party controls and commands almost every aspect of economic activity. Background: The Democratic People’s Republic of Korea is an oppressed and closed society. How Do We Measure Economic Freedom? 255 . North Korea scores some minimal points only in property rights and freedom from corruption. resolutions. Pyongyang remains heavily reliant on economic support from China. Ever since the country’s founding in 1948.2 billion (2008 estimate) Growth in 2008 n/a 5-year compound annual growth n/a Per capita n/a unemployment: n/a 2008 data unless otherwise noted Inflation (cPI): n/a Data compiled as of September 2009 FdI Inflow: n/a 2006 data unless otherwise noted. and private property (particularly land) is strictly regulated by the state. Normal foreign trade is minimal. North Korea has replaced the doctrine of Marxism–Leninism with the late Kim Il-Sung’s juche (self-reliance) as the official state ideology. North Korea is ranked 41st out of 41 countries in the Asia–Pacific region. The country’s impoverished population is heavily dependent on government subsidies in housing and food rations even though the state-run rationing system has deteriorated significantly in recent years. World average north korea 1995 1995 1998 1998 2001 2001 Least free 2004 2004 2007 2007 2010 2010 Quick Facts Population: 23. Belligerent foreign policies and actions.9 million gdP (nominal): $26.

and Kaesong.0 0 goods. tRADE fREEDOM — 0 The government controls all imports and exports.0 5. The government provides most funding for industries and takes a percentage from enterprises.0 0. the state determines wages. Non-tariff barriers are significant. 256 2010 Index of Economic Freedom . North Korean trade statistics are limited and compiled from trading partners’ data. Given the minimal level of trade. Large military spending further drains scarce resources. Since the 2002 economic reforms.0 0.0 0. Reports indicate that the effort to reassert state control and to control inflation has been largely ineffective. A small number of projects may be approved by top levels of government.0 0.0 5. A score of zero was assigned. operate. such figures as are available with respect to North Korea’s government revenues are suspect and outdated. Access to financing is very limited and constrained by the country’s failed economy.0 0. and the judiciary is not independent. Inter-Korean trade remains constrained by North Korea’s unwillingness to implement needed reform. but highly restrictive government regulations hinder any employment and productivity growth. Given the absence of published official macroeconomic data. mainly from North Korea’s two main trading partners. North Korea allows limited foreign participation in the economy through special economic zones located at Rajin-Sonbong. China and South Korea. and state-owned industries account for nearly all GDP. fREEDOM fROM CORRUPtiOn — 5 After the mid-1990s economic collapse and subsequent famines. belongs to the state. including nearly all real property. Numerous countries employ sanctions against North Korea. The central bank also serves as a commercial bank and had more than 200 local branches in 2007.nORth KOREA’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. factory managers have had limited autonomy to set wages and offer incentives. 0 20 least free 40 50 60 80 = world average 100 100 most free BUsinEss fREEDOM — 0 The overall freedom to start. A rumored overhaul of the financial system to permit firms to borrow from banks instead of receiving state-directed capital has not materialized. Because of the ongoing crisis in agriculture. and close a business is extremely restricted by North Korea’s national regulatory environment. There are many indicators of corruption in the government and security forces. MOnEtARY fREEDOM — 0 North Korea stopped publishing economic statistics as long ago as the 1960s. Without matching supply-side measures to boost output. finAnCiAL fREEDOM — 0 North Korea is a command-and-control economy with virtually no functioning financial sector. the result has been rampant inflation for many staple LABOR fREEDOM — 0 As the main source of employment. Most trade is de facto aid. The government even controls all chattel property (domestically produced goods as well as all imports and exports). fisCAL fREEDOM — 0 No data on income or corporate tax rates are available because no effective tax system is in place. and formal trade is minimal. but entrepreneurial activity is still virtually impossible. Internal laws do not allow for international dispute arbitration. gOVERnMEnt sPEnDing — 0 The government owns virtually all property and sets production levels for most products. Military and government officials reportedly divert food aid from international donors and demand bribes before distributing it. PROPERtY Rights — 5 Property rights are not guaranteed. The government plans and manages almost every part of the economy.0 0. and ongoing political and security concerns make investment extremely hazardous. Foreign aid agencies have set up microcredit schemes to lend to farmers and small businesses. Mount Kumgang. when its rapid early growth began to slow. foreign investment is prohibited. Aside from these few economic zones where investment is approved on a case-bycase basis.0 0. especially in agricultural goods. a score of zero was assigned. inVEstMEnt fREEDOM — 0 North Korea generally does not welcome foreign investment. from Corruption Labor Freedom 0. but the scale of these investments is also small. Almost all property. Price and wage reforms introduced in July 2002 consisted of reducing government subsidies and telling producers to charge prices that more closely reflect costs. the government has banned sales of grain at markets and returned to rationing. The state regulates the economy heavily through central planning. Informal trading with China in currency and goods is active. North Korea developed an immense informal market. Economic reforms implemented in 2002 allegedly brought some changes at the enterprise and industrial levels. The state directs all significant economic activity.

