Differing stages of economic freedom
The recently released 2015 version of has high rankings for members of the Gulf Cooperation Council. The report is issued by Friedrich Naumann Foundation for Liberty of Germany, the International Research Foundation of Oman and Frazer Institute of Canada.
I attended the release of the latest report in Morocco, and in my capacity as a follower of GCC economies talked about elements of economic freedom in the Gulf. I mentioned what I perceive as the success of regulating the taxi service in Dubai, as evidenced by the availability of vehicles at all times.
Taxi drivers cannot refuse to take clients to any place in Dubai. Indeed, they are not required to tell taxi drivers about their intended destinations before boarding the vehicles. Notably, the taxi business is doing fine despite competition from Dubai Metro.
Also, I commended Qatar’s move to broaden the options for local transport to meet the steady growth of demand, as Doha implements the World Cup 2022 projects. Careem in the UAE and more recently Auber have joined the call taxi service in the country. Auber is allowed to operate freely in Qatar, something not true in all GCC countries.
Still, I hailed the liberalisation of the telecom industry in Bahrain, with its untold positive spillover effects for other sectors including banking and finance. Bahrain stands out for liberalising every part of the telecom industry, including fixed lines and internet. Numerous entrepreneurs benefited from the comprehensive opening up; the other day I gave business to a telecom outlet that to my surprise operates 24X7.
The economic freedom index stands out for relying on 42 variables to arrive at the results, which are in turn grouped into five broad areas of economic freedom:
The size of the government in terms of expenditure, subsidies and investments.
Offering a legal system and property rights, an impartial judicial system as well as enforcement of contracts.
A sound monetary regime such as the absence of inflationary threats and having a reasonable money supply growth.
Freedom to trade internationally as well as having low tariffs. Plus, there should be no restriction on capital control.
The regulation of the credit market, freedom in hiring practices, a minimum wage and a proactive bureaucracy.
Of the 22 Arab countries, including the Palestinian territories, only Somalia is not ranked due to unavailability of consistent data. The 2015 report relies on 2013 data, partly because of the difficulty in securing updated statistics.
The latest report ranks the UAE as the freest economy among Arab countries. It is recognised for enforcing property rights and contracts, therefore providing comfort for small investors.
Jordan, which was on par with the UAE in the 2014 report, retreated to the second position in the latest. Bahrain emerges as the third freest economy in the Arab world partly for being open for international trade.
Kuwait and Qatar share the fourth best place in economic freedom thanks partly to sound money supply policies, in turn reflecting the strong external financial assets of both.
GCC countries occupy the top five spots in the index, which tells a great deal about openness of the Gulf for business.
However, the relatively strong involvement of the public sector in the GCC limits economic freedom. Looking forward, there remains the possibility of a reduction in the public sector as a reaction to the drop in oil prices.