-
2004 Index of Economic Freedom
-
MARC A. MILES is Director of the Center for International Trade
and Economics(CITE) at The Heritage Foundation.
EDWIN J. FEULNER is President of The Heritage Foundation.
MARY ANASTASIA OGRADY is Editor of the Americas column and
SeniorEditorial Page Writer at The Wall Street Journal.
William W. Beach is John M. Olin Fellow in Economics and
Director of the Centerfor Data Analysis at The Heritage
Foundation.
Brian M. Carney is an Editorial Page Writer for The Wall Street
Journal Europe.
Ana Isabel Eiras is Senior Policy Analyst in International
Economics in the Centerfor International Trade and Economics at The
Heritage Foundation. She is alsoEditor of the Spanish-language
edition of the Index of Economic Freedom.
Paul A. Gigot is Editor of The Wall Street Journal Editorial
Page.
Anthony Kim is Research Assistant in the Center for
International Trade and Eco-nomics at The Heritage Foundation.
Daniel J. Mitchell is McKenna Senior Fellow in Political Economy
in the ThomasA. Roe Institute for Economic Policy Studies at The
Heritage Foundation.
Richard Roll is Japan Alumni Chair in International Finance in
the AndersonSchool at the University of California, Los
Angeles.
Aaron Schavey is an Assistant Professor of Economics at Bethel
College.
-
2004 Index of Economic FreedomMarc A. MilesEdwin J. FeulnerMary
Anastasia OGradywith Ana Isabel Eiras and Aaron Schavey
-
Copyright 2004 by The Heritage Foundation and Dow Jones &
Company, Inc.
The Heritage Foundation The Wall Street Journal214 Massachusetts
Avenue, NE Dow Jones & Company, Inc.Washington, DC 20002 200
Liberty Street(202) 546-4400 New York, NY 10281heritage.org (212)
416-2000
www.wsj.com
Cover images by photos.comCover design by Elizabeth BrewerISBN:
0-89195-265-9 ISSN: 1095-7308
-
Foreword . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.ixby Paul A. Gigot
Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . .xiby Edwin J. Feulner
Acknowledgments . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .xiiiby
Marc A. Miles, Edwin J. Feulner, and Mary Anastasia OGrady
Executive Summary . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1by
Marc A. Miles, Edwin J. Feulner, and Mary Anastasia OGrady
Chapter 1: Introductionby Marc A. Miles . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . .19
Chapter 2: The Economics of Tax Competition: Harmonization
vs.Liberalization . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25 by
Daniel J. Mitchell
Chapter 3: Weighting the Components of the Index of Economic
Freedom . . . . . .39by Richard Roll
Chapter 4: The Common Agricultural Policy: How the European
Union Distorts Trade With Non-EU Nations . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . .43by Brian
M. Carney
Chapter 5: Explaining the Factors of the Index of Economic
Freedom . . . . . . . . . .49by William W. Beach and Marc A.
Miles
Chapter 6: The 2004 Index of Economic Freedom: The Countries . .
. . . . . . . . . . . . .71by Ana Isabel Eiras, Aaron Schavey, and
Anthony Kim
Table of Contents
v
-
Albania . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.75Algeria . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.77Angola . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.79Argentina . . . . . . . . . . . . . . . . . . . . . . . . .
.81Armenia . . . . . . . . . . . . . . . . . . . . . . . . . . .
.85Australia . . . . . . . . . . . . . . . . . . . . . . . . . .
.87Austria . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.89Azerbaijan . . . . . . . . . . . . . . . . . . . . . . . . .
.91The Bahamas . . . . . . . . . . . . . . . . . . . . . . .
.93Bahrain . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.95Bangladesh . . . . . . . . . . . . . . . . . . . . . . . .
.97Barbados . . . . . . . . . . . . . . . . . . . . . . . . . .
.99Belarus . . . . . . . . . . . . . . . . . . . . . . . . . . .
.101Belgium . . . . . . . . . . . . . . . . . . . . . . . . . .
.103Belize . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.105Benin . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.107Bolivia . . . . . . . . . . . . . . . . . . . . . . . . . . .
.109Bosnia and Herzegovina . . . . . . . . . . . . .111Botswana . .
. . . . . . . . . . . . . . . . . . . . . . . .113Brazil . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . .115Bulgaria . . .
. . . . . . . . . . . . . . . . . . . . . . . .117Burkina Faso . .
. . . . . . . . . . . . . . . . . . . . .119Burma (Myanmar) . . . .
. . . . . . . . . . . . . .121Burundi . . . . . . . . . . . . . . .
. . . . . . . . . . . .123Cambodia . . . . . . . . . . . . . . . .
. . . . . . . . .125Cameroon . . . . . . . . . . . . . . . . . . .
. . . . . .127Canada . . . . . . . . . . . . . . . . . . . . . . .
. . . . .129Cape Verde . . . . . . . . . . . . . . . . . . . . . .
. . .131Central African Republic . . . . . . . . . . . . .133Chad .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .135Chile .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .137China,
Peoples Republic of . . . . . . . . . .139China, Republic of
(Taiwan) . . . . . . . . . .143Colombia . . . . . . . . . . . . . .
. . . . . . . . . . . .145Congo, Democratic Republic of (formerly
Zaire) . . . . . . . . . . . . . . . . . . . .147
Congo, Republic of . . . . . . . . . . . . . . . . . .149Costa
Rica . . . . . . . . . . . . . . . . . . . . . . . . .151Croatia .
. . . . . . . . . . . . . . . . . . . . . . . . . . .153Cuba . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . .155Cyprus . .
. . . . . . . . . . . . . . . . . . . . . . . . . .159Czech
Republic . . . . . . . . . . . . . . . . . . . . .159Denmark . . .
. . . . . . . . . . . . . . . . . . . . . . .161Djibouti . . . . .
. . . . . . . . . . . . . . . . . . . . . .163Dominican Republic .
. . . . . . . . . . . . . . . .165Ecuador . . . . . . . . . . . . .
. . . . . . . . . . . . . .167Egypt . . . . . . . . . . . . . . . .
. . . . . . . . . . . . .169El Salvador . . . . . . . . . . . . . .
. . . . . . . . . . .171Equatorial Guinea . . . . . . . . . . . . .
. . . . . .173Estonia . . . . . . . . . . . . . . . . . . . . . . .
. . . . .175Ethiopia . . . . . . . . . . . . . . . . . . . . . . .
. . . .177Fiji . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . .179
Finland . . . . . . . . . . . . . . . . . . . . . . . . . . .
.181France . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.183Gabon . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.185The Gambia . . . . . . . . . . . . . . . . . . . . . . .
.187Georgia . . . . . . . . . . . . . . . . . . . . . . . . . . .
.189Germany . . . . . . . . . . . . . . . . . . . . . . . . .
.191Ghana . . . . . . . . . . . . . . . . . . . . . . . . . . .
.193Greece . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.195Guatemala . . . . . . . . . . . . . . . . . . . . . . . .
.197Guinea . . . . . . . . . . . . . . . . . . . . . . . . . . .
.199GuineaBissau . . . . . . . . . . . . . . . . . . . . .
.201Guyana . . . . . . . . . . . . . . . . . . . . . . . . . . .
.203Haiti . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.205Honduras . . . . . . . . . . . . . . . . . . . . . . . . .
.207Hong Kong . . . . . . . . . . . . . . . . . . . . . . .
.211Hungary . . . . . . . . . . . . . . . . . . . . . . . . . .
.215Iceland . . . . . . . . . . . . . . . . . . . . . . . . . . .
.217India . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.219Indonesia . . . . . . . . . . . . . . . . . . . . . . . . .
.221Iran . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. .225Iraq . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . .229Ireland . . . . . . . . . . . . . . . . . . . . . . . . . .
. .231Israel . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . .233Italy . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . .235Ivory Coast . . . . . . . . . . . . . . . . . . . . . . .
.237Jamaica . . . . . . . . . . . . . . . . . . . . . . . . . . .
.239Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.241Jordan . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.245Kazakhstan . . . . . . . . . . . . . . . . . . . . . . .
.247Kenya . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.249Korea, Democratic Peoples Republic of (North Korea) . . . . . .
. . . . . . . . . . . . . . .251
Korea, Republic of(South Korea) . . . . . . . . . . . . . . . .
. . . . . .253
Kuwait . . . . . . . . . . . . . . . . . . . . . . . . . . .
.255Kyrgyz Republic . . . . . . . . . . . . . . . . . . . .257Laos
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.259Latvia . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.261Lebanon . . . . . . . . . . . . . . . . . . . . . . . . . .
.263Lesotho . . . . . . . . . . . . . . . . . . . . . . . . . . .
.265Libya . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.267Lithuania . . . . . . . . . . . . . . . . . . . . . . . . .
.269Luxembourg . . . . . . . . . . . . . . . . . . . . . .
.271Macedonia . . . . . . . . . . . . . . . . . . . . . . . .
.273Madagascar . . . . . . . . . . . . . . . . . . . . . . .
.275Malawi . . . . . . . . . . . . . . . . . . . . . . . . . . .
.277Malaysia . . . . . . . . . . . . . . . . . . . . . . . . . .
.279Mali . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. .281Malta . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. .283Mauritania . . . . . . . . . . . . . . . . . . . . . . . .
.285Mauritius . . . . . . . . . . . . . . . . . . . . . . . . .
.287Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . .
.289
vi 2004 Index of Economic Freedom
-
Table of Contents vii
Moldova . . . . . . . . . . . . . . . . . . . . . . . . . .
.291Mongolia . . . . . . . . . . . . . . . . . . . . . . . . .
.293Morocco . . . . . . . . . . . . . . . . . . . . . . . . . .
.295Mozambique . . . . . . . . . . . . . . . . . . . . . .
.297Namibia . . . . . . . . . . . . . . . . . . . . . . . . . .
.301Nepal . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.303The Netherlands . . . . . . . . . . . . . . . . . . . .305New
Zealand . . . . . . . . . . . . . . . . . . . . . . .307Nicaragua .
. . . . . . . . . . . . . . . . . . . . . . . .309Niger . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . .311Nigeria . . . . .
. . . . . . . . . . . . . . . . . . . . . . .313Norway . . . . . .
