Index 2015 PDF

2015 Index of
Economic Freedom
Promoting Economic Opportunity and Prosperity
In partnership with Terry Miller

Anthony B. Kim
RANKING THE WORLD BY ECONOMIC FREEDOM
Rank Country Overall Score Rank Country Overall Score Rank Country Overall Score
1 Hong Kong 89.6 66 Montenegro 64.7 132 Burundi 53.7
2 Singapore 89.4 67 Trinidad and Tobago 64.1 133 Yemen 53.7
3 New Zealand 82.1 68 Panama 64.1 134 Maldives 53.4
4 Australia 81.4 69 Kazakhstan 63.3 135 Mauritania 53.3
5 Switzerland 80.5 70 Turkey 63.2 136 São Tomé and Príncipe 53.3
6 Canada 79.1 71 Ghana 63.0 137 Papua New Guinea 53.1
7 Chile 78.5 72 South Africa 62.6 138 Togo 53.0
8 Estonia 76.8 73 France 62.5 139 China 52.7
9 Ireland 76.6 74 Kuwait 62.5 140 Tajikistan 52.7
10 Mauritius 76.4 75 Thailand 62.4 141 Liberia 52.7
11 Denmark 76.3 76 The Philippines 62.2 142 Comoros 52.1
12 United States 76.2 77 Saudi Arabia 62.1 143 Russia 52.1
13 United Kingdom 75.8 78 Samoa 61.9 144 Guinea 52.1
14 Taiwan 75.1 79 Madagascar 61.7 145 Guinea-Bissau 52.0
15 Lithuania 74.7 80 Italy 61.7 146 Cameroon 51.9
16 Germany 73.8 81 Croatia 61.5 147 Sierra Leone 51.7
17 The Netherlands 73.7 82 Kyrgyz Republic 61.3 148 Vietnam 51.7
18 Bahrain 73.4 83 Paraguay 61.1 149 Ethiopia 51.5
19 Finland 73.4 84 Vanuatu 61.1 150 Laos 51.4
20 Japan 73.3 85 Azerbaijan 61.0 151 Haiti 51.3
21 Luxembourg 73.2 86 Dominican Republic 61.0 152 Nepal 51.3
22 Georgia 73.0 87 Guatemala 60.4 153 Belarus 49.8
23 Sweden 72.7 88 Slovenia 60.3 154 Micronesia 49.6
24 Czech Republic 72.5 89 Morocco 60.1 155 Lesotho 49.6
25 United Arab Emirates 72.4 90 Serbia 60.0 156 Ecuador 49.2
26 Iceland 72.0 91 Swaziland 59.9 157 Algeria 48.9
27 Norway 71.8 92 Uganda 59.7 158 Angola 47.9
28 Colombia 71.7 93 Namibia 59.6 159 Solomon Islands 47.0
29 South Korea 71.5 94 Lebanon 59.3 160 Uzbekistan 47.0
30 Austria 71.2 95 Tonga 59.3 161 Burma 46.9
31 Malaysia 70.8 96 Mongolia 59.2 162 Ukraine 46.9
32 Qatar 70.8 97 Bosnia and Herzegovina 59.0 163 Bolivia 46.8
33 Israel 70.5 98 Fiji 59.0 164 Kiribati 46.4
34 Macau 70.3 99 Benin 58.8 165 Chad 45.9
35 Saint Lucia 70.2 100 Zambia 58.7 166 Central African Republic 45.9
36 Botswana 69.8 101 Sri Lanka 58.6 167 Timor-Leste 45.5
37 Latvia 69.7 102 Burkina Faso 58.6 168 Congo, Dem. Rep. 45.0
38 Jordan 69.3 103 Côte d’Ivoire 58.5 169 Argentina 44.1
39 Brunei 68.9 104 Gabon 58.3 170 Congo, Republic of 42.7
40 Belgium 68.8 105 Indonesia 58.1 171 Iran 41.8
41 The Bahamas 68.7 106 Senegal 57.8 172 Turkmenistan 41.4
42 Poland 68.6 107 Tunisia 57.7 173 Equatorial Guinea 40.4
43 Uruguay 68.6 108 Nicaragua 57.6 174 Eritrea 38.9
44 Saint Vincent 68.0 109 Tanzania 57.5 175 Zimbabwe 37.6
and the Grenadines 110 Cambodia 57.5 176 Venezuela 34.3
45 Cyprus 67.9 111 Moldova 57.5 177 Cuba 29.6
46 Barbados 67.9 112 Djibouti 57.5 178 North Korea 1.3
47 Peru 67.7 113 The Gambia 57.5 N/A Afghanistan N/A
48 Jamaica 67.7 114 Seychelles 57.5 N/A Iraq N/A
49 Spain 67.6 115 Bhutan 57.4 N/A Kosovo N/A
50 Slovak Republic 67.2 116 Honduras 57.4 N/A Libya N/A
51 Costa Rica 67.2 117 Belize 56.8 N/A Liechtenstein N/A
52 Armenia 67.1 118 Brazil 56.6 N/A Somalia N/A
53 Macedonia 67.1 119 Mali 56.4 N/A Sudan N/A
54 Hungary 66.8 120 Nigeria 55.6 N/A Syria N/A
55 Bulgaria 66.8 121 Pakistan 55.6
56 Oman 66.7 122 Kenya 55.6
57 Romania 66.6 123 Guyana 55.5
58 Malta 66.5 124 Egypt 55.2 ECONOMIC FREEDOM SCORE
59 Mexico 66.4 125 Mozambique 54.8
60 Cabo Verde 66.4 126 Malawi 54.8 80–100 FREE
61 Dominica 66.1 127 Niger 54.6 70–79.9 MOSTLY FREE
62 El Salvador 65.7 128 India 54.6 60–69.9 MODERATELY FREE
63 Albania 65.7 129 Suriname 54.2 50–59.9 MOSTLY UNFREE
64 Portugal 65.3 130 Greece 54.0
65 Rwanda 64.8 131 Bangladesh 53.9 0–49.9 REPRESSED
2015 Index of
Economic Freedom
CONTRIBUTORS
Ambassador Terry Miller is Director of the Center for Trade and Economics
and the Center for Data Analysis, of the Institute for Economic Freedom and
Opportunity, and the Mark A. Kolokotrones Fellow in Economic Freedom, at
The Heritage Foundation.
Anthony B. Kim is Senior Policy Analyst in the Center for Trade and Economics.
Senator Jim DeMint is President of The Heritage Foundation.
James M. Roberts is Research Fellow for Economic Freedom and Growth in the
Center for Trade and Economics.
Bryan Riley is Jay Van Andel Senior Analyst in Trade Policy in the Center for Trade
and Economics.
Ryan Olson is Research Associate in the Center for Trade and Economics.
Paul A. Gigot is Editor of The Wall Street Journal Editorial Page.
Stephen Moore is Chief Economist at The Heritage Foundation.
Joel Griffith is Research Associate for the Chief Economist at The

Heritage Foundation.
Antonio Nucifora, PhD, is the former Lead Economist for Tunisia at the
World Bank.
Erik Churchill is a political analyst and consultant at the World Bank.
Bob Rijkers, PhD, is an economist in the Research Department at the World Bank.
Nicolas D. Loris is the Herbert and Joyce Morgan Fellow and Senior Analyst in the
Thomas A. Roe Institute for Economic Policy Studies of the Institute for Economic
Freedom and Opportunity.
2015 Index of
Economic Freedom
Ambassador Terry Miller
Anthony B. Kim
with James M. Roberts, Bryan Riley, and Ryan Olson

Copyright © 2015 by The Heritage Foundation and Dow Jones & Company, Inc.
The Heritage Foundation The Wall Street Journal

214 Massachusetts Avenue, NE Dow Jones & Company, Inc.
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Cover image © thinkstockphotos.com

ISBN: 978-0-89195-287-9
ISSN: 1095-7308
Contents
Foreword. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii
Paul A. Gigot
Preface. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix
Jim DeMint
Acknowledgments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xi
Ambassador Terry Miller and Anthony B. Kim
Executive Highlights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Chapter 1: Principles of Economic Freedom. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Chapter 2: Why Economic Freedom Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Chapter 3: The Freedom Path to Economic Growth:

A Comparative Analysis of Country Performance.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Stephen Moore and Joel Griffith
Chapter 4: Cronyism, Corruption, and the Arab Spring: The Case of Tunisia. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Antonio Nucifora, PhD, Erik Churchill, and Bob Rijkers, PhD
Chapter 5: Economic Freedom, Energy, and Development.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

Nicolas D. Loris
Chapter 6: Global and Regional Trends in Economic Freedom.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69

Chapter 7: The Countries.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
Appendix. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 467
Index of Economic Freedom Scores, 1995–2015. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 468
Methodology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 475
Major Works Cited.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 489
v
Foreword
I
n his famous 1980 book and TV series Free to men in the Hong Kong government. Support-
Choose, the incomparable Milton Friedman ers of democracy were harassed, notably media
held forth with the backdrop of Hong Kong baron Jimmy Lai, a chief funder of the democ-
harbor on the miracle of the then-British colony. racy movement whose home was raided by Hong
He called it “the modern exemplar of free mar- Kong’s anti-corruption agency that previously
kets and limited government.” had a reputation for incorruptibility. That raid
He was surely right, as I learned when I lived and others looked to be motivated by politics.
in Hong Kong in 1979 and again through much of This matters for economic as much as for
the 1980s. The pile of rocks had prospered under political freedom because the rule of law is essen-
the “positive non-interventionism” of its wise tial to property rights and a free society. Liberty
British rulers, and it has continued to do so since has prospered in Hong Kong in part because con-
it became a Special Administrative Region under tracts have been protected by the British legal
light Chinese control in 1997. With that happy tradition. If the law in the future can be bent to
legacy, Hong Kong has also remained at the top political ends, then individual workers and busi-
of the annual Index of Economic Freedom. ness investors will eventually get the message
The question raised this year is how long its that they too are vulnerable to threats, harass-
premier status will last. Singapore, another city- ment, and perhaps expropriation if they get on
state dependent largely on human capital, has the wrong side of the Chinese Communist Party.
been inching closer to Hong Kong and now is Some will argue that economic freedom can
essentially tied. exist without political freedom, and perhaps
More ominously, doubts have increased this that is true for a time. But eventually, the need
year about Hong Kong’s rule of law as protests for political control compromises the rule of law
broke out over Beijing’s control of future elec- and the freedom to make economic choices.
tions in the territory. Pro-democracy students This is what could now be happening in Hong
took to the streets, gaining global headlines Kong, and it is why the city’s democracy protes-
but little movement from Beijing or its yes- tors deserve the world’s support. They are fight-
vii
ing to protect their way of life as much as they America, my home, is having its own struggles.
are for the right to elect a chief executive. This is Its precipitous decline in the Index in the wake
why we at The Wall Street Journal have devoted of the financial panic of 2008 and the rise of
so much coverage to Hong Kong’s democratic the Obama Administration seems to have been
uprising. In 2014, Hong Kong has been on free- arrested. The election of a Republican Congress
dom’s front lines. in November 2014 gives some new hope for a
Hong Kong’s struggle is also a reminder that revival, but that will require the rise of a new
economic liberty is not guaranteed, and the generation of leaders willing to relearn the old
wealth of nations can rise and fall with surpris- lessons about freedom and prosperity that Mil-
ing rapidity. The “Executive Highlights” in this ton Friedman taught us through the example of
year’s Index contrast some of the gainers and Hong Kong. So here we go, back to the barricades.
losers in what is the eternal battle by men and
women to determine their own fate. It is heart- Paul A. Gigot
ening to see progress in parts of Africa, long Editorial Page Editor
ignored as hopeless in the West, but dispiriting The Wall Street Journal
to see setbacks in Europe, original home of the November 2014
Enlightenment and capitalism.
viii 2015 Index of Economic Freedom

Preface
A
s‌ I write this in November 2014, people of enemies both external and internal. False
‌around the world are celebrating the 25th starts toward economic freedom have been seen
‌ anniversary of the fall of the Berlin Wall. in places like China, where a burst of economic
This Index was inspired in many ways by the reform 30 years ago lifted millions out of poverty
heroic events that took place in Europe a quarter but where economic momentum is flagging as
of a century ago, and it was only shortly thereaf- reform has stalled. The collapse of countries like
ter that we began, in connection with The Wall Zimbabwe and Venezuela, where dictatorial rule
Street Journal, to record the march of freedom has destroyed lives and prospects for the future,
around the world. is a vivid reminder that freedoms hard won may
The unraveling of the Soviet Union and the be easily lost. In my own country, the United
liberation of Eastern Europe represent a great States, economic freedom has not advanced in
triumph for freedom and economic advance- recent years. We are performing far below poten-
ment. People who once lived in fear and poverty tial as a result. In the Middle East, a burst of revo-
have experienced a rebirth of productivity and lutionary fervor is driving change toward ends as
dramatic economic modernization. Countries yet unknown.
that once lagged badly have emerged from the Perhaps the most critical lesson for these
shadows of repression to join as equals in free- tumultuous times is that the proven superior-
dom those who in the past they could view only ity of the free-market system and the value of
dimly through an iron curtain. economic liberty must be steadfastly reiterated,
The lesson is clear: The human spirit is the particularly in times of trouble. The data we
real wellspring of economic prosperity. That present in the Index of Economic Freedom are a
spirit is at its most inspired when it is unleashed good foundation for that discussion.
from the chains in which it has been bound. In addition to its country analysis and rank-
Still, as events in countries like Georgia, ings, the 2015 Index contains three informative
Ukraine, and Russia show, the fight for freedom chapters that explore topics of particular rel-
requires perpetual vigilance against the inroads evance to today’s policy debates.
ix
• In Chapter 3, Steve Moore, Chief Economist at Like its predecessors, the 2015 Index pro-
The Heritage Foundation, and his co-author, vides ample evidence that dynamic economic
Joel Griffith, undertake comparative analysis gains can be achieved by advancing freedom.
of selected countries in various regions, high- Countries that are gaining freedom enjoy higher
lighting ways in which the rule of law, efficient economic growth, greater gains in employment,
regulatory structures, open markets, and a higher incomes, better health, cleaner environ-
commitment to lower taxes promote great- ments, and a host of other benefits. Those that
er prosperity. are not are, on average, lagging behind and, in the
• In Chapter 4, the Index takes a closer look at worst cases, remain stuck in stagnation and pov-
the causes and prospects for the Arab Spring. erty. Such failures are inexcusable. Most impor-
Presenting a detailed case study on Tunisia, tant, they are preventable.
three World Bank economists analyze the We cannot, of course, know what the future
harm inflicted by cronyism and underscore will bring as the Index of Economic Freedom
the urgent need for inclusive policies that pro- advances into its third decade. Nonetheless, it
vide opportunities for all Tunisians to ensure is encouraging to know that economic freedom
a successful economic and political transition. is still on the march. As the Index has shown in
• In Chapter 5, Nick Loris, a researcher focus- case after case, nations that find the political will
ing on energy, environmental, and regulatory and wisdom to advance economic freedom will
issues as the Herbert and Joyce Morgan Fel- be best positioned to see their citizens prosper
low at The Heritage Foundation, assesses the in the years ahead.
critical linkages between economic freedom,
energy, and development. Jim DeMint, President
The Heritage Foundation
November 2014
x 2015 Index of Economic Freedom

Acknowledgments
T
he Index of Economic Freedom is a product ies Center; Luke Coffey and Daniel Kochis of the
of intense collaboration with people and Margaret Thatcher Center for Freedom; and
organizations around the world. While it is Charlotte Florance, James Phillips, and Ana
impossible to mention all of those who have con- Quintana of the Douglas and Sarah Allison Cen-
tributed to our success, we wish to express our ter for Foreign and National Security Policy.
gratitude to the myriad individuals serving with The Index of Economic Freedom is a substan-
various international organizations, research tial publication that is brought to print each year
institutions, U.S. government agencies, foreign by an incredibly talented team of editors and
embassies, and other organizations who provide production specialists. We wish to express our
the data used in the Index. Assistance from them deepest appreciation to Senior Editor Richard
is vital and greatly appreciated. Odermatt, who is responsible for final review
The Heritage Foundation’s Center for Trade of the completed text, and Senior Copy Editor
and Economics (CTE) leads the Index produc- William T. Poole, who bears the primary respon-
tion effort. The CTE team of James Roberts, sibility for perfecting the language we employ,
Bryan Riley, and Ryan Olson shared with us as well as Therese Pennefather, Deputy Director
the responsibility for grading the 10 compo- of Research Editing, and Senior Data Graphics
nents of economic freedom. CTE interns Fan Editor John Fleming. Creative Director Melissa
Mo, Tori Whiting, Ashley Wright, Bridget Mudd, Bluey and Jay Simon, Publication Production
Elizabeth Allen, Andy Marguiles, Preston Turner, Specialist, were responsible for the design and
and Charlotte Howson contributed substan- layout of the book.
tial research. The availability of the entire Index and its
Various Heritage Foundation foreign policy database online at www.heritage.org/index has
experts who provided country backgrounds greatly expanded the publication’s reach and
informed by their regional and country expertise accessibility over the past years. The transposi-
include Lisa Curtis, Bruce Klingner, Bill Wilson, tion to the Web each year would not be possible
and Director Walter Lohman of the Asian Stud- without the expertise of Director of Marketing
xi
Technology Tim McGovern and his team, includ- Denton, and Matt Streit; and Chief of Staff Bret
ing Roger Spurzem, Maria Sousa, Isabel Isidro, Bernhardt is sincerely appreciated.
Jeph Christoff, Joe Perez, Catherine Dugyon, We also wish to acknowledge our enduring
and former Heritage staffer Jim Lawruk. debt to Chairman Thomas A. Saunders III and
Jack Spencer, Vice President for the Institute the Heritage Board of Trustees, and particularly
for Economic Freedom and Opportunity, and Dr. to Ambassador J. William Middendorf II, who
James Carafano, Vice President for the Kathryn originally encouraged us to undertake such a
and Shelby Cullom Davis Institute for National study of global economic freedom. We remain
Security and Foreign Policy, provide substantial deeply indebted to Dr. Edwin J. Feulner,
help and advice in connection with many aspects Founder and former President of The Heritage
of Index production and marketing. We are also Foundation, and Heritage Distinguished Fellow
grateful for the contributions to our work over Dr. Kim R. Holmes, who was a founding editor of
the past year of Derrick Morgan, former Vice the Index. Without their vision and insight, this
President for the Institute for Economic Free- project could never have become a reality and
dom and Opportunity. achieved such success over the past 21 years.
Senator Jim DeMint, President of The Very special thanks also go to Paul Gigot
Heritage Foundation, and Phil Truluck, Executive and Mary Anastasia O’Grady at The Wall Street
Vice President of The Heritage Foundation, have Journal, whose partnership and support we
been enthusiastic supporters and great sources truly cherish.
of encouragement in producing this annual pub-
lication. The ongoing support from Group Vice Ambassador Terry Miller
Presidents David Addington, Ed Corrigan, John Anthony B. Kim
Fogarty, and Geoff Lysaught; Vice Presidents November 2014
Becky Norton Dunlop, John Von Kannon, Wesley
xii 2015 Index of Economic Freedom

Executive Highlights
T
he results of the 2015 Index of Economic Free- that recorded in the aftermath of the financial
dom confirm that the significant rebound in crisis and recession, thus regaining all of the
world economic freedom reported in the ground that had been lost.
2014 Index was no fluke. While the growth in • On a worldwide basis, the increase in eco-
economic freedom has slowed over the past year, nomic freedom was driven by improvements
the global average economic freedom score has in trade freedom, monetary freedom, and free-
nonetheless reached its highest level ever. dom from corruption, for which global ratings
This 21st edition of the Index analyzes eco- have advanced by close to one point or more
nomic policy developments in 186 countries and on average.
territories since the second half of 2013. Econo- • Average scores for most other economic free-
mies in six regions have been graded and ranked doms, including business freedom, property
on 10 aspects of economic freedom that evaluate rights, labor freedom, and financial freedom,
the rule of law, the intrusiveness and size of gov- registered small declines. More troubling
ernment, regulatory efficiency, and the open- were declines in the Index measures related
ness of markets. to assessing government size. With a score
drop of 1.0 point, the control of government
HIGHLIGHTS FROM THE 2015 INDEX spending recorded the biggest deterioration,
• Despite the continuing challenges that con- reflecting a continuation of countercycli-
front the world economy, the global average cal or interventionist stimulus policies in
economic freedom score has improved over some countries.
the past year by one-tenth of a point, reach- • 101 countries, the majority of which are less
ing a record 60.4 (on a 0-to-100 scale) in the developed or emerging economies, showed
2015 Index. Although the rate of advancement advances in economic freedom over the past
has slowed in comparison to last year’s near year; 37 countries, including Taiwan, Lithu-
record 0.7-point increase, the world average ania, Georgia, Colombia, Israel, Cabo Verde,
has now reached a level a full point higher than Montenegro, and Côte d’Ivoire, achieved their
1
highest economic freedom scores ever in the spiral in U.S. economic freedom over the pre-
2015 Index. vious seven years has come to a halt. In the
• While five countries (Singapore, Finland, 2015 Index, the U.S. has recorded modest score
Mexico, Madagascar, and Suriname) recorded gains in six of the 10 economic freedoms and
no score change, declines in economic free- an overall score increase of seven-tenths of
dom were registered in 72 countries in the a point. On the other hand, the U.S. score for
2015 Index; 11 countries, including Venezuela, business freedom has plunged below 90, the
Equatorial Guinea, Argentina, Bolivia, Algeria, lowest level since 2006.
Greece, and El Salvador, recorded their lowest
economic freedom scores ever. Countries with higher levels of economic
• Sub-Saharan Africa is home to six of the 10 big- freedom continue to outperform others in
gest score improvements. São Tomé and Prín- reducing poverty, achieving greater prosperity,
cipe, Democratic Republic of Congo, Togo, and ensuring broader progress in many dimen-
Senegal, Burundi, and Zimbabwe all recorded sions of social and human development.
score gains of two points or more. Five coun-
tries in Europe (Slovenia, Ukraine, Armenia, • The intensity of poverty in countries whose
Greece, and Turkey) were among those regis- economies are considered mostly free or mod-
tering the worst score declines. erately free is only about one-fourth the level
• Average levels of economic freedom advanced found in countries that are rated less free.
in half of the six Index regions. Sub-Saharan • Despite varying degrees of economic freedom
Africa (led by São Tomé and Príncipe and across the regions around the globe, the posi-
Democratic Republic of Congo) and the tive relationship between economic freedom
Asia–Pacific region (led by Maldives and the and prosperity is unequivocally consistent
Philippines) each showed an average score within the regions: Per capita incomes are
improvement of 0.3 point, and Middle East/ much higher in countries that are economi-
North Africa countries (led by Israel and cally free.
Morocco) gained 0.1 point on average. While • Not surprisingly, overall human development
average economic freedom for the South and also thrives in an environment that is eco-
Central America/Caribbean region stayed the nomically free. Economic freedom is about
same as last year, Europe and North America more than a business environment in which
registered slight declines of 0.1 point and 0.2 entrepreneurship and prosperity can flour-
point, respectively. ish. Higher economic freedom induces greater
• Three northern European economies (Esto- overall human development in such key areas
nia, Lithuania, and Latvia—the so-called Baltic as life expectancy, literacy, education, and the
Tigers) are on the move toward greater eco- standard of living.
nomic freedom. Overcoming severe recessions • There is a robust relationship between
following the global financial turmoil, these improving economic freedom and achieving
countries have maintained their openness higher per capita economic growth. Wheth-
to global markets and competition, further er long-term (20 years), medium-term (10
reformed their economies, and shrunk the years), or short-term (five years), the relation-
size of their governments. Each has advanced ship between changes in economic freedom
economic freedom and moved up in the global and changes in economic growth is consis-
rankings every year since 2012. tently positive. As economies gain economic
• The United States continues to be only the freedom and thus achieve dynamic growth,
12th-freest economy, seemingly stuck in the individuals and companies are empowered
ranks of the “mostly free,” the second-tier to build businesses, create jobs, and gener-
economic freedom category into which the ate greater innovation for their communities
U.S. dropped in 2010. However, the downward and societies.
2 2015 Index of Economic Freedom

THE GLOBAL ECONOMIC commitment to the rule of law, limited govern-
FREEDOM RANKINGS ment, regulatory efficiency, and open markets.
• Hong Kong has maintained its status as the • Moving up three slots, Estonia has become
world’s freest economy, a distinction that it the world’s eighth-freest economy. The small
has achieved for 21 consecutive years. How- Baltic nation has rejoined the world’s 10 fre-
ever, the gap between that territory and Sin- est economies for the first time since 2007,
gapore, the second-freest economy, has almost overtaking Denmark (11th), Ireland (ninth),
vanished. Hong Kong’s economic freedom and Mauritius.
score declined by half a point, with an erosion • The Index rankings just below the top 10
of the rule of law reflecting an increased level underwent considerable reshuffling. Taiwan
of perceived corruption. and Lithuania, benefitting from uninter-
• Along with Hong Kong and Singapore, New rupted score improvements since 2009, have
Zealand, Australia, and Switzerland are the recorded their highest economic freedom
only economies considered “free” with eco- scores ever, jumping to 14th and 15th places,
nomic freedom scores above 80 on the 0-to- respectively, and surpassing Sweden, Finland,
100 Index grading scale. New Zealand moved Germany, Luxembourg, the Netherlands,
up two slots and reclaimed third place in the and Bahrain.
rankings as a result of committed efforts to • The so-called BRICS economies (Brazil, Rus-
cut government spending. Canada remains sia, India, China, and South Africa) showed
the world’s sixth-freest economy for the fifth little progress in economic freedom. Scores
year in a row. for India and Brazil actually declined. South
• Chile (seventh) and Mauritius (10th), two Africa recorded a modest improvement to
reform-minded developing economies, con- remain in the ranks of the “moderately free,”
tinue to rank among the world’s 10 freest econ- but the other BRICS countries continue to be
omies. Both have demonstrated persistent considered “mostly unfree.”
Executive Highlights 3
2015 Index of Economic Freedom World Rankings
Freedom from Corruption
Government Spending
Investment Freedom
Monetary Freedom
Change from 2014
Financial Freedom
Business Freedom
Property Rights
Labor Freedom
Fiscal Freedom
Trade Freedom
Overall Score
World Rank
Country
1 Hong Kong 89.6 -0.5 90 75.0 93.2 89.7 100.0 95.9 81.8 90.0 90 90
2 Singapore 89.4 0.0 90 86.0 91.2 93.8 96.9 96.9 83.7 90.0 85 80
3 New Zealand 82.1 0.9 95 91.0 70.4 43.0 95.5 91.4 87.6 86.8 80 80
4 Australia 81.4 -0.6 90 81.0 63.7 61.8 94.1 81.6 85.3 86.4 80 90
5 Switzerland 80.5 -1.1 90 85.0 70.3 65.1 78.1 75.3 86.3 90.0 85 80
6 Canada 79.1 -1.1 90 81.0 79.9 48.3 89.0 76.1 77.9 88.4 80 80
7 Chile 78.5 -0.2 90 71.0 76.5 83.3 69.3 67.0 85.6 82.0 90 70
8 Estonia 76.8 0.9 90 68.0 80.6 53.2 81.5 58.7 77.6 88.0 90 80
9 Ireland 76.6 0.4 85 72.0 73.6 45.6 82.1 76.2 83.9 88.0 90 70
10 Mauritius 76.4 -0.1 65 52.0 91.9 87.4 78.0 68.2 77.6 88.4 85 70
11 Denmark 76.3 0.2 95 91.0 39.6 1.8 97.4 92.1 87.6 88.0 90 80
12 United States 76.2 0.7 80 73.0 66.2 51.8 88.8 98.5 76.6 87.0 70 70
13 United Kingdom 75.8 0.9 90 76.0 62.9 30.3 91.1 75.6 74.4 88.0 90 80
14 Taiwan 75.1 1.2 70 61.0 80.4 87.1 92.4 55.2 83.3 86.4 75 60
15 Lithuania 74.7 1.7 60 57.0 92.9 61.3 84.9 62.0 81.2 88.0 80 80
16 Germany 73.8 0.4 90 78.0 60.8 40.1 88.2 51.2 81.5 88.0 90 70
17 The Netherlands 73.7 -0.5 90 83.0 51.8 23.8 84.3 66.3 79.8 88.0 90 80
18 Bahrain 73.4 -1.7 60 48.0 99.9 73.1 72.5 83.1 74.2 78.6 65 80
19 Finland 73.4 0.0 90 89.0 66.4 3.6 92.6 54.8 79.9 88.0 90 80
20 Japan 73.3 0.9 80 74.0 68.7 47.1 84.1 90.2 86.7 82.6 70 50
21 Luxembourg 73.2 -1.0 90 80.0 62.3 42.2 71.3 42.1 80.7 88.0 95 80
22 Georgia 73.0 0.4 40 49.0 87.2 73.8 88.6 79.9 82.7 88.6 80 60
23 Sweden 72.7 -0.4 90 89.0 43.0 19.2 87.9 54.0 85.5 88.0 90 80
24 Czech Republic 72.5 0.3 75 48.0 81.5 40.6 68.2 82.9 81.2 88.0 80 80
25 United Arab Emirates 72.4 1.0 55 69.0 99.5 85.8 74.7 83.8 83.8 82.4 40 50
26 Iceland 72.0 -0.4 90 78.0 72.0 32.6 90.5 62.2 77.0 88.0 70 60
27 Norway 71.8 0.9 90 86.0 52.1 43.8 92.1 48.2 81.7 89.4 75 60
28 Colombia 71.7 1.0 50 36.0 80.3 76.0 81.5 81.7 80.1 81.2 80 70
29 South Korea 71.5 0.3 75 55.0 72.5 67.9 89.7 51.1 81.6 72.6 70 80
30 Austria 71.2 -1.2 90 69.0 50.1 19.8 78.0 76.7 80.3 88.0 90 70
31 Malaysia 70.8 1.2 55 50.0 84.4 74.0 93.5 75.7 80.8 80.0 55 60
32 Qatar 70.8 -0.4 70 68.0 99.7 71.9 70.5 71.2 79.7 81.8 45 50
33 Israel 70.5 2.1 75 61.0 61.9 47.8 72.4 67.1 81.6 88.6 80 70
34 Macau 70.3 -1.0 60 49.7 71.8 91.8 60.0 50.0 74.9 90.0 85 70
35 Saint Lucia 70.2 -0.5 70 71.0 77.7 65.8 75.6 79.8 85.5 72.0 65 40
36 Botswana 69.8 -2.2 70 64.0 79.5 61.9 66.8 70.0 73.9 72.2 70 70

Government Spending
Investment Freedom
Monetary Freedom
Change from 2014
Financial Freedom
Business Freedom
Property Rights
Labor Freedom
Fiscal Freedom
Trade Freedom
Overall Score
World Rank
Country
37 Latvia 69.7 1.0 50 53.0 84.4 59.2 82.1 61.5 83.8 88.0 85 50
38 Jordan 69.3 0.1 60 45.0 93.7 70.7 59.1 74.4 80.6 79.6 70 60
39 Brunei 68.9 -0.1 35 60.0 87.0 63.6 68.3 96.9 76.6 81.8 70 50
40 Belgium 68.8 -1.1 80 75.0 43.6 10.2 90.7 63.7 81.7 88.0 85 70
41 The Bahamas 68.7 -1.1 70 71.0 97.8 83.2 68.9 75.3 78.8 52.2 30 60
42 Poland 68.6 1.6 60 60.0 82.1 47.1 67.3 60.4 81.3 88.0 70 70
43 Uruguay 68.6 -0.7 70 73.0 77.1 65.1 72.6 64.3 71.6 81.8 80 30
Saint Vincent
44 68.0 1.0 70 62.0 73.3 75.3 70.8 78.2 82.3 68.4 60 40
and the Grenadines
45 Cyprus 67.9 0.3 70 63.0 79.5 36.7 79.5 59.6 82.7 88.0 70 50
46 Barbados 67.9 -0.4 80 75.0 73.8 42.1 71.6 69.2 78.2 63.8 65 60
47 Peru 67.7 0.3 40 38.0 78.6 88.5 67.7 63.4 83.9 87.0 70 60
48 Jamaica 67.7 1.0 40 38.0 81.5 73.2 85.9 76.5 71.4 75.0 85 50
49 Spain 67.6 0.4 70 59.0 53.1 39.8 77.5 52.6 81.3 88.0 85 70
50 Slovak Republic 67.2 0.8 50 47.0 80.8 55.1 69.6 56.5 75.5 88.0 80 70
51 Costa Rica 67.2 0.3 50 53.0 80.0 89.9 64.5 54.6 75.8 83.8 70 50
52 Armenia 67.1 -1.8 20 36.0 84.4 82.8 82.7 64.3 70.6 85.4 75 70
53 Macedonia 67.1 -1.5 35 44.0 91.4 65.6 79.2 70.7 79.0 86.2 60 60
54 Hungary 66.8 -0.2 55 54.0 78.7 25.9 74.5 67.7 79.2 88.0 75 70
55 Bulgaria 66.8 1.1 30 41.0 91.0 64.5 68.5 76.6 83.2 88.0 65 60
56 Oman 66.7 -0.7 55 47.0 98.5 44.2 68.4 76.1 76.2 76.8 65 60
57 Romania 66.6 1.1 40 43.0 86.9 62.3 69.8 68.6 77.3 88.0 80 50
58 Malta 66.5 0.1 75 56.0 63.1 44.4 61.0 55.6 81.8 88.0 80 60
59 Mexico 66.4 -0.4 50 34.0 77.8 78.0 71.5 59.9 77.6 85.6 70 60
60 Cabo Verde 66.4 0.3 75 58.0 78.3 67.9 61.8 42.1 81.0 69.6 70 60
61 Dominica 66.1 0.9 60 58.0 73.6 61.5 71.6 68.7 89.5 72.8 75 30
62 El Salvador 65.7 -0.5 35 38.0 79.4 85.5 53.3 53.3 82.5 85.2 75 70
63 Albania 65.7 -1.2 30 31.0 87.2 76.1 70.6 52.9 80.8 87.8 70 70
64 Portugal 65.3 1.8 70 62.0 61.1 28.8 87.5 42.9 82.8 88.0 70 60
65 Rwanda 64.8 0.1 30 53.0 80.2 79.2 59.5 84.5 76.0 80.8 65 40
66 Montenegro 64.7 1.1 40 44.0 92.6 36.7 77.1 77.5 79.7 84.8 65 50
67 Trinidad and Tobago 64.1 1.4 50 38.0 79.0 69.3 65.3 76.6 74.3 78.6 60 50
68 Panama 64.1 0.7 30 35.0 84.5 78.8 71.5 41.5 76.4 78.4 75 70
69 Kazakhstan 63.3 -0.4 25 26.0 93.2 85.0 73.7 87.0 74.6 79.0 40 50
70 Turkey 63.2 -1.7 45 50.0 76.1 57.6 61.0 50.2 72.4 84.6 75 60
71 Ghana 63.0 -1.2 50 46.0 84.6 70.8 62.5 56.9 69.2 64.8 65 60
Government Spending
Investment Freedom
Monetary Freedom
Change from 2014
Financial Freedom
Business Freedom
Property Rights
Labor Freedom
Fiscal Freedom
Trade Freedom
Overall Score
World Rank
Country
72 South Africa 62.6 0.1 50 42.0 69.5 68.2 73.0 61.6 74.9 76.6 50 60
73 France 62.5 -1.0 80 71.0 47.5 2.5 80.2 43.5 77.5 83.0 70 70
74 Kuwait 62.5 0.2 45 43.0 97.7 61.1 58.6 64.2 74.0 76.2 55 50
75 Thailand 62.4 -0.9 40 35.0 81.5 81.4 72.5 63.5 69.9 75.4 45 60
76 The Philippines 62.2 2.1 30 36.0 79.1 89.3 55.3 58.2 78.8 75.4 60 60
77 Saudi Arabia 62.1 -0.1 40 46.0 99.7 61.9 65.8 72.7 68.4 76.4 40 50
78 Samoa 61.9 0.8 60 38.0 80.2 46.5 73.6 78.4 81.2 75.8 55 30
79 Madagascar 61.7 0.0 45 28.0 90.9 94.7 62.3 45.1 79.2 71.8 50 50
80 Italy 61.7 0.8 55 43.0 54.2 23.2 71.9 55.4 81.2 88.0 85 60
81 Croatia 61.5 1.1 40 48.0 74.9 46.5 55.8 42.8 80.0 87.2 80 60
82 Kyrgyz Republic 61.3 0.2 20 24.0 93.6 53.2 73.7 85.0 73.8 80.2 60 50
83 Paraguay 61.1 -0.9 30 24.0 96.0 81.9 58.4 26.3 78.3 81.4 75 60
84 Vanuatu 61.1 1.6 40 33.5 97.2 83.8 51.5 46.4 82.9 75.4 60 40
85 Azerbaijan 61.0 -0.3 20 28.0 88.1 59.7 74.5 79.1 79.8 76.0 55 50
86 Dominican Republic 61.0 -0.3 30 29.0 84.1 87.1 53.5 57.5 76.0 77.8 75 40
87 Guatemala 60.4 -0.8 20 29.0 79.6 94.1 54.7 50.6 76.8 84.6 65 50
88 Slovenia 60.3 -2.4 60 57.0 58.1 0.0 81.2 57.1 81.3 88.0 70 50
89 Morocco 60.1 1.8 40 37.0 70.9 61.0 68.8 33.4 81.9 78.2 70 60
90 Serbia 60.0 0.6 45 42.0 82.4 27.1 57.8 70.4 72.2 78.2 75 50
91 Swaziland 59.9 -1.3 40 39.0 76.4 68.6 60.5 69.3 73.9 76.0 55 40
92 Uganda 59.7 -0.2 25 26.0 73.3 89.0 43.3 87.5 76.3 76.6 60 40
93 Namibia 59.6 0.2 30 48.0 66.7 56.0 64.3 90.9 74.3 71.2 55 40
94 Lebanon 59.3 -0.1 20 28.0 91.3 70.6 54.7 60.7 72.0 75.8 60 60
95 Tonga 59.3 1.1 20 28.6 87.2 79.0 74.1 92.1 73.5 78.4 40 20
96 Mongolia 59.2 0.3 30 38.0 83.9 35.6 68.2 82.7 69.2 74.8 50 60
97 Bosnia and Herzegovina 59.0 0.6 20 42.0 82.9 27.3 53.5 63.4 84.0 87.2 70 60
98 Fiji 59.0 0.3 25 22.3 81.3 74.6 63.2 75.2 78.3 70.2 50 50
99 Benin 58.8 1.7 30 36.0 68.3 86.7 55.2 53.2 79.9 58.4 70 50
100 Zambia 58.7 -1.7 30 38.0 71.9 78.0 68.2 46.0 73.2 76.8 55 50
101 Sri Lanka 58.6 -1.4 35 37.0 85.0 88.4 72.5 58.7 68.2 71.6 30 40
102 Burkina Faso 58.6 -0.3 25 38.0 82.4 79.8 49.6 57.8 80.0 68.2 65 40
103 Côte d'Ivoire 58.5 0.8 35 27.0 77.7 82.4 65.4 46.0 75.0 71.4 55 50
104 Gabon 58.3 0.5 40 34.0 77.5 74.6 57.9 64.3 78.4 61.0 55 40
105 Indonesia 58.1 -0.4 30 32.0 83.3 88.3 49.3 48.7 74.9 74.8 40 60
106 Senegal 57.8 2.4 40 41.0 71.3 74.6 54.6 39.5 83.0 74.0 60 40
107 Tunisia 57.7 0.4 40 41.0 74.3 70.8 81.2 69.1 74.8 61.2 35 30

Government Spending
Investment Freedom
Monetary Freedom
Change from 2014
Financial Freedom
Business Freedom
Property Rights
Labor Freedom
Fiscal Freedom
Trade Freedom
Overall Score
World Rank
Country
108 Nicaragua 57.6 -0.8 10 28.0 78.4 76.6 58.0 56.7 67.8 85.4 65 50
109 Tanzania 57.5 -0.3 30 33.0 79.9 79.3 45.0 61.4 69.7 67.0 60 50
110 Cambodia 57.5 0.1 25 20.0 90.5 87.5 29.2 62.2 78.7 72.2 60 50
111 Moldova 57.5 0.2 40 35.0 85.1 51.8 66.8 40.6 76.1 79.8 50 50
112 Djibouti 57.5 1.6 25 36.0 81.2 57.1 55.4 66.6 78.9 54.8 70 50
113 The Gambia 57.5 -2.0 25 28.0 75.4 73.4 55.7 66.7 70.8 65.0 65 50
114 Seychelles 57.5 1.3 50 54.0 79.8 59.4 67.7 63.9 76.0 44.0 50 30
115 Bhutan 57.4 0.7 60 63.0 82.6 60.1 61.9 81.1 66.0 49.4 20 30
116 Honduras 57.4 0.3 30 26.0 84.9 78.7 53.2 28.0 75.4 77.6 60 60
117 Belize 56.8 0.1 30 6.7 82.4 78.3 59.1 61.8 79.3 70.4 50 50
118 Brazil 56.6 -0.3 50 42.0 68.4 50.9 53.6 52.1 69.4 69.6 50 60
119 Mali 56.4 0.9 25 28.0 69.6 89.2 47.2 50.7 81.1 73.2 60 40
120 Nigeria 55.6 1.3 30 25.0 85.2 76.1 48.3 77.7 70.4 63.8 40 40
121 Pakistan 55.6 0.4 30 28.0 77.7 86.1 65.6 42.1 71.2 65.6 50 40
122 Kenya 55.6 -1.5 30 27.0 78.0 72.1 47.9 63.8 72.8 64.0 50 50
123 Guyana 55.5 -0.2 25 27.0 68.7 70.8 63.8 74.5 78.4 72.0 45 30
124 Egypt 55.2 2.3 20 32.0 85.8 68.0 65.4 53.6 67.4 70.0 50 40
125 Mozambique 54.8 -0.2 30 30.0 75.2 66.5 60.9 37.9 82.0 75.4 40 50
126 Malawi 54.8 -0.6 40 37.0 78.5 49.0 49.1 63.1 53.8 72.2 55 50
127 Niger 54.6 -0.5 30 34.0 76.6 83.6 39.2 40.9 81.3 65.6 55 40
128 India 54.6 -1.1 55 36.0 79.4 78.3 43.3 48.7 65.3 64.6 35 40
129 Suriname 54.2 0.0 35 36.0 69.3 73.8 42.2 81.9 77.2 66.2 30 30
130 Greece 54.0 -1.7 40 40.0 64.2 0.0 73.3 51.6 77.8 83.0 60 50
131 Bangladesh 53.9 -0.2 20 27.0 72.7 92.0 62.2 63.7 67.7 59.0 45 30
132 Burundi 53.7 2.3 20 21.0 73.5 61.3 61.4 68.1 69.8 72.2 60 30
133 Yemen 53.7 -1.8 30 18.0 91.5 59.9 54.0 57.1 68.5 77.6 50 30
134 Maldives 53.4 2.4 25 21.9 95.5 50.6 85.8 73.4 74.1 47.8 30 30
135 Mauritania 53.3 0.1 25 30.0 80.2 59.8 50.5 52.1 76.6 69.0 50 40
136 São Tomé and Príncipe 53.3 4.5 25 42.0 87.8 41.4 65.1 45.8 70.7 75.2 50 30
137 Papua New Guinea 53.1 -0.8 20 25.0 66.9 68.7 53.5 74.5 72.7 85.0 35 30
138 Togo 53.0 3.1 30 29.0 69.7 78.1 51.9 43.4 80.4 67.8 50 30
139 China 52.7 0.2 20 40.0 69.7 81.5 52.1 63.0 74.2 71.8 25 30
140 Tajikistan 52.7 0.7 20 22.0 92.1 81.9 65.4 46.4 69.6 74.6 25 30
141 Liberia 52.7 0.3 25 38.0 83.0 69.9 60.1 43.9 72.7 74.4 40 20
142 Comoros 52.1 0.7 30 28.0 64.5 78.8 47.3 52.0 77.9 73.0 40 30
143 Russia 52.1 0.2 20 28.0 86.1 57.8 76.3 58.9 63.9 75.0 25 30
Government Spending
Investment Freedom
Monetary Freedom
Change from 2014
Financial Freedom
Business Freedom
Property Rights
Labor Freedom
Fiscal Freedom
Trade Freedom
Overall Score
World Rank
Country
144 Guinea 52.1 -1.4 15 24.0 68.1 79.5 51.6 74.4 66.7 61.2 40 40
145 Guinea-Bissau 52.0 0.7 20 19.0 89.1 88.0 39.6 61.7 77.5 65.4 30 30
146 Cameroon 51.9 -0.7 25 25.0 71.7 87.8 41.6 47.8 75.6 59.6 35 50
147 Sierra Leone 51.7 1.2 10 30.0 80.8 87.5 53.4 41.6 68.5 70.2 55 20
148 Vietnam 51.7 0.9 15 31.0 79.1 77.1 61.5 62.9 66.8 78.6 15 30
149 Ethiopia 51.5 1.5 30 33.0 77.4 91.4 55.9 56.4 66.1 64.4 20 20
150 Laos 51.4 0.2 15 26.0 86.2 86.8 59.5 57.1 74.5 58.6 30 20
151 Haiti 51.3 2.4 10 19.0 80.3 76.2 43.1 63.7 73.5 77.6 40 30
152 Nepal 51.3 1.2 30 31.0 85.6 88.9 65.7 44.3 70.5 61.8 5 30
153 Belarus 49.8 -0.3 20 29.0 86.4 54.7 72.0 80.1 44.5 81.0 20 10
154 Micronesia 49.6 -0.2 30 30.0 93.2 0.0 51.0 79.1 76.9 81.0 25 30
155 Lesotho 49.6 0.1 35 49.0 68.5 0.0 54.7 63.9 75.2 64.6 45 40
156 Ecuador 49.2 1.2 15 35.0 79.1 51.0 51.4 51.3 68.2 71.4 30 40
157 Algeria 48.9 -1.9 30 36.0 80.0 38.7 66.6 50.5 71.2 60.8 25 30
158 Angola 47.9 0.2 15 23.0 84.5 50.1 47.4 43.2 65.4 70.2 40 40
159 Solomon Islands 47.0 0.8 30 25.0 61.1 25.7 67.7 68.6 74.3 73.0 15 30
160 Uzbekistan 47.0 0.5 15 17.0 90.2 67.3 73.1 64.2 63.5 69.8 0 10
161 Burma 46.9 0.4 10 21.0 86.9 77.9 28.7 79.3 66.1 74.2 15 10
162 Ukraine 46.9 -2.4 20 25.0 78.7 28.0 59.3 48.2 78.6 85.8 15 30
163 Bolivia 46.8 -1.6 10 34.0 86.8 60.9 53.7 25.5 69.7 77.6 10 40
164 Kiribati 46.4 0.1 30 29.2 73.0 0.0 56.8 83.9 80.6 55.4 25 30
165 Chad 45.9 1.4 20 19.0 46.2 83.6 27.1 47.7 75.6 55.2 45 40
166 Central African Republic 45.9 -0.8 15 25.0 65.0 92.0 27.2 37.5 69.6 52.4 45 30
167 Timor-Leste 45.5 2.3 20 30.0 64.7 0.0 59.8 72.0 68.7 79.6 40 20
168 Congo, Dem. Rep. 45.0 4.4 10 22.0 72.9 85.7 42.8 38.4 75.1 63.0 20 20
169 Argentina 44.1 -0.5 15 34.0 66.8 41.2 52.8 43.3 59.6 68.8 30 30
170 Congo, Republic of 42.7 -1.0 10 22.0 67.4 60.7 36.8 36.0 71.6 62.4 30 30
171 Iran 41.8 1.5 10 25.0 81.2 93.0 57.0 51.3 48.7 41.4 0 10
172 Turkmenistan 41.4 -0.8 5 17.0 94.0 93.5 30.0 20.0 64.2 80.0 0 10
173 Equatorial Guinea 40.4 -4.0 10 19.0 75.4 31.4 37.5 33.5 78.3 53.8 35 30
174 Eritrea 38.9 0.4 10 20.0 57.0 71.8 18.2 65.5 57.8 69.2 0 20
175 Zimbabwe 37.6 2.1 10 21.0 66.6 74.2 37.1 23.7 75.4 58.4 0 10
176 Venezuela 34.3 -2.0 5 20.0 75.0 52.0 41.6 24.2 42.8 62.8 0 20
177 Cuba 29.6 0.9 10 46.0 61.8 0.0 20.0 20.0 64.8 63.8 0 10
178 North Korea 1.3 0.3 5 8.0 0.0 0.0 0.0 0.0 0.0 0.0 0 0
N/A Afghanistan N/A N/A N/A 8.0 91.7 81.2 61.4 67.5 72.6 N/A 55 N/A

Government Spending
Investment Freedom
Monetary Freedom
Change from 2014
Financial Freedom
Business Freedom
Property Rights
Labor Freedom
Fiscal Freedom
Trade Freedom
Overall Score
World Rank
Country
N/A Iraq N/A N/A N/A 16.0 N/A 43.8 57.7 74.4 73.6 N/A N/A N/A
N/A Kosovo N/A N/A 30 33.0 N/A 73.9 66.8 72.1 74.9 N/A 65 N/A
N/A Libya N/A N/A 10 15.0 95.0 37.5 46.8 66.7 71.4 80.0 5 N/A
N/A Liechtenstein N/A N/A N/A N/A N/A N/A N/A N/A N/A 90.0 85 80
N/A Somalia N/A N/A N/A 8.0 N/A N/A N/A N/A N/A N/A N/A N/A
N/A Sudan N/A N/A N/A 11.0 86.4 94.5 49.0 43.8 52.8 55.6 15 N/A
N/A Syria N/A N/A 10 17.0 N/A N/A 57.3 49.1 N/A N/A 0 20
Chapter 1
Principles of Economic Freedom

[A] society that puts freedom first will, as a individual merit. Government decision-making
happy by-product, end up with both great- is characterized by openness and transparency,
er freedom and greater equality. Though which illuminates the shadows where dis-
a by-product of freedom, greater equality crimination might flourish and promotes equal
is not an accident. A free society releases opportunity for all.
the energies and abilities of people to pur- In an economically free society, the power of
sue their own objectives. It prevents some economic decision-making is widely dispersed,
people from arbitrarily suppressing others. and the allocation of resources for production
and consumption is on the basis of open compe-
—Milton and Rose Friedman1
tition so that every individual or firm gets a fair
chance to succeed.
I
n an economically free society, each person These three fundamental principles of
controls the fruits of his or her own labor economic freedom—empowerment of the
and initiative. Individuals are empowered— individual, non-discrimination, and open compe-
indeed, entitled—to pursue their dreams by tition—underpin every measurement and policy
means of their own free choice. idea presented in the Index of Economic Freedom.
In an economically free society, individu-
als succeed or fail based on their individual ECONOMIC FREEDOM:
effort and ability. The institutions of a free and THE ROLE OF GOVERNMENT
open market society do not discriminate either As Friedrich Hayek once observed, “To be
against or in favor of individuals based on their controlled in our economic pursuits means to be
race, ethnic background, gender, class, family controlled in everything.”2 Hayek’s keen insights
connections, or any other factor unrelated to into economic freedom are based on the moral
11
truth that each person is, as a matter of natural and enjoy the fruits of their labor. For example,
right, a free and responsible being with inalien- citizens are taxed to provide revenue for public
able dignity and fundamental liberties that safety, the protection of property, and the com-
righteous and effective political systems should mon defense. Other goods—what economists call
regard as unassailable. Governments that are “public goods”—may be supplied more efficiently
just, according to the U.S. Declaration of Inde- by government than through private means.
pendence, are instituted precisely to secure Some public goods, such as the maintenance of
these rights. a police force to protect property rights, a mon-
Any discussion of economic freedom thus has etary authority to maintain a sound currency, and
at its heart reflection on the critical relationship an impartial judiciary to enforce contracts among
between individuals and the government. In parties, are themselves vital ingredients of an eco-
general, state action or government control that nomically free society. When government action
interferes with individual autonomy limits eco- rises beyond the minimal necessary level, how-
nomic freedom. ever, it leads inevitably and quickly to the loss of
However, the goal of economic freedom is freedom—and the first freedom affected is often
not simply an absence of government coercion economic freedom.3
or constraint, but the creation and maintenance Throughout history, governments have
of a mutual sense of liberty for all. As individuals imposed a wide array of constraints on econom-
enjoy the blessings of economic freedom, they ic activity. Such constraints, though sometimes
in turn have a responsibility to respect the eco- imposed in the name of equality or some other
nomic rights and freedoms of others within the noble societal purpose, are in reality imposed
rule of law. Governments are instituted to ensure most often for the benefit of societal elites or spe-
basic protections against the ravages of nature cial interests, and they come with a high cost to
or the predations of one citizen against another. society as a whole. By substituting political judg-
Positive economic rights such as property and ments for those of the marketplace, government
contracts are given societal as well as individ- diverts entrepreneurial resources and energy
ual defense against the destructive tendencies from productive activities to rent-seeking, the
of others. quest for economically unearned benefits. The
A comprehensive view of economic freedom result is lower productivity, economic stagna-
should encompass all liberties and rights of pro- tion, and declining prosperity.
duction, distribution, or consumption of goods Government provision of goods and services
and services. The highest forms of economic beyond those that are clearly considered pub-
freedom should provide an absolute right of lic goods also imposes a separate constraint on
property ownership; full freedom of movement economic activity, crowding out private-sector
for labor, capital, and goods; and an absolute activity and usurping resources that otherwise
absence of coercion or constraint of economic might have been available for private investment
activity beyond that which is necessary for the or consumption. Constraining economic choice
protection and maintenance of liberty itself. An distorts and diminishes the production, distri-
economically free society encourages the han- bution, and consumption of goods and services
dling of economic decisions in a decentralized (including, of course, labor services). The wealth
fashion. Individuals are free to work, produce, of a nation inevitably declines as a result.
consume, and invest in any way they choose
under the even-handed application of laws, with MEASURING ECONOMIC FREEDOM
their economic freedoms at once both protected The Index of Economic Freedom takes a broad
and respected by the state. and comprehensive view of economic freedom,
Some government action is necessary for measuring country performance in 10 separate
the citizens of a nation to defend themselves, areas. Some of the aspects of economic freedom
promote the peaceful evolution of civil society, that are evaluated are concerned with a coun-

try’s interactions with the rest of the world—for prospects for long-term economic growth. Such
example, the extent of an economy’s openness to a system is also vital to the maintenance of peace
global investment or trade. Most, however, focus and security and the protection of human rights.
on policies within a country, assessing the liberty A key aspect of property rights protection is
of individuals to use their labor or finances with- the enforcement of contracts. The voluntary
out undue restraint and government interference. undertaking of contractual obligations is the
Each of the measured aspects of economic foundation of the market system and the basis
freedom plays a vital role in developing and for economic specialization, gains from com-
sustaining personal and national prosperity. mercial exchange, and trade among nations.
All are complementary in their impact, howev- Even-handed government enforcement of pri-
er, and progress in one area is often likely to vate contracts is essential to ensuring equity and
reinforce or even inspire progress in another. integrity in the marketplace.
Similarly, repressed economic freedom in one Freedom from Corruption. In the context
area—respect for property rights, for example— of economic freedom, corruption can best be
may make it much more difficult to achieve high understood as the failure of integrity in the eco-
levels of freedom in other categories. nomic system, a distortion by which individu-
The 10 measured aspects of economic free- als or special-interest groups are able to gain at
dom may be grouped into four broad categories: the expense of the whole. Often a direct result
of the government’s concentration of economic
• Rule of law (property rights, freedom or political power, corruption manifests itself in
from corruption); many forms such as bribery, extortion, nepotism,
• Government size (fiscal freedom, govern- cronyism, patronage, embezzlement, and graft.
ment spending); Corruption can infect all parts of an economy
• Regulatory efficiency (business freedom, in systematic ways. There is a direct relationship
labor freedom, monetary freedom); and between the extent of government intervention
• Market openness (trade freedom, invest- in economic activity and the prevalence of cor-
ment freedom, financial freedom). ruption. In particular, excessive and redundant
government regulations provide opportunities
Rule of Law for bribery or graft. In addition, government
Property Rights. The ability to accumulate regulations or restrictions in one area may cre-
private property and wealth is understood to ate informal markets in another. For example,
be a central motivating force for workers and by imposing numerous burdensome barriers on
investors in a market economy. The recognition conducting business, including regulatory red
of private property rights and an effective rule of tape and high transaction costs, a government
law to protect them are vital features of a fully can incentivize bribery and encourage illegiti-
functioning market economy. Secure property mate market interactions.
rights give citizens the confidence to undertake Ensuring transparency is crucial to dealing
entrepreneurial activity, save their income, and effectively with corruption. Openness in regu-
make long-term plans because they know that latory procedures and processes can promote
their income, savings, and property (both real equitable treatment and greater efficiency.
and intellectual) are safe from unfair expropria-
tion or theft. Government Size
The protection of private property requires Fiscal Freedom. Fiscal freedom is a direct
an autonomous and accountable judicial system measure of the extent to which government
that is available to all equally and without dis- permits individuals and businesses to keep and
crimination. The independence, transparency, manage their income and wealth for their own
and effectiveness of the judicial system have benefit and use. A government can impose fiscal
proven to be key determinants of a country’s burdens on economic activity through taxation,
Chapter 1 13
but it also does so when it incurs public debt that and private investment incentives. Even worse,
ultimately must be paid off through taxation. a government’s insulation from market dis-
The marginal tax rate confronting an indi- cipline often leads to bureaucracy, lower pro-
vidual is, in effect, the government’s cut of the ductivity, inefficiency, and mounting public
profit from that individual’s next unit of work or debt that imposes an even greater burden on
engagement in a new entrepreneurial venture; future generations.
whatever remains after the tax is the individu- As many economies have experienced in
al’s actual reward for the effort. Therefore, the recent years, high levels of public debt accumu-
higher the government’s cut, the lower the indi- lated through irresponsible government spend-
vidual’s reward—and the lower the incentive to ing undermine economic freedom and prevent
undertake the work at all. Higher tax rates inter- dynamic entrepreneurial growth.
fere with the ability of individuals and firms to
pursue their goals in the marketplace and there- Regulatory Efficiency
by reduce overall private-sector activity. Business Freedom. Business freedom is
While individual and corporate income tax about an individual’s right to establish and run
rates are important to economic freedom, they an enterprise without undue interference from
are not a comprehensive measure of the tax bur- the state. Burdensome and redundant regula-
den. Governments impose many other indirect tions are the most common barriers to the free
taxes, including payroll, sales, and excise taxes, conduct of entrepreneurial activity.
as well as tariffs and the value-added tax (VAT). By increasing the costs of production, regula-
In the Index of Economic Freedom, the burden of tions can make it difficult for entrepreneurs to
these taxes is captured by measuring the overall succeed in the marketplace. Although many reg-
tax burden from all forms of taxation as a per- ulations hinder business productivity and profit-
centage of total GDP. ability, the most inhibiting to entrepreneurship
Government Spending. The cost of exces- are those that are associated with licensing
sive government is a central issue in economic new businesses.
freedom, both in terms of generating revenue In some countries, as well as many states in
(see fiscal freedom) and in terms of spending. the United States, the procedure for obtaining
Government spending comes in many forms. a business license can be as simple as mailing in
Some government spending—for example, a registration form with a minimal fee. In Hong
to provide infrastructure, fund research, or Kong, for example, obtaining a business license
improve human capital—may be considered requires filling out a single form, and the process
investments. Government also spends on can be completed in a few hours. In other econo-
public goods, the benefits of which accrue mies, such as India and parts of South America,
broadly to society in ways that markets cannot the process of obtaining a business license can
price appropriately. take much longer, involving endless trips to gov-
All government spending that must eventu- ernment offices and repeated encounters with
ally be financed by higher taxation, however, officious and sometimes corrupt bureaucrats.
entails an opportunity cost. This cost is the value Once a business is open, government regu-
of the private consumption or investment that lation may interfere with the normal decision-
would have occurred had the resources involved making or price-setting process. Interestingly,
been left in the private sector. two countries with the same set of regulations
Excessive government spending runs a great can impose different regulatory burdens. If one
risk of crowding out private economic activ- country applies its regulations evenly and trans-
ity. Even if an economy achieves faster growth parently, this can lower the regulatory burden by
through more government spending, such eco- facilitating long-term business planning. If the
nomic expansion tends to be only temporary, other applies regulations inconsistently, it raises
distorting the market allocation of resources the regulatory burden by creating an unpredict-

able business environment. Rigid and onerous term plans can be made more confidently. An
bankruptcy procedures are also distortionary, inflationary policy, by contrast, confiscates
providing a disincentive for entrepreneurs to wealth like an invisible tax and also distorts pric-
start businesses in the first place. es, misallocates resources, and raises the cost of
Labor Freedom. The ability of individuals doing business.
to work as much as they want and wherever they There is no single accepted theory of the right
want is a key component of economic freedom. monetary policy for a free society. At one time,
By the same token, the ability of businesses to the gold standard enjoyed widespread support.
contract freely for labor and dismiss redun- What characterizes almost all monetary theo-
dant workers when they are no longer needed is ries today, however, is support for low inflation
essential to enhancing productivity and sustain- and an independent central bank. There is also
ing overall economic growth. The core principle widespread recognition that price controls cor-
of any market is free, voluntary exchange. That rupt market efficiency and lead to shortages
is just as true in the labor market as it is in the or surpluses.
market for goods.
State intervention generates the same prob- Market Openness
lems in the labor market that it produces in any Trade Freedom. Trade freedom reflects an
other market. Government regulations take a economy’s openness to the flow of goods and
variety of forms, including wage controls, restric- services from around the world and the citizen’s
tions on hiring and firing, and other constraints. ability to interact freely as buyer or seller in the
In many countries, unions play an important international marketplace. Trade restrictions
role in regulating labor freedom and, depending can manifest themselves in the form of tariffs,
on the nature of their activity, may be either a export taxes, trade quotas, or outright trade bans.
force for greater freedom or an impediment to However, trade restrictions also appear in more
the efficient functioning of labor markets. subtle ways, particularly in the form of regula-
Onerous labor laws penalize businesses and tory barriers.
workers alike. Rigid labor regulations prevent The degree to which government hinders the
employers and employees from freely negoti- free flow of foreign commerce has a direct bear-
ating changes in terms and conditions of work, ing on the ability of individuals to pursue their
resulting often in a chronic mismatch of labor economic goals and maximize their productiv-
supply and demand. In general, the greater the ity and well-being. Tariffs, for example, directly
degree of labor freedom, the lower the rate of increase the prices that local consumers pay for
unemployment in an economy. foreign imports, but they also distort production
Monetary Freedom. Monetary freedom incentives for local producers, causing them to
requires a stable currency and market-deter- produce either a good in which they lack a com-
mined prices. Whether acting as entrepreneurs parative advantage or more of a protected good
or as consumers, free people need a steady and than is economically efficient. This impedes
reliable currency as a medium of exchange, unit overall economic efficiency and growth.
of account, and store of value. Without monetary In many cases, trade limitations also put
freedom, it is difficult to create long-term value advanced-technology products and services
or amass capital. beyond the reach of local entrepreneurs, limit-
The value of a country’s currency can be ing their own productive development.
influenced significantly by the monetary policy Investment Freedom. A free and open
of its government. With a monetary policy that investment environment provides maximum
endeavors to fight inflation, maintain price sta- entrepreneurial opportunities and incentives
bility, and preserve the nation’s wealth, people for expanded economic activity, greater pro-
can rely on market prices for the foreseeable ductivity, and job creation. The benefits of such
future. Investments, savings, and other longer- an environment flow not only to the individual
Chapter 1 15
companies that take the entrepreneurial risk in es that offer alternative means for raising capital
expectation of greater return, but also to society or diversifying risk. As with the banking system,
as a whole. An effective investment framework the useful role for government in regulating
will be characterized by transparency and equi- these institutions lies in ensuring transparency
ty, supporting all types of firms rather than just and integrity and promoting disclosure of assets,
large or strategically important companies, and liabilities, and risks.
will encourage rather than discourage innova- Banking and financial regulation by the state
tion and competition. that goes beyond the assurance of transparency
Restrictions on the movement of capital, both and honesty in financial markets can impede
domestic and international, undermine the effi- efficiency, increase the costs of financing entre-
cient allocation of resources and reduce pro- preneurial activity, and limit competition. If the
ductivity, distorting economic decision-making. government intervenes in the stock market, for
Restrictions on cross-border investment can instance, it contravenes the choices of millions
limit both inflows and outflows of capital, there- of individuals by interfering with the pricing of
by shrinking markets and reducing opportuni- capital—the most critical function of a market
ties for growth. economy. Equity markets measure on a con-
In an environment in which individuals and tinual basis the expected profits and losses in
companies are free to choose where and how to publicly held companies. This measurement is
invest, capital will flow to its best use: to the sec- essential in allocating capital resources to their
tors and activities where it is most needed and highest-valued uses and thereby satisfying con-
the returns are greatest. State action to redirect sumers’ most urgent requirements.
the flow of capital and limit choice is an imposi-
tion on the freedom of both the investor and the ECONOMIC FREEDOM: AN END IN
person seeking capital. The more restrictions ITSELF, A MEANS FOR PROGRESS
a country imposes on investment, the lower its As a vital element of human dignity, auton-
level of entrepreneurial activity. omy, and personal empowerment, economic
Financial Freedom. An accessible and effi- freedom is valuable as an end itself. But just as
ciently functioning formal financial system important is the fact that economic freedom is
ensures the availability of diversified savings, the key to achieving the broad-based economic
credit, payment, and investment services to dynamism that ensures lasting inclusive growth
individuals. By expanding financing opportuni- and increased prosperity for society as a whole.
ties and promoting entrepreneurship, an open As Hayek foresaw decades ago, “the guiding prin-
banking environment encourages competition ciple in any attempt to create a world of free men
in order to provide the most efficient financial must be this: a policy of freedom for the individ-
intermediation between households and firms ual is the only truly progressive policy.”4
as well as between investors and entrepreneurs. As editions of this Index have documented
Through a process driven by supply and over the past two decades, the link between
demand, markets provide real-time information economic freedom and long-term development
on prices and immediate discipline for those who is clear and strong. Countries that allow their
have made bad decisions. This process depends citizens more economic freedom reach higher
on transparency in the market and the integrity incomes and better standards of life. People in
of the information being made available. A pru- economically free societies live longer. They
dent and effective regulatory system, through have better health. They are able to be better
disclosure requirements and independent audit- stewards of the environment, and they push for-
ing, ensures both. ward the frontiers of human achievement in sci-
Increasingly, the central role played by banks ence and technology through greater innovation.
is being complemented by other financial servic-

ENDNOTES
1. Milton Friedman and Rose D. Friedman, Free
to Choose: A Personal Statement (New York:
Harcourt Brace Jovanovich, 1979).
2. Friedrich A. Hayek, The Road to Serfdom
(Chicago: University of Chicago Press, 1944).
3. “The property which every man has in his own
labor, as it is the original foundation of all other
property, so it is the most sacred and inviolable.”
Adam Smith, An Inquiry into the Nature and
Causes of the Wealth of Nations (New York:
The Modern Library, 1937), pp. 121–122; first
published in 1776.
4. Hayek, The Road to Serfdom.
Chapter 1 17
Chapter 2
Why Economic Freedom Matters

S
ince its inception in 1995, the Index of Eco- linkages are straightforward: Higher taxes, for
nomic Freedom has chronicled hundreds example, reduce investment and hurt job growth.
of examples of government policy changes Others, such as the impact on economic growth
that have enhanced economic freedom, thereby from the promotion of property rights or the
promoting human progress and greater pros- maintenance of a stable monetary system, are
perity. As the Index has catalogued, nations with more intricate, multidimensional, and nonlinear.
higher degrees of economic freedom prosper Even in these cases, however, the evidence is
because they capitalize more fully on the ability strong that adherence to the principles of eco-
of the free-market system not only to generate, nomic freedom is an unmatched strategy for
but also to reinforce dynamic growth through promoting solutions to human problems and
efficient resource allocation, value creation, advancing overall well-being. No alternative sys-
and innovation. Policies that promote freedom, tems—and many have been tried—come close to
whether through improvements in the rule of the record of free-market capitalism in promot-
law, the promotion of competition and openness, ing growth and improving the human condition.
or suitable restraints on the size and economic
reach of government, turn out in practice to offer ECONOMIC FREEDOM:
and advance practical solutions to a wide range ADVANCING OPPORTUNITY
of economic and social challenges that face the Today’s successful economies are not neces-
world’s societies. sarily geographically large or richly blessed with
The findings of the 2015 Index once again natural resources. Many economies have man-
demonstrate the strongly positive linkages aged to expand opportunities for their citizens by
between economic freedom and various dimen- enhancing their economic dynamism. In general,
sions of human development. Many of the the overarching objective of economic policies
19
Economic Freedom Promotes Entrepreneurial Dynamism
Rank— 1
Entrepreneurship
and Opportunity
20
Correlation: 0.80
R2 = 0.64
40
60
80
ine
100
ndL
Tre
Each circle
120 represents a nation
in the Index of
Economic Freedom
140
140 120 100 80 60 40 20 1
Rank—Index of Economic Freedom
Sources: Terry Miller and Anthony B. Kim, 2015 Index of Economic Freedom (Washington, DC: The Heritage Foundation
and Dow Jones & Company, Inc., 2015), http://www.heritage.org/index, and Legatum Institute Foundation, “Legatum
Prosperity Index: Entrepreneurship and Opportunity,” http://www.prosperity.com/#!/entrpreneurship-opportunity
(accessed November 20, 2014).
Chart 1 heritage.org
must be to create an environment that provides the free-market system is not on the verge of
the most opportunity for the widest range of breakdown. In fact, as the negative impact of
activities that can lead to increased prosperity. regulatory and spending mistakes has become
The Index results have shown that sustain- apparent, a greater number of people around
ing such economic dynamism is achievable only the world seem to be realizing that the economic
when governments adopt economic policies that damage inflicted by the heavy hand of govern-
empower individuals and firms with more choic- ment—subpar growth, deteriorating entrepre-
es, encouraging greater entrepreneurship. neurial environments, and lower employment
It is noteworthy that despite recent policy growth—is not inevitable, but rather the result
missteps by many countries in responding to the of bad policy choices.
global economic slowdown, which amounted to Even as the free market has been under chal-
a political assault on capitalism in some places, lenge in countries such as Venezuela, Bolivia,

Economic Freedom and Prosperity
GDP per Capita (Purchasing Power Parity)

$140,000
Each circle
represents a nation
$120,000 in the Index of
Economic Freedom
$100,000
e
d Lin
R2 = 0.42
Tren
$80,000
$60,000
$40,000
$20,000
$0
0 10 20 30 40 50 60 70 80 90 100
Overall Score in the Index of Economic Freedom
GDP per Capita (Purchasing Power Parity)

$52,799
$50,000
$39,840
$40,000
$30,000
$20,000 $18,509
$10,000 $7,955
$6,157
$0
Free Mostly Free Moderately Mostly Repressed
Free Unfree
Category in the Index of Economic Freedom
and Dow Jones & Company, Inc., 2015), http://www.heritage.org/index; and International Monetary Fund, World
Economic Outlook Databases, http://www.imf.org/external/ns/cs.aspx?id=28 (accessed November 19, 2014).
Chapter 2 21
As Economic Freedom Rises, the Global Economy Expands and Poverty Falls
Average Score in the Global GDP, in Trillions Percent of Global