automobile. making its economy the 31st freest in the 2010 Index. and inflation is under control.9 s outh Korea’s economic freedom score is 69. Improving the efficiency of the tax system and making tax rates more competitive have been part of the government’s reform agenda. and South Korea has been pursuing additional trade agreements. South Korea’s export-oriented economy.org/index. South Korea’s overall economic freedom is limited by lingering corruption and a low level of labor freedom. and trade freedom. World average South korea 1995 1995 1998 1998 2001 2001 Least free 2004 2004 2007 2007 2010 2010 Quick Facts Population: 48. and shipbuilding industries. which is one of Asia’s most vibrant and successful. or chaebols. fierce political opposition. The impact of the global financial turmoil on the banking sector has been relatively modest. Background: South Korea is one of Asia’s liveliest democracies and the world’s 15th largest economy. In the years since South Korea’s transition to democracy in 1988. telecommunications. South Korea is ranked 8th out of 41 countries in the Asia–Pacific region. and protectionism. but he has been stymied by militant labor unions.1% 5-year compound annual growth $27. The overall regulatory environment has gradually become more efficient and transparent.8 points. scores above the world average in nine of the 10 economic freedoms. It has long benefited from relative openness to global trade and investment. reflecting improved scores in fiscal freedom. the economy has been dominated to a significant extent by large conglomerates. How Do We Measure Economic Freedom? 257 .REPUBLIC OF (SOUTh KOREA) 25 75 Economic Freedom Score Least free Least free KOREA 50 50 75 100 Most free 100 free Most 0 25 0 World Rank: 31 Regional Rank: 8 100 100 100 80 80 80 60 60 60 40 40 40 20 20 20 0 00 Country’s Score Over Time Country’s Score Over Time Most free 69. The country has sophisticated electronics. and the European Union. monetary stability is relatively well maintained. President Lee Myung-bak.2% growth in 2008 4. The labor market remains rigid despite some efforts by government to enhance flexibility.9.4 trillion 2.2% Inflation (cPI): 4. vowed to liberalize the economy further through freer trade. Its overall score has increased by 1. who took office in 2008 with a large electoral majority.6 million gdP (PPP): $1. including agreements with the United States. financial freedom. India.6 billion Data compiled as of September 2009 2008 data unless otherwise noted Data compiled as of September 2009 See page 457 for an explanation of the methodology or visit the Index Web site at heritage.939 per capita unemployment: 3.7% 2008 data unless otherwise noted FdI Inflow: $7. and the privatization of major industries. Property rights and the rule of law are well maintained in a transparent manner. deregulation.