. . . . . . . . . . . . . . . . . . . . .315Oman . . . . . . . . .
. . . . . . . . . . . . . . . . . . . .317Pakistan . . . . . . . .
. . . . . . . . . . . . . . . . . . .321Panama . . . . . . . . . .
. . . . . . . . . . . . . . . . . .323Paraguay . . . . . . . . . .
. . . . . . . . . . . . . . . .325Peru . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . .327The Philippines . . . . . . . .
. . . . . . . . . . . . .329Poland . . . . . . . . . . . . . . . .
. . . . . . . . . . . .331Portugal . . . . . . . . . . . . . . . .
. . . . . . . . . . .333Qatar . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . .335Romania . . . . . . . . . . . . . . . . . .
. . . . . . . . .337Russia . . . . . . . . . . . . . . . . . . . .
. . . . . . . . .339Rwanda . . . . . . . . . . . . . . . . . . . .
. . . . . . .343Saudi Arabia . . . . . . . . . . . . . . . . . . .
. . . .345Senegal . . . . . . . . . . . . . . . . . . . . . . . . .
. . .349Serbia and Montenegro . . . . . . . . . . . . . .351Sierra
Leone . . . . . . . . . . . . . . . . . . . . . . . .353Singapore .
. . . . . . . . . . . . . . . . . . . . . . . . .355Slovak Republic
. . . . . . . . . . . . . . . . . . . .357Slovenia . . . . . . . .
. . . . . . . . . . . . . . . . . . .359South Africa . . . . . . .
. . . . . . . . . . . . . . . . .361Spain . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . .363Sri Lanka . . . . . . . . . . .
. . . . . . . . . . . . . . .365Sudan . . . . . . . . . . . . . . .
. . . . . . . . . . . . . .367Suriname . . . . . . . . . . . . . .
. . . . . . . . . . . .369Swaziland . . . . . . . . . . . . . . . .
. . . . . . . . .371Sweden . . . . . . . . . . . . . . . . . . . .
. . . . . . . .373Switzerland . . . . . . . . . . . . . . . . . . .
. . . . .375Syria . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . .377Tajikistan . . . . . . . . . . . . . . . . . . . . . .
. . . .379Tanzania . . . . . . . . . . . . . . . . . . . . . . . .
. . .381Thailand . . . . . . . . . . . . . . . . . . . . . . . . .
. .383Togo . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. .385Trinidad and Tobago . . . . . . . . . . . . . . . .387Tunisia
. . . . . . . . . . . . . . . . . . . . . . . . . . . .389Turkey .
. . . . . . . . . . . . . . . . . . . . . . . . . .
.391Turkmenistan . . . . . . . . . . . . . . . . . . . . .
.393Uganda . . . . . . . . . . . . . . . . . . . . . . . . . . .
.395Ukraine . . . . . . . . . . . . . . . . . . . . . . . . . . .
.397United Arab Emirates . . . . . . . . . . . . . . .399United
Kingdom . . . . . . . . . . . . . . . . . . . .401
United States . . . . . . . . . . . . . . . . . . . . . .
.403Uruguay . . . . . . . . . . . . . . . . . . . . . . . . . .
.407Uzbekistan . . . . . . . . . . . . . . . . . . . . . . . .
.409Venezuela . . . . . . . . . . . . . . . . . . . . . . . . .
.411Vietnam . . . . . . . . . . . . . . . . . . . . . . . . . .
.413Yemen . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.415Zambia . . . . . . . . . . . . . . . . . . . . . . . . . . .
.417Zimbabwe . . . . . . . . . . . . . . . . . . . . . . . .
.419
Appendix . . . . . . . . . . . . . . . . . . . . . . . . .
.421Major Works Cited . . . . . . . . . . . . . . . . . .423
-
Three years after the American stock mar-ket bubble burst, and
two years after Septem-ber 11, the news is that the global
consensusin favor of economic liberalization has held.The trend
that gained speed in the 1980s andbegan to gallop after the Berlin
Wall fell cantherefore be said to be passing its sternesttest.
Liberalization is far easier amid prosper-ity, but the fact that
the world did not regresseven amid the global trials and slowdown
ofthe past three years may be a larger achieve-ment.
This continuing progress owes much tothe proven success of free
economies in thepast three decades. The rise of the AsianTigers was
a seminal event, shattering theimport substitution model of
developmentthat had held sway for so many years. Chinasaw their
progress and made its own greatleap forward from Maoism.
Twenty-threeyears after Deng Xiaopings decision to
openeconomically, China by 2003 has become oneof the worlds growth
engines. It remainswell down the list on our Index of
EconomicFreedom survey at 128, largely because of itstrade and
regulatory controls, but its rapidgrowth is being felt
everywhere.
To be sure, there were setbacks in the pastyear, some of them
severe. The troubles inSouth America worsened, with Argentinaand
Venezuela putting in two of the worstperformances in the Index
survey. Venezuelain particular is tempting long-run decline
asPresident Hugo Chvez takes that oil-richnation down an
anti-democratic path.Argentina is beset by populist
democraticgridlock, with political leaders unable orunwilling to
champion the reforms that haveproven so effective in nearby Chile.
Theentire Latin American region could use arenewal of U.S.
attention and leadership.
The trend toward trade liberalization alsoseems to be at a
crossroads. World trade talkscollapsed at Cancun in September,
thanks inpart to U.S. and especially European refusalto compromise
enough on farm subsidies.Yet even this is a sign of some progress,
inthat the worlds developing countries(notably in Africa) now
realize they must beattached to global markets to prosper. Theyare
right that First World subsidies hurtThird World farmers, though,
as the surveyshows, many of them could help themselvesby
liberalizing their own economic policies.
Foreword
ix
-
Rwanda and Ethiopia did precisely that thispast year, but too
many others regressed.
The United States, for its part, seemsheaded for one of its
periodic nationaldebates about trade. The recession and
glob-alization are again putting pressure on man-ufacturing jobs,
and the issue is emerging inthe 2004 presidential contest.
Democrats areturning protectionist, with the sole exceptionof Joe
Lieberman, and the Bush Administra-tion isnt helping by making
China a targetfor currency lobbying. Though sound on taxpolicy, the
Bush White House and Treasuryseem clueless on international
monetaryissues. This may not matter if the worldeconomy recovers
smartly, but it is a wildcard to watch.
It is impossible, since September 11, todiscuss world trends
without consideringthe war on terrorism. And on that score,
theliberation of Iraq could well prove to be theyears most
significant economic event. Inthe current survey, Iraq remains tied
for deadlast at 156. But only days after this list wasassembled,
the new Iraqi Governing Councilannounced major liberal reforms.
Theyinclude a flat tax regime with a top marginalrate on individual
and corporate income of15 percent. That is better than Hong Kong.
Itstrade and foreign ownership laws will alsowelcome investment
capital, both foreignand domestic. Iraqs transition to stabilityand
freedom remains a challenge, but if it
succeeds, it may well set off a revolution byexample in a Middle
East that has beentrapped in the statist economics of the
pastcentury.
Continued progress on the road from serf-dom probably now
requires another burst ofglobal growth. As this is being written,
thatrevival seems probable, led by a resurgentUnited States.
Pro-growth tax cuts and mon-etary reflation appear to be combining
toshake the world from its three-year dol-drums. Japan and Europe
are laggards, ashas been the case for most of the past decade,but
even they are showing signs of econom-ic life.
One of the great dramas in the comingyears will be whether
global competition andthe rise of the euro force European
govern-ments, especially France and Germany, toliberalize their
suffocating labor and tax poli-cies. So far the evidence is scant,
but publicpressure may grow as the population agesand living
standards fail to rise. The Euro-pean Lazarus rose again with a
burst of free-market growth after World War II, and thecoming
decades will see whether it canrepeat that miracle. World
prosperity wouldincrease enormously if it did.
Paul A. GigotEditorial Page EditorThe Wall Street Journal
October 2003
x 2004 Index of Economic Freedom
-
Economic freedom continues to advance,albeit slowly. For the
past 10 years, the Indexof Economic Freedom, published jointly by
TheHeritage Foundation and The Wall Street Jour-nal, has used 10
factors to measure economicfreedom around the world in an effort to
tracethe path to economic prosperity. This annualvolume continues
to serve a wide and diverseaudience ranging from teachers and
studentsto executives, politicians, and the media.
While progressing more slowly than onemight hope, economic
freedom nonethelesscontinues to show significant net gains intwo
regions. North America and Europetogether show the greatest net
gain withseven countries. Following close behind,sub-Saharan Africa
shows a surprising netgain of six countries.
Sadly, however, this cannot be said for allof the worlds
regions. North Africa and theMiddle East show no net change, Asia
andthe Pacific show the largest net loss, andLatin America and the
Caribbean exhibit anet loss as well.
A loss or relative lack of economic free-dom usually calculates
into a lower GDP. Asthe worlds freest economy, Hong Kong hasa per
capita income that differs significantly
from that of a country like Zimbabwe. HongKong has an attractive
environment for busi-ness and enterprise, whereas Zimbabwe hasan
environment that can be characterizedfairly as both statist and
anti-business.
The benefits of economic freedom areobvious, yet many
governments continue tostifle their economies by
implementingunsound policies. Obstacles in the form ofdomestic
politics often prevent leaders fromtaking the actions needed to
encourage a cli-mate of economic freedom and overall pros-perity.
Both developed and developingcountries fall into the trap of
choosing whatis easy over what is economically sound.
While Europe claims the largest numberof countries in the top
10, the EuropeanUnion (EU) continues to burden Europeaneconomies by
heavily subsidizing agricul-ture through its Common Agricultural
Poli-cy (CAP). Brian M. Carney describes theadverse effects of the
CAP in his chapter,The Common Agricultural Policy: How theEuropean
Union Distorts Trade with Non-EU Nations. Because of the CAP,
farmers indeveloping countries cannot compete withEuropean goods,
and Europeans are forcedto pay more for the food they need.