Index of Economic Freedom of 2005 U.S. Dollars Population in Poverty
61 $60 50%
60 $51.1
$50 40%
59.4 34.1%
59
$40 30%
$39.8
58
58.1
$30 20%
57 20.6%
56 $20 10%
1995 2000 2010 2015 2005 2000 2010 2012 1990 2000 2010
Sources: Terry Miller and Anthony B. Kim, 2015 Index of Economic Freedom (Washington, DC: The Heritage Foundation and
Dow Jones & Company, Inc., 2015), http://www.heritage.org/index; The World Bank, World Development Indicators
Online, http://databank.worldbank.org/data/views/variableSelection/selectvariables.aspx?source=world-development-
indicators (accessed November 20, 2014); and The World Bank, PovcalNet, http://iresearch.worldbank.org/PovcalNet/
index.htm?1 (accessed November 20, 2014). Some figures have been interpolated.
Russia, and even the United States, many other try’s entrepreneurial environment, its promo-
governments around the world have acknowl- tion of innovative activity, and the evenness
edged its superiority. Decades of evidence, some of opportunity.”
presented in the pages of this Index, are hard for Given such a strong relationship, it should
even the most ideological governments to ignore. be apparent that a government’s most effective
Not only does the free-market system remain via- stimulus activity will not be to increase its own
ble, but many of its core features, such as private spending or increase layers of regulation, both
property rights, openness to trade and invest- of which reduce economic freedom. The best
ment, and fiscal discipline, have entrenched results are likely to be achieved instead through
themselves as the policy standard, any deviation policy reforms that improve the incentives that
from which requires strong justification. drive entrepreneurial activity, creating more
opportunities for greater economic dynamism.
ECONOMIC FREEDOM: Equally notable are the fundamental benefits
PROMOTING PROSPERITY that stem from the strong positive relationship
In many respects, economic freedom is between economic freedom and levels of per
merely shorthand for an openness to entrepre- capita income. For countries achieving scores
neurial activity that increases opportunity for in the Index that reflect even moderate levels of
individuals to succeed in their endeavors. Chart economic freedom (60 or above), the relation-
1 shows the close correspondence between eco- ship between economic freedom and per capita
nomic freedom and entrepreneurial oppor- GDP is highly significant.
tunity as measured by the Entrepreneurship As indicated in Chart 2, countries moving up
and Opportunity sub-index of the Legatum the economic freedom scale show increasingly
Prosperity Index, which “measures a coun- high levels of average income. Economies rated

Advancing Economic Freedom Leads to Higher Economic Growth
Average Annual Growth in Real Per Capita GDP

20 YEARS 10 YEARS 5 YEARS
4.0% 4.0% 2.5%
3.5% 3.5%
2.0%
3.0% 3.0%
2.5% 2.5%
1.5%
2.0% 2.0%
1.0%
1.5% 1.5%
1.0% 1.0%
0.5%
0.5% 0.5%
0% 0% 0%
1st 2nd 3rd 4th 1st 2nd 3rd 4th 1st 2nd 3rd 4th
Change in Economic Freedom Score, by Quartile

(1st—most improvement, 4th—least)
Dow Jones & Company, Inc., 2015), http://www.heritage.org/index, and The World Bank, World Development Indicators
Online, http://databank.worldbank.org/data/views/variableSelection/selectvariables.aspx?source=world-development-
indicators (accessed November 20, 2014). Changes in economic freedom score have been calculated as the annual
compound growth rate.
“free” or “mostly free” in the 2015 Index enjoy The free-market system that is rooted in
incomes that are over twice the average levels in the principles of economic freedom has fueled
all other countries and more than five times high- unprecedented economic growth around the
er than the incomes of “repressed” economies. world. As Chart 3 illustrates, as the global econ-
omy has moved toward greater economic free-
ECONOMIC FREEDOM: dom over the past two decades, real world GDP
ANTIDOTE TO POVERTY has increased by about 70 percent, and the global
By a great many measures, the past two decades poverty rate has been cut in half, lifting hundreds
during which the Index has been charting the of millions of people out of poverty.
advance of economic freedom have been the most Greater economic freedom has had a posi-
prosperous in the history of humankind. Those tive impact not just on the number of people in
countries that have adopted some version of free- poverty, but also on the intensity of the poverty
market capitalism, with economies supported by still experienced by some. Poverty intensity as
efficient regulations and open to the free flow of measured by the United Nations Development
goods, services, and capital, have participated in Programme’s Multidimensional Poverty Index,
an era of globalization and economic integration which assesses the nature and intensity of depri-
in which solutions to many of the world’s devel- vation at the individual level in education, health
opment problems have taken hold and generated outcomes, and standard of living, is much lower
real improvements in living standards. on average in countries with higher levels of eco-
Chapter 2 23
Economic Freedom and al per capita economic growth rates of countries
Poverty Intensity that have grown economic freedom the most are
at least 50 percent higher than those of countries
Poverty Intensity where freedom has stagnated or slowed.
0.25
0.22 ECONOMIC FREEDOM:
0.20 SOCIETAL DEVELOPMENT
AND DEMOCRATIC PROGRESS
0.15
Growing economic freedom is unequivo-
cally about more than financial success. Achiev-
0.10
ing greater overall prosperity that goes beyond
0.06
0.05 materialistic and monetary dimensions of well-
being is equally important. The societal benefits
0 of economic freedom extend far beyond higher
Mostly Free and Mostly Unfree incomes or reductions in poverty. Countries
Moderately Free and Repressed
countries countries with higher levels of economic freedom enjoy
higher levels of overall human development as
Sources: Terry Miller and Anthony B. Kim, 2015 Index of measured by the United Nations Human Devel-
Economic Freedom (Washington, DC: The Heritage
Foundation and Dow Jones & Company, Inc., 2015), opment Index, which measures life expectancy,
http://www.heritage.org/index, and U.N. Human literacy, education, and the standard of living in
Development Programme, “Human Development
Report 2014,” 2014, http://hdr.undp.org/en/content/ countries worldwide. As Chart 6 shows, govern-
human-development-report-2014 (accessed ments that choose policies that increase eco-
November 20, 2014).
nomic freedom are placing their societies on the
Chart 5 heritage.org pathway to more education opportunities, bet-
ter health care, and higher standards of living for
their citizens.
nomic freedom. Chart 5 shows that the intensity In some countries, government policies
of poverty in countries whose economies are and actions concerning the environment have
considered mostly free or moderately free is only become more intrusive and economically dis-
about one-fourth the level in countries that are tortionary. Many governments have pushed
rated less free. programs to tax carbon emissions and increase
The key driver of poverty reduction is dynam- taxes on gasoline, organized non-transparent
ic and resilient economic growth that creates and sometimes corrupt exchanges for the buy-
jobs. Not surprisingly, one of the most important ing and selling of carbon emissions, and provided
goals of economic policy in almost every country subsidies for “clean” energy to politically favored
in the world has thus been to increase the rate of firms. Such policies impose a huge direct cost on
economic growth. society, and they also retard economic growth—
As Chart 4 demonstrates, there is a robust rela- and all for uncertain environmental benefits.
tionship between improving economic freedom Interestingly, the same free-market princi-
and achieving higher per capita economic growth. ples that have proven to be the key to economic
Whether long-term (20 years), medium-term (10 success have also proven to deliver environmen-
years), or short-term (five years), the relationship tal success. Around the world, economic freedom
between changes in economic freedom and chang- has been shown to increase countries’ capacity
es in economic growth is consistently positive. for innovation and thus to improve overall envi-
Undeniably, countries moving toward greater ronmental performance.
economic freedom tend to achieve higher rates of The positive link between economic free-
per capita GDP growth over time. Whether in the dom and higher levels of innovation ensures
short term or over the long run, the average annu- greater economic dynamism in coping with

various developmental challenges, and the most Greater Freedom Means Greater
remarkable improvements in clean energy use Performance by Several Measures
and energy efficiency over the past decades have
occurred not as a result of government regula- Human Development Health
tion, but rather because of advances in technol- 1.00 Per Capita
ogy and trade. A virtuous cycle of investment, Income
innovation (including in greener technologies), Education
0.75
and dynamic economic growth has flourished
where governments have trusted market forces
0.50
and competition to spur efficiency. (See Chart 7.)
Greater economic freedom can also provide
more fertile ground for effective and democratic 0.25
governance. Debate over the direction of causal-
ity between economic freedom and democracy 0
has become more controversial in recent years 0 25 50 75 100
because of the multifaceted interaction between Overall Score in the Index
the two. Undoubtedly, achieving greater political of Economic Freedom
freedom through well-functioning democracy is
a messy and often excruciating process. Sources: Terry Miller and Anthony B. Kim, 2015 Index of
However, the positive relationship between Economic Freedom (Washington, DC: The Heritage
Foundation and Dow Jones & Company, Inc., 2015),
economic freedom and democratic governance http://www.heritage.org/index, and U.N. Human
is undeniable. (See Chart 8.) By empowering Development Programme, International Human
Development Indicators, http://hdr.undp.org/en/
people to exercise greater control of their daily statistics/ (accessed November 20, 2014). Human
lives, economic freedom ultimately nurtures Development values have been converted to a 0–1 scale.
political reform by making it possible for indi- Chart 6 heritage.org
viduals to gain the economic resources necessary
to challenge entrenched interests and compete
for political power, thereby encouraging the cre- At the heart of ensuring upward economic
ation of more pluralistic societies. mobility is the task of advancing economic free-
Pursuit of greater economic freedom is thus dom so that dynamic and inclusive growth can
an important stepping-stone to democracy. It meaningfully occur for ordinary people in a free
empowers the poor and builds the middle class. society. Milton and Rose Friedman made a keen
It is a philosophy that encourages entrepreneur- observation on the critically intertwined rela-
ship and disperses economic power and deci- tionship between freedom and mobility:
sion-making throughout society.
[S]o long as freedom is maintained, it pre-
vents … positions of privilege from becom-
ECONOMIC FREEDOM: ing institutionalized. Freedom means
THE KEY TO UPWARD MOBILITY diversity, but also mobility. It preserves the
AND GREATER SOCIAL PROGRESS opportunity for today’s disadvantaged to
The massive improvements in global indica-
become tomorrow’s privileged and, in the
tors of income and quality of life largely reflect a
process enables almost everyone, from top
paradigm shift in the debate over how societies
to bottom, to enjoy a fuller and richer life.1
should be structured to achieve the most optimal
outcome. Over the past two decades, this debate Economic freedom is critical to generat-
has largely been won by capitalism. However, ing the broader-based economic growth that
fears that the immediate benefits of capitalism brings more opportunities for a greater number
are fading has brought to the forefront concerns of people to work, produce, and save. In other
about economic mobility and economic freedom. words, ensuring greater economic freedom is
Chapter 2 25
Economic Freedom, Innovation, and the Environment
Innovation 70
Capacity
Each circle
represents a nation
60 in the Index of
Economic Freedom
50
Correlation: 0.74
R2: 0.55
40
30
20
e
Lin
rend
T
10
0
20 30 40 50 60 70 80 90 100
Environmental Performance Index

82.1
80
69.7
60 55.9
43.2
40.2
40
20
0
Free Mostly Free Moderately Mostly Repressed
Free Unfree
and Dow Jones & Company, Inc., 2015), http://www.heritage.org/index; and Cornell University, INSEAD, and World
Intellectual Property Organization, The Global Innovation Index 2013: The Local Dynamics of Innovation (Geneva: World
Intellectual Property Organization, 2013), http://www.globalinnovationindex.org/content.aspx?page=gii-full-report-2013
(accessed November 20, 2014); and Yale University, “2014 Environmental Performance Index,” http://epi.yale.edu/epi

Economic Freedom and Democratic Governance
The Economist Intelligence Unit’s Index of Democracy

12
e
Each circle
Lin
represents a nation
nd
in the Index of
Tre
10 Economic Freedom
R2 = 0.43
0 10 20 30 40 50 60 70 80 90 100
Dow Jones & Company, Inc., 2015), http://www.heritage.org/index, and The Economist Intelligence Unit, “Democracy Index
2013,” http://www.eiu.com/public/topical_report.aspx?campaignid=Democracy0814 (accessed November 19, 2014).
directly related to preserving and enhancing ronments that are most conducive to social
dynamic upward mobility. progress.2 Countries that improve their com-
Also notable is that although some naysay- petitiveness and open their societies to new
ers claim that economic and social progress has ideas, products, and innovations have largely
been limited in recent years as incomes in some achieved the high levels of social progress
countries have become more unequal as a result that their citizens demand. It is not massive
of economic freedom, the evidence does not sup- redistributions of wealth or government dic-
port this contention. Instead, societies based on tates on income levels that produce the most
economic freedom are the ones that have dem- positive social outcomes. Instead, mobility
onstrated the strongest social progress. and progress require lower barriers to entry,
As shown in Chart 9, countries that largely freedom to engage with the world, and less
embrace economic freedom provide the envi- government intrusion.
Chapter 2 27
Economic Freedom and Social Progress
Social Progress Index

100
Each circle
represents a nation
in the Index of
Economic Freedom
80
Correlation: 0.71
R2 = 0.49
60
40
ine
ndL
Tre
20
0 10 20 30 40 50 60 70 80 90 100
Dow Jones & Company, Inc., 2015), http://www.heritage.org/index, and Social Progress Imperative, “Social Progress Index
2014,” April 2014, http://www.socialprogressimperative.org/data/spi (accessed November 19, 2014).
STAYING ON COURSE disease, and hunger. The link between economic

The 21st edition of the Index of Economic freedom and development is clear and strong.
Freedom shows economic freedom once again People in economically free societies live longer.
on the rise, reaching the highest point in the They have better health. They are able to be better
Index’s 21-year history. Behind this record are stewards of the environment, and they push for-
stories of human progress and the achievements ward the frontiers of human achievement in sci-
of countries and their citizens—literally billions ence and technology through greater innovation.
of people around the world whose lives have A recurring theme of human history has been
measurably improved. resilience and revival. The country profiles in
It is no coincidence that the increase of eco- the 2015 Index of Economic Freedom include
nomic liberty over the past decades has coincided many examples of countries that have accelerat-
with a massive reduction in worldwide poverty, ed their economic and social progress in the face

of difficult challenges and a sometimes harsh The principles of economic freedom are a
international environment. Their successes can sure guide, but only a guide. What truly will mat-
be emulated by others. The Index of Economic ter are the creative solutions to pressing world
Freedom charts not just one path to develop- problems that are certain to flow from people
ment, but as many as the ingenuity of humans who are, in the words of Milton and Rose Fried-
can produce when they are free to experiment man, “free to choose.”
and innovate.
Chapter 2 29
ENDNOTES
1. Milton Friedman and Rose D. Friedman, Free
to Choose: A Personal Statement (New York:
Harcourt Brace Jovanovich, 1979).
2. The Social Progress Index defines social
progress as the capacity of a society to meet
the basic human needs of its citizens, establish
the building blocks that allow citizens and
communities to enhance and sustain the quality
of their lives, and create the conditions for all
individuals to reach their full potential.

Chapter 3
The Freedom Path to Economic

Growth: A Comparative Analysis
of Country Performance
Stephen Moore and Joel Griffith
F
or 21 years, the Index of Economic Free- over “tax cuts for the rich,” much of the world has
dom has provided an indispensable road taken note of the impressive and sustained rates
map for countries that aspire to greater of economic growth that typically follow such cuts,
economic dynamism and prosperity. The rules and tax rates have come down worldwide.
are not complicated. As the Index has revealed, One of the taxes that have perhaps the larg-
lasting prosperity is a result of a persistent com- est impact on a nation’s ability to compete in
mitment to low tax rates, a stable currency, lim- global markets is the corporate tax. The reason,
ited government, strong private property rights, of course, is that tax’s large impact on the flow of
openness to global trade and financial flows, investment. In this age of information and tech-
and sensible regulation. Together, these factors nology, borders do not matter much anymore for
empower the individual and induce dynamic businesses. The world has become one massive
entrepreneurial activity. shopping market for capital. Nations are in a
The supply-side economics model, which contest to climb past each other in a race up the
focuses on ways to increase the production of ladder of economic growth.
goods and services rather than on maintaining The impact of non-competitive corporate
high levels of demand, was popularized in the tax rates can be debilitating. For example, the
United States by President Ronald Reagan more U.S.’s effective statutory rate is now a full 50
than 30 years ago. It is now a primary operating percent higher than the average of its inter-
principle of countries around the world. A key part national competitors. Businesses are adapting
of the supply-side model is careful attention to the by relocating overseas or through structural
potentially stifling nature of taxes, and tax cuts are changes such as corporate inversion, in which
often the preferred policy prescription for eco- companies legally reincorporate in a foreign
nomic woes. Despite occasional howls of protest country that has lower tax rates.
31
Corporate Tax Rate: U.S. vs. Average of Developed Countries
Combined Corporate Income Tax Rate

45%
39.1%
United States
40%
35%
Average for OECD

30% Countries 25.3%
25%
20%
15%
10%
5%
0%
1990 1995 2000 2005 2010 2014
Source: Organisation for Economic Co-operation and Development, OECD Tax Database, Corporate and Capital Income
Taxes, http://www.oecd.org/tax/tax-policy/tax-database.htm (accessed November 17, 2014).
The Index of Economic Freedom has shown markets are vital to achieving greater prosper-
that commitment to lower taxation is one of the ity. Over the lifetime of the Index, some politi-
key components of a country’s effort to create a cians have evidently been listening and taking
virtuous cycle of entrepreneurship, growth, and action. Others have not. The resulting dispari-
lasting prosperity for its citizens. A recent study ties of living standards among countries are not
by the Organisation for Economic Co-operation just happenstance.
and Development examines why some countries This essay provides three types of compari-
are becoming more prosperous than others and sons:
concludes that “corporate taxes are found to be
most harmful for growth, followed by personal • We look at some dramatic differences between
income taxes, and then consumption taxes.” 1 outcomes in neighboring countries that have
The OECD study finds, not surprisingly, that pursued vastly different economic policies;
investment rates fall when corporate tax rates • We compare the economic results since the
rise and that the most profitable and most rap- collapse of the Soviet Union in 1991 between a
idly expanding companies tend to be those that leading free market–embracing Baltic country
are the most sensitive to corporate tax rates. and a less liberty-minded nation; and
High corporate tax rates are also self-defeating • We explain that the interrelation between
because they produce little if any revenue. economic policy and outcomes is evidenced
But taxes are not all that matters. The rule by the “laboratories of democracy” in the 50
of law, efficient regulatory structures, and open United States.

NEIGHBORING COUNTRIES: also welcomed foreign trade and investment
SO CLOSE BUT SO FAR AWAY and abandoned various price-control schemes.5
In 2014, a book co-authored by one of us, An Through these reforms, Chile’s per capita gross
Inquiry into the Nature and Causes of the Wealth domestic product (GDP) has been growing at
of States,2 explored numerous instances in which an average annual rate of 3.6 percent6 over the
individual U.S. states located close to one anoth- past 38 years, and Chile has moved from being a
er achieved vastly different economic outcomes. debtor nation to being a creditor nation.
Many of these disparate outcomes were linked Today, mining, which is one of the pillars of
to distinct state policies pursued by the state Chile’s economy, accounts for 57.3 percent of its
governments. To summarize, states with higher total exports (by value) and 11.1 percent of GDP7
taxes, more restrictive regulations, and onerous and absorbs about one-third of foreign direct
labor restrictions often realized lower rates of investment in Chile.8 But Chile’s mining sector
job creation and economic growth. was not always this prosperous. Throughout
Likewise, nations may share a common bor- the 1970s, Marxist President Salvador Allende
der and sometimes even the same language but sought and obtained constitutional changes that
implement vastly different economic policies. In gave the state “absolute, exclusive, inalienable,
countries where tax rates have been ratcheted and imprescriptible”9 ownership of production.
down, sensible monetary policies are pursued This effectively paralyzed the entire sector.
by the central bank, and the free flow of capital Not until approval of the new 1980 constitu-
is encouraged, economies have prospered; but tion and the subsequent Constitutional Mining
where politicians attempt to seize the wealth of Law were traditional private property rights
those with capital, co-opt the central banks to restored. The current prosperity is a result of
meet political ends, and engage in protection- these guarantees.10 In the words of Jose Pinera,
ism, citizens—particularly those aspiring to the Secretary of Mining in Chile during these
middle class—are harmed. reforms, “The positive effects of the law began to
The following case studies highlight how show themselves in the form of increased explo-
nations with similar cultural, geographic, or ration and production activity from the moment
demographic conditions but different levels its approval was announced.”11 In other words,
of economic freedom often realize far differ- capital investment is spurred once investors are
ent outcomes. assured profits and successful projects are safe
from state confiscation.
CHILE VS. ARGENTINA Furthermore, in stark contrast to Argentina
Chile. Chile’s post-war history has been char- (and other Latin American countries), Chile’s
acterized by the struggle for greater freedom, with healthy investment environment attracts foreign
the right emphasizing economic freedom and the investment. According to the World Bank’s Busi-
left emphasizing political freedom. In one of the ness Environment Snapshots, “Chile is one of the
more felicitous outcomes anywhere in the world most open countries to foreign equity owner-
during this period, both sides have succeeded: ship, as measured by the Investing Across Sectors
Chile now has robust democratic institutions and indicators.”12 A foreign limited liability company
a strong commitment to human rights as well as (LLC) can be established in less than a month.13
one of the freest economies in the world. Minister of the Presidency Cristián Larroulet
Over the decades, Chile has undertaken a expressed his pleasure that Chile “has benefited
series of free-market reforms, including priva- from the presence of large local institutional
tizing various government-run entities such as investors—mainly private pension funds—which
the telecommunications, power, and water sec- are sophisticated investors that continuously
tors.3 Chile also privatized the bankrupt social invest in the local market. As a result, high-qual-
security system, granting citizens control of ified human capital and a solid regulatory frame-
their personal retirement funds.4 The nation work are already in place.”14
Chapter 3 33
The decades-long respect for property rights The recent $100 billion national debt default,
has incentivized investing and fostered trust in a wave of nationalizations, and strict capital
financial institutions. With the Socialists cur- controls are deterring foreign investment, but
rently back in control, all of this could be undone, Argentina’s bureaucrats seem not to mind. Minis-
but Chile has forged a remarkable record under ter of Economy and Production Roberto Lavagna
both the left and the right in advancing and pro- boasted that “Argentina isn’t interested in luring
tecting hard-won freedoms, both political and speculative investors…. It generates bubbles that
economic. With Chile well on its way to becom- when they are reverted can produce a negative
ing the first developed economy in Latin Ameri- impact, especially for the poorest people.”18
ca, one can only hope that such political wisdom Economic results clearly show the repercus-
continues to prevail. sions of these policies. Consider R.R. Donnelly
Argentina. Contrast Chile’s remarkable suc- & Sons, a Chicago company that just shuttered
cess with the situation in Argentina, once Latin the doors of its factory in Argentina. This print-
America’s richest country. Argentina now ranks ing plant employed up to 400 people for more
169th out of 178 countries included in the Index than two decades. Yet, according to the compa-
and 27th out of 29 countries in the South and ny, “rising labor costs, inflation, materials price
Central America/Caribbean region. Continuing increases, devaluation, inability to pay debts
to be mired in a climate of economic repression, as they become due, and other issues” forced
Argentina has recorded its lowest economic free- the closure.19
dom score ever in the 2015 Index. Despite a population more than twice as
The erosion of freedom is creating havoc. large as Chile’s, Argentina has barely attracted
Cristina Fernández de Kirchner’s government even a third the level of Chile’s net foreign direct
in Buenos Aires “bullies and nationalises busi- investment. Inflation in Argentina has run at
nesses, and pressures the central bank to use more than three times that of Chile. Both taxes
international reserves for debt payments.”15 and government spending as a fraction of the
For example, on April 16, 2012, Kirchner economy are nearly twice the level of Chile’s. In
introduced a bill, overwhelmingly approved by 2012, Argentina’s 1.9 percent GDP growth greatly
both houses of Congress, that partially rena- underperformed Chile’s 5.5 percent boom.20
tionalized YPF, the nation’s largest energy firm.16 In fact, after years of Kirchner’s steel grip,
This followed the discovery by the company just Argentina’s economy is now smaller than Brazil’s,
months before of nearly 1 billion barrels of oil in Mexico’s, and Colombia’s.21 This is quite a fall
one of its fields.17 No wonder that the country is from grace for the Keynesian experiment consid-
on track to remain dependent on foreign suppli- ering that just 20 years ago, Argentina’s economy
ers for energy even though the nation possesses was nearly five times that of Colombia’s.22
the world’s third largest deposits of shale gas, This plunge in economic standing worsened
and no wonder that investors are hesitant to risk as the government officially devalued the peso
capital in such an environment. early in 2014. In combination with the flood-
Furthermore, in Argentina, politicians— ing of the markets with newly created currency,
regional governors—have sway over the opera- future investment is chased away, and prices
tions of private businesses. The authority leap higher.
wielded by elected officials to set prices, man-
date production, and engage in other corporate CHINA VS. HONG KONG
governance is in many ways similar to expropria- AND TAIWAN
tion. Value is destroyed and profits diminished, China. China ranks a dismal 139th worldwide
although title of the wrangled entity remains in in economic freedom and 30th out of 42 coun-
private hands. We have seen this before in Argen- ties in the Asia–Pacific region. Some have touted
tina during the socialist Peronist years, and the China’s model of state-guided capitalism as one
middle class suffered. to be followed.

China has enjoyed annual growth of nearly 9 output above what the Communist state-owned
percent over the past five years, and in the years farms produced); the establishment of coastal
since liberalization in the late 1970s, per capita economic enterprise zones; new opportunities
income and real GDP have grown exponential- for foreign investment; and the privatization of
ly. However, economic freedom in China has state-owned enterprises.28 Although sporadic
advanced only sporadically since then, and prob- and limited, these market reforms, enhanced by
lems long unaddressed are becoming impossible China’s participation in the global trading sys-
to ignore. In particular, the Chinese leadership tem, have lifted more than half a billion people
still maintains inordinate control of the levers out of abject poverty—one of the great economic
of economic power, including finance and triumphs in human history.
investment, and has concentrated its develop- Yet the errant political idea that bureaucrats
ment efforts on seizing market share in existing are actually capable of centrally planning a large
international markets rather than on develop- modern economy has held overall development
ing new products and markets to advance world far below potential and kept hundreds of mil-
economic growth. lions of Chinese citizens in poverty. Further-
China’s focus on technological imitation more, the concentration of power in the hands
rather than innovation may have brought short- of central planners and away from local leader-
term, low-cost prosperity relative to 50 years ago, ship has created environmental mayhem nation-
but unless the economy is freed from such state- ally. With growth rates falling, the pressures of
imposed self-limitations, the nation will con- unemployment are likely to increase, and with
tinue to lag behind its free-market competitors. no legitimate democratic outlet for expres-
A glance at production levels of state-owned vs. sion of the population’s concerns, political and
non-state-owned industrial firms illustrates this. economic stability is a constant concern for
Since 2008, non-state-owned industrial firms the government.
have enjoyed expansion rates that are twice as Just think of the prosperity that could have
high as those of state-owned firms.23 resulted if the mainland Chinese had truly
Even after modest privatization, state- embraced economic and political freedom. But
owned-enterprises (SOEs) still play an enor- we don’t have to imagine it. All we need do is look
mous role in China. Currently, SOEs exist in at Hong Kong and Taiwan.
a broad range of sectors, including banking, Hong Kong. Hong Kong follows an ancient
aviation, petroleum, electricity, shipping, and common-law tradition handed down from the
machinery. 24 More than 150,000 enterprises English that “everything which is not forbid-
are included in this list.25 In the past, this has den is allowed.” It is no surprise that it is ranked
represented an enormous slice of the national number one globally for economic freedom.
economy, at times exceeding 30 percent of Hong Kong also must surely be considered one of
nationwide industrial and business revenue.26 the great economic triumphs in human history.
In 2013, these enterprises were worth $5.7 tril- This is a very inconvenient place for mercan-
lion,27 more than half the size of China’s official tilists. How, therefore, does one explain its pros-
$9.4 trillion GDP. perity? After all, as Milton Friedman reminded
Despite this dampening of authentic entre- us in Free to Choose, this is a tiny port island
preneurialism, certain market reforms have with relatively few natural resources, the high-
enabled robust economic growth. Tax reduc- est population density of virtually any nation
tions, for example, are an underappreciated except for Singapore and tiny Monaco, and no
part of the decades-long progress. In 1978, then military power.
Chinese leader Deng Xiaoping unleashed a Hong Kong has never implemented the Mao-
series of free market–based economic reforms, ist one-child policy of Communist China. Given
including the legalization of privately owned its constricted geographical confines and lim-
farms (which caused a near doubling of food ited natural resources, a Malthusian would have
Chapter 3 35
GDP per Capita—Hong Kong, Taiwan, and China
GDP per $60,000

Capita
(Purchasing $52,722 Hong Kong
Power Parity) $50,000
$40,000 $39,767 Taiwan
$30,000
$20,000
$10,000 $9,844 China
$0
1980 1985 1990 1995 2000 2005 2010 2013
Sources: International Monetary Fund, World Economic Outlook Databases, http://www.imf.org/external/ns/cs.aspx?id=28

(accessed December 2, 2014).
predicted more human misery after decades of spending is low; regulations on small businesses
unchecked population growth than one finds in are light; education is largely private; capital
the poorest province of India or village of Africa. moves freely in and out, unhindered.
Yet the contrary is true: Hong Kong’s per capita For many decades after it adopted a flat tax in
GDP exploded by more than $45,000 from 1980 1947, Hong Kong enjoyed the benefits of a com-
to 2013. The mainland’s GDP grew under $300 petitively low tax rate with no tax on dividends
yearly during that same period, to around $9,800 or capital gains or money earned outside of the
in 2013. In terms of GDP per capita adjusted for island. Hong Kong has also embraced free trade,
purchasing power parity, the average Hong Kong which explains why it has evolved into a capital-
resident had a standard of living more than five ist paradise brimming with entrepreneurial spir-
times higher than the average mainlander. it. The tax code is about 200 pages, compared to
By meeting the demands of individual con- over 70,000 pages for the U.S. tax code.29
sumers and companies across the globe rather Over several decades, Hong Kong has evolved
than the dictates of state bureaucrats, Hong into one of the richest places on Earth despite
Kong has attained prosperity. Skeptics say, “Well, its tiny land mass and no natural resources. The
that’s only because Westerners—Brits and Amer- only mystery is why it took nearly half a century
icans—invested so much there.” Which begs the for the rest of the world to start copying the Hong
question: Why did they invest there? Hong Kong Kong model.
is the most economically free country on the Taiwan. In the wake of the Chinese Com-
planet. It has long had a 15 percent flat individual munist revolution, the remnants of the previous
income tax; it is a free trade mecca; government Chinese government were confined to the island

of Taiwan, which operates for all practical pur- declining government spending, political stabil-
poses as an independent nation. Although Taiwan ity, and the lowest level of judicial corruption on
shares a common cultural and historic tradition the entire continent.36
with mainland China just 110 miles away, its eco- Botswana also has a relatively high per cap-
nomic system is far different from Beijing’s. ita income at over $16,000. This is higher than
Prudent macroeconomic policy within a some European countries and by world stan-
stable legal and monetary environment has dards makes it an upper-middle-class country.
been the key to Taiwan’s continuing success in The past 10 years have seen an influx of foreign
achieving rising levels of economic freedom over capital and growing privatization of many indus-
the past two decades. A sustained commitment tries, and with this has followed growth, making
to structural reforms and openness to global Botswana one of the most prosperous countries
commerce have enabled the country to advance in Africa. On a continent riddled with poverty,
far into the ranks of the “mostly free.” Recordingother countries would be wise to take note.37
uninterrupted years of growth in economic free- Corporations are selecting Botswana for their
dom since 2009, Taiwan has achieved its highest international headquarters. The prestigious list
score ever in the 2015 Index. includes Laurelton Diamonds (a Tiffany & Co.
Starting a company in Taiwan takes just three subsidiary); HJ Heinz; Hewlett-Packard; Bar-
steps, and property rights are generally pro- clays Bank; and the South African Development
tected. Business owners know that the judiciary Community (SADC).38 Certainly, the rejection of
exists to enforce contractual rights.30 corruption in Botswana helps to attract foreign
Taiwan illustrates the benefits of free trade. investment and employers. In 2013, Transpar-
During the past 40-plus years, foreign trade has ency International ranked Botswana the least
been the core driver of Taiwan’s economy as total corrupt African country.39
annual trade increased nearly eightyfold from Botswana has also harnessed the power of
under $4 billion USD in 1971 to $300 billion in free markets to conserve endangered species
2013.31 Taiwan also illustrates the dynamism of and wildlife areas. Revenue from increased
comparative advantage in conjunction with ecotourism and sustainable hunting expeditions is
nomic freedom: Export composition has evolved protecting the nation’s natural beauty while also
from predominantly agricultural commodities spurring business growth.
to more than 98 percent industrial goods.32 Moreover, Botswana has advanced a type of
The importance of tax cuts, particularly for government austerity that works. Unlike West-
businesses and investments, is demonstrated by ern European “austerity,” which fails to reduce
Taiwan’s response to the global economic down- government spending significantly and increas-
turn of 2008–2009. The negative growth of 2009 es taxes, Botswana has cut both spending and
was Taiwan’s first recession in 10 years.33 In thetaxes as a percentage of GDP.
midst of the turmoil, Taiwan slashed its corpo- Zimbabwe. Located due east of Botswana in
rate income tax from 25 percent to 17 percent in the southern part of Africa is Zimbabwe. Despite
2009.34 The next year, it enjoyed a GDP boom of some progress, Zimbabwe remains one of the
more than 10 percent—its most rapid growth in least free economies in the world. President Rob-
more than 30 years.35 ert Mugabe oversees a corrupt and inefficient
government that is rife with graft and nepotism.
BOTSWANA VS. ZIMBABWE The labor market is one of the most restricted
Botswana. Botswana ranks high on the in the world, and business licensing forces most
freedom index at 36th globally and 2nd in Sub- workers to seek employment in the informal sec-
Saharan Africa. Several factors enable Botswana tor. The violent seizure of land has upset investor
to be an oasis of prosperity in a neighborhood of confidence in a once-vibrant agricultural sector.
uncertainty and turmoil. These include taxation Robert Mugabe has been in power since 1980,
of individual income at no more than 25 percent, first as prime minister and then as president. For
Chapter 3 37
years, the government engaged in monetary mis- Israel has welcomed foreign investment into
chief, printing such copious amounts of curren- these start-ups, embraced foreign expertise in
cy that inflation hit 79,600,000,000 percent in governmental development, and sought foreign
November 2008 with an average daily inflation capital for its burgeoning energy sector.
rate of 98 percent a day. This fiscal malpractice, Established with a socialist bent, Israel has
combined with lack of property rights, deters been deregulating industry and allowing priva-
domestic and foreign investment. tization and competition to grow in areas once
Under the guise of racial equality and concern dominated by state monopoly. Israel now has a
for the poor, the government has seized swaths of booming technology sector with start-ups such
land belonging to white farmers. For those who as Consumer Physics and Reduxio, which raised
pursue entrepreneurship, opening a business $4 million and $12 million, respectively, in the
takes three months, during which you will need past year. As home to between 4,000 and 5,000
to go through nine different procedures and start-ups, Israel is second only to Silicon Valley
spend on average 140 percent of average gross in technology innovation.43
per capita income. Protectionism is rampant, Perhaps Israel best exemplifies what the late
and foreign investment in numerous industries Julian Simon taught: “The ultimate resource is
is severely restricted.40 people—skilled, spirited, and hopeful people
Unemployment in Zimbabwe is estimated to who will exert their wills and imaginations for
be as high as 95 percent, with per capita GDP at their own benefit as well as in a spirit of faith and
only $600 per person. These alarming statistics, social concern. Inevitably they will benefit not
combined with the lack of foreign investment only themselves but the rest of us as well.”44
and economic growth, make Zimbabwe an eco- Despite the constant threat of war with hos-
nomic nightmare.41 Ironically, the neighboring tile neighbors, terrorist activity, and diplomatic
country of Botswana, with almost identical geo- hurdles, Israel continues to advance. The abil-
graphic, demographic, and natural resources, ity of smaller political groups to obtain propor-
is flourishing. tional representation in the Israeli parliament
If Zimbabweans ever wish to lift themselves provides a robustness to Israel’s democracy; the
from poverty, all they need do is look next door necessity to build coalitions has allowed eco-
to Botswana. nomic reform to move forward. The entire world
is better off as a result.
ISRAEL VS. LEBANON Lebanon. Although Israel and Lebanon
Israel. Israel re-emerged as an independent share similar climate, geography, and cuisine,
nation in 1948. Since then, it has become known these two neighbors are far different in matters
as the “start-up nation.” Israel ranks 33rd for of economics. Lebanon ranks 94th globally and
economic freedom globally and 4th in the Mid- 10th in the region for economic freedom. In fact,
dle East/North Africa region. Registering the the situation has deteriorated in recent years,
10th largest score increase in the 2015 Index, and Lebanon’s economy is now classified as
Israel has achieved its highest score ever. “mostly unfree.” This has come about as a result
This tiny country in the Middle East has of a turbulent political situation influenced by
absorbed millions of impoverished immigrants radical ideology that is geared toward state con-
from Eastern Europe, the Middle East, and Afri- trol and socialism.
ca, yet its economy has boomed. Immigrants who Recent years’ decline in economic freedom
fled often-repressive nations have transformed has weakened an already fragile structural and
the desert into a start-up nation. Business incu- institutional environment. Entrepreneurs are
bators dot the landscape, and technological out- suffocated by restrictive business and labor
put is among the highest in the world. In fact, the regulations that inhibit business formation
number of Israeli companies trading on the Nas- and the development of a dynamic private sec-
daq totals 40 with more IPOs to come in 2015.42 tor. Prevalent corruption has undermined the

basic political institutions of society. Although work. In 1994, he heroically and wisely ignored
the banking sector is relatively well-developed, the economic pundits and snapped in place one
Lebanon’s economy remains more closed to of the world’s first flat taxes at 23 percent. Since
trade and investment than those of many of its then, Estonia has had one of the most rapid
regional peers. growth spurts of any nation, and adoption of the
With a paramilitary terrorist and political flat tax has been widely heralded as a corner-
force (Hezbollah) lodged within its borders, gov- stone of its prosperity. In the 13 years immedi-
ernment instability is only exacerbated. Conflict ately following adoption, GDP dipped below 4.5
with Syria and Israel, along with a rapid suc- percent only once (–0.3 percent in 1999). From
cession of leadership, has deterred those with 1995–2015, average annual GDP growth was 4.76
capital from making longer-term investments. percent, and real per capita GDP jumped more
Furthermore, confidence that the courts will than 150 percent.46
fairly adjudicate matters is low. Even the judi- Estonia has become both a technology and
ciary is heavily influenced by political interests. angel investor hub. Technology such as Skype
In 2013, per capita income was just half the level was developed there, and the nation welcomes
of Israel’s. foreign investment: In 2012, more than 80 per-
cent of venture capital originated from out-
ESTONIA VS. UKRAINE side investors.47
Estonia. Following the dissolution of the Yet Estonia’s pro-market environment, cre-
Soviet Union in 1991, some countries chose to ated by a commitment to restrained govern-
cling to centrally planned economic models. The ment spending and low taxes, has not escaped
Baltic republics of Estonia, Latvia, and Lithu- criticism. Paul Krugman, for example, has
ania, however, threw off the shackles of statism blasted the nation as “the poster child for aus-
and embraced free-market reform, implement- terity defenders.”48
ing a dramatic policy turnaround. An economic The facts, however, speak loudly. Since 1993,
boom ensued. real per capita GDP in Estonia has jumped
While the socialist instinct may be to demand more than 150 percent. In dollar terms, this
that the rich “pay their fair share,” those who represents an increase in income of more than
are truly dedicated to expansion of the middle $7,000 per person.49
class and eradication of poverty understand that Ukraine. Contrast Estonia’s remarkable
resisting the urge to confiscate private wealth income growth with the situation in Ukraine,
results in more jobs and even more government where income has grown only about 15 percent
revenue. Even former Communists are grasping since 1993, a paltry $700 per person. Why the
this concept. disparity? More than two decades since the col-
Mart Laar, former Prime Minister of Esto- lapse of the Soviet Union, Ukraine remains dedi-
nia, was the first politician to bring the flat tax to cated to many of the same policies and practices
Eastern Europe. Mr. Laar told one of the authors that held back its development during the Com-
in 2007 that when he first pushed the flat tax, munist period.
the major opponents were not Estonian citi- According to the 2008–2009 Business Envi-
zens, “who love the flat tax,” but the economists ronment and Enterprise Performance Sur-
and other wise men of government “both inside vey (BEEPS), almost all companies in Ukraine
and outside of this tiny country. Almost all of the complain about high tax rates and corruption.50
smartest minds told me ‘We cannot have a flat Ukraine was ranked 144th out of 177 countries in
tax. It is untested. It will not work. It will cause Transparency International’s 2013 Corruption
budget deficits.’”45 Perceptions Index.51 The need to escape high
Mr. Laar, however, remembered the virtues taxes and regulation has led to a shadow econo-
of the flat tax in Milton Friedman’s classic book my that is equivalent to 44 percent of Ukraine’s
Free to Choose and insisted that the plan would economic output.52
Chapter 3 39
Change in Real GDP per Capita—Estonia and Ukraine
Cumulative 200%
Change in
GDP per
Capita 159.8% Estonia
Since 1993 150%
100%
50%
14.8% Ukraine
0%
–50%
1994 1995 2000 2005 2010 2013
Source: World Bank, “GDP per Capita (Constant 2005 US$),” http://data.worldbank.org/indicator/NY.GDP.PCAP.KD/
countries/EE-UA?display=graph (accessed November 20, 2014).
Ukrainian politicians use energy subsidies U.S. EXPERIENCE UNDERSCORES

as a way to curry favor with the public, but by BIG GOVERNMENT’S
subsidizing up to 75 percent of the actual cost of THREAT TO GROWTH
natural gas, the nation also discourages domes- Every day in America the 50 states compete
tic energy development. In fact, The Economist against each other for people, jobs, investment
reports that “domestic production has slumped capital, and overall prosperity. This interstate
by two-thirds since the 1970s.”53 competition is economically healthy because it
In addition, the people that benefit from forces governors and legislators to adopt fiscal
these subsidies actually are harmed by them. and regulatory policies that maximize job oppor-
Jobs that would have been created from a tunities and prosperity for their citizens.
booming energy sector fail to materialize. More State governments have generally divided
important, lack of an affordable, abundant sup- into two competing camps, which we call “the red
ply of energy gas results in Ukraine’s not being state model” and the “blue state model.” This has
as competitive in the manufacturing sector. In a raised the stakes in this interstate competition.
European continent becoming ever more inte- The conservative red state model is predicated on
grated, Ukraine places itself at a disadvantage low tax rates, right-to-work laws, light regulation,
with these policies. and pro-energy development policies. This policy
Because of such policy mistakes, Ukraine strategy is now common in most of the southern
ranks last in economic freedom in Europe states and the more rural and mountain states.
and remains one of the poorest of the former The liberal blue state model is found pre-
Soviet republics. dominantly in the Northeast and in California,

Illinois, Minnesota, and (until recently) Michi- Employment Growth in Four
gan and Ohio. The blue states have doubled Large States
down on policies that include high levels of gov-
ernment spending, high income tax rates on the 66.9% Percentage Change
rich, generous welfare benefits, forced union in Non-Farm
requirements, super-minimum wage laws, and Employment
Since 1990
restrictions on oil and gas drilling.
Perhaps the area in which we can see the 46.4%
effect of these competing models most clearly
is tax policy. California, Connecticut, Hawaii,
Illinois, Minnesota, New York, and Oregon have 27.7%
24.3%
raised their income tax rates on “the rich” since
2008.54 In four of these states, the combined
state and local income tax rates now exceed 10 9.5%
percent.55 Meanwhile, the red states of Arizona,
Arkansas,56 Kansas,57 Missouri,58 North Caro-
lina,59 Oklahoma,60 and Idaho61 have cut their Texas Florida U.S. California New
tax rates. As a result, the income tax differen- York
tial between blue and red states has widened for Source: U.S. Department of Labor, Bureau of Labor
businesses and upper-income families. Statistics, “State and Metro Area Employment, Hours,
and Earnings,” http://www.bls.gov/sae/ (accessed
Similarly, red states like Oklahoma, Texas, November 17, 2014).
and North Dakota have embraced the oil and
gas drilling revolution in America. Blue states
like New York, Vermont, Illinois, and Califor-
nia have resisted it. Blue states have raised their
minimum wages; red states generally have not. • Among the four largest states, from 1990–Sep-
A thorough examination of interstate migra- tember 2014, the jobs growth rate in red states
tion, economic performance, and job growth Florida (46 percent) and Texas (65 percent)
shows that these divergent policy choices have a was more than double the jobs growth of blue
noticeable impact on growth. For example: states California (24 percent) and New York
(9 percent).
• The nine states with zero income tax gained • Personal income has grown about 15 percent
an average of 3.7 percent population from faster in the no-income tax states than it has
domestic in-migration from 2003–2013, while in the highest-income tax states over the
the highest-income tax states lost an average past decade.
of 2.0 percent population. Overall, popula- • The right-to-work states enjoyed a jobs growth
tion growth on an equally weighted basis rate more than three times that of the forced
from 2003–2013 was twice as high in the low- union states. Jobs growth was 6.8 percent
income tax states.62 The flow of families from in right-to-work states and only 1.9 percent
high-tax to low-tax states is unmistakable. 63
in non–right-to-work states.66 With respect
• The jobs growth rate in the zero income tax to the effect of right-to-work laws, the same
states was more than two times higher than picture comes into sharp focus. A right-to-
that of the high-income tax states on an equal- work law does not prohibit a union, but rather
ly weighted basis. Businesses like Toyota
64
empowers individual workers with the right
are more likely to set up operations in low- to choose whether to join the union (and pay
tax states. This kind of business relocation to dues for political purposes) or not. As of Janu-
low-tax states is happening routinely and even ary 1, 2013, 23 states were right to work and 27
accelerating. 65
were forced union.67
Chapter 3 41
Interstate competition for jobs, people, and Few had predicted the rapid change with
capital is a positive force that helps to discipline
which Eastern Europe would embrace freedom
politicians to do the right thing. Yet many politi-
or the notable extent to which many develop-
cians and pundits pretend that taxes, labor laws,ing countries in other parts of the world would
indebtedness, and heavy regulation do not affect pursue free-market reforms that advance eco-
economic growth. nomic freedom. We have seen hundreds of mil-
Growth is not a zero sum game: More jobs, lions of people advance rapidly from poverty and
higher incomes, and expanded opportunity ben- subsistence living to modern comforts. Experi-
efit all residents without regard to their incomeences of individual nations have acted as labora-
or status. And as states get richer, they are able to
tories to evaluate performance under a myriad of
provide higher-quality public services—and will policy conditions.
need fewer services—for things like welfare and Over the past 21 years, the Index of Economic
crime prevention. Freedom has gathered ample evidence to track
What would happen if every country were to the performance of countries implementing to
adopt the pro-growth policies embraced by such varying degrees the precepts of economic free-
states as Texas, Florida, and North Dakota? The dom and the resulting levels of their economic
entire globe would benefit from rising living success. The comparisons presented in this
standards and expanded opportunity. Billions of chapter highlight the opportunity for prosper-
those who are now mired in poverty would ben- ity that is inherent in giving people the freedom
efit the most. to choose.
Much has been accomplished, and much
CONCLUSION remains to be done. In charting the freedom path
Twenty-one years ago, when the first edition to economic growth, the challenge of advancing
of the Index of Economic Freedom was published, economic freedom is the challenge of pursuing
the supply-side idea of the Laffer Curve—that sustained prosperity. Those countries that have
high tax rates reduce growth and can even been brave enough to accept the challenge have
reduce revenues—was still highly controversial reaped great rewards and, in doing so, have set a
and disregarded among the political class and powerful example for others to follow.
even trained economists. Today, however, more
nations around the globe are embracing the idea.

ENDNOTES
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Department Working Paper No. 620, July 2008, economics-blog/2013/nov/22/chile-prosper-
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4. Ibid. 18. “Argentine Peso, Bonds, Stocks Drop on
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9. Jose Pinera, “Wealth Through Ownership:
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Chapter 3 43
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26. “China Focus: China Pledges Further Reforms 40. World Bank Group, “Ease of Doing Business in
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english/indepth/2012-10/24/c_131928023.htm exploreeconomies/zimbabwe/
27. “China’s Major SOEs Report Assets Growth,” 41. U.S. Central Intelligence Agency, “Zimbabwe,”
Shanghai Daily, July 27, 2014, The World Factbook, last updated June 20, 2014,
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54. Tax Foundation, “State Individual Income Tax
63. Laffer, Moore, Sinquefield, and Brown, An
Rates Data Series, 2000–2014,” April 1, 2013,
Inquiry Into the Nature and Causes of the Wealth
http://taxfoundation.org/article/state-
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States, Table 6, p. 39.
55. Arthur B. Laffer, Stephen Moore, and Jonathan
Williams, Rich States, Poor States, ALEC–Laffer 65. Laffer, Moore, Sinquefield, and Brown, An
State Economic Competitiveness Index, 7th Inquiry Into the Nature and Causes of the Wealth
Edition, American Legislative Exchange Council, of States, Table 3.1, pp. 57–58.
2014, pp. 74 and 101, 66. Ibid.
http://alec.org/docs/RSPS_7th_Edition.pdf 67. Michigan became a right-to-work state in
(accessed November 17, 2014). March 2013.
Chapter 3 45
Chapter 4
Cronyism, Corruption,
and the Arab Spring:
The Case of Tunisia
Antonio Nucifora, PhD, Erik Churchill, and Bob Rijkers, PhD 1
Editor’s Note: Since 2011, the countries of the Middle East and North Africa have experienced a period
of economic and political turmoil—the Arab Spring—that holds both great promise and great risk. Such
a widespread uprising against autocratic rule will have many diverse causes. What began as a protest
by a street vendor against, in part, excessive economic regulation in Tunisia has become a wide-ranging
movement challenging entrenched political, economic, cultural, and religious interests across an entire
region. An empirical study presented in the 2012 Index by Dr. Nahid Anaraki used the techniques of
econometric analysis to demonstrate that the motivation for violence in the region is likely to be less
about conflict between Islam and Western values and more about revenge against corrupt regimes. This
chapter deepens that analysis, looking specifically at the role that cronyism and corruption played in
the Tunisian uprising while identifying ongoing problems that must still be addressed if Tunisia is to
achieve the full flowering of economic freedom and broad-based development that benefits everyone, not
just a politically connected elite.
T
he Tunisian Revolution took the world by Nevertheless, deep-rooted deficiencies of the
surprise in January 2011 and unleashed socioeconomic system have not yet been tack-
expectations of a transition toward liberal led. This system, characterized by privileges and
Western-style democracy in the Arab World. Much cronyism at the expense of competition and per-
progress has been made in Tunisia over the past formance, is at the root of the Arab Spring and
three years on the political front. A new constitu- still needs to change if the future of the Tunisian
tion was adopted with a large consensus in January transition is to be secured.2
2014, and the first democratic parliamentary and Tunisia’s economy was one of the best-per-
presidential elections under the new constitution forming in the region before 2011. Rapid pov-
were held in October–November 2014. erty reduction was accompanied by significant
47
Economic Significance of Cronyism and Regulation
Connected Firms in 2010
Ben Ali Firms 21.3% Prevalance of Regulatory
Share of Total Restrictions Across Sectors
■ Sectors with Ben Ali Firms
■ Sectors without Ben Ali Firms
42.9%
39.3%
3.2%
0.8%
24.3%
Employment Output Net Profits

14.1%
Source: Bob Rijkers, Caroline Freund, and Antonio
Nucifora, “All in the Family: State Capture in Tunisia,”
World Bank Policy Research Working Paper No. 6810,
March 2014.
Authorization FDI
Chart 1 heritage.org Required Restriction
Source: Bob Rijkers, Caroline Freund, and Antonio
World Bank Policy Research Working Paper No. 6810,
improvements in the main human development March 2014.
indicators. On the basis of these achievements, Chart 2 heritage.org
Tunisia was heralded as a role model for other
developing countries by the International Mon-
etary Fund and the World Bank. Similarly, the CRONYISM, CORRUPTION, AND
World Economic Forum repeatedly ranked SOCIAL EXCLUSION IN TUNISIA
Tunisia as the most competitive economy Tunisia’s economic development model has
in Africa. been predicated on an active role for the state
As the revolution made clear, however, since the 1960s. This model initially accelerated
beyond the shiny façade often presented by the growth and rapid poverty reduction.5 However,
former regime, the Tunisian socioeconomic interventionism became increasingly direct-
model was (and remains) deeply deficient. ed by the country’s elite for their own benefit.
Unemployment has remained high, especially Over the past decade, extensive corruption and
among young graduates, and regional dispari- abuses were associated with the activities of
ties have persisted. At the root of these dis- the cronies and family of former president Ben
appointing economic outcomes lies a policy Ali.6 Pervasive barriers to competition allowed
infrastructure put in place during the presiden- underperforming firms to survive in spite of low
cy of Zine al-Abidine Ben Ali (April 1989–Janu- productivity and created opportunities for rent-
ary 2011), which results in privileges for an elite seeking by cronies of the regime. This evolution
few at the expense of those who lack significant of Tunisia’s economy into a system of rents and
political connections.3 privileges is at the root of its failure.
Achieving stability in the region will require It is notoriously difficult to demonstrate
transitioning to an open economic system that clearly the impact of cronyism and predation
brings greater economic opportunity.4 The key on firms’ growth and characteristics because
policy challenge, therefore, is to identify instru- access to relevant data is usually difficult.7 In
ments that will ensure that such a transition is Tunisia, we were able to use information on
orderly, swift, and sustainable. 220 firms confiscated from President Ben Ali

Profits of Ben Ali Firms Compared with Competitors
200%
Profits of Ben Ali Firms as Percentage 183.7%
Difference with Competitors’ Profits
150%
100%
75.1%
58%
50% Ben Ali Firms
Sectors without Had Higher
Restrictions Profits
0%
Sectors Subject Sectors Subject Sectors Subject
Ben Ali Firms
to FDI to Entry to Entry and FDI
Had Lower
–50% Restriction Restrictions Restrictions
Profits
–50.6%
–100%
Source: Bob Rijkers, Caroline Freund, and Antonio Nucifora, “All in the Family: State
Capture in Tunisia,” World Bank Policy Research Working Paper No. 6810, March 2014. Chart 3 heritage.org
and his extended family (a total of 114 people) construction (nine); financial services (eight);
in the aftermath of the 2011 revolution and to the food industry (seven); hotels and restaurants
compare their performance to that of all other (seven); media activities (five).
firms in Tunisia.8 Specifically, our analysis found that confis-
Firms confiscated from President Ben cated firms are more likely to operate in sectors
Ali’s extended family were important from an subject to entry regulation. Approximately 40
aggregate economic point of view. Although percent of Ben Ali firms were in sectors subject
they account for less than 1 percent of all jobs, to authorizations and restrictions on foreign
they pocketed a striking 21.3 percent of all net direct investment (FDI).9 By comparison, autho-
private-sector profits in Tunisia, equivalent to rization requirements apply to only 24 percent of
US$233 million in 2010, corresponding to over all sectors in which Ben Ali firms are not present,
0.5 percent of GDP. (See Chart 1.) Considering while FDI restrictions apply to approximately 14
that we identify only firms with direct links to percent of sectors that are free of Ben Ali firms.10
the Ben Ali family as opposed to all firms with (See Chart 2.) Thus, regulatory restrictions and
cultivated connections, this number is probably connected firms go hand-in-hand.
best interpreted as a lower bound on the impor- The superior performance of Ben Ali firms
tance of political connections. is especially marked in densely regulated sec-
How could connected firms make so much tors (at the five-digit sector level). Restrictions
money? The firms confiscated from President on entry into these sectors were associated with
Ben Ali’s family were concentrated in sectors greater market share and greater profits for the
where profit margins are quite high and close firms owned by Ben Ali’s extended family, who
relations with government counterparts is an had privileged access. Ben Ali firms are especial-
important determinant of profitability, notably ly more profitable than their peers in sectors that
in the real estate and enterprise services sectors are subject to authorization and FDI restrictions;
(59 firms); personnel services (20); transport these regulations thus appear disproportionate-
(16); wholesale trade (15); automobile trade (11); ly to assist the profitability of Ben Ali firms. In
Chapter 4 49
sectors that are not subject to these restrictions, Prevalence of New Regulations by
Ben Ali firms make significantly less profit than Presence of Ben Ali Firms
their competitors, which countermands the idea
that Ben Ali family members were innately bet- Change in New Regulations at
ter entrepreneurs. (See Chart 3.) the 5-Digit Level, 1994–2010
Legislative changes introducing new entry
■ Sectors with Ben Ali Firms
restrictions were plausibly due to manipulation ■ Sectors without Ben Ali Firms
by the Ben Ali clan.11 First, the prevalence of FDI
2.00%
restrictions and authorization requirements
was significantly higher in sectors in which Ben
1.55%
Ali firms were present when the Investment
Incentives Code was approved in December
1993. Second, over time, new restrictions were
introduced at a higher frequency in sectors in 0.75%
which Ben Ali firms had set up shop. 12 Sectors 0.38%
in which Ben Ali firms are active are two times
more likely to be subjected to new authorization
requirements than sectors in which they are not Authorization FDI
and five times more likely to be subjected to new Required Restriction
FDI restrictions.13 (See Chart 4.) In sum, if exist- Source: Bob Rijkers, Caroline Freund, and Antonio
ing regulations did not suffice to secure lucrative World Bank Policy Research Working Paper No. 6810,
business deals, Ben Ali would use executive pow- March 2014.
ers to change the legislation in his favor. Chart 4 heritage.org
Tunisia’s investment policies thus did not
serve only their purported objectives of creat-
ing jobs and stimulating investment. Instead, administration, custom duties, and public pro-
regulations often served the personal interests curement) and the (ab)use of public assets and
of those in power at the expense of providing fair public enterprises (including public banks). 15
opportunities to the vast majority of Tunisian All of these practices undermine competition by
entrepreneurs who lacked political connections. favoring better-connected firms and those who
Is Tunisia an isolated case? Unfortunately practice corruption.
not: Our findings are consistent with a large The inefficiencies and distortions resulting
body of literature showing that countries with from this system of rents extraction obstruct
more extensive business entry regulations tend the development of a dynamic economic envi-
to grow more slowly and to have higher levels of ronment—which is at the root of the economic
corruption.14 Across the globe, corruption and stagnation of Tunisia.16 Few new firms are cre-
burdensome business regulation go hand-in- ated, and productive firms do not grow, as they
hand. (See Chart 5.) face unfair competition by crony firms.17 The
In sum, our results substantiate that state emergence and expansion of innovative dynam-
interventions and barriers to competition cre- ic firms is hampered by the expensive and low-
ated ample opportunities for rents extraction by quality goods and services they need to pay to
cronies, severely hampering the performance crony firms. As a result, Tunisian entrepreneurs
of the private sector in Tunisia. While we have are competitive only in labor-intensive low-
focused on authorizations and restrictions on skill tasks, investment has been lacking, and
FDI, several other policy instruments were unemployment has been rampant. Most of the
also used to gain unfair competitive advantage jobs created were in low-value-added activities
and extract rents, notably through the discre- and mostly in the informal sector, offering low
tionary enforcement of regulations (e.g., in tax wages and no job security. Such jobs certainly do

Relationship Between Regulatory Environment and Corruption
Rank— 180
Corruption
Perceptions
Index 160
140
120
ine
ndL
100 Tre
Tunisia
80
60
40
Each circle
20 represents a
country
1
1 20 40 60 80 100 120 140 160 180 200
Rank—Ease of Doing Business
Sources: World Bank, “Doing Business: Economy Rankings,” http://www.doingbusiness.org/rankings (accessed November
17, 2014), and Transparency International, “Corruption Perceptions Index 2013,” http://www.transparency.org/cpi2013
not meet the aspirations of the growing number they have been captured in practice for rents
of graduates. extraction and privileges by those who are close
Tunisia’s rents-prone economic system is to those in power. The resulting inequality was a
not only inefficient, but also highly inequitable. fundamental cause of the revolution and, since
That such a small group of 114 entrepreneurs the economic model has not yet been changed,
could appropriate such a large share of Tuni- remains a latent source of instability in the Tuni-
sia’s wealth creation illustrates how corruption sian transition.
has been synonymous with social exclusion.
Inequality of opportunity characterizes Tunisia LESSONS FROM THE EXPERIENCE OF
today, as the current institutional infrastruc- OTHER DEMOCRATIC TRANSITIONS
ture creates an “insider-outsider” culture. Even Successful transitions are often associated
if the interventionist policies were introduced with rapid reforms, though historically, a coun-
originally to foster the country’s development, try that undertakes a democratic transition has
Chapter 4 51
only a 30 percent probability of succeeding.18 MOVING FROM A CLOSED
A democracy is more likely to be established SOCIOECONOMIC SYSTEM TO ONE
when per capita GDP is high and increasing;19 THAT IS OPEN TO ALL CITIZENS
income distribution is equal (low Gini coeffi- How can Tunisia move from a closed socioeco-
cient or low ratio of incomes of top-to-bottom nomic system to an open one? Since the Ben Ali
quintile); populations are small; urbanization is regime limited access to political and economic
advanced; people are educated; gender equality functions in order to generate rents, we can turn
in primary education is high; natural resources to the limited access order (LAO) framework for
are limited; there is no ethnic division; the tran- guidance.23 The framework is premised on the
sition is not conducted by a military regime; idea that power is tied to organizations and not
democratic states are present in the region (the to the individual and that rents-sharing is the
“contagion effect”);20 the time to election is mini- process by which a dominant coalition reaches
mal; the regime is not a presidential regime or an equilibrium that allows economic activities to
not dominated completely and permanently continue to generate rents.
by one political force; and the country has a Tunisia during the Ben Ali era could be char-
parliamentary system. acterized as a basic LAO with strong elements of
There is some consensus that rapid demo- predation. Few players were part of the domi-
cratic transition occurs primarily when several nant elite, which comprised the “ruling” fam-
fundamentals are in place: per capita GDP is ily, the security forces, the administration, the
high,21 the middle class is large, urbanization is media, civil society organizations, and business
advanced, the percentage of people receiving firms that allied with the political elite (or at
primary school educations is high, gender equal- least stayed out of politics). All other groups were
ity in primary education is high, a military force marginalized or actively suppressed. In such a
is present before the transition, there is a pre- setting, the LAO framework offers guidance on
vious attempt at democratization, democratic how organizations in societies arrive at elite bar-
states are present in the region, and natural gains—formal or informal agreements—to divide
resources are limited. Further, although there is the available opportunities for rents extraction
no empirical evidence from historical data, some and profit making in the economy.
scholars have noted that a democratic transition, The LAO framework predicts that countries
especially in middle-income capitalist countries, will not transition easily from limited access
might occur following years of declining growth orders, in which rent-seeking dominates, to an
and/or increasing inflation,22 as was the case for open access order, which characterizes most lib-
Latin American countries during the period of eral democracies. By limiting access to economic
hyperinflation in the 1980s and the Asian finan- activity and resources, the LAO creates rents
cial crisis in 1997. that help to maintain the equilibrium. Thus,
Unlike many other Arab Spring countries, there will be strong incentives for rent-seeking
which have seen their transitions fail, Tunisia to continue, albeit with some changes in the cast
has many of these fundamentals. Some of these, of organizations in the dominant coalition. In
such as high rates of urbanization and a large other words, even if countries hold fair elections,
middle class, Tunisia possessed before its upris- they will not soon become open democracies, but
ings. Others are the outcomes of choices Tuni- they may mature in the range of institutions and
sia has made since the revolution, such as the organizations that are allowed to participate in
decision to opt for a parliamentary rather than broader decision making.
presidential system. Together, they imply that Of course, advancing the principles of eco-
the country has a high likelihood of successfully nomic freedom—empowerment of the individual,
completing its democratic transition despite the non-discrimination, and open competition—can
risk of backsliding that is inherent in virtually all weaken the rent-creation system that holds the
democratic transitions. LAO together. These changes, whether in the

form of revolution or of reform, therefore threat- government. As part of these negotiations, which
en the basis of order and hold the risk of violence. included political, union, and business interests,
Similarly, attempts to remove corruption, install the Ennahda government agreed to postpone
a functioning rule of law, and institute democ- plans to exclude former regime officials from
racy with competitive parties can also desta- running for office.
bilize an LAO and generate broad resistance. While the post-revolutionary political order
Groups that benefit directly from market distor- included new interest groups in the form of the
tions, such as those reaping monopoly profits or Ennahda party and the UGTT, these groups
receiving services at subsidized prices, will resist did not overturn the existing order, but rath-
the reforms.24 er added to its ranks. Moreover, the October
It may be argued that although the revolution 2014 parliamentary elections saw the return
disrupted this equilibrium and empowered a of many of these former regime officials to the
new coalition, even after the departure of Ben Ali, political sphere.
most of the organizations supporting him have During Tunisia’s transitional period, reforms
retained their interests and political importance. that might challenge the existing elite bargain
Consequently, they are likely to continue to play have been either extremely slow to develop or
a role in shaping the evolving political arrange- rejected by those who continue to hold con-
ments in spite of facing increased competition siderable leverage. These efforts have not only
among a wider set of elites, which now represent stymied controversial legislation, such as the
some segments of the population that had no aforementioned political exclusion law. They
voice or participation before. have also prevented reforms in less controver-
Several political realities in Tunisia during sial areas such as the Investment Incentives
the past four years are consistent with this char- Code, which was the basis for much of Ben Ali’s
acterization. New political actors have become rent-seeking.
central to negotiations about control of the Institutionally, extra-governmental dia-
economy, while interests of the previous regime logues, including both the National Dialogue
have continued to play a major role. Two exam- negotiations25 and protest movements, have pro-
ples demonstrate this rebalancing. vided a means for otherwise unreformed institu-
First, when the Ennahda party, a previously tional structures to deal with newly competing
banned political party, was elected to lead a interests. While this has served as a way for the
coalition government (2011–2013), its term in country to avoid winner-take-all outcomes, it
office was marked more by bargaining and nego- has come at the expense of the democratic pro-
tiation with political adversaries and interest cess (i.e., decisions by legislative bodies) and has
groups than by changes in the status quo. Patron- resulted in outcomes that have failed to fulfill
age in the form of civil service and state-owned the expectations of revolutionaries who fought
enterprise recruitment continued, and legisla- largely against these elites.
tion meant to change the Ben Ali–era economic While the return of former regime elements
policy infrastructure largely stalled. has been cast by some as a sign of failure of the
Second, the General Union of Tunisian Work- revolution, the LAO framework suggests that
ers (known by its French acronym UGTT), which elections will only gradually become an arena for
had played an important role in Tunisia’s inde- competition among power groups. They serve to
pendence but was eventually coopted by the test the relative ability of competing organiza-
state, became a balance against both government tions to mobilize supporters.
and private-sector initiatives that threatened Meanwhile, achieving stability will require
its interests. During the transition period, the creating institutions that avoid winner-take-all
UGTT first led protests and then negotiations, outcomes. International experience shows that
which eventually resulted in the Ennahda gov- sustained improvements in LAOs and moves
ernment’s handing over power to a technocratic toward open access have happened in incre-
Chapter 4 53
mental steps rather than giant leaps. Historical- tem, which privileges its elites and is at the root
ly, incremental steps that have led to increased of the revolution, to a more open system for the
openness have included greater predictability in benefit of all Tunisians.
the elite bargain. Notably, experience has shown This requires changing the policy infra-
the importance of building institutions that structure inherited from the Ben Ali era, which
can underpin predictable resolution of conflict perpetuates social exclusion and invites cor-
between elites (i.e., to enforce the rule of law for ruption. The system of laws and regulations
elites). As these elite-oriented rule-of-law insti- that allowed the family to capture such a large
tutions become stronger over time, they provide share of the country’s wealth remains largely in
a platform to move from privileges for the elite to place, maintaining the opportunities for firms
a level playing field for all citizens. to earn rents through cronyism and corruption.
In Tunisia, several new institutions, in the These regulations perpetuate social exclusion, as
form of the new, relatively liberal constitution or unconnected Tunisians have very limited eco-
various laws such as those governing freedom of nomic opportunities.
association or access to information, may form Without such changes, there is a risk that
the basis for greater competition among a wider instead of reforming the policy infrastructure,
cross-section of society. Granting citizens access Tunisia’s elites will collaborate just enough to
to information will enable independent analysis share the spoils, albeit with a slightly differ-
of the beneficiaries of existing policies, which ent group of vested interests. In lieu of reforms
will also increase the pressure for policy changes. that would level the playing field, the economic
Nevertheless, the LAO framework emphasizes system would remain closed in favor of a small,
that trying to go straight from revolution to an though slightly expanded, minority of elites.
open access order has often led to disruption and Under this scenario, markets would remain
more fragility.26 closed off from competition, regulatory policy
What is yet more difficult to measure, given would remain subject to discretion, and decision
the extent of elite capture that continues to pre- making would be opaque.
vail, is whether incremental progress is taking Opening the economic system will require
place in the aggregate. While certain institution- political determination, since fierce resistance
al reforms appear objectively to be steps forward, can be expected from those who are at risk of
these have been counterbalanced by economic losing rents and privileges. Moving too rapidly
decision making that has remained exclusive will likely create tension and instability, which
and unequal. Even the task of creating a work- could undermine the process. Moving too tim-
able limited access order will not be easy—as we idly, however, will fuel the frustration expressed
see in many other post–Arab Spring countries. by the marginalized groups in society.
Empowering strong independent governance
THE WAY FORWARD: OPENING institutions that enforce the rule of law on elites
ECONOMIC OPPORTUNITY and vested interest groups will accelerate the
TO ALL TUNISIANS change process. Enforcing citizens’ right of
Tunisia has made enormous progress in its access to information, as well as transparency
democratic transition, and historical experience and accountability in the government, is also
from other countries suggests that it has the key critical in order to arrive at a stable democracy,
ingredients required to succeed. The challenge is both in Tunisia and everywhere else.
to move from a fairly closed socioeconomic sys-

ENDNOTES
1. The findings, interpretations, and conclusions 550 properties; 48 boats and yachts; 40
expressed in this paper are entirely those of the stock portfolios; and 367 bank accounts. The
authors. They do not represent the views of the confiscation commission estimates that the total
World Bank, its affiliated organizations, or the value of these assets combined is approximately
Executive Directors of the World Bank or the US$13 billion, or more than one-quarter of
governments they represent. Tunisian GDP in 2011.
2. World Bank, From Privilege to Competition: 9. Entry authorizations and restrictions on
Unlocking Private-Led Growth in the Middle East domestic and foreign investors remain the
and North Africa, MENA Flagship Development prevalent feature of the business environment
Report, 2009; World Bank, The Unfinished in Tunisia. At present, these barriers exist
Revolution: Bringing Opportunity, Good Jobs and through several pieces of legislation, notably
Greater Wealth to All Tunisians, Development the Investment Incentives Code; the Commerce
Policy Review Report No. 86179-TN, May 2014; Code; many of the sectoral legislations regulating
World Bank, From Jobs to Privileges: Unleashing services sectors (notably telecommunications,
the Employment Potential of the Middle East and health, education, and professional services);
North Africa, Report No. 88879-MNA, June 2014. and the Competition Law.
3. Bob Rijkers, Caroline Freund, and Antonio 10. If we focus on firms engaged in activities covered
Nucifora, All in the Family: State Capture in by the investment code, we observe that in
Tunisia, World Bank Policy Research Working 2010, roughly two-thirds (64 percent) of all
Paper No. 6810, March 2014; World Bank, confiscated firms are in sectors in which firms
The Unfinished Revolution. One of the words require an “authorization” to operate. Similarly,
heard most frequently from young people two-thirds of confiscated firms (64 percent)
demonstrating in Tunisia in early 2011 was are active in sectors in which foreign-owned
“dignity.” This highlighted that social and firms are not allowed to operate. These shares
economic problems went beyond the narrow are much higher than those for non-connected
dimension of material poverty. It was first and firms, which are 45 percent and 36 percent,
foremost about exclusion and lack of access to respectively.
opportunities and participation in the economy. 11. To attempt to shed light on this question, we
4. Adeel Malik and Bassem Awadallah, “The assemble a database documenting all changes
Economics of the Arab Spring,” World in the investment code during 1994 and 2010
Development, Vol. 45 (May 2013), pp. 296–313. and assess whether revisions in the code are
5. Institut National de la Statistique, African more likely when Ben Ali firms are undertaking
Development Bank, and World Bank, Mesure de a particular activity. During 1994 and 2010, 22
la pauvreté, des inégalités et de la polarisation decrees were signed by Ben Ali introducing
en Tunisie (Tunis: Institut National de la new authorization requirements in 45 different
Statistique, November 2012); World Bank, The sectors and new FDI restrictions in 28 sectors.
Unfinished Revolution. 12. While statistical power is limited due to the
6. Béatrice Hibou, Surveiller et Réformer: Economie relatively small number of observations on
Politique de la Servitude Volontaire en Tunisie both connected firms and regulatory changes,
(Paris: La Découverte, 2006). we document a few instances of striking
7. Raymond Fisman, “Estimating the Value of simultaneity between regulatory changes
Political Connections,” American Economic and deployment of business activities by clan
Review, Vol. 91, No. 4 (September 2001), members. For example, Decree No. 96-1234
pp. 1095–1102; Thomas Ferguson and Hans- issued in 1996 amended the investment code
Joachim Voth, “Betting on Hitler—The Value by introducing authorization requirements for
of Political Connections in Nazi Germany,” firms engaging in the handling and transfer of
Quarterly Journal of Economics, Vol. 123, Issue 1 goods in ports, as well as the towing and rescue
(February 2008), pp. 101–137. of ships. The decree also introduced restrictions
on FDI for firms involved in the transport of red
8. Rijkers, Freund, and Nucifora, All in the
meat. That same year, Med Afif Chiboub, uncle of
Family: State Capture in Tunisia. In line with
Ben Ali’s son-in-law Mohammed Slim Chiboub,
the Decree Law No. 2011-13 of February 2011,
established La Méditérranéene pour le Commerce,
the government confiscated the assets of a
le Transport et la Consignation, a shipping and
list of 114 people, mostly close relatives of Ben
logistics company focused on the transport of
Ali. Among the assets that were seized were
refrigerated products. As another example, the
over 400 enterprises (some of them abroad);
establishment of Carthage Cement by Belhassen
Chapter 4 55
Trabelsi, the brother of the president’s second 18. Caroline Freund and Mélise Jaud, “Democratic
wife, followed on the heels of Decree No. 2007- Transitions: Successful, Gradual, and Failed,”
2311 stipulating the need for government World Bank, Office of the Chief Economist,
authorization for firms producing cement. Middle East and North Africa Region,
13. Rijkers, Freund, and Nucifora, All in the Family: September 2012.
State Capture in Tunisia. Each year 1.6 percent of 19. Adam Przeworski and Fernando Limongi also
all sectors in which Ben Ali firms are active are note that a democracy is unlikely not to last
subjected to new authorization requirements, when per capita GDP is above $6,000. Adam
whereas only 0.8 percent of sectors in which Przeworski and Fernando Fernando Limongi,
Ben Ali firms are not present are subjected “Modernization: Theories and Facts,” World
to new authorization requirements. For FDI Politics, Vol. 49, No. 2 (January 1997), pp. 155–183.
restrictions, the difference is even larger with 20. Abraham Lowenthal, Exporting Democracy:
2 percent of sectors in which Ben Ali firms are Themes and Issues (Baltimore: Johns Hopkins
active being subjected to new FDI restrictions University Press, 1991).
each year, compared to 0.4 percent of sectors 21. Seymour Martin Lipset, “Some Social Requisites
without Ben Ali firms. of Democracy: Economic Development and
14. Simeon Djankov, Rafael La Porta, Florencio Political Legitimacy,” American Political Science
Lopez-De-Silanes, and Andrei Shleifer, “The Review, Vol. 53, Issue 1 (March 1959), pp. 69–105.
Regulation of Entry,” The Quarterly Journal of 22. Stephan Haggard and Robert R. Kaufman, “The
Economics, Vol. 117, Issue 1 (February 2002), Political Economy of Democratic Transitions,”
pp. 1–37. Comparative Politics, Vol. 29, No. 3 (April 1997),
15. The 2011 report of the Tunisian Anticorruption pp. 263–283.
Commission highlighted that the areas that 23. Douglass C. North, John Joseph Wallis, Steven
had been the most at risk during the Ben Ali B. Webb, and Barry R. Weingast, Limited
regime were real estate, agricultural land, state- Access Orders in the Developing World: A New
owned enterprises, public procurement and Approach to the Problems of Development, World
concessions awards, large public investments Bank Policy Research Working Paper No. 4359,
projects, privatization, information technology, September 2007.
financial and banking sectors, customs and
24. Ibid.
taxation, and justice. The Organisation for
Economic Co-operation and Development 25. In the fall of 2013, a severe political impasse
(OECD) carried out an assessment of corruption was resolved when the governing coalition and
risks in Tunisia and found similar problems. The the opposition engaged in a National Dialogue
results of a parallel qualitative survey that we process that was brokered by key civil society
carried out in Tunisia in 2012 broadly confirm organizations. The dialogue focused on the
this diagnosis. See Hamouda Chekir and Claude constitutional and electoral timetables, as well
Menard, “Barriers to Private Firms Dynamism as on the opposition’s proposition to replace the
in Tunisia: A Qualitative Approach,” Internal government with a nonpartisan, technocratic
Mimeo, World Bank, October 2012. government to oversee the final year of the
transition until new elections would be held.
16. Rijkers, Freund, and Nucifora, All in the Family:
State Capture in Tunisia. 26. North, Wallis, Webb, and Weingast, Limited
Access Orders in the Developing World.
17. Bob Rijkers, Hassen Arrouri, Caroline Freund,
and Antonio Nucifora, Which Firms Create the
Most Jobs in Developing Countries? Evidence
from Tunisia, World Bank Policy Research
Working Paper No. 7068, October 2014.