Payments. Regulations on work hours are inflexible. compared to the world average of 35 days. and some energy products. averaging 3. import and export restrictions. and regulates or controls prices in certain sectors. came into force early in 2009.0 47. time-consuming. other utilities. PROPERtY Rights — 70 Private property is secure. newspapers. In the most recent year. tRADE fREEDOM — 70. Obtaining a business license requires much less than the world average of 18 procedures and 218 days. providing positive momentum for reforms in other sectors. Non-transparent and burdensome regulation. services market access barriers. Legal disputes can be complex. 258 2010 Index of Economic Freedom . Capital markets are sophisticated and well developed. Ten points were deducted from South Korea’s LABOR fREEDOM — 47. but dismissing an employee is costly.1 0 0 20 least free 40 monetary freedom score to account for policies that distort domestic prices. including agriculture. but media. Korean monetary policy has adjusted quickly to evolving international inflationary and deflationary pressures. fisCAL fREEDOM — 71.4 70. the government has succeeded in recapitalizing banks and non-bank financial institutions. Some prohibitive tariffs. are moderate. Foreign individuals and corporations share the same rights as Koreans in purchasing and using land.0 70. as piracy of copyrighted material is significant. Despite considerable strain caused by the global financial crisis. Starting a business takes an average of 14 days. airline transport. can cap prices on key raw materials. which removes about one-third of 300 financial regulations. certain agricultural sectors. electric power. Reforms have focused largely on improving transparency and efficiency and ending statedirected lending. and a property tax. Fifteen points were deducted from South Korea’s trade freedom score to account for non-tariff barriers. from Corruption Labor Freedom 91. fishing. Other taxes include a value-added tax (VAT). state trading. South Korea ranks 40th out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008. In the most recent year. political. but the justice system can be inefficient and slow.4 Inflation has been moderate. with government capital injections into the banking sector more modest than in other major countries.1 Labor regulations are burdensome.8 71.9 The overall freedom to conduct a business is well protected under South Korea’s regulatory environment.0 56. Companies are also subject to a 10 percent resident surtax.1 The top income tax rate is 38.1 74. The non-salary cost of employing a worker is moderate. fREEDOM fROM CORRUPtiOn — 56 Corruption is perceived as present. The government can control prices on several products by emergency decree. Since the late 1990s. The government has been selling its shares in private banks but retains some ownership positions. power generation. and the lingering economic influence of large conglomerates undermine investment. and business structures. and expropriation is highly unlikely. gOVERnMEnt sPEnDing — 74. MOnEtARY fREEDOM — 77.9 70. burdensome and non-transparent standards and regulations. import taxes. overall tax revenue as a percentage of GDP was 28. Weak institutions have been closed or merged. exclusionary social. and insufficient institutional checks and balances. pharmaceuticals and medical services. finAnCiAL fREEDOM — 70 South Korea’s modern financial sector has become more open and competitive. Closing a business is easy.1 percent in 2007. Residents and non-residents may hold foreign exchange accounts. 50 60 80 = world average 100 100 most free BUsinEss fREEDOM — 91. Foreign banks own majority stakes in major commercial banks. and subsidies add to the cost of trade.7 percent.8 South Korea’s weighted average tariff rate was 7. use of “adjustment” tariffs and taxes. telecommunications. Relevant ministries must approve investments in restricted sectors. and expensive. The protection of intellectual property rights needs to be improved. transfers. a capital acquisitions tax on certain items. government spending equaled 28. Public debt is holding at about 30 percent of GDP but likely will rise as a result of two waves of stimulus spending during the recent recession.sOUth KOREA’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. and the top corporate tax rate has been reduced to 22 percent. Corruption is fostered by non-transparent rulemaking. and non-performing loans have decreased considerably. including consumption and transfer payments.9 Total government expenditures. though foreign ownership remains restricted. the banking sector has weathered the financial turmoil relatively well.9 percent between 2006 and 2008. inVEstMEnt fREEDOM — 70 The investment climate is increasingly open.0 70. The Capital Market Consolidation Act. inflexible labor laws.9 77. and repatriation of profits are subject to reporting requirements or restrictions on amounts for specified periods. and a few other sectors remain restricted.5 percent (35 percent plus a 10 percent resident surtax).9 percent of GDP.