Preface
xi
-
America has likewise pursued this coun-terproductive approach,
both by subsidizingfarmers and by protecting items such assugar
with high tariffs. These policies punishthe average citizen with
higher prices andimpede competition. As Adam Smith notedin The
Wealth of Nations:
By means of glasses, hotbeds, and hotwalls,very good grapes can
be raised in Scotland,and very good wine too can be made of themat
about thirty times the expence for which atleast equally good can
be brought from for-eign countries. Would it be a reasonable lawto
prohibit the importation of all foreignwines, merely to encourage
the making ofclaret and burgundy in Scotland?1
Despite the apparent staying power of theCAP, however, there are
positive signs inother areas. Tax reductions are sweepingacross
Europe. Daniel Mitchells chapter,The Economics of Tax Competition:
Harmo-nization vs. Liberalization, highlights theencouraging
changes in Western Europe andin the former Soviet Union. European
coun-tries are starting to realize that Irelands suc-cess does not
have to be an isolatedphenomenon. Russia is ranked as a
mostlyunfree country, but Russian PresidentVladimir Putin has still
managed to promoteenactment of a flat personal income tax
andreduced corporate and small business taxes.
By lowering corporate taxes, Putin hasgiven an incentive to
investors to hang theirhats in Russia. If Russia wants to attract
theamount of investment that its Western neigh-bors are luring,
however, more changes need tobe implemented. Russia has a large
informalmarket, a high level of restrictions on bankingand finance,
weak protection of propertyrights, and a high level of regulation.
All ofthese issues translate into higher business costsand barriers
to a higher level of prosperity.
Russia could learn a lot from Estonia andLithuania. While
Estonias success has beenheralded over the past several years,
Lithua-nia has been improving steadily since it wasfirst graded in
1996.
Lithuania is the second freest country inthe former Soviet bloc.
More than a decadeafter Ronald Reagan told Mikhail Gorbachev
to tear down this wall, the former Sovietcountries continue to
advance by tearingdown the walls that kept their citizens
fromprospering. Today, the private sector pro-duces roughly 80
percent of Lithuanias GDP.Foreign banks dominate the banking
sector.Lithuania has a very low level of restrictionson banking and
finance, and low barriers toforeign investment.
On the other side of the world, sub-Saha-ran Africa has made
great strides this year inraising its level of economic freedom.
Five ofthe countries in this regionRwanda,Ethiopia, Cape Verde,
Senegal, and Maurita-niaare among the worlds 10 mostimproved
countries. Despite the improve-ments this year, however, not one of
thecountries in this region is truly free. Each isheld back by such
persistent problems as cor-ruption and weak property rights.
Thoughsome have made progress, as this years edi-tion of the Index
of Economic Freedom demon-strates, each still remains in dire need
ofinvestmentbut has failed to make thechanges in the direction of
economic free-dom that are needed to attract it.
Most developing countries depend heav-ily on agriculture.
History is telling. Ireland,once a poor country dependent on
agricul-ture, has implemented changes to become amajor center for
investment. With somechanges, many of these developing
countrieshave the potential to become the next Irelandor even the
next Hong Kong, and withexpanded economic freedom, the citizens
ofthose countries will be able to enjoy long-denied economic
prosperity.
Rome wasnt built in a day, and Irelandssuccess wasnt either.
Countries wont seeprosperity unless they commit to economicfreedom
for the long haul. As the sayinggoes, good things come to those who
wait.Leaders who take the time to fully imple-ment economic reforms
will come to see thefruits of their labor. For the citizens living
insuch a country, the taste of economic free-dom will be sweet.
Edwin J. Feulner, PresidentThe Heritage Foundation
October 2003
xii 2004 Index of Economic Freedom
1 Adam Smith, The Wealth of Nations (New York: Prometheus Books,
1991), p. 354.
-
We wish to express our grateful appreci-ation to the many
individuals, especiallythose at The Heritage Foundation, who
havemade such valuable contributions to this10th annual edition of
the Index of EconomicFreedom.
The primary responsibility for producingthe Index was borne by
The Heritage Foun-dations Center for International Trade
andEconomics (CITE). Ana Isabel Eiras andAaron Schavey did an
excellent job in grad-ing the countries this year. Ana also
coordi-nated the complex process of producing theIndex. In managing
the data and the exten-sive research process, she was ably
assistedby Anthony Kim, Ha Nguyen, and CarrieDonovan. In addition
to these tasks, Antho-ny authored the statistical summary
thataccompanies each country. Sara Fitzgeraldmade invaluable
contributions to the open-ing chapters.
In the Katheryn and Shelby Cullom DavisInstitute for
International Studies, ArielCohen, Nile Gardiner, John
Hulsman,Stephen Johnson, and James Phillips wroteintroductory
paragraphs and provided theirexpertise. We are especially grateful
for the
insightful contributions that Larry Wortzel,Vice President and
Director of the DavisInstitute, and Helle Dale, Deputy Director
ofthe Davis Institute, made to the content,design, and marketing of
this years Index.Yvette Campos and Kathy Gudgel providedvaluable
production support.
In the Asian Studies Center, Director PeterBrookes, Dana Dillon,
Balbina Hwang, JohnTkacik, Jr., and Paolo Pasicolan wrote
intro-ductions and provided assistance, and Alli-son Goodman
provided valuable productionsupport. We are particularly grateful
toWilliam Beach, Director of the Center forData Analysis, for his
continued support andfor his contributions to Chapter 5.
We thank Todd Gaziano, Senior Fellow inLegal Studies, for his
perceptive commentson the property rights factor and for gradingthe
property rights factor in the United States.In the Information
Technology Department,invaluable help was provided by Vice
Presi-dent of Information Technology MichaelSpiller, Genevieve
Grimes, and Joanna Yu. Weare grateful for their
professionalism.
We are also grateful to Ted Morgan, Direc-tor of Online
Communications, and his staff
Acknowledgments
xiii
-
for placing the entire Index on the HeritageWeb site
(http://www.heritage.org/index/). Theyalso did an excellent job of
developing asearchable database that helps researchersidentify key
trends over the 10-year historyof the Index. John Hanley, Melissa
Kaiser, andJason Schryer were likewise indispensable tothis
project.
Once again, we wish to express our deepappreciation for the work
of Senior EditorRichard Odermatt, who was responsible forfinal
review of the entire text, and SeniorCopy Editor William T. Poole,
who continuesto bear the primary responsibility for editingthe
entire book. Their professionalism, com-mitment to the project, and
attention to detailplay a major part in making each years edi-tion
of the Index a reality.
In Publishing Services, Director JonathanLarsen and Elizabeth
Brewer were responsi-ble for the extensive design and layoutchanges
that make this 10th edition the mostreadable and accessible yet
published, aswell as for developing the regional and coun-try maps
and formatting the charts andtables, and Therese Pennefather
coordinatedthe entire production process.
We are especially pleased to include anessay by Richard Roll,
who holds the JapanAlumni Chair in Finance at the AndersonSchool,
UCLA, this year. We are also pleasedto include essays by Daniel J.
Mitchell,McKenna Senior Fellow in Political Economyin the Thomas A.
Roe Institute for EconomicPolicy Studies at the Heritage
Foundation,and Brian M. Carney, an editorial page writerfor The
Wall Street Journal Europe. In addition,we thank Ben Goodrich,
Philippe Lacoude,Gary Hufbauer, and Richard Roll for
theircontributions in reviewing and revising themethodology. As
always, the editors of TheWall Street Journal have helped to guide
uswith their thoughtful advice and insight onthe countries.
Countless individuals serving with vari-ous accounting firms,
businesses, researchorganizations, U.S. government agencies,foreign
embassies, and other organizationscooperated in providing us with
the dataused in the Index. Their assistance is muchappreciated. So,
too, is the work of Heritageinterns Jaydip Das, John Goodman,
JamieHomer, and Sarah Sanders, who were partic-ularly helpful in
producing this edition. Liketheir predecessors, they did the
legwork,compiled the data, and researched hard-to-find information
in an unfailingly timelyfashion. We wish them the best in their
newventures.
As always, we acknowledge our endur-ing debt both to Heritage
Trustee Ambas-sador J. William Middendorf II, for
originallyencouraging us to undertake such a study ofglobal
economic freedom, and to the manyother people within Heritage who
continueto lend their expertise to our effort as theyhave in past
years.
Finally, we would like to express ourappreciation to the many
people who, yearafter year, have either praised or criticizedthe
Index of Economic Freedom so enthusiasti-cally. The support and
encouragement ofpeople in all parts of the world continue toserve
as a major source of inspiration for TheHeritage Foundation and The
Wall Street Jour-nal in their ongoing collaboration on
thisimportant work. We hope this years effortmatches the
expectations of all our support-ers, as well as the thoughtful
critics who sooften have provided the insights that enableus to
continue to improve the Index.
Marc A. MilesEdwin J. Feulner
Mary Anastasia OGradyOctober 2003
xiv 2004 Index of Economic Freedom
-
With the publication of this edition, TheHeritage
Foundation/Wall Street JournalIndex of Economic Freedom marks its
10thanniversary. The idea of producing a user-friendly index of
economic freedom as atool for policymakers and investors was
firstdiscussed at The Heritage Foundation in thelate 1980s. The
goal then, as it is today, was todevelop a systematic, empirical
measure-ment of economic freedom in countriesthroughout the world.
To this end, the deci-sion was made to establish a set of
objectiveeconomic criteria that, since 1994, have beenused to study
and grade various countriesfor the annual publication of the Index
of Eco-nomic Freedom.
The Index, however, is more than just adataset based on
empirical study; it is a care-ful theoretical analysis of the
factors thatmost influence the institutional setting ofeconomic
growth. Moreover, although thereare many theories about the origins
andcauses of economic development, the find-ings of this study are
straightforward: Thecountries with the most economic freedomalso
have higher rates of long-term econom-ic growth and are more
prosperous than arethose with less economic freedom.
The 2004 Index of Economic Freedom mea-sures how well 161
countries score on a list of50 independent variables divided into
10broad factors of economic freedom. Lowscores are more desirable.
The higher thescore on a factor, the greater the level of
gov-ernment interference in the economy and theless economic
freedom a country enjoys.
These 50 variables are grouped into thefollowing categories:
n Trade policy,n Fiscal burden of government,n Government
intervention in the economy,n Monetary policy,n Capital flows and
foreign investment,n Banking and finance,n Wages and prices,n
Property rights,n Regulation, andn Informal market activity.