Chapter 5
Economic Freedom, Energy,

and Development
Nicolas D. Loris
A
ccess
‌ to dependable energy is an essential conventional energy supplies or renewables, the
requirement
‌ for development, underpin- world’s energy needs will be met best through
‌ning our ability to produce goods and ser- free markets.
vices more efficiently, communicate more easily, Governments of all stripes regulate the ener-
and trade with other parts of the world. More- gy sector with measures ranging from outright
over, energy markets are becoming increas- state ownership or the direct government man-
ingly more international, and the energy sector agement of prices or supply to the more general
evolves dynamically as technological, economic, maintenance of a system of laws and property
and political environments change. rights. The energy sector is uniquely prone to
It is common these days to talk about an ener- government intervention because of energy’s
gy revolution, by which many politicians and unique connection to an economy.
commentators mean a government-planned and While the exact relationship between ener-
government-subsidized switch from conven- gy consumption and gross domestic product
tional fuels to renewable forms of energy. But all (GDP) can vary, it is clear that energy is a key
forms of renewable energy continue to account ingredient in a nation’s economic growth.2 Con-
for a very small percentage of world energy pro- sequently, many governments have sought to
duction. The real revolution, unforeseen and control energy supply, manipulate demand, and
unplanned by any government but nonethe- limit competition through feed-in tariffs, pref-
less bringing energy and opportunity to billions erential tax treatment, renewable energy quotas,
around the world, is a market-driven technologi- regulatory structures, trade barriers, targeted
cal revolution in exploration and exploitation stimulus investments, and other such market
that has seen investment in energy supply more manipulations that artificially increase access
than double since 2000.1 Whether it is through to and perhaps lower the price of politically pre-
57
ferred energy or, conversely, decrease access and real one).” Young villagers carried signs demand-
increase price of other energy sources. ing the “real source of energy” and “not the fake
Both experience and data show that policies solar powered” one.5
designed to engineer energy markets through In fact, the environmental concerns that
state interference hamper economic growth drive such projects, while admirable in theo-
rather than stimulate it. Conversely, both expe- ry, are sadly misdirected when they hold back
rience and data show that whether a country is development. Arguably, advances in traditional
rich in natural resources or deprived of them, energy production and use are the single most
policies that sustain the four pillars of economic important factor in achieving the societal wealth
freedom—rule of law, limited government, regu- that enables advances in health, pollution con-
latory efficiency, and open markets—are more trol, and higher standards of living.
successful not only in stimulating economic Improved Efficiency and Environment.
growth and innovation, but also in using energy As economies develop and become richer, they
more efficiently. also tend to be more capable of adopting great-
er energy efficiency through innovation. Both
ECONOMIC FREEDOM small and large innovations that improve energy
AND ACCESS TO ENERGY efficiency add up to big savings for businesses as
There are 1.3 billion people around the world well as families, and the accumulation of these
without access to reliable electricity. More innovations and efficiency improvements can
than 2.5 billion people use biomass for cook- dramatically enhance a country’s energy use per
ing, meaning that they cook their food and heat dollar of GDP.
their homes with animal waste, leaves, wood, and As shown in Chart 1, economically freer coun-
charcoal.3 Without access to reliable, affordable tries tend to consume energy more efficiently.
energy—something the developed world has Granted, there are unfree countries that have
enjoyed for a century or more—these people both extremely low electrification and high rates
have little chance to improve their lives. of energy efficiency, but on average, free and
Economic and technological realities make mostly free countries use energy more efficiently
conventional coal, nuclear, oil, hydroelectric, than do mostly unfree and repressed economies.
and natural gas the most affordable and reliable Economically freer countries also enjoy
energy-dense sources of power. For example, cleaner environments and greater environmen-
Tanzania is hoping to switch increasingly from tal sustainability. Freer economies have access to
environmentally destructive charcoal to natu- more products and technologies that make our
ral gas, and it recently built infrastructure to lives healthier and the environment cleaner. For
deliver offshore natural gas to the homes of Dar instance, the availability of simple products like
es Salaam.4 While renewable sources like solar soaps, cleaners, and detergents makes our homes
and wind may one day play a larger role, they dramatically cleaner and healthier. The devel-
cannot be relied on for the far-reaching or basel- opment of sanitation systems and availability of
oad power that fuels economies and reaches the garbage collection greatly reduce many types of
average citizen. diseases and reduce toxins in the air and water.
Regrettably, too many special interests are As a country grows economically, it increases the
pursuing political and environmental agen- financial ability of its citizens and businesses to
das that interfere with the effort to meet basic care for the environment and reduce pollutants
energy needs in developing countries. When emitted from industrial growth.
Greenpeace India installed a solar micro-grid One measure of different countries’ environ-
in Dharnai, an Indian village surviving without mental status is the Yale Center for Environmen-
electricity since 1981, the villagers had one mes- tal Law and Policy’s Environmental Performance
sage for them: “Hamen nakli nahin, asli bijli cha- Index (EPI), a joint project of the Yale Center
hiye (We do not want artificial energy, give us the for Environmental Law and Policy (YCELP) at

Freer Nations Use Energy More Efficiently
Average Energy Consumption per Dollar of GDP 16,830

(BTU per Year in 2005 U.S. Dollars)
15,166
15,000
12,734
10,000
8,500
7,797
5,000
0
Free Mostly Free Moderately Mostly Unfree Repressed
Free
Dow Jones & Company, Inc., 2015), http://www.heritage.org/index, and U.S. Department of Energy, Energy Information
Administration, International Energy Statistics, http://www.eia.gov/cfapps/ipdbproject/iedindex3.cfm?
tid=92&pid=46&aid=2&cid=regions&syid=2011&eyid=2011&unit=BTUPUSDM (accessed October 6, 2014).
Yale University and the Center for International freedom achieve the best results in protecting
Earth Science Information Network (CIESIN) at the environment.
Columbia University. The EPI ranks countries The principles driving economic freedom and
based on a number of environmental indicators their importance to environmental improve-
including agriculture, health impacts, air quality, ments are unmistakable. Private property rights
biodiversity, climate, water and sanitation, and incentivize owners to take care of their belong-
other measures.6 It provides comprehensive ings rather than abuse the land and water. As
analysis and important measurements of 178 the economist’s adage notes, “Nobody washes a
countries’ environmental performance.7 rental car.”
As it turns out, there is a highly positive cor- A sound rule of law ensures that pollut-
relation between a country’s environmental ers cannot violate the rights of others without
performance as measured by the EPI and its accounting for externalities or providing just
economic freedom. (See Chart 2). The EPI is not compensation for any damage inflicted. Free
without its faults; for example, the index places trade promotes competition and creates oppor-
unwarranted and subjective weight on carbon tunities for businesses to adopt newer and
emissions and climate change relative to more more innovative technologies. When countries
basic environmental measures. But even with increase their economic prosperity by advanc-
the index’s bias toward government command- ing economic freedom, their capacity to increase
and-control environmental regulation, it is overall well-being and protect the environment
striking that countries with greater economic also increases.
Chapter 5 59
As Economic Freedom Rises, So Does Environmental Performance
Environmental Performance Index Score

100
90
80
70
60
50
40
30
e
Lin
rend
T
20 Each circle
represents a nation
in the Index of
10 Economic Freedom
0
20 30 40 50 60 70 80 90 100
Dow Jones & Company, Inc., 2015), http://www.heritage.org/index, and Yale University, Environmental Performance Index,
http://www.epi.yale.edu/downloads (accessed October 6, 2014).
BENEFICIAL ENERGY free-market reforms to encourage investment

POLICIES EMANATING and energy development.
FROM ECONOMIC LIBERTY Private Ownership with Clearly Defined and
Many of the benefits the United States and Enforced Property Rights. The United States is
other countries are experiencing from energy now the world’s largest producer of oil and natural
production stem from factors that promote eco- gas and, as a result, is reaping the tremendous eco-
nomic freedom. Policies that open access to mar- nomic benefits that such large-scale production
kets and secure private property rights broadly generates. This success emerged organically from
expand energy development opportunities and innovation in the private marketplace to unlock
economic gains. Even some countries with cen- energy resources formerly thought inaccessible
tralized autocratic governments and weak legal rather than from any specific government policy
foundations are implementing the necessary to promote these technologies and processes.

Oil and gas production is booming in some distribution of oil and gas. The problems inher-
regions of the U.S., while the rate of production ent in government ownership extend far beyond
in others has slowed or even decreased. The the mere holding of title to the land.
divergent trajectories in production primarily Government-controlled energy enterprises
boil down to one word: ownership. Much of the still respond to the profit motive in order to
growth is occurring on private and state-owned bring money into the government’s coffers and
lands, while oil and gas output on federally often can attain high rates of production. How-
owned or controlled lands has been in decline.8 ever, because they do not have to make appro-
In fact, because of U.S. government ownership priate decisions in a true market environment,
and control, the U.S. is the only nation to pro- state-owned oil and gas companies suffer from
hibit energy exploration in a majority of its ter- economic inefficiencies, reduced foreign invest-
ritorial waters. ment, higher rates of pollution, wasteful spend-
The government of Canada, one of the world’s ing, less technological innovation, and aging
economically freest countries and most success- infrastructure. Further, by relying on oil compa-
ful energy producers, also upholds the strong nies’ profits to fund other sectors of the economy,
enforcement of property rights when it comes governments divert resources that otherwise
to mineral and resources extraction.9 Chile, one would be available to invest in new energy tech-
of the world’s 10 freest economies according to nologies or potential new areas of energy explo-
the Index of Economic Freedom, is well known ration and development.13
for its free-market reforms for water use, which Venezuela, for example, over the past sev-
include secure private property rights and pri- eral decades has poured billions of dollars in oil
vate investments in hydroelectric power.10 profits into social and military programs, leav-
Although land use laws are exceedingly ing the country with out-of-date, inefficient
complex in different regions of the world, the infrastructure and gaps in energy investment.14
fact remains that delineated and enforceable As a result of former President Hugo Chávez’s
property rights along with decentralized land attempt to nationalize Venezuela’s entire oil
management will be essential for rural ener- industry, oil production fell 30 percent, state-
gy and economic development in places like owned company PDVSA was underfunded to
Latin America, sub-Saharan Africa, and South invest in infrastructure, and foreign investment
Asia. Progress has been made in decentralizing practically vanished.15
land management and changing land use laws Similarly, state-owned Petrobras in Brazil is
in countries like Burkina Faso, Kenya, Malawi, facing massive delays and cost overruns because
Mozambique, Rwanda, and Zambia.11 of failure to keep up with increasing domestic
Decentralizing and privatizing land use rights energy demand.16 Exacerbating the problem, the
is a step in the right direction, but true reform Brazilian government sets the price for gasoline,
will occur when the legal structure and rule of artificially stimulating demand, hampering com-
law protect those changes. Botswana and Cabo petitiveness, and reducing investment, which
Verde, for example, have made enforceable cannot respond to the proper price signals.17
reforms under which landowners’ rights are Declines in Iran’s oil recovery rate and serious
truly protected.12 losses in efficiency and investment stem from an
By contrast, in many countries around the increasingly meddlesome government that exer-
world, not only are land and mineral resources cises nearly complete control of that sector of
state-owned, but entire supply chains of energy the economy.18 Nigeria is another resource-rich
production are partially or fully state-owned nation that is plagued by restrictions on private
or controlled. Fully or partially state-owned oil investment as well as stringent regulations and
companies in Saudi Arabia, Brazil, Iran, China, fiscal stipulations for the oil industry.19
Venezuela, Norway, Russia, and many other This is not to say that private-sector invest-
countries control much of the production and ments do not experience cost overruns or delays.
Chapter 5 61
Many times, however, those obstacles can be owned Pemex, kept in place since 1938, and
traced to burdensome government regulations. allowing private companies to compete in the
The marked decline in the U.S. nuclear industry, energy sector. As a direct result, the U.S. Energy
even in the midst of significant international Information Administration now projects that
growth, is a clear case in point. Private business- Mexico’s oil production will stop its 10-year
es have the knowledge and expertise to respond decline, level off, and eventually begin grow-
to market signals and succeed or fail by taking ing again.21 An open, resource-rich Mexico is
risks with their own resources. Government an extremely attractive new market for foreign
intervention, no matter the form, interferes with investors, and reform of the power market will
that process. upgrade the country’s energy infrastructure
Open Markets. Opening markets to domes- and provide both increased energy supplies and
tic private investment and foreign investment more economic opportunity.
is crucial to developing energy resources and Mexico is far from the only country imple-
increasing economic growth. The countries menting market-oriented reforms. India has
where private actors own the mineral rights signed civil commercial nuclear agreements
and reap the rewards from risk-taking typically with the United States and Australia, under
have more efficient, economically competitive which nuclear technologies can be traded freely
outcomes than do countries where the pro- and safely to bring electricity to energy-starved
ceeds from energy production funnel back to Indians. South African President Jacob Zuma is
the government or to corrupt special interests calling for more competitive pricing and encour-
allied with the government. Opening markets aging foreign investment through increased
to encourage foreign investment will not auto- private-sector participation.22 The United States’
matically eliminate the political corruption that Anadarko, Italy’s ENI, and India’s Jindal Steel and
is prevalent within the governments of many Power are investing directly in Mozambique’s
countries, but access to foreign capital will result wealth of coal and natural gas, and the doubling
in more competition, expanded energy supplies, of foreign direct investment has sparked steady
more jobs, and higher standards of living for economic growth for the country.23
more people. Open markets can also foster the explora-
While many countries are already enjoy- tion and development of new and more efficient
ing the economic benefits that flow from open energy technologies. Innovation and increased
energy markets, others are recognizing the need access to energy spurred by competition have
for change. Underinvestment and serious inef- the ultimate effect of reducing energy costs.
ficiencies in Mexico’s government-run energy As energy becomes more affordable, both the
sector, for example, have led to wasteful, out-of- expense of operating businesses and the cost of
date infrastructure and the underdevelopment products decrease, benefiting consumers.
of energy supplies. Unlike its North American
neighbors, Mexico has largely been detached THE EROSION OF ECONOMIC
from the energy boom in oil and natural gas cre- LIBERTY AND HARMFUL
ated by new technology. From 2000 to 2012, the ENERGY POLICIES
world’s major oil-producing countries increased Many of the problems associated with
their proven reserves; during the same period, accessing, producing, and consuming energy in
Mexico’s proven reserves fell 50 percent.20 countries around the world are a direct result
In recent years, however, Mexico has adopted of government intervention and policies that
a series of reforms that should open up invest- undermine economic liberty. Even in the freest
ment for oil and gas production, refineries, economies, the energy sector is uniquely prone
power plants, and pipelines and enable it to to government intervention. Governments have
upgrade existing energy infrastructure. Chang- sought to control energy supply, manipulate
es include ending the monopoly held by state- demand, and limit competition. However, both

experience and data show that policies seeking with subsidies, the new law reduces the amount
to engineer energy markets end up hampering and availability of subsidies and opens the ener-
economic growth rather than stimulating it. gy market to more competition.26
Government Subsidies. Using the political Spain has suffered a similar fate. According to
process to support the production or consump- an Institute for Energy Research report:
tion of one energy source or technology over
Spain’s feed-in tariffs have created a “rate
another misallocates labor and capital, wastes
deficit” amounting to $41 billion (about
taxpayer dollars, and perpetuates stagnation
$850 per Spaniard) as of February 2014.
among the very technologies that governments
This deficit exists between the price that
want to promote. Government support that tar-
utilities are obligated to pay for renewable
gets one group or industry artificially props up
energy and the price that they are allowed
that market and suppresses the real price signals
to pass on to consumers, creating the impe-
that drive efficiency.
tus for high electricity prices and high
Rather than increase competition, a special
taxes to fund the gap.27
endorsement from the government gives one
technology an unfair price advantage over oth- Denmark has experienced similarly poor
ers. Further, subsidies reduce the incentive for results from the government’s spending on
that technology to become cost-competitive renewable projects.28
and encourage dependence on the preferential Although Germany, Spain, and Denmark have
treatment that a government subsidy represents. relatively high levels of economic freedom over-
Energy sources that need subsidies from the gov- all, their governments’ energy policies, which
ernment are those that cannot compete econom- are often driven by politically charged environ-
ically without them. If a project makes economic mental agendas rather than by market realities,
sense, however, investments will occur without are characteristic of less free economies and are
government subsidies. undoubtedly holding back economic growth.
For example, policies in climate-conscious Excessive Regulation and Energy Taxes.
Europe have attempted to engineer energy Much of the world’s demand for energy is met
supplies around heavily subsidized renewable by carbon-emitting conventional fuels; in fact,
sources like wind and solar while driving up nearly 80 percent is met by coal, oil, and natural
the costs of conventional fuels in order to cap gas, and that situation is expected to continue
or reduce carbon dioxide emissions. Western at least for the next several decades.29 Out of
Europe, often touted as the model to follow when concern that man-made carbon dioxide emis-
it comes to energy policy, is suffering serious sions will result in catastrophic warming, many
economic consequences because of this subsi- countries and sub-national jurisdictions have
dizing of expensive, intermittent energy sources. implemented or are planning carbon reduc-
Europe’s energy policies are not success tion policies.
stories; they are cautionary tales. For instance, The European Union, New Zealand, South
between 2000 and 2010, Germany spent over Korea, Australia, and provinces in Canada
$100 billion subsidizing solar and wind power. each have their own carbon-emission trading
The result has been a higher tax burden, costlier schemes.30 France, Costa Rica, Ireland, the Unit-
electricity forced into the grid, and an unsustain- ed Kingdom, Switzerland, Sweden, Norway, Fin-
able market propped up only by the government’s land, Iceland, Denmark, and Japan all impose
support.24 Even worse, electricity has become carbon taxes,31 and South Africa plans to imple-
a luxury for more Germans who are unable to ment a carbon tax of its own.32 Other countries
afford to heat their homes.25 Consequently, Ger- such as Brazil, Chile, and Thailand have consid-
man lawmakers have voted to scale back the gov- ered their own carbon-restricting plans, and the
ernment’s “green” subsidies. Although Germany United States Environmental Protection Agen-
is maintaining an aggressive renewable policy cy is attempting to regulate carbon emissions
Chapter 5 63
from motor vehicles and both new and existing tic energy production, the United States should
power plants. be in a position to gain significant economic
Carbon dioxide (CO2) and other greenhouse benefits by exporting energy. Rather than treat-
gas (GHG) emissions do not have direct adverse ing energy like other goods traded freely around
health impacts. In fact, CO2 is critical to enhanc- the world, however, America bans exports of
ing plant growth and improving ecosystems, pro- crude oil and places needless restrictions on the
viding a number of agricultural and broad human exporting of other energy sources and technolo-
health benefits. Countries around the world are gies.36 It even hampers imports, as shown by its
implementing schemes to reduce CO2 because, failure to approve construction of the Keystone
it is claimed, its contribution to global warming XL pipeline that would facilitate imports of
negatively affects human health and the environ- crude oil from Canada.
ment. While a near-universal consensus exists In other cases, governments have resorted
among climatologists that man-made emissions to restrictions on energy trade in pursuit of
have some warming effect, a large community strategic or tactical advantages. The govern-
of scientists have serious reservations about ment of Venezuela, for example, has subsi-
the rate of warming, the magnitude of climate dized oil exports to Cuba, other nations of the
change induced by GHG emissions, and the abil- Caribbean and Central America, and even the
ity of climate models to predict conditions sev- United States in pursuit of political support
eral centuries into the future. for its foreign policy goals. Russia, by contrast,
More important, no matter what one believes has restricted or threatened to restrict the flow
regarding climate change, one thing is clear: of natural gas to European countries to mute
Collectively, the proposed carbon-emissions their objections to its expansionist policies in
reduction policies will cost billions of dollars in Ukraine and Georgia.
higher taxes33 and trillions of dollars in lost eco- The most famous case of the attempted use
nomic opportunity while likely having little if of energy export controls for strategic advan-
any noticeable impact on global temperatures.34 tage is probably the 1973 Arab oil embargo
When energy prices are artificially increased, enforced by the Organization of Petroleum
higher costs reverberate throughout the global Exporting Countries (OPEC) against the
economy as affected industries pass these costs United States and others who were supporting
onto consumers. Simply put, consumers are con- Israel in the so-called Yom Kippur War. The
strained to consume less as producers are forced result was a quadrupling of oil prices and a
to raise prices. This results in lower incomes, global recession. The link between government
fewer jobs, and lost economic output. actions that reduce the availability of energy
Recognizing the high costs that a carbon tax and economic growth could not have been
was imposing on its citizens and businesses to demonstrated more vividly.
achieve insignificant climate benefits, Australia
abolished the tax in July 2014.35 No doubt other ENERGY: AN ESSENTIAL BUILDING
countries are watching the Australian about- BLOCK FOR AN IMPROVED
face with significant interest. STANDARD OF LIVING
Carbon regulations and taxes are merely one Energy is a key building block for economic
example of how governments impose stringent opportunity. Energy policies rooted in the prin-
regulations on the energy industry that achieve ciples of economic freedom lead to increased
little in the way of meaningful environmental production, improved access, and greater pros-
benefit. Many governments impose controls on perity, while governments that deviate from
exploration, exploitation, and trade in oil and those principles are likely to doom their citizens
natural gas. to lives of energy scarcity, thereby curtailing eco-
Restrictions on Trade. With a wealth of nomic growth, environmental progress, health,
natural resources and a recent surge in domes- and longevity.

It is clear from the data that one need not
choose between energy availability and cleaner
environments. With technological advances
and high rates of economic growth, societies can
have both. But it is the freer economies—those
that encourage competition and private own-
ership—that do the best job of providing the
efficient, reliable, and clean energy that every
society needs for a prosperous future.
Chapter 5 65
ENDNOTES
1. International Energy Agency, World Energy 11. William J. Garvelink, “Land Tenure, Property
Investment Outlook, 2014, Rights, and Rural Economic Development in
http://www.iea.org/publications/ Africa,” Center for Strategic and International
freepublications/publication/weio2014.pdf. Studies Critical Questions, February 17, 2012,
2. See, for example, Ross McKitrick and Elmira http://csis.org/publication/land-tenure-
Aliakbari, Energy Abundance and Economic property-rights-and-rural-economic-
Growth: International and Canadian Evidence, development-africa.
Fraser Institute, May 2014, 12. Daron Acemoglu, Simon Johnson, and James A.
http://www.fraserinstitute.org/uploadedFiles/ Robinson, “An African Success Story: Botswana,”
fraser-ca/Content/research-news/research/ July 11, 2011, http://www.colby.edu/economics/
publications/energy-abundance-and-economic- faculty/jmlong/ec479/ajr.pdf, and Global
growth.pdf. Property Guide, “Property Rights Index—Cape
3. International Energy Agency, “World Energy Verde Compared to Continent,”
Outlook,” Energy Access Database, http://www.globalpropertyguide.com/Africa/
http://www.worldenergyoutlook.org/resources/ Cape-Verde/property-rights-index.
energydevelopment/energyaccessdatabase/. 13. David Victor, David R. Hults, and Mark C.
4. Deutsche Welle, “Tanzanian Natural Gas Comes Thurber, eds., Oil and Governance: State-Owned
Ashore,” August 19, 2014, Enterprises and the World Energy Supply,
http://www.dw.de/tanzanian-natural-gas- (Cambridge, UK: Cambridge University Press,
comes-ashore/a-17862556. 2014), http://www.cambridge.org/us/academic/
5. Giridhar Jha, “Bihar Village Clamours for Real subjects/politics-international-relations/
Electricity,” India Today, August 6, 2014, political-economy/oil-and-governance-state-
http://indiatoday.intoday.in/story/bihar-village- owned-enterprises-and-world-energy-supply.
dharnai-nitish-kumar-clamours-for-real- 14. Cesar J. Alvarez and Stephanie Hanson,
electricity/1/375733.html. “Venezuela’s Oil-based Economy,” Council
6. Yale Center for Environmental Law and Policy on Foreign Relations Backgrounder, updated
and Center for International Earth Science February 9, 2009, www.cfr.org/world/
Information Network at Columbia University, venezuelas-oil-based-economy/p12089.
2014 Environmental Performance Index, “Our 15. Jim Jelter, “Why Oil Prices Dipped on Chavez’s
Methods,” http://epi.yale.edu/our-methods. Death,” The Wall Street Journal, MarketWatch,
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thetell/2013/03/05/why-oil-prices-dipped-on-
8. Marc Humphries, “U.S. Crude Oil and
chavezs-death/.
Natural Gas Production in Federal and Non-
Federal Areas,” Congressional Research 16. Fabiola Moura, “Energy Losses Expose Petrobras
Service Report for Congress, March 7, 2013, Fuel Distortion: Corporate Brazil,” Bloomberg,
http://energycommerce.house.gov/sites/ November 23, 2012, http://www.bloomberg.
republicans.energycommerce.house.gov/ com/news/2012-11-23/energy-losses-expose-
files/20130228CRSreport.pdf. petrobras-fuel-distortion-corporate-brazil.html.
9. Doug Black, “A Canadian Energy Strategy 17. Christian Gómez, Jr., “Brazil’s Energy Agenda:
Framework Summary,” in A Canadian Energy The Way Forward,” Americas Society/Council
Strategy Framework: A Guide to Building of the Americas Energy Action Group Working
Canada’s Future as a Global Energy Leader, Paper, September 2013,
Energy Policy Institute of Canada, August 2012, http://www.as-coa.org/sites/default/files/
http://www.canadasenergy.ca/wp-content/ Brazils%20Energy%20Agenda.pdf.
uploads/2012/08/Final-Document-Aug-1.pdf. 18. U.S. Energy Information Administration,
10. Carl Bauer, “Market Approaches to Water “Country Analysis Brief: Iran,” last updated
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Education, Issue 144 (March 2010), pp. 44–49, 19. KPMG, “Oil and Gas in Africa: Africa’s Reserves,
http://www.ucowr.org/issue-144/market- Potential and Prospects,” 2013,
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latin-america. IssuesAndInsights/Articles-Publications/
Documents/Oil%20and%20Gas%20in%20
Africa.pdf.

20. Eduardo León, Iván Martén, Raul Livas, 28. CEPOS (Center for Politiske Studier), “Wind
and Marcelo Mereles, “The Promise Energy Policy: The Case of Denmark,”
of Mexico’s Energy Reform,” Boston September 2009, http://www.cepos.dk/
Consulting Group and EnergeA, April 2014, fileadmin/user_upload/Arkiv/PDF/Wind_
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21. U.S. Energy Information Administration, International Energy Outlook 2014,
“Energy Reform Could Increase Mexico’s Long- September 2014, http://www.eia.gov/forecasts/
term Oil Production by 75%,” Today in Energy, ieo/pdf/0484(2014).pdf.
August 25, 2014, 30. European Commission, Climate Action, “The EU
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22. Free Market Foundation Energy Policy Unit, en.htm.
“South Africa Has an Energy Plan—It Just Needs 31. World Bank, “Putting a Price on Carbon with a
to Implement It,” June 30, 2014, Tax,” http://www.worldbank.org/content/dam/
http://www.esi-africa.com/south-africa-has-an- Worldbank/document/SDN/background-note_
energy-plan-it-just-needs-to-implement-it/. carbon-tax.pdf.
23. Enerdata, Mozambique Energy Market, 32. World Bank, “State & Trends Report Charts
“Emerging Opportunities for Investors,” Global Growth of Carbon Pricing,”
January 21, 2014, May 28, 2014, http://www.worldbank.org/en/
http://www.enerdata.net/enerdatauk/press- news/feature/2014/05/28/state-trends-report-
and-publication/energy-features/mozambique- tracks-global-growth-carbon-pricing.
ressources-coal-and-natural-gas.php. 33. Risa Maeda, “Japan’s New Carbon Tax to
24. Rheinisch-Westfälisches Institut für Cost Utilities $1billion Annually,” Reuters,
Wirtschaftsforschung, Economic Impacts from October 10, 2012, http://www.reuters.com/
the Promotion of Renewable Energies: The article/2012/10/10/us-energy-japan-tax-
German Experience, Final Report, October 2009, idUSBRE8990G520121010.
http://instituteforenergyresearch.org/media/ 34. Nicolas D. Loris, Kevin D. Dayaratna, and David
germany/Germany_Study_-_FINAL.pdf. W. Kreutzer, “EPA Power Plant Regulations: A
25. Spiegel Online International, “Germany’s Energy Backdoor Energy Tax,” Heritage Foundation
Poverty: How Electricity Became a Luxury Good,” Backgrounder No 2863, December 5, 2013,
September 4, 2013, http://www.heritage.org/research/
http://www.spiegel.de/international/germany/ reports/2013/12/epa-power-plant-regulations-
high-costs-and-errors-of-german-transition-to- a-backdoor-energy-tax.
renewable-energy-a-920288.html. 35. Australian Government, Department of the
26. Stefan Nicola, “German Lawmakers Vote Environment, “Repealing the Carbon Tax,” 2014,
to Reduce Renewable-Energy Subsidies,” http://www.environment.gov.au/climate-
Bloomberg News, June 27, 2014, change/repealing-carbon-tax.
http://www.businessweek.com/news/2014-06- 36. Nicolas D. Loris, “Energy Exports Promote
27/german-lawmakers-back-new-clean-energy- Prosperity and Bolster National Security,”
law-to-reduce-subsidies. Heritage Foundation Backgrounder No 2931,
27. Institute for Energy Research, “Spain’s Green July 23, 2014, http://www.heritage.org/research/
Energy Experiment: A Cautionary Tale,” 2014, reports/2014/07/energy-exports-promote-
http://instituteforenergyresearch.org/wp- prosperity-and-bolster-national-security.
content/uploads/2014/08/Renewables-in-Spain.
pdf (emphasis in original).
Chapter 5 67
Chapter 6
Global and Regional Trends

in Economic Freedom
T
he 2015 Index of Economic Freedom assess- That represents a 2.8-point overall improve-
es economic policy developments in 186 ment from the inception of the Index in 1995.
economies in six regions around the world. (See Chart 1.)
The Index grades and ranks economies based Of the 178 economies graded in the 2015 Index,
on their performance in 10 key policy areas only five have sustained very high freedom scores
affecting overall economic freedom, which are of 80 or more, putting them in the ranks of the
grouped into categories that evaluate the rule economically “free.” The next 30 countries have
of law, respect for the principle of limited gov-been rated as “mostly free” economies recording
ernment, regulatory efficiency, and the domes- scores between 70 and 80. With scores of 60 to 70,
tic and international openness of markets. The 55 countries have earned scores that place them
2015 Index, the 21st annual edition, evaluates in the “moderately free” category. Thus, a total of
economic conditions and policy developments 90 economies, or about 50 percent of all nations
between July 1, 2013, and June 30, 2014. and territories graded in the 2015 Index, provide
institutional environments in which individu-
GLOBAL PROGRESS als and private enterprises benefit from at least
IN ECONOMIC FREEDOM a moderate degree of economic freedom in the
The 2015 Index judges the world economy as pursuit of greater prosperity and success.
a whole to be “moderately free.” Average eco- On the opposite side of the spectrum, nearly
nomic freedom has increased for the third year half of the remaining countries graded in the
in a row. Although the pace of advancement has Index—88 economies—have registered economic
slowed sharply in comparison to last year’s 0.7- freedom scores below 60. Of those, 62 economies
point improvement, economic freedom has still are considered “mostly unfree” (scores of 50–60),
advanced by 0.1 point to 60.4 in the 2015 Index. and 26 are clearly “repressed” (below 50).
69
Global Economic Freedom
Average Score in the Index of Economic Freedom

61
60.4
60.2 60.3
MODERATELY FREE
60
59.6
59.6
59.4
59
58
57.6
57
57.1
56
1995 2000 2005 2010 2015
Source: Terry Miller and Anthony B. Kim, 2015 Index of Economic Freedom (Washington, DC: The Heritage Foundation
and Dow Jones & Company, Inc., 2015), http://www.heritage.org/index.
Despite the global progress recorded over the by close to one point or more on average. Aver-
21-year history of the Index, the number of people age scores for most other economic freedoms,
living without economic freedom remains disturb- including business freedom, property rights,
ingly high: 4.5 billion, or about 65 percent of the labor freedom, investment freedom, and finan-
world’s population. More than half of these people cial freedom, have registered small declines.
live in just two countries, China and India, where The loss of economic freedom was most
advancement toward greater economic freedom pronounced in the area of respect for limited
has been both limited and uneven. In the two most government. A score drop of 1.0 point in the cat-
populous economies, structural reforms in a few egory measuring control of government spend-
key sectors have sometimes boosted growth, but ing reflects the continuation of countercyclical or
the governments have failed to institutionalize interventionist stimulus policies in some countries,
open environments that promote broad-based though there is scant evidence that such policies
and sustained improvements in the economic are boosting growth or restoring employment.
well-being of the population as a whole.
As shown in “The Ten Economic Freedoms: A GAINS AND LOSSES
Global Look” on the next page, on a worldwide In the 2015 Index, 101 countries, the majority
basis, this year’s increase in economic freedom of which are less developed or emerging econo-
has been driven by improvements in trade free- mies, showed advances in economic freedom
dom, monetary freedom, and freedom from cor- over the past year. Remarkably, 37 countries,
ruption, for which global ratings have advanced including Taiwan, Lithuania, Georgia, Colom-

The 10 Economic Freedoms: A Global Look
Score Changes
GOVERNMENT REGULATORY
RULE OF LAW SIZE EFFICIENCY OPEN MARKETS
Property Rights –0.9 Fiscal Freedom +0.1 Business Freedom –0.8 Trade Freedom +0.6
Freedom from +1.6 Government –1.0 Labor Freedom –0.3 Investment Freedom –0.7
Corruption Spending Monetary Freedom +0.8 Financial Freedom –0.4
RULE OF LAW Property Rights 42.2

Freedom from Corruption 41.9
0 20 40 60 80 100
The world average score for property rights has declined since last year, with 28 countries’
scores deteriorating. In many countries, the judiciary has become more vulnerable to political
interference. Despite some improvement, the average score for freedom from corruption still
lags behind scores for other components of economic freedom. Populations in some countries
have engaged in demonstrations calling for greater transparency and accountability.
GOVERNMENT Fiscal Freedom 77.4

SIZE Government Spending 61.7
0 20 40 60 80 100
The average top individual income tax rate for all countries is about 28 percent, and the average
top corporate tax rate is 24.1 percent. The average overall tax burden corresponds to around
23 percent of gross domestic product. The average level of government spending is equal to
34.7 percent of GDP. The average level of gross public debt for countries covered in the Index is
equivalent to slightly over 50 percent of GDP.
REGULATORY Business Freedom 64.1

EFFICIENCY Labor Freedom 61.3
Monetary Freedom 75.0
0 20 40 60 80 100
Many countries continue to implement regulatory reforms, although developed countries have
generally lagged behind developing countries. Globally, starting a business takes seven proce-
dures and 22 days, while licensing requirements consume over five months on average. For
the world as a whole, burdensome labor codes stifle job growth. Monetary freedom registered
a continued improvement as a result of generally low inflationary pressures.
OPEN Trade Freedom 75.4

MARKETS Investment Freedom 54.8
Financial Freedom 48.5
0 20 40 60 80 100
The average trade freedom score continues to improve. The average investment freedom score
remains essentially unchanged. Many countries’ investment policies remain geared toward
sectoral investment promotion rather than general market openness. Despite some progress,
the global financial system remains under continuing strain and uncertainty. Overall, global
financial freedom has recorded a slight decline since last year.
Chapter 6 71
Economic Freedom: Regional Variations (Regional Average)
Regional North Middle East / South and Central Sub-Saharan
Ranking America North Africa America / Caribbean Asia-Pacific Europe Africa
(73.9) (61.6) (59.7) (58.8) (67) (54.9)
1 Canada Bahrain Chile Hong Kong Switzerland Mauritius
2 United States United Arab Emirates Colombia Singapore Estonia Botswana
3 Mexico Qatar Saint Lucia New Zealand Ireland Cabo Verde
4 Israel Bahamas, The Australia Denmark Rwanda
5 Jordan Uruguay Taiwan United Kingdom Ghana
Saint Vincent
6 Oman Japan Lithuania South Africa
and the Grenadines
7 Kuwait Barbados South Korea Germany Madagascar
8 Saudi Arabia Peru Malaysia Netherlands Swaziland
9 Morocco Jamaica Macau Finland Uganda
10 Lebanon Costa Rica Brunei Luxembourg Namibia
11 Tunisia Dominica Kazakhstan Georgia Benin
12 Egypt El Salvador Thailand Sweden Zambia
13 Yemen Trinidad and Tobago Philippines, The Czech Republic Burkina Faso
14 Algeria Panama Samoa Iceland Côte d'Ivoire
15 Iran Paraguay Kyrgyz Republic Norway Gabon
16 Dominican Republic Vanuatu Austria Senegal
17 Guatemala Azerbaijan Latvia Tanzania
18 Nicaragua Tonga Belgium Djibouti
19 Honduras Mongolia Poland Gambia, The
20 Belize Fiji Cyprus Seychelles
21 Brazil Sri Lanka Spain Mali
22 Guyana Indonesia Slovak Republic Nigeria
23 Suriname Cambodia Armenia Kenya
24 Haiti Bhutan Macedonia Mozambique
25 Ecuador Pakistan Hungary Malawi
26 Bolivia India Bulgaria Niger
27 Argentina Bangladesh Romania Burundi
28 Venezuela Maldives Malta Mauritania
São Tomé
29 Cuba Papua New Guinea Albania
and Príncipe
30 China Portugal Togo
31 Tajikistan Montenegro Liberia
32 Vietnam Turkey Comoros
33 Laos France Guinea
34 Nepal Italy Guinea-Bissau
35 Micronesia Croatia Cameroon
36 Solomon Islands Slovenia Sierra Leone
37 Uzbekistan Serbia Ethiopia
Bosnia and
38 Burma Lesotho
Herzegovina
39 Kiribati Moldova Angola
40 Timor-Leste Greece Chad
Economic Freedom Scores Central African
41 Turkmenistan Russia
Republic
80–100 Free
42 North Korea Belarus Congo, Dem. Rep.
70–79.9 Mostly Free
43 Ukraine Congo, Republic of
60–69.9 Moderately Free
44 Equatorial Guinea
50–59.9 Mostly Unfree
45 Eritrea
0–49.9 Repressed
46 Zimbabwe

One–Year Freedom Score Change
Index Year
Region 2014 2015 One–Year Change
Sub-Saharan Africa 54.6 54.9 +0.3
Asia-Pacific 58.5 58.8 +0.3
Middle East and North Africa 61.5 61.6 +0.1
South and Central America/Caribbean 59.7 59.7 No change
Europe 67.1 67.0 -0.1
North America 74.1 73.9 -0.2
bia, Israel, Cabo Verde, Montenegro, and Côte Fourteen countries, including Angola, Poland,
d’Ivoire, achieved their highest economic free- South Korea, Taiwan, and the United Arab Emir-
dom scores ever in the 2015 Index. ates, have achieved uninterrupted growth in eco-
While four countries (Singapore, Finland, nomic freedom over the past five years. Seven of
Madagascar, and Suriname) recorded no score the 14, all developing countries, have recorded
change, declines in economic freedom have notable cumulative score gains of over five
occurred in 73 countries. Eleven countries, includ- points: Zimbabwe, Burma, Comoros, Seychelles,
ing Venezuela, Equatorial Guinea, Argentina, Liberia, the Philippines, and Guinea–Bissau.
Bolivia, Algeria, Greece, and El Salvador, recorded Competition for the top spot in the Index
their lowest economic freedom scores ever. rankings has intensified. The 2015 Index has
Sub-Saharan Africa is home to six of the 10 recorded a number of noticeable realignments
most improved countries. São Tomé and Prínci- and achievements within the top 20 global eco-
pe, Democratic Republic of Congo, Togo, Senegal, nomic freedom rankings.
Burundi, and Zimbabwe all recorded score gains
of two points or more. On the other hand, Europe • Hong Kong has maintained its status as the
has the most countries (Slovenia, Ukraine, Arme- world’s freest economy, a distinction that it
nia, and Greece) recording serious declines, fol- has achieved for 21 consecutive years. How-
lowed by Sub-Saharan Africa (Equatorial Guinea, ever, the gap between that territory and Sin-
Botswana, and the Gambia) and Middle East/ gapore, the second-freest economy, has almost
North Africa (Algeria and Yemen). vanished. Hong Kong’s economic freedom
Score improvements in eight countries, all score declined by 0.5 point, with an erosion of
of which are developing or emerging econo- the rule of law reflecting an increased level of
mies, were significant enough to merit upgrades perceived corruption.
in their economic freedom status in the Index. • Along with Hong Kong and Singapore, New
Notably, Israel and Malaysia have joined the Zealand, Australia, and Switzerland are the
ranks of the “mostly free,” in Israel’s case for the only economies considered “free” with eco-
first time ever and in Malaysia’s case regaining a nomic freedom scores above 80 on the 0-to-
level of economic freedom it had not experienced 100 Index grading scale. New Zealand moved
since 1996. Three developing countries (Moroc- up two slots and reclaimed third place in the
co, Serbia, and Vanuatu) have advanced into the rankings as a result of committed efforts to
ranks of the “moderately free.” Three others cut government spending. Canada remains
(Haiti, São Tomé and Príncipe, and Togo) have the world’s sixth-freest economy for the fifth
escaped the status of economically “repressed.” year in a row.
Chapter 6 73
Per-Capita Income by Region
GDP per Capita
(Purchasing Power Parity)
$60,000
$53,106 ■ Five Most Free Nations
$50,841 ■ Five Least Free Nations
50,000
$39,097
40,000
30,000 $27,452
20,000
$15,607
$10,655 $11,228
10,000 $8,658 $8,371
$5,841
0
Middle East and Asia-Pacific Europe Americas Sub-Saharan
North Africa Africa
and Dow Jones & Company, Inc., 2015), http://www.heritage.org/index; and International Monetary Fund, World
Economic Outlook Databases, http://www.imf.org/external/ns/cs.aspx?id=28 (accessed November 19, 2014).
• Chile (seventh) and Mauritius (10th), two REGIONAL TRENDS

reform-minded developing economies, con- IN ECONOMIC FREEDOM
tinue to rank among the world’s 10 freest econ- In the 2015 Index, each of the six regions con-
omies. Both have demonstrated persistent tinues to be represented by at least one country
commitment to the rule of law, limited govern- that ranks among the top 20 freest economies.
ment, regulatory efficiency, and open markets. However, as shown in Chart 2, average levels
• Moving up three slots, Estonia has become the of economic freedom advanced in only half of
world’s eighth-freest economy. The small Baltic the regions.
nation has rejoined the world’s 10 freest econo- Sub-Saharan Africa (led by São Tomé and
mies for the first time since 2007, overtaking Príncipe and Democratic Republic of Congo)
Denmark (11th), Ireland (ninth), and Mauritius. and the Asia–Pacific region (led by Maldives and
• The United States continues to be only the the Philippines) each showed an average score
12th-freest economy, seemingly stuck in the improvement of 0.3 point, and Middle East/
ranks of the “mostly free,” the second-tier North Africa countries (led by Israel and Moroc-
economic freedom category into which the co) gained 0.1 point on average. While average
U.S. dropped in 2010. economic freedom for the South and Central
• Taiwan and Lithuania, benefitting from unin- America/Caribbean region stayed the same as
terrupted score improvements since 2009, have last year, Europe and North America registered
recorded their highest economic freedom scores slight declines of 0.1 and 0.2 point, respectively.
ever, advancing to 14th and 15th places, respec- Among the six regions, average levels of eco-
tively, and surpassing Sweden, Finland, Germany, nomic freedom vary widely. North America and
Luxembourg, the Netherlands, and Bahrain. Europe continue to record the highest average

Comparing Regional Average Scores with the Global Average
Above or Equal to Global Average Below Global Average
Middle South and

East/ Central Sub-
North North America/ Asia- Saharan GLOBAL
America Europe Africa Caribbean Pacific Africa AVERAGE
Overall 73.9 67.0 61.6 59.7 58.8 54.9 60.4
Property Rights 73.3 59.9 39.4 39.0 38.0 30.1 42.2
Freedom from Corruption 62.7 57.0 38.4 41.1 37.6 32.5 41.9
Fiscal Freedom 74.6 71.7 88.8 78.4 80.2 75.6 77.4
Government Spending 59.4 40.5 62.3 69.3 66.7 72.2 61.7
Business Freedom 83.1 76.6 64.0 60.3 65.4 52.2 64.1
Labor Freedom 78.2 61.9 64.4 57.5 67.3 55.2 61.3
Monetary Freedom 77.3 78.8 73.4 74.9 73.2 73.7 75.0
Trade Freedom 87.0 86.7 74.1 74.8 72.8 67.2 75.4
Investment Freedom 73.3 74.1 44.4 55.3 44.1 48.4 54.8
Financial Freedom 70.0 63.2 45.3 46.6 43.1 40.2 48.5
Source: Terry Miller and Anthony B. Kim, 2015 Index of Economic Freedom (Washington, DC: The Heritage Foundation and
Dow Jones & Company, Inc., 2015), http://www.heritage.org/index.
Table 1 heritage.org
economic freedom scores among the regions: co. Average economic freedom scores in the
73.9 and 67, respectively. Despite the ongoing South and Central America/Caribbean region,
economic and political turmoil in a number of the Asia–Pacific region, and Sub-Saharan Africa
countries in the Middle East and North Africa, continue to be below 60.
the region as a whole still achieved an average Despite varying degrees of economic free-
economic freedom score slightly above 60 due dom across the regions, the fundamental
to high ratings of economic freedom in Bahrain, relationship between economic freedom and
the United Arab Emirates, and Qatar, reinforced prosperity is readily apparent worldwide. Chart
by improved scores in Egypt, Israel, and Moroc- 3 shows that, no matter the region, per capita
Economic Freedom in North American Countries

Government Spending
Investment Freedom
Monetary Freedom
Change from 2014
Financial Freedom
Business Freedom
Property Rights
Labor Freedom
Fiscal Freedom
Trade Freedom
Regional Rank
Overall Score
World Rank
Country
6 1 Canada 79.1 -1.1 90 81.0 79.9 48.3 89.0 76.1 77.9 88.4 80 80
12 2 United States 76.2 0.7 80 73.0 66.2 51.8 88.8 98.5 76.6 87.0 70 70
59 3 Mexico 66.4 -0.4 50 34.0 77.8 78.0 71.5 59.9 77.6 85.6 70 60
Chapter 6 75
North America
United
States
Canada
Economic Freedom Scores

80–100 Free
United States
0–49.9 Repressed
Not Ranked
Mexico
Source: Terry Miller and Anthony B. Kim, 2015 Index of Economic Freedom (Washington, DC: The Heritage
Foundation and Dow Jones & Company, Inc., 2015), http://www.heritage.org/index.
Map 1 heritage.org
income levels are consistently higher in coun- There is no single answer to the particular
tries that are economically freer. challenges of development that we face. One
The diversity of the world’s peoples and cul- thing, however, is sure: Governments that
tures implies that there will be many paths to respect and promote economic freedom provide
economic development and prosperity. The the best environment for experimentation, inno-
whole idea of economic freedom is to empow- vation, and progress, and it is through these that
er people with more opportunity to choose humankind grows in prosperity and well-being.
for themselves how to pursue and fulfill their
dreams, subject only to the basic rule of law and NORTH AMERICA
honest competition from others. The patterns of The North America region has two “mostly
economic freedom across the six Index regions free” economies (Canada and the U.S.) and one
are, not surprisingly, unique. They reflect the “moderately free” economy (Mexico). Canada has
culture and history of each nation and the indi- led the region in economic freedom since 2010.
viduals that inhabit them, not to mention cir- Overall, average economic freedom in the
cumstances of geography or endowments of region has registered a slight decline (0.2 point)
natural resources. since last year, with a small improvement in the

Economic Freedom in European Countries
Government Spending
Investment Freedom
Monetary Freedom
Change from 2014
Financial Freedom
Business Freedom
Property Rights
Labor Freedom
Fiscal Freedom
Trade Freedom
Regional Rank
Overall Score
World Rank
Country
5 1 Switzerland 80.5 -1.1 90 85.0 70.3 65.1 78.1 75.3 86.3 90.0 85 80
8 2 Estonia 76.8 0.9 90 68.0 80.6 53.2 81.5 58.7 77.6 88.0 90 80
9 3 Ireland 76.6 0.4 85 72.0 73.6 45.6 82.1 76.2 83.9 88.0 90 70
11 4 Denmark 76.3 0.2 95 91.0 39.6 1.8 97.4 92.1 87.6 88.0 90 80
13 5 United Kingdom 75.8 0.9 90 76.0 62.9 30.3 91.1 75.6 74.4 88.0 90 80
15 6 Lithuania 74.7 1.7 60 57.0 92.9 61.3 84.9 62.0 81.2 88.0 80 80
16 7 Germany 73.8 0.4 90 78.0 60.8 40.1 88.2 51.2 81.5 88.0 90 70
17 8 The Netherlands 73.7 -0.5 90 83.0 51.8 23.8 84.3 66.3 79.8 88.0 90 80
19 9 Finland 73.4 0.0 90 89.0 66.4 3.6 92.6 54.8 79.9 88.0 90 80
21 10 Luxembourg 73.2 -1.0 90 80.0 62.3 42.2 71.3 42.1 80.7 88.0 95 80
22 11 Georgia 73.0 0.4 40 49.0 87.2 73.8 88.6 79.9 82.7 88.6 80 60
23 12 Sweden 72.7 -0.4 90 89.0 43.0 19.2 87.9 54.0 85.5 88.0 90 80
24 13 Czech Republic 72.5 0.3 75 48.0 81.5 40.6 68.2 82.9 81.2 88.0 80 80
26 14 Iceland 72.0 -0.4 90 78.0 72.0 32.6 90.5 62.2 77.0 88.0 70 60
27 15 Norway 71.8 0.9 90 86.0 52.1 43.8 92.1 48.2 81.7 89.4 75 60
30 16 Austria 71.2 -1.2 90 69.0 50.1 19.8 78.0 76.7 80.3 88.0 90 70
37 17 Latvia 69.7 1.0 50 53.0 84.4 59.2 82.1 61.5 83.8 88.0 85 50
40 18 Belgium 68.8 -1.1 80 75.0 43.6 10.2 90.7 63.7 81.7 88.0 85 70
42 19 Poland 68.6 1.6 60 60.0 82.1 47.1 67.3 60.4 81.3 88.0 70 70
45 20 Cyprus 67.9 0.3 70 63.0 79.5 36.7 79.5 59.6 82.7 88.0 70 50
49 21 Spain 67.6 0.4 70 59.0 53.1 39.8 77.5 52.6 81.3 88.0 85 70
50 22 Slovak Republic 67.2 0.8 50 47.0 80.8 55.1 69.6 56.5 75.5 88.0 80 70
(continued on next page)
United States outweighed by declines in Canada dom in the region. In 1995, when the first edition
and Mexico. The downward spiral in U.S. eco- of the Index measured these freedoms, the score
nomic freedom over the previous seven years has differences between the United States and Mexi-
come to a halt. In the 2015 Index, the U.S. recorded co were over 10 points. Over the past two decades,
modest score gains in six of the 10 economic free- the trade and investment freedom margins have
doms; however, its score for business freedom has narrowed to less than three points.
plunged below 90, the lowest level since 2006.
The North American Free Trade Agreement EUROPE
remains the linchpin of massive trade and invest- The Europe region includes 43 countries graded
ment flows in the North America region. This by the Index, the most of any region. Switzerland
increasing integration is reflected in converging continues to be the only “free” economy in the
scores for trade freedom and investment free- region, with a score of 80.5. Nine of the world’s 20
Chapter 6 77
Economic Freedom in European Countries (continued)
Government Spending
Investment Freedom
Monetary Freedom
Change from 2014
Financial Freedom
Business Freedom
Property Rights
Labor Freedom
Fiscal Freedom
Trade Freedom
Regional Rank
Overall Score
World Rank
Country
52 23 Armenia 67.1 -1.8 20 36.0 84.4 82.8 82.7 64.3 70.6 85.4 75 70
53 24 Macedonia 67.1 -1.5 35 44.0 91.4 65.6 79.2 70.7 79.0 86.2 60 60
54 25 Hungary 66.8 -0.2 55 54.0 78.7 25.9 74.5 67.7 79.2 88.0 75 70
55 26 Bulgaria 66.8 1.1 30 41.0 91.0 64.5 68.5 76.6 83.2 88.0 65 60
57 27 Romania 66.6 1.1 40 43.0 86.9 62.3 69.8 68.6 77.3 88.0 80 50
58 28 Malta 66.5 0.1 75 56.0 63.1 44.4 61.0 55.6 81.8 88.0 80 60
63 29 Albania 65.7 -1.2 30 31.0 87.2 76.1 70.6 52.9 80.8 87.8 70 70
64 30 Portugal 65.3 1.8 70 62.0 61.1 28.8 87.5 42.9 82.8 88.0 70 60
66 31 Montenegro 64.7 1.1 40 44.0 92.6 36.7 77.1 77.5 79.7 84.8 65 50
70 32 Turkey 63.2 -1.7 45 50.0 76.1 57.6 61.0 50.2 72.4 84.6 75 60
73 33 France 62.5 -1.0 80 71.0 47.5 2.5 80.2 43.5 77.5 83.0 70 70
80 34 Italy 61.7 0.8 55 43.0 54.2 23.2 71.9 55.4 81.2 88.0 85 60
81 35 Croatia 61.5 1.1 40 48.0 74.9 46.5 55.8 42.8 80.0 87.2 80 60
88 36 Slovenia 60.3 -2.4 60 57.0 58.1 0.0 81.2 57.1 81.3 88.0 70 50
90 37 Serbia 60.0 0.6 45 42.0 82.4 27.1 57.8 70.4 72.2 78.2 75 50
97 38 Bosnia and Herzegovina 59.0 0.6 20 42.0 82.9 27.3 53.5 63.4 84.0 87.2 70 60
111 39 Moldova 57.5 0.2 40 35.0 85.1 51.8 66.8 40.6 76.1 79.8 50 50
130 40 Greece 54.0 -1.7 40 40.0 64.2 0.0 73.3 51.6 77.8 83.0 60 50
143 41 Russia 52.1 0.2 20 28.0 86.1 57.8 76.3 58.9 63.9 75.0 25 30
153 42 Belarus 49.8 -0.3 20 29.0 86.4 54.7 72.0 80.1 44.5 81.0 20 10
162 43 Ukraine 46.9 -2.4 20 25.0 78.7 28.0 59.3 48.2 78.6 85.8 15 30
N/A N/A Kosovo N/A N/A 30 33.0 N/A 73.9 66.8 72.1 74.9 N/A 65 N/A
N/A N/A Liechtenstein N/A N/A N/A N/A N/A N/A N/A N/A N/A 90.0 85 80
freest countries are in Europe, and the vast major- problems in public finance management result-
ity of the region’s countries are considered at least ing from years of expansion of the public sector.
“moderately free.” Europe has three “mostly unfree” The result has been stagnant economic growth,
economies (Moldova, Greece, and Russia) and two which has exacerbated the burden of fiscal deficits
“repressed” economies (Ukraine and Belarus). and mounting debt. In many countries of the region,
Taken as a whole, the Europe region still struggles decisive policy action is needed to cut spending.
with a variety of policy barriers to dynamic eco- Where such actions have been taken, progress is
nomic expansion, such as overly protective and apparent. Three Baltic economies (Estonia, Lithu-
costly labor regulations, higher tax burdens, various ania, and Latvia) are on the move toward greater
market distortionary subsidies, and continuing economic freedom. Overcoming severe recessions

Europe
Finland
Norway Sweden
Estonia
Iceland
Latvia Russia
Denmark
Netherlands Lithuania
Belgium
Belarus
United
Kingdom Poland
Germany
80–100 Free Ireland
Czech Ukraine
70–79.9 Mostly Free Luxembourg Republic
60–69.9 Moderately Free Slovakia Moldova
50–59.9 Mostly Unfree Austria
Liechtenstein Hungary
0–49.9 Repressed Switzerland
Sea of
Chapter 6
Not Ranked Croatia Romania
Italy Azov
France Caspian
Serbia Sea
Black
Bulgaria Sea
Georgia
Spain
Slovenia Greece Turkey
Malta
Portugal Cyprus Armenia
Bosnia & Herzegovina Macedonia
Montenegro Kosovo
Albania
Map 2 heritage.org
79
South and Central America/Caribbean
The Bahamas
Cuba
Haiti
Dominican Republic
Belize
Honduras Jamaica Dominica
Guatemala St. Lucia
St. Vincent & The Grenadines
El Salvador Barbados
Trinidad & Tobago
Nicaragua
Costa Rica Venezuela Guyana
Panama Suriname
Colombia
Ecuador
Brazil
Peru
Bolivia
80–100 Free
Paraguay
0–49.9 Repressed
Not Ranked
Chile Argentina
Uruguay
Note: French Guiana not depicted

because it is French territory.
Map 3 heritage.org

Economic Freedom in South and
Central America / Caribbean Countries
Government Spending
Investment Freedom
Monetary Freedom
Change from 2014
Financial Freedom
Business Freedom
Property Rights
Labor Freedom
Fiscal Freedom
Trade Freedom
Regional Rank
Overall Score
World Rank
Country
7 1 Chile 78.5 -0.2 90 71.0 76.5 83.3 69.3 67.0 85.6 82.0 90 70
28 2 Colombia 71.7 1.0 50 36.0 80.3 76.0 81.5 81.7 80.1 81.2 80 70
35 3 Saint Lucia 70.2 -0.5 70 71.0 77.7 65.8 75.6 79.8 85.5 72.0 65 40
41 4 The Bahamas 68.7 -1.1 70 71.0 97.8 83.2 68.9 75.3 78.8 52.2 30 60
43 5 Uruguay 68.6 -0.7 70 73.0 77.1 65.1 72.6 64.3 71.6 81.8 80 30
Saint Vincent
44 6 68.0 1.0 70 62.0 73.3 75.3 70.8 78.2 82.3 68.4 60 40
and the Grenadines
46 7 Barbados 67.9 -0.4 80 75.0 73.8 42.1 71.6 69.2 78.2 63.8 65 60
47 8 Peru 67.7 0.3 40 38.0 78.6 88.5 67.7 63.4 83.9 87.0 70 60
48 9 Jamaica 67.7 1.0 40 38.0 81.5 73.2 85.9 76.5 71.4 75.0 85 50
51 10 Costa Rica 67.2 0.3 50 53.0 80.0 89.9 64.5 54.6 75.8 83.8 70 50
61 11 Dominica 66.1 0.9 60 58.0 73.6 61.5 71.6 68.7 89.5 72.8 75 30
62 12 El Salvador 65.7 -0.5 35 38.0 79.4 85.5 53.3 53.3 82.5 85.2 75 70
67 13 Trinidad and Tobago 64.1 1.4 50 38.0 79.0 69.3 65.3 76.6 74.3 78.6 60 50
68 14 Panama 64.1 0.7 30 35.0 84.5 78.8 71.5 41.5 76.4 78.4 75 70
following the global financial turmoil, these young

economic freedom category of “moderately free.”
free-market democracies have sustained their open-
There is no “free” economy, but three “mostly
ness to global markets and competition, pursued free” economies (Chile, Colombia, and Saint
regulatory reform, and shrunk the size of their Lucia) lead the region. Recording its highest
governments. Each has moved up in the Index rank-
score ever in the 2015 Index, Colombia has solidi-
ings every year since 2012, outperforming many fied its ranking as the second freest in the region.
older members of the European Union such as Although Haiti has moved out of the ranks of
Spain, Portugal, France, and Italy. the “repressed,” five countries (Cuba, Venezuela,
Argentina, Bolivia, and Ecuador) persist with
SOUTH AND CENTRAL AMERICA/ poor policy choices that trap their citizens in the
CARIBBEAN lowest category of economic freedom.
In the South and Central America/Caribbean Although countries in the region demonstrate a
region, 29 countries are distributed throughout high degree of economic and political diversity, the
the rankings in a more bell-shaped way than is stark reality in common across the region is that
found among the countries of any other region. economies are underperforming and stagnating
All but eight countries have received an eco- due to the lack or even loss of economic freedom.
nomic freedom score between 50 and 70 in the The foundations of well-functioning free-market
2015 Index, and 14 countries fall in the middle democracy remain fragile in the South and Cen-
Chapter 6 81
Economic Freedom in South and
Central America / Caribbean Countries (continued)
Government Spending
Investment Freedom
Monetary Freedom
Change from 2014
Financial Freedom
Business Freedom
Property Rights
Labor Freedom
Fiscal Freedom
Trade Freedom
Regional Rank
Overall Score
World Rank
Country
83 15 Paraguay 61.1 -0.9 30 24.0 96.0 81.9 58.4 26.3 78.3 81.4 75 60
86 16 Dominican Republic 61.0 -0.3 30 29.0 84.1 87.1 53.5 57.5 76.0 77.8 75 40
87 17 Guatemala 60.4 -0.8 20 29.0 79.6 94.1 54.7 50.6 76.8 84.6 65 50
108 18 Nicaragua 57.6 -0.8 10 28.0 78.4 76.6 58.0 56.7 67.8 85.4 65 50
116 19 Honduras 57.4 0.3 30 26.0 84.9 78.7 53.2 28.0 75.4 77.6 60 60
117 20 Belize 56.8 0.1 30 6.7 82.4 78.3 59.1 61.8 79.3 70.4 50 50
118 21 Brazil 56.6 -0.3 50 42.0 68.4 50.9 53.6 52.1 69.4 69.6 50 60
123 22 Guyana 55.5 -0.2 25 27.0 68.7 70.8 63.8 74.5 78.4 72.0 45 30
129 23 Suriname 54.2 0.0 35 36.0 69.3 73.8 42.2 81.9 77.2 66.2 30 30
151 24 Haiti 51.3 2.4 10 19.0 80.3 76.2 43.1 63.7 73.5 77.6 40 30
156 25 Ecuador 49.2 1.2 15 35.0 79.1 51.0 51.4 51.3 68.2 71.4 30 40
163 26 Bolivia 46.8 -1.6 10 34.0 86.8 60.9 53.7 25.5 69.7 77.6 10 40
169 27 Argentina 44.1 -0.5 15 34.0 66.8 41.2 52.8 43.3 59.6 68.8 30 30
176 28 Venezuela 34.3 -2.0 5 20.0 75.0 52.0 41.6 24.2 42.8 62.8 0 20
177 29 Cuba 29.6 0.9 10 46.0 61.8 0.0 20.0 20.0 64.8 63.8 0 10
tral America/Caribbean region. With widespread MIDDLE EAST/NORTH AFRICA

corruption and the weak protection of property The Middle East/North Africa region con-
rights aggravating systemic shortcomings such as tinues to be a critical global hot spot for eco-
regulatory inefficiency and monetary instability nomic, political, and security vulnerabilities.
caused by various market distortions, the region The majority of the Middle East/North Africa
as a whole has become increasingly vulnerable to region’s 15 economies graded by the Index
competing deceptive models of governance based continue to be only “moderately free” or
on cronyism and populism. “mostly unfree,” with Algeria and Iran consid-
Over the past year, economic freedom in the ered “repressed.” Algeria, Yemen, and Bahrain
South and Central America/Caribbean region recorded three of the 10 largest score declines
has improved in 13 countries while declining in in the 2015 Index, while Egypt and Israel were
15. Suriname scored the same as the previous among the best in improving economic freedom
year. The erosion of economic freedom in popu- this year.
lous countries such as Brazil and Argentina is Since early 2011, many countries in the region
particularly troubling, exacerbating poverty have been undergoing socioeconomic upheaval,
and increasing the challenge of fostering broad- with outcomes far from certain. The lives of
based sustainable growth in the future. many ordinary people in the region have yet to

Middle East/North Africa
Caspian
Sea
Tunisia Lebanon Syria

Israel Iraq
Iran
Jordan
Morocco
Algeria
Kuwait
Libya
Egypt
Bahrain
Qatar
Saudi Arabia
Chapter 6
United
Oman Arab
Emirates
Yemen
80–100 Free
0–49.9 Repressed
Not Ranked
Source: Terry Miller and Anthony B. Kim, 2015 Index of Economic Freedom (Washington, DC: The Heritage Foundation and Dow Jones & Company, Inc., 2015),
http://www.heritage.org/index.
Map 4 heritage.org
83
Economic Freedom in Middle East/North African Countries
Government Spending
Investment Freedom
Monetary Freedom
Change from 2014
Financial Freedom
Business Freedom
Property Rights
Labor Freedom
Fiscal Freedom
Trade Freedom
Regional Rank
Overall Score
World Rank
Country
18 1 Bahrain 73.4 -1.7 60 48.0 99.9 73.1 72.5 83.1 74.2 78.6 65 80
25 2 United Arab Emirates 72.4 1.0 55 69.0 99.5 85.8 74.7 83.8 83.8 82.4 40 50
32 3 Qatar 70.8 -0.4 70 68.0 99.7 71.9 70.5 71.2 79.7 81.8 45 50
33 4 Israel 70.5 2.1 75 61.0 61.9 47.8 72.4 67.1 81.6 88.6 80 70
38 5 Jordan 69.3 0.1 60 45.0 93.7 70.7 59.1 74.4 80.6 79.6 70 60
56 6 Oman 66.7 -0.7 55 47.0 98.5 44.2 68.4 76.1 76.2 76.8 65 60
74 7 Kuwait 62.5 0.2 45 43.0 97.7 61.1 58.6 64.2 74.0 76.2 55 50
77 8 Saudi Arabia 62.1 -0.1 40 46.0 99.7 61.9 65.8 72.7 68.4 76.4 40 50
89 9 Morocco 60.1 1.8 40 37.0 70.9 61.0 68.8 33.4 81.9 78.2 70 60
94 10 Lebanon 59.3 -0.1 20 28.0 91.3 70.6 54.7 60.7 72.0 75.8 60 60
107 11 Tunisia 57.7 0.4 40 41.0 74.3 70.8 81.2 69.1 74.8 61.2 35 30
124 12 Egypt 55.2 2.3 20 32.0 85.8 68.0 65.4 53.6 67.4 70.0 50 40
133 13 Yemen 53.7 -1.8 30 18.0 91.5 59.9 54.0 57.1 68.5 77.6 50 30
157 14 Algeria 48.9 -1.9 30 36.0 80.0 38.7 66.6 50.5 71.2 60.8 25 30
171 15 Iran 41.8 1.5 10 25.0 81.2 93.0 57.0 51.3 48.7 41.4 0 10
N/A N/A Iraq N/A N/A N/A 16.0 N/A 43.8 57.7 74.4 73.6 N/A N/A N/A
N/A N/A Libya N/A N/A 10 15.0 95.0 37.5 46.8 66.7 71.4 80.0 5 N/A
N/A N/A Syria N/A N/A 10 17.0 N/A N/A 57.3 49.1 N/A N/A 0 20
change for the better. Of the Arab Spring econo- whose average unemployment rate is close to
mies, Tunisia and Egypt have shown the most 25 percent.
encouraging results over the past year. However, Undoubtedly, mounting economic problems
Yemen and Bahrain continue to be on downward will not be solved simply by holding elections or
paths in terms of economic freedom, and grading allowing greater expressions of dissent. Exist-
of economic freedom for Iraq, Libya, and Syria ing policies and practices continue to restrict
remains suspended because of ongoing violence economic freedom. Over the past year, business
and unrest. freedom, the lack of which contributed to ignit-
Structural and institutional problems ing Arab Spring protests, has declined in 11 of the
abound throughout the region, and private- 18 countries in the region. Equally troublesome
sector growth continues to lag far behind levels is that costly subsidies on energy and food, which
needed to provide adequate jobs for growing place a considerable burden on budgets and
populations. Taken as a whole, the Middle East/ stand in the way of sound sustainable economic
North Africa region’s lack of job opportunities development, are still on the rise as many gov-
continues to be a serious problem, particu- ernments in the region continue to rely on lavish
larly for younger members of the labor force subsides to quell social and political unrest.