Occupied in 1990 by Iraq.7. Oil accounts for nearly 50 percent of GDP and 95 percent of export revenues.1 points higher than last year.-led coalition in 1991.1% 5-year compound annual growth $39. gained its independence from Britain in 1961. remains committed to cautious economic reform but faces opposition from Islamist and populist members of parliament. Kuwait scores slightly below the world average in monetary freedom.5% FdI Inflow: $56 million 2008 data unless otherwise noted Data compiled as of September 2009 See page 457 for an explanation of the methodology or visit the Index Web site at heritage. and high oil revenues have delayed privatization and other structural reforms that were intended to diversify the economy. an oil-rich Arab constitutional monarchy. Former Prime Minister Sabah al-Ahmad al-Jabr al-Sabah. The global financial turmoil necessitated a liquidity injection into the banking system. There is no income tax. Its score is 2. Country’s Score Over Time Most free 80 80 60 60 World average 40 40 kuwait 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 3.7% Inflation (cPI): 10. making its economy the 42nd freest in the 2010 Index. increased Shiite representation. chosen amir in January 2006.7 100 100 K uwait’s economic freedom score is 67. How Do We Measure Economic Freedom? 259 . Background: Kuwait.5% growth in 2008 6. and its overall score is well above the world and regional averages. The Kuwaiti economy performs relatively well in many of the 10 components of economic freedom and significantly better than the world average in fiscal freedom and labor freedom. Scores for investment freedom and financial freedom are about the world average. The Al-Sabah dynasty has used state-owned oil revenues to build modern infrastructure and a cradle-to-grave welfare system for Kuwait’s small population. and for the first time added four women to the 50-seat parliament.4 million gdP (PPP): $137. which is now relatively stabilized. mainly because of improved scores in trade freedom and investment freedom. it was liberated by a U. With an estimated 104 billion barrels of oil reserves.KUWAit Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 42 Regional Rank: 3 67.914 per capita unemployment: 5. Kuwait is ranked 3rd out of 17 countries in the Middle East/North Africa region. The May 2009 elections weakened Sunni Islamist parties. Kuwait is a major energy producer. Kuwait controls roughly 10 percent of the world’s oil supply.org/index.S. and corporate taxes are more competitive since the 2008 reduction.4 billion 2.

Defaulting on most of its $3 billion debt obligations. LABOR fREEDOM — 88 Labor regulations are flexible. There is no private-sector minimum wage. and close a business is relatively well protected by Kuwait’s regulatory environment. The central bank has improved its supervision. and it can be biased in favor of domestic interests. with its loss on derivative transactions over $1 billion.4 Inflation has been relatively high. Bureaucracy is often inefficient and non-transparent. transfers. averaging 8. Ten points were deducted from Kuwait’s trade freedom score to account for non-tariff barriers.S.9 76.6 66.7 percent in 2008. equal to the world average. who took steps to guarantee customer deposits at local banks and implement a recapitalization plan. and weak enforcement of intellectual property rights add to the cost of trade. In the most recent year. which is now a flat 15 percent. several investigations and trials involved current or former government officials accused of malfeasance. owing to the predominance of dollar-denominated oil exports in the trade account. fREEDOM fROM CORRUPtiOn — 43 Corruption is perceived as significant.6 Total government expenditures.9 percent of GDP. gOVERnMEnt sPEnDing — 76.4 55. fisCAL fREEDOM — 99. The government intends to privatize its stakes in several commercial banks. Some prohibitive tariffs. tRADE fREEDOM — 82. Obtaining a business license takes slightly more than the world average of 18 procedures. Foreign-owned firms and joint ventures are the only businesses that are subject to corporate income tax. and the government intends to implement proposed GCCwide standards and trademark legislation. are moderate. 260 2010 Index of Economic Freedom . Licenses are required to establish new companies. import licensing requirements. The government provides numerous subsidies and controls prices through state-owned utilities and enterprises. Kuwait’s largest investment company was forced to undergo a debt restructuring. from Corruption Labor Freedom inVEstMEnt fREEDOM — 55 Kuwait is open to foreign investment. trade-weighted basket of currencies to which the dinar is pegged. both of which would require parliamentary approval.0 88. Non–Gulf Cooperation Council (GCC) citizens may not own land. three Islamic banks.0 0 0 20 least free 40 50 60 80 = world average 100 100 most free BUsinEss fREEDOM — 65. Foreign residents frequently claim that the courts favor Kuwaitis. Residents and non-residents may hold foreign exchange accounts.8 The overall freedom to start. and transportation. PROPERtY Rights — 50 The constitution provides for an independent judiciary. The executive. dollar makes up much of the undisclosed. In 2009. transactions. There is no value-added tax (VAT).8 82. including telecommunications.1 percent of GDP. but the amir appoints all judges. 