Chapter 5 explains these factors in detail.Taken together, they
offer an empirical depic-tion of a countrys level of economic
free-dom. A systematic analysis of these factorscontinues to
demonstrate that countries withthe highest levels of economic
freedom alsohave the highest living standards.
Executive Summary
by Marc A. Miles, Edwin J. Feulner, and Mary Anastasia
OGrady
1
-
WORLDWIDE PATTERNS
This year, economic freedom has advancedthroughout the world:
the scores of 75 coun-tries are better, the scores of 69 are worse,
andthe scores of 11 are unchanged. Of the 155countries numerically
graded in the 2004Index, 16 are classified as free, 55 as most-ly
free, 72 as mostly unfree, and 12 asrepressed. (Angola, Burundi,
DemocraticRepublic of Congo, Sudan, and Iraq were sus-pended from
grading because of civil unrestor anarchy. Serbia and Montenegro
was sus-pended because reliable data were not avail-able.)
Most of the worlds economically repressedcountries lie in Asia,
which experienced a netloss of economic freedom in five countries.
(Atthe same time, however, the top three countriesin this years
rankings are also located in Asia.)Latin America and the Caribbean
experienceda net loss of two countries. North Africa and theMiddle
East had no change.
North America and Europe experiencedthe largest gain in economic
freedom: a netgain of seven countries. Sub-Saharan
Africaexperienced a net gain of six countries.
By factor, the results were more evenlysplit. Four factors of
the Index had a greaternet number of countries with
expandedfreedom, four had less freedom, and twohad no net change.
The fiscal burden factormarked the greatest number of improve-ments
(57) and the greatest number of loss-es (71), for an overall net
loss of 14. This wasthe largest net loss. The biggest net gain
wasin the monetary policy factor, with 30 coun-tries improving and
nine worsening for anet gain of 21. The government
interventionfactor experienced a net gain of 11, with 41countries
improving and 30 countriesdeclining.
Openness to foreign investment had a netsetback of 11, with two
countries improvingand 13 declining. The level of protection
thatcountries maintain in their trade policy isworse, with 15
countries improving and 20countries declining for a net loss of
five.Banking and finance remained the sameoverall, as 10 countries
had freer financialmarkets but 10 found their freedom
slipping.Regulation also remained the same overall
with a gain of one and a loss of one. Wagesand prices
experienced a net loss of eight,with three countries improving and
11declining. The informal market experienceda net gain of one
country, with 15 countriesimproving and 14 declining.
For the past three years, we have noted aworldwide trend toward
a decline in the pro-tection of property rights. Regrettably,
thisyear is no different. Many countries continueto disregard the
important relationshipbetween maintaining strong property rightsand
attracting investment. The protection ofproperty rights experienced
a net loss ofseven countries, with seven countries declin-ing in
their protection and none demonstrat-ing improvement.
In order to grow, countries must imple-ment policies that
attract investors andencourage entrepreneurs. Without
strongproperty rights, an investor cannot be sure ofhis ability to
lay claim to a business he builds;as a result, the level of risk
involved in a busi-ness venture increases, and investors
andentrepreneurs are left reluctant, skeptical,and likely to put
their money elsewhere.Hong Kong and Singapore have good invest-ment
climates characterized by strong prop-erty rights. Both countries
have also beenmagnets for investment and have prospered,each one
having a GDP per capita over$24,000.
By contrast, countries that fail to imple-ment strong property
rights suffer the conse-quences of that failure. Zimbabwe,
forexample, lacks strong property rights andhas a GDP per capita of
only $559. Govern-ments that refuse to embrace property rightsand
other economic freedoms sentence theircitizens to an impoverished
life.
NORTH AMERICA AND EUROPEBy quantity, North America and
Europe
continue as the worlds most economicallyfree region with seven
of the 10 freest coun-tries in this years Index. Most of these
coun-tries are European, as Europe claims six ofthe 10 freest
countries.
Seven more countries in this region exhib-it an expansion in
economic freedom thisyear than exhibit a declineone more coun-try
than last year. Fiscal burden improves the
2 2004 Index of Economic Freedom
-
Executive Summary 3
most, with 18 countries reducing their bur-dens, yet also
declines the most with 18 coun-tries increasing theirs. The
regionexperiences the largest net gain in monetarypolicy with eight
countries improving andnone declining. The protection of
propertyrights declined in two countries.
The country that illustrates the most dra-matic improvement in
its overall score is theSlovak Republic. The Slovak
Republicimproved by 0.27 point this year, making itthe worlds 8th
most improved country. Thegovernment has implemented many
positivereforms over the past several years: It hasreduced taxes,
liberalized prices, acceleratedthe pace of privatization, and
restructuredthe banking sector. As a result, foreign invest-ment
has increased and the banking sector isdominated by foreign
capital.
Malta was the worlds 10th most improvedcountry with an overall
score that is 0.25 pointbetter this year. Like the Slovak
Republic,however, Malta still has some distance tocover before it
can be classified as a freecountry. Despite its marked
improvement,Malta still has high tariffs and high tax rates.
Belarus maintains the stigma of least freecountry in the region.
It remains dependenton Russian economic assistance and
self-isolated from the West. Belorussian policies,economic or
otherwise, are a disaster: a highlevel of protectionism, high
taxes, high levelof government intervention, high level
ofinflation, high barriers to foreign investment,high level of
restrictions to banking andfinance, high level of intervention in
wagesand prices, high level of regulation, andweak protection of
property rights.
Overall, however, a number of positivechanges are occurring in
todays Europe. AsDaniel J. Mitchell notes in his chapter onThe
Economics of Tax Competition: Harmo-nization vs. Liberalization,
tax reductionsare taking place across the continent. Taxcompetition
has helped drive down corpo-rate taxes in Western Europes
welfarestates, for instance, and [n]umerousnations in the former
Soviet bloc have enact-ed flat taxes.
Ireland remains the second freest countryin the region, an
accolade that is attributed toits low taxes and pro-business
environment.
Irelands 12.5 percent corporate tax rate is farbelow the
European Union average of 30 per-cent. As a result, Ireland is a
major center forU.S. investment in Europe.
Luxembourg, the freest country in theregion, has no restrictions
that apply specifi-cally to foreign investors. As a result,
itremains a favored destination for both U.S.and European
investment. The coalition gov-ernment has enacted tax reform as a
center-piece of its domestic policy. With a GDP percapita of over
$25,000, Luxembourg is a primeexample of the fruits of economic
freedom.
LATIN AMERICA AND THE CARIBBEAN
The countries of Latin America and theCaribbean continue to
suffer from their owncounterproductive policies. Economic free-dom
in the region has not increased: It hasdecreased. Of the 26
countries that have beengraded this year, 11 have improved in
theiroverall level of economic freedom and 13 areworse. In fact, of
the 10 countries with theworlds largest declines in economic
free-dom, two are Latin American: Venezuela andArgentina.
The lack of economic vitality in these twocountries reflects the
evaporation of econom-ic rights. Argentinas economic plight
wors-ens as it marches toward a closed economy.The downward spiral
of its economy hasbeen accompanied by price controls, finan-cial
restrictions, high inflation, and a historyof violating property
rights. Argentinas newPresident, Nestor Kirchner, aims to
jump-start the economy by financing public works.Inevitably, he
will discover that such meth-ods kill economic growth, not create
it. Theeconomic history of the former Soviet Unionis a telling
example.
Venezuelas situation is even darker. Presi-dent Hugo Chvez has
purposely strangledVenezuelas private sector in revenge
againstentrepreneurs who attempted to force himfrom power. Chvez
has introduced exchangecontrols that have made it difficult for
busi-ness, both foreign and domestic, to operate. Asa result, 80
percent of Venezuelans live belowthe poverty level. Venezuela is
now ranked asa repressed economy and possesses the leastamount of
economic freedom in the region.
-
Despite being ranked as repressed,Cuba is one of the worlds 10
most improvedcountries, entirely because of an improvedmonetary
policy score. Despite thisimproved score, however, Cubas
significantnon-tariff barriers, high taxes, numerousstate-owned
companies, barriers to invest-ment, high level of restrictions in
bankingand finance, weak protection of propertyrights, entirely
government-set wages andprices, high level of regulation, and
highlevel of activity in the informal market leaveit with much to
change before it can evenbegin to resemble a free economy.
With an improved monetary policy score,Chile has shifted from a
mostly free to afree country this year and is by far thefreest
economy in the region. Chile has com-pleted free trade agreements
(FTAs) with theEuropean Union and the United States andwill be
phasing out complex non-tariff bar-riers as a result of the FTA
with the UnitedStates.
El Salvador, ranked as mostly free, hasimproved both its
government interventionand monetary policy scores this year,
makingit the regions second freest country. It hasmade great
strides in liberalizing markets,advancing privatization, and
deregulatingcommerce.
NORTH AFRICA AND THE MIDDLE EAST
North Africa and the Middle East havethe same net amount of
economic freedom aslast year. The scores of eight countries in
thisregion have improved, while those of eightare worse. The region
has no countries thatare ranked as free.
Of the 10 factors measured in the Index,the fiscal burden factor
both improved inthe most countries (seven) and worsened inthe most
(nine), resulting in an overall netloss of two. The trade policy
factor experi-enced the largest net gain, with three coun-tries
improving and not a single countrydeclining in openness to trade.
The largestnet loss was in the wages and prices factor,where no
countries improved and threecountries declined.
Libya is again ranked as the regions leasteconomically free
country and remains a
repressed economy. Its fiscal burden ofgovernment score is worse
this year. Withthe exception of a low inflation rate, Libyaneeds to
show significant improvement inall factors.
Despite a worse score this year, Bahrainremains the most
economically free countryin this region. It is one of the most
advancedeconomies in the Persian Gulf, and itsfinancial sector has
eclipsed oil as the lead-ing source of income. Bahrain maintains
apro-business environment to attract foreigninvestment. It has
strong property rights,low regulation, low barriers to
foreigninvestment, and a low level of activity inthe informal
market. Yet Bahrain receivesover 70 percent of its revenues from
state-owned enterprises and could attract moreforeign investment if
these entities wereprivatized.