Asia and the Pacific
Uzbekistan Tajikistan Kyrgyz Republic

Samoa
Vanuatu Fiji
Kazakhstan
Mongolia
Caspian
Sea Australia Tonga
North
Korea
Azerbaijan
Nepal Bhutan China
Turkmenistan
South Japan
Afghanistan Korea New Zealand
Pakistan Laos Taiwan

India Hong Kong
Macau
Bangladesh Cambodia
Chapter 6
Philippines Micronesia
Burma
Vietnam
Thailand
Maldives Malaysia Brunei
Sri Lanka
Kiribati
80–100 Free
Singapore Indonesia Timor-Leste Papua Solomon 0–49.9 Repressed
New Guinea Islands
Not Ranked
and Dow Jones & Company, Inc., 2015), http://www.heritage.org/index. Map 5 heritage.org
85
Economic Freedom in Asia–Pacific Countries
Government Spending
Investment Freedom
Monetary Freedom
Change from 2014
Financial Freedom
Business Freedom
Property Rights
Labor Freedom
Fiscal Freedom
Trade Freedom
Regional Rank
Overall Score
World Rank
Country
1 1 Hong Kong 89.6 -0.5 90 75.0 93.2 89.7 100.0 95.9 81.8 90.0 90 90
2 2 Singapore 89.4 0.0 90 86.0 91.2 93.8 96.9 96.9 83.7 90.0 85 80
3 3 New Zealand 82.1 0.9 95 91.0 70.4 43.0 95.5 91.4 87.6 86.8 80 80
4 4 Australia 81.4 -0.6 90 81.0 63.7 61.8 94.1 81.6 85.3 86.4 80 90
14 5 Taiwan 75.1 1.2 70 61.0 80.4 87.1 92.4 55.2 83.3 86.4 75 60
20 6 Japan 73.3 0.9 80 74.0 68.7 47.1 84.1 90.2 86.7 82.6 70 50
29 7 South Korea 71.5 0.3 75 55.0 72.5 67.9 89.7 51.1 81.6 72.6 70 80
31 8 Malaysia 70.8 1.2 55 50.0 84.4 74.0 93.5 75.7 80.8 80.0 55 60
34 9 Macau 70.3 -1.0 60 49.7 71.8 91.8 60.0 50.0 74.9 90.0 85 70
39 10 Brunei 68.9 -0.1 35 60.0 87.0 63.6 68.3 96.9 76.6 81.8 70 50
69 11 Kazakhstan 63.3 -0.4 25 26.0 93.2 85.0 73.7 87.0 74.6 79.0 40 50
75 12 Thailand 62.4 -0.9 40 35.0 81.5 81.4 72.5 63.5 69.9 75.4 45 60
76 13 The Philippines 62.2 2.1 30 36.0 79.1 89.3 55.3 58.2 78.8 75.4 60 60
78 14 Samoa 61.9 0.8 60 38.0 80.2 46.5 73.6 78.4 81.2 75.8 55 30
82 15 Kyrgyz Republic 61.3 0.2 20 24.0 93.6 53.2 73.7 85.0 73.8 80.2 60 50
84 16 Vanuatu 61.1 1.6 40 33.5 97.2 83.8 51.5 46.4 82.9 75.4 60 40
85 17 Azerbaijan 61.0 -0.3 20 28.0 88.1 59.7 74.5 79.1 79.8 76.0 55 50
95 18 Tonga 59.3 1.1 20 28.6 87.2 79.0 74.1 92.1 73.5 78.4 40 20
96 19 Mongolia 59.2 0.3 30 38.0 83.9 35.6 68.2 82.7 69.2 74.8 50 60
98 20 Fiji 59.0 0.3 25 22.3 81.3 74.6 63.2 75.2 78.3 70.2 50 50
101 21 Sri Lanka 58.6 -1.4 35 37.0 85.0 88.4 72.5 58.7 68.2 71.6 30 40
105 22 Indonesia 58.1 -0.4 30 32.0 83.3 88.3 49.3 48.7 74.9 74.8 40 60
ASIA–PACIFIC the 41 countries in the Asia–Pacific region score

For two years in a row, the Asia–Pacific region between 40 and 60 on the economic freedom scale,
has outperformed the other five regions in terms remaining either “mostly unfree” or “repressed.”
of advancing economic freedom. Since 2013, the Despite the stark divergences, the region on
region as a whole has recorded a cumulative score the whole continues to demonstrate an impres-
gain of close to 1.5 points. The Asia–Pacific area sive degree of economic resilience and dynamism.
continues to have by far the largest number of Asia is home to the world’s largest economies and
the world’s “free” economies. Hong Kong, Singa- a number of fast-growing emerging economies. As
pore, New Zealand, and Australia lead the Index. indicated by the region’s high level of trade freedom,
Nonetheless, the region is marked by sharp dis- Asia–Pacific economies have been capitalizing on
parities in levels of economic freedom, with six the freer flow of goods and services both around the
of the world’s 20 freest economies but also seven world and within the region. Facilitating vibrant
of the 20 least free countries. Over 60 percent of commercial engagement beyond borders and ampli-

Economic Freedom in Asia–Pacific Countries (continued)
Government Spending
Investment Freedom
Monetary Freedom
Change from 2014
Financial Freedom
Business Freedom
Property Rights
Labor Freedom
Fiscal Freedom
Trade Freedom
Regional Rank
Overall Score
World Rank
Country
110 23 Cambodia 57.5 0.1 25 20.0 90.5 87.5 29.2 62.2 78.7 72.2 60 50
115 24 Bhutan 57.4 0.7 60 63.0 82.6 60.1 61.9 81.1 66.0 49.4 20 30
121 25 Pakistan 55.6 0.4 30 28.0 77.7 86.1 65.6 42.1 71.2 65.6 50 40
128 26 India 54.6 -1.1 55 36.0 79.4 78.3 43.3 48.7 65.3 64.6 35 40
131 27 Bangladesh 53.9 -0.2 20 27.0 72.7 92.0 62.2 63.7 67.7 59.0 45 30
134 28 Maldives 53.4 2.4 25 21.9 95.5 50.6 85.8 73.4 74.1 47.8 30 30
137 29 Papua New Guinea 53.1 -0.8 20 25.0 66.9 68.7 53.5 74.5 72.7 85.0 35 30
139 30 China 52.7 0.2 20 40.0 69.7 81.5 52.1 63.0 74.2 71.8 25 30
140 31 Tajikistan 52.7 0.7 20 22.0 92.1 81.9 65.4 46.4 69.6 74.6 25 30
148 32 Vietnam 51.7 0.9 15 31.0 79.1 77.1 61.5 62.9 66.8 78.6 15 30
150 33 Laos 51.4 0.2 15 26.0 86.2 86.8 59.5 57.1 74.5 58.6 30 20
152 34 Nepal 51.3 1.2 30 31.0 85.6 88.9 65.7 44.3 70.5 61.8 5 30
154 35 Micronesia 49.6 -0.2 30 30.0 93.2 0.0 51.0 79.1 76.9 81.0 25 30
159 36 Solomon Islands 47.0 0.8 30 25.0 61.1 25.7 67.7 68.6 74.3 73.0 15 30
160 37 Uzbekistan 47.0 0.5 15 17.0 90.2 67.3 73.1 64.2 63.5 69.8 0 10
161 38 Burma 46.9 0.4 10 21.0 86.9 77.9 28.7 79.3 66.1 74.2 15 10
164 39 Kiribati 46.4 0.1 30 29.2 73.0 0.0 56.8 83.9 80.6 55.4 25 30
167 40 Timor-Leste 45.5 2.3 20 30.0 64.7 0.0 59.8 72.0 68.7 79.6 40 20
172 41 Turkmenistan 41.4 -0.8 5 17.0 94.0 93.5 30.0 20.0 64.2 80.0 0 10
178 42 North Korea 1.3 0.3 5 8.0 0.0 0.0 0.0 0.0 0.0 0.0 0 0
N/A N/A Afghanistan N/A N/A N/A 8.0 91.7 81.2 61.4 67.5 72.6 N/A 55 N/A
fying economic development, trade agreements pines, and Burma) have achieved five consecutive
have proliferated in the Asia–Pacific region over years of advancing economic freedom.
the past decade. There are now some 40 completed On the other hand, Hong Kong’s economic
intraregional trade agreements and over 100 agree- freedom score has tumbled to the territory’s
ments with countries outside the region. second lowest rating since 2007. Although Hong
In the 2015 Index, the Asia–Pacific region has Kong continues strongly to maintain the fea-
recorded some notable changes in economic free- tures of an economically free society, the city’s
dom. The scores of 27 countries have improved, waning institutional uniqueness has placed it
and those of 14 have worsened. Of those that have at a critical crossroads. The current failure to
improved, seven countries, including Taiwan, deliver promised meaningful electoral reform
Vietnam, and Laos, have achieved their highest has galvanized greater pro-democracy senti-
economic freedom score ever in the 2015 Index. ments in Hong Kong and undermined trust and
Four countries (Taiwan, South Korea, the Philip- confidence in the government.
Chapter 6 87
Sub-Saharan Africa
The Gambia
Senegal
Mauritania
Mali Niger Eritrea
Chad Sudan
Burkina Djibouti
Guinea Faso
Nigeria Somalia
Cote Ghana Ethiopia
South
Guinea- d'Ivoire Central African
Sudan
Bissau Republic
Cameroon
Sierra Benin
Leone Liberia Togo Uganda
Kenya
Sao Tome Gabon Democratic
Cabo Verde & Principe Rwanda
Republic of
Congo Burundi
Equatorial Guinea Comoros
Tanzania
Republic of Congo Seychelles
Angola
Note: Western Sahara is not depicted Zambia
because its economy is not in the Index of
Economic Freedom. Malawi
Zimbabwe
Namibia Mozambique
Economic Freedom Scores Botswana
80–100 Free
60–69.9 Moderately Free Swaziland Madagascar
50–59.9 Mostly Unfree South Lesotho
0–49.9 Repressed Africa
Mauritius
Not Ranked
Map 6 heritage.org
SUB-SAHARAN AFRICA ly unfree” or “repressed.” In fact, nine of the

Unlike other regions that have a more world’s 26 “repressed” economies are in Sub-
diverse and a wider range of economic freedom Saharan Africa.
scores, Sub-Saharan Africa continues to show Nevertheless, together with the Asia–Pacific
variations only within the lower bands of eco- region, Sub-Saharan African has experienced
nomic freedom. There is no “free” economy the most widespread increases in economic
in the region, and Mauritius continues to lead freedom over the past year. In the 2015 Index,
the region as a “moderately free” economy. A economic freedom has advanced in 59 percent
majority of 46 nations are ranked either “most- of the economies of the Sub-Saharan Africa

Economic Freedom in Sub-Saharan Africa Countries
Government Spending
Investment Freedom
Monetary Freedom
Change from 2014
Financial Freedom
Business Freedom
Property Rights
Labor Freedom
Fiscal Freedom
Trade Freedom
Regional Rank
Overall Score
World Rank
Country
10 1 Mauritius 76.4 -0.1 65 52.0 91.9 87.4 78.0 68.2 77.6 88.4 85 70
36 2 Botswana 69.8 -2.2 70 64.0 79.5 61.9 66.8 70.0 73.9 72.2 70 70
60 3 Cabo Verde 66.4 0.3 75 58.0 78.3 67.9 61.8 42.1 81.0 69.6 70 60
65 4 Rwanda 64.8 0.1 30 53.0 80.2 79.2 59.5 84.5 76.0 80.8 65 40
71 5 Ghana 63.0 -1.2 50 46.0 84.6 70.8 62.5 56.9 69.2 64.8 65 60
72 6 South Africa 62.6 0.1 50 42.0 69.5 68.2 73.0 61.6 74.9 76.6 50 60
79 7 Madagascar 61.7 0.0 45 28.0 90.9 94.7 62.3 45.1 79.2 71.8 50 50
91 8 Swaziland 59.9 -1.3 40 39.0 76.4 68.6 60.5 69.3 73.9 76.0 55 40
92 9 Uganda 59.7 -0.2 25 26.0 73.3 89.0 43.3 87.5 76.3 76.6 60 40
93 10 Namibia 59.6 0.2 30 48.0 66.7 56.0 64.3 90.9 74.3 71.2 55 40
99 11 Benin 58.8 1.7 30 36.0 68.3 86.7 55.2 53.2 79.9 58.4 70 50
100 12 Zambia 58.7 -1.7 30 38.0 71.9 78.0 68.2 46.0 73.2 76.8 55 50
102 13 Burkina Faso 58.6 -0.3 25 38.0 82.4 79.8 49.6 57.8 80.0 68.2 65 40
103 14 Côte d'Ivoire 58.5 0.8 35 27.0 77.7 82.4 65.4 46.0 75.0 71.4 55 50
104 15 Gabon 58.3 0.5 40 34.0 77.5 74.6 57.9 64.3 78.4 61.0 55 40
106 16 Senegal 57.8 2.4 40 41.0 71.3 74.6 54.6 39.5 83.0 74.0 60 40
109 17 Tanzania 57.5 -0.3 30 33.0 79.9 79.3 45.0 61.4 69.7 67.0 60 50
112 18 Djibouti 57.5 1.6 25 36.0 81.2 57.1 55.4 66.6 78.9 54.8 70 50
113 19 The Gambia 57.5 -2.0 25 28.0 75.4 73.4 55.7 66.7 70.8 65.0 65 50
114 20 Seychelles 57.5 1.3 50 54.0 79.8 59.4 67.7 63.9 76.0 44.0 50 30
119 21 Mali 56.4 0.9 25 28.0 69.6 89.2 47.2 50.7 81.1 73.2 60 40
120 22 Nigeria 55.6 1.3 30 25.0 85.2 76.1 48.3 77.7 70.4 63.8 40 40
122 23 Kenya 55.6 -1.5 30 27.0 78.0 72.1 47.9 63.8 72.8 64.0 50 50
125 24 Mozambique 54.8 -0.2 30 30.0 75.2 66.5 60.9 37.9 82.0 75.4 40 50
126 25 Malawi 54.8 -0.6 40 37.0 78.5 49.0 49.1 63.1 53.8 72.2 55 50
region. Most impressively, six of the top 10 larg- from the ranks of the economically “repressed.”
est score improvements in the 2015 Index have Also encouraging is that six countries in the
occurred in countries in this region. São Tomé region, including Angola, Comoros, Guinea–
and Príncipe, Democratic Republic of Congo, Bissau, and Seychelles, have registered sus-
Togo, Senegal, Burundi, and Zimbabwe have tained growth in economic freedom throughout
all recorded score gains of two points or more. the past five years.
Liberia and Sierra Leone, two post-conflict Many countries in the region have substantial
countries currently confronting challenges of growth momentum. The positive economic results
containing Ebola, have continued to move up achieved through advancing economic freedom
Chapter 6 89
Economic Freedom in Sub-Saharan Africa Countries (continued)
Government Spending
Investment Freedom
Monetary Freedom
Change from 2014
Financial Freedom
Business Freedom
Property Rights
Labor Freedom
Fiscal Freedom
Trade Freedom
Regional Rank
Overall Score
World Rank
Country
127 26 Niger 54.6 -0.5 30 34.0 76.6 83.6 39.2 40.9 81.3 65.6 55 40
132 27 Burundi 53.7 2.3 20 21.0 73.5 61.3 61.4 68.1 69.8 72.2 60 30
135 28 Mauritania 53.3 0.1 25 30.0 80.2 59.8 50.5 52.1 76.6 69.0 50 40
136 29 São Tomé and Príncipe 53.3 4.5 25 42.0 87.8 41.4 65.1 45.8 70.7 75.2 50 30
138 30 Togo 53.0 3.1 30 29.0 69.7 78.1 51.9 43.4 80.4 67.8 50 30
141 31 Liberia 52.7 0.3 25 38.0 83.0 69.9 60.1 43.9 72.7 74.4 40 20
142 32 Comoros 52.1 0.7 30 28.0 64.5 78.8 47.3 52.0 77.9 73.0 40 30
144 33 Guinea 52.1 -1.4 15 24.0 68.1 79.5 51.6 74.4 66.7 61.2 40 40
145 34 Guinea-Bissau 52.0 0.7 20 19.0 89.1 88.0 39.6 61.7 77.5 65.4 30 30
146 35 Cameroon 51.9 -0.7 25 25.0 71.7 87.8 41.6 47.8 75.6 59.6 35 50
147 36 Sierra Leone 51.7 1.2 10 30.0 80.8 87.5 53.4 41.6 68.5 70.2 55 20
149 37 Ethiopia 51.5 1.5 30 33.0 77.4 91.4 55.9 56.4 66.1 64.4 20 20
155 38 Lesotho 49.6 0.1 35 49.0 68.5 0.0 54.7 63.9 75.2 64.6 45 40
158 39 Angola 47.9 0.2 15 23.0 84.5 50.1 47.4 43.2 65.4 70.2 40 40
165 40 Chad 45.9 1.4 20 19.0 46.2 83.6 27.1 47.7 75.6 55.2 45 40
166 41 Central African Republic 45.9 -0.8 15 25.0 65.0 92.0 27.2 37.5 69.6 52.4 45 30
168 42 Congo, Dem. Rep. 45.0 4.4 10 22.0 72.9 85.7 42.8 38.4 75.1 63.0 20 20
170 43 Congo, Republic of 42.7 -1.0 10 22.0 67.4 60.7 36.8 36.0 71.6 62.4 30 30
173 44 Equatorial Guinea 40.4 -4.0 10 19.0 75.4 31.4 37.5 33.5 78.3 53.8 35 30
174 45 Eritrea 38.9 0.4 10 20.0 57.0 71.8 18.2 65.5 57.8 69.2 0 20
175 46 Zimbabwe 37.6 2.1 10 21.0 66.6 74.2 37.1 23.7 75.4 58.4 0 10
N/A N/A Somalia N/A N/A N/A 8.0 N/A N/A N/A N/A N/A N/A N/A N/A
N/A N/A Sudan N/A N/A N/A 11.0 86.4 94.5 49.0 43.8 52.8 55.6 15 N/A
have created valuable impetus for additional with exports often concentrated in sectors with
institutional reforms that are needed to ensure little scope for sustained productivity increases.
long-term economic development. However, the More critically, uneven economic playing fields,
region as a whole continues to underperform in exacerbated by the weak rule of law, continue to
following through on policy changes that will help leave those who lack connections with only lim-
the emergence of a more dynamic private sector. ited prospects for a brighter future. It remains to
Despite sustained high growth over the past be seen whether the region’s political leaders have
decade, structural transformation remains the political will to undertake the fundamental
patchy in many African countries. Limited diver- economic reforms that are needed to translate
sification has resulted in less broad-based growth, narratives of “Africa Rising” into reality.

Chapter 7
The Countries
T
his chapter reports data on economic free- averaged (using equal weights) to compute the
dom for each of the countries included in country’s final economic freedom score. In addi-
the 2015 Index of Economic Freedom, the tion to the scores, the country pages include in
21st annual edition. Of the 186 countries includ- each case a brief introduction describing the
ed in the 2015 Index, 178 are fully scored and economic strengths and weaknesses and the
ranked. Because of insufficient data, Afghani- political and economic background influencing
stan, Iraq, Kosovo, Libya, Somalia, Sudan, Syria, a country’s performance, as well as a statistical
and Liechtenstein are covered without numeri- profile documenting the country’s main eco-
cal grading. nomic indicators.
For analytical understanding and presen- To assure objectivity and reliability within
tational clarity, the 10 economic freedoms are each of the 10 components on which the coun-
grouped into four broad categories of econom- tries are graded, every effort has been made to
ic freedom: use the same data source consistently for all
countries; when data are unavailable from the
• Rule of law (property rights, freedom primary source, secondary sources are used.
from corruption); (For details, see Appendix, “Methodology.”)
• Government size (fiscal freedom, govern-
ment spending); DEFINING THE “QUICK FACTS”
• Regulatory efficiency (business freedom, Each country page includes “Quick Facts”
labor freedom, monetary freedom); and with nine different categories of information.
• Market openness (trade freedom, invest- Unless otherwise indicated, the data in each
ment freedom, financial freedom). country’s profile are for 2013 (the year for which
the most recent data are widely available) and in
Ranked countries are given a score ranging current 2013 U.S. dollars (also the most recent
from 0 to 100 on each of the 10 components of available). The few cases in which no reliable
economic freedom, and these scores are then statistical data were available are indicated by
91
“n/a.” Definitions and sources for each category Unemployment rate: A measure of the por-
of information are as follows. tion of the workforce that is not employed but
Population: 2013 data from World Bank, is actively seeking work. Data are from Interna-
World Development Indicators Online 2014. For tional Labour Organization, Global Employment
some countries, other sources include the coun- Trends 2014.
try’s statistical agency and/or central bank. Inflation: The annual percent change in con-
GDP: Gross domestic product—total produc- sumer prices as measured for 2013 (or the most
tion of goods and services—adjusted to reflect recent available year). The primary source for
purchasing power parity (PPP). The primary 2013 data is International Monetary Fund, World
source for GDP data is World Bank, World Devel- Economic Outlook Database, 2014. Secondary
opment Indicators Online 2014. The major sec- sources are Economist Intelligence Unit, Data
ondary source is International Monetary Fund, Tool; Asian Development Bank, Asian Develop-
World Economic Outlook Database, 2014. Other ment Outlook 2014; and a country’s statistical
sources include a country’s statistical agency agency and/or central bank.
and/or central bank. Foreign direct investment (FDI) inward
GDP growth rate: The annual percentage flow: The total annual inward flow of FDI in cur-
growth rate of real GDP derived from constant rent 2013 U.S. dollars, reported in millions. FDI
national currency units. Annual percent changes flows are defined as investments that acquire a
are year-on-year. The primary source is Inter- lasting management interest (10 percent or more
national Monetary Fund, World Economic Out- of voting stock) in a local enterprise by an investor
look Database, 2014. Secondary sources include operating in another country. Such investment is
World Bank, World Development Indicators the sum of equity capital, reinvestment of earn-
Online 2014; Economist Intelligence Unit, Data ings, other long-term capital, and short-term
Tool; Asian Development Bank, Asian Develop- capital as shown in the balance of payments and
ment Outlook 2014; and a country’s statistical both short-term and long-term international
agency and/or central bank. loans. Data are from United Nations Conference
GDP five-year compound annual growth: on Trade and Development, World Investment
The compound average growth rate measured Report 2014.
over a specified period of time. The compound Public debt: Gross government debt as a per-
annual growth rate is measured using data from centage of GDP, which indicates the cumulative
2008 to 2013, based on real GDP expressed in total of all government borrowings less repay-
constant national currency units. It is calcu- ments that are denominated in a country’s cur-
lated by taking the nth root of the total percent- rency. Public debt is different from external debt,
age growth rate, where n is the number of years which reflects the foreign currency liabilities of
in the period being considered. The primary both the private and public sectors and must be
source is International Monetary Fund, World financed out of foreign exchange earnings. The
Economic Outlook Database, 2014. Secondary primary sources for 2013 data are International
sources are World Bank, World Development Monetary Fund, World Economic Outlook Data-
Indicators Online 2014, and Asian Development base, 2014; International Monetary Fund, Arti-
Bank, Asian Development Outlook 2014. cle IV Staff Reports, 2011–2014; and a country’s
GDP per capita: Gross domestic product statistical agency. The data source for U.S. pub-
(adjusted for PPP) divided by total population. lic debt is United States Office of Management
The sources for these data are World Bank, World and Budget. Concerning the U.S. data, gross debt
Development Indicators Online 2014; Interna- includes both publicly held debt (bonds and
tional Monetary Fund, World Economic Outlook Treasury bills held by foreigners, corporations,
Database, 2014; U.S. Central Intelligence Agency, individual citizens, investment vehicles, etc.)
The World Factbook 2014; and a country’s statis- and intragovernmental debt such as Social Secu-
tical agency and/or central bank. rity trust funds.

COMMONLY USED ACRONYMS IMF: International Monetary Fund, estab-
CARICOM: Caribbean Community and Com- lished in 1945 to help stabilize countries during
mon Market, composed of Antigua and Barbuda, crises; now includes 188 member countries.
the Bahamas, Barbados, Belize, Dominica, Gre- OECD: Organisation for Economic Co-
nada, Guyana, Haiti, Jamaica, Montserrat, Saint operation and Development, an international
Lucia, Saint Kitts and Nevis, Saint Vincent and the organization of developed countries, founded
Grenadines, Suriname, and Trinidad and Tobago. in 1948; now includes 34 member countries.
CEMAC: Central African Economic and Mon- SACU: Southern African Customs Union,
etary Community, which includes Cameroon, the consisting of Botswana, Lesotho, Namibia,
Central African Republic, Chad, the Republic of South Africa, and Swaziland.
Congo, Equatorial Guinea, and Gabon. WTO: World Trade Organization, founded
EU: European Union, consisting of Austria, in 1995 as the central organization dealing with
Belgium, Bulgaria, Cyprus, Croatia, the Czech the rules of trade between nations and based on
Republic, Denmark, Estonia, Finland, France, signed agreements among member countries.
Germany, Greece, Hungary, Ireland, Italy, Latvia, As of September 2014, there were 160 mem-
Lithuania, Luxembourg, Malta, the Netherlands, ber economies.
Poland, Portugal, Romania, Slovakia, Slovenia,
Spain, Sweden, and the United Kingdom.
Chapter 7 93
AFGHANISTAN
Economic Freedom Score
50
25 75
Least Most
free 0 100 free
World Rank: Not Ranked Regional Rank: Not Ranked This economy is not graded
A fghanistan’s
‌ economic freedom could not be fully assessed
‌in the 2015 Index of Economic Freedom because of a lack
of sufficient comparable data. This assessment is based on
Freedom Trend
the limited information available from government and
international sources. Afghanistan will receive an economic
freedom score and ranking in future editions as more data
become available.
While undergoing substantial political, economic, and
Not graded this year
social transformation over the past decade, Afghanistan has
achieved rapid yet volatile economic growth. The construc-
tion and agricultural sectors have been the key contributors to
economic expansion, which has averaged around 10 percent
over the past five years. There have been noticeable improve-
ments in such areas as health, education, and microfinance,
but dependence on high levels of foreign aid continues.
2011 2012 2013 2014 2015
The economy still lacks the overall institutional capacity to
enhance productivity and promote self-sustaining growth.
Although some progress has been made in developing the pri-
Country Comparisons
vate sector, it remains small and informal, and there is little
impetus for more vibrant entrepreneurial activity. Political Country n/a
uncertainty and security challenges undermine the rule of law
World
and continue to be formidable. Average 60.4
BACKGROUND: Ashraf Ghani Ahmadzai is Afghanistan’s new Regional

president following a hotly contested election marred by alle- Average 58.8
gations of vote-rigging. After three months of political wran-
gling between run-off candidates Ghani and former Afghan Free
Economies 84.6
Foreign Minister Abdullah Abdullah, the two agreed to form a
0 20 40 60 80 100
unity government. The terms of the agreement call for Presi-
dent Ghani, who won the election according to Afghanistan’s
Independent Election Commission, to share power with Quick Facts
Abdullah, who was named Chief Executive Officer. Ghani’s Population: 30.6 million
signing of the Bilateral Security Agreement with the U.S. short- GDP (PPP): $35.1 billion
ly after his assumption of power opens the way for the U.S. to 3.6% growth in 2013
leave a non-combat presence of 9,800 troops in the country. 5-year compound annual growth 10.5%
Taliban insurgents continue to attack Afghan security forces $1,150 per capita
and civilians. Afghanistan’s economy remains hobbled by poor Unemployment: 8.5%
infrastructure, insurgency, and corruption. The agricultural Inflation (CPI): 7.4%
sector depends heavily on cultivation of the opium poppy. FDI Inflow: $69.3 million
Public Debt: 6.1% of GDP
How Do We Measure Economic Freedom?
See page 475 for an explanation of the methodology 2013 data unless otherwise noted.
or visit the Index Web site at heritage.org/index. Data compiled as of September 2014.
95
AFGHANISTAN (continued)
THE TEN ECONOMIC FREEDOMS
1–Year
Score Country World Average Rank Change
RULE OF Property Rights n/a — n/a

LAW Freedom from Corruption 8.0 182nd –2.0
0 20 40 60 80 100
In 2015, as foreign troops prepare to withdraw, the government is still challenged by serious
corruption, heavy and persistent drug trafficking, and weak institutional capacity. Afghani-
stan’s judicial system is severely underdeveloped. Protection of property rights is weak. The
lack of property registries or a land-titling database leads to title disputes, and an estimated 80
percent of land is held and transferred informally.
GOVERNMENT Fiscal Freedom 91.7 22nd +0.5

SIZE Government Spending 81.2 45th –3.0
0 20 40 60 80 100
Despite efforts to improve the system, governance and security issues impede tax collection.
The revenue that is collected comes from corporate and individual income taxes of 20 percent.
Sales taxes also contribute to fiscal receipts. Expenditures have been rising and currently equal
about 25 percent of the domestic economy. Future fiscal health may depend on the extent of
donor contributions.
REGULATORY Business Freedom 61.4 104th –1.7

EFFICIENCY Labor Freedom 67.5 67th –7.5
Monetary Freedom 72.6 132nd –1.7
0 20 40 60 80 100
The entrepreneurial environment still holds back private production and investment. Pro-
cesses for establishing businesses and obtaining licenses have been relatively streamlined,
but other structural barriers persist. The presence of a large informal economy continues to
dampen development of a functioning labor market. The government has very limited influ-
ence on monetary policy.
OPEN Trade Freedom n/a — n/a

MARKETS Investment Freedom 55.0 96th –10.0
Financial Freedom n/a — n/a
0 20 40 60 80 100
Afghanistan has a 6.8 percent average tariff rate. Complex customs procedures deter imports.
The constitution prohibits discrimination against foreign investors, but foreign ownership of
land is not allowed. The underdeveloped financial sector remains dominated by banking. There
are 17 commercial banks and three state banks, but scarce access to financing hinders private-
sector growth.
Long-Term Score Change: n/a

Property Rights n/a Fiscal Freedom n/a Business Freedom n/a Trade Freedom n/a
Freedom from n/a Government n/a Labor Freedom n/a Investment Freedom n/a
Corruption Spending Monetary Freedom n/a Financial Freedom n/a

ALBANIA
50
25 75
Least Most
free 0 100 free
World Rank: 63 Regional Rank: 29 65.7
A lbania’s economic freedom score is 65.7, making its econ-

omy the 63rd freest in the 2015 Index. Its overall score
has decreased by 1.2 points, with notable declines in business
Freedom Trend
68
freedom, fiscal freedom, and investment freedom. Albania is
ranked 29th among the 43 countries in the Europe region, and 67
its overall score is above the world average.
Over the past five years, Albania has advanced its economic 66
freedom score by 1.7 points. With score increases in six of
the 10 economic freedoms, including trade freedom and the 65
management of public spending, it has fluctuated within the
category of “moderately free.” However, in the 2015 Index, the
64
upward trend of economic freedom in Albania has reversed.
The Albanian economy is mostly in private hands, but the 63
state continues to control key enterprises, particularly in 2011 2012 2013 2014 2015
the energy sector. Although foreign direct investment has
increased in recent years, overall levels still remain among
the lowest in the region. Deeper structural reforms to diver- Country Comparisons
sify the economy and improve labor market flexibility remain
critical for more broad-based economic development. Prop- Country 65.7
erty rights and freedom from corruption are weak, and gov-
ernment interference and regulatory control continue to limit World
60.4
dynamic investment and overall economic efficiency. Average
BACKGROUND: Socialist Edi Rama was elected prime min- Regional

Average 67.0
ister in June 2013, defeating conservative eight-year incum-
bent Sali Berisha. Rama campaigned on a promise to secure Free
84.6
European Union candidacy status within a year. Albania Economies
achieved full membership in NATO in April 2009 and con- 0 20 40 60 80 100
tinues to make a small contribution to the NATO-led mis-
sion in Afghanistan. Albania has received significant foreign
direct investment to fund development of its oil and natural Quick Facts
gas resources. Its transportation and energy infrastructure Population: 2.8 million
remain poor by European standards. Corruption is an imped- GDP (PPP): $26.5 billion
iment to growth. The economy is dominated by agriculture, 0.7% growth in 2013
which employs about half of the workforce, and services, 5-year compound annual growth 2.4%
including tourism. $9,506 per capita
Unemployment: 16.1%
Inflation (CPI): 1.9%
FDI Inflow: $1.2 billion
97
ALBANIA (continued)
1–Year
RULE OF Property Rights 30.0 94th 0

LAW Freedom from Corruption 31.0 118th +0.6
0 20 40 60 80 100
In 2014, Albania became an EU candidate country on the condition that it make further prog-
ress in reforming the judiciary and law enforcement to combat deeply rooted corruption and
organized crime, especially human trafficking, fraudulent documents, and money laundering.
Judges sometimes face threats and physical violence. Protection of intellectual and real prop-
erty rights is weak, particularly for land tenure.
GOVERNMENT Fiscal Freedom 87.2 36th –5.5

SIZE Government Spending 76.1 64th +0.5
0 20 40 60 80 100
The government has raised its top marginal individual and corporate income tax rates. The
top individual income tax rate is now 23 percent, and the top corporate tax rate is 15 percent.
Overall tax receipts remain stagnant at around 23 percent of gross domestic product. Public
expenditures amount to 28.2 percent of the domestic economy, and public debt is equal to
around 70 percent of domestic income.

EFFICIENCY Labor Freedom 52.9 126th +3.2
Monetary Freedom 80.8 44th +0.8
0 20 40 60 80 100
Despite recent reforms, the inefficient business environment still impedes broader economic
development. On average, launching a business requires five procedures, but obtaining neces-
sary permits can take over 200 days. In the absence of a well-functioning labor market, infor-
mal labor activity persists. Price controls and government subsidies distort domestic prices for
electricity, water, agricultural products, and railroad transportation.
OPEN Trade Freedom 87.8 37th +0.3

Financial Freedom 70.0 19th 0
0 20 40 60 80 100
Albania has a 1.1 percent average tariff rate, and there are few non-tariff barriers. Promotion
of foreign investment is a stated goal, but there are limits on foreign ownership of agricultural
land. Banks account for over 90 percent of total financial-sector assets. Although the banking
system remains relatively well capitalized, nonperforming loans have risen to over 20 percent
of all loans.
Long-Term Score Change (since 1995)

Property Rights –20.0 Fiscal Freedom +5.5 Business Freedom +0.6 Trade Freedom +28.8
Freedom from +21.0 Government +41.8 Labor Freedom +3.9 Investment Freedom 0
Corruption Spending Monetary Freedom +58.7 Financial Freedom +20.0

ALGERIA
50
25 75
Least Most
free 0 100 free
A lgeria’s economic freedom score is 48.9, making its econ-

omy the 157th freest in the 2015 Index. Its overall score is
1.9 points lower than last year due to considerable declines
Freedom Trend
54
in investment freedom and the management of government 53
spending that outweigh improvements in freedom from cor-
ruption and monetary freedom. Algeria is ranked 14th among 52
the 15 countries in the Middle East/North Africa region,
and its score remains lower than both the regional and 51
world averages. 50
Algeria’s economy has been on a declining path of economic 49

freedom over the past five years. Having registered the sev-
enth-largest overall score decline in the 2015 Index, the econ- 48
omy is now rated “repressed.” Public spending, bolstered by
47
the hydrocarbon sector, has been expanding in recent years,
undermining fiscal governance. 2011 2012 2013 2014 2015
As policies to sustain regulatory efficiency and open mar-

kets have been neglected or even reversed, the economy has Country Comparisons
become more dependent on the state-dominated energy sec-
tor. Tariff and non-tariff barriers, coupled with burdensome Country 48.9
business and investment regulations, continue to hamper
development of a more dynamic private sector and interfere World
Average 60.4
with much-needed diversification of the economic base.
Regional
BACKGROUND: President Abdelaziz Bouteflika won a fourth Average 61.6
term in April 2014 despite rarely appearing in public after a
2013 stroke. After the “Arab Spring” protests swept Tunisia Free
Economies 84.6
and Libya, the government introduced some political reforms,
0 20 40 60 80 100
including an end to state-of-emergency restrictions on civil
liberties that had lasted almost two decades. The social-
ist model adopted after independence from France in 1962
has hindered development. Formal-sector unemployment Quick Facts
remains persistently high, and there is a housing shortage. Population: 37.9 million
Algeria is the world’s sixth-largest exporter of natural gas and GDP (PPP): $285.5 billion
has the world’s 10th-largest natural gas reserves and 16th- 2.7% growth in 2013
largest oil reserves. The government began a five-year, $286 5-year compound annual growth 2.8%
billion program to modernize infrastructure in 2010 and $7,534 per capita
appears to be trying to attract foreign and domestic private Unemployment: 9.8%
investment and to diversify the economy. Inflation (CPI): 3.3%
99
ALGERIA (continued)
1–Year

0 20 40 60 80 100
In 2014, the government introduced constitutional revisions that appear to be pro-democratic,
but few expect improvements in the generally weak, slow, and opaque judicial system. High
levels of corruption plague Algeria’s business and public sectors, especially the energy sector.
An estimated one-half of all economic transactions occur in the informal sector. Most real
property remains in government hands.
GOVERNMENT Fiscal Freedom 80.0 83rd –0.5

0 20 40 60 80 100
Algeria’s modest tax revenue amounts to around 12 percent of GDP. Individual income and
corporate tax rates remain unchanged at 35 percent and 25 percent, respectively. Companies
involved in tourism and mining pay reduced rates. Other taxes include a value-added tax. Gov-
ernment expenditures equal 45.2 percent of the domestic economy, and public debt is below
10 percent of gross domestic product.
REGULATORY Business Freedom 66.6 85th +0.3

0 20 40 60 80 100
Despite some enhancement of the business environment, significant bureaucratic impedi-
ments to entrepreneurial activity and economic diversification persist. The labor market
remains rigid, contributing to a high youth unemployment rate. Generous but unsustainable
state spending on subsidies for food and fuel, price ceilings, and redistribution schemes to con-
trol prices have been used to stave off political unrest.
OPEN Trade Freedom 60.8 164th 0

Financial Freedom 30.0 131st 0
0 20 40 60 80 100
Algeria has an 8.6 percent average tariff rate. Imports of medical equipment and used earth-
moving equipment are restricted. The government screens foreign investment, and regulatory
barriers discourage some investors. The financial system remains subject to government inter-
ference. State-owned banks provide over 80 percent of loans. The degree of financial interme-
diation remains low.

Freedom from –14.0 Government –30.8 Labor Freedom –5.4 Investment Freedom –25.0

ANGOLA
50
25 75
Least Most
free 0 100 free
A ngola’s economic freedom score is 47.9, making its econo-

my the 158th freest in the 2015 Index. Its overall score has
improved by 0.2 point, reflecting improvements in freedom
Freedom Trend
49
from corruption, labor freedom, and monetary freedom that
were largely offset by deteriorations in the control of govern-
ment spending and fiscal freedom. Angola is ranked 39th out 48
of 46 countries in the Sub-Saharan Africa region, and its score
remains far below world and regional averages.
47
Over the past five years, Angola has advanced its economic
freedom by 1.7 points. It has recorded an overall improvement
each year since 2011, with gains in six of the 10 economic free- 46
doms, including business freedom, investment freedom, and
freedom from corruption.
45
Nonetheless, significant corruption and a lack of judicial inde- 2011 2012 2013 2014 2015
pendence because of political interference continue to under-
mine the foundations for economic progress. The government
is highly dependent on oil and diamond revenues and plays an Country Comparisons
overly dominant role in the economy, undermining efficiency.
Monopolies and quasi-monopolies are common in the most Country 47.9
important sectors of the economy.
World
BACKGROUND: José Eduardo dos Santos has ruled Angola Average 60.4
for more than three decades. His Popular Movement for the
Liberation of Angola (MPLA) won parliamentary elections in Regional
Average 54.9
August 2012, only the second such elections since the end of
the 27-year civil war in 2002. Angola is Africa’s second-largest Free
84.6
oil producer, with much of its proven reserves concentrated Economies
in Cabinda province, a region plagued by a separatist con- 0 20 40 60 80 100
flict. Nevertheless, oil production has nearly doubled from
800,000 barrels a day in 2001 to over 1.4 million barrels a day
in 2014. In 2014, a French oil company invested $16 billion in Quick Facts
an offshore project. Angola also has natural gas, diamonds, Population: 20.8 million
hydroelectric potential, and rich agricultural land. Nonethe- GDP (PPP): $130.1 billion
less, most Angolans remain poor and dependent on subsis- 4.1% growth in 2013
tence farming. 5-year compound annual growth 3.8%
$6,247 per capita
Unemployment: 8.4%
FDI Inflow: –$4.3 billion
101
ANGOLA (continued)
1–Year

0 20 40 60 80 100
Money-laundering legislation was passed in 2014, but government corruption and patronage
remain endemic, especially in the extractive sectors. Bribery often underpins business activity.
Although courts occasionally rule against the government, the judiciary is subject to extensive
political influence, particularly from the executive. Property registration fees can be prohibi-
tively expensive. Overall, protection of property rights is weak.
GOVERNMENT Fiscal Freedom 84.5 52nd –3.2

SIZE Government Spending 50.1 133rd –5.2
0 20 40 60 80 100
The individual income tax rate is 17 percent, and the corporate tax rate is 35 percent. Other
taxes include fuel and consumption taxes. Tax revenue is equal to 5.6 percent of gross domestic
product. Government expenditures are 40.8 percent of domestic income, and public debt has
fallen to less than 30 percent of the economy.

0 20 40 60 80 100
Despite the recent implementation of more streamlined business start-up procedures, burden-
some regulations still hinder private-sector development. The regulatory system lacks trans-
parency and clarity, and regulations are enforced inconsistently. The formal labor market is
underdeveloped. Price controls are pervasive in many sectors, and energy subsidies amounting
to 4 percent of GDP are the highest in the region.

MARKETS Investment Freedom 40.0 131st 0
0 20 40 60 80 100
Angola has a 7.4 percent average tariff rate. The government procurement process favors
domestic companies. Most land is owned by the state, and investment in several sectors is
restricted. The underdeveloped financial system has only a limited role in the economy, ham-
pering private entrepreneurial growth. The banking sector, dominated by commercial banks,
continues to evolve. There is no stock exchange.

Freedom from –7.0 Government +50.1 Labor Freedom –1.7 Investment Freedom +10.0

ARGENTINA
50
25 75
Least Most
free 0 100 free
A rgentina’s economic freedom score is 44.1, making its

economy the 169th freest in the 2015 Index. Its overall
score has decreased by 0.5 point due to declines in five of the
Freedom Trend
54
10 economic freedoms, including the management of govern-
ment spending, labor freedom, and business freedom. Argen- 52
tina ranks 27th out of 29 countries in the South and Central
America/Caribbean region, and its overall score remains far 50
below the regional and world averages.

48
Argentina continues to be mired in a climate of economic
repression. Severely hampered by state interference, the for- 46
mal economy grows increasingly stagnant as informal eco-
nomic activity expands. Monetary stability is particularly 44
weak, and there are price controls on almost all goods and ser-
vices. Government interference in the financial sector further 42
distorts price levels. 2011 2012 2013 2014 2015
Over the past five years, Argentina’s economic freedom score

has dropped by over 7 points, plunging the economy into the Country Comparisons
“repressed” category. Considerable losses have occurred in
eight of the 10 economic freedoms, most notably in govern- Country 44.1
ment spending, investment freedom, business freedom, and
property rights. In the 2015 Index, Argentina has recorded its World
60.4
lowest economic freedom score ever. Average
BACKGROUND: Argentina will elect a new president in Octo- Regional

Average 59.7
ber 2015. President Cristina Fernandez de Kirchner, elected
in 2007 and re-elected in 2011, is constitutionally barred from Free
84.6
seeking a third term. Argentina’s investment profile has been Economies
badly damaged by monetary and fiscal mismanagement, ris- 0 20 40 60 80 100
ing protectionism, and expropriations. The 2001 debt default
remains a stumbling block. A U.S. court decision in favor of
holdouts who did not accept previous restructuring offers Quick Facts
sent the country into default again in 2014. Economic growth Population: 41.5 million
has plummeted, and the poverty rate has increased. Capital GDP (PPP): $777.9 billion
controls have aggravated capital flight, and the economy has 4.3% growth in 2013
dropped from third-largest to fourth-largest in Latin Amer- 5-year compound annual growth 4.9%
ica. Argentina continues to claim possession of the Falkland $18,749 per capita
Islands despite a vote by residents to remain under Brit- Unemployment: 7.3%
ish rule. Inflation (CPI): 10.6%
103
ARGENTINA (continued)
1–Year

0 20 40 60 80 100
Corruption plagues Argentine society, and scandals are common. In June 2014, Vice Presi-
dent Amado Boudou was charged with bribery and conduct incompatible with public office.
The justice system is afflicted by scores of tenured but incompetent and corrupt judges. The
lower courts are highly politicized, and the relatively independent Supreme Court has received
heightened pressure from the government.
GOVERNMENT Fiscal Freedom 66.8 151st +3.3

0 20 40 60 80 100
Argentina’s individual and corporate income tax rates are 35 percent. Other taxes include a
value-added tax, a wealth tax, and a tax on financial transactions. The tax burden is 29.5 per-
cent of gross domestic product. Government spending amounts to over 40 percent of GDP, and
public debt is about half of the size of the domestic economy. The government is in technical
default because of restructured bond payments.

Monetary Freedom 59.6 176th –0.4
0 20 40 60 80 100
Government regulation has increased, undermining efficiency and productivity growth. Estab-
lishing a new business is cumbersome, and obtaining necessary permits is costly. Reforms of
the rigid labor market have long been stalled. The government underreports official inflation
statistics; regulates prices of electricity, water, gasoline, and hundreds of other products; and
pressures companies to fix prices and wages.
OPEN Trade Freedom 68.8 139th –0.1

MARKETS Investment Freedom 30.0 149th 0
0 20 40 60 80 100
Argentina has a 5.6 percent tariff rate. Non-tariff barriers include import licensing and an
official “import substitution” policy. Foreign investment in some sectors of the economy is
regulated. The government exercises considerable control of financial activities. Argentina’s
largest bank, which is state-owned and the sole financial institution in some areas, has been
known to allocate credit based on political expediency.

Property Rights –55.0 Fiscal Freedom –13.9 Business Freedom –32.2 Trade Freedom +10.4
Corruption Spending Monetary Freedom –1.5 Financial Freedom –20.0

ARMENIA
50
25 75
Least Most
free 0 100 free
A rmenia’s economic freedom score is 67.1, making its econ-

omy the 52nd freest in the 2015 Index. Its overall score
has declined by 1.8 points from last year, reflecting consid-
Freedom Trend
71
erable deterioration in property rights, labor freedom, and
monetary freedom. This decline was the eighth-largest in the 70
2015 Index. Armenia is ranked 23rd among the 43 countries
in the Europe region, and its score puts it above the world and 69
regional averages.
Armenia’s transition to a more dynamic and market-oriented 68
economy has been facilitated by openness to global commerce
and by regulatory reforms designed to encourage entrepre- 67
neurial activity. However, continued efforts, particularly to
strengthen the independence of the judiciary and eradicate
66
corruption, are needed to ensure progress in long-term eco-
nomic development. 2011 2012 2013 2014 2015
Although Armenia performs relatively well in most categories

compared to world averages, the historical gains are not fully Country Comparisons
institutionalized, and the country’s economic freedom has
been on a five-year downward path. This decline has taken Country 67.1
place across six of the 10 economic freedoms, most nota-
bly in labor freedom, freedom from corruption, and mon- World
Average 60.4
etary freedom.
Regional
BACKGROUND: President Serzh Sargsyan of the center- Average 67.0
right Republican Party won a second five-year term in 2013.
A cease-fire in Armenia’s 24-year dispute with Azerbaijan Free
Economies 84.6
over the Nagorno–Karabakh region has been in effect since
0 20 40 60 80 100
1994, but minor hostilities continue. The economy relies on
manufacturing, services, remittances, and agriculture. Arme-
nia announced in September 2013 that it was suspending an
association agreement with the European Union and would Quick Facts
seek membership in the Russian-backed Eurasian Economic Population: 3.3 million
Union. The eurozone financial crisis and the sluggish Russian GDP (PPP): $20.4 billion
economy are drags on growth, and unemployment is high. The 3.2% growth in 2013
government relies heavily on loans from the World Bank, the 5-year compound annual growth 0.3%
International Monetary Fund, the Asian Development Bank, $6,191 per capita
and Russia. Armenia is running a modest budget deficit. Unemployment: 16.0%
FDI Inflow: $370.0 million
105
ARMENIA (continued)
1–Year
RULE OF Property Rights 20.0 138th –10.0

0 20 40 60 80 100
In 2014, the president dismissed several well-known reformers and formed a new cabinet
including officials who alledgedly have grown wealthy from their government connections.
For example, the finance minister has long been subject to media allegations of corruption.
The judicial system, hobbled by corruption, impedes the enforcement of contracts. Scores for
rule of law are below average.

0 20 40 60 80 100
Armenia’s individual income tax rate is 26 percent, and its corporate tax rate is 20 percent.
Other taxes include a value-added tax and an excise tax. The overall tax burden equals 22
percent of the domestic economy. Government expenditures equal about 24 percent of gross
domestic income, and public debt reached a level equal to about 42 percent of the domestic
economy in the most recent year.

0 20 40 60 80 100
Several business reforms have been implemented in recent years. The minimum capital
requirement for establishing a business has been eliminated, licensing requirements have been
reduced, and the bankruptcy procedure has been modernized. The non-salary cost of labor is
moderate, but the informal labor market is sizable. Increased government subsidies distort
prices in such sectors as public transportation, electricity, and gas.

MARKETS Investment Freedom 75.0 36th +5.0
0 20 40 60 80 100
Armenia has a 2.3 percent average tariff rate. Non-tariff barriers are low, but there are some
bureaucratic barriers to trade and foreign investment. Land ownership is generally limited to
domestic investors. The state no longer has a stake in any bank, but the banking sector, which
accounts for over 90 percent of total financial-sector assets, still struggles to provide adequate
long-term credit or sophisticated financial services.

Freedom from –14.0 Government +82.8 Labor Freedom +2.2 Investment Freedom +45.0

AUSTRALIA
50
25 75
Least Most
free 0 100 free
A ustralia’s economic freedom score is 81.4, making its econ-

0.6 point lower than last year, with gains in monetary free-
Freedom Trend
85
dom and labor freedom outweighed by declines in investment
freedom, freedom from corruption, and the control of govern- 84
ment spending. Australia is ranked 4th out of 42 countries in
the Asia–Pacific region. 83
Australia’s strong commitment to economic freedom has
resulted in a policy framework that has facilitated economic 82
dynamism and resilience. Although overall economic free-
dom has declined slightly over the past five years, the Aus- 81
tralian economy performs remarkably well in many of the
10 economic freedoms. Regulatory efficiency remains firmly
80
institutionalized, and well-established open-market policies
sustain flexibility, competitiveness, and large flows of trade 2011 2012 2013 2014 2015
and investment. In 2014, Australia became the first developed
country to repeal a carbon-emissions tax. Country Comparisons
Banking regulations are sensible, and lending practices have
been relatively prudent. Monetary stability is well main- Country 81.4
tained, with inflationary pressures under control. A well-
functioning independent judiciary ensures strong protection World
Average 60.4
of property rights, and corruption has been minimal.
Regional
BACKGROUND: Since the early 1980s, successive govern- Average 58.8
ments have deregulated financial and labor markets and
reduced trade barriers. In September 2013, Liberal Party Free
Economies 84.6
leader Tony Abbott was elected prime minister following his
0 20 40 60 80 100
coalition’s victory in national elections. Australia is one of
the Asia–Pacific’s wealthiest nations and has enjoyed more
than two decades of economic expansion. Australia emerged
from the global recession relatively unscathed, but stimulus Quick Facts
spending by the previous Labor government generated a fis- Population: 23.2 million
cal deficit. Australia is internationally competitive in servic- GDP (PPP): $999.6 billion
es, technologies, and high-value-added manufactured goods. 2.4% growth in 2013
Mining and agriculture are important sources of exports. 5-year compound annual growth 2.5%
$43,073 per capita
Unemployment: 5.6%
107
AUSTRALIA (continued)
1–Year
RULE OF Property Rights 90.0 3rd 0

LAW Freedom from Corruption 81.0 9th –6.7
0 20 40 60 80 100
Australia has a stable political environment with well-established and transparent political
processes, a strong legal system, and a professional bureaucracy. Anti-corruption measures are
generally effective in discouraging bribery of public officials. Australia’s judicial system oper-
ates independently and impartially. Property rights are secure, and enforcement of contracts
is reliable. Expropriation is highly unusual.

0 20 40 60 80 100
The top individual income tax rate is 45 percent, and the top corporate tax rate is 30 percent.
Other taxes include a value-added tax and a capital gains tax. Total tax revenues equal about 27
percent of the domestic economy. A controversial carbon tax has been repealed. Government
expenditures equal 35.7 percent of the economy, and public debt is equivalent to less than 30
percent of GDP.

EFFICIENCY Labor Freedom 81.6 21st +2.4
0 20 40 60 80 100
Start-up companies enjoy great flexibility under licensing and other regulatory frameworks. It
takes only one procedure to start a business, and no minimum capital is required. Flexible labor
regulations facilitate a dynamic labor market, increasing overall productivity. In 2014, the gov-
ernment lifted price controls on electricity to encourage market-based production of power.
OPEN Trade Freedom 86.4 43rd 0

MARKETS Investment Freedom 80.0 23rd –5.0
0 20 40 60 80 100
Australia has a 1.8 percent average tariff rate, and non-tariff barriers are low. Large-scale for-
eign investments are subject to review. In 2013, the government rejected a takeover of Austra-
lia’s GrainCorp by the U.S. firm Archer Daniels Midland. The well-developed financial sector
offers a wide range of financing instruments. The banking system has remained stable, and all
banks are privately owned.

Property Rights 0 Fiscal Freedom +4.1 Business Freedom +24.1 Trade Freedom +9.4
Freedom from +11.0 Government +7.9 Labor Freedom –4.2 Investment Freedom +10.0
Corruption Spending Monetary Freedom –1.4 Financial Freedom 0

AUSTRIA
50
25 75
Least Most
free 0 100 free
A ustria’s economic freedom score is 71.2, making its econo-

my the 30th freest in the 2015 Index. Its score is 1.2 points
worse than last year, with declines in freedom from corrup-
Freedom Trend
74
tion, labor freedom, and the management of government
spending outweighing improvements in business freedom 73
and monetary freedom. Austria is ranked 16th out of 43 coun-
tries in the Europe region, and its overall score is well above 72
the regional and world averages.
Despite considerable strains over the past five years, Austria 71
has maintained much of its economic stability and dynamism.
Continued strong protection of the rule of law and the founda- 70
tions of economic freedom is reflected in high scores in prop-
erty rights and freedom from corruption, but these strengths
69
are not matched by a commitment to limited government.
Public spending has been expanding, generating great bud- 2011 2012 2013 2014 2015
getary pressure.
Counterbalancing excessive government spending and weak Country Comparisons
fiscal freedom, the transparent and competitive business
environment has promoted a thriving entrepreneurial private Country 71.2
sector. The banking system has regained much of its charac-
teristic efficiency and competitiveness after being roiled by World
Average 60.4
the global economic crisis.
Regional
BACKGROUND: The coalition of the center-left Social Demo- Average 67.0
cratic Party and the center-right Austrian People’s Party, led
by Social Democrat Chancellor Werner Faymann, lost seats in Free
Economies 84.6
September 2013 but retained a governing majority. Euroscep-
0 20 40 60 80 100
tic parties made gains. Austria’s economy has been relatively
resilient through the eurozone crisis, outperforming the econ-
omies of many other EU members, and unemployment is the
lowest in the eurozone. Yet GDP growth has been modest, and Quick Facts
government debt is growing. The government has gradually Population: 8.5 million
relinquished control of formerly nationalized oil, gas, steel, GDP (PPP): $361.4 billion
and engineering companies and has deregulated telecommu- 0.4% growth in 2013
nications and electricity. Austria has large service and indus- 5-year compound annual growth 0.4%
trial sectors and a small, highly developed agricultural sector. $42,597 per capita
Unemployment: 4.8%
109
AUSTRIA (continued)
1–Year

0 20 40 60 80 100
Corruption is relatively rare, and cases are routinely reported in the media. Enforcement is
improving but still somewhat haphazard, and legal proceedings in corruption cases are slow.
The independent judiciary provides an effective means for protecting property and contractual
rights of nationals and foreigners. The land registry, overhauled in 2012, is a reliable and acces-
sible system for recording interests in property.

0 20 40 60 80 100
Austria’s top individual income tax rate is 50 percent, and its top corporate tax rate is 25 per-
cent. Other taxes include a value-added tax and a tax on real estate transfers. The tax burden
equals 43.2 percent of the economy. Government expenditures amount to over 50 percent of
gross domestic product, and public debt has remained steady at 74 percent of domestic income.

EFFICIENCY Labor Freedom 76.7 33rd –3.8
0 20 40 60 80 100
Austria’s overall regulatory framework has been marked by transparency and efficiency,
encouraging business innovation and productivity, but the absence of major regulatory reforms
has eroded overall competitiveness. With no minimum wage, relatively flexible regulations
facilitate employment growth. A high degree of state ownership and regulation remains in the
electricity generation and transmission sectors.

MARKETS Investment Freedom 90.0 2nd 0
0 20 40 60 80 100
EU members have a 1.0 percent average tariff rate. Although some non-tariff barriers exist, the
EU is relatively open to external trade. Austria is open to most investment, but the regulatory
system is complicated. There are no controls on currency transfers, access to foreign exchange,
or repatriation of profits. The modern and competitive banking sector provides a wide range
of financial services.


AZERBAIJAN
50
25 75
Least Most
free 0 100 free
A zerbaijan’s economic freedom score is 61.0, making its

score is 0.3 point lower than last year, reflecting declines in
Freedom Trend
63
the management of public finance, investment freedom, and
62
trade freedom that outweigh improvements in freedom from
corruption and regulatory efficiency. Azerbaijan is ranked
61
17th out of 41 countries in the Asia–Pacific region, and its
overall score is above the regional and global averages.
60
Azerbaijan’s gains in economic freedom over the past five
years have moved it into the “moderately free” category. 59
Wide-ranging reforms have resulted in limited progress in
regulatory efficiency and economic diversification, improv- 58
ing the overall macroeconomic and entrepreneurial environ-

57
ments. Tax reforms and continued openness to global trade
and investment have aided Azerbaijan’s gradual transition to 2011 2012 2013 2014 2015
a more market-based system.
Nonetheless, substantial challenges remain, particularly in Country Comparisons
implementing deeper systemic and social reforms to strength-
en the foundations of economic freedom. Property rights and Country 61.0
freedom from corruption remain fragile, and burdensome
regulatory requirements continue to undermine the emer- World
Average 60.4
gence of a more dynamic private sector and long-term eco-
nomic development. Regional
58.8
Average
BACKGROUND: President Ilham Aliyev was elected to a third
term in 2013 amid evidence of massive electoral fraud. His Free
Economies 84.6
father, Heydar, ruled Azerbaijan first as a Soviet republic
0 20 40 60 80 100
and later as an independent country until his death in 2003,
when his son succeeded him. An upsurge in violence in 2014
between Armenian and Azerbaijani forces nullified progress
in peace talks regarding their dispute over the Nagorno– Quick Facts
Karabakh region, which has cost tens of thousands of lives Population: 9.3 million
and the loss of about a fifth of Azerbaijan’s territory. Falling GDP (PPP): $102.8 billion
oil production is expected to be partially offset by natural gas 5.8% growth in 2013
exports. In 2015, construction will begin on the Trans-Anato- 5-year compound annual growth 4.4%
lian Natural Gas Pipeline to export Azeri gas through Turkey $11,044 per capita
and ease Europe’s energy dependence on Russia. Negotiations Unemployment: 5.5%
for accession to the World Trade Organization began in 2002. Inflation (CPI): 2.4%
111
AZERBAIJAN (continued)
1–Year

LAW Freedom from Corruption 28.0 132nd +5.3
0 20 40 60 80 100
Corruption is widespread, and wealth from oil and gas exports creates growing opportunities
for graft. The judiciary is corrupt, inefficient, and largely subservient to the president and rul-
ing party. Government officials are rarely held accountable for corruption. In general, respect
for property rights has plummeted. The state appears able to seize any property it wishes, and
ordinary citizens have little recourse.
GOVERNMENT Fiscal Freedom 88.1 32nd 0

0 20 40 60 80 100
Azerbaijan’s top individual income tax rate is 25 percent, and its top corporate tax rate is 20
percent. Other taxes include a value-added tax and a property tax. The overall tax burden is
equal to about 13 percent of gross domestic product. Government expenditures, supported in
part by oil revenue, equal 36.7 percent of domestic income. Government debt amounts to less
than 15 percent of the domestic economy.
REGULATORY Business Freedom 74.5 43rd +1.0

0 20 40 60 80 100
The business start-up process has been streamlined, but licensing requirements remain time-
consuming and bureaucratic. Although relatively flexible employment regulations have been
put in place, enforcement has been uneven in practice. Price controls are in effect for most
energy products, and monopolies, limits on imports, and agricultural subsidies also cause dis-
tortions in domestic prices.

0 20 40 60 80 100
Azerbaijan’s average tariff rate is 4.5 percent. Although the country is working to improve its
customs procedures, its relatively inefficient regulatory and legal systems can deter trade and
investment. Banks hold about 95 percent of total financial-sector assets. Azerbaijan’s financial
penetration rate remains one of the lowest in the region. Capital markets are dominated by
government securities.

Freedom from +18.0 Government +10.9 Labor Freedom +14.3 Investment Freedom +45.0

THE BAHAMAS
50
25 75
Least Most
free 0 100 free
Thasheeconomy
Bahamas’ economic freedom score is 68.7, making its
the 41st freest in the 2015 Index. Its overall score
decreased by 1.1 points, with notable declines in finan-
Freedom Trend
72
cial freedom and labor freedom offsetting improvements in
freedom from corruption and monetary freedom. The Baha- 71
mas’ overall score continues to be higher than the regional
and world averages, and its economy is the 4th freest out of 70
29 countries in the South and Central America/Caribbe-
an region.
69
Over the past half-decade, economic freedom in the Bahamas
has improved by 0.7 point despite score declines in the past 68
two years. Gains in economic freedom have been led by strong
improvements in freedom from corruption and trade free-
67
dom, which have advanced by 16 and 10 points, respectively.
More modest improvements have occurred in monetary and 2011 2012 2013 2014 2015
fiscal freedoms.
Despite some improvement, corruption remains a problem, Country Comparisons
and regulatory inefficiency continues to hold back the eco-
nomic dynamism that should result from the competitive Country 68.7
financial sector and a tax regime with no personal or corpo-
rate income tax. Ultimately, it is the government’s ability to World
Average 60.4
promote more broad-based reforms that will determine the
prospects for a long-term and diversified economic expansion. Regional
59.7
Average
BACKGROUND: In 2012, Prime Minister Perry Christie and
his Progressive Liberal Party won a five-year term. The Baha- Free
Economies 84.6
mian economy centers on tourism, international banking,
0 20 40 60 80 100
investment management, and financial services, with tour-
ism accounting for more than 60 percent of GDP. While acces-
sion to the World Trade Organization would be a positive
step, politicians and the private sector are locked in a dispute Quick Facts
about how to replace the revenues that would be lost. Due to Population: 0.4 million
its geographic location just 50 miles off the coast of Florida, GDP (PPP): $11.4 billion
the country is a major transshipment point for illegal drugs, 1.9% growth in 2013
particularly shipments to the U.S. and Europe, and is used for 5-year compound annual growth 0.4%
smuggling illegal migrants into the U.S. $32,036 per capita
Unemployment: 13.6%
113
THE BAHAMAS (continued)
1–Year

0 20 40 60 80 100
Corruption remains a problem at all levels of government and may be exacerbated by a reported
increase in cocaine transshipment through the Bahamas in 2014. Ongoing concerns include
money laundering and allegedly extensive nepotism, cronyism, and favoritism in government.
The largely well-functioning legal system, based on British common law, is independent, but
the judicial process tends to be very slow. Property registration is difficult and time-consuming.
GOVERNMENT Fiscal Freedom 97.8 6th +0.5

0 20 40 60 80 100
The Bahamas imposes no individual or corporate income taxes and has one of the world’s low-
est tax burdens. Government revenue, which equals 15 percent of the domestic economy, is
reliant on tariffs and national insurance, property, and stamp taxes. Government spending
has reached 23.7 percent of gross domestic product, and public debt amounts to 56 percent of
domestic income.

EFFICIENCY Labor Freedom 75.3 42nd –6.2
0 20 40 60 80 100
The overall regulatory environment is efficient and facilitates business formation, although no
major reforms have been implemented in recent years. The labor market is relatively flexible,
but enforcement of the labor codes remains ineffective. The government influences domestic
prices for such “breadbasket” items as medicines, gasoline, and petroleum gas and subsidizes
state-owned corporations.

Financial Freedom 60.0 39th –10.0
0 20 40 60 80 100
The average tariff rate is 18.9 percent, and tariffs are a major source of government revenue.
Some agricultural imports are restricted. New foreign investment is subject to a lengthy review
process. The financial sector, the second most important contributor to the economy, is fair-
ly competitive. However, nonperforming loans have increased to around 14 percent of total
bank lending.

Freedom from +1.0 Government –3.7 Labor Freedom –4.7 Investment Freedom 0

BAHRAIN
50
25 75
Least Most
free 0 100 free
Bhasahrain’s economic freedom score is 73.4, making its econ-

omy the 18th freest in the 2015 Index. Its overall score
decreased by 1.7 points due to declines in investment
Freedom Trend
79
freedom, monetary freedom, and business freedom. Bahrain
78
continues to be the freest economy in the Middle East/North
Africa region, and its economic freedom score is well above 77
the world average.
76
Over the past five years, Bahrain’s economic freedom score
has declined by 4.3 points, with a particularly sharp drop fol- 75
lowing civil unrest in 2011. In the 2015 Index, the kingdom
74
registered the 10th largest score decline. Renewed efforts to
enhance the foundations of economic freedom through firm 73
institutionalization of property rights and greater transpar-
ency remain critical to ensuring long-term economic develop- 72
ment and a successful transition to a more open society. 2011 2012 2013 2014 2015
The recent disappointing trend in economic freedom, howev-

er, masks significant score gains since 1995 when Bahrain was Country Comparisons
first graded in the Index. Impressive long-term improvements
in financial, investment, and labor freedoms have helped the Country 73.4
kingdom transform itself into a competitive trade and finan-
cial hub that leads the region in many areas. World
60.4
Average
BACKGROUND: Bahrain gained independence in 1971 and
became a constitutional monarchy in 2002. In 2011, Shia Regional
Average 61.6
activists launched a campaign demanding a new constitu-
tion and greater political power. When modest concessions Free
84.6
and efforts at dialogue failed to stem the demonstrations, Economies
King Hamad authorized a crackdown that was subsequently 0 20 40 60 80 100
supported by the regional Gulf Cooperation Council security
forces. The government has sought to ease tensions through a
national dialogue led by the crown prince and by introducing Quick Facts
several law enforcement, intelligence, and judicial reforms. Population: 1.2 million
Efforts have been made to reduce dependence on declining GDP (PPP): $40.6 billion
oil reserves by encouraging investment in non-energy sec- 4.9% growth in 2013
tors. Home to many multinational firms that do business in 5-year compound annual growth 3.4%
the region, Bahrain has a modern communications and trans- $34,584 per capita
portation infrastructure, a cosmopolitan outlook, and a free Unemployment: 7.4%
trade agreement with the U.S. Inflation (CPI): 3.3%
115
BAHRAIN (continued)
1–Year
RULE OF Property Rights 60.0 41st 0

0 20 40 60 80 100
Bahrain’s long-serving prime minister, uncle of the king, approved legislation in 2014 to fight
corruption and prevent the misuse of public money. Critics view the new laws as an effort to
blunt a renewed, high-profile anti-corruption drive initiated by the crown prince in late 2013.
The legal system adequately protects and facilitates acquisition and disposition of property
rights. Expropriation is infrequent, and private property is secure.
GOVERNMENT Fiscal Freedom 99.9 1st 0

0 20 40 60 80 100
Bahrain has no tax on individual income. Most businesses are exempt from taxation, but oil
companies must pay a 46 percent income tax. Other taxes include a stamp tax and a tax on prop-
erty purchases. Overall tax revenue amounts to less than 4 percent of gross domestic product.
Government expenditures equal about 30 percent of the domestic economy, and public debt
is equivalent to about 44 percent of GDP.
REGULATORY Business Freedom 72.5 53rd –3.8

0 20 40 60 80 100
Bahrain’s commercial law system is relatively straightforward, but the regulatory environment
lacks coordination and efficient enforcement of regulations. Following labor reforms in recent
years, labor market flexibility has been relatively well maintained. Bahrain’s subsidy programs,
consuming more than 10 percent of GDP, cover natural gas for industrial users, food items,
water, and electricity.

Financial Freedom 80.0 3rd 0
0 20 40 60 80 100
Bahrain has a 5.7 percent average tariff rate. Government procurement policies can favor
domestic companies. Foreign investment in several sectors is restricted. Bahrain’s more than
400 banks and financial institutions account for over a quarter of GDP. Foreign and domestic
investors have access to a wide range of financial services. Capitalization of the banking system
remains high, and nonperforming loans are declining.