65. the third-largest bank (Gulf Bank) was bailed out by the authorities. but all proposals are screened and require government approval. but dismissing an employee can be costly. Credit is generally allocated on market terms. government spending equaled 27. MOnEtARY fREEDOM — 66.KUWAit’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. import restrictions. local preference in government procurement. six branches of foreign banks. Foreign banks may establish operations in Kuwait but are confined to a single branch. The majority are non-citizens.5 Kuwait’s weighted average tariff rate was 3. ensuring fairer and more efficient credit distribution. Kuwait ranks 65th out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008. services market access barriers. and renewal of their appointments is subject to government approval. There have been no convictions for bribery since the end of the Gulf War in 1991. but they can be timeconsuming to acquire. The Council of Ministers is considering patent and copyright legislation. The U. ports. The global financial turmoil has put considerable pressure on the financial sector.0 50. In late 2008. operate. restrictive regulations and standards. Fifteen points were deducted from Kuwait’s monetary freedom score to account for policies that distort domestic prices.5 99. legislative.0 50. Starting a business takes 35 days.0 43.6 percent between 2006 and 2008. Restrictions on work hours can be rigid. and one specialized bank. There are seven commercial banks. Trials are lengthy. overall tax revenue (mainly from duties on international trade and transactions) was 3. or repatriation of profits. and judicial branches are widely perceived as subject to corruption. finAnCiAL fREEDOM — 50 Kuwait’s financial system is relatively well developed and offers a full range of financial services for commercial transactions. In the most recent year. and there are no restrictions or controls on payments. Planned privatizations are unlikely to occur given parliamentary opposition.9 Kuwait does not tax individual or domestic business income. and certain sectors are restricted to domestic entities. including consumption and transfer payments. The non-salary cost of employing a worker is low.

The Kyrgyz Republic is ranked 11th out of 41 countries in the Asia–Pacific region.7% growth in 2008 4.5 billion 7. Taxation has been simplified with a competitive personal and corporate flat rate of 10 percent. and drug smuggling. and government spending.0 million 2008 data unless otherwise noted Data compiled as of September 2009 See page 457 for an explanation of the methodology or visit the Index Web site at heritage.S. air base at Manas after Russia offered grants and loans of over $2 billion. Bakiyev announced the closure of the U. Government spending is also moderate. Lax rule of law fosters pervasive corruption and insecure property rights. which jeopardize prospects for long-term economic growth and development. reflecting decreases in trade freedom and freedom from corruption.5 point worse than last year. A new law governing internal audits of government agencies and institutions establishes a framework for conducting audits in line with international best practice. but political stability remains precarious because of rampant crime and religious extremism in the South. Some reforms have been implemented. despite some remaining restrictions. Country’s Score Over Time Most free 80 80 60 60 World average 40 40 kyrgyz republic 20 20 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 5. Financial aid from Russia has helped the Kyrgyz Republic to offset some of the effects of the economic crisis. but overall progress has been uneven.5% FdI Inflow: $233. In January 2009. and its overall score is slightly above the world average. labor freedom.7% 5-year compound annual growth $2.KYRgYZ REPUBLiC Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 80 Regional Rank: 11 61. fiscal freedom. informal economic activity.1% (2007) Inflation (cPI): 24. heavy dependence on foreign aid. The Kyrgyz Republic’s transition to greater economic freedom has progressed slowly.3. was expected to fall to around 1 percent in 2009.org/index. Its score is 0. The Kyrgyz Republic’s property rights and freedom from corruption remain weak. making its economy the 80th freest in the 2010 Index. buoyed by a strong recovery in gold production. GDP growth.188 per capita unemployment: 8. Background: President Kurmanbek Bakiyev’s party won early parliamentary elections in December 2007. The country rates relatively well in business freedom. The labor market is flexible. How Do We Measure Economic Freedom? 261 . Ongoing concerns include a large external debt. implementation of a new labor code has helped to tailor employment to free-market conditions.3 million gdP (PPP): $11.3 100 100 t he Kyrgyz Republic’s economic freedom score is 61.