Israel has improved over the past severalyears and this year is
the regions secondfreest economy. Its fiscal burden of govern-ment,
for example, is lower. If the views ofFinance Minister Benjamin
Netanyahushould prevail, public-sector growth will becurbed and a
stalled privatization plan willbe revived.
While the United Arab Emirates is thethird freest economy in the
region, its overallscore worsened by the third largest margin inthe
world. The UAEs fiscal burden of gov-ernment, banking and finance,
wages andprices, and informal market scores are worsethis year. The
UAE has a bloated publicemployment sector, subsidized services,
andgovernment handouts. There is, however, aglimmer of hope: Abu
Dhabi is spearheadingthe privatization of utilities and seeking
toattract foreign investment in the power andwater sectors.
SUB-SAHARAN AFRICAOn net, economic freedom continues to
improve in sub-Saharan Africa, with 21countries economic freedom
scores improv-ing and 15 countries scores declining. Themajority of
countries30 out of 42remainmostly unfree. Of the 10 factors used
tograde countries in the Index, governmentintervention showed the
greatest netimprovement, with 18 countries improving
4 2004 Index of Economic Freedom
-
Executive Summary 5
and only four declining. The largest net losswas in the fiscal
burden factor, with 14 coun-tries improving and 21 declining.
Five countries in this region (Rwanda,Ethiopia, Cape Verde,
Senegal, and Maurita-nia) are among the worlds 10 mostimproved. At
the same time, four others(Namibia, Madagascar, Lesotho, and
Gabon)are among the 10 whose scores worsened bythe worlds widest
margins.
In addition, of all the countries in thisyears edition of the
Index, Rwanda experi-enced the single greatest degree of
improve-ment overall: an amazing feat when oneconsiders that last
year it was one of thecountries showing the greatest decline
ineconomic freedom. Rwanda has improvedits trade policy, government
intervention,monetary policy, and regulation scores.
Zimbabwe continues to be the least freecountry in the region.
Despite improving itsfiscal burden of government and
governmentintervention scores, it remains repressed.As a result,
unemployment is at 80 percent,inflation is over 200 percent, and
millions ofZimbabweans are facing starvation.
On the other end of the spectrum,Botswana remains the freest
country in theregion despite a worse score this year. Bothits trade
policy and fiscal burden of govern-ment scores are worse. The
second freest isUganda, which has privatized 74 businessesover the
past decade and is targeting 85more.
Sub-Saharan Africa needs trade liberaliza-tion. The trade policy
factor improved inonly five countries, and 10 countries closedtheir
markets further this year. South Africahas a free trade agreement
with the EuropeanUnion. Additionally, South Africa,
Lesotho,Swaziland, and Namibia form the SouthernAfrican Customs
Union, which, with anaverage common external tariff rate of
11.4percent, is currently negotiating a free tradeagreement with
the United States.
ASIAPACIFICOn net, the scores of the AsiaPacific
region are worse for five countries, withscores for 11 countries
improved and scoresfor 16 countries worse this year. This is
dras-tically different from last year when, on net,
the scores of six countries improved. Of the10 factors, fiscal
burden and monetary pol-icy exhibited the greatest
improvementoverall, and the greatest number of coun-tries declining
in economic freedomoccurred in the government
interventionfactor.
Although most countries in the region areranked mostly unfree,
the region also con-tains the worlds three freest economies:Hong
Kong, Singapore, and New Zealand.Additionally, Fiji and Laos are
among theworlds 10 most improved countries.
Not surprisingly, Indonesia is among the10 countries whose
scores worsened by thewidest margin worldwide. Indonesias
fiscalburden of government, government inter-vention, capital flows
and foreign invest-ment, and wages and prices scores are allworse
this year. Indonesias economy is final-ly growing, albeit slowly,
and the list ofchanges needed for faster growth includeslower
taxes, less government intervention inthe economy, lower barriers
to investment,lower level of restrictions on banking andfinance,
stronger protection of propertyrights, less regulation, and a
significantreduction in the informal market. Indonesiacontinues to
suffer from many of the prob-lems that made it so vulnerable to the
Asianfinancial crisis.
North Korea remains the least free coun-try in the region. In
addition to earning morerevenue from illegal drugs than from
legiti-mate business, North Korea scores poorly onevery factor and
has nowhere to go but upif it should ever choose to do so.
Once again, Hong Kong is the postercountry for economic freedom,
both in theregion and around the world. With a duty-free port, Hong
Kong is a model for freetrade. It also is the worlds 10th largest
trad-ing entity. Likewise, as the worlds secondfreest country,
Singapore has a weightedaverage tariff rate of approximately 0
per-cent. Singapore has a high level of govern-ment intervention in
the economy and amoderate cost of government; Hong Konghas a low
level of government interventionin the economy and a low cost of
govern-ment. In fact, Hong Kongs governmentintervention score
improved this year.
-
COUNTRY TREND TABLESTable 1 lists the countries whose scores
have improved the most since publication ofthe 2003 edition of
the Index. Cuba once againhas made this list with an even
largerimprovement than last year. Cubas mone-tary score is 4 points
better this year.
Rwanda is the most improved country,with improved trade policy,
governmentintervention, monetary policy, and regulationscores.
Ethiopia, the second most improvedcountry, improved its score in
four factors:trade policy, capital flows and foreign invest-ment,
fiscal burden of government, and gov-ernment intervention.
Despite such marked improvements, bothcountries remain mostly
unfree, but if theycontinue to improve at this pace, they
couldachieve a ranking of free within two years,creating the
environment for higher GDP per
capita. Ethiopia has a GDP per capita of only$121, and Rwanda
has a GDP per capita ofonly $253.
Table 2 lists the countries experiencing thegreatest decline in
economic freedom duringthe past year. With a president who is
tryingto punish the business sector, Venezuelasoverall level of
economic freedom fell themost. Its fiscal burden of government,
gov-ernment intervention, monetary policy,banking and finance, and
capital flows andforeign investment scores are all worse. As
aresult, its overall score is 0.47 point worsethis year, causing
Venezuela to be classifiedas repressed.
Last year, Argentina experienced the great-est decline in
economic freedom. This year, itis the second country on the list.
Argentinasmonetary policy, wages and prices, and infor-mal market
scores are all worse. As a result, itsoverall score is 0.44 point
worse this year.
Honduras and Indonesia are tied forfourth place on this list.
Hondurass fiscalburden of government, capital flows andforeign
investment, wages and prices, andproperty rights scores are all
worse this year,as are Indonesias fiscal burden of govern-ment,
government intervention, capitalflows and foreign investment, and
wagesand prices scores.
Table 3 shows the countries that havemade the largest overall
improvement overthe entire history of the Index. Azerbaijan
hasimproved the most with a score change of1.39 since it was first
graded in 1996. Bosniaand Lithuania are tied for the second
mostimproved with a change of 1.31 in theirscores. As this years
most improved coun-try, Rwanda has made the third largest over-all
improvement with a score change of 1.24since it was first graded in
1997. Nicaraguahas made the greatest improvement since theinception
of the Index.
Table 4 shows the countries that haveexhibited the greatest
decline in economicfreedom over the entire history of the
Index.Venezuela has declined the most, both thisyear and over the
entire 10 years of the Index.President Hugo Chvez can begin to
reversethis pattern only if he recognizes his coun-trys
long-standing, dire need of economicfreedom.
6 2004 Index of Economic Freedom
Table 1: Countries Showing Greatest Improvement Overall Since
2003 Index of Economic Freedom
Countries Score Improvement Region
Rwanda 0.57 Sub-Saharan AfricaEthiopia 0.46 Sub-Saharan
AfricaFiji 0.42 Asia and the PacificCape Verde 0.39 Sub-Saharan
AfricaCuba 0.35 Latin America and the CaribbeanSenegal 0.33
Sub-Saharan AfricaLaos 0.27 Asia and the PacificSlovak Republic
0.27 North America and EuropeMauritania 0.26 Sub-Saharan
AfricaMalta 0.25 North America and Europe
Source: Marc A. Miles, Edwin J. Feulner, and Mary Anastasia
OGrady, 2004 Index of Economic Freedom(Washington, D.C.: The
Heritage Foundation and Dow Jones & Company, Inc., 2004).
Table 2: Countries Showing Greatest Decline Overall Since 2003
Index of Economic Freedom
Countries Score Deterioration Region
Venezuela 0.47 Latin America and the CaribbeanArgentina 0.44
Latin America and the CaribbeanUnited Arab Emirates 0.40 North
Africa and Middle EastHonduras 0.34 Latin America and the
CaribbeanIndonesia 0.34 Asia and the PacificNamibia 0.31
Sub-Saharan AfricaMadagascar 0.29 Sub-Saharan AfricaLesotho 0.26
Sub-Saharan AfricaGabon 0.26 Sub-Saharan AfricaPanama 0.24 Latin
America and the Caribbean
Source: Marc A. Miles, Edwin J. Feulner, and Mary Anastasia
OGrady, 2004 Index of Economic Freedom(Washington, D.C.: The
Heritage Foundation and Dow Jones & Company, Inc., 2004).
-
Executive Summary 7
Malaysias economic freedom not onlydeclined this year, but also
exhibited the sec-ond greatest decline over the history of theIndex
with a score change of 0.71. Malaysia isranked as mostly unfree.
Argentina is alsoon this list with the third greatest decline
ineconomic freedom and a cumulative scorechange of 0.63.
GLOBAL FREE TRADE ASSOCIATION COUNTRIES
In the 2001 edition of the Index, three Her-itage analysts
proposed a plan for a globalfree trade association (GFTA).1 This
year, 12countries qualify, while 19 are in the near-miss category,
falling short in only one fac-tor by 1 point.2
The qualifying countries, based on 2004Index of Economic Freedom
data, are Australia,Denmark, Estonia, Finland, Hong Kong, Ice-land,
Ireland, Luxembourg, New Zealand,Singapore, the United Kingdom, and
theUnited States. All of these countries qualifiedlast year as
well.
Among the near-miss countries are exam-ples that range from
Switzerland to Bahrain.Regulation continues to be the most com-mon
reason for a near miss. Trinidad andTobagos trade policy score
improved thisyear, moving the country into the near-misscategory.