Property Rights 0 Fiscal Freedom +0.5 Business Freedom –27.5 Trade Freedom +0.2
Corruption Spending Monetary Freedom –12.5 Financial Freedom +10.0

BANGLADESH
50
25 75
Least Most
free 0 100 free
Bhasangladesh’s economic freedom score is 53.9, making its

economy the 131st freest in the 2015 Index. Its overall score
decreased by 0.2 point since last year, with improvements
Freedom Trend
56
in labor freedom, freedom from corruption, and monetary
freedom outweighed by notable declines in investment free- 55
dom and business freedom. Bangladesh is ranked 27th out of
42 countries in the Asia–Pacific region. 54
Over the past five years, Bangladesh’s economic freedom has
fluctuated at the lower end of the “mostly unfree” category. 53
Modest score improvements have occurred in just four of the
10 economic freedoms (financial freedom, labor freedom, 52
freedom from corruption, and trade freedom), and overall
policy reform appears to have stalled.
51
A general disregard for the rule of law, rampant corruption, 2011 2012 2013 2014 2015
and a judicial system that suffers from political interfer-
ence provide a weak foundation for economic moderniza-
tion. Lack of a national consensus on the direction of future Country Comparisons
policy changes has diminished the momentum for economic
reforms, and deteriorating prospects for near-term improve- Country 53.9
ments in economic freedom make it unlikely that the relative-
ly high growth rates of recent years can be maintained. World
Average 60.4
BACKGROUND: Prime Minister Sheikh Hasina was reelected Regional
in January 2014. The opposition boycotted the election and Average 58.8
blocked roads and highways. The government’s use of force to
open thoroughfares led to violent clashes, and Bangladeshis Free
Economies 84.6
suffered economically. In 2014, the war crimes tribunal set
0 20 40 60 80 100
up to investigate human rights violations committed during
the 1971 war for independence handed down several death
sentences that led to rioting by Islamists. Despite a decade of
overall economic and social gains for much of the population, Quick Facts
Bangladesh remains one of the world’s poorest nations. Gar- Population: 156.3 million
ment manufacturing accounts for over 90 percent of export GDP (PPP): $325.1 billion
earnings, and the collapse of the Rana Plaza garment facto- 5.8% growth in 2013
ry in April 2013, which killed over 1,000 people, has focused 5-year compound annual growth 6.1%
international attention on working conditions and labor and $2,080 per capita
safety standards. Unemployment: 4.3%
117
BANGLADESH (continued)
1–Year

LAW Freedom from Corruption 27.0 141st +3.7
0 20 40 60 80 100
Institutional accountability is not well established, and the judiciary is not clearly separated
from the executive. Government effectiveness is undermined by pervasive graft. Contract
enforcement and dispute settlement procedures are inefficient. Antiquated real property laws
and poor record-keeping systems complicate land and property transactions. Poor governance
is one of the main barriers to foreign direct investment.

0 20 40 60 80 100
Bangladesh’s top individual income tax rate is 25 percent, and its top corporate tax rate is
45 percent. Other taxes include a value-added tax. Despite relatively high rates, tax revenue
remains low at around 10 percent of gross domestic product. Public expenditures account for
about 16.3 percent of the domestic economy, and public debt has grown to a level equal to about
40 percent of GDP.

Monetary Freedom 67.7 163rd +1.8
0 20 40 60 80 100
Reform measures in recent years have streamlined the procedures for establishing a business,
but other institutional deficiencies such as pervasive corruption and poor access to credit dis-
courage start-ups. The labor market remains underdeveloped, and the enforcement of labor
rules is ineffective. The government maintains an extensive system of price controls and sub-
sidies for basic food staples, fuels, fertilizers, and electricity.

0 20 40 60 80 100
Bangladesh has a relatively high 13.0 percent average tariff rate, and tariffs are a significant
source of government revenue. Efforts are underway to improve customs processes. Foreign
investors face bureaucratic hurdles. The financial sector remains underdeveloped despite
modernization efforts. State-owned commercial banks account for over 30 percent of total
banking system assets. Stock market capitalization is low.

Freedom from +17.0 Government +0.5 Labor Freedom –0.4 Investment Freedom –5.0

BARBADOS
50
25 75
Least Most
free 0 100 free
Bworse
arbados’s economic freedom score is 67.9, making its econ-
omy the 46th freest in the 2015 Index. Its score is 0.4 point
than last year due to declines in half of the 10 economic
Freedom Trend
71
freedoms including the control of public spending, labor free-
dom, and freedom from corruption. Barbados is ranked 7th 70
out of 29 countries in the South and Central America/Carib-
bean region, and its overall score remains well above the glob- 69
al and regional averages.
Barbados is one of the Caribbean region’s most prosper- 68
ous economies, and offshore finance and tourism have been
important sources of economic growth. With relatively strong 67
foundations of economic freedom supported by a high degree
of transparency and an efficient judiciary, the economy has
66
focused on attracting international companies and long-
term investment. 2011 2012 2013 2014 2015
Over the past five years, Barbados’s economic freedom has

declined by about 0.5 point. Improvements in such areas as Country Comparisons
investment freedom, trade freedom, and fiscal freedom have
been offset by notable deteriorations in business freedom, Country 67.9
labor freedom, and the management of government spending.
Large fiscal deficits have driven an increase in government World
Average 60.4
debt, which is now almost equal to the size of the economy.
Regional
BACKGROUND: Barbados is a politically stable parliamentary Average 59.7
democracy. Prime Minister Freundel Stuart and his Demo-
cratic Labour Party won a five-year term in office in 2013. Free
Economies 84.6
Barbados has transformed itself from a low-income, agricul-
0 20 40 60 80 100
tural economy producing mainly sugar and rum into a middle-
income economy built on tourism and offshore banking that
generates one of the highest per capita incomes in the Carib-
bean. However, tourism revenues have declined, and financial Quick Facts
services and construction have never fully recovered from the Population: 0.3 million
Great Recession that began in 2008. The government is try- GDP (PPP): $7.0 billion
ing to diversify away from tourism, which has been the main –0.7% growth in 2013
source of external vulnerability. In 2014, in an effort to reduce 5-year compound annual growth –0.8%
its large fiscal deficit, the government imposed an asset tax on $25,181 per capita
banks and laid off 3,000 public-sector workers. Unemployment: 12.2%
119
BARBADOS (continued)
1–Year

0 20 40 60 80 100
Corruption is not a major problem in Barbados. There are criminal penalties for official cor-
ruption, and the government’s enforcement of anti-corruption measures is generally effective.
The court system is based on British common law and is generally unbiased and efficient. The
protection of property rights is strong, and the rule of law is respected.

0 20 40 60 80 100
Other taxes include a value-added tax and a property tax. The overall tax burden equals 27.8
percent of domestic income, and government spending is equivalent to around 43.9 percent of
the total domestic economy. At 92 percent of GDP, public debt is high for a small island nation.

0 20 40 60 80 100
There is no minimum capital requirement, but starting a business requires eight procedures
and takes more than two weeks. On average, obtaining permits for construction takes over 400
days. Despite relatively flexible employment regulations, a well-functioning labor market has
not fully developed. The government maintains price controls on basic food commodities but
removed its fuel subsidy for public service vehicles in 2014.

0 20 40 60 80 100
Barbados has a relatively high 13.1 percent average tariff due to its reliance on tariff revenue
to finance the government. Foreign and domestic investors are generally treated equally, but
investment in some sectors is regulated. The banking sector has grown, offering a wider range
of services for domestic and foreign investors. The securities market lacks depth and remains
relatively illiquid.

Property Rights +30.0 Fiscal Freedom +13.0 Business Freedom +1.6 Trade Freedom +14.8

BELARUS
50
25 75
Least Most
free 0 100 free
Bis 0.3elarus’s economic freedom score is 49.8, making its econ-

point lower than last year, reflecting declines in half of
Freedom Trend
52
the 10 economic freedoms including investment freedom, the
51
control of government spending, and fiscal freedom. Belarus
is ranked 42nd among the 43 countries in the Europe region.
50
Despite this year’s decline, Belarus’s economic freedom score
has improved by nearly 2 points over the past five years. 49
Marked improvements in overall fiscal management and a
decline in perceived corruption have bolstered overall eco- 48
nomic freedom. However, the score decline in the 2015 Index
has pushed the country back into the “repressed” category. 47
Belarus remains one of the world’s most controlled econo- 46

mies. The state directs or interferes in many areas of the econ- 2011 2012 2013 2014 2015
omy. Proposed labor laws include a so-called serfdom decree
that threatens to limit the free movement of agricultural
workers. These policies, along with centralized state control Country Comparisons
and harsh redistribution, have stifled Belarus’s prosperity and
economic freedom compared to the rest of Europe. Country 49.8
BACKGROUND: President Alexander Lukashenko, in power World

60.4
since 1994, rules all branches of government. The U.N. Human Average
Rights Council has appointed a human rights investigator for Regional
Belarus. The European Union imposed targeted economic Average 67.0
sanctions following beatings and arrests of opposition fig-
ures after Lukashenko falsified the December 2010 election Free
Economies 84.6
results. Parliamentary elections in 2012 were rigged, and
0 20 40 60 80 100
the two main opposition parties boycotted the elections.
Belarus’s industries and state-controlled agriculture are not
competitive. Corruption and inflation plague the economy.
Russia maintains huge political influence in the government Quick Facts
and economy, and a significant portion of Russian oil and gas Population: 9.5 million
exports passes through the country. In May 2014, Belarus GDP (PPP): $149.1 billion
signed an agreement with Russia to create a Eurasian Eco- 0.9% growth in 2013
nomic Union. 5-year compound annual growth 3.2%
$15,753 per capita
Unemployment: 5.9%
121
BELARUS (continued)
1–Year

0 20 40 60 80 100
President Alexander Lukashenko presides over an authoritarian system that has destroyed
checks and balances and dominates all branches of government. The state controls 70 percent
of the economy, feeding widespread corruption. Graft is also enabled by the lack of transpar-
ency and accountability in government. Soviet-era state ownership of land and government-
controlled collective farms continues.
GOVERNMENT Fiscal Freedom 86.4 41st –2.8

0 20 40 60 80 100
Belarus’s flat individual income tax rate is 12 percent, and its corporate tax rate is 18 percent.
Income earned in technology parks is taxed at a lesser rate. Other taxes include a value-added
tax and excise taxes. The overall tax burden equals 29.8 percent of gross domestic income. Gov-
ernment spending has reached 38.9 percent of domestic income, and public debt equals 37
percent of GDP.

EFFICIENCY Labor Freedom 80.1 23rd +2.4
Monetary Freedom 44.5 181st +10.6
0 20 40 60 80 100
Simplified registration formalities facilitate business formation, but obtaining necessary
permits remains time-consuming and burdensome. A well-functioning labor market has not
developed, and the public sector is the main source of employment. The state subsidizes prices
for energy and many household goods and fixes artificially low prices for products made by
state-owned enterprises.

0 20 40 60 80 100
Belarus has a relatively low 2.0 percent average tariff rate. It is a member of the Eurasian Cus-
toms Union and has not joined the World Trade Organization. The government reviews foreign
investment. The financial sector, dominated by banking, remains heavily government-influ-
enced, with commercial banks’ lending practices subject to state pressure. The stock market
is small and largely dormant.

Freedom from +19.0 Government +23.2 Labor Freedom +8.1 Investment Freedom –30.0

BELGIUM
50
25 75
Least Most
free 0 100 free
Bdecreased
elgium’s economic freedom score is 68.8, making its econ-
omy the 40th freest in the 2015 Index. Its overall score has
by 1.1 points from last year, with declines in labor
Freedom Trend
72
freedom, the management of public spending, and fiscal
freedom outweighing improvements in monetary freedom, 71
business freedom, and freedom from corruption. Belgium is
ranked 18th among the 43 countries in the Europe region, and 70
its overall score is above the regional and global averages.
Over the past five years, Belgium’s economic freedom score 69
has slipped by 1.4 points, moving the country further away
from the rank of “mostly free” that it last achieved in 2011. 68
Long-term declines in four of the 10 economic freedoms,
including the management of public spending, business free-
67
dom, labor freedom, and monetary freedom, have caused this
deterioration. In particular, Belgium’s government spending 2011 2012 2013 2014 2015
score has declined by nearly 15 points.
Policy responses during and after the eurozone financial cri- Country Comparisons
sis have exacerbated long-term structural weaknesses. A rigid
labor market and high taxation have undermined any broad- Country 68.8
based recovery, and government spending has increased sub-
stantially, pushing public debt close to the size of the economy. World
Average 60.4
Labor market reforms and fiscal prudence must be at the top
of the policy agenda in order to secure broad-based economic Regional
67.0
freedom and growth. Average
BACKGROUND: Belgium is a federal state with three cultur- Free

Economies 84.6
ally different regions: Flanders, Wallonia, and the capital city
0 20 40 60 80 100
of Brussels. Brussels also serves as the headquarters of NATO
and the European Union. In October 2011, an electoral reform
package was adopted with the aim of avoiding a situation simi-
lar to the one that occurred when the country went 541 days Quick Facts
without forming a government after the 2010 elections. The Population: 11.2 million
first federal elections under these reforms were in May 2014. GDP (PPP): $422.8 billion
Bart De Wever’s center-right New Flemish Alliance won a plu- 0.2% growth in 2013
rality but not a majority. Services account for 75 percent of 5-year compound annual growth 0.3%
economic activity. Leading exports are electrical equipment, $37,881 per capita
vehicles, diamonds, and chemicals. Unemployment: 8.6%
123
BELGIUM (continued)
1–Year

0 20 40 60 80 100
Notwithstanding ongoing political difficulties between the two linguistic communities, corrup-
tion remains minimal in Belgium. The government prohibits and punishes all forms of bribery.
Property rights are well protected by law. Laws are well-codified, and the judicial system is
generally respected, but the courts can be slow. Enforcement actions to protect intellectual
property rights can be protracted.

SIZE Government Spending 10.2 172nd –4.6
0 20 40 60 80 100
Belgium’s top individual income tax rate is 50 percent, and its top corporate income tax rate
is 33 percent. Other taxes include a value-added tax and an estate tax. The overall tax burden
equals 45.3 percent of gross domestic product. Government spending is equivalent to 54.7 per-
cent of the domestic economy, and public debt is approaching nearly 100 percent of GDP.

0 20 40 60 80 100
The overall regulatory environment is efficient and transparent. The cost of establishing a
company has been reduced, and starting a business takes only three days and four procedures.
Although employment regulations have become less burdensome, the non-salary cost of hiring
a worker remains high. The state controls the prices of a wide range of fuels and other items
and spends almost 1 percent of GDP on coal subsidies.

0 20 40 60 80 100
EU is relatively open to external trade. Foreign and domestic investors are generally treated
equally in Belgium. The financial sector remains vibrant and generally free from government
involvement. Some institutions received bailouts during the economic slowdown, and the
recently passed Financial Crisis Law grants the state stronger powers during crises.


BELIZE
50
25 75
Least Most
free 0 100 free
Baboutelize’s economic freedom score is 56.8, making its econo-

my the 117th freest in the 2015 Index. Its overall score is
the same as last year, with improvements in investment
Freedom Trend
66
freedom and the control of government spending counter-
balanced by declines in business and labor freedoms. Belize 64
is ranked 20th out of 29 countries in the South and Central
America/Caribbean region. 62
Over the past five years, Belize’s economic freedom has 60

declined by 7 points. Deterioration has occurred in half of the
10 economic freedoms since 2011, with double-digit declines 58
in freedom from corruption, business freedom, and labor free-
dom. Given the patchy efforts to advance economic reforms, 56
economic dynamism in Belize remains constrained by struc-
tural weaknesses that undermine prospects for broad-based 54
economic development. 2011 2012 2013 2014 2015
Corruption has become prevalent, with Belize’s score on free-

dom from corruption declining by more than 20 points over Country Comparisons
the past half-decade. A weak and politically vulnerable judi-
ciary has been ineffective in upholding the rule of law, and the Country 56.8
country has become a haven for money laundering and drug
transit. Despite a comparatively high level of trade freedom, World
60.4
dynamic gains from trade have been undercut by the lack of Average
progress in reforming the investment climate and the finan- Regional
cial sector. Average 59.7
BACKGROUND: Belize is a parliamentary democracy. Prime Free

84.6
Minister Dean Barrow of the United Democratic Party won re- Economies
election for a five-year term in March 2012, more than a year 0 20 40 60 80 100
earlier than constitutionally mandated. Since taking office
in 2008, Barrow’s government has undermined investment
by expropriating the leading private telecommunications Quick Facts
and electricity companies and the water company. However, Population: 0.3 million
Belize has reached an agreement with bondholders to restruc- GDP (PPP): $3.0 billion
ture its $544 million external debt, also referred to as the 1.6% growth in 2013
“superbond.” The economy is based primarily on tourism fol- 5-year compound annual growth 2.2%
lowed by exports of marine products, citrus, sugar, and banan- $8,716 per capita
as. Oil reserves are declining. Belize has high crime rates, a Unemployment: 8.2%
prevalence of HIV/AIDS, and significant unemployment. Inflation (CPI): 0.5%
125
BELIZE (continued)
1–Year

LAW Freedom from Corruption 6.7 185th 0
0 20 40 60 80 100
A government commission to monitor, prevent, and combat corruption has not met for sev-
eral years. Business owners complain that government officials, police, and others often solicit
bribes or show favoritism. The judiciary, although independent, is influenced by the executive.
As of May 2014, the government had not compensated the owners of expropriated foreign-
owned electricity and telecommunications companies.
GOVERNMENT Fiscal Freedom 82.4 63rd +0.3

0 20 40 60 80 100
The top individual income and corporate tax rates are 25 percent. Other taxes include a goods
and services tax and a stamp duty. The overall tax burden is equal to 22.5 percent of the domes-
tic economy. Government expenditures are equivalent to 26.9 percent of gross domestic prod-
uct, and public debt amounts to 76 percent of the size of the domestic economy.

0 20 40 60 80 100
The process for setting up a business and completing regulatory requirements has been stream-
lined, but entrepreneurial activity often faces such challenges as poor enforcement of the com-
mercial code and lack of regulatory transparency. A formal labor market has not been fully
developed. The government maintains price controls on various products such as rice, sugar,
and flour and subsidizes the cost of electricity.

0 20 40 60 80 100
Belize has a 9.8 percent average tariff rate. The government relies heavily on tariff revenue, and
import licensing affects some agricultural imports. Both foreign and domestic investors may
find it difficult to title land. Despite efforts to improve efficiency, the government-controlled
financial sector does not meet private-sector credit needs sufficiently. The banking sector
remains burdened with nonperforming loans.

Freedom from –43.3 Government +13.6 Labor Freedom –21.5 Investment Freedom –20.0

BENIN
50
25 75
Least Most
free 0 100 free
B1.7 enin’s economic freedom score is 58.8, making its econ-

points better than last year, with notable improvements
Freedom Trend
60
in freedom from corruption and in the area of regulatory effi-
ciency consisting of business freedom, labor freedom, and 59
monetary freedom. Benin is ranked 11th out of 46 countries in
the Sub-Saharan Africa region, and its overall score is higher 58
than the regional average.

57
Over the past five years, economic freedom in Benin has
advanced by 2.8 points. Six of the 10 economic freedoms, nota- 56
bly investment freedom, business freedom, and freedom from
corruption, have improved by close to 10 points or more. 55
Nonetheless, as a “mostly unfree” economy in which the 54

foundations of economic freedom remain fragile and uneven 2011 2012 2013 2014 2015
across the country, Benin continues to lack the broad-based
economic dynamism that is necessary to ensure long-term
economic development. Though some previously govern- Country Comparisons
ment-owned enterprises have been privatized, lingering
government interference and inefficiency continue to crowd Country 58.8
out private-sector development. Further reforms in the rule
of law and financial freedom are urgently needed to improve World
60.4
productivity and raise incomes. Average
BACKGROUND: President Thomas Boni Yayi was elected in Regional

Average 54.9
2006 and re-elected for another five-year term in 2011. Police
foiled a coup against Yayi in March 2013. His former associ- Free
84.6
ate, Patrice Talon, was linked to the alleged assassination plot. Economies
Talon was arrested in Paris; however, a Paris court blocked his 0 20 40 60 80 100
extradition on the grounds that he would be denied a fair trial
in Benin. Although it is one of Africa’s largest cotton produc-
ers, Benin remains underdeveloped and dependent on subsis- Quick Facts
tence agriculture and regional trade. Population: 10.3 million
GDP (PPP): $16.7 billion
5.6% growth in 2013
5-year compound annual growth 3.9%
$1,623 per capita
Unemployment: 1.0%
127
BENIN (continued)
1–Year

0 20 40 60 80 100
The business environment is undermined by the government’s failure to meet contractual obli-
gations, ensure an independent judiciary, and accept adverse court decisions. Corruption per-
sists in customs administration, government procurement, and the judicial system. There are
no separate commercial courts, and backlogs of civil cases cause long delays. There is extensive
smuggling of food and fuel across the border with Nigeria.
GOVERNMENT Fiscal Freedom 68.3 147th 0

0 20 40 60 80 100
Companies engaged in hydrocarbon exploration, extraction, and sales pay between 35 percent
and 45 percent. Other taxes include a value-added tax. The overall tax burden equals 15.5 per-
cent of gross domestic income. Government spending accounts for 21 percent of the domestic
economy, and government debt equals 30 percent of GDP.
REGULATORY Business Freedom 55.2 132nd +4.2

0 20 40 60 80 100
The entrepreneurial environment remains burdensome. Bureaucratic procedures are not
streamlined and lack transparency. Despite some progress, obtaining business licenses is time-
consuming and costly. Outmoded employment regulations hinder job creation and productiv-
ity growth. The government subsidizes the production of cotton, and the country relies on
subsidized gasoline and diesel fuel smuggled from Nigeria.

0 20 40 60 80 100
Benin has a 15.8 percent average tariff rate. It has implemented a one-stop shop for customs
documents to facilitate trade. The slow-moving court system can impede international trade
and investment. The banking sector is predominantly private, and foreign ownership is
allowed, but despite the noticeable development of microfinance institutions, overall access
to credit remains low.

Freedom from –14.0 Government –3.8 Labor Freedom +0.6 Investment Freedom +20.0
Corruption Spending Monetary Freedom +22.0 Financial Freedom 0

BHUTAN
50
25 75
Least Most
free 0 100 free
Bincreased
hutan’s economic freedom score is 57.4, making its
economy the 115th freest in the 2015 Index. Its score has
0.7 point from last year, with improvements in free-
Freedom Trend
59
dom from corruption, the management of government spend-
ing, and business freedom partially offset by declines in labor 58
freedom and fiscal freedom. Bhutan is ranked 24th out of 42
countries in the Asia–Pacific region, and its overall score is
57
below the global and regional averages.
Over the past five years, Bhutan has charted a V-shaped trend 56
in economic freedom. Bolstered by improvements in freedom
from corruption and business freedom, it has bounced back
55
from its lowest economic freedom score ever in 2013. None-
theless, Bhutan continues to be in the ranks of the “mostly
unfree,” with scores on many of the 10 economic freedoms 54
remaining below the world averages. 2011 2012 2013 2014 2015
Efforts to diversify the economy have been at the top of the

policymaking agenda in the past few years. Hydropower Country Comparisons
production and development, led by the government, has
been a large driver of growth, but the poverty rate remains Country 57.4
persistently high. Landlocked and mountainous, Bhutan
remains relatively isolated from the world economy and has World
60.4
yet to open itself fully to international trade and global finan- Average
cial flows. Regional
Average 58.8
BACKGROUND: Bhutan is a small Himalayan constitutional
monarchy that made the transition from absolute monarchy Free
84.6
to parliamentary democracy in March 2008. In July 2013, it Economies
completed its second democratic handover of power after the 0 20 40 60 80 100
People’s Democratic Party won the majority of seats in the
National Assembly. Bhutan has one of the world’s smallest
and least-developed economies. Until a few decades ago, it was Quick Facts
largely agrarian, with few roads, little electricity, and no mod- Population: 0.7 million
ern hospitals. Recent interregional economic cooperation, GDP (PPP): $4.7 billion
particularly involving trade with Bangladesh and India, is 5.0% growth in 2013
helping to encourage economic growth. Connections to global 5-year compound annual growth 7.3%
markets are limited and dominated significantly by India. $6,370 per capita
Unemployment: 2.1%
129
BHUTAN (continued)
1–Year

0 20 40 60 80 100
The government operates with limited transparency and accountability, but a new performance
management system was implemented in 2014 to improve efficiency. Misuses of resources,
bribery, collusion, and nepotism are major problems. Bhutan’s civil and criminal codes include
many modern provisions based on English common law. Property rights are generally better
protected than in other South Asian countries.

0 20 40 60 80 100
Bhutan’s top individual income tax rate is 25 percent, and its top corporate tax rate is 30 per-
cent. Other taxes include a property tax and an excise tax. The overall tax burden amounts to
14.8 percent of domestic income. Government expenditures are equivalent to 36.5 percent of
gross domestic product, and public debt equals 110 percent of domestic output.
REGULATORY Business Freedom 61.9 101st +2.5

0 20 40 60 80 100
A modern regulatory framework has not been fully developed. Despite recent efforts, the busi-
ness climate is still hampered by inconsistent enforcement of regulations. On average, it takes
36 days to start a company. The imbalance between labor supply and demand persists, and
unemployment has risen in recent years. In July 2014, India renewed its LPG and kerosene
subsidy program for Bhutan.

0 20 40 60 80 100
As of 2007, Bhutan had a 17.8 percent tariff rate. The cost and time required to import goods
are relatively high. The government may screen new foreign investment. The financial sector
is small, and an underdeveloped regulatory framework limits access to capital for local entre-
preneurs. Competition has improved with the gradual opening of the sector to more foreign
partnerships, but banking remains state-controlled.

Property Rights 0 Fiscal Freedom –1.0 Business Freedom +0.2 Trade Freedom +7.4

BOLIVIA
50
25 75
Least Most
free 0 100 free
B1.6 olivia’s economic freedom score is 46.8, making its econ-

omy the 163rd freest in the 2015 Index. Its overall score is
points worse than last year, with notable deteriorations in
Freedom Trend
52
six of the 10 economic freedoms including financial freedom, 51
investment freedom, and labor freedom. Bolivia is ranked
26th out of 29 countries in the South and Central America/ 50
Caribbean region, and its overall score is far below the world
and regional averages. 49
Over the past five years, Bolivia’s economic freedom has 48
declined by 3.2 points, registering its lowest score ever in the 47

2015 Index. Modest improvements in freedom from corrup-
tion and fiscal and monetary freedoms are more than offset 46
by declines in half of the 10 factors, including double-digit
45
declines in labor, investment, and financial freedoms.
2011 2012 2013 2014 2015
Weak investment protections, rigid labor rules, and an
increased cost of business add to a perception of rising eco-
nomic subjugation under President Evo Morales, whose gov- Country Comparisons
ernment has expropriated over 20 private companies since
2006. Growth has been driven largely by windfall gains from Country 46.8
high commodity prices that are unlikely to be distributed
broadly. Reforms across all sectors are needed to guarantee World
Average 60.4
long-term economic growth.
Regional
BACKGROUND: President Evo Morales, in power since 2006, Average 59.7
imposed a new constitution in 2009 to expand his executive
powers and nationalize the economy. He has pledged to move Free
Economies 84.6
Bolivia toward “communitarian socialism.” Constitutionally
0 20 40 60 80 100
limited to two terms, Morales was elected to a third term in
October 2014. Bolivia has strong alliances with Cuba, Ven-
ezuela, and Iran. Although its economic growth rate since
2010 is one of the highest in Latin America and its macroeco- Quick Facts
nomic environment seems stable thanks to revenues from gas Population: 11.0 million
exports, the rate of private investment is among the region’s GDP (PPP): $59.2 billion
lowest, and foreign direct investment is concentrated in natu- 6.8% growth in 2013
ral resources. Half of all Bolivians live in poverty, and nearly 5-year compound annual growth 4.9%
60 percent of working arrangements are informal. Bolivia is $5,364 per capita
one of the world’s three main cocaine-producing countries Unemployment: 3.2%
and a significant transit zone for Peruvian cocaine. Inflation (CPI): 5.7%
131
BOLIVIA (continued)
1–Year

0 20 40 60 80 100
Corruption continues to be a serious problem in Bolivia. The constitution specifically allows
expropriation in cases of public necessity or where property is not serving a public function.
In recent years, there has been a series of mob invasions of rural and mining properties, which
authorities seem unable or unwilling to deter.

0 20 40 60 80 100
Bolivia’s top individual income tax rate is 13 percent, and the top corporate tax rate is 25 per-
cent. Other taxes include a value-added tax and a transactions tax. In the most recent year, tax
revenue equaled 22.9 percent of domestic output. Supported by hydrocarbon savings, govern-
ment expenditures have been steady at 36.1 percent of gross domestic product. Public debt is
equivalent to 33 percent of the domestic economy.

0 20 40 60 80 100
The regulatory environment is burdened with red tape and inconsistent enforcement of com-
mercial regulations. With 15 procedures required, on average, it takes more than a month to
start a business. The labor market is not fully developed, and employment regulations are not
conducive to productivity growth. Fuel prices, subsidized and controlled by the government,
are frozen for years at a time. Electricity is also subsidized.

MARKETS Investment Freedom 10.0 173rd –5.0
0 20 40 60 80 100
Bolivia has a 3.7 percent average tariff rate. Government procurement processes may favor
domestic firms. New foreign investment may be subject to government screening. New legisla-
tion on financial services enacted in August 2013 increases the state’s interference in the finan-
cial sector, introduces more controls, and directs banks to increase the availability of credit to
certain sectors.


BOSNIA AND HERZEGOVINA
50
25 75
Least Most
free 0 100 free
59.0
World Rank: 97 Regional Rank: 38
Freedom Trend
B osnia and Herzegovina’s economic freedom score is 59.0,
making its economy the 97th freest in the 2015 Index. Its
overall score has increased by 0.6 point, with improvements in
60
freedom from corruption, monetary freedom, and labor free- 59

dom partially offset by declines in investment freedom and
business freedom. Bosnia and Herzegovina is ranked 38th out
of 43 countries in the Europe region, and its score is below the 58
global and regional averages.
Over the past five years, Bosnia and Herzegovina’s economic
57
freedom has advanced by 1.5 points, registering its highest
score ever in the 2015 Index. Reforms have led to improve-
ments in half of the 10 factors, including government spending 56
and labor, monetary, and trade freedoms, with an especially
2011 2012 2013 2014 2015
notable 12-point gain in freedom from corruption.
Despite a decade of concerted effort to improve economic
prospects through broad, gradual institutional improvements,
Country Comparisons
however, Bosnia and Herzegovina’s economy remains in the
“mostly unfree” category, and deeper structural and institu- Country 59.0
tional reforms are needed. In particular, fully eradicating cor-
World
ruption, guaranteeing the independence of the judiciary, and Average 60.4
consistently enforcing property rights are vital to propelling the
country to higher levels of economic freedom and prosperity. Regional
67.0
Average
BACKGROUND: The 1995 Dayton Agreement ended three
Free
years of war in the former Yugoslavia and finalized Bosnia Economies 84.6
and Herzegovina’s independence. Two separate entities exist
0 20 40 60 80 100
under a loose central government: the Republika Srpska
(Serbian) and Federation of Bosnia and Herzegovina (Mus-
lim/Croat). The European Union signed a Stabilization and Quick Facts
Association Agreement with Bosnia and Herzegovina in 2008.
Population: 3.9 million
Bosnia also received a NATO Membership Action Plan in 2010
and is one of four official candidates for NATO membership.
1.2% growth in 2013
The country is one of Europe’s poorest. There has been some
5-year compound annual growth –0.2%
privatization, but agriculture and industry require modern-
$8,280 per capita
ization. Corruption is widespread, and a weak central govern-
Unemployment: 28.6%
ment makes implementation of economic reforms difficult.
Inflation (CPI): –0.1%
Violent unrest and protests in February 2014 were fueled in
part by rampant youth unemployment.
133
BOSNIA AND HERZEGOVINA (continued)
1–Year

0 20 40 60 80 100
Public procurement is a principal source of corruption and fraud in Bosnia and Herzegovina.
According to a 2014 estimate, around 60 percent of institutions ignore the procurement law,
and about 25 percent of contracts are processed through public tenders. The complex system
of government lends itself to deadlock and prevents reform. Property registries are largely
unreliable, leaving transfers open to dispute.

0 20 40 60 80 100
Tax policies in Bosnia and Herzegovina vary depending on the governing entity. The top indi-
vidual and corporate income tax rates are 10 percent. Other taxes include a value-added tax and
a property tax. The overall tax burden reached 38.8 percent of GDP in the most recent year.
Public expenditures amount to 49.2 percent of domestic output, and public debt is equal to 43
percent of the domestic economy.

0 20 40 60 80 100
Starting a company still takes more than a month, and licensing requirements remain burden-
some. Labor regulations’ complex administrative structure has inspired a dual labor market.
The unemployment rate, particularly among the young, is one of the highest in the region.
Energy-related subsidies amount to nearly 10 percent of GDP. The government also subsidizes
agricultural production and controls some prices.

0 20 40 60 80 100
Bosnia and Herzegovina’s 1.4 percent average tariff is relatively low. Non-tariff barriers have
been reduced, and customs procedures have improved. Foreign investors face bureaucratic
hurdles. About 80 percent of banking capital is privately owned, and around 90 percent of
banks are foreign-owned. Difficulties in contract enforcement and an insecure regulatory
environment limit the availability of credit for start-up businesses.


BOTSWANA
50
25 75
Least Most
free 0 100 free
Bscoreotswana’s economic freedom score is 69.8, making its

is 2.2 points worse than last year, reflecting consider-
Freedom Trend
73
able declines in half of the 10 economic freedoms, including
72
trade freedom, the management of government spending,
and investment freedom. Although Botswana has registered
71
the fourth-largest score drop in the 2015 Index, it remains the
second-freest economy in the Sub-Saharan Africa region, and
70
its overall score is well above the regional and world averages.
A significant increase in the trade-weighted tariff rate has 69
resulted in a decline in Botswana’s trade freedom score. This
increase, along with deterioration in the management of pub- 68
lic spending, has moved Botswana out of the “mostly free”

67
category.
2011 2012 2013 2014 2015
Nonetheless, Botswana’s scores on many of the 10 economic
freedoms are consistently among the region’s highest. The
level of corruption is the lowest in Africa. An independent Country Comparisons
judiciary enforces contracts effectively and protects property
rights, buttressing competitiveness. Country 69.8
BACKGROUND: The Botswana Democratic Party has gov- World

60.4
erned this multi-party democracy since independence from Average
Britain in 1966. Ian Khama assumed the presidency in 2008 Regional
upon his predecessor’s resignation, won a five-year term in Average 54.9
2009, and won a second term in October 2014. Gomolemo
Motswaledi, head of the opposition Botswana Movement for Free
Economies 84.6
Democracy and vice president of the opposition Umbrella for
0 20 40 60 80 100
Democratic Change coalition, died in a car crash in July 2014,
increasing tensions in the run-up to the fall elections. With
abundant natural resources and a market-oriented economy,
Botswana has Africa’s highest sovereign credit rating. Dia- Quick Facts
monds account for one-third of GDP (about US$3.3 billion), Population: 2.1 million
and the diamond industry has transformed Botswana into a GDP (PPP): $34.1 billion
middle-income country. In an attempt to diversify the econ- 3.9% growth in 2013
omy through tourism, Botswana has focused on conservation 5-year compound annual growth 2.8%
and developing extensive nature preserves. Botswana has one $16,377 per capita
of the world’s highest HIV/AIDS infection rates but is also Unemployment: 18.4%
among Africa’s leaders in combating the disease. Inflation (CPI): 5.8%
135
BOTSWANA (continued)
1–Year

0 20 40 60 80 100
Although Botswana continues to be rated Africa’s least corrupt country, there are almost no
restrictions on the private business activities of public servants (the president is a large stake-
holder in the tourism sector), and political ties often play a role in awarding government jobs
and tenders. The legal system is sufficient to enforce secure commercial dealings, but the pro-
cess is lengthy and time-consuming.

0 20 40 60 80 100
Other taxes include a sales tax, a value-added tax, and a property tax. The overall tax burden
equals 30.7 percent of GDP. Public expenditures amount to 35.7 percent of domestic income,
and public debt equals 16 percent of the domestic economy. A sovereign wealth fund helps to
ease fiscal cycles.
REGULATORY Business Freedom 66.8 82nd –1.7

Monetary Freedom 73.9 122nd +1.5
0 20 40 60 80 100
A more streamlined licensing process has eased business start-up procedures, but the overall
pace of reform has slowed. Employment regulations are moderately flexible, and the non-sal-
ary cost of hiring a worker is relatively low. The inefficient agricultural sector is highly subsi-
dized by the government, which also influences prices through state-owned enterprises and
service providers.

0 20 40 60 80 100
Botswana’s average tariff rate is 6.4 percent. Importing goods can be costly. There are some lim-
its on land sales to foreign investors. Botswana’s competitive banking sector is one of Africa’s
most advanced. Credit is allocated on market terms, although the government provides some
subsidized loans. The government has abolished exchange controls, and the Botswana Stock
Exchange is growing.


BRAZIL
50
25 75
Least Most
free 0 100 free
Bworse
razil’s economic freedom score is 56.6, making its econo-
my the 118th freest in the 2015 Index. Its score is 0.3 point
than last year, reflecting declines in half of the 10 eco-
Freedom Trend
59
nomic freedoms including investment freedom, the manage-
ment of government spending, and monetary freedom. Brazil
is ranked 21st out of 29 countries in the South and Central 58
America/Caribbean region, and its overall score is below the
world average.
57
Over the past five years, Brazil’s economic freedom has
advanced by less than 0.5 point. Improvements in financial
freedom and freedom from corruption have been largely 56
offset by deteriorations in the area of regulatory efficiency,
including business freedom and labor freedom.
55
The negative economic impact of stagnant economic freedom 2011 2012 2013 2014 2015
has largely been masked by strong growth driven by high com-
modity prices over the past decade, but a deteriorating inter-
national environment and diminished growth expectations Country Comparisons
have brought these structural issues to the forefront. More
broad-based and consistent reforms will be needed to guar- Country 56.6
antee long-term economic development.
World
BACKGROUND: Preparations for the 2014 World Cup and Average 60.4
2016 Rio Olympic games have tested President Dilma Rous-
seff ’s government. Public discontent was reflected in the Regional
Average 59.7
unexpectedly strong showing by Socialist Party candidate
Marina Silva, but Rousseff was re-elected to a second term Free
84.6
in October 2014. Brazil is spending heavily to host marquee Economies
sporting events, but Brazilians resent the fact that they are 0 20 40 60 80 100
left to contend with poor public services, antiquated and
insufficient infrastructure, high taxes, inflation, corruption,
and sluggish economic growth. Brazil’s “Bolsa Família,” a Quick Facts
conditional cash transfer program for the poor, has helped Population: 198.3 million
the government to win support in some sectors. Brazil is the GDP (PPP): $2.4 trillion
world’s seventh-largest economy, and its population of almost 2.3% growth in 2013
200 million is heavily concentrated on the Atlantic coast. The 5-year compound annual growth 2.6%
middle class is growing, and millions have been lifted out of $12,221 per capita
poverty, but government intervention in the economy con- Unemployment: 6.6%
tinues to cause the misallocation of capital and limit mobility, Inflation (CPI): 6.2%
fueling a sense of injustice. FDI Inflow: $64.0 billion
137
BRAZIL (continued)
1–Year

0 20 40 60 80 100
Public discontent about new state-funded World Cup stadiums while public services remain
deficient is reflected in a 2014 survey, which indicates that 85 percent of Brazilians disapprove
of President Rousseff’s policies on corruption and crime. The judiciary is inefficient and sub-
ject to political and economic influence. The court system is generally overburdened, and con-
tract disputes can be lengthy and complex.

SIZE Government Spending 50.9 131st –3.2
0 20 40 60 80 100
The top individual income tax rate is 27.5 percent. The top corporate tax rate of 34 percent
includes a 15 percent corporate tax, a corporate surtax, and a 9 percent social contributions tax
on net profits. There are other federal, state, and municipal taxes. The tax burden is equivalent
to 35.3 percent of domestic income. Public spending equals 40.4 percent of GDP, and public
debt amounts to 66 percent of the economy.

Monetary Freedom 69.4 153rd –0.5
0 20 40 60 80 100
Progress in reforming the regulatory framework has been uneven. Bureaucratic hurdles
include lengthy processes for launching a business and obtaining permits. The non-salary cost
of employing a worker adds to the cost of doing business, and labor regulations remain strin-
gent. Inflation has increased steadily since 2011, and the government has imposed economi-
cally distortionary price controls and subsidies.

0 20 40 60 80 100
Brazil’s average tariff rate is 7.7 percent. The government has worked to improve customs pro-
cedures, but non-tariff barriers deter imports of goods and services. Foreign investment in avia-
tion, insurance, and other sectors is limited. The financial sector is diversified and competitive,
but the state’s role remains significant. State-owned banks control over a quarter of assets and
direct loans to certain preferred sectors.

Property Rights 0 Fiscal Freedom –8.3 Business Freedom –1.4 Trade Freedom +13.2
Freedom from –8.0 Government –23.5 Labor Freedom –12.5 Investment Freedom 0

Bandar Seri Begawan
BRUNEI
50
25 75
Least Most
free 0 100 free
Bis essentially
runei’s economic freedom score is 68.9, making its econ-
the same as last year’s, with improvements
Freedom Trend
71
in freedom from corruption, monetary freedom, and labor
freedom counterbalanced by declines in property rights, fis-
70
cal freedom, and the management of public spending. Bru-
nei is ranked 10th out of 42 countries in the Asia–Pacific
region, and its overall score is higher than the regional and
69
world averages.
Brunei was graded in the Index for the first time in 2014 and
continues to perform competitively in most aspects of eco- 68
nomic freedom. Relatively high market openness facilitates
integration into the global economy, particularly in the oil
67
and natural gas sectors. Macroeconomic stability has been a
staple of development, which has been supported by a well- 2011 2012 2013 2014 2015
developed legal system, secure property rights, and a commit-
ment to investment. Country Comparisons
Improving access to private-sector financing remains critical
if the government wishes to diversify away from the oil and Country 68.9
gas industry. The small financial sector, largely insulated from
the global financial crisis, has seen a boom in Islamic finance World
Average 60.4
in recent years. Streamlined investment rules and regulations
would improve openness and encourage economic growth. Regional
58.8
Average
BACKGROUND: The Sultan of Brunei is prime minister, min-
ister of defense, and minister of finance. He is advised by Free
Economies 84.6
several councils, including a Legislative Council and Privy
0 20 40 60 80 100
Council, which he appoints. Imposition of a new Sharia Penal
Code, which includes harsh penalties (including death) for
a variety of offenses, in 2014 generated widespread interna-
tional criticism. The oil and gas industry, which accounts for Quick Facts
over half of GDP and 90 percent of government revenues, Population: 0.4 million
funds a sizable welfare state, and most of the population GDP (PPP): $21.7 billion
works directly for the government. Brunei has extremely low –1.2% growth in 2013
manufacturing capacity and imports most of its manufactured 5-year compound annual growth 0.8%
goods and food. The government is seeking integration into $53,431 per capita
the global economy as a member of the Trans-Pacific Partner- Unemployment: 3.7%
ship negotiations. Inflation (CPI): 0.4%
139
BRUNEI (continued)
1–Year

0 20 40 60 80 100
Human rights concerns arose in 2014 as the government began to implement Shari’ah (Islamic)
law in Brunei. Protection of private property is weak. Only citizens of Brunei may purchase
land; foreign firms must have a local partner. The constitution does not provide for an inde-
pendent judiciary, and the sultan wields broad powers. No direct legislative elections have been
held since 1962.

0 20 40 60 80 100
Brunei has no income tax, and the top corporate tax rate is 20 percent for most companies. The
corporate tax rate for oil and gas companies is 55 percent. Other taxes include a social security
tax. The overall tax burden is equivalent to 30 percent of gross domestic output. Government
spending equals around 35 percent of the domestic economy, and public debt is below 3 percent
of GDP.

EFFICIENCY Labor Freedom 96.9 2nd +0.4
0 20 40 60 80 100
Incorporating new businesses takes more than three months, but there is no minimum capital
requirement. Licensing requirements consume 17 procedures and 88 days on average. A sup-
ply-and-demand imbalance persists in the labor market. The public sector remains the main
source of employment. The government provides large price-distorting subsidies for nearly
everything the average citizen needs.
OPEN Trade Freedom 81.8 61st 0

0 20 40 60 80 100
Brunei’s average tariff rate is 4.1 percent. Non-tariff barriers are low, but numerous state-
owned enterprises affect trade and investment. There is no foreign ownership of land. The
government restricts foreign investment in certain sectors of the economy. The small but grow-
ing financial sector is dominated by commercial banks, which remain well-capitalized. Despite
some progress, the banking sector lacks competition.

Property Rights –5.0 Fiscal Freedom –3.2 Business Freedom +0.1 Trade Freedom 0
Freedom from +6.7 Government –2.5 Labor Freedom +0.4 Investment Freedom 0

BULGARIA
50
25 75
Least Most
free 0 100 free
B1.1 points
ulgaria’s economic freedom score is 66.8, making its econ-
better than last year due to improvements in invest-
Freedom Trend
68
ment freedom, freedom from corruption, and monetary free-
dom that outweigh declines in business freedom and labor 67
freedom. Bulgaria is ranked 26th out of 43 countries in the
Europe region, and its overall score is above the world aver-
66
age but below the regional average.
Over the past five years, economic freedom in Bulgaria has 65
advanced by nearly 2.0 points, led by a more open invest-
ment environment, improvements in the fiscal outlook,
64
diminished perceptions of corruption, and low inflation.
Gains were recorded in six of the 10 factors, led by invest-
ment and monetary freedom, which advanced 10 points and 63
7.7 points, respectively. 2011 2012 2013 2014 2015
Bulgaria has taken steps to control budget deficits and pub-

lic debt more effectively, but further reform is necessary Country Comparisons
to achieve broad-based economic freedom and growth. In
particular, institutional reforms must promote judicial Country 66.8
independence and tackle corruption in order to solidify the
foundations of economic freedom and ensure progress toward World
60.4
greater prosperity. Average
BACKGROUND: Bulgaria joined the European Union in Regional

Average 67.0
January 2007. Former Finance Minister Plamen Oresharski
became prime minister in May 2013 at the head of a Social- Free
84.6
ist Party–led coalition. In June 2014, amid protests against Economies
low standards of living, high energy costs, and corruption, 0 20 40 60 80 100
President Rosen Plevneliev announced that he was dissolving
Parliament because of banking instability. Tourism, informa-
tion technology and telecommunications, agriculture, phar- Quick Facts
maceuticals, and textiles are leading industries. Despite EU Population: 7.2 million
protests, Bulgaria has refused to stop work on its section of GDP (PPP): $105.0 billion
Russia’s South Stream pipeline and the Azerbaijan/Turkey- 0.9% growth in 2013
backed Trans-Anatolian Natural Gas pipeline. Sluggishness 5-year compound annual growth –0.4%
in the economy has been exacerbated by the EU crisis and $14,499 per capita
internal instability. Bulgaria remains one of the EU’s poorest Unemployment: 13.1%
countries. Prospects for adoption of the euro have declined. Inflation (CPI): 0.4%
141
BULGARIA (continued)
1–Year

0 20 40 60 80 100
Corrupt and inconsistent public administration, a weak judiciary, and organized crime con-
tinue to hamper Bulgaria’s economic prospects. Human trafficking, narcotics, and contraband
smuggling contribute to corruption. In May 2014, the parliament approved a five-year residen-
cy requirement for foreign purchase of agricultural land. The judicial system does not enforce
property rights effectively.

SIZE Government Spending 64.5 100th 0
0 20 40 60 80 100
Bulgaria’s top individual and corporate income tax rates are 10 percent. Other taxes include
a value-added tax and an estate tax. Total tax revenue equaled 26.5 percent of gross domestic
product in the most recent year. Public expenditures account for 34.4 percent of GDP, and
public debt remains under 18 percent of the size of the economy.

0 20 40 60 80 100
The overall regulatory framework supports entrepreneurial activity. Launching a business is
less time-consuming, and the minimum capital requirement has been eliminated. However,
obtaining licenses still takes more than three months. The labor market needs further reform.
Although most prices are determined by market forces, rising and unevenly distributed agri-
cultural subsidies from the European Union have distorted land values.

0 20 40 60 80 100
EU is relatively open to external trade. Bulgaria’s regulatory and court systems can be a hurdle
for foreign investors. The financial sector, dominated by banks, has benefited from increased
competition. A June 2014 run on deposits at Corpbank prompted the central bank to seize
control of the bank and freeze its operations.


BURKINA FASO
50
25 75
Least Most
free 0 100 free
Bscoreurkina Faso’s economic freedom score is 58.6, making its

economy the 102nd freest in the 2015 Index. Its overall
has decreased by 0.3 point since last year, with improve-
Freedom Trend
62
ments in half of the 10 economic freedom, including freedom
from corruption and investment freedom, offset by declines in 61
business freedom and property rights. Burkina Faso is ranked
13th out of 46 countries in the Sub-Saharan Africa region, and 60
its overall score is above the regional average.
Over the past five years, Burkina Faso’s economic freedom 59
has been declining. Since 2011, when it registered its highest
economic freedom score ever, Burkina Faso has fallen back to 58
the “mostly unfree” category. Improvements in investment
freedom, labor freedom, and monetary freedom have been
57
counterbalanced by significant declines in business freedom,
financial freedom, and trade freedom. 2011 2012 2013 2014 2015
Deeper structural and institutional reforms are critically

needed to maintain stability and ensure long-term economic Country Comparisons
development. Systemic weaknesses in the protection of prop-
erty rights, exacerbated by an inefficient judicial system that Country 58.6
remains vulnerable to political influence, hinder the develop-
ment of a more vibrant entrepreneurial environment. World
Average 60.4
BACKGROUND: President Blaise Compaoré had ruled the Regional
former French colony since seizing power in 1987, but was Average 54.9
ousted in a coup in late 2014. The country now faces a year
of political transition. In 2013, Burkina Faso sent 500 troops Free
Economies 84.6
to Mali to help secure the northern half of the country from
0 20 40 60 80 100
Tuareg separatists and groups linked to al-Qaeda. As many
as 33,000 Malian refugees remain in Burkina Faso, despite
efforts to repatriate the refugees back to Mali. Burkina Faso
is the world’s third-poorest country, with an estimated pov- Quick Facts
erty rate of 46 percent, and relies heavily on cotton and gold Population: 16.8 million
exports. Approximately 90 percent of the population depends GDP (PPP): $26.6 billion
on subsistence agriculture. Ongoing problems include infla- 6.8% growth in 2013
tion and endemic corruption. 5-year compound annual growth 6.4%
$1,585 per capita
Unemployment: 3.1%
143
BURKINA FASO (continued)
1–Year

LAW Freedom from Corruption 38.0 83rd +6.7
0 20 40 60 80 100
Burkina Faso, one of the world’s poorest and least developed countries, has never experienced
a peaceful transition of power. President Compaoré, who seized power in 1987, was ousted in
a coup in 2014. Corruption is widespread, especially in public procurement, and the judiciary
is weak. Members of the presidential family and the ruling party have controlled key econom-
ic activities.

0 20 40 60 80 100
The top individual income and corporate tax rates are 27.5 percent. Other taxes include a val-
ue-added tax. The overall tax burden is equivalent to 15.8 percent of gross domestic product.
Government expenditures make up 25.9 percent of the domestic economy, and public debt
amounts to 33 percent of total domestic output.

0 20 40 60 80 100
The inefficient business environment continues to impede broader economic development.
The minimum capital required to start a business exceeds three times the level of average
annual income. Getting necessary permits takes more than 100 days. In the absence of a well-
functioning labor market, informal labor activity persists in many sectors. The state subsidizes
fuels and electricity and maintains price supports for cotton.
OPEN Trade Freedom 68.2 141st +0.4

0 20 40 60 80 100
Burkina Faso has an average tariff rate of 8.4 percent. Importing goods is time-consuming and
expensive. The government must compensate investors in the event of expropriation of prop-
erty. The financial system remains underdeveloped. Banks have continued to increase their
domestic assets, and there are several microfinance institutions, but overall access to credit
remains limited.

Freedom from +28.0 Government –4.5 Labor Freedom +14.0 Investment Freedom –5.0

BURMA
50
25 75
Least Most
free 0 100 free
Bbetter
urma’s economic freedom score is 46.9, making its econo-
my the 161st freest in the 2015 Index. Its score is 0.4 point
than last year due to improvements in five of the 10
Freedom Trend
51
economic freedoms, including freedom from corruption,
48
labor freedom, and monetary freedom, that outweigh a sub-
stantial decline in the control of government spending. Burma
45
is ranked 38th out of 42 countries in the Asia–Pacific region,
and its overall score is much lower than the regional average.
42
Over the past five years, economic freedom in Burma has
advanced by about 9.0 points, the second-best improvement 39
among graded countries. From a low base, Burma has made
considerable strides in liberalizing its economy and opening 36
itself to the outside world. Gains in eight of the 10 economic

33
freedoms include greater price stability and double-digit
improvements in labor freedom and investment freedom. 2011 2012 2013 2014 2015
Nevertheless, Burma remains a “repressed” economy due

to years of state intervention, poor institutional structures, Country Comparisons
and autarkic investment and financial regimes. To solidify
and build on the past half-decade’s gains, the government Country 46.9
must continue its reform agenda with particular emphasis on
stamping out corruption, enforcing property rights, creating World
Average 60.4
an independent judiciary, and further opening up the econo-
my to the international marketplace. Regional
58.8
Average
BACKGROUND: Burma has been a military dictatorship
since 1962 but since 2010 has pursued limited political and Free
Economies 84.6
economic reform, including releases of political prisoners,
0 20 40 60 80 100
relaxation of media censorship, and exchange rate reform.
Sectarian violence and continued persecution of Muslim and
Christian minorities remain problems. National League for
Democracy leader and Nobel laureate Aung San Suu Kyi was Quick Facts
released from jail in November 2010 and won a seat in par- Population: 64.9 million
liament in 2012. The United States and the European Union GDP (PPP): $113.0 billion
eased some sanctions in response to Burma’s limited changes, 7.5% growth in 2013
but state-sponsored repression has led many to urge caution 5-year compound annual growth 6.2%
before lifting all sanctions. Heavy government intervention $1,740 per capita
in the economy has made Burma one of the world’s poor- Unemployment: 3.5%
est countries. Inflation (CPI): 5.8%
145
BURMA (continued)
1–Year

0 20 40 60 80 100
Burma’s emerging but deeply flawed democratic reform process will likely lose momentum in
the run-up to the 2015 elections. Corruption is endemic. Due to a complex and capricious regu-
latory/legal environment and extremely low government salaries, rent-seeking is ubiquitous.
Rule of law and protection of property rights are weak. Judicial decisions are often influenced
by government interference, personal relationships, or bribes.

0 20 40 60 80 100
Burma’s top individual income tax rate is 20 percent, and its top corporate tax rate is 30 per-
cent. Commercial and capital gains taxes add to government revenue, but the overall tax bur-
den remains less than 5 percent of gross domestic product. Public expenditures amount to
27.2 percent of the domestic economy, and public debt is equal to around 43 percent of total
domestic output.

0 20 40 60 80 100
Significant bureaucratic impediments to entrepreneurial activity and economic development
persist. The labor market remains underdeveloped, and enforcement of the labor codes is inef-
fective. The informal sector continues to be an important source of employment. Inflation is
expected to remain elevated, led by higher prices for rice and other staple foods and electricity.

0 20 40 60 80 100
Burma’s average tariff rate is 3.2 percent, and some imports face additional restrictions. The
government reviews new foreign investment, and state-owned enterprises dominate some sec-
tors of the economy. The financial system remains underdeveloped, and the banking sector
is dominated by state-owned banks. Most loans are directed to government-led projects, and
access to credit remains very poor.


BURUNDI
50
25 75
Least Most
free 0 100 free
Bis 2.3urundi’s economic freedom score is 53.7, making its econ-

points better than last year, reflecting improvements in
Freedom Trend
56
six of the 10 economic freedoms including the management
of government spending, labor freedom, and freedom from 54
corruption. Burundi is ranked 27th out of 46 countries in the
Sub-Saharan Africa region, and its score is worse than the
52
world average.
Over the past five years, economic freedom in Burundi has 50
advanced by 4.1 points. Business freedom, control of govern-
ment spending, and investment freedom have improved by
48
5.0 points or more. This year, Burundi has achieved its highest
economic freedom score ever, registering the seventh-biggest
improvement in the 2015 Index. 46
2011 2012 2013 2014 2015
Despite these improvements, Burundi remains in the ranks
of the “mostly unfree.” The lack of capable public institutions
and the weak rule of law continue to undermine the imple- Country Comparisons
mentation of other critical reforms. Tariff and non-tariff bar-
riers, coupled with burdensome investment regulations, still Country 53.7
hamper development of a more dynamic private sector and
interfere with diversification of the economic base. World
60.4
Average
BACKGROUND: The 1993 assassination of Hutu President
Melchior Ndadaye sparked a civil war between Hutus and Regional
Average 54.9
Tutsis that also significantly influenced the Hutu-led 1994
Rwandan genocide. Negotiations mediated by South Africa Free
84.6
led to a power-sharing government in 2001. Pierre Nku- Economies
runziza, elected president by the National Assembly under 0 20 40 60 80 100
a new constitution in 2005, was re-elected in 2010 in a dis-
puted vote. His regime’s repressive policies and attacks on the
opposition and media have led to fears of renewed violence. Quick Facts
Burundi is active in the African Union’s AMISOM peacekeep- Population: 9.0 million
ing mission in Somalia and deployed troops to the Central GDP (PPP): $5.8 billion
African Republic as part of an international effort to prevent 4.5% growth in 2013
civil war in 2014. The economy is dominated by subsistence 5-year compound annual growth 4.3%
agriculture, and half of the population lives below the poverty $642 per capita
line. Corruption is endemic. Unemployment: 8.5%
147
BURUNDI (continued)
1–Year

0 20 40 60 80 100
Land-locked Burundi is one of the world’s poorest nations and one of the most corrupt coun-
tries in sub-Saharan Africa. Government procurement is conducted nontransparently amid
allegations of cronyism, and customs officials reportedly extort bribes. The judiciary is nomi-
nally independent, but judges are subject to undue political pressure. Private property is vul-
nerable to government expropriation and armed banditry.
GOVERNMENT Fiscal Freedom 73.5 123rd 0

0 20 40 60 80 100
Burundi’s top individual and corporate income tax rates are 35 percent. Other taxes, including
a value-added tax, add to government revenue that equates to 14.1 percent of domestic output.
Foreign assistance also helps to support government expenditures that equal about 35.9 per-
cent of gross domestic product. Public debt equals 32 percent of the domestic economy.

0 20 40 60 80 100
Reform measures in recent years have streamlined the procedures for incorporating a busi-
ness, but start-ups are discouraged by time-consuming licensing requirements. With the labor
market relatively underdeveloped, the public sector accounts for most formal employment.
The state subsidizes fuel, rations subsidized electricity, and influences other prices through
state-owned enterprises and agriculture-support programs.

0 20 40 60 80 100
Burundi’s average tariff rate is 6.4 percent. Importers may face customs delays, and importing
goods is expensive. Although the country is relatively open to foreign investment, corruption
may be a problem. The underdeveloped financial sector remains dominated by banks that are
plagued by nonperforming loans and inadequate capitalization. Much of the population relies
on informal lending.

Freedom from +11.0 Government –20.2 Labor Freedom +14.4 Investment Freedom +30.0

CABO VERDE
50
25 75
Least Most
free 0 100 free
Cis 0.3abo Verde’s economic freedom score is 66.4, making its

economy the 60th freest in the 2015 Index. Its overall score
point better than last year due to advancements in mon-
Freedom Trend
68
etary stability and the rule of law as measured by property
rights and freedom from corruption. Cabo Verde is ranked 3rd 67
out of 46 countries in the Sub-Saharan Africa region, and its
overall score continues to be much higher than the global and 66
regional averages.
65
Over the past five years, economic freedom in Cabo Verde
has advanced by close to 2.0 points, reflecting broad-based 64
improvements in six of the 10 economic freedoms, including
investment freedom, fiscal freedom, and the protection of 63
property rights. In the 2015 Index, Cabo Verde has recorded
its highest economic freedom score ever, progressing further 62
into the ranks of the “moderately free.” 2011 2012 2013 2014 2015
With macroeconomic stability well maintained and good gov-

ernance firmly in place, Cabo Verde has made notable prog- Country Comparisons
ress in economic growth and development. Its impressive
transition to a more open and flexible economic system has Country 66.4
been facilitated by policies that promote open markets and
regulatory efficiency, buttressed by a transparent legal frame- World
60.4
work that upholds the rule of law. Average
BACKGROUND: Cabo Verde is a stable, multi-party parlia- Regional

Average 54.9
mentary democracy. Prime Minister Jose Maria Neves of the
Independence for Cabo Verde Party took office in 2001 and Free
84.6
was re-elected in 2006 and 2011. Opposition leader Jose Car- Economies
los Fonseca of the Movement for Democracy won presiden- 0 20 40 60 80 100
tial elections in 2011. The Cabo Verde islands have few natural
resources. Severe droughts in the 20th century caused the
deaths of 200,000 people and prompted heavy emigration. Quick Facts
As a result, Cabo Verde’s expatriate population is larger than Population: 0.5 million
its domestic population. Services dominate the economy, GDP (PPP): $2.2 billion
and about 82 percent of the country’s food is imported. Eco- 0.5% growth in 2013
nomic reforms aim to boost foreign investment and diversify 5-year compound annual growth 1.1%
the economy. $4,338 per capita
Unemployment: 8.6%
149
CABO VERDE (continued)
1–Year
RULE OF Property Rights 75.0 25th +5.0

0 20 40 60 80 100
Although Cabo Verde is among Sub-Saharan Africa’s least corrupt countries, the government
launched a new program in 2014 to combat “serious ethical problems and strong indication of
corruption” in the civil service. Private property is reasonably well protected. The constitu-
tional provision for an independent judiciary is generally respected, but the judicial system is
inefficient, and the case backlog causes significant delays.

0 20 40 60 80 100
Other taxes include a value-added tax. The overall tax burden is equal to 18 percent of the
domestic economy. Public expenditures equal 32.7 percent of gross domestic product, and pub-
lic debt is nearly equivalent to the total size of the economy.

0 20 40 60 80 100
Steps to introduce greater regulatory efficiency have been implemented in recent years. It
takes seven procedures and 10 days on average to incorporate a business, and no minimum cap-
ital is required. Despite reform efforts, labor market rigidity persists. The market determines
most prices, but the government subsidizes electricity and water as well as a state-owned, loss-
making airline.

0 20 40 60 80 100
Cabo Verde’s average tariff rate is 10.2 percent, and non-tariff barriers are relatively low for
the region. Domestic and foreign investors are generally treated equally under the law. Banks
dominate the small financial sector. They remain well-capitalized, and the number of nonper-
forming loans is decreasing. Small and medium-sized companies have access to credit that is
allocated on market terms, but capital markets are not fully developed.

Freedom from +28.0 Government +37.0 Labor Freedom –14.8 Investment Freedom 0

CAMBODIA
50
25 75
Least Most
free 0 100 free
Cessentially
ambodia’s economic freedom score is 57.5, making its econ-
unchanged from last year, with improvements in
Freedom Trend
60
labor freedom and freedom from corruption largely offset by
declines in business freedom and property rights. Cambodia
is ranked 23rd out of 42 countries in the Asia–Pacific region, 59
and its overall score is lower than the regional average.
Over the past five years, economic freedom in Cambodia has 58
stagnated, with potential gains from a liberalized labor market
and a small opening to international markets undermined by
a weakening business environment, looser fiscal policy, and a 57
decline in property rights.
Little progress has been made in tackling corruption, which is 56
by far the most serious threat to advancing economic freedom 2011 2012 2013 2014 2015
in Cambodia. The government must do more to strengthen
the institutional environment underpinning the rule of law,
including improving the judiciary and reinforcing property Country Comparisons
rights. These issues, along with a poor business environment
and government interference in the economy, continue to Country 57.5
undermine the dynamic investment flows enjoyed by region-
al neighbors. World
60.4
Average
BACKGROUND: Between 1975 and 1979, Pol Pot’s Khmer
Rouge regime killed an estimated 3 million Cambodians. The Regional
Average 58.8
Khmer Rouge Tribunal, established under an agreement with
the United Nations to prosecute senior officials involved in Free
84.6
the atrocities, has been slow to deliver justice. Though it is Economies
nominally a democracy, Cambodia has been ruled by former 0 20 40 60 80 100
Khmer Rouge member and Vietnamese puppet Prime Min-
ister Hun Sen since 1993. The 2013 election nearly unseated
Hun Sen and remains hotly contested by the opposition party. Quick Facts
In 2012, Cambodia took its turn chairing the Association of Population: 15.4 million
Southeast Asian Nations, drawing increased international GDP (PPP): $39.7 billion
attention to and criticism of its undemocratic policies and 7.0% growth in 2013
close ties to China. Cambodia’s economy depends heavily on 5-year compound annual growth 5.5%
tourism and apparel assembly. $2,576 per capita
Unemployment: 0.3%
151
CAMBODIA (continued)
1–Year

0 20 40 60 80 100
The perverse effects of decades of international intervention and foreign aid have contributed
to rampant corruption in Cambodia. Three new judicial “reform” laws approved in 2014 will
further entrench the ruling party. Weak and inconsistent courts do not protect private property
effectively. Investments in many economic sectors frequently are accompanied by land grabs
by powerful politicians, bureaucrats, and military officers.

0 20 40 60 80 100
The top individual and corporate income tax rates are 20 percent. Businesses in the petroleum
and gas sectors are assessed at a 30 percent rate. Other taxes include a value-added tax and an
excise tax. Total tax revenue equals 12.2 percent of GDP. Government expenditures amount
to around 20 percent of the domestic economy, and public debt is equivalent to 28 percent of
total domestic output.

0 20 40 60 80 100
Red tape and inconsistent enforcement of the laws hinder the development of a critically need-
ed private sector. The formal labor market remains distorted by state intervention that sets
public-sector wages and influences wage-setting in the market. Enforcement of the labor code
remains ineffective. Although most prices are determined by the market, the government has
been increasing subsidies for fuel.

0 20 40 60 80 100
Cambodia has an average tariff rate of 8.9 percent. Non-tariff barriers at the border further
restrict trade. The slow-moving bureaucracy and court system present challenges for foreign
investors. Development of the financial sector has progressed gradually, although large state
banks have recorded notable growth and continue to dominate the banking system.


CAMEROON
50
25 75
Least Most
free 0 100 free
Cscoreameroon’s economic freedom score is 51.9, making its

is 0.7 point worse than last year, with declines in labor
Freedom Trend
54
freedom, business freedom, property rights, and trade free-
dom outweighing improvements in monetary freedom and
53
freedom from corruption. Cameroon is ranked 35th out of
46 countries in the Sub-Saharan Africa region, and its overall
score is lower than the regional average.
52
Over the past half-decade, economic freedom in Cameroon
has stagnated. The country made progress in a four of the 10
economic freedoms—freedom from corruption, fiscal free- 51
dom, labor freedom, and monetary freedom—but registered
no improvements in opening markets to integrate more fully
50
into the global economy.
2011 2012 2013 2014 2015
Although Cameroon has risen from the ranks of the
“repressed” where it was over a decade ago, it has made little
headway in capitalizing on reform momentum, and growth Country Comparisons
from an oil and commodity boom has lessened pressure for
needed changes. Institutional reforms to tackle nepotism and Country 51.9
cronyism and to promote an independent judiciary remain
vital for laying the foundations of economic freedom and World
Average 60.4
spurring the broad-based growth that is needed to deal with
high rates of poverty. Regional
54.9
Average
BACKGROUND: President Paul Biya has held office since
1982 and was re-elected in October 2011 for another seven- Free
Economies 84.6
year term in an election that was marred by irregularities.
0 20 40 60 80 100
Cameroon is rife with corruption and often accused of failing
to ensure equality under the law. The economy is dependent
on commodity exports and subject to burdensome regula-
tion. Economic growth was seriously affected by the global Quick Facts
economic slowdown. Cameroonian security forces are at war Population: 22.0 million
with Nigerian Islamist terrorist group Boko Haram, which GDP (PPP): $53.3 billion
has attacked and infiltrated villages along the 1,800-km Cam- 4.6% growth in 2013
eroon–Nigerian border. Cameroon currently hosts approxi- 5-year compound annual growth 3.7%
mately 35,000 refugees from the Central African Republic. $2,423 per capita
Unemployment: 4.0%
153
CAMEROON (continued)
1–Year

0 20 40 60 80 100
In power since 1982, President Paul Biya’s unwieldy government includes over 50 ministers and
secretaries of state, mostly from his Beti ethnic group. Cronyism and corruption are endemic.
Revenues from oil, gas, and mining are not openly reported. Protection of real property rights
is weak, and the judicial system is slow, inefficient, and vulnerable to political interference.
Intellectual property rights are routinely violated.

SIZE Government Spending 87.8 21st +1.8
0 20 40 60 80 100
The top individual income tax rate is 35 percent, and the top corporate tax rate is 38.5 percent
(a 35 percent tax rate and 10 percent surcharge). Other taxes include a value-added tax and
inheritance taxes. The overall tax burden amounts to 11.0 percent of gross domestic output.
Public expenditures equal 20.2 percent of GDP, and public debt is equal in size to 19 percent of
the domestic economy.

0 20 40 60 80 100
Bureaucracy and a lack of transparency make business formation costly and burdensome. Busi-
ness start-up has been streamlined, but obtaining necessary licenses remains time-consuming.
Labor regulations are rigid, and restrictions on work hours are stringent. In 2014, the govern-
ment reduced subsidies for most energy products to stem the growth of budget deficits that
had undermined public infrastructure investment.

0 20 40 60 80 100
Cameroon’s average tariff rate is 12.7 percent. As with other members of the Central African
Economic and Monetary Community, importing goods may be costly. Foreign investors may
face bureaucratic hurdles. The financial sector remains relatively resilient and continues to
expand. Despite increased market competition, however, state-owned financial institutions
dominate the sector and influence lending.


CANADA
50
25 75
Least Most
free 0 100 free
C1.1 points
anada’s economic freedom score is 79.1, making its econ-
lower than last year, with modest improvements in
Freedom Trend
82
monetary freedom and the control of government spending
outweighed by declines in labor freedom and freedom from
81
corruption. Canada continues to be the freest economy in the
North America region.
Over the past five years, Canada’s economic freedom score has 80
declined by 1.7 points, highlighting a trend that has pushed
the country into the “mostly free” category for the first time
since 2007. Score declines have been spread over five of the 10 79
economic freedoms, with an increase in the level of perceived
corruption contributing the most to the moderate slide in
78
Canada’s score.
2011 2012 2013 2014 2015
Nonetheless, Canada remains one of the world’s most stable
business climates and an attractive investment destination.
With the world’s second-best property rights regime buttress- Country Comparisons
ing openness to global commerce, Canada has a solid founda-
tion of economic freedom. The financial sector is competitive, Country 79.1
and its efficiency is supported by prudent lending practices
and sound oversight. World
Average 60.4
BACKGROUND: Prime Minister Stephen Harper and his Con- Regional
servative Party have governed since 2011 with a strong parlia- Average 74.0
mentary majority of 166 out of 308 seats. With 103 seats, the
social democratic New Democratic Party has become the lead- Free
Economies 84.6
ing opposition party for the first time. The next election must
0 20 40 60 80 100
be held no later than October 19, 2015, when 30 new seats will
be added to the House of Commons to increase representa-
tion of provinces with growing populations. Canada’s diversity
and geographic size are reflected in a democratic system that Quick Facts
provides substantial autonomy to its 13 provinces and terri- Population: 35.1 million
tories. The 20 percent of Canadians for whom French is the GDP (PPP): $1.5 trillion
native language are heavily concentrated in Quebec. Canada is 2.0% growth in 2013
a major exporter of oil, minerals, automobiles, manufactured 5-year compound annual growth 1.4%
goods, and forest products, and its economy is closely linked $43,472 per capita
to the U.S. economy. Unemployment: 7.1%
155
CANADA (continued)
1–Year

0 20 40 60 80 100
Canada’s robust economic freedom rests on a judicial system with an impeccable record of
independence and transparency. The government prosecutes corruption vigorously. Private
property is well protected. In 2014, the Supreme Court for the first time confirmed an indig-
enous land title. Enforcement of contracts is very secure, and expropriation is highly unusual.
Protection of intellectual property rights is consistent with world standards.