The non-salary cost of employing a worker is moderate. law enforcement bodies. The income and corporate tax rates are a flat 10 percent. Financial intermediation has continued to increase. an estimated 98 percent of DVDs. but the sector remains vulnerable to executive and legislative interference. MOnEtARY fREEDOM — 62.2 50. water. The central bank has improved supervision and established minimum capital requirements. Many price controls and subsidies have been eliminated. BUsinEss fREEDOM — 76. Tax and customs agencies.6 0 0 20 least free 40 cial system is underdeveloped and lacks independence.2 Total government expenditures. Foreign investors may lease but not purchase land. one of the largest micro-finance institutions. Import bans and restrictions. Thousands of cases of suspected official bribe-taking. complex regulations and standards. and malfeasance have reportedly led to hundreds of arrests but no convictions.2 62. and corrupt customs administration add to the cost of trade.9 The Kyrgyz Republic has relatively low tax rates. but the government regulates or influences prices through state-owned industries. and energy. government spending equaled 25. 262 2010 Index of Economic Freedom . Capital markets are not fully developed. The Kyrgyz Republic is obligated to protect intellectual property rights as a member of the WTO. from Corruption Labor Freedom 76. and other audiovisual products sold are counterfeit. registration. There are 21 banks. but most capital transactions must be registered with the relevant government authority or are subject to controls. the parliament approved privatization of Aiyl Bank. and close a business is relatively well protected under the Kyrgyz Republic’s regulatory environment. agriculture. Foreign investors lack the knowledge needed to work the system. a decline from 2007.KYRgYZ REPUBLiC’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. operate. negligence. A deposit insurance scheme came into effect in 2009.0 82. fREEDOM fROM CORRUPtiOn — 18 Corruption is perceived as pervasive. telecommunications.9 80. gOVERnMEnt sPEnDing — 80. Residents and non-residents may hold foreign exchange accounts. PROPERtY Rights — 25 Property right protections are slowly emerging. fisCAL fREEDOM — 92. CDs. compared to the world average of 35 days.7 percent of GDP. including consumption and transfer payments. Obtaining a business license requires less than the world average of 218 days. and contract enforcement is weak. Ten points were deducted from the Kyrgyz Republic’s trade freedom score to account for non-tariff barriers. tRADE fREEDOM — 75. The Kyrgyz Republic ranks 166th out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008.6 75. averaging 19. import fees and taxes. half of which are majority foreignowned and account for more than 70 percent of total assets. 50 60 80 = world average 100 100 most free finAnCiAL fREEDOM — 50 The Kyrgyz Republic has been trying to modernize and restructure its financial system. and domestic credit provided by the banking sector amounted to about 12 percent of GDP in 2008. inVEstMEnt fREEDOM — 50 Most of the economy is open to foreign investment.6 The overall freedom to start. In 2008. red tape is burdensome. and agencies controlling construction and the issuance of business licenses are notably corrupt.0 18.0 25. embezzlement. As of January 2009.0 50. but high credit costs remain a barrier to entrepreneurial activity. There are no limits on foreign ownership of banks and microcredit institutions. Non-performing loans reached about 7 percent in early 2009. Corruption remains a disincentive. The government has adopted a new labor code to further improve labor market flexibility. but the judicial system remains underdeveloped and lacks independence. Banking dominates the financial sector. In the most recent year. Starting a business takes an average of 11 days. Court actions can force the sale of property to enforce payments and other contractual obligations.2 Inflation has been very high. However. Subsidiaries of Kazakhstan’s banks have a large presence. are relatively low. overall tax revenue as a percentage of GDP was 22. but there is a small stock exchange. There are no restrictions on payments and transfers. Corruption is endemic at all levels of society. Ten points were deducted from the Kyrgyz Republic’s monetary freedom score to account for remaining price controls. but restrictions on work hours remain rigid.6 percent. including electricity.9 The Kyrgyz Republic’s weighted average tariff rate was 7 percent in 2008. The judi- LABOR fREEDOM — 82.6 Labor regulations are relatively flexible. In the most recent year. weak enforcement of intellectual property rights. courts. and enforcement of contracts are prone to dispute. but rules and regulations are non-transparent and arbitrarily applied. export and import licensing requirements. the value-added tax (VAT) rate was reduced from 20 percent to 12 percent. fraud. Licensing.9 92.3 percent between 2006 and 2008.