Burdensome regulation is keepingthe country from qualifying.
Of the 19 near-miss countries, 14 fail toqualify because of
their regulation scores;two (Canada and Cyprus) do not
qualifybecause of their foreign investment scores;two (Bahrain and
Botswana) do not qualifybecause of restrictions on trade; and one
(ElSalvador) does not qualify because of weakproperty rights.
Although all liberalization in the past yearhas been
accomplished through bilateral freetrade agreements, such
agreements includeonly two parties, thereby creating trade
diver-sion for those who are left out. AGFTAwouldnot be a
substitute for a comprehensive WorldTrade Organization (WTO)
agreement, butwould seek to advance liberalization whilethe WTO
round is being negotiated.
A GFTA would limit trade diversion bywelcoming all those who are
truly freetraders into the fold. Additionally, a GFTA
would motivate other countries to liberalizetheir markets in
order to join.
Market liberalization should be voluntary,and the GFTA would
operate under this con-cept. Membership in the GFTA would beopen
only to countries that have demonstrat-ed their commitment to free
trade and freemarkets.
Source: Marc A. Miles, Edwin J. Feulner, and Mary Anastasia
OGrady, 2004 Index of Economic Freedom (Washington, D.C.: The
Heritage Foundation and Dow Jones & Company, Inc., 2004).
Table 3: Countries Showing Greatest Improvement in Economic
Freedom Since the 1995 Index of Economic Freedom*
Country Score Improvement Region
* Number in parentheses indicates the first year country was
included in the Index.
Azerbaijan (1996) 1.39 Asia and the Pacific Bosnia (1998) 1.31
North America and EuropeLithuania (1996) 1.31 North America and
EuropeRwanda (1997) 1.24 Sub-Saharan AfricaNicaragua (1995) 1.14
Latin America and the CaribbeanMozambique (1995) 1.11 Sub-Saharan
AfricaArmenia (1996) 1.06 North America and EuropeMoldova (1995)
1.01 North America and EuropeHaiti (1995) 1.01 Latin America and
the CaribbeanSlovenia (1996) 0.99 North America and
EuropeMauritania (1996) 0.99 Sub-Saharan Africa
Source: Marc A. Miles, Edwin J. Feulner, and Mary Anastasia
OGrady, 2004 Index of Economic Freedom (Washington, D.C.: The
Heritage Foundation and Dow Jones & Company, Inc., 2004).
* Number in parentheses indicates the first year country was
included in the Index.
Country Score Improvement Region
Venezuela (1995) 0.91 Latin America and the CaribbeanMalaysia
(1995) 0.71 Asia and the Pacific Argentina (1995) 0.63 Latin
America and the CaribbeanNigeria (1995) 0.53 Sub-Saharan
AfricaJapan (1995) 0.47 Asia and the Pacific Paraguay (1995) 0.45
Latin America and the CaribbeanZimbabwe (1995) 0.45 Sub-Saharan
AfricaTurkey (1995) 0.44 North America and EuropeBelarus (1995)
0.39 North America and EuropeZambia (1995) 0.35 Sub-Saharan
AfricaFrance (1995) 0.33 North America and Europe
Table 4: Countries Showing Greatest Decline in Economic Freedom
Since the 1995 Index of Economic Freedom*
-
8 2004 Index of Economic Freedom
Endnotes1 John C. Hulsman, Gerald P. ODriscoll, Jr., and Denise
H. Froning, The Free Trade
Association: A Trade Agenda for the New Global Economy, in
Gerald P. ODriscoll, Jr.,Kim R. Holmes, and Melanie Kirkpatrick,
2001 Index of Economic Freedom (Washing-ton, D.C.: The Heritage
Foundation and Dow Jones & Company, Inc., 2001), pp. 3341.
2 See Table 5, Membership in a Global Free Trade Association,
above.
Criteria for Membership in a Global Free Trade
AssociationFreedom to Trade. Countries must maintain an open trade
policy, with minimal barriers to importsand minimal subsidies to
domestic industries. This means an average tariff rate not greater
than 9percent as well as few or no non-tariff barriers, which
include import quotas or licensing require-ments that restrict
trade. Countries that generally set low tariff barriers, do not
impose excessivenon-tariff barriers, and do not put serious
impediments in the way of foreign investment demon-strate their
fundamental commitment to free trade.
Freedom to Invest. Countries must maintain liberal policies
regarding capital flows and investment.Specifically, this means a
transparent and open foreign investment code, impartial treatment
of for-eign investments, and an efficient approval process.
Restrictions on foreign investment must be fewin number and not
significant economically.
Freedom to Operate a Business (Low Regulatory Burden). Countries
must maintain an open environ-ment for business. Overly burdensome
regulations can deter trade and investment. Investors maychoose not
to enter a country because of the difficulties involved in opening
a business or becausethe cost of doing business in that country is
excessive. Countries must maintain simple licensing pro-cedures,
apply regulations uniformly, and be nondiscriminatory in their
treatment of foreign-ownedbusiness.
Secure Property Rights. A country with a well-established rule
of law protects private property andprovides an environment in
which business transactions can take place with a degree of
certainty.Investors are likely to engage in economic transactions
when they know the judicial system protectsprivate property and is
not subject to outside influence. Secure property rights help to
ensure thatefforts to expand trade with a GFTA country can be
successful.
Qualifying Countries Country Policy Blocking Membership
1 Australia 1 Austria Regulation
2 Denmark 2 Bahrain Trade
3 Estonia 3 Belgium Regulation
4 Finland 4 Canada Foreign Investment
5 Hong Kong 5 Chile Regulation
6 Iceland 6 Cyprus Foreign Investment
7 Ireland 7 Germany Regulation
8 Luxembourg 8 Netherlands Regulation
9 New Zealand 9 Sweden Regulation
10 Singapore 10 Switzerland Regulation
11 United Kingdom 11 Botswana Trade Policy
12 United States 12 El Salvador Property Rights13 France
Regulation14 Israel Regulation15 Italy Regulation16 Portugal
Regulation17 Spain Regulation18 Trinidad and Tobago Regulation19
Uruguay Regulation
Table 5: Membership in a Global Free Trade Association
Next in Line:
Source: Marc A. Miles, Edwin J. Feulner, and Mary Anastasia
OGrady, 2004 Index of Economic Freedom (Washington, D.C.: The