0 20 40 60 80 100
Canada’s top federal individual income tax rate is 29 percent, and its top corporate tax rate is
15 percent. Other taxes include a property tax and a value-added tax. The overall tax burden is
equivalent to 30.7 percent of gross domestic product. Government expenditures amount to 41.5
percent of domestic output, and public debt is equal to 89 percent of the domestic economy.

0 20 40 60 80 100
With no minimum capital requirement, establishing a business takes only one procedure and
five days, but completing licensing requirements takes over 200 days on average. The labor
market remains relatively flexible, and labor costs are moderate. The government provides
extensive energy and agricultural subsidies and controls virtually all prices for health care
through a mandatory “single-payer” nationalized program.

MARKETS Investment Freedom 80.0 23rd 0
0 20 40 60 80 100
Canada’s average tariff rate is a low 0.8 percent. Canada continues to negotiate free trade agree-
ments but restricts dairy imports. Foreign investment in some sectors of the economy, includ-
ing airlines and telecommunications, is regulated. Financial institutions offer a wide range of
services, and credit is readily available on market terms. The banking sector remains stable,
and securities markets are well developed.


CENTRAL AFRICAN REPUBLIC
50
25 75
Least Most
free 0 100 free
45.9
Freedom Trend
T he Central African Republic’s economic freedom score
is 45.9, making its economy the 166th freest in the 2015
Index. Its overall score is 0.8 point lower than last year, with
54
52
modest gains in the rule of law undermined by declines in six
other areas. The CAR is ranked 41st out of 46 countries in the 50
Sub-Saharan Africa region, and its overall score is lower than
the regional average. 48
Over the past five years, economic freedom in the CAR has
46
declined by 3.4 points, with score decreases in the past two
years wiping out steady improvements earlier in the decade.
44
Score declines in eight of the 10 economic freedoms indicate
deteriorations across such key policy areas as market open- 42
ness and regulatory efficiency. In the 2015 Index, the CAR has
2011 2012 2013 2014 2015
registered its lowest economic freedom score ever.
The Central African Republic’s overall entrepreneurial envi-
ronment remains severely constrained, burdened by over-
Country Comparisons
regulation that pushes many entrepreneurs into the informal
sector. Poor access to credit and high financing costs further Country 45.9
suppress the development of a vibrant private sector. Since
World
2013, state institutions have collapsed, and the economy has Average 60.4
contracted sharply.
Regional
BACKGROUND: In 2013, Seleka rebels ousted President Fran- Average 54.9
çois Bozizé and seized power under the leadership of Michel
Free
Djotodia. Widespread atrocities carried out by the Seleka mili- Economies 84.6
tia spurred the emergence of the “anti-balaka” militia, com-
0 20 40 60 80 100
prised of Christians opposed to Seleka rule. France sent forces
to the former French colony in December 2013, and a U.N.
peacekeeping force was deployed in September 2014. Djoto- Quick Facts
dia stepped down early in 2014 after failing to stop sectarian
violence and was replaced by interim President Catherine
Samba-Panza. General elections are scheduled for early 2015.
–36.0% growth in 2013
The CAR is one of the world’s least-developed countries. More
than half of the population lives in rural areas and depends on
$542 per capita
subsistence agriculture. The CAR has abundant timber, dia-
Unemployment: 8.8%
monds gold, uranium, and prospects for oil exploration.
157
CENTRAL AFRICAN REPUBLIC (continued)
1–Year

0 20 40 60 80 100
A 2013 coup d’état disrupted the economy and amplified a state of lawlessness, and despite
growing financial and military support, the interim government is struggling to restore stabil-
ity. Corruption remains pervasive. Armed groups are involved in the illicit trade and exploita-
tion of natural resources, especially gold and diamonds, which account for more than half of
export earnings. Protection of property rights is weak.

0 20 40 60 80 100
The Central African Republic’s top individual income tax rate is 50 percent, and its top cor-
porate tax rate is 30 percent. Other taxes include a value-added tax. The overall tax burden
equals 9.8 percent of gross domestic product. Government expenditures equal 16.3 percent of
the domestic economy, and public debt is about half the size of the domestic economy.

0 20 40 60 80 100
Progress in improving the business framework has been slow and uneven. Labor regulations
are not generally enforced, and the labor market remains poorly developed. Most of the popula-
tion is employed outside of the formal sector, primarily in agriculture. Government distortions
of the economy through subsidies and wage/price controls are aggravated by political instabil-
ity that undermines the basic functioning of state institutions.

0 20 40 60 80 100
The Central African Republic’s average tariff rate is 16.3 percent. Imports of products like sugar
face additional restrictions, and exports may be subject to taxation. Political instability contin-
ues to be a serious deterrent to foreign investment. Poor access to credit significantly hinders
private-sector growth. The banking system remains highly dependent on the government and
state-owned companies.


CHAD
50
25 75
Least Most
free 0 100 free
Cpoints
had’s economic freedom score is 45.9, making its economy
the 165th freest in the 2015 Index. Its overall score is 1.4
better than last year, reflecting improvements in five of
Freedom Trend
47
the 10 economic freedoms, particularly in policy areas relat-
ed to regulatory efficiency such as monetary freedom, labor
freedom, and business freedom. Chad is ranked 40th out of 46
score is lower than the regional average.
45
Over the past five years, Chad’s economic freedom has
advanced by 0.6 points, but with a trend that has seen it
bounce between yearly score gains and losses. Score improve- 44
ments have been modest and evenly spread among four of the
10 economic freedoms: freedom from corruption, business
freedom, labor freedom, and monetary freedom. Price stabil- 43
ity has improved the most. 2011 2012 2013 2014 2015
Despite these modest improvements, the state continues to

interfere heavily but ineffectively in the economy, and the Country Comparisons
quality of governance is low. Price controls continue to distort
the markets for essential goods, and poor maintenance of the Country 45.9
rule of law causes uncertainty, corruption, and lax enforce-
ment of property rights. These factors gravely undermine the World
60.4
prospects for long-term economic development that could Average
combat rampant poverty. Regional
Average 54.9
BACKGROUND: President Idriss Déby, who seized power in
1990, won a fourth term in 2011 in a highly dubious election. Free
84.6
President Déby continues to face armed revolt by the oppo- Economies
sition as well as charges of corruption. Security forces foiled 0 20 40 60 80 100
coup plots in 2006, 2008, and 2013. Chad has sent troops to
assist peacekeeping forces in Darfur, the Central African
Republic, and the Democratic Republic of Congo to reduce Quick Facts
cross-border violence and instability. Conflict in eastern Chad Population: 11.0 million
and unrest in Sudan’s Darfur region have created hundreds of GDP (PPP): $28.0 billion
thousands of refugees. In January 2014, Chad began a two- 3.6% growth in 2013
year rotation on the U.N. Security Council. 5-year compound annual growth 6.0%
$2,539 per capita
Unemployment: 8.6%
159
CHAD (continued)
1–Year

0 20 40 60 80 100
Although several high-profile officials were arrested on corruption charges in 2013, Chad
remains one of the world’s most corrupt countries. The president’s inner circle continues to
siphon off the nation’s oil wealth. The rule of law is weak, and most key officials in the consti-
tutionally independent judiciary are named by the president. Protection of private property is
inadequate, and fraud is common in property transactions.

0 20 40 60 80 100
Chad’s top individual income tax rate is the world’s highest: 60 percent. Its top corporate tax
rate is 45 percent. Other taxes include a value-added tax and a property tax. Lax enforcement
results in an overall tax burden of just 5.1 percent of domestic income. Government expendi-
tures equal 23.4 percent of gross domestic product, and public debt equals 30 percent of the
domestic economy.

0 20 40 60 80 100
Burdensome regulations continue to hinder private-sector development. The regulatory sys-
tem lacks transparency and clarity, and regulations are enforced inconsistently. The formal
labor market is underdeveloped. Inflation has fallen, but the state continues to subsidize state-
owned enterprises such as an oil refinery, a tractor assembly plant, and electricity, water, and
cotton companies.
OPEN Trade Freedom 55.2 172nd 0

0 20 40 60 80 100
Chad’s average tariff rate is 14.9 percent. Chad is a member of the Central African Economic
and Monetary Community. Exports may be subject to taxation, and state-owned enterprises
operate in several sectors of the economy. The high cost of credit and scarce access to financing
hold back private-sector development. A large part of the population remains outside of the
formal banking sector.

Property Rights –10.0 Fiscal Freedom 0 Business Freedom –27.9 Trade Freedom +1.8

CHILE
50
25 75
Least Most
free 0 100 free
Clowerhile’s economic freedom score is 78.5, making its economy

the 7th freest in the 2015 Index. Its overall score is 0.2 point
than last year, with an improvement in monetary free-
Freedom Trend
80
dom outweighed by declines in labor freedom, freedom from
corruption, and the control of government spending. Still
one of the 10 freest economies in the Index, Chile enjoys the 79
highest degree of economic freedom in the South and Central
America/Caribbean region.
78
Over the past five years, Chile’s economic freedom has
advanced by 1.1 points, securing Chile’s place as the first South
and Central American country to reach the top 10 in the rank- 77
ings. Improvements in five of the 10 economic freedoms have
been led by sizeable gains in property rights, price stability,
and the investment climate. 76
2011 2012 2013 2014 2015
Despite recent declines, Chile remains a global leader in eco-
nomic freedom and an example for other Latin American
countries. Aided by prudent public financial management and Country Comparisons
successful countercyclical fiscal policy, it has kept public debt
low and budget deficits under control. Chile is second in the Country 78.5
world in protecting property rights and has been renewing its
commitment to open trade and investment by participating in World
60.4
the Trans-Pacific Partnership talks. Average
BACKGROUND: Socialist President Michelle Bachelet began Regional

Average 59.7
her second (non-consecutive) four-year term in 2014, suc-
ceeding Sebastian Piñera, and immediately proposed tax Free
84.6
increases to fund higher government spending on educa- Economies
tion and other services while discounting concerns that this 0 20 40 60 80 100
would dampen future growth. Even if Bachelet largely main-
tains market-based institutions and economic policies, her
campaign promises to reform Chile’s constitution could have Quick Facts
significant undesirable effects, and Chile’s commitment to the Population: 17.6 million
Pacific Alliance could weaken. Nonetheless, Chile retains the GDP (PPP): $334.8 billion
region’s best reputation among foreign investors. It was the 4.2% growth in 2013
first South American country to join the Organisation for Eco- 5-year compound annual growth 4.0%
nomic Co-operation and Development and is the world’s lead- $19,067 per capita
ing producer of copper. The economy is very open to imports Unemployment: 5.9%
but is also an export powerhouse in minerals, wood, fruit, sea- Inflation (CPI): 1.8%
food, and wine. FDI Inflow: $20.3 billion
161
CHILE (continued)
1–Year

0 20 40 60 80 100
Chile is among South America’s least corrupt countries. Courts are generally free from politi-
cal interference. Although President Bachelet campaigned in 2013 on a promise to reform the
constitution, adopted in 1980 during the return to democratic self-government, Chile most
likely will retain its independent and competent judiciary. Property rights and contracts are
strongly respected, and expropriation is rare.

0 20 40 60 80 100
The top individual income tax rate remains 40 percent, and the top corporate tax rate is 20 per-
cent. Other taxes include a value-added tax and a property tax. The total tax burden is equiva-
lent to 18.8 percent of domestic income. Government expenditures equal 23.6 percent of total
domestic output, and public debt amounts to less than 15 percent of gross domestic product.
REGULATORY Business Freedom 69.3 69th 0

0 20 40 60 80 100
The regulatory regime sustains business formation and operation. Starting a business takes
seven procedures and six days on average and costs less than 1 percent of the level of average
annual income. Labor regulations are rigid, with broad wage settlements and high unioniza-
tion. Government price supports for agriculture are less than 5 percent of total farm receipts,
one of the lowest rates among OECD countries.

0 20 40 60 80 100
Chile has a 4.0 percent average tariff rate. Most imports enter duty-free, and tariffs have been
reduced through the Pacific Alliance. Chile is very open to foreign investment. A well-capital-
ized and dynamic banking sector provides a wide range of services, and the financial system
remains one of the region’s most advanced. Credit is issued on market terms, and domestic and
foreign financial firms receive equal treatment.

Freedom from +21.0 Government –3.7 Labor Freedom –10.3 Investment Freedom +20.0

CHINA
50
25 75
Least Most
free 0 100 free
Cpointhina’s economic freedom score is 52.7, making its economy

higher than last year, with modest improvements in
Freedom Trend
54
freedom from corruption, business freedom, and labor free-
dom largely offset by declines in investment freedom and the
53
control of government spending. China is ranked 30th out of
42 countries in the Asia–Pacific region, and its overall score is
lower than the global and regional averages.
52
Over the past five years, economic freedom in China has
improved by less than 1.0 point, continuing its patchy and
uneven progress since 1995. The one bright spot has been an 51
8.1-point improvement in labor freedom since 2011. A restric-
tive residency permitting system remains in place, and gains
50
in labor freedom have been largely offset by losses in other
factors, including a 5.5-point decline in the control of govern- 2011 2012 2013 2014 2015
ment spending.
A more comprehensive set of economic reforms is desper- Country Comparisons
ately needed, especially a loosening of the government’s
stranglehold on investment flows. The Communist Party’s Country 52.7
control of all levels of government continues to undermine
confidence in the rule of law and interfere with the develop- World
Average 60.4
ment of an independent judiciary. Institutionalized cronyism
is prevalent. Regional
58.8
Average
BACKGROUND: Under the government of Communist Party
General Secretary Xi Jinping, China has talked about the need Free
Economies 84.6
for economic “rebalancing” (the shifting of power and wealth
0 20 40 60 80 100
from state-owned enterprises and local governments to the
household sector), but real changes in power relationships
have been hard to detect. Reforms to improve labor mobility
have gained no traction. Tensions in the South and East China Quick Facts
Seas have increased with Beijing’s unilateral declaration of Population: 1.36 billion
an Air Defense Identification Zone and its deployment of an GDP (PPP): $13.4 trillion
oil rig in Vietnamese waters. China has achieved impressive 7.7% growth in 2013
GDP growth based on economic reforms and greater integra- 5-year compound annual growth 8.9%
tion into the world trading and financial systems since the late $9,844 per capita
1970s. The size of its industrial and manufacturing sector now Unemployment: 4.6%
rivals that of the United States. Inflation (CPI): 2.6%
163
CHINA (continued)
1–Year

0 20 40 60 80 100
Xi Jinping began his first year in power with an anti-corruption campaign that netted several
high-ranking officials, but corruption remains endemic. With Chinese cyber espionage visibly
on the rise in 2014, protection of property rights has clearly deteriorated. China’s weak judicial
system is highly vulnerable to political influence. The giant urban migrant workforce has little
legal protection despite promises of reform.

0 20 40 60 80 100
China’s top individual income tax rate is 45 percent, and its top corporate tax rate is 25 percent.
Other taxes include a value-added tax and a real estate tax. The total tax burden equaled 19.4
percent of gross domestic product in the most recent year. Total government expenditures
account for 24.8 percent of domestic output, and public debt equals 22 percent of GDP.

0 20 40 60 80 100
Regulatory reform has progressed gradually and unevenly. Incorporating a business takes 11
procedures and about a month. Bureaucratic hurdles still add to the cost of completing licens-
ing requirements. Labor regulations are relatively flexible, but enforcement of labor laws is not
consistent. The government provides large fossil fuel and electricity subsidies and also funds
significant agricultural subsidies.

0 20 40 60 80 100
China’s average tariff rate is 4.1 percent. Export taxes, subsidies to state-owned enterprises,
anti-dumping barriers, and other measures restrict trade. The government screens foreign
investment and still tightly controls the financial system. State-owned enterprises benefit from
greater access to capital and lower financing costs, but small and medium-sized companies
continue to suffer from the lack of access to credit.


COLOMBIA
50
25 75
Least Most
free 0 100 free
C1.0olombia’s economic freedom score is 71.7, making its econ-

point higher than last year, with improvements in six of
Freedom Trend
73
the 10 economic freedoms, including investment freedom,
72
freedom from corruption, and trade freedom. Recording its
highest score ever in the 2015 Index, Colombia has solidified
71
its ranking as the 2nd freest out of 29 countries in the South
and Central America/Caribbean region.
70
Over the past five years, economic freedom in Colombia has
risen by 3.7 points as reform has gained momentum. Impres- 69
sive gains in market openness include double-digit improve-
ments in both investment and financial freedom and an 68
8.0-point improvement in trade freedom.

67
Colombia’s relatively open economy has benefited from a pet- 2011 2012 2013 2014 2015
rochemical boom and diminished threat of risk as the govern-
ment engages in talks with the militant group FARC. This has
allowed greater fiscal flexibility while the government imple- Country Comparisons
ments a reform program to open the country further to trade,
investment, and financial flows. Corruption is perceived Country 71.7
as widespread.
World
60.4
BACKGROUND: President Juan Manuel Santos, elected in Average
2010 and re-elected in 2014, has tried to distance himself from Regional
former President Alvaro Uribe. Uribe’s “democratic security” Average 59.7
agenda significantly reduced crime and violence and reestab-
lished the state’s presence in rural areas. Uribe also boosted Free
Economies 84.6
business confidence. Santos has made peace talks with FARC
0 20 40 60 80 100
and ELN guerrillas the centerpiece of his government. He has
promised that guerrillas will be given no immunity, but the
FARC leadership has stated that it will not spend a single day
in jail. Santos faces the challenge of delivering peace while Quick Facts
ensuring justice for victims of the FARC and ELN. Colombia’s Population: 47.2 million
economy depends heavily on exports of petroleum, coffee, GDP (PPP): $527.6 billion
and cut flowers. It has replaced Argentina as Latin America’s 4.3% growth in 2013
third-largest economy, surpassed only by Brazil and Mexico. 5-year compound annual growth 4.1%
Colombia is a founding member of the Pacific Alliance. Infla- $11,189 per capita
tion is low, and the poverty rate is decreasing. Unemployment: 10.5%
165
COLOMBIA (continued)
1–Year

0 20 40 60 80 100
Settlement of the 50-year internal conflict could strengthen governance in large areas of
Colombia, but drug trafficking and the violence and corruption that it engenders will contin-
ue to erode institutions. Corruption occurs at multiple levels of public administration. The
courts have demonstrated a degree of independence from the executive, but the justice system
remains compromised by corruption and extortion.

0 20 40 60 80 100
Colombia’s top individual income tax rate is 33 percent, and its top corporate income tax rate is
25 percent. Other taxes include a value-added tax and a financial transactions tax. The overall
tax burden is equivalent to 16.1 percent of domestic income. Total government expenditures
account for 28.3 percent of the domestic economy, and public debt equals 32 percent of gross
domestic product.

0 20 40 60 80 100
Incorporating a business takes fewer than 10 procedures, with no paid-in minimum capital
required, but completing licensing requirements remains time-consuming. The non-salary
cost of hiring a worker is moderate, and regulation of work hours is relatively flexible. In 2014,
the government reduced subsidies to coffee farmers in light of higher market prices. Other state
subsidies remain below regional averages.

MARKETS Investment Freedom 80.0 23rd +5.0
0 20 40 60 80 100
The average tariff rate is 4.4 percent. Colombia is a member of the Pacific Alliance with Chile,
Costa Rica, Mexico, and Peru. Foreign and domestic investors are generally treated equally
under the law. Following a decade of significant consolidation, private institutions dominate
the growing financial sector. Credit is allocated on market terms, and foreign firms receive
equal treatment. Access to long-term financing can be difficult.


COMOROS
50
25 75
Least Most
free 0 100 free
C0.7omoros’s economic freedom score is 52.1, making its econ-

omy the 142nd freest in the 2015 Index. Its overall score is
point higher than last year, reflecting improvements in
Freedom Trend
57
half of the 10 economic freedoms, including freedom from
54
corruption, investment freedom, monetary freedom, and
labor freedom. Comoros is ranked 32nd out of 46 countries in
51
the Sub-Saharan Africa region, and its overall score is lower
than the regional average.
48
Over the past five years, economic freedom in Comoros has
advanced by 8.3 points, the second-best improvement by any 45
country. Comoros has recorded impressive score improve-
ments in five straight years, led by double-digit gains in labor 42
freedom, trade freedom, investment freedom, and financial

39
freedom. Investment freedom has improved by 30 points
since 2011. 2011 2012 2013 2014 2015
Comoros has been graded only since 2009. It moved out of the
ranks of the “repressed” last year and registered its highest Country Comparisons
score ever in the 2015 Index. Institutionalizing and improv-
ing on gains made in the past half-decade will be essential. Country 52.1
Comoros continues to lag far behind on rule of law, and
corruption remains pervasive. Despite opening to foreign World
Average 60.4
investment, the repressive domestic regulatory environment
hinders entrepreneurial dynamism. The government must Regional
54.9
also do more to promote competition, as financial and invest- Average
ment regimes remain among the world’s least free. Free
Economies 84.6
BACKGROUND: The three-island Union of the Comoros has
0 20 40 60 80 100
endured more than 20 coups since independence in 1975.
Under a 2001 constitution granting each island increased
autonomy, the presidency rotates among the three islands
every four years. The transfer of power to President Ikililou Quick Facts
Dhoinine in 2011 was peaceful. Although Comoros is a leading Population: 0.7 million
producer of ylang-ylang, cloves, and vanilla, its narrow export GDP (PPP): $0.9 billion
base leaves it vulnerable to external shocks. It also has poor 3.5% growth in 2013
transportation links. Comoros remains heavily dependent on 5-year compound annual growth 2.5%
foreign aid and remittances. In 2012, the International Mon- $1,287 per capita
etary Fund and the World Bank provided $176 million in debt Unemployment: 7.9%
relief to Comoros. Inflation (CPI): 2.3%
167
COMOROS (continued)
1–Year

0 20 40 60 80 100
Although President Dhoinine is pursuing governance reforms, corruption remains a serious
problem at all levels of the government, judiciary, and civil service, as well as among the police
and security forces. The judicial system, based on both Sharia (Islamic) law and the French
legal code, is relatively weak and subject to influence by the executive branch and other elites.

0 20 40 60 80 100
Other taxes include a value-added tax and an insurance tax. The overall tax burden is 12.3 per-
cent of GDP. Government expenditures equal 26.6 percent of the domestic economy. Public
debt has fallen to 19 percent of the domestic economy as debt forgiveness continues under the
Highly Indebted Poor Country initiative.
REGULATORY Business Freedom 47.3 161st –2.1

0 20 40 60 80 100
Simplifying the business start-up process has progressed unevenly, and private enterprises still
face costly and time-consuming regulatory hurdles. Launching a company costs more than the
level of average annual income, and completing licensing requirements takes over 100 days.
The formal labor market is not fully developed. The government subsidizes state-owned utili-
ties (water, electricity, and oil) and controls other prices.

MARKETS Investment Freedom 40.0 131st +5.0
0 20 40 60 80 100
Comoros has an average tariff rate of 6.0 percent. It is a member of the Common Market for
Eastern and Southern Africa. Lack of a strong court system to enforce contracts can deter
foreign investors. The financial sector remains limited in scope and depth, and much of the
population has very limited access to financial services. The majority of bank loans are for
short terms only.


DEMOCRATIC REPUBLIC OF CONGO
50
25 75
Least Most
free 0 100 free
45.0
Freedom Trend
T2015hescore
Democratic Republic of Congo’s economic freedom
is 45.0, making it the 168th freest economy in the
Index. Its overall score is 4.4 points better than last
48
year, with double-digit gains in business freedom, monetary 46

freedom, and the control of government spending. None-
theless, the DRC is ranked 42nd out of 46 countries in the 44
Sub-Saharan Africa region, and its score is far below the
regional average. 42
Over the past five years, the DRC’s economic freedom has 40
advanced by 4.3 points, with especially strong gains in the past
two years. Monetary freedom has improved by over 28 points, 38
but advancement has been broad-based, with gains in six of
the 10 factors. The DRC has registered its highest economic 36
freedom score ever in the 2015 Index. 2011 2012 2013 2014 2015
Despite this welcome progress, the DRC’s level of economic

freedom remains among the lowest in the world, still well Country Comparisons
within the “repressed” category. Inadequate institutions
make the formation of a vibrant private sector difficult. Country 45.0
BACKGROUND: The Democratic Republic of Congo remains World
plagued by wide-ranging conflict between government forces Average 60.4
that historically have been backed by Angola, Namibia, and
Zimbabwe and rebels supported by Uganda and Rwanda. Regional
Average 54.9
Much of the eastern part of the country remains embroiled
in conflict. In 2006, Joseph Kabila won the first multi-party Free
84.6
election in 40 years. He was re-elected in December 2011 Economies
in a flawed and violent election. Rebel groups including the 0 20 40 60 80 100
Lord’s Resistance Army, M23, and the Democratic Forces for
the Liberation of Rwanda remain active in the eastern regions.
Renewed violence has led to massive population displacement Quick Facts
and atrocities against civilians. The DRC continues to host the Population: 77.0 million
U.N.’s largest peacekeeping mission. Political instability, lack GDP (PPP): $49.9 billion
of transparency, and systematic corruption undermine eco- 8.5% growth in 2013
nomic growth. The DRC’s immense natural resources, includ- 5-year compound annual growth 6.5%
ing copper, cobalt, and diamonds, have fueled conflict, forcing $648 per capita
foreign businesses to limit their operations. The DRC suffered Unemployment: 7.9%
from an Ebola outbreak in the summer of 2014. Inflation (CPI): 0.8%
169
DEMOCRATIC REPUBLIC OF CONGO (continued)
1–Year

0 20 40 60 80 100
An uncertain legal framework, conflicts with armed militias for control of eastern Congo’s rich
mineral deposits, endemic corruption, and a lack of transparency in government policy are
long-term problems for the mining sector and the economy as a whole. Protection of property
rights remains weak and dependent on a dysfunctional public administration and judicial sys-
tem. Human rights abuses and banditry deter economic activity.

0 20 40 60 80 100
The top individual income tax rate is 30 percent, and the top corporate income tax rate is 40
percent. Other taxes include a tax on vehicles and a tax on rentals. The overall tax burden equals
14.5 percent of the domestic economy. Government spending is equal to 21.8 percent of domes-
tic production, and public debt amounts to 22 percent of gross domestic product.

EFFICIENCY Labor Freedom 38.4 171st –0.1
0 20 40 60 80 100
Despite some progress, the regulatory environment still remains significantly burdensome.
Minimum capital requirements to launch a company are about five times the level of average
annual income. With development of a modern labor market lagging, the informal sector is the
source of most employment. Prices are controlled and regulated by the government, which also
subsidizes electricity.

0 20 40 60 80 100
The Democratic Republic of Congo’s average tariff rate is 11.0 percent. Bureaucratic and regu-
latory barriers impede the free flow of trade and discourage foreign direct investment. Over
the past five years, the banking sector has recorded considerable growth. The level of financial
inclusion has also increased, but the financial system, dominated by banks, remains one of the
region’s least developed.


REPUBLIC OF CONGO
50
25 75
Least Most
free 0 100 free
Toverall
he Republic of Congo’s economic freedom score is 42.7,
score is 1.0 point worse than last year, with improve-
Freedom Trend
45
ments in investment freedom, trade freedom, business free-
dom, and freedom from corruption counterbalanced by
44
declines in the control of government spending and labor
freedom. Congo is ranked 43rd out of 46 countries in the Sub-
Saharan Africa region, and its overall score is much lower than
43
the global and regional averages.
Large sections of the population remain trapped in poverty.
Government remains involved in leading economic sectors, 42
and institutional constraints force many small entrepreneurs
to operate informally. Lack of an effective independent judi-
41
ciary, corruption, and an oppressive regulatory environment
hamper the development of a dynamic private sector. 2011 2012 2013 2014 2015
These institutional difficulties are reflected in Congo’s declin-

ing score over the past five years. Economic freedom has fall- Country Comparisons
en significantly in three of the 10 factors. A 19-point decline
in government spending highlights the government’s contin- Country 42.7
ued interference in the domestic economy, and the regulatory
environment has become particularly burdensome for entre- World
Average 60.4
preneurs and workers.
Regional
BACKGROUND: Congo became independent in 1960. After Average 54.9
seizing power in 1979, Denis Sassou-Nguesso governed the
country as a Marxist–Leninist state before moderating eco- Free
Economies 84.6
nomic policy and allowing multi-party elections in 1992. He
0 20 40 60 80 100
lost to Pascal Lissouba but seized power again following a 1997
civil war, won a flawed election in 2002, and won a seven-year
term in 2009 in a similarly dubious election. Civil war militias
remain active in the southern Pool region. Congo is sub-Saha- Quick Facts
ran Africa’s fourth-largest oil producer, but lack of infrastruc- Population: 4.2 million
ture has prevented the exploitation of its sizable natural gas GDP (PPP): $20.0 billion
reserves and significant hydropower potential. Seventy per- 4.5% growth in 2013
cent of the population lives in poverty. As of mid-2013, Congo 5-year compound annual growth 5.6%
hosted more than 60,000 refugees from Angola, the Central $4,791 per capita
African Republic, Chad, the Democratic Republic of Congo, Unemployment: 7.8%
and Rwanda. Inflation (CPI): 4.6%
171
REPUBLIC OF CONGO (continued)
1–Year

0 20 40 60 80 100
Corruption is almost invariably linked to doing business in Congo. There is an absence of sub-
stantiated figures on government revenues and spending. Contract terms are not transparent,
and “informal” tax collectors regularly solicit bribes. The judiciary is underfunded and crippled
by institutional weakness and a lack of technical capability. The state oil company is directly
controlled by the president’s family and advisers.

0 20 40 60 80 100
Other taxes include a value-added tax, a tax on rental values, and an apprenticeship tax. The
overall tax burden equals 8.7 percent of gross domestic output. Government spending is equiva-
lent to 36.2 percent of GDP, and public debt equals about 25 percent of the domestic economy.
Rebels continue to undermine tax collection.

0 20 40 60 80 100
The process for establishing a company is now more streamlined, but paid-in minimum capital
required to launch a business almost equals the level of average annual income. The formal
labor market is not fully developed, and cumbersome labor codes hinder job growth. Govern-
ment ownership and subsidization of the large public sector affect the prices of a range of goods
and services.

0 20 40 60 80 100
The average tariff rate is 14.7 percent. Congo is a member of the Central African Economic
and Monetary Community. Exports may be taxed, and imports of sugar are restricted. Foreign
investors face bureaucratic hurdles. The financial sector remains limited in depth and scope.
The number of banks has increased to 10, but the sector remains underdeveloped, and total
assets equal only about 20 percent of GDP.


COSTA RICA
50
25 75
Least Most
free 0 100 free
Chasosta Rica’s economic freedom score is 67.2, making its

increased by 0.3 point from last year, reflecting improve-
Freedom Trend
69
ments in labor freedom and freedom from corruption that
outweigh a combined decline in monetary freedom, business
freedom, and the control of government spending. Costa Rica 68
America/Caribbean region, and its overall score is higher than
67
the global and regional averages.
Economic development has focused on orienting the econ-
omy to the global marketplace. Costa Rica has one of the 66
highest levels of foreign direct investment in Latin America,
and the government’s limited economic presence has facili-
tated a business environment based on tourism, agriculture, 65
and technology. 2011 2012 2013 2014 2015
The small increase in Costa Rica’s overall score this year has
reversed a multi-year decline. Over the past five years, Costa Country Comparisons
Rica’s economic freedom has declined in four of the 10 factors,
including property rights, fiscal freedom, labor freedom, and Country 67.2
trade freedom. Changes in the corporate income tax regime to
help pay for security services have undermined fiscal freedom. World
60.4
Average
BACKGROUND: Luis Guillermo Solís of the Partido Acción
Ciudadana was elected president in 2014, ousting the incum- Regional
Average 59.7
bent Partido Liberación Nacional amid concerns over cor-
ruption. The peaceful transfer of power highlighted the long Free
84.6
history of democratic stability that has contributed to one of Economies
Latin America’s highest levels of foreign direct investment per 0 20 40 60 80 100
capita. Nevertheless, many people live in poverty and work in
the underground economy. Fiscal and structural reforms to
liberalize the economy are long overdue. While Costa Rica Quick Facts
remains safer than many of its neighbors, crime rates are Population: 4.8 million
rising. There is an ongoing border dispute with Nicaragua. GDP (PPP): $61.6 billion
Costa Rica has benefited from foreign investments in elec- 3.5% growth in 2013
tronics and health care, and the Central America–Dominican 5-year compound annual growth 3.4%
Republic–United States Free Trade Agreement (CAFTA– $12,942 per capita
DR) has opened insurance and telecommunications to pri- Unemployment: 7.7%
vate investors. Inflation (CPI): 5.2%
173
COSTA RICA (continued)
1–Year

0 20 40 60 80 100
Corruption is lower than elsewhere in the region, and Costa Rica has avoided the infiltration
of its state institutions by organized crime, but drug-related activity has increased in the past
two years as Mexican cartels move into Central America. The judicial branch is independent,
but there are often substantial delays in the judicial process. Property rights are secure, and
contracts are generally upheld.

0 20 40 60 80 100
Other taxes include a general sales tax and a real property tax. The overall tax burden equals
21.9 percent of the domestic economy. Government spending amounts to 18.3 percent of gross
domestic product, and public debt is equivalent to around 37 percent of yearly domestic income.

0 20 40 60 80 100
The environment for business formation is now more streamlined, but regulatory compliance
remains time-consuming. Obtaining necessary permits still takes more than 100 days. The
labor market remains relatively flexible, although a modest increase in the minimum wage
went into force in July 2013. The government maintains price controls and in 2014 announced
a one-year extension of price supports for rice.

0 20 40 60 80 100
Costa Rica’s average tariff rate is 3.1 percent, and the government has upgraded its customs
procedures. Domestic and foreign investors are treated similarly, but investment in some sec-
tors of the economy is restricted. The growing financial sector has gradually become more open
to competition, but state-owned banks continue to dominate the sector. Capital markets are
not fully developed.


CÔTE D’IVOIRE
50
25 75
Least Most
free 0 100 free
Cpointôte d’Ivoire’s economic freedom score is 58.5, making its

economy the 103rd freest in the 2015 Index. Its score is 0.8
higher than last year, reflecting improvements in half
Freedom Trend
60
of the 10 economic freedoms, including business freedom,
59
property rights, investment freedom, and freedom from cor-
ruption. Registering its highest score ever in the 2015 Index, 58
Côte d’Ivoire has advanced to 14th out of 46 countries in the
Sub-Saharan Africa region, and its overall score is now slightly 57
above the regional average.
56
Over the past five years, economic freedom in Côte d’Ivoire
55
has expanded by 3.1 points, led by 20-point gains in business
and investment freedoms. The largely market-based economy 54
has benefited in recent years from the international trade in
coffee and palm oil. 53
2011 2012 2013 2014 2015
However, the weak rule of law, affected by corruption and
unclear property rights, still undermines the institutional
environment necessary for sustained economic growth. Regu- Country Comparisons
latory inefficiencies and insufficient investor protections have
retarded the development of a more dynamic entrepreneur- Country 58.5
ial environment.
World
BACKGROUND: In 2002, civil war split Côte d’Ivoire between Average 60.4
a rebel-controlled North and a government-controlled
South. Renewed violence flared in 2004 and 2010. In 2010, Regional
Average 54.9
when Alassane Ouattara was internationally recognized
as winner of the presidential election, incumbent Laurent Free
84.6
Gbagbo refused to hand over power and was removed by U.N. Economies
and French forces. Gbabgo is currently awaiting trial in The 0 20 40 60 80 100
Hague for crimes against humanity that he allegedly commit-
ted during the post-election period. Political tensions have
cooled under Ouattara’s leadership, but because of his poor Quick Facts
health and the country’s upcoming elections in 2015, instabil- Population: 24.1 million
ity could return. The African Development Bank, after leav- GDP (PPP): $43.8 billion
ing the country 11 years ago for Tunisia due to unrest, has 8.1% growth in 2013
reopened its headquarters in Abidjan. Côte d’Ivoire is West 5-year compound annual growth 3.7%
Africa’s second-largest economy and a leading producer of $1,818 per capita
cocoa and cashews. Unemployment: 3.9%
175
CÔTE D’IVOIRE (continued)
1–Year

0 20 40 60 80 100
Although the government has improved the investment climate, private and public corrup-
tion persists, especially with respect to judicial proceedings, contract awards, customs, and
tax issues. Obtaining an official stamp, a copy of a birth or death certificate, or an automobile
title often requires payment of a supplemental “commission.” Protection of property rights is
fragile, and land titles are rare outside of urban areas.

0 20 40 60 80 100
Côte d’Ivoire’s top individual income tax rate is 36 percent, and its top corporate tax rate is 25
percent. Other taxes include a value-added tax and a tax on interest. Total tax revenue amounts
to 17.6 percent of domestic output, and public expenditures are equal to about 24.2 percent of
domestic production. Public debt amounts to 43 percent of gross domestic product.

0 20 40 60 80 100
Considerable improvements have been made in streamlining the entrepreneurial framework.
The time and number of procedures required to incorporate a business have been reduced. In
the absence of well-functioning efficient labor markets, informal labor activity persists in many
sectors. In 2013, the government abandoned a decade of sector liberalization to guarantee a
minimum price for cocoa farmers, and it still regulates many other prices.

0 20 40 60 80 100
The average tariff rate is 6.8 percent. Côte d’Ivoire is a member of the West Africa Economic
and Monetary Union. The government has announced plans to privatize many state-owned
enterprises. Efforts to modernize and restructure the financial sector have been made. The
banking penetration rate remains under 15 percent, but telephone banking has been growing.
Access to loans, particularly short-term working capital, remains a challenge.

Freedom from –3.0 Government –3.7 Labor Freedom –13.9 Investment Freedom +5.0

CROATIA
50
25 75
Least Most
free 0 100 free
Cpoints
roatia’s economic freedom score is 61.5, making its econo-
my the 81st freest in the 2015 Index. Its overall score is 1.1
better than last year, reflecting improvements in five
Freedom Trend
63
of the 10 economic freedoms including freedom from corrup-
tion, fiscal freedom, and labor freedom. Croatia has registered
62
its highest score ever in the 2015 Index, but it continues to lag
behind many other emerging economies in the region, and its
overall score remains below the regional average.
61
Despite its accession to the European Union in 2013, Croatia
still suffers some of the difficulties facing other transitional
economies. An independent judiciary has not been fully estab- 60
lished, and there are delays and backlogs in adjudicating cases.
High levels of corruption persist in business, education, and
59
basic government services. Land registry offices need further
reform to guarantee clearly defined property rights. 2011 2012 2013 2014 2015
An uncertain civic environment and fiscal pressures will

continue to challenge efforts to build on Croatia’s modest Country Comparisons
improvements in economic freedom over the past five years.
Reforms to open up the investment regime should help the Country 61.5
country to integrate more fully into the European market.
World
60.4
BACKGROUND: Croatia declared its independence in 1991, Average
contributing to the breakup of Yugoslavia along ethnic and Regional
religious lines. Years of Croat/Serb conflict ended formally in Average 67.0
1995 with the Dayton Peace Accords. Croatia joined NATO in
April 2009 and the European Union in July 2013. In Decem- Free
Economies 84.6
ber 2011, former Prime Minister Jadranka Kosor, credited
0 20 40 60 80 100
with making the final push toward EU accession, was defeated
by center-left Prime Minister Zoran Milanovic. Turnout for
Croatia’s first-ever elections for the EU Parliament, held in
April 2013, was only 20.8 percent. Growth has been hurt by Quick Facts
the global financial crisis and overreliance on tourism, and Population: 4.3 million
domestic demand is weak. The slow pace of privatization GDP (PPP): $77.9 billion
of state-owned businesses has been a drag on the economy, –1.0% growth in 2013
which has been shrinking since 2008 despite membership in 5-year compound annual growth –2.5%
the EU. $18,191 per capita
Unemployment: 17.2%
177
CROATIA (continued)
1–Year

0 20 40 60 80 100
Corruption is perceived as prevalent in major public companies, the health sector, universi-
ties, public procurement systems, the construction sector, and land registry offices. In 2014,
a former prime minister was found guilty of masterminding a scheme to siphon off $2.7 mil-
lion from state companies. Although some reforms are being implemented, the court system
is cumbersome, inefficient, and time-consuming.

0 20 40 60 80 100
Croatia’s top individual income tax rate is 40 percent, and its top corporate tax rate is 20 per-
cent. Other taxes include a value-added tax and an excise tax. The overall tax burden amounts
to 22.6 percent of gross domestic product. Government spending is equal to 42.2 percent of the
domestic economy, and public debt is equivalent to 60 percent of domestic income.

0 20 40 60 80 100
Reform measures have streamlined the procedures for establishing a business, but the overall
regulatory environment remains burdensome and inefficient. Despite some progress, the labor
market remains rigid. In 2014, the government pledged to cut subsidies and raise excise taxes
on petrol and telecom operators to meet EU budget requirements. The state still attempts to
influence price levels through various mechanisms.

0 20 40 60 80 100
EU members have a 1.0 percent average tariff rate. Although some non-tariff barriers exist,
the EU is relatively open to external trade. In Croatia, foreign and domestic firms are gener-
ally treated equally under the law. The financial system has become more competitive. The
consolidated banking sector is relatively efficient, with over 30 commercial banks. Croatia’s
capital market is not fully developed and lags behind other key markets in the EU.

Property Rights –10.0 Fiscal Freedom –2.5 Business Freedom +0.8 Trade Freedom +18.2

CUBA
50
25 75
Least Most
free 0 100 free
Chigher
uba’s economic freedom score is 29.6, making its economy
one of the world’s least free. Its overall score is 0.9 point
than last year, with a slight deterioration in monetary
Freedom Trend
31
freedom outweighed by improvements in three of the 10 eco-
nomic freedoms, including trade freedom, fiscal freedom, 30
and freedom from corruption. Cuba is ranked least free of
29 countries in the South and Central America/Caribbean 29
region, and its overall score is significantly lower than the
regional average.
28
In recent years, the government has made measured conces-
sions to encourage more entrepreneurship and private-sector 27
growth. Communist Party–endorsed reforms to cut govern-
ment payrolls and expand approved professions have not
26
been broad enough to ensure any meaningful advancement in
overall economic freedom. The state continues to interfere in 2011 2012 2013 2014 2015
most economic activity. Price controls are pervasive, and the
two-tiered exchange rate regime continues to distort prices. Country Comparisons
Despite membership in the World Trade Organization, the
economy remains relatively cut off from the international Country 29.6
marketplace. Only state enterprises are allowed to engage in
international trade and investment. The state uses an oppres- World
Average 60.4
sive regulatory environment to suppress entrepreneurial
activity and controls most means of production. Shallow Regional
59.7
credit markets impede access to credit for business activities. Average
BACKGROUND: A one-party Communist state, Cuba depends Free

Economies 84.6
on external assistance (chiefly oil subsidies provided by Ven-
0 20 40 60 80 100
ezuela and remittances from Cuban émigrés) and a captive
labor force to survive. Property rights are severely restrict-
ed. Fidel Castro’s 83-year-old brother Raúl continues to
lead both the government and the Cuban Communist Party. Quick Facts
Workers’ wages are not enough to live on, the agriculture sec- Population: 11.2 million
tor is starved for investment, and tourism revenue is volatile. GDP (PPP): $130.0 billion
Under Raúl Castro, violent repression of civil society and of 2.8% growth in 2013
dissidents has increased dramatically. Much-touted “free- 5-year compound annual growth 2.3%
market reforms” have proven to be cosmetic changes in what $11,610 per capita
remains a socialist state. Restrictions on foreign travel have Unemployment: n/a
been eased, but certain Cubans are still barred from leaving. Inflation (CPI): 6.0%
FDI Inflow: n/a
179
CUBA (continued)
1–Year

0 20 40 60 80 100
Although the perceived level of corruption has traditionally been far lower in Cuba than in
other Latin American countries, it remains a considerable systemic problem. Low salaries for
public officials and the dual exchange rate provide incentives for illicit enrichment. Only state
enterprises may enter into economic agreements with foreigners as minority partners. Most
means of production are owned by the state.

0 20 40 60 80 100
Cuba’s top individual income tax rate is 50 percent, and its top corporate tax rate is 30 percent.
Other taxes include a property transfer tax and a sales tax. The overall tax burden equals 20.5
percent of domestic production. Public expenditures account for 60.2 percent of the domestic
economy, and public debt is equal to about 38 percent of gross domestic product.
REGULATORY Business Freedom 20.0 182nd 0

EFFICIENCY Labor Freedom 20.0 182nd 0
0 20 40 60 80 100
Private entrepreneurship exists only on a very small scale. The inconsistent and non-trans-
parent application of regulations impedes the creation of new businesses. The rigid, state-
controlled labor market has helped to create a large informal economy. The government tries
to contain inflation directly by using price controls and regulating the limited areas of free-
market activity and indirectly by controlling monetary growth.

0 20 40 60 80 100
Cuba’s average tariff rate is 8.1 percent. The country’s centrally planned economy is a barri-
er to the free flow of international trade and investment. The financial sector is tightly con-
trolled by the state. Over a dozen foreign banks have opened representative offices, but they
are not allowed to operate freely. Credit is not allocated on market terms, and capital markets
remain underdeveloped.

Freedom from +36.0 Government 0 Labor Freedom 0 Investment Freedom –10.0

CYPRUS
50
25 75
Least Most
free 0 100 free
Cup yprus’s economic freedom score is 67.9, making its econ-

by 0.3 point from last year due to improvements in trade
Freedom Trend
76
freedom, investment freedom, and monetary freedom that
outweigh declines in labor freedom and freedom from cor- 74
ruption. Cyprus is ranked 20th out of 43 countries in the
Europe region. 72
Over the past five years, spurred by government responses 70

to the financial crisis and the difficult external environment,
economic freedom in Cyprus has declined by 5.4 points, the 68
second-largest decline in the European region. With scores
dropping in nine of the 10 economic freedoms, Cyprus has 66
been rated “moderately free” since 2013.
64
The eurozone crisis has severely strained Cyprus’s economy. 2011 2012 2013 2014 2015
Multiple bailouts to prop up government finances and the
financial sector have increased the country’s relative debt
load to one of the highest in Europe. To reverse this trend, Country Comparisons
the government will have to demonstrate that it is willing to
reopen its market to free trade and capital flows. A renewed Country 67.9
commitment to easing the regulatory environment will be
needed to promote entrepreneurial activity and reorient the World
60.4
economy away from offshore financial services. Average
BACKGROUND: A U.N. buffer zone has separated the Greek Regional

Average 67.0
Cypriot Republic of Cyprus from the Turkish Republic of
Northern Cyprus since 1974. The Republic of Cyprus joined Free
84.6
the European Union in 2004 and acts as the island’s inter- Economies
nationally recognized administration. Despite deep mutual 0 20 40 60 80 100
hostility, Greek and Turkish leaders continue to negotiate
on possible reunification through U.N.-brokered talks. Cen-
ter-right Cyprus President Nicos Anastasiades took office Quick Facts
in February 2013. After the collapse of the banking sector Population: 0.9 million
in 2013, Cyprus received a €10 billion bailout plan from the GDP (PPP): $22.3 billion
EU. However, draconian measures that include taxing bank –6.0% growth in 2013
deposits were imposed as part of the bailout. The economy 5-year compound annual growth –1.7%
remains very weak, and the unemployment rate is one of $25,265 per capita
Europe’s highest. Unemployment: 15.7%
181
CYPRUS (continued)
1–Year

LAW Freedom from Corruption 63.0 31st –1.0
0 20 40 60 80 100
Despite renewed efforts by the two governments in 2014 to reach a political settlement con-
cerning the Turkish-controlled region, the division of the island continues. Corruption, patron-
age, and a lack of transparency will continue to flourish in that area and pose inherent risks for
foreign investors. The independent judiciary in the Republic of Cyprus operates according to
the British tradition, upholding due process rights.

0 20 40 60 80 100
The top individual income tax rate is 35 percent, and the top corporate tax rate is 12.5 percent.
Other taxes include a value-added tax and a real estate tax. The overall tax burden amounts to
25.9 percent of gross domestic product. Government expenditures are equal to 45.9 percent of
domestic income, and public debt is equivalent to 112 percent of annual domestic production.

0 20 40 60 80 100
Forming and operating a business is relatively straightforward within the regulatory frame-
work. With no minimum capital required, it takes less than a week to launch a company. Rela-
tively flexible labor regulations facilitate employment and productivity growth, although union
power remains strong. EU subsidies to Cyprus increased after the 2013 banking crisis, and the
government mandated price controls on food staples.

0 20 40 60 80 100
the EU is relatively open to external trade. In most sectors of the Cypriot economy, foreign
and domestic investors are treated similarly. Capital controls imposed during the 2013 bank-
ing crisis have been lifted. Despite reorganizations following the bailout, the banking sector
remains unstable, with a high level of nonperforming loans.

Property Rights +20.0 Fiscal Freedom +7.6 Business Freedom –5.5 Trade Freedom +19.6

CZECH REPUBLIC
50
25 75
Least Most
free 0 100 free
Tall score
he Czech Republic’s economic freedom score is 72.5, mak-
ing its economy the 24th freest in the 2015 Index. Its over-
is 0.3 point better than last year, with declines in the
Freedom Trend
74
management of public spending, business freedom, and labor
73
freedom outweighed by improvements in the area of the rule
of law as measured by property rights and freedom from cor-
72
ruption. The Czech Republic is ranked 13th out of 43 coun-
tries in the Europe region, and its overall score is higher than
71
the regional and global averages.
Over the past five years, the Czech Republic’s transition to a 70
market economy has been facilitated by a strong commitment
to economic freedom. Since 2011, its economic freedom score 69
has improved by 2.1 points, reinforcing the country’s position

68
in the “mostly free” category. Score improvements in six of the
10 economic freedoms have been led by double-digit improve- 2011 2012 2013 2014 2015
ments in investment freedom and property rights.
With a vibrant automotive production base, the Czech Repub- Country Comparisons
lic has established itself as an open and dynamic market econ-
omy, a sharp reversal after decades of Communism. However, Country 72.5
further efforts to institutionalize the independence of the
judiciary and stamp out corruption remain critical. World
Average 60.4
BACKGROUND: The end of Czechoslovakia’s Communist dic- Regional
tatorship in 1989 led to the election of dissident playwright Average 67.0
Vaclav Havel as president. The Czech Republic separated
from Slovakia in 1993 and joined NATO in 1999 and the Euro- Free
Economies 84.6
pean Union in 2004. Prospects for adoption of the euro are
0 20 40 60 80 100
uncertain because of the EU economic crisis, but the govern-
ment appears to be moving toward closer alignment with the
eurozone. The first directly elected president, Miloš Zeman,
appointed a caretaker government in August 2013, and legis- Quick Facts
lative elections followed in October. In January 2014, Zeman Population: 10.5 million
asked Social Democrat leader Bohuslav Sobotka to form a GDP (PPP): $286.0 billion
government. The Czech Republic is an export economy, but –0.9% growth in 2013
foreign trade decreased in 2013. 5-year compound annual growth –0.5%
$27,200 per capita
Unemployment: 7.0%
183
CZECH REPUBLIC (continued)
1–Year

0 20 40 60 80 100
An abuse-of-power scandal toppled the government in 2013 and propelled the rise of the “ANO
2011” anti-corruption party. The new government’s anti-graft program applies to all govern-
mental departments and offices. The judiciary’s independence is largely respected, though its
complexity and multilayered composition lead to the slow delivery of judgments. Property
rights are relatively well protected, and contracts are generally secure.

0 20 40 60 80 100
Other taxes include a value-added tax and an inheritance tax. The overall tax burden is equal to
35.5 percent of the domestic economy. Government spending equals 44.5 percent of domestic
income, and public debt is equivalent to 48 percent of gross domestic product.

0 20 40 60 80 100
With minimum capital required, starting a company involves nine bureaucratic procedures.
Obtaining necessary permits still takes over 100 days. Hiring and dismissal regulations are not
onerous, but the non-salary cost of employing a worker can be burdensome. Although a number
of price controls are maintained, the government has taken steps to reduce subsidies for state
pensions and green energy.

0 20 40 60 80 100
EU is relatively open to external trade. The Czech financial system is relatively well developed
and open to competition. Foreign banks dominate the banking sector, and direct government
involvement is minimal. Capital markets are not fully developed.


DENMARK
50
25 75
Least Most
free 0 100 free
D enmark’s economic freedom score is 76.3, making its econ-

omy the 11th freest in the 2015 Index. Its overall score is up
by 0.2 point from last year, with improvements in six of the 10
Freedom Trend
80
economic freedoms, including monetary freedom and prop-
erty rights, partially offset by declines in financial freedom 79
and freedom from corruption. Denmark is ranked 4th out of
43 countries in the Europe region.
78
Although economic freedom in Denmark has generally flour-
ished in the past, the recent eurozone crisis has taken a toll. 77
Over the past half-decade, Denmark’s economic freedom
score has declined by 2.3 points. Contributing to this decrease
76
have been declines in half of the 10 economic freedom factors,
including freedom from corruption, fiscal freedom, govern-
ment spending, business freedom, and financial freedom. 75
2011 2012 2013 2014 2015
Negative growth rates in recent years have put intense pres-
sure on government finances, with Denmark’s government
spending score declining by nearly 18 points since 2011. Nev- Country Comparisons
ertheless, economic freedom continues to flourish in one of
Europe’s most stable economies. The rule of law and property Country 76.3
rights are well entrenched, and the economy is open to global
trade and investment. World
60.4
Average
BACKGROUND: Social Democrat Prime Minister Helle
Thorning-Schmidt heads a center-left coalition that defeated Regional
Average 67.0
Prime Minister Lars Løkke Rasmussen in the September 2011
parliamentary elections. She is Denmark’s first female prime Free
84.6
minister. Denmark has been a member of the European Union Economies
since 1973. Its economy depends heavily on foreign trade, 0 20 40 60 80 100
and the private sector includes many small and medium-size
companies. Increased immigration spurred by the 2011 upris-
ings in North Africa has led the government to consider more Quick Facts
restrictive immigration laws. Although not party to the euro, Population: 5.6 million
Denmark has felt the impact of the European economic cri- GDP (PPP): $211.9 billion
sis. Economic growth has been sluggish, though unemploy- 0.4% growth in 2013
ment remains relatively low. There are no significant natural 5-year compound annual growth –0.7%
resources, and the economy relies almost totally on services. $37,900 per capita
Unemployment: 7.1%
185
DENMARK (continued)
1–Year
RULE OF Property Rights 95.0 1st +5.0

0 20 40 60 80 100
Levels of corruption are generally very low in Denmark, which was tied with New Zealand for
first place out of 177 countries surveyed in Transparency International’s 2013 Corruption Per-
ceptions Index. Protections for property rights are strongly enforced, and an independent and
fair judicial system is institutionalized throughout the economy. Intellectual property rights
are respected, and enforcement is consistent with world standards.

0 20 40 60 80 100
Denmark’s top individual income tax rate is 56.0 percent, and its top corporate tax rate is down
slightly at 24.5 percent. Other taxes include a value-added tax and an inheritance tax. The over-
all tax burden equals 48.0 percent of the domestic economy. Government spending amounts
to 57.2 percent of gross domestic product, and public debt is equivalent to 45 percent of GDP.

0 20 40 60 80 100
The overall regulatory environment remains one of the world’s most transparent and efficient.
Minimum capital requirements for limited liability companies have been reduced, and launch-
ing a business involves only four procedures. Flexible and modern employment regulations
sustain the labor market. Monetary stability is well established, but rents are controlled and
medications are heavily subsidized. Green energy subsidies were cut in 2013.

Financial Freedom 80.0 3rd –10.0
0 20 40 60 80 100
EU members have a 1.0 percent average tariff rate. Some non-tariff barriers exist, but the EU
is relatively open to external trade. Denmark is very open to foreign investment and gener-
ally treats foreign and domestic investors equally under the law. The modern and diversified
financial sector has undergone some instability, with several banks performing poorly. The
three largest banks account for over half of total banking assets.


DJIBOUTI
Djibouti Economic Freedom Score
50
25 75
Least Most
free 0 100 free
D jibouti’s economic freedom score is 57.5, making its econ-

is 1.6 points better than last year, reflecting improvements
Freedom Trend
59
in six of the 10 economic freedoms, including business free-
58
dom, freedom from corruption, and investment freedom. Dji-
bouti is ranked 18th out of 46 countries in the Sub-Saharan 57
Africa region.
56
Djibouti has achieved gradual improvements in economic
freedom over the past five years. Since 2011, its economic 55
freedom score has risen by 3.0 points, led by gains in freedom
54
from corruption, government spending, monetary freedom,
and investment freedom. Strategically located at the mouth of 53
the Red Sea, Djibouti has developed as a vital port and trans-
shipment terminal for international trade. 52
2011 2012 2013 2014 2015
Nevertheless, Djibouti has remained “mostly unfree”
throughout its history in the Index. Its integration with the
world economy as a transshipment point contrasts sharply Country Comparisons
with a trade freedom score that sits well below the world
average. Tariff and non-tariff barriers exacerbate well-known Country 57.5
food security issues. Strategic attempts to reorient the econ-
omy toward financial services and communication are under- World
60.4
mined by an increasingly onerous regulatory regime. Average
BACKGROUND: President Ismael Omar Guelleh, whose Regional

Average 54.9
multi-party, multi-ethnic coalition controls all levels of gov-
ernment, was re-elected to a third term in 2011. One of Dji- Free
84.6
bouti’s comparative advantages is its geostrategic location at Economies
the mouth of the Red Sea. Port facilities and the railway are 0 20 40 60 80 100
key assets. Djibouti is also home to French, Japanese, and
American military facilities. The main port serves as a key
staging point for international antipiracy operations. Dji- Quick Facts
bouti is active in the African Union’s AMISOM peacekeep- Population: 0.9 million
ing mission in Somalia. Djibouti has few natural resources GDP (PPP): $2.5 billion
and imports most of its food. The government relies on for- 5.0% growth in 2013
eign assistance to pay its bills and finance development proj- 5-year compound annual growth 4.6%
ects. In 2013, Guelleh announced that Djibouti would focus $2,746 per capita
on improving and expanding its financial and communica- Unemployment: n/a
tions sectors. Inflation (CPI): 2.5%
187
DJIBOUTI (continued)
1–Year

0 20 40 60 80 100
Despite tepid efforts to curb corruption, power remains concentrated in the hands of the presi-
dent, and political repression increased in 2014. Public officials do not have to disclose their
assets. Trials and judicial proceedings are time-consuming, prone to corruption, and politically
manipulated. Protection of private property is weak. The judicial system is based on the French
civil code, but Sharia law prevails in family matters.

0 20 40 60 80 100
Other taxes include a property tax and an excise tax. Overall tax revenue is equivalent to 18.9
percent of gross domestic product. Government expenditures equal 37.8 percent of domestic
income, and public debt amounts to 35 percent of the gross domestic economy.

0 20 40 60 80 100
The regulatory system lacks clarity and efficiency. Launching a business remains burdensome,
and the minimum capital required amounts to about twice the level of average annual income.
A modern labor market has not fully developed. Several goods and services are subject to price
controls. In 2013, the IMF urged the government to replace costly subsidies on food and fuel
with targeted assistance.

0 20 40 60 80 100
Djibouti’s average tariff rate is 17.6 percent. Non-tariff barriers are relatively low for the region.
Domestic and foreign investors generally receive equal treatment under the law, but invest-
ment in some sectors of the economy is restricted. The banking sector has expanded as more
banks, particularly foreign banks, have entered the market and increased competition in
recent years.


DOMINICA
50
25 75
Least Most
free 0 100 free
D ominica’s economic freedom score is 66.1, making its econ-

omy the 61st freest in the 2015 Index. Its overall score is
0.9 point higher than last year, due primarily to improvements
Freedom Trend
70
in investment freedom, freedom from corruption, and mon-
etary freedom. Dominica is ranked 11th out of 29 countries 68
in the South and Central America/Caribbean region. It has
recorded its highest economic freedom score ever in the 2015 66
Index, and its overall score is above the world average.

64
Over the past five years, economic freedom in Dominica has
improved by 2.8 points, advancing in half of the 10 factors. 62
Efforts to develop an offshore medical and financial industry
have been assisted by improvements in labor freedom and an 60
easing of the investment regime.
58
However, Dominica still falls short of the world average in the 2011 2012 2013 2014 2015
four economic freedoms in the areas of finance, trade, fiscal
policy, and the management of government spending. Diver-
sifying the economy from agriculture to services and eco- Country Comparisons
tourism requires more serious restructuring, particularly in
opening the economy to the global marketplace. Country 66.1
BACKGROUND: Dominica has a unicameral parliamentary World

government with a president and prime minister. Prime Average 60.4
Minister Roosevelt Skerrit took office in 2004; his Dominica
Labour Party was re-elected in 2009 and will face the voters Regional
Average 59.7
again in 2015. In 2008, Dominica was among the first Carib-
bean nations to join the Bolivarian Alliance for the Ameri- Free
84.6
cas (ALBA), a restrictive trade organization led by socialist Economies
Venezuela. ALBA’s continuing interference in the Caribbean 0 20 40 60 80 100
Community (CARICOM) threatens to undermine progress in
free-market democratic institutions and regional integration.
In 2010, Dominica entered into an economic union with other Quick Facts
members of the Organization of Eastern Caribbean States. In Population: 0.1 million
an effort to diversify the economy, the government encour- GDP (PPP): $1.0 billion
ages investments in non-traditional agricultural exports such 0.8% growth in 2013
as coffee, patchouli, aloe vera, exotic fruits, and cut flowers. It 5-year compound annual growth 0.0%
also plans to sign agreements with private-sector investors to $14,283 per capita
develop geothermal energy resources. Unemployment: n/a
189
DOMINICA (continued)
1–Year

0 20 40 60 80 100
Dominica does not have a major corruption problem, although anti-corruption statutes are
sometimes not implemented effectively. It has an independent judiciary based on English com-
mon law, and private property rights are generally respected. Public trials are considered fair.
Pirated copyrighted material is sold openly. Non-bank financial institutions are monitored to
combat money laundering and the financing of terrorism.

0 20 40 60 80 100
Dominica’s top individual income tax rate is 35 percent, and its top corporate tax rate is 30
percent. Other taxes include a value-added tax and an environment tax. Overall tax revenue
equals 22.6 percent of the domestic economy. Government expenditures are equivalent to 35.8
percent of domestic income, and public debt amounts to 75 percent of gross domestic product.

0 20 40 60 80 100
Incorporating a business takes about two weeks, and no minimum capital is required. Com-
pleting licensing requirements still takes over three months on average. The non-salary cost
of employing a worker is moderate, but restrictions on work hours are rigid. An ongoing and
comprehensive effort by government to restructure the economy includes the elimination of
price controls.

0 20 40 60 80 100
Dominica’s average tariff rate is 8.6 percent. Government procurement rules can favor domes-
tic firms. Foreign and domestic investors are generally treated equally under the law, but there
are some restrictions on foreign ownership of land. The financial sector remains underdevel-
oped. Shallow capital markets and a lack of available financial instruments restrict overall
access to credit.

Property Rights 0 Fiscal Freedom +6.2 Business Freedom –4.8 Trade Freedom –1.4

DOMINICAN REPUBLIC
50
25 75
Least Most
free 0 100 free
Toverall
he Dominican Republic’s economic freedom score is 61.0,
score is 0.3 point lower than last year due to consid-
Freedom Trend
63
erable declines in the control of government spending and

business freedom that outweigh gains in labor freedom and 62
freedom from corruption. The Dominican Republic is ranked
Caribbean region, and its score is just above the region-
al average.
60
A free trade agreement with the United States and a strategic
location in the Caribbean have facilitated economic growth 59
in the Dominican Republic. Over the past half-decade, how-
ever, the Dominican Republic has recorded positive changes
58
in only two of the 10 economic freedoms. Labor freedom
improved only marginally, but investment freedom advanced 2011 2012 2013 2014 2015
by 20 points.
Once an agricultural economy, the Dominican Republic now Country Comparisons
boasts a robust tourism and services sector. Liberalization of
the investment regime has facilitated growth surrounding Country 61.0
free trade zones along the coast. However, entrepreneurship
World
and private-sector development remain constrained by ineffi- Average 60.4
cient government services and weak rule of law. Corruption is
still pervasive in the economy, exacerbated by drug trafficking Regional
59.7
in recent years. Institutionalizing free-market principles will Average
be vital for securing long-term growth. Free
Economies 84.6
BACKGROUND: Danilo Medina of the center-left Dominican
0 20 40 60 80 100
Liberation Party (PLD) won the presidency in August 2012,
succeeding three-term President Leonel Fernández, also of
the PLD. Haitian immigration is a hot political issue. A 2013
Supreme Court ruling that limited the rights of Haitians who Quick Facts
are unlawfully present in the country and their Dominican- Population: 10.4 million
born children was partially undone by a Medina-sponsored GDP (PPP): $103.2 billion
law in 2014. The Dominican Republic is the second-largest 4.1% growth in 2013
economy in the Caribbean. The traditional agricultural econ- 5-year compound annual growth 4.7%
omy has shifted in recent years toward greater reliance on $9,911 per capita
tourism and manufacturing. Remittances from the United Unemployment: 15.0%
States account for about 10 percent of GDP. Drug and human Inflation (CPI): 4.8%
trafficking undermine the rule of law. FDI Inflow: $2.0 billion
191
DOMINICAN REPUBLIC (continued)
1–Year

0 20 40 60 80 100
Late in 2013, the government launched an effort to improve public-sector transparency, but
it seems unlikely to make the institutional reforms needed to reduce widespread graft, and
bureaucratic processes will probably remain vulnerable to corruption. The judiciary is politi-
cized and riddled with corruption, and the legal system offers little recourse to those who lack
money or influence. Enforcement of intellectual property rights is poor.

0 20 40 60 80 100
The top individual income tax rate is 25 percent, and the top corporate tax rate has been
reduced from 29 percent to 28 percent. Other taxes include a value-added tax and a tax on net
wealth. Overall tax revenue is 13.5 percent of gross domestic product. Government expendi-
tures equal 20.7 percent of the domestic economy, and public debt equals 34 percent of annual
domestic income.

0 20 40 60 80 100
Launching a business takes seven procedures, and the minimum capital required equals about
half the level of average annual income. Obtaining necessary permits takes over 150 days on
average. The non-salary cost of employing a worker is moderate, but the labor market lacks
flexibility in other areas. The government’s SIUBEN system includes targeted conditional cash
transfers, electricity and cooking gas subsidies, and subsidized health insurance.

0 20 40 60 80 100
The Dominican Republic’s average tariff rate is 6.1 percent. Imports of used cars are restricted,
and government procurement rules can benefit domestic companies. Foreign investors some-
times find it challenging to deal with the bureaucracy. The small financial sector has been
modernized and consolidated, but confidence in banking has been shaky. Capital markets are
underdeveloped, and long-term financing is hard to obtain.


ECUADOR
50
25 75
Least Most
free 0 100 free
E1.2cuador’s economic freedom score is 49.2, making its econ-

points higher than last year due to significant improve-
Freedom Trend
51
ments in freedom from corruption, the control of govern-
50
ment spending, and monetary freedom. Scores in five other
economic freedoms declined. Ecuador is ranked 25th out of
49
29 countries in the South and Central America/Caribbean
region, and its overall score is far below world and region-
48
al averages.
Ecuador’s improvement of 2.1 points over the past five years 47
masks long-term deterioration in economic freedom since
scoring began in 1995. Once considered “moderately free,” 46
Ecuador has fallen into the ranks of the “repressed” econo-

45
mies since 2010.
2011 2012 2013 2014 2015
Ecuador continues to lag significantly in promoting the rule
of law and has yet to establish a judicial system that is free
from political interference. Deep petroleum reserves have Country Comparisons
enhanced financial growth, and Ecuador returned to the bond
market in 2014. However, a history of fiscal incompetence, Country 49.2
along with a restrictive investment climate, continues to sup-
press overall economic freedom. World
Average 60.4
BACKGROUND: President Rafael Correa was re-elected in Regional
2013 for the third time, having amended the constitution Average 59.7
in 2008 to ease presidential term limits. The ruling Alianza
PAIZ has proposed legislation to abolish the limits altogether, Free
Economies 84.6
which would allow Correa to run again in 2017. Other consti-
0 20 40 60 80 100
tutional amendments passed in 2011 increased Correa’s con-
trol of media and reduced the judicial system’s independence.
The Inter-American Human Rights Commission has criti-
cized Ecuador for restricting freedom of the press. Ecuador Quick Facts
is part of the Bolivarian Alliance for the Americas (ALBA), led Population: 15.8 million
by socialist Venezuela, and has strengthened its relations with GDP (PPP): $159.0 billion
Iran and China. By 2013, Ecuador was sending most of its oil 4.2% growth in 2013
exports to China. Ecuador returned to international credit 5-year compound annual growth 4.2%
markets in June 2014 for the first time since its $3.2 billion $10,080 per capita
default in 2008. Approximately one-third of the population Unemployment: 4.5%
lives below the poverty line. Inflation (CPI): 2.7%
193
ECUADOR (continued)
1–Year

0 20 40 60 80 100
The government’s anti-corruption agency reported in 2013 that cronyism, impunity, excessive
discretion, fragmented anticorruption policies, lack of correspondence between offenses and
sanctions, and collusion were among the factors that have favored the persistence of corrup-
tion in Ecuador. Judicial processes are slow and subject to political influence. The government
decriminalized intellectual property rights violations in 2014.

0 20 40 60 80 100
The top individual income tax rate is 35 percent, and the top corporate tax rate is 22 percent. A
lower rate of 12 percent applies to profits that are reinvested. Other taxes include a value-added
tax and an inheritance tax. Overall revenue equals 19.4 percent of domestic income. Public
expenditures are equivalent to 40.4 percent of the overall domestic economy, and public debt
equals 24 percent of GDP.

0 20 40 60 80 100
Commercial laws are applied inconsistently, and launching a business takes about two months
and 13 procedures. Completing licensing requirements takes over 100 days. Job-tenure reg-
ulations create a disincentive for new hiring, and employers resort to short-term contracts.
Although dollarization produces a modicum of monetary stability, the state makes extensive
use of subsidies and price controls.

0 20 40 60 80 100
Ecuador’s average tariff rate is 4.3 percent. Additional barriers to trade include export taxes
and government promotion of “import substitution.” Foreign investment in several sectors of
the economy is restricted. The financial system lacks efficiency and depth, and capital markets
are underdeveloped. Lack of financing options hampers private-sector growth, and the number
of nonperforming loans has increased.


EGYPT
50
25 75
Least Most
free 0 100 free
Epoints
gypt’s economic freedom score is 55.2, making its economy
higher than last year due to improvements in six of the
Freedom Trend
62
10 economic freedoms, including labor freedom, monetary
freedom, and investment freedom, that outweigh declines in 60
trade freedom and the control of government spending. Egypt
is ranked 12th out of 15 countries in the Middle East/North 58
Africa region, and its overall score is below the world average.
56
Over the past five years, Egypt’s economic freedom score has
declined by nearly 4.0 points, pushed down by double-digit 54
losses in property rights, investment freedom, and finan-
cial freedom. However, this decline has come to a halt in the 52
2015 Index.
50
Further action to restore and improve economic freedom is 2011 2012 2013 2014 2015
essential to counter economic stagnation and poverty. Long-
established weaknesses in the institutional framework that
include price controls and government subsidies of gasoline Country Comparisons
have greatly burdened the budget and forced the government
to seek a bailout from both the IMF and other Arab states. The Country 55.2
rule of law is ineffective and arbitrary, and judicial procedures
are long and costly. World
60.4
Average
BACKGROUND: The army ousted President Hosni Mubarak
in February 2011, and the Supreme Council of the Armed Regional
Average 61.6
Forces assumed power pending election of a new civilian gov-
ernment. The parliament was dissolved in June 2012 after Free
84.6
one-third of its members were found to have won their seats Economies
illegitimately. Mohamed Morsi of the Muslim Brotherhood’s 0 20 40 60 80 100
Freedom and Justice Party was elected president in June 2012
and granted himself sweeping new powers in November. His
increasingly authoritarian rule triggered huge demonstra- Quick Facts
tions and a July 2013 army coup. Field Marshal Abdel Fat- Population: 84.2 million
tah el-Sisi was elected president in May 2014. Three years of GDP (PPP): $553.6 billion
political instability have hurt tourism and foreign investment, 2.1% growth in 2013
both of which are important sources of foreign exchange. 5-year compound annual growth 3.2%
There have been limited market reforms, but food, energy, $6,579 per capita
and other key commodities remain heavily subsidized. Unemployment: 12.7%
195
EGYPT (continued)
1–Year

0 20 40 60 80 100
Long before the 2013–2014 political upheaval, corruption was pervasive at all levels of govern-
ment. The rule of law has been highly unstable across the country, and the judicial system’s
independence is poorly institutionalized. Judicial procedures tend to be protracted, costly,
and subject to political pressure. Property rights are not protected effectively, and titles to real
property may be difficult to establish.