reflecting improved scores in five of the 10 economic freedoms. making its economy the 138th freest in the 2010 Index. The government’s responses to the economic slowdown. but with only limited success. How Do We Measure Economic Freedom? 263 . and trade freedom. The government began to liberalize slowly in 1991. government spending. The country remains highly dependent on international aid and suffers from high levels of corruption and weak rule of law. The Laotian economy scores relatively well in fiscal freedom. and its overall score is below the world and regional averages.6% FdI Inflow: $228 million 2008 data unless otherwise noted Data compiled as of September 2009 See page 457 for an explanation of the methodology or visit the Index Web site at heritage.5% growth in 2008 7. which have included suspension of a new value-added tax and improved expenditure management.LAOs Economic Freedom Score 25 Least free 50 75 100 free Most 0 World Rank: 138 Regional Rank: 30 51. the Communist government imposed a rigid socialist program that had a devastating impact on the economy. Background: Laos is governed by one of the world’s few remaining Communist regimes and is also one of Asia’s poorest nations.4% (2005) Inflation (cPI): 7. The development of a more vibrant private sector is hindered by poor infrastructure. Upon coming to power in 1975. and regulatory as well as legal enforcement are in the hands of an opaque bureaucracy.1.2 million gdP (PPP): $13. Burdensome business regulations impede entrepreneurship. The rule of law does not always hold against political influence. the government has taken steps to modernize and reform the trade regime and management of public finance. have been consistent with reform efforts. Laos is ranked 30th out of 41 countries in the Asia–Pacific region. but significant non-tariff barriers remain.1 100 100 L aos’s economic freedom score is 51. Its overall score has improved by 0. and corruption is rampant. Many institutional challenges continue to have a negative effect on overall economic freedom and growth. Country’s Score Over Time Most free 80 80 60 60 World average 40 40 20 20 Laos 00 Least free 1995 1998 2001 2004 2007 2010 Quick Facts Population: 6. In 1998.5% 5-year compound annual growth $2.134 per capita unemployment: 2. Although progress has been sluggish.2 billion 7. Basic human rights are still heavily restricted. and limited access to financing. Tariff barriers have been reduced.org/index. Laos began formal negotiations with the World Trade Organization with an eye to joining the WTO by 2010. cumbersome regulations.7 point.