Heritage Foundation and Dow Jones & Company, Inc., 2004).
-
Executive Summ
ary9
1
2
3
4
5
6
7
8
9
10
11
12
13
14
14
16
17
18
19
20
20
22
22
24
25
26
27
28
29
29
31
32
33
34
35
36
37
38
39
Hong Kong
Singapore
New Zealand
Luxembourg
Ireland
Estonia
United Kingdom
Denmark
Switzerland
United States
Australia
Sweden
Chile
Cyprus
Finland
Canada
Iceland
Germany
Netherlands
Austria
Bahrain
Belgium
Lithuania
El Salvador
Bahamas
Italy
Spain
Norway
Israel
Latvia
Portugal
Czech RepublicBarbadosTaiwanSlovak RepublicTrinidad and
TobagoMaltaJapanBotswana
1.34
1.61
1.70
1.71
1.74
1.76
1.79
1.80
1.84
1.85
1.88
1.90
1.91
1.95
1.95
1.98
2.00
2.03
2.04
2.08
2.08
2.19
2.19
2.24
2.25
2.26
2.31
2.35
2.36
2.36
2.38
2.39
2.41
2.43
2.44
2.45
2.51
2.53
2.55
1.44
1.61
1.68
1.68
1.73
1.68
1.88
1.71
1.88
1.86
1.90
1.88
2.01
2.09
1.85
2.00
1.93
2.03
2.00
2.08
2.04
2.10
2.21
2.35
2.15
2.31
2.31
2.28
2.40
2.30
2.40
2.35
2.29
2.29
2.71
2.54
2.76
2.36
2.49
1.39
1.69
1.68
1.88
1.73
1.73
1.83
1.79
1.80
1.84
1.91
1.88
1.88
2.13
1.89
1.90
2.18
2.00
2.03
2.08
2.10
2.10
2.35
2.23
2.06
2.28
2.41
2.40
2.55
2.49
2.30
2.29
2.53
2.38
2.76
2.54
2.78
2.34
2.99
1.29
1.66
1.71
1.79
1.60
1.89
1.78
2.10
1.89
1.78
1.91
2.03
2.03
2.11
2.04
2.01
2.16
2.04
1.84
2.03
2.01
2.10
2.53
2.16
2.23
2.21
2.49
2.44
2.60
2.49
2.33
2.10
2.64
2.18
2.85
2.64
2.84
2.04
2.95
1.40
1.59
1.75
1.84
1.81
2.19
1.85
2.29
1.91
1.84
1.90
2.15
2.04
2.68
2.06
2.06
2.11
2.24
2.03
1.98
1.88
2.14
2.84
2.15
2.23
2.21
2.51
2.25
2.70
2.69
2.34
2.20
2.74
1.98
3.18
2.48
3.09
2.06
2.93
1.51
1.54
1.71
1.95
1.88
2.29
1.81
2.13
1.88
1.89
1.94
2.20
2.13
2.66
2.19
2.04
2.20
2.26
2.01
2.08
1.81
2.06
2.90
2.38
2.16
2.24
2.41
2.28
2.68
2.74
2.31
2.14
1.40
1.54
1.83
1.96
1.91
2.43
1.85
2.11
1.91
1.89
1.95
2.24
2.10
2.64
2.09
2.09
2.20
2.36
2.03
2.08
1.90
2.05
2.98
2.61
2.16
2.34
2.40
2.28
2.65
2.84
2.41
2.43
1.54
1.68
1.75
1.96
2.14
2.46
1.95
1.98
1.91
1.88
2.19
2.25
2.26
2.63
2.18
2.08
2.30
2.25
1.88
2.03
1.80
2.03
3.05
2.60
2.05
2.41
2.50
2.39
2.64
2.91
2.41
2.29
1.50
1.63
1.74
1.99
2.14
2.44
1.85
2.13
1.94
1.94
2.08
2.53
2.61
2.64
2.34
2.08
n/a
2.26
1.89
2.06
1.75
2.06
3.50
2.68
2.09
2.56
2.73
2.39
2.81
3.24
2.60
2.33
1.51
1.68
n/a
n/a
2.15
2.40
1.75
n/a
n/a
1.99
2.09
2.63
2.60
n/a
n/a
2.10
n/a
2.15
n/a
2.09
1.78
n/a
n/a
2.94
2.36
2.58
2.54
n/a
2.90
n/a
2.80
2.38
1.0
1.0
2.0
2.0
2.0
1.0
2.0
2.0
2.0
2.0
2.0
2.0
2.0
2.0
2.0
2.0
2.0
2.0
2.0
2.0
3.0
2.0
2.0
2.0
5.0
2.0
2.0
2.0
2.0
2.0
2.0
3.0
1.9
2.6
4.0
4.1
2.4
2.1
3.9
4.0
3.4
4.0
3.8
4.0
2.6
2.5
3.5
2.8
3.0
3.8
4.4
4.3
1.8
4.4
2.4
3.4
1.5
4.1
4.1
4.0
4.6
2.6
3.8
3.9
2.0
3.5
2.0
2.0
2.0
2.0
2.0
3.0
2.0
2.0
2.0
3.0
2.0
2.0
3.0
3.0
3.0
2.0
3.0
2.0
4.0
2.5
2.5
1.5
2.0
2.0
2.0
3.5
2.5
2.5
2.0
2.5
1.0
1.0
1.0
1.0
2.0
2.0
1.0
1.0
1.0
1.0
2.0
1.0
1.0
1.0
1.0
1.0
2.0
1.0
2.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
2.0
1.0
1.0
1.0
2.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
2.0
2.0
2.0
2.0
2.0
1.0
2.0
3.0
2.0
3.0
2.0
1.0
1.0
2.0
2.0
1.0
2.0
2.0
3.0
2.0
2.0
3.0
2.0
2.0
2.0
2.0
1.0
2.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
2.0
2.0
2.0
2.0
3.0
3.0
1.0
2.0
1.0
2.0
1.0
2.0
2.0
2.0
2.0
3.0
3.0
2.0
3.0
1.0
2.0
2.0
2.0
2.0
2.0
2.0
2.0
2.0
2.0
2.0
2.0
2.0
2.0
2.0
2.0
2.0
1.0
2.0
2.0
2.0
3.0
3.0
2.0
2.0
3.0
2.0
2.0
2.0
2.0
2.0
2.0
2.0
1.0
1.0
1.0
1.0
1.0
2.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
3.0
3.0
1.0
2.0
2.0
1.0
2.0
3.0
2.0
2.0
1.0
1.0
2.0
2.0
2.0
2.0
2.0
1.0
3.0
2.0
2.0
3.0
3.0
2.0
2.0
2.0
2.0
3.0
3.0
3.0
2.0
3.0
3.0
2.0
2.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
1.5
1.0
1.0
1.0
2.0
2.5
1.0
1.0
1.0
1.5
1.0
1.0
1.5
2.0
1.0
1.0
1.0
1.5
1.0
1.5
2.0
2.0
3.0
3.5
2.0
2.5
2.0
1.0
1.5
3.5
2.0
3.5
2.86
2.09
3.38
2.49
3.14
2.11
2.91
2.63
2.24
3.31
2.60
3.15
2.16
2.90
2.93
2.21
3.18
2.68
3.25
2.16
2.75
3.15
2.23
3.18
2.69
3.24
2.18
3.09
n/a
2.26
2.88
n/a
3.44
2.06
3.38
4.0
2.0
3.0
2.0
4.0
2.0
3.0
4.6
3.3
2.9
4.0
4.1
4.3
3.0
2.5
2.5
2.0
2.5
3.0
2.0
4.5
1.0
1.0
2.0
2.0
1.0
1.0
3.0
3.0
3.0
2.0
2.0
3.0
3.0
2.0
2.0
3.0
1.0
2.0
2.0
4.0
2.0
2.0
2.0
2.0
2.0
2.0
2.0
2.0
1.0
2.0
3.0
2.0
1.0
2.0
2.0
2.0
3.0
3.0
3.0
2.0
3.0
2.0
2.0
2.5
3.5
3.0
3.0
2.0
2.0
2004 Rank Country
2004 Scores
2003 Scores
2002 Scores
2001 Scores
2000 Scores
1999 Scores
1998 Scores
1997 Scores
1996 Scores
1995 Scores
Trade Policy
Fiscal Buden
Govt.Intervention
Monetary Policy
Foreign Investment
Banking & Finance
Wages & Prices
Property Rights Regulation
Informal Market
Index of Economic Freedom Rankings
-
102004 Index of Econom
ic Freedom
39
41
42
42
44
44
46
46
48
48
50
51
52
53
54
54
56
56
58
58
60
60
60
63
63
63
66
67
67
67
70
71
72
73
74
74
76
76
78
Uruguay
Bolivia
Hungary
United Arab Emirates
Armenia
France
Belize
Korea, South
Kuwait
Uganda
Costa Rica
Jordan
Slovenia
South Africa
Greece
Oman
Jamaica
Poland
Panama
Peru
Cape Verde
Qatar
Thailand
Cambodia
Mexico
Mongolia
Morocco
Mauritania
Nicaragua
Tunisia
Namibia
Mauritius
Senegal
Macedonia
Philippines
Saudi Arabia
Fiji
Sri Lanka
Bulgaria
2.55
2.59
2.60
2.60
2.63
2.63
2.69
2.69
2.70
2.70
2.71
2.73
2.75
2.79
2.80
2.80
2.81
2.81
2.83
2.83
2.86
2.86
2.86
2.90
2.90
2.90
2.93
2.94
2.94
2.94
2.96
2.99
3.00
3.04
3.05
3.05
3.06
3.06
3.08
2.45
2.59
2.55
2.20
2.59
2.74
2.74
2.75
2.58
2.95
2.71
2.80
2.86
2.58
2.79
2.75
2.73
2.83
2.59
2.86
3.25
2.78
2.71
2.68
2.81
3.01
2.96
3.20
3.09
2.91
2.65
2.96
3.33
3.23
2.95
3.09
3.48
3.05
3.26
2.51
2.66
2.23
2.28
2.78
2.85
2.79
2.49
2.71
3.15
2.73
2.73
3.25
2.79
2.84
2.78
3.01
2.60
2.68
2.88
3.30
3.03
2.46
2.78
2.96
2.98
3.15
3.46
3.23
2.89
2.84
2.95
3.45
3.35
3.05
3.16
3.54
2.89
3.28
2.30
2.31
2.38
2.16
3.03
2.49
2.69
2.35
2.48
3.15
2.84
2.85
3.01
3.00
2.69
2.60
3.01
2.64
2.58
2.61
3.56
3.18
2.29
3.00
3.05
3.03
2.80
3.89
3.54
3.04
2.93
2.98
3.33
n/a
3.16
3.35
3.50
2.84
3.28
2.50
2.61
2.43
2.20
3.21
2.44
2.84
2.50
2.45
3.15
2.88
2.95
3.20
3.01
2.69
2.93
2.61
2.84
2.56
2.64
3.66
3.18
2.76
3.14
3.09
3.06
3.05
4.00
3.70
2.94
2.98
2.90
3.34
n/a
3.00
3.15
3.29
2.91
3.35
2.60
2.61
2.89
2.30
3.50
2.34
2.76
2.38
2.40
2.64
3.00
2.96
3.05
2.98
2.88
2.80
2.91
2.83
2.43
2.66
3.81
3.11
2.58
3.13
3.25
3.18
2.95
4.00
3.75
3.01
2.84
2.68
3.41
n/a
2.98
3.11
3.29
2.81
3.49
2.59
2.61
2.94
2.35
3.50