0 20 40 60 80 100
Egypt’s top individual and corporate income tax rates are 25 percent. Other taxes include a
property tax and a general sales tax. Total tax revenue is equal to 12.9 percent of domestic
income. Government spending equals 32.7 percent of the domestic economy, and public debt
has risen to 89 percent of GDP. Measures to reduce the budget deficit by lowering energy sub-
sidies are underway.

0 20 40 60 80 100
Previous regulatory reforms have made starting a business less time-consuming. However,
without restructuring in other policy areas, those reforms have failed to create real momen-
tum for dynamic entrepreneurial growth. Informal labor activity persists in many sectors. The
government introduced significant electricity and fuel price increases in 2014 in a move to cut
state subsidies.
OPEN Trade Freedom 70.0 133rd –1.4

0 20 40 60 80 100
Egypt’s average tariff rate is 8.1 percent. The government increased tariffs on luxury goods in
2013. Foreign ownership of land in some regions is restricted. Despite the uncertainty gener-
ated by political turmoil that has included the overthrow of two governments, the banking
sector remains integrated into international markets and has shown a high level of resilience.
Banks continue to be relatively well capitalized.


EL SALVADOR
50
25 75
Least Most
free 0 100 free
Escoreleconomy
Salvador’s economic freedom score is 65.7, making its
the 62nd freest in the 2015 Index. Its overall
is 0.5 point lower than last year, with declines in labor
Freedom Trend
70
freedom, business freedom, and property rights outweigh-
ing improvements in trade freedom, investment freedom, 69
and freedom from corruption. El Salvador is ranked 12th out
of 29 countries in the South and Central America/Caribbean 68
region, and its overall score remains above the world average.
67
Over the past five years, economic freedom in El Salvador has
declined by over 3.0 points, and the country has recorded its 66
lowest score ever in the 2015 Index. Declines in half of the 10
economic freedoms include especially serious deteriorations 65
in fiscal freedom and regulatory efficiency.
64
El Salvador’s deteriorating economic freedom undermines 2011 2012 2013 2014 2015
an already weak institutional environment. Rampant vio-
lent crime further incapacitates a legal environment that is
already subject to lingering corruption and obstructionism. Country Comparisons
However, relatively open trading and investment environ-
ments have fueled growth and offset other weaknesses. Country 65.7
BACKGROUND: After the end of El Salvador’s 12-year civil war World

in 1992, three successive presidents from the National Repub- Average 60.4
lican Alliance (ARENA) sought to liberalize the economy in
order to spur growth. A fourth, Antonio Saca (2004–2009), Regional
Average 59.7
broke with that line of thinking. Corruption and deteriorat-
ing property rights during the Saca administration alienated Free
84.6
foreign investors and drove the electorate to look for another Economies
option. Mauricio Funes of the Farabundo Martí Liberation 0 20 40 60 80 100
Front (FMLN), elected in 2009, stepped into the vacuum,
but his policies further undermined the rule of law. FMLN
member and former guerrilla commander Salvador Sánchez Quick Facts
Cerén succeeded Funes in March 2014. The disintegration of Population: 6.3 million
a gang truce has led to an increase in homicides, and El Salva- GDP (PPP): $47.5 billion
dor currently has the world’s fourth-highest murder rate. Two 1.6% growth in 2013
days after Sánchez Cerén’s inauguration, El Salvador became 5-year compound annual growth 0.8%
a member of Petrocaribe, an alliance formed by former Ven- $7,515 per capita
ezuelan President Hugo Chávez. Unemployment: 6.3%
197
EL SALVADOR (continued)
1–Year

0 20 40 60 80 100
In 2014, an arrest warrant was issued for a former president on corruption charges including
embezzlement and illicit gains, but few high-level public officials have ever been convicted.
The judicial system is somewhat independent but still subject to corruption and obstruction-
ism. Property rights are not strongly respected, and law enforcement is inefficient and uneven.
Violent crime, much of it gang-related, remains a problem.

0 20 40 60 80 100
El Salvador’s top individual and corporate income tax rates are 30 percent. Other taxes include
a value-added tax and excise taxes. Total tax revenue equals 16 percent of gross domestic prod-
uct. Government spending has reached 22 percent of the total domestic economy in the most
recent year, and public debt is equivalent to 55 percent of domestic income.

0 20 40 60 80 100
Despite ongoing reform efforts, the overall regulatory environment remains burdensome.
Starting a business takes over two weeks on average, and obtaining necessary permits involves
25 procedures. Lack of flexibility in the labor market hinders job growth. Although electricity
generation has been largely privatized, the government partially subsidizes fuels and imposes
price controls on several goods and services.

0 20 40 60 80 100
El Salvador’s average tariff rate is 2.4 percent. Imports of agricultural products can face addi-
tional barriers. Foreign and domestic investors are generally subject to the same rules. Banks,
largely foreign-owned and private, dominate the evolving financial system. The two state-
owned banks account for less than 5 percent of all loans. A weak legal framework constrains
local capital market development.


EQUATORIAL GUINEA
50
25 75
Least Most
free 0 100 free
Eoverall
quatorial Guinea’s economic freedom score is 40.4, mak-
ing its economy the 173rd freest in the 2015 Index. Its
score has dropped by 4.0 points, the biggest decline in
Freedom Trend
50
this year’s Index. Equatorial Guinea is ranked 44th out of 46
countries in the Sub-Saharan Africa region, and its score is far 48
below the regional and world averages.
46
Economic freedom in Equatorial Guinea has declined by over
7 points over the past half-decade, and the country has regis- 44
tered its lowest score ever in the 2015 Index. Led by a 49-point
deterioration in its score for government spending, it has 42
dropped even further into the “repressed” category. Scores
for financial freedom and property rights have plummeted by 40
over 10 points.
38
Abundant oil reserves have generated high economic growth, 2011 2012 2013 2014 2015
but most Equatorial Guineans remain trapped in poverty.
A corrupt government and the small group of presidential
cronies and other elites have captured billions of dollars in Country Comparisons
petroleum rents. The government continues to influence for-
eign investment decisions, subsidize key industries, control Country 40.4
the flow of capital, and generally maintain its pervasive pres-
ence in the economy. The judiciary is one of the weakest in World
60.4
the world and is directly influenced by the president’s office. Average
BACKGROUND: President Teodoro Obiang Nguema Mbasogo Regional

Average 54.9
seized power in 1979 and continues to control the military and
the government. Human rights organizations criticize Obiang Free
84.6
for using an oil boom to enrich himself at the expense of his Economies
people. In 2011, U.S. authorities filed suit to seize $71 million 0 20 40 60 80 100
worth of assets allegedly obtained illegally by the president’s
family. Equatorial Guinea is one of Africa’s fastest-growing
economies and Africa’s third-largest oil producer. The oil Quick Facts
boom has led to a dramatic increase in government revenue Population: 0.8 million
in recent years, but the standard of living has been slow to GDP (PPP): $17.7 billion
increase due to endemic corruption, mismanagement of oil –4.9% growth in 2013
revenues, and an absence of the rule of law. 5-year compound annual growth –1.3%
$23,370 per capita
Unemployment: 9.1%
199
EQUATORIAL GUINEA (continued)
1–Year

0 20 40 60 80 100
President Obiang and his inner circle dominate the economic landscape with absolute power.
Graft is rampant. In 2014, the French government announced a formal investigation into
money laundering by Obiang’s son, Teodorìn, Equatorial Guinea’s second vice president. U.S.
authorities are also investigating. The judiciary is not independent as the president is the chief
magistrate. Protection of property rights is poor.

0 20 40 60 80 100
Equatorial Guinea’s top individual and corporate income tax rates are 35 percent. Other taxes
include a value-added tax and a tax on inheritance. The overall tax burden equals 2.4 percent
of gross domestic product. Government spending, which stands at 47.8 percent of the domestic
economy, is mostly funded by hydrocarbon revenue. Public debt equals 9 percent of domes-
tic income.

0 20 40 60 80 100
Starting a business costs about the level of average annual income, and completing licensing
requirements takes over 140 days. The inefficient labor market lacks flexibility, and imbalances
persist in the demand for and supply of skilled workers. The government has misused its sub-
stantial oil revenues to subsidize strategic sectors such as fisheries, agriculture, and ecotourism.

0 20 40 60 80 100
Equatorial Guinea’s average tariff rate was 15.6 percent as of 2007. It may take weeks to import
goods. The government screens foreign investment and imposes additional sectoral restric-
tions. The small financial sector remains underdeveloped, with only four commercial banks
in operation. The high costs of finance and limited access to credit instruments hinder entre-
preneurial activities. There is no stock exchange.

Property Rights 0 Fiscal Freedom –13.9 Business Freedom –17.5 Trade Freedom –0.6

ERITREA
50
25 75
Least Most
free 0 100 free
Eall ritrea’s economic freedom score is 38.9, making its econo-

my one of the most “repressed” in the 2015 Index. Its over-
score is 0.4 point better than last year, with improvements
Freedom Trend
40
in labor freedom and the control of government spending
offset by declines in freedom from corruption and business 39
freedom. Although Eritrea has recorded its highest economic
freedom score ever in the 2015 Index, it is ranked 45th out
38
of the 46 countries in the Sub-Saharan Africa region and
remains the world’s fifth least free economy.
37
Located on the Red Sea and with a burgeoning mining sector,
Eritrea has experienced a half-decade of strong GDP growth
36
that, along with more prudent spending and a slightly more
stable monetary outlook, has led to a modest increase in eco-
nomic freedom. However, improvements have occurred in 35
only three of the 10 factors. 2011 2012 2013 2014 2015
Over the past five years, scores have declined in the areas of
corruption, taxation, and labor policy, further burdening an Country Comparisons
already weak institutional framework. An oppressive central
government controls investment and the financial sector and Country 38.9
distorts prices. Corruption is endemic. The judiciary is highly
politicized and fails to check government expropriations of World
60.4
private property. Average
BACKGROUND: Isaias Afwerki has ruled this one-party state Regional

Average 54.9
since 1993. According to a U.N. report in 2014, 4,000 Eritreans
flee every month because of government repression. Eritrea is Free
84.6
subject to U.N. military and economic sanctions for support- Economies
ing armed opposition groups in Horn of Africa countries. Bor- 0 20 40 60 80 100
der conflicts persist between Ethiopia and Eritrea. Although
Eritrea is one of Africa’s faster-growing countries in percent-
age terms, growth in absolute terms is relatively meager. Cop- Quick Facts
per and gold are important exports, but military spending Population: 6.3 million
drains resources from development of public infrastructure. GDP (PPP): $4.5 billion
An estimated 70 percent of Eritreans cannot meet basic food 1.3% growth in 2013
needs, and the government declines international food aid. 5-year compound annual growth 4.6%
Roughly three-quarters of Eritreans depend on small-scale $707 per capita
agriculture and fishing, and up to two-thirds reportedly rely Unemployment: 8.9%
on government assistance. Inflation (CPI): 12.3%
201
ERITREA (continued)
1–Year

0 20 40 60 80 100
The autocratic regime of the president and his small circle of senior advisers and military com-
manders is widely considered to be one of the world’s most repressive. Corruption is a major
problem. The politicized judiciary, understaffed and unprofessional, has never ruled against
the government. Protection of property rights is poor. The state has often expropriated private
property without notice, explanation, or compensation.

0 20 40 60 80 100
The top individual and corporate income tax rates are 30 percent. Other taxes include a con-
troversial 2 percent levy on the Eritrean diaspora. The overall tax burden equals 50 percent of
the domestic economy. Government expenditures equal 30.7 percent of domestic income, and
public debt is larger than the size of the economy at over 125 percent of gross domestic product.

0 20 40 60 80 100
Cumbersome procedures and high compliance costs continue to be impediments to business
formation. In the absence of private-sector employment opportunities, an organized labor
market has not emerged. Existing labor regulations are outmoded and create challenging bar-
riers to hiring. Monetary stability remains weak overall. Subsidies and price controls have been
a core feature of the country’s command economy.

0 20 40 60 80 100
Eritrea’s average tariff rate was 5.4 percent as of 2006. Importing goods can be a time-con-
suming process. Eritrea’s economy is dominated by the state and provides a difficult environ-
ment for foreign investors. The financial system remains very underdeveloped. All banks are
majority-owned by the state, and private-sector involvement in the system remains limited.

Property Rights 0 Fiscal Freedom –29.4 Business Freedom –0.1 Trade Freedom 0

ESTONIA
50
25 75
Least Most
free 0 100 free
Epointstonia’s economic freedom score is 76.8, making its econo-

my the 8th freest in the 2015 Index. Its overall score is 0.9
higher than last year, reflecting improvements in six of
Freedom Trend
78
the 10 economic freedoms, including business freedom, free-
dom from corruption, and labor freedom. Estonia is ranked 77
2nd out of 43 countries in the Europe region, and its overall
score is well above the regional and world averages. 76
Despite the eurozone crisis and a half-decade of weak regional 75

growth, Estonia’s domestic economy has proven resilient, and
economic freedom has advanced. Since 2011, economic free- 74
dom has increased in a majority of the 10 factors, with strong
improvements in the property rights regime and the entrepre- 73
neurial environment.
72
An increase in its overall score for the past three years has 2011 2012 2013 2014 2015
helped to confirm Estonia as a regional leader in economic
freedom, reestablished as one of the world’s 10 freest econo-
mies for the first time since 2007. Minimal state interference Country Comparisons
has been accompanied by a prudent fiscal policy, a commit-
ment to open markets, and overall regulatory efficiency. In Country 76.8
addition, the government has reinforced the rule of law and
promoted an independent judiciary since independence from World
60.4
the Soviet Union in 1991. Average
BACKGROUND: Estonia regained its independence from the Regional

Average 67.0
Soviet Union in 1991 and is a stable multi-party democracy. It
joined NATO and the European Union in 2004 and the Organ- Free
84.6
isation for Economic Co-operation and Development in 2010. Economies
In 2011, it became the first former Soviet state to adopt the 0 20 40 60 80 100
euro. With a liberal investment climate, foreign investments
have risen substantially. In March 2014, Prime Minister Taavi
Röivas of the center-right Reform Party replaced Andrus Quick Facts
Ansip, also of the Reform Party, who had served for nine Population: 1.3 million
years. Estonia is one of the world’s most dynamic and modern GDP (PPP): $29.8 billion
economies. It profits from strong electronics and telecommu- 0.8% growth in 2013
nication sectors and has strong trade relations with Russia, 5-year compound annual growth 0.2%
Germany, Sweden, and Finland. $23,144 per capita
Unemployment: 8.5%
203
ESTONIA (continued)
1–Year

0 20 40 60 80 100
There are occasional problems with government corruption. In 2013, senior members of the
governing Reform Party were implicated in a business corruption scandal involving a now-
defunct company owned by the environment minister’s father. Estonia’s judiciary is effectively
insulated from government influence. Property rights and contracts are well enforced and
secure. Commercial codes are applied consistently.

0 20 40 60 80 100
The top individual income tax rate is 21 percent, and the corporate tax is 21 percent of the net
amount of profit distribution. Other taxes include a value-added tax and excise taxes. Total
government revenue equals 32.5 percent of the domestic economy, and government spend-
ing equals 39.5 percent of domestic income. Public debt is a relatively low 11 percent of gross
domestic product.

0 20 40 60 80 100
Recent reforms have facilitated insolvent firms’ restructuring, making bankruptcy procedures
less costly and improving regulatory efficiency. Enhancing labor productivity has been a key
goal, and the recently enacted labor law aims to reduce the costs of dismissing employees. In
2014, the government reduced the “renewable energy fee” on monthly electricity bills to cush-
ion the effect of higher prices from liberalization.

0 20 40 60 80 100
equally under Estonian law. The relatively well regulated financial market continues to grow
steadily. The banking sector remains competitively open and resilient, offering a wider range
of financial products.

Property Rights +20.0 Fiscal Freedom –1.4 Business Freedom –3.5 Trade Freedom +11.0

ETHIOPIA
50
25 75
Least Most
free 0 100 free
Epoints
thiopia’s economic freedom score is 51.5, making its econo-
my the 149th freest in the 2015 Index. Its overall score is 1.5
higher than last year, reflecting considerable improve-
Freedom Trend
53
ments in monetary freedom, freedom from corruption, and
labor freedom. Ethiopia is ranked 37th out of 46 countries in 52
the Sub-Saharan Africa region, and its overall score continues
to be below the regional average. 51
With a large domestic market and promising economic pros-
pects, Ethiopia has the potential to become a regional eco- 50
nomic powerhouse, but persistent state intervention in the
relatively closed economy has suppressed the growth of eco- 49
nomic freedom over the past five years. Since 2011, Ethiopia’s
economic freedom has expanded by a modest 1.0 point.
48
Overall, the institutional basis of economic freedom in Ethio- 2011 2012 2013 2014 2015
pia is still weak. A nominally independent judiciary continues
to follow government policy advice, and corruption remains
endemic. The government has made significant investments Country Comparisons
in major development projects, including the Grand Renais-
sance Dam, but restricts foreign investment in major indus- Country 51.5
tries and keeps important sectors of the economy closed to
global trade and investment. World
Average 60.4
BACKGROUND: Prime Minister Hailemariam Desalegn’s Regional
Ethiopian People’s Revolutionary Democratic Front and Average 54.9
allied parties hold all but two seats in parliament. Elections
are scheduled for 2015. Desalegn served a one-year term as the Free
Economies 84.6
elected chairman of the African Union. In May 2014, Ethiopia,
0 20 40 60 80 100
Kenya, Burundi, and Rwanda agreed to send troops to South
Sudan to prevent renewed fighting between government
troops and rebel forces. After years of unilateral intervention
to secure border buffer zones in Somalia, Ethiopia joined the Quick Facts
African Union’s peacekeeping mission there in 2014. Border Population: 88.9 million
tensions continue between Ethiopia and Eritrea. Ethiopia GDP (PPP): $121.4 billion
has had 10 years of steady economic growth, but not enough 9.7% growth in 2013
to reduce poverty. Its per capita income remains among 5-year compound annual growth 10.1%
the world’s lowest. Ethiopia is a leading coffee producer. Its $1,366 per capita
economy is largely based on agriculture and is vulnerable to Unemployment: 5.7%
droughts and external shocks. Inflation (CPI): 8.0%
205
ETHIOPIA (continued)
1–Year

0 20 40 60 80 100
Corruption is a significant problem in Ethiopia. State institutions are dominated by ruling
EPRDF officials who reportedly receive preferential access to credit, land leases, and jobs.
Under the government’s “villagization” program, hundreds of thousands of indigenous people
have been forcibly relocated to new villages with inadequate infrastructure so that the state
can lease their lands to commercial agricultural foreign investors.

0 20 40 60 80 100
Ethiopia’s top individual income tax rate is 35 percent, and its top corporate tax rate remains
at 30 percent. Other taxes include a value-added tax and a tax on capital gains. The overall tax
burden equals 11.6 percent of the domestic economy, and government spending accounts for
16.9 percent of gross domestic product. Public debt equals 22 percent of annual production.

0 20 40 60 80 100
Inconsistent enforcement of regulations often impedes business activity and undermines eco-
nomic development. The minimum capital requirement for launching a business is higher than
the level of average annual income. Much of the labor force is employed in the informal sector.
Monetary stability has been weak, and subsidies for the government’s state-led development
model are hindering private-sector growth.
OPEN Trade Freedom 64.4 152nd +0.2

0 20 40 60 80 100
Ethiopia has a 10.3 percent average tariff rate. It is not a member of the WTO, and government
procurement processes can favor domestic companies. Foreign investment is heavily regulated.
There is no constitutional right to own land. The small financial sector continues to evolve
and is largely dominated by banks. The capital market remains underdeveloped, and there is
no stock exchange.


FIJI
50
25 75
Least Most
free 0 100 free
Fpointiji’s economic freedom score is 59.0, making its economy

higher than last year, with improvements in monetary
Freedom Trend
62
freedom, freedom from corruption, and labor freedom par-
61
tially offset by a combined decline in business freedom, the
control of government spending, and fiscal freedom. Fiji is
60
ranked 20th out of 42 countries in the Asia–Pacific region,
and its overall score is about average, both for the world and
59
the region.
Over the past five years, Fiji’s economic freedom has declined 58
by 1.4 points, a trend that has pushed the economy into the
“mostly unfree” category. Led by score declines in freedom 57
from corruption, financial freedom, and government spend-

56
ing, economic freedom in Fiji has fallen in half of the 10 cat-
egories measured. 2011 2012 2013 2014 2015
Reflecting the lack of progress in structural and institutional

reforms, Fiji continues to underperform in many policy areas Country Comparisons
critical to economic freedom. The autocratic and centralized
government undercuts the effective development of an inde- Country 59.0
pendent judiciary. Government spending has been growing,
with subsidies and price controls undermining overall mon- World
Average 60.4
etary stability and fiscal soundness.
Regional
BACKGROUND: The Pacific island nation of Fiji is ruled by Average 58.8
military strongman Commodore Frank Bainimarama, who
has dominated island politics for a decade. There is a long his- Free
Economies 84.6
tory of ethnic tension between the indigenous, mostly Chris-
0 20 40 60 80 100
tian population and a large minority of Hindu and Muslim
Indo–Fijians. Sanctions imposed in 2006 by Fiji’s main trad-
ing partners, including the European Union and Australia,
in reaction to the coup that installed Bainimarama hurt the Quick Facts
vital agriculture, apparel, and fishing industries. In September Population: 0.9 million
2009, Fiji was suspended from the Commonwealth of Nations. GDP (PPP): $4.5 billion
In July 2012, Australia and New Zealand restored diplomatic 3.0% growth in 2013
ties in response to Fiji’s preparations for democratic elec- 5-year compound annual growth 1.8%
tions in 2014. A reform of the industrial sector has done little $5,085 per capita
to boost growth. Unemployment: 8.0%
207
FIJI (continued)
1–Year

0 20 40 60 80 100
Since seizing power in 2006, the military government has suspended the constitution, neu-
tralized political opponents, and crippled democratic institutions. Official corruption is
widespread, and government decision-making is not transparent. Eight percent of the land is
freehold; the rest (indigenous and government land) can only be leased. Protection of property
is highly uncertain, and obtaining land titles is difficult.

0 20 40 60 80 100
Fiji’s top individual income tax rate is 29 percent, and its top corporate tax rate is 20 percent.
Other taxes include a value-added tax and a land sales tax. The overall tax burden is 25 percent
of domestic income. Government spending equals 29.1 percent of domestic output, and public
debt equals 52 percent of gross domestic product.

0 20 40 60 80 100
Incorporating a business has become less time-consuming, but other regulatory requirements
increase the overall cost of conducting business. The minimum capital requirement for starting
a business has been eliminated. The underdeveloped labor market traps much of the labor force
in informal economic activity. The government maintains price controls on various goods and
continues to subsidize electricity for residential customers.

0 20 40 60 80 100
Fiji has a 9.9 percent average tariff rate. There are few formal non-tariff barriers. Most land is
owned by the government. The financial sector, dominated by commercial banks, is relatively
well developed and stable. The central bank has relaxed several foreign exchange controls in
recent years. The capital market remains underdeveloped, with 18 companies listed in the stock
exchange as of 2014.

Freedom from –7.7 Government +2.1 Labor Freedom –8.4 Investment Freedom 0

FINLAND
50
25 75
Least Most
free 0 100 free
Ffrominland’s economic freedom score is 73.4, making its econo-

my the 19th freest in the 2015 Index. Its score is unchanged
last year, with improvements in labor freedom, fiscal
Freedom Trend
75
freedom, monetary freedom, and trade freedom counterbal-
anced by declines in the management of government spend-
74
ing, freedom from corruption, and business freedom. Finland
is ranked 9th out of 43 countries in the Europe region, and its
overall score is well above the world average.
73
Finland, a top performer in economic freedom in both Europe
and the world, remains a dynamic and flexible economy. How-
ever, over the past five years, its strong growth in economic 72
freedom has ended, with declines in business freedom, mon-
etary freedom, and control of government spending offsetting
71
significant improvements in labor freedom. Economic growth
has also stagnated. 2011 2012 2013 2014 2015
A European leader in information and communications tech-

nology, Finland has developed a strong domestic market with Country Comparisons
openness, efficiency, and flexibility at its core. The rule of
law is buttressed by strong property rights, and the perceived Country 73.4
level of corruption is one of the world’s lowest. As with other
Nordic countries, government spending is high relative to the World
Average 60.4
domestic economy, but the government remains committed
to meeting deficit targets. Regional
67.0
Average
BACKGROUND: With about one-fourth of its land mass above
the Arctic Circle, Finland is sparsely populated. Prime Min- Free
Economies 84.6
ister Jyrki Katainen of the center-right National Coalition
0 20 40 60 80 100
Party stepped down in 2014. His successor, Alexander Stubb,
formed a five-party government coalition in June. Finland
joined the European Union in 1995 and adopted the euro
as its currency in 1999. It also became a member of NATO’s Quick Facts
Partnership for Peace in 1994 and sits on the Euro–Atlantic Population: 5.5 million
Council. Public debate on pursuing full NATO membership GDP (PPP): $194.2 billion
has renewed in response to recent Russian aggression against –1.4% growth in 2013
Ukraine. Although growth remains sluggish, Finland’s econo- 5-year compound annual growth –1.0%
my is modern and competitive, with a focus on international $35,617 per capita
trade and vibrant information and communications-technol- Unemployment: 8.1%
ogy sectors. Inflation (CPI): 2.2%
209
FINLAND (continued)
1–Year

LAW Freedom from Corruption 89.0 3rd –4.4
0 20 40 60 80 100
Corruption is not a significant problem in Finland, which was ranked second out of 177 coun-
tries surveyed in Transparency International’s 2013 Corruption Perceptions Index. Secured
interests in movable and real property are recognized and enforced. Contractual agreements
are strictly honored. The quality of the judiciary is generally high. Finland adheres to many
international agreements that aim to protect intellectual property.

0 20 40 60 80 100
Finland’s top individual income tax rate is 31.8 percent, and its top corporate tax rate has been
reduced from 24.5 percent to 20 percent. Other taxes include a 28 percent flat tax on capital
income and a value-added tax. The total tax burden equals 44.1 percent of domestic income,
and government spending is equivalent to 56.7 percent of domestic output. Public debt equals
57 percent of GDP.

0 20 40 60 80 100
The overall regulatory framework is transparent and competitive. Launching a business is sub-
ject to minimum capital requirements but takes only three procedures. Bankruptcy proce-
dures are modern and efficient. Labor regulations are relatively rigid, and the non-salary cost of
employing a worker is high. Monetary stability has been well maintained, but the government
subsidizes numerous biogas, wind, and solar energy projects.

0 20 40 60 80 100
the EU is relatively open to external trade. The Finnish government generally treats foreign
and domestic investors equally. The financial sector, market-driven and competitive, offers a
wide range of financing options. Supervision of banking is prudent, and regulations are largely
consistent with international norms. Credit is allocated on market terms.


FRANCE
50
25 75
Least Most
free 0 100 free
Fdecreased
rance’s economic freedom score is 62.5, making its econo-
my the 73rd freest in the 2015 Index. Its overall score has
by 1.0 point, with particularly large declines in
Freedom Trend
66
labor freedom and the management of government spend-
ing. France is ranked 33rd out of 43 countries in the Europe 65
region, and its overall score is higher than the world average
but below the regional average. 64
Over the past five years, France’s economic freedom has
waned as the size and reach of government have expanded. A 63
stagnating domestic economic environment has led to persis-
tently high unemployment, particularly among young people, 62
and structural deficiencies have suppressed dynamic private-
sector expansion. Since 2011, economic freedom in France has
61
declined by over 2.0 points, falling in five of the 10 economic
freedoms including the control of government spending, fiscal 2011 2012 2013 2014 2015
freedom, and labor freedom.
However, with such institutional strengths as strong protec- Country Comparisons
tion of property rights and a relatively efficient legal frame-
work, the French economy is diversified and modern. The Country 62.5
entrepreneurial environment is generally facilitated by a
sophisticated and relatively resilient financial sector. The World
Average 60.4
government has pursued reform measures to increase the
economy’s competitiveness and flexibility, but progress has Regional
67.0
been slow and patchy. Average
BACKGROUND: François Hollande was elected president in Free

Economies 84.6
May 2012, and his Socialist Party has majority control of the
0 20 40 60 80 100
National Assembly. Hollande’s poor handling of the economy
has led to low approval ratings. French voters punished the
mainstream parties in the 2014 European Parliament elec-
tions, which resulted in the far-right National Front taking the Quick Facts
most seats. Formally reintegrated into NATO’s military com- Population: 63.7 million
mand structures, France was a leading participant in NATO’s GDP (PPP): $2.3 trillion
March 2011 military engagement in Libya and recently sent 0.3% growth in 2013
troops to Mali and the Central African Republic to counter 5-year compound annual growth 0.2%
advancing Islamic militants. The economy is diversified but $35,784 per capita
also is the top recipient of market-distorting agricultural Unemployment: 10.5%
subsidies under the European Union’s Common Agricultur- Inflation (CPI): 1.0%
al Policy. FDI Inflow: $4.9 billion
211
FRANCE (continued)
1–Year

0 20 40 60 80 100
France has an independent judiciary, and the rule of law is firmly established. In 2014, however,
former President Nicolas Sarkozy was detained for questioning about long-running accusa-
tions of corruption. Property rights and contract enforcement are secure, but complex and
inefficient regulations help to make property in France among the most expensive in the world,
despite weak demand and slowing construction activity.

0 20 40 60 80 100
France’s top individual income tax rate is 45 percent, and its top corporate tax rate is 34.3 per-
cent. Other taxes include a value-added tax and a tax on inheritance. Overall tax revenue equals
about 45.3 percent of domestic income, and government spending equals 57.0 percent of gross
domestic product. Public debt is close to 94 percent of annual domestic output.

0 20 40 60 80 100
With no minimum capital requirement for launching a firm, business start-up is straightfor-
ward. Completing licensing requirements takes over three months on average. The rigid labor
market lacks the capacity to generate more vibrant employment growth. Price controls affect
many products and services, and state subsidies to increase renewable energy capacity threaten
the competitiveness of the French power industry.

0 20 40 60 80 100
EU members have a 1.0 percent average tariff rate. France protects its film industry from
competition and imposes quotas on the broadcast of foreign television shows and music. The
government screens foreign investment in some sectors. The competitive financial sector,
dominated by banks, stable, and open to competition, offers a wide range of services. Foreign
financial firms have gained considerable market share.


GABON
50
25 75
Least Most
free 0 100 free
G abon’s economic freedom score is 58.3, making its econ-

has increased by 0.5 point, reflecting improvements in free-
Freedom Trend
60
dom from corruption, monetary freedom, and fiscal freedom
that outweigh declines in the management of government 59
spending and business freedom. Gabon is ranked 15th out of
58
score is lower than the world average.
Over the past five years, Gabon’s economic freedom score has 57
advanced by 1.6 points. Led by relatively broad-based gains in
six of the 10 economic freedoms, Gabon has registered a score
56
decline since 2011 only in the management of public spending.
While economic freedom has increased, Gabon has failed to 55
fully use the wealth generated by its vast oil to produce greater 2011 2012 2013 2014 2015
prosperity for its people by restructuring and modernizing its
economy. In particular, the rule of law remains weak and not
fully institutionalized. Natural resource revenues encourage Country Comparisons
rent-seeking and graft, and the judicial system continues to
be arbitrary and used for political ends. An IMF bailout in Country 58.3
2007 has not prevented the deterioration of public finances
in recent years. A closed domestic marketplace exacerbates World
60.4
sensitivity to price fluctuations in key industries. Average
BACKGROUND: President Omar Bongo ruled Gabon from Regional

Average 54.9
1967 until his death in 2009 when his son, Ali Ben Bongo,
replaced him. Opposition leaders accused the Bongo fam- Free
84.6
ily of electoral fraud to ensure dynastic succession. In 2011, Economies
President Bongo’s Gabonese Democratic Party (PDG) took 0 20 40 60 80 100
95 percent of the seats in flawed parliamentary elections.
The Bongo family is the subject of a long-running corruption
investigation in France. Gabon is the fifth-largest oil producer Quick Facts
in sub-Saharan Africa, but oil production has been declining Population: 1.6 million
steadily in recent years. The government is working to reduce GDP (PPP): $30.4 billion
dependence on oil and to diversify the economy by spending 5.9% growth in 2013
more on education and infrastructure. 5-year compound annual growth 4.4%
$19,478 per capita
Unemployment: 19.2%
213
GABON (continued)
1–Year

0 20 40 60 80 100
Corruption is rampant, although Gabon ranked as less corrupt than most of its Central African
neighbors in 2013. Payoffs are common in the commercial and business arenas, especially in the
energy sector. The judiciary is inefficient and not independent. Some prosecutions of former
government officials appear to target opposition members. Protections for property rights and
contracts are not strongly enforced.

0 20 40 60 80 100
The top individual income tax rate is 35 percent. The top corporate tax rate was cut from 35
percent to 30 percent in 2013 (extractive industries and other companies can qualify for lower
rates). Other taxes include a value-added tax. The overall tax burden equals 11.2 percent of eco-
nomic activity. Government spending amounts to 29.1 percent of domestic output, and public
debt equals 23 percent of GDP.

0 20 40 60 80 100
Despite recent reform efforts, administrative procedures for incorporating businesses remain
time-consuming. On average, it takes about 200 days to complete licensing requirements.
Labor regulations are outmoded, and the labor market does not function well. The state influ-
ences prices through subsidies to state-owned enterprises and direct control of the prices of
other products.

0 20 40 60 80 100
Gabon’s average tariff rate is 14.5 percent. Imports of sugar, eggs, and used cars are restricted.
Gabon’s Investment Charter guarantees the right of foreign investors to repatriate profits.
The financial sector remains state-controlled. Credit costs are high, and access to financing is
scarce, with fewer than 10 commercial banks in operation. The government controls long-term
lending through the state-owned development bank.

Freedom from –16.0 Government –1.4 Labor Freedom +4.1 Investment Freedom –15.0

THE GAMBIA
50
25 75
Least Most
free 0 100 free
Tscoreheeconomy
Gambia’s economic freedom score is 57.5, making its
the 113th freest in the 2015 Index. Its overall
is 2.0 points worse than last year, with especially notable
Freedom Trend
61
declines in the management of government spending, prop-
erty rights, freedom from corruption, and fiscal freedom. The 60
Gambia is ranked 19th out of 46 countries in the Sub-Saharan
Africa region, and its overall score is below the world average. 59
With few natural resources and high rates of poverty, The
Gambia has been behind many developing countries in imple- 58
menting policies that advance economic freedom. Over the
past five years, improvements to open the economy to greater 57
trade and investment have been offset by declines in six of the
10 economic freedoms including the control of government
56
spending and property rights. The Gambia’s overall score
decline is the fifth-largest in the 2015 Index. 2011 2012 2013 2014 2015
Investments in the institutions vital to growth and prosper-

ity are stagnant. Despite small improvements, high tariffs Country Comparisons
and relatively closed domestic markets limit investment in
promising sectors like agriculture and tourism. Rampant Country 57.5
government corruption and patronage are exacerbated by
the judiciary’s lack of independence. Despite recent reform World
Average 60.4
efforts, inefficiency in business and labor regulations contin-
ues to inhibit entrepreneurial growth. Regional
54.9
Average
BACKGROUND: Yahya Jammeh, who came to power in a
bloodless coup in 1994, won his fourth term in 2011 in flawed Free
Economies 84.6
elections. Jammeh’s Alliance for Patriotic Reorientation
0 20 40 60 80 100
and Construction won a major victory in the 2012 legislative
elections, which were boycotted by opposition parties. The
government restrains civil liberties and harasses political
opponents. In 2013, President Jammeh withdrew The Gam- Quick Facts
bia from the Commonwealth. The Gambia has few natural Population: 1.9 million
resources. Government revenue depends heavily on peanut GDP (PPP): $3.7 billion
exports, leaving the state vulnerable to price fluctuations and 6.3% growth in 2013
market shocks. Due to its unique location along the Gambia 5-year compound annual growth 4.0%
River, the country is also a natural hub for tourism and trade. $1,962 per capita
Unemployment: 8.6%
215
THE GAMBIA (continued)
1–Year

0 20 40 60 80 100
President Jammeh retains an increasingly erratic but firm grip on power with a combination
of patronage and repression. Although the judiciary is constitutionally independent, the presi-
dent fired the chief justice and his own justice minister early in 2014. The judicial system rec-
ognizes customary law and Sharia (Islamic) law in family matters. Impunity for members of
the security forces remains a serious problem.

0 20 40 60 80 100
Other taxes include a capital gains tax and a sales tax. The overall tax burden equals 14.4 percent
of the domestic economy. Government spending is equivalent to 29.8 percent of total domestic
output, and government debt equals about 82 percent of GDP.

0 20 40 60 80 100
The overall regulatory framework remains hampered by red tape and a lack of transparency.
Inconsistent application of commercial regulations remains a considerable impediment to
business. The stagnant labor market perpetuates high unemployment and underemployment.
The government heavily subsidizes the parastatal water and electricity companies, which are
among the least efficient operators on the African continent.

0 20 40 60 80 100
The Gambia’s average tariff rate is 12.5 percent. Foreign and domestic investors are generally
treated equally under the law. The banking sector has gradually expanded and benefits from
increased competition. Almost all of the 13 commercial banks are majority-owned by foreign
banks. Credit to the private sector has been increasing, and nonperforming loans are less than
10 percent of total loans. There is no stock exchange.


GEORGIA
50
25 75
Least Most
free 0 100 free
G eorgia’s economic freedom score is 73.0, making its econ-

has increased by 0.4 point since last year, primarily reflecting
Freedom Trend
74
improvements in freedom from corruption, monetary free-
73
dom, and the management of government spending that out-
weigh a notable decline in labor freedom. Georgia is ranked
72
11th out of 43 countries in the Europe region, and its score is
well above the regional average.
71
With a 2.6-point score increase over the past five years, Geor-
gia has registered improvements in five of the economic 70
freedoms, including freedom from corruption, the control of
government spending, business freedom, monetary freedom, 69
and investment freedom. Achieving its highest score ever in

68
the 2015 Index, Georgia has advanced further into the catego-
ry of “mostly free.” 2011 2012 2013 2014 2015
A decade of solid increases in economic freedom has contrib-

uted to the dynamic expansion of Georgia’s economy. Sound Country Comparisons
public finances and policies that support open markets have
boosted prosperity and reinforced Georgia’s commitment to Country 73.0
economic freedom. However, not all of the pillars of economic
freedom are fully entrenched. Rule of law remains weak, and World
Average 60.4
the perceived level of corruption, though improving, is higher
than average for a European country. Regional
67.0
Average
BACKGROUND: A leading economic reformer among the
former Soviet satellites, Georgia has been particularly effec- Free
Economies 84.6
tive in reducing regulations, taxes, and corruption. Russia
0 20 40 60 80 100
invaded Georgia in 2008 and continues to occupy the terri-
tories of South Ossetia and Abkhazia. In 2012, billionaire Bid-
zina Ivanishvili and his Georgian Dream coalition defeated
President Mikheil Saakashvili’s United National Movement. Quick Facts
After serving briefly as prime minister, Ivanishvili voluntarily Population: 4.5 million
resigned in November 2013 and named Irakli Garibashvili as GDP (PPP): $27.6 billion
his successor. The Georgian Dream coalition’s political domi- 3.2% growth in 2013
nance was reinforced with a victory in the 2013 presidential 5-year compound annual growth 3.7%
elections. Although economic growth remains solid, foreign $6,145 per capita
direct investment has decreased. Georgia has been commit- Unemployment: 14.3%
ted to Euro-Atlantic integration. It hopes to join NATO and in Inflation (CPI): –0.5%
June 2014 signed Association Agreements with the EU. FDI Inflow: $1.0 billion
217
GEORGIA (continued)
1–Year

0 20 40 60 80 100
In 2014, a former prime minister and senior figure in the main opposition party was found
guilty of corruption and misuse of public funds. Several members of the current government
were also removed from office for alleged graft. Georgia continues to struggle with the lin-
gering effects of Soviet-era corruption. There are ongoing efforts to improve the security of
property rights.

0 20 40 60 80 100
Georgia’s top individual income tax rate is 20 percent, and its top corporate tax rate is 15 per-
cent. Other taxes include a value-added tax and a tax on dividends. The overall tax burden
equals 25.5 percent of domestic output. Government spending amounts to 29.6 percent of the
domestic economy, and public debt is equivalent to 32 percent of gross domestic product.

0 20 40 60 80 100
The competitive and efficient regulatory framework facilitates entrepreneurial activity. With
no minimum capital required, it takes two days and two procedures to start a business. Com-
pleting licensing requirements can be difficult, taking about two months on average. The labor
market is relatively flexible and still evolving. Prices are generally set in the market, but the
state maintains price-control measures and subsidizes fuel.

0 20 40 60 80 100
Georgia’s average tariff rate is 0.7 percent. After gaining independence, it pursued a policy of
unilateral tariff cuts and free trade. Foreign and domestic investors are generally treated equal-
ly under the law. The financial sector, dominated by banks, remains stable. With the state’s
role limited primarily to regulatory enforcement, banking has become more competitive. The
capital market remains underdeveloped with a small stock exchange.

Property Rights +10.0 Fiscal Freedom –4.8 Business Freedom +33.6 Trade Freedom +19.6

GERMANY
50
25 75
Least Most
free 0 100 free
G ermany’s economic freedom score is 73.8, making its econ-

up by 0.4 point from last year, with improvements in the man-
Freedom Trend
75
agement of public spending and labor freedom outweighing
declines in freedom from corruption and business freedom. 74
Germany is ranked 7th out of 43 countries in the Europe
region, and its score exceeds the world and regional averages. 73
Germany has achieved its highest score ever in the 2015 Index.
Since 2011, a 2.0-point increase in economic freedom has been 72
led by marked improvements in labor freedom and in policy
areas related to market openness. Overall, economic freedom 71
has increased in five of the 10 measured categories.
Germany’s judicial system, independent and free of corrup- 70
tion, enforces contracts reliably. Openness to global trade and 2011 2012 2013 2014 2015
investment has enabled Germany to become one of the world’s
most competitive and flexible economies. The government
has held firm to policies emphasizing sound public finance, Country Comparisons
keeping spending under control through deficit-cutting mea-
sures. In response to changing economic conditions, employ- Country 73.8
ers and workers have worked to adjust wages and work hours.
World
60.4
BACKGROUND: Chancellor Angela Merkel’s Christian Dem- Average
ocratic Union won the biggest share of the national vote in Regional
the September 2013 election, but its coalition partner, the Average 67.0
economically liberal Free Democratic Party, is no longer in
the Bundestag. In December 2013, Merkel’s party reached an Free
Economies 84.6
agreement with the Social Democratic Party to form a coali-
0 20 40 60 80 100
tion government. Economic reforms remain stalled, with
most policy attention focused on rescuing the euro. Germany
has funded the lion’s share of large rescue packages for fel-
low eurozone members. Its industrialized economy, the larg- Quick Facts
est in Europe, is well integrated into the global marketplace Population: 80.8 million
and generates average per capita incomes that are among the GDP (PPP): $3.2 trillion
world’s highest. Germany has one of Europe’s lowest unem- 0.5% growth in 2013
ployment rates, and shortages of skilled labor may be develop- 5-year compound annual growth 0.7%
ing. Germany remains, both politically and economically, the $40,007 per capita
most influential nation in the EU. Unemployment: 5.3%
219
GERMANY (continued)
1–Year

0 20 40 60 80 100
Although government transparency is high and anti-corruption measures are enforced effec-
tively, the auto industry, construction, and public contracting, in conjunction with question-
able political party influence and party donations, are areas of continuing concern. Property
owned by foreigners is fully protected under German law, and secured interests in both chattel
and real property are recognized and enforced.

SIZE Government Spending 40.1 152nd +1.9
0 20 40 60 80 100
Germany’s top individual income tax rate is 47.5 percent, and its top corporate tax rate is 15.8
percent. Other taxes include a value-added tax and a capital gains tax. The overall tax burden
equals 37.6 percent of domestic output. Government expenditures are equivalent to 44.7 per-
cent of gross domestic product, and public debt is equal to 75 percent of domestic output.

0 20 40 60 80 100
The regulatory regime supports innovative business formation and operation. Starting a busi-
ness takes nine procedures and costs about 9 percent of the level of average annual income.
Labor regulations are rigid, with broad wage settlements and high unionization. Monetary sta-
bility is well maintained, although the government uses a surcharge on monthly electricity bills
to subsidize the cost of renewable power generation.

0 20 40 60 80 100
EU is relatively open to external trade. Germany generally applies the same rules to foreign and
domestic investment. The competitive financial sector remains dynamic and well developed,
offering a full range of financing options. Despite consolidation, the traditional three-tiered
system of private, public, and cooperative banks is intact.


GHANA
50
25 75
Least Most
free 0 100 free
G hana’s economic freedom score is 63.0, making its econ-

omy the 71st freest in the 2015 Index. Its overall score is
1.2 points lower than last year, with improvements in free-
Freedom Trend
68
dom from corruption and monetary freedom outweighed by
declines in the management of government spending, invest- 66
ment freedom, and labor freedom. Ghana is ranked 5th out of
46 countries in the Sub-Saharan Africa region, and its overall 64
score remains above the world average.

62
Over the past five years, economic freedom in Ghana has
increased by 3.6 points. Along with an improvement of more 60
than 20 points in its score for control of government spending,
the country’s scores have advanced in half of the 10 economic 58
freedoms including freedom from corruption and monetary
freedom. These improvements have propelled Ghana into the 56
ranks of the “moderately free.” 2011 2012 2013 2014 2015
These steady advances, however, have masked deeper struc-

tural and institutional problems. Ghana remains well short Country Comparisons
of solidifying the foundations of macroeconomic fundamen-
tals necessary for sustained growth and prosperity. Fiscal Country 63.0
improvements have been overshadowed by the malinvest-
ment of future oil revenues, forcing the government to seek World
60.4
IMF assistance in 2014. The judiciary is poorly funded and Average
subject to bribery. Land titles are hard to obtain, and the pro- Regional
cess is lengthy, compromising the ability of individuals and Average 54.9
firms to invest in their property.
Free
Economies 84.6
BACKGROUND: Ghana has been a stable democracy since
1992. Following the death of President John Atta Mills in July 0 20 40 60 80 100
2012, Vice President John Dramani Mahama became interim
head of state. Mahama was elected president in December
2012. Ghana is rich in natural resources, including gold, dia- Quick Facts
monds, manganese ore, and bauxite, as well as oil. It is Afri- Population: 25.6 million
ca’s second-biggest gold producer after South Africa. In 2013, GDP (PPP): $88.5 billion
Ghana deported thousands of Chinese nationals for illegally 5.5% growth in 2013
mining gold. Economic challenges include managing new oil 5-year compound annual growth 8.0%
revenue while maintaining fiscal discipline. $3,461 per capita
Unemployment: 4.5%
221
GHANA (continued)
1–Year

0 20 40 60 80 100
Successive governments have deployed robust legal and institutional frameworks to combat
corruption in Ghana, which is comparatively less corrupt than neighboring countries, but few
Ghanaians feel that the situation has improved. Scarce resources compromise and delay the
judicial process, and poorly paid judges can be tempted by bribes. The process for obtaining
clear title to land is often difficult, complicated, and lengthy.

0 20 40 60 80 100
Ghana’s top individual and corporate income tax rates are 25 percent. Other taxes include a
national insurance levy, a value-added tax, and a capital gains tax. The total tax burden equaled
17.1 percent of GDP in the most recent year. Public expenditures equal 31.2 percent of gross
domestic product, and public debt equals 60 percent of domestic output.

0 20 40 60 80 100
Recent regulatory reform measures have yielded reductions in bureaucracy, but progress in
enhancing overall regulatory efficiency has lagged compared to other economies. Labor regu-
lations have been under modernization, but informal labor activity remains significant. The
government has reinstated a fuel-price adjustment mechanism to eliminate subsidies and has
sharply increased electricity and water tariffs to reduce the fiscal deficit.

0 20 40 60 80 100
Ghana has an 8.6 percent average tariff rate. Government procurement procedures can favor
domestic firms. Freely repatriating profits, foreign investors are typically treated equally with
domestic investors under the law. The financial sector has undergone restructuring, and there
are over 20 commercial banks. However, high interest rates on bank loans limit financing
opportunities for new firms.


GREECE
50
25 75
Least Most
free 0 100 free
G reece’s economic freedom score is 54.0, making its econ-

omy the 130th freest in the 2015 Index. Its score has
declined by 1.7 points since last year due to a substantial dete-
Freedom Trend
64
rioration in the control of government spending and smaller
declines in business freedom, labor freedom, and fiscal free- 62
dom. Greece is ranked 40th out of 43 countries in the Europe
region, and its overall score is below the world and region- 60
al averages.
58
Since 2011, Greece’s economic freedom has declined by 6.3
points, with scores falling in seven of the 10 measured catego- 56
ries. Once ranked in the “moderately free” category, Greece is
now considered “mostly unfree.” With the 10th largest score 54
decline in the 2015 Index, Greece has recorded its lowest eco-
nomic freedom score ever this year. 52
2011 2012 2013 2014 2015
Large continued declines in the management of government
spending bode ill for a government still reeling from a sov-
ereign debt crisis and multiple international bailouts. The Country Comparisons
rule of law remains problematic, with property rights weakly
enforced, tax evasion on the rise, and corruption pervasive. Country 54.0
Despite efforts to create a more business-friendly regulato-
ry environment, the labor market remains rigid and slow to World
60.4
adjust to market realities. Average
BACKGROUND: Greece joined NATO in 1952 and the Euro- Regional

Average 67.0
pean Union in 1981. It adopted the euro in 2002. In response
to a Greek sovereign debt crisis in 2010, the European Central Free
84.6
Bank and the International Monetary Fund provided emer- Economies
gency loans in exchange for austerity measures. Elections in 0 20 40 60 80 100
June 2012 led to formation of a “pro-Euro” coalition led by
Antonis Samaras and his center-right New Democracy party.
In June 2013, the Democratic Left Party left the coalition, Quick Facts
forcing a reshuffle that gave the center-left Pan-Hellenic Population: 11.1 million
Socialist Movement an expanded role in the government. GDP (PPP): $265.6 billion
Greece’s economy, which depends heavily on shipping, tour- –3.9% growth in 2013
ism, and services, has been in recession for six years. Interna- 5-year compound annual growth –5.2%
tional creditors expected it to expand slightly in 2014. Greek $24,012 per capita
unemployment is among the highest in the eurozone. Unemployment: 27.6%
223
GREECE (continued)
1–Year

0 20 40 60 80 100
Successive governments have made election promises to root out deeply entrenched corrup-
tion in Greece, but progress has been very slow. Ninety percent of households surveyed in 2013
consider Greece’s political parties to be corrupt or extremely corrupt. Nevertheless, the judi-
ciary is independent, and the constitution provides for public trials. Protection of property
rights is not strongly enforced.

0 20 40 60 80 100
Greece’s top individual income tax rate is 42 percent, and its top corporate tax rate is 26 per-
cent. Other taxes include a value-added tax and a real estate tax. Overall tax revenue amounts to
33.8 percent of gross domestic product, and public expenditures equal 58.5 percent of domestic
output. Public debt is equivalent to over 170 percent of gross domestic product.

0 20 40 60 80 100
The overall pace of regulatory reform lags behind other countries. With no minimum capital
required, launching a business takes five procedures and 13 days. However, completing licens-
ing requirements still takes about four months on average. Despite reform efforts, the labor
market remains rigid and stagnant. Monetary stability is weak, and Greece is receiving sub-
stantial subsidies from the European Union.

0 20 40 60 80 100
EU is relatively open to external trade. Greece maintains additional barriers to the provision
of some professional services. Foreign investment in some sectors is capped. The financial
system remains under strain. In the banking sector, nonperforming loans account for over 30
percent of total loans.


GUATEMALA
50
25 75
Least Most
free 0 100 free
G uatemala’s economic freedom score is 60.4, making its

economy the 87th freest in the 2015 Index. Its score is
down by 0.8 point, reflecting declines in property rights, busi-
Freedom Trend
63
ness freedom, and trade freedom that are partially offset by
improvements in labor freedom, the management of govern-
62
ment spending, and freedom from corruption. Guatemala
America/Caribbean region, and its overall score is equal to the
61
world average.
Over the past five years, Guatemala’s economic freedom has
declined by 1.5 points. Longer-term declines have been con- 60
centrated largely in four of the 10 economic freedoms: proper-
ty rights, freedom from corruption, government spending, and
59
labor freedom. Property rights scores have dropped sharply.
2011 2012 2013 2014 2015
The rule of law is weakly established, and crime, violence, and
corruption are endemic. Poverty is high, and inefficient busi-
ness regulations continue to inhibit entrepreneurship and Country Comparisons
employment. Despite a relatively high degree of trade free-
dom and low tariff rates, the dynamic economic gains from Country 60.4
trade are undercut by the absence of progress in reforming
other policies that are critical to sustaining open markets in World
Average 60.4
the financial and investment areas.
Regional
BACKGROUND: Center-right President Otto Pérez Molina Average 59.7
succeeded social democrat Alvaro Colom in 2012. Guatemala
withdrew from the Venezuela-led Petrocaribe oil alliance in Free
Economies 84.6
2013 after failing to negotiate favorable rates. As the admin-
0 20 40 60 80 100
istrative hub for the Central American Integration System,
Guatemala is tasked with improving regional economic coop-
eration. Agriculture accounts for 11 percent of GDP. The econ-
omy was seriously damaged during the global recession but Quick Facts
has rebounded since 2012. More than half of the population Population: 15.5 million
lives below the poverty line. Guatemala works closely with GDP (PPP): $81.8 billion
the U.S. on security issues, but Mexican drug cartels continue 3.5% growth in 2013
to expand their influence in the country. Former President 5-year compound annual growth 2.8%
Alfonso Portillo was extradited to the U.S. in 2013 and pleaded $5,282 per capita
guilty to charges of money laundering in 2014. Unemployment: 2.8%
225
GUATEMALA (continued)
1–Year

0 20 40 60 80 100
In 2014, former President Alfonso Portillo pleaded guilty to taking $2.5 million in Taiwanese
government bribes and attempting to launder the money through U.S. banks. A government
study reports that corruption in customs offices costs $1.5 billion annually. Organized crime
has infiltrated key state institutions. The judiciary is characterized by corruption, inefficiency,
capacity shortages, and intimidation of judges, prosecutors, and witnesses.

SIZE Government Spending 94.1 3rd +0.5
0 20 40 60 80 100
Guatemala’s top individual and corporate income tax rates are 31 percent. Other taxes include
a value-added tax and a tax on real estate. The overall tax burden is 10.9 percent of the domestic
economy. Government expenditures are equivalent to 14.1 percent of domestic output, and
public debt is equal to about 24 percent of gross domestic output.

0 20 40 60 80 100
Progress in improving the regulatory framework has been uneven. Bureaucratic hurdles,
including lengthy processes for obtaining necessary permits, remain common. Completing
licensing requirements takes over five months on average. Labor regulations are rigid, and a
large portion of the workforce is employed in the informal sector. The state maintains few price
controls but subsidizes numerous key economic activities and products.

0 20 40 60 80 100
Guatemala’s average tariff rate is 2.7 percent. Foreign investors can repatriate profits. There are
some limits on foreign ownership of land. The financial system is dominated by bank-centered
financial conglomerates. The banking sector remains stable and open to competition, but fewer
than 20 banks are now in operation. Foreign insurance companies may open branches under
a recently enacted insurance law.


GUINEA
50
25 75
Least Most
free 0 100 free
G uinea’s economic freedom score is 52.1, making its econo-

decreased by 1.4 points, reflecting declines in half of the 10
Freedom Trend
55
economic freedoms, including investment freedom, property
54
rights, the management of public spending, and fiscal free-
dom. Guinea is ranked 33rd out of 46 countries in the Sub-
53
Saharan Africa region, and its overall score is below the world
and regional averages.
52
Wracked by political instability and violence after a military
coup in 2008, Guinea has yet to return to the levels of eco- 51
nomic freedom witnessed in the mid-2000s. With significant
bauxite reserves, a main source of aluminum, Guinea’s rela- 50
tively closed economy relies on export earnings to fund the

49
importation of food. The financial sector is underdeveloped
and poorly integrated, and many Guineans do not hold formal 2011 2012 2013 2014 2015
bank accounts. The government’s myriad rules and regula-
tions deter investors. Country Comparisons
Entrepreneurial activity faces many hurdles. The business
licensing process is lengthy and expensive, and the for- Country 52.1
mal labor market remains underdeveloped and resistant
to economic changes. The public sector dominates formal World
Average 60.4
employment. Ineffective rule of law and rampant corruption
undermine private-sector economic activity that could lift Regional
54.9
many Guineans out of poverty. Average
BACKGROUND: In 2010, Alpha Conde won Guinea’s first pres- Free

Economies 84.6
idential election since independence from France in 1958. The
0 20 40 60 80 100
election was marred by irregularities and political violence. In
2013, Conde’s Rally of the Guinean People party won a major-
ity of seats in flawed parliamentary elections. According to
the U.N., roughly 10,000 refugees from Côte d’Ivoire, Liberia, Quick Facts
and Sierra Leone resided in Guinea in 2014. This has strained Population: 11.1 million
government services, generated ethnic tensions, and soured GDP (PPP): $12.5 billion
relations with bordering nations. Guinea has two-thirds of the 2.5% growth in 2013
world’s bauxite reserves and large deposits of iron ore, gold, 5-year compound annual growth 2.4%
and diamonds, but the population remains impoverished due $1,125 per capita
to the lack of property rights, rampant corruption, poor gov- Unemployment: 3.1%
ernment administration, limited infrastructure, and politi- Inflation (CPI): 12.0%
cal instability. FDI Inflow: $24.8 million
227
GUINEA (continued)
1–Year

0 20 40 60 80 100
Despite rich natural resources, most Guineans live in poverty, partly because of rampant cor-
ruption. A 2014 FBI investigation found that a British front company (BGSR) bribed govern-
ment officials to win a mining concession for $165 million; BGSR later sold 51 percent of the
mine to Brazilian firm Vale for $2.5 billion. The courts are subject to political interference, and
protection of property rights is weak.

0 20 40 60 80 100
Other taxes include a value-added tax and an inheritance tax. Overall tax revenue equals 19
percent of gross domestic product, and government spending is equivalent to 26.1 percent of
the domestic economy. Public debt equals 38 percent of GDP after debt forgiveness by the IMF
in 2012.

0 20 40 60 80 100
Private enterprises face numerous hurdles. The minimum capital requirement for launching
a company exceeds four times the level of average annual income, and completing licensing
requirements takes more than three months. The formal labor market is underdeveloped.
Despite substantial subsidies provided to the state electrical utility, there are widespread and
frequent power shortages. The government cut fuel subsidies in 2014.

MARKETS Investment Freedom 40.0 131st –10.0
0 20 40 60 80 100
Guinea’s average tariff rate is 11.9 percent. Non-tariff barriers including restrictions on imports
like rice, flour, and sugar further impede trade. The government has expressed a desire to
attract foreign investment, but the uncertain political climate is a deterrent. The financial sec-
tor remains underdeveloped. Most economic activity remains outside of the formal banking
sector as there are fewer than 10 commercial banks.


GUINEA–BISSAU
50
25 75
Least Most
free 0 100 free
G uinea–Bissau’s economic freedom score is 52.0, making

its economy the 145th freest in the 2015 Index. Its score
has increased by 0.7 point, reflecting improvements in trade
Freedom Trend
54
freedom, monetary freedom, and the control of government
spending that outweigh declines in freedom from corruption 52
and business freedom. Guinea-Bissau is ranked 34th out of
50
score remains well below the world and regional averages.
Despite continued instability resulting from the 2012 military 48
coup, Guinea–Bissau has made steady progress in improv-
ing economic freedom for its citizens over the past half-
46
decade. Since 2011, the economy has advanced in the Index
by 5.5 points, the third-biggest gain in the Sub-Saharan Africa
region. Led by double-digit score improvements in both the 44
control of government spending and business freedom, Guin- 2011 2012 2013 2014 2015
ea–Bissau has risen out of the “repressed” category.
Improvements so far have put in place a foundation of basic Country Comparisons
economic market structures, but much more must be done
to solidify an institutional environment that will foster sus- Country 52.0
tained growth. The economy remains closed to outside invest-
ment and trade, and the financial sector operates largely World
60.4
informally. Rigid business regulations condemn much of the Average
population to informal work arrangements, stifling dynamism Regional
and perpetuating subsistence agriculture as the dominant Average 54.9
economic activity.
Free
Economies 84.6
BACKGROUND: Guinea–Bissau had a civil war in the late
1990s, and there have been multiple military coups, most 0 20 40 60 80 100
recently in April 2012. In May 2014, Jose Mario Vaz was elect-
ed president of the former Portuguese colony. Guinea–Bissau
is one of the world’s poorest countries. It also is a major transit Quick Facts
point for illegal South American drugs bound for Europe, and Population: 1.6 million
several senior military officials are allegedly involved in the GDP (PPP): $1.9 billion
drug trade. Guinea–Bissau remains highly dependent on sub- 0.3% growth in 2013
sistence agriculture, the export of cashew nuts (the country’s 5-year compound annual growth 2.1%
most important commercial crop), and foreign assistance. $1,206 per capita
Unemployment: 8.5%
229
GUINEA–BISSAU (continued)
1–Year

0 20 40 60 80 100
Corruption is pervasive and has been aggravated by Guinea-Bissau’s prominent role in interna-
tional narco-trafficking and political instability before the re-establishment of constitutional
rule in the spring of 2014. Scant budgets and endemic corruption severely challenge judicial
independence. Judges and magistrates are poorly trained, irregularly paid, and highly suscep-
tible to graft and political pressure.

0 20 40 60 80 100
Guinea-Bissau’s top individual income tax rate is 20 percent, and its top corporate tax rate is
25 percent. Other taxes include a sales tax. The overall tax burden is equivalent to 8.3 percent
of gross domestic product, and government expenditures equal 20.0 percent of the domestic
economy. Public debt is equivalent to 61 percent of domestic output.

0 20 40 60 80 100
The cost of incorporating a business has been reduced considerably, and the time has been cut
from over 200 days to nine, but completing licensing requirements still takes over 100 days.
Much of the labor force is employed in the public sector or the informal economy. The govern-
ment uses reference prices for fuel and basic foods to control prices of key products.

0 20 40 60 80 100
Guinea-Bissau has an average tariff rate of 9.8 percent. It is a member of the Economic Com-
munity of West African States and the West African Economic and Monetary Union. The uncer-
tain political and economic climate deters foreign investment. Much of the population is still
outside of the formal banking sector. High credit costs and scarce access to financing severely
impede entrepreneurial activity.


GUYANA
50
25 75
Least Most
free 0 100 free
G uyana’s economic freedom score is 55.5, making its econ-

is 0.2 point worse than last year, with improvements in free-
Freedom Trend
58
dom from corruption and labor freedom counterbalanced by
declines in property rights and the management of govern- 56
ment spending. Guyana is ranked 22nd out of 29 countries
in the South and Central America/Caribbean region, and its 54
overall score is well below the world and regional averages.

52
Over the past five years, Guyana has recorded the largest score
improvement of any South and Central American country. 50
Since 2011, its economic freedom has advanced by 6.1 points,
with impressive score increases in government spending 48
and investment freedom. As a result, Guyana’s economy has
moved from “repressed” to “mostly unfree.” 46
2011 2012 2013 2014 2015
Nevertheless, the underlying institutional environment is still
weak. Large improvements in investment freedom have come
from a relatively low base. Political unrest and poor access to Country Comparisons
financing continue to undermine foreign direct investment.
Poorly institutionalized rule of law deters investors and Country 55.5
entrepreneurs. The cocaine trade has generated corruption
and violence. World
60.4
Average
BACKGROUND: President Donald Ramotar, an economist and
head of the left-wing People’s Progressive Party (PPP), was Regional
Average 59.7
elected to a five-year term in 2011. The PPP has been in power
since 1992. Local municipal government elections have not Free
84.6
been held for almost two decades. Political reform has been Economies
attempted only under framework agreements with interna- 0 20 40 60 80 100
tional organizations. Although the risk of political violence is
low, relations between the ruling Indo-Guyanese PPC/Civic
parties and the Afro-Guyanese People’s National Congress/ Quick Facts
Reform parties remain hostile. Exports of sugar, gold, bauxite, Population: 0.8 million
shrimp, timber, and rice represent nearly 60 percent of formal GDP (PPP): $6.6 billion
GDP and are susceptible to weather conditions and fluctua- 4.8% growth in 2013
tions in commodity prices. Violent crime and drug trafficking 5-year compound annual growth 4.5%
are endemic, and the informal economy is driven primarily by $8,250 per capita
drug proceeds. Unemployment: 11.2%
231
GUYANA (continued)
1–Year

0 20 40 60 80 100
In November 2013, Guyana was blacklisted by the Caribbean Financial Action Task Force after
the government failed to strengthen anti–money laundering legislation. Organized criminal
activity and narco-trafficking have increased, and violent crime is a major problem. The judi-
cial system is generally perceived as slow and ineffective in enforcing contracts or resolving
disputes. Protection of property rights is poor.

0 20 40 60 80 100
Guyana’s top individual income tax rate is 33.3 percent, and its top corporate tax rate is 40 per-
cent. Other taxes include a value-added tax and a property tax. The overall tax burden equals
20.5 percent of domestic income. Public expenditures are equal to 31.2 percent of the domestic
economy, and public debt is equivalent to 63 percent of gross domestic product.

0 20 40 60 80 100
Reform measures have streamlined the procedures for establishing a business, and the cost of
licenses has been reduced, but the overall pace of regulatory reform has lagged behind other
countries. A well-functioning private labor market has not yet emerged. The government influ-
ences prices through state-owned utilities and enterprises and provides significant subsidies
for electricity, transportation, and the sugar industry.

0 20 40 60 80 100
Guyana has an average tariff rate of 6.5 percent. It is a member of the Caribbean Community
and Common Market. Political unrest is a concern. The banking sector remains relatively well
capitalized, and nonperforming loans are around 5 percent of total loans, but high credit costs
and scarce access to financing remain barriers to private-sector development. The capital mar-
ket is not fully developed.


HAITI
50
25 75
Least Most
free 0 100 free
H aiti’s economic freedom score is 51.3, making its economy

the 151st freest in the 2015 Index. Its overall score is 2.4
points better than last year, reflecting notable improvements
Freedom Trend
54
in the control of government spending, business freedom, 53
trade freedom, and freedom from corruption. Haiti is ranked
Caribbean region, and its overall score is below the region-
al average. 51
Haiti has recorded the fourth largest score improvement 50
in the 2015 Index, but its economy is still reeling from the 49
destruction of the 2010 earthquake. Despite some progress,
institutional and economic foundations remain fragile, with 48
economic freedom declining by close to 1.0 point over the past
47
five years.
2011 2012 2013 2014 2015
Of particular concern is the poor regard for rule of law. Cor-
ruption is rampant, and the judicial system is ineffective and
inefficient. Smuggling remains a huge problem and is exacer- Country Comparisons
bated by poor trade freedom. Entrepreneurs find Haiti one of
the world’s most difficult places to do business, as the regu- Country 51.3
latory environment for both business and labor is outdated
and inefficient. World
Average 60.4
BACKGROUND: President Michel Martelly took office in 2011 Regional
promising a fresh start for Haiti, but his policies have had lit- Average 59.7
tle effect on the daily economic struggle that most Haitians
face. Inflation and corruption remain popular grievances, Free
Economies 84.6
weakening his political capital. Relations with the Dominican
0 20 40 60 80 100
Republic have been strained since Santo Domingo revoked
the citizenship of thousands of Dominican-born people of
Haitian descent. The United Nations Stabilization Mission
in Haiti, established in 2004 to ensure security, extended its Quick Facts
mandate until October 2014 but reduced the number of U.N. Population: 10.3 million
peacekeeping troops in the country. Haiti is still recover- GDP (PPP): $13.6 billion
ing from a 2010 earthquake, and reconstruction is far from 4.3% growth in 2013
complete. More than 90 percent of the government’s budget 5-year compound annual growth 2.0%
comes from an agreement with Petrocaribe, a Venezuela-led $1,315 per capita
oil alliance. Extreme poverty, weak government institutions, Unemployment: 7.1%
and violent crime are still major problems. Inflation (CPI): 6.8%
233
HAITI (continued)
1–Year

0 20 40 60 80 100
In 2013, Transparency International’s Corruption Perceptions Index ranked Haiti as the most
corrupt country in the Western Hemisphere. Haiti is a major narco-trafficking transshipment
point. The dysfunctional judicial system is underfunded, inefficient, corrupt, and burdened by
a large backlog of cases, outdated legal codes, and poor facilities. There is no comprehensive
civil registry. Clear property titles are virtually nonexistent.

0 20 40 60 80 100
The top individual and corporate income tax rates are 30 percent. Other taxes include a value-
added tax and a capital gains tax. The overall tax burden is equal to 12.9 percent of domestic
output, and government expenditures amount to 28.2 percent of domestic income. Public debt
has been growing and exceeds a level equal to 21 percent of gross domestic product.

0 20 40 60 80 100
Launching a business has become more streamlined and takes only 12 procedures, but the cost
of obtaining necessary licenses remains about twice the level of average annual income. The
labor market is inefficient, and much of the labor force is employed in the informal sector. The
state-owned electrical utility receives an annual government subsidy of $170 million but serves
only 25 percent of the population.

0 20 40 60 80 100
Haiti’s average tariff rate is 3.7 percent. Importing goods can take several weeks. Foreign and
domestic investors are treated equally under the law, but navigating the legal system is difficult,
as are titling and selling land. Scarce access to financing impedes private-sector development.
The financial sector is dominated by banking, but much of the population remains outside of
the formal banking sector.