Foreign investors are generally advised to seek arbitration outside of Laos.1 Laos has a moderate income tax rate and a relatively high corporate tax rate.0 percent of GDP. The government directs credit allocation. An intellectual property law drafted in 1996 with help from the World Intellectual Property Organization is still pending. owing to a sharp decline in global prices for food and fuel. government spending equaled 18.4 The overall freedom to start. and there is growing anecdotal evidence of more pervasive corruption among higher-level officials within the executive and judicial branches. import licensing. but the government plans to open Laos’s first stock market in 2010.0 20. 264 2010 Index of Economic Freedom . Foreign investors may lease but not own land. A value-added tax (VAT) introduced in January 2009 was suspended in March following pressure from the private sector. Starting a business takes an average of 100 days. secure a license. High credit costs and scarce access to financing severely impede entrepreneurial activity and private-sector development. Foreign investors must submit project proposals for screening and approval by various levels of government.8 percent between 2006 and 2008. Changes in work hours can be challenged. Modern bankruptcy proceedings have not been fully developed.0 20.4 80. including consumption and transfer payments. Capital markets remain underdeveloped. import taxes. weak and inconsistent contract enforcement. MOnEtARY fREEDOM — 73. gOVERnMEnt sPEnDing — 90. averaging 6.3 73. a slight improvement over 2007. fisCAL fREEDOM — 80. but prohibitive tariffs. Activities of the 10 private and foreign banks are limited. but dismissing an employee can be costly and difficult. operate. accounting for more than 50 percent of assets.0 percent. since the domestic arbitration authority cannot enforce its decisions. There has been some liberalization.0 58. 59. or are regarded as harmful to health or national traditions. and the top corporate tax rate is 35 percent (20 percent for companies that fall under the Foreign Investment Law).3 Total government expenditures. have a negative impact on the environment. Much of the population remains outside the formal banking sector.0 15. and close a business is restricted by Laos’s regulatory environment.5 Inflation has been relatively high. Laos ranks 151st out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008.5 25. and weak enforcement of intellectual property rights still add to the cost of trade.4 68. Other taxes include a vehicle tax and a tax on insurance contracts. Investors must obtain a number of certificates. import bans and restrictions. Foreign investors may not own land but may lease it with government permission. and surmount other bureaucratic hurdles before gaining permission to operate. Arbitrary regulation. Some payments and transfers face quantitative restrictions or require indirect government approval. tRADE fREEDOM — 68.4 Laos’s weighted average tariff rate was 8. Ten points were deducted from Laos’s monetary freedom score to account for policies that distort domestic prices.LAOs’s tEn ECOnOMiC fREEDOMs Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Fdm. overall tax revenue as a percentage of GDP was 12.9 0 0 20 least free 40 50 60 80 = world average 100 100 most free BUsinEss fREEDOM — 59. corrupt and inefficient customs administration.9 Laos’s labor regulations are relatively inflexible. Supervision and regulation are weak. restrictions on services market access.3 percent in 2007. Obtaining a business license requires more than the world average of 18 procedures. There is no copyright system. Bribery of low-level officials to expedite business licenses and import permits is common. and non-transparent bureaucracy inhibit investment. In the most recent year. PROPERtY Rights — 15 The judiciary is not independent. Three state-owned banks dominate banking. The government influences many prices through state-owned enterprises and utilities and sets the price for fuel products. LABOR fREEDOM — 58.1 90. are low. and judges can be bribed. The top income tax rate is 25 percent. The nonsalary cost of employing a worker is low. fREEDOM fROM CORRUPtiOn — 20 Corruption is perceived as rampant. In the most recent year. Residents and non-residents may hold foreign exchange accounts subject to restrictions and government approval. compared to the world average of 35 days. A banking law passed in late 2006 permits foreign banks to set up branches in all provinces of Laos. from Corruption Labor Freedom inVEstMEnt fREEDOM — 25 Foreign investors may not engage in business activities that are deemed detrimental to national security. Fifteen points were deducted from Laos’s trade freedom score to account for non-tariff barriers. but has slowed in 2009. finAnCiAL fREEDOM — 20 The financial system is underdeveloped and subject to heavy government involvement. and the central bank is not independent.

but the rate has fallen sharply since then. banking.4 point.2. and the transparency of business regulation promotes dynamic entrepreneurial activity. severely compromising monetary freedom. Latvia is ranked 23rd out of 43 countries in the Europe region. and its political system has been generally stable despite regular changes of ruling coalitions. How Do We Measure Economic Freedom