2.34
2.96
2.30
2.50
2.64
3.00
2.99
3.15
2.88
2.89
2.69
2.89
2.91
2.45
2.96
3.74
n/a
2.56
3.24
3.41
3.14
3.08
3.96
3.68
2.90
2.99
n/a
3.51
n/a
2.84
2.89
3.23
2.76
3.60
2.60
2.56
3.04
2.35
3.50
2.33
2.71
2.31
2.39
2.75
3.03
2.85
3.45
2.99
2.81
2.79
2.86
3.09
2.54
3.03
3.80
n/a
2.58
3.68
3.35
3.23
3.00
4.03
3.80
2.89
2.80
n/a
3.64
n/a
3.06
2.95
3.23
2.61
3.53
2.85
2.61
2.98
2.40
3.69
2.31
2.74
2.49
2.50
2.89
3.00
3.10
3.74
3.25
2.95
2.85
2.99
3.24
2.60
3.06
3.60
n/a
2.58
n/a
3.31
3.60
2.89
3.93
3.70
2.83
n/a
n/a
3.81
n/a
3.14
2.95
3.24
2.94
3.50
3.03
3.21
2.93
n/a
n/a
2.30
2.85
2.41
n/a
3.10
3.04
2.90
n/a
3.23
3.15
2.70
3.16
3.46
2.70
3.59
n/a
n/a
2.59
n/a
3.10
3.50
3.03
n/a
4.08
2.98
n/a
n/a
n/a
n/a
3.35
n/a
3.49
3.06
3.56
2.0
3.0
3.0
2.0
2.0
2.0
4.0
4.0
2.0
3.0
3.0
4.0
3.0
4.0
2.0
3.0
4.0
3.0
3.0
4.0
5.0
3.0
4.0
4.0
2.0
2.0
5.0
3.0
2.0
5.0
4.0
5.0
3.0
4.0
2.0
4.0
4.0
3.0
4.0
3.5
2.9
3.0
2.0
2.3
4.3
2.9
3.4
1.5
3.0
3.1
3.8
3.5
3.9
4.0
1.5
4.1
3.6
3.8
3.3
3.6
3.1
3.6
2.5
4.0
4.5
3.8
2.9
2.9
3.9
4.1
2.9
4.5
2.4
3.5
2.0
3.6
3.6
1.8
2.0
2.0
2.0
4.0
3.0
5.0
2.0
2.5
4.5
2.0
2.0
3.5
2.5
2.0
2.0
4.5
2.5
2.0
3.5
2.5
2.0
4.5
2.5
2.5
3.5
2.5
2.0
2.5
2.5
2.5
3.0
3.0
2.0
3.5
2.0
4.5
2.0
2.5
2.5
3.0
1.0
3.0
1.0
2.0
1.0
1.0
2.0
1.0
1.0
3.0
1.0
3.0
3.0
2.0
1.0
3.0
2.0
1.0
1.0
1.0
1.0
1.0
1.0
3.0
2.0
1.0
2.0
2.0
1.0
3.0
2.0
1.0
2.0
2.0
1.0
1.0
3.0
4.0
2.0
1.0
2.0
3.0
2.0
2.0
3.0
2.0
4.0
3.0
2.0
2.0
3.0
2.0
3.0
3.0
1.0
3.0
2.0
2.0
3.0
3.0
3.0
3.0
3.0
3.0
2.0
2.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
4.0
4.0
3.0
3.0
3.0
2.0
2.0
4.0
1.0
3.0
3.0
3.0
3.0
2.0
3.0
2.0
3.0
2.0
3.0
3.0
2.0
2.0
2.0
2.0
3.0
3.0
3.0
2.0
2.0
3.0
3.0
2.0
2.0
3.0
3.0
2.0
3.0
2.0
3.0
4.0
2.0
3.0
2.0
2.0
2.0
3.0
3.0
3.0
2.0
2.0
2.0
3.0
2.0
2.0
2.0
2.0
2.0
3.0
4.0
2.0
3.0
2.0
2.0
2.0
2.0
2.0
3.0
2.0
2.0
2.0
3.0
3.0
2.0
2.0
4.0
3.0
2.0
3.0
2.0
3.0
3.0
2.0
2.0
4.0
2.0
2.0
3.0
2.0
3.0
2.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
4.0
4.0
3.0
3.0
3.0
4.0
3.0
3.0
4.0
4.0
4.0
3.0
2.0
2.0
3.0
4.0
4.0
3.0
4.0
3.0
4.0
3.0
4.0
3.0
3.0
4.0
3.0
3.0
3.0
3.0
4.0
3.0
3.0
2.0
3.0
3.0
3.0
3.0
3.0
3.0
4.0
2.0
4.0
3.0
4.0
3.0
4.0
3.0
4.0
4.0
3.0
3.0
3.0
4.0
4.0
4.0
3.0
3.0
3.0
4.0
3.0
4.0
3.0
2.0
4.0
2.0
3.0
3.0
2.0
4.0
3.0
3.0
2.5
3.0
3.0
2.0
3.5
3.5
4.0
3.5
4.0
2.0
3.5
3.0
3.5
3.0
3.5
4.0
4.0
3.0
2.5
3.0
3.5
3.5
4.0
3.0
4.0
3.5
3.5
2004 Rank Country
2004 Scores
2003 Scores
2002 Scores
2001 Scores
2000 Scores
1999 Scores
1998 Scores
1997 Scores
1996 Scores
1995 Scores
Trade Policy
Fiscal Buden
Govt.Intervention
Monetary Policy
Foreign Investment
Banking & Finance
Wages & Prices
Property Rights Regulation
Informal Market
Index of Economic Freedom Rankings
-
Executive Summ
ary11
79
80
80
82
83
83
83
86
87
87
89
89
91
92
93
94
95
95
95
98
99
100
101
102
103
103
105
106
106
106
109
109
111
111
113
114
114
116
117
3.09
3.10
3.10
3.11
3.13
3.13
3.13
3.14
3.16
3.16
3.18
3.18
3.19
3.23
3.24
3.26
3.28
3.28
3.28
3.29
3.30
3.31
3.33
3.34
3.36
3.36
3.38
3.39
3.39
3.39
3.40
3.40
3.43
3.43
3.44
3.46
3.46
3.48
3.49
3.13
3.28
3.01
3.06
3.10
3.20
3.09
2.85
3.01
3.14
3.16
3.00
3.40
3.30
3.26
3.21
3.35
3.39
3.40
3.54
3.49
3.39
3.79
3.20
3.41
3.93
3.28
3.50
3.40
3.50
3.54
3.44
3.18
3.61
3.56
3.63
3.54
3.04
3.59
3.30
3.24
3.06
3.29
2.94
3.28
3.01
3.29
3.00
3.23
3.00
3.21
3.48
3.16
3.45
3.28
3.33
3.53
3.15
3.56
3.89
3.05
3.70
3.10
3.65
3.73
3.31
3.58
3.28
3.33
3.59
3.44
3.33
3.74
3.46
3.64
3.74
2.58
3.84
3.75
3.48
3.21
3.39
3.00
3.35
2.65
3.29
2.88
3.05
3.08
3.05
3.68
3.38
3.21
3.26
3.45
3.53
3.40
3.65
4.04
3.40
3.88
3.15
3.80
3.94
n/a
3.93
3.39
2.93
3.29
3.50
3.38
3.78
3.23
3.76
3.79
2.29
3.88
3.35
3.78
3.46
3.49
3.14
3.35
3.06
3.39
2.91
2.76
3.68
3.16
3.80
3.38
3.34
3.05
3.61
3.58
3.94
3.58
4.40
3.40
3.70
3.13
3.78
4.28
n/a
4.33
3.01
2.73
3.24
3.50
3.26
4.09
3.16
3.84
3.75
2.23
3.75
3.49
3.51
3.19
3.55
2.99
3.30
3.03
3.45
2.89
2.64
3.73
3.06
3.85
3.28
3.19
3.09
3.63
3.35
3.95
3.36
4.61
3.59
3.68
3.24
3.73
4.29
n/a
4.29
3.00
2.80
3.29
3.50
3.09
3.91
3.29
3.89
3.60
2.28
3.75
3.48
3.53
3.36
3.63
3.19
3.55
3.06
3.51
2.91
2.64
3.74
3.13
3.78
3.29
3.11
3.06
3.80
3.31
4.15
3.48
4.61
3.64
3.70
3.33
4.00
4.60
n/a
4.35
3.04
2.66
3.29
3.31
3.18
4.01
3.35
3.96
3.54
2.53
3.83
3.65
3.59
3.28
3.56
3.23
3.35
2.78
3.44
2.89
2.85
3.80
3.31
3.88
3.18
3.39
3.26
3.81
3.49
4.15
3.46
n/a
3.63
3.80
3.50
n/a
4.60
n/a
4.58
2.91
2.70
3.53
3.29
3.31
4.19
3.44
3.86
3.83
2.75
3.83
3.50
3.58
3.56
3.53
3.15
3.38
2.96
3.55
3.15
2.63
3.83
3.30
3.94
n/a
3.13
3.54
3.96
3.40
4.11
3.73
n/a
3.70
3.80
3.44
n/a
n/a
n/a
4.78
2.89
3.00
3.54
3.26
3.40
4.25
3.53
3.64
3.65
2.63
3.75
4.10
3.48
3.46
n/a
3.10
3.70
n/a
3.74
3.36
2.45
3.43
3.16
n/a
n/a
3.29
3.45
n/a
3.69
4.39
3.79
n/a
3.68
3.90
3.53
n/a
n/a
n/a
n/a
2.94
2.95
3.54
3.34
3.19
n/a
n/a
3.74
3.55
2.85
4.05
2.0
4.0
4.0
4.0
4.0
4.0
4.0
3.0
3.0
3.0
4.0
4.0
4.0
5.0
5.0
5.0
4.0
4.0
4.0
5.0
3.0
5.0
4.0
3.0
4.0
3.0
5.0
3.0
3.0
3.0
4.0
5.0
5.0
4.0
4.0
3.0
3.0
4.0
3.0
2.4
3.0
2.5
3.1
4.3
3.8
2.3
4.4
3.6
3.6
4.3
3.8
2.4
2.8
4.4
3.6
3.8
4.3
3.8
3.9
2.5
4.1
3.8
4.4
3.1
4.6
3.8
3.4
3.4
3.9
4.0
4.0
4.8
4.3
4.4
4.1
2.6
3.8
3.9
2.5
3.0
4.0
2.5
3.5
3.5
3.0
1.5
2.0
4.0
1.5
2.0
1.5
3.5
1.0
2.5
3.0
3.0
2.0
2.0
2.5
4.0
3.0
4.0
2.5
2.0
4.0
3.0
3.0
2.5
3.5
3.0
3.5
3.0
4.0
2.5
2.0
2.0
3.0
3.0
2.0
3.0
2.0
3.0
2.0
1.0
4.0
3.0
1.0
2.0
3.0
3.0
1.0
2.0
2.0
1.0
1.0
4.0
2.0
1.0
1.0
1.0
2.0
3.0
1.0
1.0
1.0
3.0
5.0
4.0
1.0
1.0
1.0
1.0
4.0
5.0
4.0
3.0
4.0
2.0
3.0
3.0
2.0
3.0
3.0
3.0
4.0
4.0
3.0
3.0
3.0
3.0
4.0
3.0
3.0
3.0
2.0
3.0
4.0
2.0
3.0
3.0
3.0
4.0
2.0
4.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
4.0
3.0
3.0
3.0
2.0
2.0
2.0
2.0
3.0
2.0
4.0
2.0
3.0
3.0
3.0
2.0
3.0
3.0
4.0
2.0
2.0
2.0
4.0
4.0
4.0
3.0
3.0
3.0
4.0
3.0
3.0
3.0
4.0
3.0
3.0
3.0
4.0
4.0
4.0
3.0
3.0
2.0
2.0
3.0
2.0
2.0
3.0
2.0
2.0
3.0
3.0
3.0
3.0
2.0
2.0
2.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
2.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
4.0
3.0
4.0
4.0
3.0
4.0
3.0
4.0
3.0
4.0
3.0
4.0
4.0
4.0
3.0
4.0
3.0
4.0
4.0
5.0
4.0
4.0
3.0
4.0
4.0
4.0
4.0
4.0
3.0
3.0
4.0
3.0
4.0
4.0
3.0
4.0
4.0
4.0
4.0
4.0
3.0
4.0
3.0
4.0
4.0
3.0
4.0
3.0
4.0
3.0
4.0
4.0
4.0
4.0
4.0
4.0
4.0
4.0
5.0
3.0
4.0
3.0
4.0
4.0
4.0