Property Rights 0 Fiscal Freedom +1.7 Business Freedom +3.1 Trade Freedom –2.4

HONDURAS
50
25 75
Least Most
free 0 100 free
H onduras’s economic freedom score is 57.4, making its econ-

increased by 0.3 point since last year, with improvements in
Freedom Trend
60
freedom from corruption, trade freedom, and labor freedom
offsetting declines in business freedom and the control of gov-
ernment spending. Honduras is ranked 19th out of 29 coun- 59
tries in the South and Central America/Caribbean region, and
its overall score is lower than the world and regional averages.
58
Over the past decade, Honduras has been developing “charter
cities” with more reasonable business and trade regulations
to attract trade and investment. Overall economic freedom, 57
however, has fallen by 1.2 points over the past five years. Score
deteriorations in three of the 10 economic freedoms have
included drops of close to 10 points in the management of 56
government spending and labor freedom. 2011 2012 2013 2014 2015
The decline in economic freedom has undermined an eco-

nomic environment that already lacks strong institutional Country Comparisons
foundations. As in many other Latin American countries,
political and social instability related to the drug trade desta- Country 57.4
bilizes the rule of law and encourages corruption. The labor
market remains one of the world’s most rigid, and procedural World
60.4
and licensing requirements make it prohibitive for entrepre- Average
neurs to enter the formal sector. Regional
Average 59.7
BACKGROUND: Juan Orlando Hernández of the conserva-
tive National Party of Honduras took office in January 2014, Free
84.6
defeating Xiomara Castro, leftist candidate and wife of ousted Economies
President Manuel Zelaya. Hernández has created the National 0 20 40 60 80 100
Investment Board to facilitate dialogue between the private
and public sectors and to promote foreign investment and
growth. Honduras plans to launch a “Zone for Employment Quick Facts
and Economic Development,” and Hernández has encour- Population: 8.1 million
aged El Salvador and Nicaragua to join him in making Central GDP (PPP): $39.2 billion
America more competitive. Honduras remains one of Latin 2.6% growth in 2013
America’s poorest countries, with more than two-thirds of the 5-year compound annual growth 2.3%
population living in poverty. Hernández faces the challenge of $4,839 per capita
reducing a rising deficit and endemic corruption. Honduras Unemployment: 4.2%
still has the world’s highest homicide rate. Inflation (CPI): 5.2%
235
HONDURAS (continued)
1–Year

0 20 40 60 80 100
Rampant corruption and weak state institutions make it almost impossible to combat threats
posed by transnational gangs and organized criminal groups. Honduras has the world’s high-
est murder rate. The court system is weak and inefficient, and resolution of disputed cases can
take years. Laws and practices regarding real estate differ substantially from those in more
developed countries, and fraudulent deeds and titles are common.

0 20 40 60 80 100
The top individual and corporate income tax rates are 25 percent. Other taxes include a 5 per-
cent social contribution tax for corporations, a capital gains tax, and a sales tax. The overall tax
burden is equivalent to 16.1 percent of domestic income, and government expenditures amount
to 26.6 percent of domestic output. Public debt is equal to 40 percent of gross domestic product.

0 20 40 60 80 100
Application of regulations has been inconsistent and non-transparent. Starting a new business
is fairly easy, but obtaining operating licenses still takes close to three months on average. In
the absence of a well-functioning labor market, informal labor activity persists. Although the
government regulates the prices of key products (e.g., fuel) and services, it took steps in 2014
to reduce electricity and other subsidies.

0 20 40 60 80 100
The average tariff rate for Honduras is 6.5 percent. Additional barriers impede imports of agri-
cultural goods. The government is attempting to create special economic development zones to
attract foreign investment. The small financial sector remains relatively stable. The reasonably
sound regulatory framework and financial system infrastructure have helped to enhance the
public’s access to formal banking institutions and credits.


HONG KONG
50
25 75
Least Most
free 0 100 free
H ong Kong’s economic freedom score is 89.6. Its overall

score has declined by 0.5 point since last year, reflecting
a higher level of perceived corruption that outweighs small
Freedom Trend
92
improvements in business freedom, labor freedom, and fiscal
freedom. Hong Kong continues to be the top-rated economy
91
in the Index.
Hong Kong, a global free port and financial hub, continues to
thrive on the free flow of goods, services, and capital. As the 90
economic and financial gateway to China, and with an effi-
cient regulatory framework, low and simple taxation, and
sophisticated capital markets, the territory continues to offer 89
the most convenient platform for international companies
doing business on the mainland. An impressive level of resil-
88
ience has enabled it to navigate global economic swings and
domestic shocks. 2011 2012 2013 2014 2015
However, the economy’s institutional uniqueness, enshrined

in its exceptional commitment to economic freedom and a Country Comparisons
high degree of autonomy pledged by the mainland, has faded
a bit. Although Hong Kong maintains the features of an eco- Country 89.6
nomically free society, economic decision-making has become
somewhat more bureaucratic and politicized, and the govern- World
Average 60.4
ment’s administrative scope and reach have expanded. Recent
political events appear to have undermined public trust and Regional
58.8
confidence in the administration. Average
BACKGROUND: Hong Kong became part of the People’s Free

Economies 84.6
Republic of China in 1997, but under the “one country, two
0 20 40 60 80 100
systems” agreement, China promised not to impose its social-
ist policies on Hong Kong and to allow Hong Kong a high
degree of autonomy in all matters except foreign and defense
policy for 50 years. The critical issue today is the shape and Quick Facts
form that “universal suffrage,” promised for 2017 by Chinese Population: 7.2 million
authorities, will take. Although the government controls all GDP (PPP): $381.9 billion
land in Hong Kong, the economy has benefited from its com- 2.9% growth in 2013
mitment to small government, low taxes, and light regulation. 5-year compound annual growth 2.7%
Major industries include financial services and shipping; $52,722 per capita
manufacturing has largely migrated to the mainland. Hong Unemployment: 3.3%
Kong’s economy has become increasingly integrated with Inflation (CPI): 4.3%
China through trade, tourism, and financial links. FDI Inflow: $76.6 billion
237
HONG KONG (continued)
1–Year

0 20 40 60 80 100
Hong Kong continues to enjoy relatively low rates of corruption, although business interests
exercise a strong influence in the unicameral legislature and executive branch. Beijing’s heavy-
handed efforts in 2014 to assert greater control from the mainland have galvanized pro-democ-
racy sentiments. The rule of law is respected, and the efficient and capable judiciary remains
independent. Property rights are well protected.

0 20 40 60 80 100
The standard income tax rate is 15 percent, and the top corporate tax rate is 16.5 percent. The
overall tax burden equals 13.7 percent of domestic income. Government expenditures amount
to 18.5 percent of gross domestic product. Public debt is low, and a budget surplus has been
maintained, but population aging and greater spending on social programs have increased fis-
cal pressures.

0 20 40 60 80 100
The competitive and transparent regulatory framework supports dynamic business formation
and operation. The labor market is vibrant, with flexible and well-enforced labor codes. Work-
ing hours and wages are largely determined by the market. Monetary stability is maintained
through the exchange-rate peg to the U.S. dollar. The government provides some low-cost hous-
ing and green energy subsidies.

0 20 40 60 80 100
Hong Kong has a 0 percent average tariff rate and remains one of the world’s most open econo-
mies for international trade and investment. The highly developed and prudently regulated
financial system offers a wide range of innovative financing options. The banking sector is
dynamic and resilient. The large and growing financial exposure to the mainland continues
to deepen.

Property Rights 0 Fiscal Freedom +0.2 Business Freedom 0 Trade Freedom 0

Freedom from –15.0 Government –3.8 Labor Freedom +9.4 Investment Freedom 0

HUNGARY
50
25 75
Least Most
free 0 100 free
H ungary’s economic freedom score is 66.8, making its econ-

omy the 54th freest in the 2015 Index. Its score is down
by 0.2 point from last year, with declines in property rights,
Freedom Trend
69
business freedom, fiscal freedom, and the control of public
spending outweighing improvements in monetary freedom,
labor freedom, and freedom from corruption. Hungary is 68
ranked 25th out of 43 countries in the Europe region, and its
overall score is above the world average but below the region-
67
al average.
Hungary’s economic freedom peaked in 2013, and declines in
the past two years, particularly in property rights and busi- 66
ness freedom, have raised questions about the momentum for
further reform.
65
Hungary’s longer-term economic transition to an open mar- 2011 2012 2013 2014 2015
ket economy has been highlighted by improvements in the
trade and investment regimes. The business environment is
relatively encouraging to entrepreneurship and risk-taking, Country Comparisons
and capital markets are developed and open to foreign invest-
ment. Concerns about the rule of law have been increasing Country 66.8
over the past few years, and the government has been strug-
gling with a burgeoning budget and foreign currency debt. World
60.4
Average
BACKGROUND: Hungary has been a member of NATO since
1999 and a member of the European Union since 2004. The Regional
Average 67.0
April 2014 parliamentary election was held in accordance
with a new constitution, which went into force in January Free
84.6
2012. The center-right Fidesz–Hungarian Civic Alliance won Economies
the majority of seats, and Prime Minister Viktor Orbán, who 0 20 40 60 80 100
has been in office since May 2010, formed a new government.
Despite achieving broad electoral support, Orbán so far has
achieved only limited economic success. Hungary exited from Quick Facts
recession in early 2013, but with only a modest recovery. The Population: 9.9 million
low-skilled labor supply greatly exceeds demand, generating GDP (PPP): $198.2 billion
high unemployment. Hard currency indebtedness remains a 1.1% growth in 2013
key vulnerability. 5-year compound annual growth –1.0%
$20,065 per capita
Unemployment: 10.5%
239
HUNGARY (continued)
1–Year

0 20 40 60 80 100
Hungary ranked low among EU members in Transparency International’s 2013 Corruption
Perceptions Index, partly because government watchdog institutions are weak and headed by
party loyalists. Corruption has long been rampant in public procurement and state aid; in 2014,
it was estimated that firms routinely pay bribes of up to 20 percent of a project’s value. Recent
reforms have undermined the independence of the judiciary.

0 20 40 60 80 100
Hungary’s individual income tax rate is a flat 16 percent, and its top corporate tax rate is 19
percent. Other taxes include a value-added tax and a property tax. Total tax revenues equal
38.9 percent of domestic output. Government expenditures are equivalent to 49.7 percent of
domestic income, and public debt equals 79 percent of gross domestic product.

0 20 40 60 80 100
The entrepreneurial framework is relatively transparent and efficient. Starting a business
takes four procedures and five days on average, but licensing can be time-consuming. The labor
market lacks flexibility, but the non-salary cost of employment is not high in comparison to
other countries in the region. Hungary will receive nearly €2 billion in agricultural subsidies
from the EU between 2014 and 2020.

0 20 40 60 80 100
equally under Hungarian law. The financial sector is dominated by banks, many of which are
foreign-owned. The banking sector remains plagued by low profitability and uncertainty. Since
2010, commercial banks have suffered from higher taxes.


ICELAND
50
25 75
Least Most
free 0 100 free
Idecreased
celand’s economic freedom score is 72.0, making its econ-
by 0.4 point since last year, with combined declines
Freedom Trend
74
in freedom from corruption, fiscal freedom, business free- 73
dom, and the management of public spending outweighing
improvements in labor freedom and monetary freedom. Ice- 72
land is ranked 14th out of 43 countries in the Europe region,
and its overall score remains well above the world and region- 71
al averages. 70
Iceland’s score change in the 2015 Index is negative for the 69

first time in five years. Nonetheless, economic freedom has
still advanced by 3.8 points in the past half-decade, led by 68
gains in fiscal freedom, government spending, labor freedom,
67
monetary freedom, and investment freedom.
2011 2012 2013 2014 2015
Despite recent setbacks, Iceland has consistently remained
among the “mostly free,” falling below this threshold only
once in its history in the Index. Supported by one of the stron- Country Comparisons
gest property rights regimes in the world, Iceland has built
a society based on the rule of law and open markets. Fiscal Country 72.0
policy has ranked poorly in recent years due to a collapsing
revenue base and bank bailouts. World
Average 60.4
BACKGROUND: The pro–European Union Social Democrats Regional
lost the April 2013 parliamentary elections. Sigmundur Davíð Average 67.0
Gunnlaugsson of the Progressive Party was elected prime
minister in a coalition government of the Progressive Party Free
Economies 84.6
and Independence Party. The new government indefinitely
0 20 40 60 80 100
suspended accession talks with the EU in May 2013 and then,
in May 2014, postponed plans to withdraw its application for
EU membership. To join the EU, the government must win
a public referendum, and public opinion remains divided. Quick Facts
Iceland already enjoys EU-related benefits that include free Population: 0.3 million
trade and movement of capital, labor, goods, and services GDP (PPP): $13.2 billion
within the region. It also has membership in the Schengen 2.9% growth in 2013
Zone, which allows visa-free travel in 26 European countries. 5-year compound annual growth –0.8%
The economy, dependent on tourism and fishing, is expected $41,000 per capita
to grow slowly in 2014 and 2015. Unemployment: 5.6%
241
ICELAND (continued)
1–Year

0 20 40 60 80 100
The institutionalization of accountability and transparency results from 1,000 years of par-
liamentary government. Isolated cases of corruption occur but are not an obstacle to foreign
investment. Private property is well protected. Iceland has a solid legislative and institutional
framework to enforce intellectual property protection laws. The constitution provides for an
independent judiciary, and trials are generally public and fair.

0 20 40 60 80 100
The top individual income tax rate is 31.8 percent, and the top corporate tax rate is 20 percent.
Other taxes include a value-added tax and an estate tax. The total tax burden is equal to 37.2
percent of total domestic income. Public expenditures equal 47.4 percent of gross domestic
product. Public debt has fallen steadily but is still equivalent to 90 percent of GDP.

0 20 40 60 80 100
The overall regulatory framework is transparent and competitive. Launching a business is
subject to minimum capital requirements but takes only five procedures. Bankruptcy proce-
dures are modern and efficient. Labor regulations are relatively rigid, and the non-salary cost
of employing a worker is high. Despite the challenging economic situation, inflation was con-
trolled in 2014, and monetary stability has been maintained.

0 20 40 60 80 100
Iceland’s average tariff rate is 1.0 percent. Imports of agricultural goods, including meat
and dairy products, are restricted. Capital controls put in place in 2008 have not been fully
removed, and investment in some economic sectors is capped. Extensive reforms of financial
market regulations have been implemented, and reform is ongoing. The financial system has
regained stability, with the banking sector recapitalized.


INDIA
50
25 75
Least Most
free 0 100 free
Ipoints
ndia’s economic freedom score is 54.6, making its economy
the 128th freest in the 2015 Index. Its score is down by 1.1
from last year, with modest improvements in busi-
Freedom Trend
57
ness freedom, property rights, and freedom from corruption
offset by declines in labor freedom and trade freedom. India
is ranked 26th out of 41 countries in the Asia–Pacific region, 56
and its overall score continues to be below the regional and
world averages.
55
India’s level of economic freedom is unchanged over five years.
The state’s presence in the economy remains extensive through
state-owned enterprises and wasteful subsidy programs that 54
cause chronically high budget deficits. In the absence of a well-
functioning legal and regulatory framework, a weak rule of law
exacerbated by corruption in many areas of economic activity 53
undermines the emergence of a more vibrant private sector. 2011 2012 2013 2014 2015
India remains a “mostly unfree” economy.
The reform-minded Modi administration has undertak- Country Comparisons
en some necessary structural adjustments with a focus on
reforming the inefficient and bloated government sector, bet- Country 54.6
ter managing public finance, and improving the business and
investment environments. The first budget presented in July World
60.4
2014, however, was short on detail about plans to restructure Average
wasteful subsidy programs and reignite economic growth. Regional
Average 58.8
BACKGROUND: India is a relatively stable democracy. It is
80 percent Hindu but is still home to one of the world’s larg- Free
84.6
est Muslim populations. The Bharatiya Janata Party, led by Economies
Narendra Modi, won a sweeping victory in the 2014 national 0 20 40 60 80 100
elections, held over a five-week period. The previous Congress
Party–led government was unseated amid corruption scan-
dals and a faltering economy. After decade-low GDP growth Quick Facts
in 2013, Prime Minister Modi has promised to implement eco- Population: 1.24 billion
nomic reform in order to attract private-sector investment. GDP (PPP): $5.1 trillion
Corruption, poor infrastructure, and fiscal deficits are major 4.4% growth in 2013
obstacles to economic growth. India is a significant force in 5-year compound annual growth 6.9%
world trade, but its economy continues to operate far below $4,077 per capita
its potential. Unemployment: 3.7%
243
INDIA (continued)
1–Year

0 20 40 60 80 100
In a poll, 96 percent of Indians said chronic corruption was holding back their country. Corrup-
tion has had a negative effect on government efficiency and economic performance. The judi-
ciary is independent, but Indian courts are understaffed and lack the technology necessary to
clear an enormous backlog, estimated by the U.N. to total 30 million–40 million pending cases.
GOVERNMENT Fiscal Freedom 79.4 92nd 0

0 20 40 60 80 100
The top individual income tax rate is 30.9 percent (including an education tax). The top cor-
porate tax rate is 32.4 percent. The overall tax burden equals 7.3 percent of domestic income,
and government expenditures amount to 26.9 percent of the domestic economy. Public debt
equals approximately 67 percent of GDP. The fiscal deficit has declined but remains above 4
percent of GDP.

Monetary Freedom 65.3 171st –0.2
0 20 40 60 80 100
Business registration fees have been considerably reduced, but completing licensing require-
ments remains time-consuming. Although minimum wages are low, the labor market remains
plagued by low labor productivity and the relatively high non-salary cost of hiring a worker.
The government had announced its intention to cut badly targeted fuel subsidies but has yet
to set out a clear plan.

0 20 40 60 80 100
India’s average tariff rate is 7.7 percent. Non-tariff barriers further interfere with the flow of
goods and services. Government procurement policies can favor domestic firms. The govern-
ment screens new foreign investment. The evolving financial sector remains vulnerable to state
interference. The government retains considerable ownership in the banking sector, and the
level of nonperforming loans is relatively high.


INDONESIA
50
25 75
Least Most
free 0 100 free
Ideteriorated
ndonesia’s economic freedom score is 58.1, making its
by 0.4 point since last year, reflecting declines
Freedom Trend
60
in business freedom, the control of government spending,
and monetary freedom that counterbalance improvements 59
in freedom from corruption and labor freedom. Indonesia is
ranked 22nd out of 41 countries in the Asia–Pacific region,
58
and its overall score is below the world and regional averages.
Steady growth in economic freedom over the past five years 57
has tapered off more recently. However, since 2011, economic
freedom in Indonesia has advanced by over 2.0 points, reflect-
56
ing a more sustained commitment to opening up the financial
sectors and improving the investment regime. Other changes
have led to score advances in six of the 10 economic freedoms, 55
reflecting relatively broad-based policy improvements. 2011 2012 2013 2014 2015
Nonetheless, economic freedom remains weakly entrenched

in Indonesia. The judiciary has demonstrated some indepen- Country Comparisons
dence, but corruption is present. Overregulation of the busi-
ness and labor markets leads to inefficiencies in labor supply Country 58.1
and business formation. Despite its presence in a dynamic
East Asian trading network, Indonesia remains relatively World
60.4
closed off from the global marketplace. Average
BACKGROUND: Indonesia is the world’s most populous Mus- Regional

Average 58.8
lim-majority democracy. Since 1998, when long-standing
authoritarian ruler General Suharto stepped down, Indo- Free
84.6
nesia’s 250 million people have enjoyed a widening range of Economies
political freedoms, and participation in the political process 0 20 40 60 80 100
is high. Joko Widodo, former businessman and governor of
Jakarta, won a tight race for the presidency in 2014, pledging
to end corruption and promote economic reform. Weak rule Quick Facts
of law remains a major impediment to attracting capital. As a Population: 248.0 million
member of the G-20 and a driving force within the Association GDP (PPP): $1.3 trillion
of Southeast Asian Nations, Indonesia plays a growing role at 5.8% growth in 2013
the multilateral level. Its increasingly modern and diversified 5-year compound annual growth 5.9%
economy has recovered from the 2009 global recession. $5,214 per capita
Unemployment: 6.0%
245
INDONESIA (continued)
1–Year

0 20 40 60 80 100
Corruption remains endemic, including in the parliament and other key institutions like the
police. The judicial process is slow and inefficient. In June 2014, the former Constitutional
Court chief justice was sentenced to life imprisonment for accepting more than $4.8 million
in exchange for favorable rulings in regional election disputes. Property rights are generally
respected, but enforcement is inefficient and uneven.

0 20 40 60 80 100
Other taxes include a value-added tax and a property tax. Overall tax revenue equals 11.9 per-
cent of domestic income. Public expenditures are equivalent to 19.7 percent of the domestic
economy, and public debt corresponds to 26 percent of gross domestic product.

0 20 40 60 80 100
Progress in improving the entrepreneurial environment has been modest. Launching a busi-
ness takes 10 procedures on average, and meeting licensing requirements takes 200 days. The
labor market lacks flexibility, and complex regulations hinder job growth. Fuel subsidies con-
sumed 13 percent of GDP in 2014, although President Widodo announced that he will phase
out fuel subsidies entirely within the next four years.

0 20 40 60 80 100
Indonesia’s average tariff rate is 2.6 percent, and non-tariff barriers are numerous. State-owned
enterprises play a large role in the economy. Foreign investment in several sectors is capped.
The government still retains ownership in the banking sector, which is stable and evolving.
Supervision of the sector has recently been transferred from the central bank to the Financial
Services Authority.


IRAN
50
25 75
Least Most
free 0 100 free
I1.5ran’s economic freedom score is 41.8, making its economy

the 171st freest in the 2015 Index. Its score has increased by
points since last year, with improvements in five of the 10
Freedom Trend
45
economic freedoms, including labor freedom, the control of
44
government spending, and monetary freedom, outweighing a
decline in business freedom. Iran is ranked last out of 15 coun-
43
tries in the Middle East/North Africa region, and its overall
score is well below the world and regional averages.
42
International isolation and a faltering domestic economy
have undermined economic freedom in Iran. Over the past 41
five years, its score has declined by 0.3 point, with losses con-
centrated in three of the 10 economic freedoms. In particular, 40
rising business regulations have made it harder for entrepre-

39
neurs to do business. Capital flight and increased inflation
due to currency devaluation also have affected the petroleum- 2011 2012 2013 2014 2015
dependent economy.
Weak rule of law and autarkic trade and investment policies Country Comparisons
have long undermined the foundations of economic freedom
in Iran. Political and religious interference in judicial matters Country 41.8
is common. All investment must be approved by the govern-
ment and is limited to certain sectors. Small-business entre- World
Average 60.4
preneurs struggle to register businesses or acquire capital.
Regional
BACKGROUND: Iran had one of the Middle East’s most Average 61.6
advanced economies before the 1979 Islamic revolution.
Today, the economy is in shambles thanks to an agenda char- Free
Economies 84.6
acterized by large subsidies to favored sectors, a bloated pub-
0 20 40 60 80 100
lic sector, and high inflation. Corruption is another serious
problem. Economic sanctions imposed by the U.S. and Euro-
pean Union in response to Iran’s illicit nuclear weapons pro-
gram have had devastating effects. Petroleum exports, which Quick Facts
provide about 85 percent of government revenues, declined Population: 77.1 million
to about 1.5 million barrels per day in 2012 from about 2.5 GDP (PPP): $945.5 billion
million per day in 2011. President Hassan Rowhani, elected in –1.7% growth in 2013
June 2013, will find it difficult to revive the economy unless he 5-year compound annual growth 1.0%
can secure the removal of Western sanctions by negotiating a $12,264 per capita
deal to curb Iran’s nuclear program. Unemployment: 13.2%
247
IRAN (continued)
1–Year

0 20 40 60 80 100
Corruption is pervasive. The hard-line clerical establishment has gained great wealth through
control of tax-exempt foundations that dominate many economic sectors. The government
long ago abolished independent financial watchdogs. The judicial system is not independent;
the supreme leader appoints the head of the judiciary, who in turn appoints senior judges. The
government has confiscated property belonging to religious minorities.

0 20 40 60 80 100
Iran’s top individual income tax rate is 35 percent, and its top corporate tax rate is 25 percent.
Other taxes include a value-added tax and a property tax. The overall tax burden is equal to
5.9 percent of domestic output. Total government expenditures equal 15.3 percent of gross
domestic product, and public debt is equivalent to 11 percent of GDP.

0 20 40 60 80 100
Bureaucracy and a lack of transparency often make business formation and operation costly
and burdensome. Business start-up is now more streamlined, but obtaining necessary licenses
remains time-consuming. Labor regulations are rigid, and informal labor activity is substantial.
In April 2014, Iran cut gasoline subsidies as part of a fiscal consolidation program; gas prices
increased by 75 percent.

0 20 40 60 80 100
Iran’s average tariff rate is 21.8 percent. Importing goods is time-consuming. The government
reviews proposed foreign investment and maintains several sectoral restrictions. Iran’s finan-
cial sector remains heavily affected by state interference. A small number of private banks
operate under strict restrictions directed by the government. State-owned commercial banks
and specialized financial institutions direct credit allocation.

Property Rights 0 Fiscal Freedom +39.7 Business Freedom +2.0 Trade Freedom –3.6

IRAQ
50
25 75
Least Most
free 0 100 free
Icountry.
raq remains unranked in the 2015 Index because of the lack
of sufficiently reliable data on economic freedom within the
The Iraqi economy has slowly recovered from the
Freedom Trend
hostilities that began in 2003, but much of this progress has
been patchy or even reversed. The country faces worsening
political and security challenges. Iraq was last graded in the
2002 Index, when it received an overall score of 15.6.
A higher degree of political instability and violence has
plagued Iraq over the past year and undermined its recon-
struction. Endowed with abundant oil wealth, the govern-
ment has failed to address problems in economic freedom
that hold back private-sector development and improvements
in productivity.
Inefficient business regulations undermine the entrepreneur-
ial environment, preventing the diversification of the econo- 2011 2012 2013 2014 2015
my away from oil production. Monetary and fiscal policies are
poorly enforced, and the government has trouble maintain-
ing proper bookkeeping or budgetary functions. Corruption
Country Comparisons
is endemic and undermines the development of a dynamic
private sector. Sectarian favoritism in government bureau- Country n/a
cracies leads to arbitrary economic policies that favor par-
World
ticular groups. Average 60.4
BACKGROUND: Iraq grew increasingly unstable in 2013 due Regional

to the bloody comeback of radical Islamists in the form of Average 61.6
the Islamic State in Iraq and Syria (ISIS), the successor to al-
Qaeda in Iraq, which spearheaded a Sunni Arab revolt against Free
Economies 84.6
Prime Minister Nuri al-Maliki’s Shia-dominated coalition
0 20 40 60 80 100
government. Maliki, whose party won the largest number
of seats in the April 2014 parliamentary elections, alienated
Iraq’s Sunni Arabs and Kurds with a heavy-handed sectar- Quick Facts
ian agenda. He stepped down in August in favor of Haider Population: 34.8 million
al-Abadi. The oil industry provides more than 90 percent of GDP (PPP): $257.0 billion
government revenue. Inadequate infrastructure, weak prop- 4.2% growth in 2013
erty rights, bureaucratic red tape, high unemployment, and 5-year compound annual growth 7.2%
widespread corruption continue to impede development. $7,391 per capita
Unemployment: 16.1%
249
IRAQ (continued)
1–Year

0 20 40 60 80 100
Until the Islamic State incursion in 2014, the Iraqi state, with its history of authoritarian and
intrusive regimes, could be quite efficient at enforcing contracts, albeit through subjective legal
processes. Post-ISIS, however, central government control has been weakened, and vested
interests and corruption have increased. In such a political environment, property rights are
not well protected.
GOVERNMENT Fiscal Freedom n/a — n/a

0 20 40 60 80 100
Iraq’s individual and corporate income tax rates are 15 percent. Oil and gas companies pay a
corporate tax of 35 percent. There are few other taxes. Taxation remains erratic and poorly
enforced. Most government revenue comes from hydrocarbon rents. Government expendi-
tures equal 43.3 percent of domestic output, and public debt is equivalent to 31 percent of gross
domestic product.

0 20 40 60 80 100
Before the ongoing security turmoil, the business environment, lacking transparency and effi-
ciency, had improved only marginally. The labor market, which had already suffered from state
interference and control, has been severely affected by the devastating conflicts. The govern-
ment uses oil revenues to subsidize basic goods and services and maintains tight price controls
on food and medicine.

MARKETS Investment Freedom n/a — n/a
0 20 40 60 80 100
Iraq’s legal and regulatory regime discourages the free flow of foreign trade and investment.
The uncertain security environment also impedes international commerce. Inadequate super-
vision, political uncertainty, and a lack of security have severely undermined the financial sys-
tem. Banks suffer from a lack of liquidity. The state has used banks to finance deficit spending
and has required loans to state-owned enterprises.


IRELAND
50
25 75
Least Most
free 0 100 free
Ipoint
reland’s economic freedom score is 76.6, making its econ-
omy the 9th freest in the 2015 Index. Its score is up by 0.4
from last year, with a notable combined improvement
Freedom Trend
80
in the management of government spending and monetary
freedom outweighing declines in half of the 10 economic free- 79
doms including property rights, labor freedom, and freedom
from corruption. The Irish economy is ranked third out of 43 78
countries in the Europe region, and its score is far above the
77
world and regional averages.
Two years of gains in economic freedom have not totally 76
reversed losses earlier in the past half-decade. During that
period, Ireland’s economic freedom has declined by over 2.0 75
points, with ratings for freedom from corruption and business
freedom recording the largest declines. 74
2011 2012 2013 2014 2015
This erosion of economic freedom has undermined com-
petitiveness and hindered economic recovery in a difficult
external environment. Nonetheless, by adhering to its com- Country Comparisons
mitment to policies that sustain open markets and reducing
the costs of a bloated public sector to restore fiscal soundness, Country 76.6
Ireland has been able to reemerge as one of the world’s 10 fre-
est economies. World
60.4
Average
BACKGROUND: Prime Minister Enda Kenny’s Fine Gael
government was elected in February 2011. Ireland’s modern, Regional
Average 67.0
highly industrialized economy performed extraordinarily well
throughout the 1990s and most of the next decade, encour- Free
84.6
aged by free-market policies that attracted investment capi- Economies
tal. However, a speculative housing bubble burst in 2008 and 0 20 40 60 80 100
generated a financial crisis. A 2010 National Recovery Plan
was implemented after the government nationalized several
banks, and Ireland accepted a $90 billion European Union– Quick Facts
International Monetary Fund rescue package. The policy Population: 4.8 million
agenda aims to get the economy back on a solid footing by GDP (PPP): $188.9 billion
2015. In February 2013, Ireland reached agreement with the –0.3% growth in 2013
European Central Bank to restructure loans and ease the debt 5-year compound annual growth –1.1%
burden incurred when the Anglo Irish Bank was nationalized $39,547 per capita
in 2009. Ireland’s economy was expected to grow in 2014, but Unemployment: 13.6%
the ratio of public debt to GDP remains very high. Inflation (CPI): 0.5%
251
IRELAND (continued)
1–Year

0 20 40 60 80 100
More than four-fifths of the Irish think that corruption is a major problem, according to a
2014 EU report. Corruption, including cronyism, political patronage, and illegal donations, is
in fact a recurring issue. Nevertheless, contracts are secure, and expropriation is rare. Ireland’s
legal system is based on common law, and the judiciary is independent. Property rights are
well protected.

0 20 40 60 80 100
Ireland’s top individual income tax rate is 41 percent, and its top corporate tax rate is 12.5
percent. Other taxes include a value-added tax and a capital gains tax. Total tax revenue is
equivalent to 28.3 percent of domestic output. Government expenditures equal 42.6 percent
of gross domestic product, and public debt corresponds to 123 percent of the size of the domes-
tic economy.

0 20 40 60 80 100
Launching a business takes four procedures and six days, and no minimum capital is required,
but obtaining necessary permits takes 150 days on average. Relatively flexible hiring and dis-
missal regulations sustain an efficient labor market. Monetary stability has been relatively well
maintained. Prices are generally set by market forces, but the government subsidizes some
industries (e.g., wind energy).

0 20 40 60 80 100
the EU is relatively open to external trade. Ireland has few barriers to international trade and
investment. Foreign and domestic investors are generally treated equally under the law. Mas-
sive recapitalization and restructuring since 2009 have changed the banking sector substan-
tially. Major domestic banks have become almost fully nationalized.


ISRAEL
50
25 75
Least Most
free 0 100 free
Ipoints
srael’s economic freedom score is 70.5, making its econo-
my the 33rd freest in the 2015 Index. Its overall score is 2.1
better than last year, with improvements in six of the
Freedom Trend
72
10 economic freedoms, including the management of gov- 71
ernment spending, trade freedom, labor freedom, and fiscal
freedom. Registering the 10th largest score increase in the 70
2015 Index, Israel has achieved its highest score ever. Israel
is ranked 4th out of 15 countries in the Middle East/North 69
Africa region, and its overall score is above the world and 68
regional averages.
67
Broad, sustained improvements in property rights and the
regulatory sectors over the past five years have propelled Isra- 66
el into the ranks of the “mostly free” for the first time. Since
65
2011, economic freedom has advanced by 2.0 points, with
scores advancing broadly in six of the 10 categories measured. 2011 2012 2013 2014 2015
Improvements in property rights and the regulatory environ-
ment have been the backbone of this advance. Country Comparisons
A democratic and free-market bastion in the Middle East,
Israel has entrenched the principles of economic freedom Country 70.5
during its development. A small, open economy, Israel relies
on its competitive regulatory environment and well-estab- World
Average 60.4
lished rule of law to attract international investment. While
government spending is sizeable, the government has not Regional
61.6
interfered heavily with industrial activity. Average
BACKGROUND: Israel gained independence in 1948, and its Free

Economies 84.6
vibrant democracy remains unique in the region. Prime Min-
0 20 40 60 80 100
ister Benjamin Netanyahu, re-elected in January 2013, leads
a right-of-center coalition government. Israel has developed a
modern market economy with a thriving high-technology sec-
tor that attracts considerable foreign investment because of Quick Facts
reliable property rights. The recent discovery of large offshore Population: 7.9 million
natural gas deposits has improved Israel’s energy security and GDP (PPP): $273.7 billion
balance-of-payments prospects. Despite the 2006 war against 3.3% growth in 2013
Hezbollah in Lebanon and the 2008–2009, 2012, and 2014 5-year compound annual growth 3.6%
wars against Hamas in Gaza, and despite the constant threat $34,770 per capita
of terrorism, Israel’s economy remains fundamentally sound, Unemployment: 6.7%
growing by over 3 percent in 2013. Inflation (CPI): 1.5%
253
ISRAEL (continued)
1–Year

0 20 40 60 80 100
Fairly frequent high-level corruption investigations (e.g., leading to the 2014 bribery convic-
tion of a former prime minister), coupled with a strong societal intolerance for graft, have led
to a governance environment with relatively low levels of corruption. Israel has a modern and
independent legal system that provides effective means for enforcing property and contrac-
tual rights.

0 20 40 60 80 100
The top individual income tax rate is 48 percent, and the top corporate tax rate is now 26.5
percent. Other taxes include a value-added tax and a capital gains tax. The overall tax burden
is equivalent to 28.3 percent of domestic production. Government expenditures equal 41.7 per-
cent of domestic output, and public debt equals 67 percent of gross domestic product.

0 20 40 60 80 100
With no minimum capital requirement, incorporating a business takes five procedures, but
completing licensing requirements takes over 200 days on average. The labor market remains
relatively flexible, and labor costs are moderate. Prices are generally set by market forces, but
the government controls food prices and subsidizes some political priorities (e.g., West Bank
settlement housing and green energy initiatives).

0 20 40 60 80 100
Israel’s average tariff rate is 0.7 percent. The government has worked to facilitate trade. It
maintains some sectoral restrictions on foreign investment but generally welcomes invest-
ment. The evolving financial system, dominated by banks, functions without undue govern-
ment influence. Credit is allocated on market terms, and relatively sound regulation and
supervision assure free flows of financial resources.


ITALY
50
25 75
Least Most
free 0 100 free
Iincreased
taly’s economic freedom score is 61.7, making its econo-
by 0.8 point since last year, with improvements in
Freedom Trend
63
five of the 10 economic freedoms, including property rights,
62
freedom from corruption, labor freedom, and monetary free-
dom, outweighing declines in business freedom, management
61
of government spending, and fiscal freedom. Italy is ranked
34th out of 43 countries in the Europe region, and its score is
60
above the world average but below the regional average.
Despite the eurozone’s challenging economic environment, 59
economic freedom in Italy has advanced by 1.4 points since
2011, maintaining the country’s “moderately free” rating. 58
Medium-term gains have occurred in only three of the 10

57
economic freedoms but have been enough to advance Italy’s
overall score. Improvements in labor and investment freedom 2011 2012 2013 2014 2015
have led sectoral gains.
However, more substantial reforms are needed. A rigid labor Country Comparisons
market delays hiring and firing, causing supply and demand
mismatches. Government spending that consumes about Country 61.7
50 percent of the domestic economy crowds out produc-
tive investment. Growth is hindered by a property rights World
Average 60.4
regime and rule of law that are weakly established by Euro-
pean standards. Regional
67.0
Average
BACKGROUND: After a February 2013 general election that
produced no clear winner, center-left Democratic Party lead- Free
Economies 84.6
er Enrico Letta was chosen to form a government and serve as
0 20 40 60 80 100
prime minister. A year later, former Florence mayor Matteo
Renzi won 80 percent of the vote to become Italy’s youngest
prime minister ever. He leads a coalition government con-
sisting of the center-left Democratic Party, the center-right Quick Facts
People of Freedom Party led by former Prime Minister Sil- Population: 59.7 million
vio Berlusconi, and the centrist Civic Choice Party. Renzi GDP (PPP): $1.8 trillion
has pledged to reform entitlements, taxes, and labor laws, –1.9% growth in 2013
and he remains broadly popular. Italy has an immense pub- 5-year compound annual growth –1.5%
lic debt, entrenched organized crime, a large informal sector, $30,289 per capita
and high unemployment, particularly among the young. The Unemployment: 12.2%
North is industrialized and prosperous, while the South is Inflation (CPI): 1.3%
less developed. FDI Inflow: $16.5 billion
255
ITALY (continued)
1–Year

0 20 40 60 80 100
Former Prime Minister Berlusconi’s expulsion from parliament late in 2013 following his con-
viction for tax fraud led to the election in 2014 of a new government pledged to fight corrup-
tion. The legal system, however, remains vulnerable to political interference. Property rights
and contracts are secure, but court procedures are extremely slow. Protection of intellectual
property is below EU norms.

0 20 40 60 80 100
The top individual income tax rate is 43 percent, and the top corporate tax rate is 27.5 percent.
Other taxes include a value-added tax and an inheritance tax. The total tax burden equals 44.4
percent of domestic production, and government expenditures account for 50.6 percent of
domestic output. Public debt remains high at 133 percent of GDP, but sovereign financing con-
cerns have abated.

0 20 40 60 80 100
With no minimum capital required, business formation takes only five procedures, but bur-
densome licensing requirements require over three months on average, discouraging dynamic
entrepreneurial growth. The labor market remains stagnant. The rigid labor code hurts com-
petitiveness and employment prospects. Monetary stability has been relatively well main-
tained, and the government has reduced subsidies for renewable energy.

0 20 40 60 80 100
the EU is relatively open to external trade. Foreign and domestic investments are generally
treated equally under Italian law. The financial system, dominated by banks, remains vulner-
able to state interference. There are about 700 banks. Nonperforming loans have increased
considerably since 2007.


JAMAICA
50
25 75
Least Most
free 0 100 free
Jbyamaica’s economic freedom score is 67.7, making its econo-

my the 48th freest in the 2015 Index. Its score has increased
1.0 point since last year, reflecting gains in five of the 10
Freedom Trend
69
economic freedoms, including freedom from corruption, fis-
cal freedom, and the management of government spending, 68
that outweigh a decline in monetary freedom. Jamaica ranks
9th out of 29 countries in the South and Central America/
67
Caribbean region.
Action to correct terms of trade issues and poor fiscal policy 66
has helped Jamaica to improve its overall economic freedom
score over the past five years. Since 2011, economic freedom
65
on the island has improved by 2.0 points, led by advances in
five of the 10 economic freedoms including freedom from cor-
ruption, the management of government spending, and fiscal 64
freedom. In the 2015 Index, Jamaica has achieved its highest 2011 2012 2013 2014 2015
economic freedom score ever.
However, the foundations of economic freedom in Jamaica Country Comparisons
are still weak. Corruption is common, and the rule of law is
weakly enforced. Violence related to the drug trade has been Country 67.7
prevalent. Jamaica scores only about average on trade and
financial freedom, a serious problem for an island nation World
60.4
dependent on imports for basic goods and fuel. Average
BACKGROUND: Prime Minister Portia Simpson-Miller’s Peo- Regional

Average 59.7
ple’s National Party was re-elected in December 2011 with a
large parliamentary majority. Simpson-Miller has maintained Free
84.6
market-friendly policies, but high interest rates and govern- Economies
ment debt burden the economy. A $1.27 billion standby agree- 0 20 40 60 80 100
ment with the International Monetary Fund signed in 2010
required a commitment to major fiscal reforms that have
been slow to materialize. An extended IMF agreement was Quick Facts
approved in 2013. Most foreign exchange comes from remit- Population: 2.8 million
tances, tourism, and bauxite production, all of which declined GDP (PPP): $25.2 billion
sharply during the 2009 recession and have not recovered. 0.5% growth in 2013
Unemployment remains high, particularly in the formal sec- 5-year compound annual growth –0.7%
tor. Services account for more than 60 percent of GDP. Jamai- $9,048 per capita
ca is a member of the Venezuela-led Petrocaribe oil alliance. Unemployment: 15.0%
257
JAMAICA (continued)
1–Year

0 20 40 60 80 100
Jamaicans see corruption as a root cause of their high crime rate. The government has yet to
send a strong signal against corruption. In May 2014, a license to a Hong Kong–based company
for a major power project was revoked amid allegations of improper handling of the tender
process. The inefficient legal system weakens property rights and the rule of law.

0 20 40 60 80 100
Jamaica’s top individual income tax rate is 25 percent, and its corporate tax rate is down to 25
percent from 33.3 percent. Other taxes include a property transfer tax and a general consump-
tion tax. Overall tax revenue equals 24.4 percent of domestic income. Government expendi-
tures equal 29.9 percent of domestic production, and public debt is equivalent to 139 percent
of gross domestic product.

0 20 40 60 80 100
With no minimum capital required, the business start-up process takes only two procedures.
However, completing licensing requirements continues to be time-consuming, taking over
four months on average. Inefficiencies in the labor market continue to cause chronically high
unemployment and underemployment. Most prices are set by the market, but the government
regulates the prices of several goods and services.

0 20 40 60 80 100
Jamaica’s average tariff rate is 7.5 percent. Tariffs are an important source of government rev-
enue. Some imports require a license. The government does not automatically screen foreign
investment. The banking sector is diversified, providing a wide range of financial services.
Incorporating new provisions related to the evolving financial system, the Banking Services
Act was approved in June 2014.


JAPAN
50
25 75
Least Most
free 0 100 free
J0.9apan’s economic freedom score is 73.3, making its economy

the 20th freest in the 2015 Index. Its score has increased by
point since last year, with improvements in labor freedom,
Freedom Trend
75
business freedom, and trade freedom outweighing modest
declines in freedom from corruption, monetary freedom, and 74
fiscal freedom. Japan is ranked 6th out of 41 countries in the
Asia–Pacific region, and its overall score is above the world 73
Over the past five years, Japan’s economic freedom has expe- 72
rienced a turnaround, with early losses overcome by recent
gains. In particular, improvements in labor and trade freedom 71
have contributed to overall score gains.
While the government’s three arrows of reform have gener- 70
ated substantial enthusiasm, key structural issues continue to 2011 2012 2013 2014 2015
hold back economic freedom and growth. Government spend-
ing has been high, and deficit spending most recently has been
funded by a multi-year increase in the sales tax. The financial Country Comparisons
sector is difficult for foreign investors and subject to political
influence. Propelling Japan out of its decades-long malaise Country 73.3
will require targeted reforms to improve economic freedom
and remove institutional constraints. World
Average 60.4
BACKGROUND: Prime Minister Shinzo Abe’s Liberal Demo- Regional
cratic Party has held power since 2012. Abe has reversed a Average 58.8
13-year trend of steadily decreasing defense spending, pushed
forward on collective self-defense, and stood up to Chinese Free
Economies 84.6
assertiveness near the Japanese-controlled Senkaku Islands.
0 20 40 60 80 100
But his revisionist comments on Japan’s wartime actions,
a visit to the controversial Yasukuni Shrine, and his unwill-
ingness to discipline politicians for making provocative and
egregious comments have hindered his ability to achieve Quick Facts
international support for defense reform that would allow Population: 127.3 million
Japan a larger regional role. Abe has taken preliminary steps GDP (PPP): $4.7 trillion
toward structural economic reform as part of his “Abenomics” 1.5% growth in 2013
plan to pull Japan from a two-decade economic slump, but he 5-year compound annual growth 0.3%
faces resistance from entrenched special interests. Japan is a $36,899 per capita
significant force in world trade, but its economy continues to Unemployment: 4.1%
operate far below its potential. Inflation (CPI): 0.4%
259
JAPAN (continued)
1–Year

0 20 40 60 80 100
While the direct exchange of cash for favors from government officials is extremely rare in
Japan, a web of close relationships among companies, politicians, government agencies, and
other groups fosters an inwardly cooperative business climate conducive to corruption, most
often the rigging of bids on government public works projects. The judiciary is independent
and provides secure protection of real and intellectual property.

0 20 40 60 80 100
The top individual income tax rate is 40.8 percent, and the top corporate tax rate is 25.5 per-
cent (28.05 percent with a fiscal surtax). The government plans to increase the sales tax to 10
percent by 2015. The overall tax burden amounts to 28.6 percent of domestic output, and public
spending is equivalent to about 42 percent of domestic production. Public debt exceeds twice
the size of the economy.

0 20 40 60 80 100
The process for incorporating a business is relatively streamlined, but entrepreneurial growth
is discouraged by unaddressed structural problems. The labor market is well functioning, but a
propensity for lifetime employment guarantees and seniority-based wages impedes the devel-
opment of greater flexibility. Prices are generally set by market forces, but the government
subsidizes numerous industries and sectors.

0 20 40 60 80 100
Japan has a 1.2 percent average tariff rate. Imports and foreign direct investment are low rela-
tive to GDP, and agricultural imports face significant barriers. Investment in some economic
sectors may be screened. The financial sector is competitive but vulnerable to political influ-
ence. The government retains considerable shares in the banking sector, which includes 100
percent ownership in Japan Post Holding as of 2014.


JORDAN
50
25 75
Least Most
free 0 100 free
Junchanged
ordan’s economic freedom score is 69.3, making its econo-
my the 38th freest in the 2015 Index. Its score is essentially
from last year, with a change of 0.1 point reflect-
Freedom Trend
72
ing improvements in the management of government spend-
ing and labor freedom that are largely counterbalanced by 71
declines in business freedom, monetary freedom, and free-
dom from corruption. Jordan is ranked 5th out of 15 countries 70
in the Middle East/North Africa region, and its overall score
continues to be well above the world and regional averages.
69
Steady improvement in economic freedom in the early half of
the past decade has tapered off in recent years. Over the past 68
five years, Jordan’s economic freedom has advanced by just
0.4 point, primarily due to a deteriorating regulatory envi-
67
ronment and an increased level of perceived corruption that
offset gains in the control of government spending and prop- 2011 2012 2013 2014 2015
erty rights.
Despite challenges, economic freedom in Jordan continues Country Comparisons
its gradual advance, and the economy has moved closer to
the “mostly free” category. Jordan is relatively open to global Country 69.3
investment and trade. Property rights are generally respected,
but improvements are needed to combat corruption and rein- World
Average 60.4
force the judiciary’s independence.
Regional
BACKGROUND: Jordan is a constitutional monarchy with Average 61.6
relatively few natural resources. Foreign loans, international
aid, and remittances from expatriate workers support the Free
Economies 84.6
economy. In 2011, King Abdullah responded to “Arab Spring”
0 20 40 60 80 100
demonstrations by dismissing his cabinet and ceding greater
authority to the judiciary and parliament. The government
also implemented two economic relief packages and a supple-
mentary budget to subsidize the middle class and the poor. Quick Facts
In 2000, Jordan joined the World Trade Organization and Population: 6.5 million
signed a free trade agreement with the United States; in 2001, GDP (PPP): $40.0 billion
it signed an association agreement with the European Union. 3.3% growth in 2013
Jordan negotiated a $2.1 billion standby arrangement with the 5-year compound annual growth 3.2%
International Monetary Fund in 2012 to finance its budget- $6,115 per capita
ary and balance-of-payments deficits. The presence of more Unemployment: 12.6%
than 600,000 Syrian refugees causes serious administrative Inflation (CPI): 5.5%
and resource problems. FDI Inflow: $1.8 billion
261
JORDAN (continued)
1–Year

0 20 40 60 80 100
As in most Middle-Eastern states, wasta (the use of family, business, and other personal con-
nections to advance one’s interests) is endemic in Jordan. Officials are sometimes influenced
in government procurement processes and in dispute settlement. Anti-corruption efforts have
yielded mixed results. Property rights are respected for the most part. The judiciary is generally
independent, but the king is the ultimate authority.

0 20 40 60 80 100
added tax and a property tax. The overall tax burden is equal to 15.3 percent of domestic pro-
duction. Public expenditures are equivalent to 31.2 percent of gross domestic product, and
public debt corresponds to about 88 percent of domestic output.

0 20 40 60 80 100
Incorporating a business takes seven procedures, and no minimum capital is required, but
completing licensing requirements takes about two months. The labor market remains rigid,
and the public sector employs much of the labor force. The government, facing budget deficits,
plans to eliminate electricity subsidies by 2017 and has increased prices for fuel, but it has
increased agricultural subsidies.

0 20 40 60 80 100
Jordan has a 5.2 percent average tariff rate. Imports of agricultural products may be subject
to licensing requirements. The Jordan Investment Board reviews new investments. Despite a
challenging economic environment and ongoing uncertainty stemming from regional security
turmoil, banking remains resilient and well capitalized. There are 26 banks in operation, and
the capital market continues to develop.


KAZAKHSTAN
50
25 75
Least Most
free 0 100 free
K azakhstan’s economic freedom score is 63.3, making its

decreased by 0.4 point since last year, with declines in prop-
Freedom Trend
65
erty rights and business freedom outweighing a modest com-
bined improvement in half of the 10 economic freedoms,
64
including trade freedom, labor freedom, and freedom from
corruption. Kazakhstan ranks 11th out of 42 countries in the
Asia–Pacific region, and its overall score is above the world
63
With strong fiscal restraint, low taxes, and stabilizing mon-
etary policy, Kazakhstan has made steady gains in economic 62
freedom. Over the past five years, its Index score has advanced
by 1.2 points with improvements in fiscal freedom, govern-
61
ment spending, monetary freedom, and investment freedom.
2011 2012 2013 2014 2015
Kazakhstan’s transition to a market-led economy has been
steady, but further reforms are necessary to solidify past
gains. Its overall investment and trade regime remains rela- Country Comparisons
tively closed to foreign investors compared to regional and
global peers. The judiciary lacks statutory independence and Country 63.3
is subservient to the executive branch. Corruption is preva-
lent and reaches into all branches of government. World
Average 60.4
BACKGROUND: In May 2014, Kazakhstan signed a treaty with Regional
Russia and Belarus to bring the Eurasian Economic Union Average 58.8
into being on January 1, 2015. The EEU will have a GDP of $2.7
trillion and a population of 170 million. President Nursultan Free
Economies 84.6
Nazarbayev, whose rule began in 1989 when Kazakhstan was
0 20 40 60 80 100
still a Soviet republic, won a fifth five-year term in 2011 and is
likely to stay in power until at least the end of his term in 2016.
The opposition is marginalized, and the lack of a succession
plan creates longer-term political uncertainty. Production in Quick Facts
the giant Kashagan oil field off the northern shore of the Cas- Population: 17.2 million
pian Sea is expected to begin by 2016 and could help Kazakh- GDP (PPP): $246.9 billion
stan extract 3 million barrels per day by 2030. Kazakhstan is 6.0% growth in 2013
also the world’s largest producer of uranium. 5-year compound annual growth 5.4%
$14,391 per capita
Unemployment: 5.2%
263
KAZAKHSTAN (continued)
1–Year

0 20 40 60 80 100
Corruption pervades public services, the judiciary, the security forces, and the economy gener-
ally. It also contributes to capital flight. Kazakhstan fell by seven places in the 2013 Corruption
Perceptions Index, ranking just 140th out of 177 countries. New procedures were introduced
in 2014 to expedite property transfers and registration, but courts lack the capacity to protect
property rights effectively.

SIZE Government Spending 85.0 33rd 0
0 20 40 60 80 100
Other taxes include a value-added tax and excise taxes. Overall tax revenues equal 13.5 percent
of domestic production. Oil revenues contribute to public expenditures that total 22.4 percent
of domestic output. Public debt equals approximately 14 percent of gross domestic product.

0 20 40 60 80 100
No minimum capital is required to start a company, which takes six procedures and 10 days, but
obtaining necessary operating permits requires over five months on average. The labor market
needs more flexibility to accommodate rapid economic transformation. Monetary stability is
well maintained, but the government subsidizes agriculture and imposes price controls on fuel.

0 20 40 60 80 100
Kazakhstan’s average tariff rate is 3.0 percent. Kazakhstan is working to join the WTO, but non-
tariff barriers impede imports of agricultural products. Government procurement processes
can favor domestic firms. Foreign investors may not purchase agricultural land. The financial
sector is dominated by banks in which the government holds considerable ownership. Nonper-
forming loans account for over 30 percent of total assets.


KENYA
50
25 75
Least Most
free 0 100 free
K enya’s economic freedom score is 55.6, making its economy

the 122nd freest in the 2015 Index. Its score is down by 1.5
points from last year, with an improvement in freedom from
Freedom Trend
59
corruption outweighed by declines in five of the 10 economic
freedoms, including trade freedom, business freedom, and the 58
control of government spending. Kenya is ranked 23rd out of
57
score is just above the regional average.
Over the past half-decade, Kenya’s economic freedom score 56
has declined by 1.8 points, pushing the economy further down
into the ranks of the “mostly unfree.” Declines in four of the 10
55
economic freedoms include alarming deteriorations in busi-
ness and trade freedom that could threaten local entrepre-
neurs and Kenya’s integration into global trading networks. 54
2011 2012 2013 2014 2015
Kenya ranks higher than the global average in just three of
the 10 economic freedoms. Property rights are poorly pro-
tected, much of the population lacks land titles, and corrup- Country Comparisons
tion throughout all levels of government undermines basic
procurement of government services. Country 55.6
BACKGROUND: In March 2013, Uhuru Kenyatta won the World

first presidential election under the 2010 constitution. Both Average 60.4
he and running mate William Ruto have faced International
Criminal Court charges of crimes against humanity related Regional
Average 54.9
to post-election violence in 2007. In November 2011, Kenya
launched a military incursion into Somalia in response to Free
84.6
terrorist activity and kidnappings by Somalia’s al-Shabaab. Economies
Kenya joined the African Union peacekeeping mission in 0 20 40 60 80 100
Somalia in 2012. In September 2013, al-Shabaab terrorists
attacked a Nairobi mall, killing 67 people. In April 2014, Kenya
and several other East African states agreed to send troops to Quick Facts
South Sudan. There has been a moderate economic recovery Population: 44.4 million
since the 2007–2008 ethnic clashes, but poor infrastructure, GDP (PPP): $80.4 billion
systemic corruption, high unemployment, and a lack of pub- 5.6% growth in 2013
lic security undermine economic development. A $25.5 billion 5-year compound annual growth 4.6%
trade corridor in the port of Lamu is scheduled for completion $1,812 per capita
by 2017. Unemployment: 9.2%
265
KENYA (continued)
1–Year

0 20 40 60 80 100
Corruption is a serious problem. The 2010 constitution increased transparency and the inde-
pendence of the judiciary, but no top officials have been prosecuted successfully. In 2013, the
head of the state anti-corruption agency was charged with corruption, and an IMF request
to publicize agreements between the government and mining corporations was rejected. The
lower courts remain understaffed, underfinanced, and slow.

0 20 40 60 80 100
The top individual and corporate income tax rates are 30 percent. Other taxes include a val-
ue-added tax and a tax on interest. Total tax revenues are equivalent to 20.1 percent of gross
domestic product. Government expenditures equal 30.5 percent of Kenya’s GDP, and govern-
ment debt is equal to 50 percent of annual output.

0 20 40 60 80 100
Implementation of reforms to enhance regulatory efficiency has been uneven. Launching a firm
still takes 10 procedures and 30 days, and completing licensing requirements takes a month.
The public sector is the main source of employment, and the informal economy employs much
of the labor force. The government still regulates prices through subsidies, agricultural market-
ing boards, and state-owned enterprises.

0 20 40 60 80 100
Kenya’s average tariff rate is 10.5 percent. Efforts to facilitate trade through customs improve-
ments are underway with other members of the East African Community. Foreign investors
face regulatory hurdles. The state still owns or holds shares in several domestic financial insti-
tutions and continues to influence the allocation of credit. Financial inclusion has increased
through mobile banking.

Freedom from –23.0 Government +9.1 Labor Freedom +4.4 Investment Freedom 0

KIRIBATI
50
25 75
Least Most
free 0 100 free
K iribati’s economic freedom score is 46.4, making its econo-

my the 164th freest in the 2015 Index. Its score is essential-
ly the same as last year’s, with a change of 0.1 point reflecting
Freedom Trend
48
improvements in fiscal freedom and labor freedom that are
offset by declines in business freedom and monetary freedom. 47
Kiribati is ranked 39th out of 42 countries in the Asia–Pacific
region, and its overall score is below the world and region-
46
al averages.
Kiribati’s economy has institutionalized few of the basic 45
principles of economic freedom. Over the past five years,
the country’s low overall score, near the bottom ranks of the
44
Index, has improved by 1.6 points. This modest advancement
has occurred in just three of the 10 economic freedoms: fiscal
freedom, monetary freedom, and freedom from corruption. 43
2011 2012 2013 2014 2015
Kiribati is one of the countries least open to trade. Tariffs
remain a significant source of revenue, removing the incen-
tive to liberalize to a more open trading environment. Govern- Country Comparisons
ment spending supports over half of the domestic economy,
and government payrolls make up a significant portion of Country 46.4
employment. Much of the population is engaged in subsis-
tence agriculture. The rule of law is weakly enforced, and World
60.4
respect for business contracts is uneven. Average
BACKGROUND: The Pacific archipelago of Kiribati gained its Regional

Average 58.8
independence from Britain in 1979 and has a democratic form
of government. Third-term President Anote Tong is barred Free
84.6
from re-election. Kiribati was once rich in phosphates and Economies
highly dependent on mining, but deposits were exhausted in 0 20 40 60 80 100
1979. Today, it depends on a $500 million Revenue Equaliza-
tion Reserve Fund created using phosphates earnings, as well
as foreign assistance, remittances from overseas, and revenue Quick Facts
from fishing licenses, exports of fish and coconuts, and tour- Population: 0.1 million
ism. Crippling algae in the corals surrounding Kiribati seri- GDP (PPP): $0.7 billion
ously threaten the fishing industry, and preservation of the 2.9% growth in 2013
coral ecosystem, the South Pacific’s largest marine reserve, 5-year compound annual growth 1.5%
continues to be a priority. $6,391 per capita
Unemployment: n/a
267
KIRIBATI (continued)
1–Year

0 20 40 60 80 100
Official corruption and abuse are serious problems, and international donors continue to
demand improved governance and transparency. The judicial system is modeled on English
common law and provides adequate due process rights, but the rule of law remains uneven
across the country. Traditional customs permit corporal punishment. Contracts are weakly
enforced, and courts are relatively inexperienced in commercial litigation.

0 20 40 60 80 100
The top individual and corporate income tax rates are 35 percent. Tax administration is erratic,
and government expenditures have been more reliant on fishing license revenue. The total tax
burden equals 15.7 percent of the domestic economy, but government expenditures, including
transfer payments, exceed 109 percent of domestic production. Public debt is low.

0 20 40 60 80 100
Commercial regulations are not enforced consistently and lack the capacity to spur dynamic
entrepreneurial growth. Only a small share of the labor force participates in the formal econ-
omy. The government is the major source of employment. Although monetary instability is
mitigated by use of the Australian dollar as the official currency, the state funds price-distorting
subsidies for some agricultural products.

0 20 40 60 80 100
Kiribati’s average tariff rate was 17.3 percent as of 2006. Tariffs are an important source of rev-
enue. The government may screen new foreign investment, and there are restrictions on for-
eign ownership of land. High credit costs and constrained access to financing severely impede
private-sector development. A large proportion of the population remains outside the formal
banking system.

Freedom from –3.8 Government 0 Labor Freedom –1.7 Investment Freedom –5.0

Least Most
NORTH KOREA
free 0 100 free
46.4
Freedom Trend
50
25 75
Least
free 0
48
Most
100 free
World Rank:178 Regional Rank: 42 1.3
47
N orth Korea remains a closed society. Timely collection of
data is extremely difficult, and reported economic statis-
tics must be considered highly speculative. Nevertheless, it is
Freedom Trend
4
possible to determine that North Korea scores some minimal 46
points only in property rights and freedom from corruption,
3
and its overall score is only 1.3 points, hardly measurable on
the Index scale. North Korea continues to be the world’s least 45
free economy.
2
North Korea is an unreformed dictatorial state. Little is
known about the economic policy intentions of Kim Jong-un, 44
the hermit kingdom’s third-generation “supreme leader,” but 1
his time in power has been marked by inconsistencies.
Calling for North Korea to become an “economic giant,” Kim 43
0
has attempted to attract more foreign direct investment with 2011 2012 2013 2014 2015
such measures as designating new economic development 2011 2012 2013 2014 2015
zones. There have been few takers. Additionally, a new Min-
istry of External Economic Affairs was formed in June 2014. Country Comparisons
The regime firmly upholds the development of its military
and nuclear strength as key priorities, severely undercutting Country Comparisons
Country 1.3
any chance of economic reform and development.
World
60.4
BACKGROUND: Western-educated North Korean dictator Average
Country 46.4
Kim Jong-un rules a totalitarian state unchanged since his Regional
father died in 2011. Kim rejects any alterations in the status Average 58.8
quo, warning of the dangers of outside contagion to the sta- World
bility of the country. He has maintained Pyongyang’s aggres- Free
Average 60.4 84.6
Economies
sive rhetoric and provocative behavior toward its neighbors
0 20 40 60 80 100
and the international community. North Korea continues to
Regional
conduct nuclear and missile tests in violation of U.N. Security
Average 58.8
Council resolutions. It has threatened nuclear attacks on the
United States and its allies, and it continues to augment and Quick Facts
refine its nuclear and missile-delivery capabilities. Typically, Free
Pyongyang escalates and then lowers tensions in attempts to Economies
GDP (PPP): $40.0 billion (2011) 84.6
win diplomatic and economic benefits. The Obama Admin- 0.8% growth in 2011
istration, South Korea, and Japan have refused to resume 0 20 annual
5-year compound 40 60 80n/a100
growth
negotiations on denuclearizing the Korean Peninsula without $1,800 per capita (2011)
tangible signs of change in North Korean policy. Unemployment: n/a
Inflation (CPI): n/a
FDI Inflow: n/a
Public Debt: n/a
269
NORTH KOREA (continued)
1–Year

0 20 40 60 80 100
Bribery is pervasive, and corruption is endemic at every level of the state and economy. A mod-
ern, independent judiciary does not exist. The Workers’ Party, the Korean People’s Army, and
cabinet officials run companies that compete to earn foreign exchange. Almost all property
belongs to the state. Government control extends to all imports and exports as well as domesti-
cally produced goods.

0 20 40 60 80 100
No effective tax system is in place. The state commands almost every part of the economy and
directs all significant economic activity. The government sets production levels for most prod-
ucts, and state-owned industries account for nearly all GDP. Large military spending further
drains scarce resources. Despite attempts to crack down on them, black markets have grown.

EFFICIENCY Labor Freedom 0.0 184th 0
Monetary Freedom 0.0 183rd 0
0 20 40 60 80 100
The state regulates the economy through central planning and control. The private sector is
virtually nonexistent. Since the 2002 economic reforms, factory managers have had limited
autonomy to offer incentives, but the government controls the labor market. The botched cur-
rency reform in late 2009 has exacerbated monetary instability. “Yuanization” of the economy,
especially in areas abutting China, is increasing.

0 20 40 60 80 100
North Korea is isolated from the global economy. International trade and investment are
tightly controlled by the government. Limited foreign participation is allowed in the economy
through special economic zones, investment in which is approved on a case-by-case basis. The
limited financial sector is tightly controlled by the state.

Property Rights –5.0 Fiscal Freedom 0 Business Freedom –40.0 Trade Freedom 0
Freedom from –2.0 Government 0 Labor Freedom 0 Investment Freedom –10.0
Corruption Spending Monetary Freedom 0 Financial Freedom –10.0

SOUTH KOREA
50
25 75
Least Most
free 0 100 free
S0.3outh Korea’s economic freedom score is 71.5, making its

point higher than last year, with improvements in prop-
Freedom Trend
73
erty rights, labor freedom, and monetary freedom exceeding
declines in the management of government spending and 72
business freedom. South Korea is ranked 7th out of 42 coun-
tries in the Asia–Pacific region, and its overall score is above 71
the world and regional averages.
Over the past five years, South Korea’s economic freedom has 70
improved by 1.7 points, further advancing the country into the
“mostly free” category. The export-oriented, dynamic econo- 69
my scores above the world average in seven of the 10 economic
freedoms. Openness to global trade and investment has been
68
institutionalized through free trade agreements, and the regu-
latory environment has become more efficient and competitive. 2011 2012 2013 2014 2015
Nonetheless, South Korea’s overall economic freedom is lim-

ited by corruption and a low level of labor freedom. Despite a Country Comparisons
sound legal framework, corruption continues to erode equi-
ty and trust in government; despite reform efforts, the rigid Country 71.5
labor market undermines competitiveness and results in a
high level of underemployment. World
Average 60.4
BACKGROUND: Conservative President Park Geun-hye Regional
assumed office in February 2013 vowing a new policy toward Average 58.8
North Korea. Her “trustpolitik” strategy balances enhanc-
ing South Korea’s ability to deter North Korean attacks with Free
Economies 84.6
a willingness to engage Pyongyang in conditional, reciprocal
0 20 40 60 80 100
diplomacy. North Korea has demanded that it first be granted
unconditional aid and developmental subsidies from Seoul.
Pyongyang rejected Park’s “Dresden Declaration,” a vision for
Korean reconciliation articulated during a visit to Germany, Quick Facts
as an attempt at “unification through absorption.” At home, Population: 50.2 million
Park has yet to deliver on pledges of a mixture of business- GDP (PPP): $1.7 trillion
friendly economic policies to jump-start the economy and 2.8% growth in 2013
increased government “social welfarism” to redress economic 5-year compound annual growth 3.0%
disparities. Scandals involving senior administration officials $33,189 per capita
have reduced her popularity and political capital. The country Unemployment: 3.2%
remains a world leader in electronics, telecommunications, Inflation (CPI): 1.3%
automobile production, and shipbuilding. FDI Inflow: $12.2 billion
271
SOUTH KOREA (continued)
1–Year

0 20 40 60 80 100
Despite the political system’s overall health, bribery, influence peddling, and extortion con-
tinue in politics, business, and everyday life. Since 2013, there have been several investigations
into allegations of corruption among high-ranking officials. A well-functioning modern legal
framework ensures strong protection of private property rights. The rule of law is effective, and
the judicial system is independent and efficient.

0 20 40 60 80 100
The top individual income tax rate is 35 percent, and the top corporate tax rate is 22 percent
(with a 10 percent surtax on individual and corporate rates). Other taxes include a value-add-
ed tax. The overall tax burden is equivalent to 26.8 percent of domestic income. Government
spending equals 32.7 percent of total domestic output, and public debt amounts to approxi-
mately 37 percent of GDP.

0 20 40 60 80 100
The competitive regulatory framework facilitates business formation and innovation. With
no minimum capital required, incorporating a business takes three procedures and four days
on average. The labor market is dynamic, but costs of hiring and dismissing a worker remain
burdensome. Monetary stability has been well maintained, but the government subsidizes
numerous renewable energy projects, child care, and medical care.

0 20 40 60 80 100
The average tariff rate is 8.7 percent. South Korea continues to pursue its “World’s Best Cus-
toms” strategy. Foreign investment in some sectors is regulated or capped. The financial system
has become more sophisticated and competitive, offering a wide range of options, but busi-
ness start-ups and small and medium-sized companies struggle to obtain timely financing. The
banking sector remains largely stable.


KOSOVO
50
25 75
Least Most
free 0 100 free
K osovo’s economy is not graded in the 2015 Index due

to insufficient data. Facets of economic freedom for
which data are available have been scored individually.
Freedom Trend
Kosovo will receive an overall economic freedom score and
ranking in future editions as more reliable information
becomes available.
Kosovo’s continued transition to a market-based economy
has yielded dividends over the past five years. Its move from a
centrally planned to a market-based economy has proceeded Not graded this year
steadily, and the government has engaged in a series of high-
profile privatizations. Limited by political and geographic
constraints, the young nation has opened its borders to trade
and investment and now relies heavily on remittances and
foreign direct investment.
Continued progress is hindered by weak institutional capacity, 2011 2012 2013 2014 2015
and the government has yet to show a sustained commitment
to economic freedom. Corruption is still prevalent and under-
mines the already restricted business environment. Political Country Comparisons
interference in the judiciary is troubling. Remnants of the cen-
trally planned economy still linger in a government bureaucra- Country n/a
cy that makes business formation costly and onerous.
World
60.4
BACKGROUND: Transitioning from a centrally planned econ- Average
omy to a more market-based economy, Kosovo has been priva-
Regional
tizing many of its state-owned assets. The nation has opened Average 67.0
its borders to trade and investment, with services and manu-
facturing accounting for a large majority of economic activity. Free
84.6
Parliamentary elections in May 2014 produced political dead- Economies
lock, further hampering progress on economic reform. Half 0 20 40 60 80 100
of Kosovo’s population is under 25, unemployment remains
high at 35 percent, and informal networks and transactions Quick Facts
remain a large portion of the economy. Despite progress Population: 1.85 million
since independence, institutional capacity remains weak, GDP (PPP): $14.0 billion
and remittances account for around 15 percent of GDP. A truly 2.5% growth in 2013
independent judiciary is not yet a reality. Intrusive bureau- 5-year compound annual growth 3.2%
cracy and costly registration procedures reflect a history of $7,600 per capita
central planning. Greater political commitment is needed to Unemployment: 30.9%
implement the significant reforms necessary to jump-start Inflation (CPI): 1.9%
the economy and stamp out corruption. FDI Inflow: n/a
273
KOSOVO (continued)
1–Year

0 20 40 60 80 100
Political corruption is one of Kosovo’s greatest challenges. Several reforms were implement-
ed in 2013 to improve the transparency of campaign financing, but high-level senior officials
involved in corruption are not routinely punished. In general, the current institutional frame-
work is not designed to resolve claims and challenges to property rights in an efficient and
effective manner.

0 20 40 60 80 100
Kosovo’s top individual and corporate income tax rates are 10 percent. Other taxes include
a value-added tax and a property tax. Government revenue is largely dependent on the VAT,
excise and trade taxes, and transfers from abroad. Taxation is poorly enforced. Public expen-
ditures equal 29.5 percent of domestic output, and public debt equals approximately 9 percent
of GDP.

0 20 40 60 80 100
With no minimum capital required, it takes five procedures and less than a week to start a
company, but completing licensing requirements takes about five months on average. The
labor market is underdeveloped, and informal labor activity is substantial. Agricultural and
energy-related subsidies from the government and international donors amount to more than
one-third of GDP.

0 20 40 60 80 100
Kosovo is a member of the Central European Free Trade Agreement (CEFTA) region. Most
sectors of the economy are open to foreign investment. Kosovo has several state-owned enter-
prises. The financial system, dominated by a small number of banks, remains limited in scope
and depth. A lack of readily available financing hinders the development of a dynamic pri-
vate sector.


KUWAIT
50
25 75
Least Most
free 0 100 free
K uwait’s economic freedom score is 62.5, making its econo-

better than last year, reflecting improvements in the manage-
Freedom Trend
66
ment of government spending, business freedom, monetary
freedom, and labor freedom that offset declines in property 65
rights, freedom from corruption, and trade freedom. Kuwait is
ranked 7th out of 15 countries in the Middle East/North Afri- 64
ca region, and its overall score is slightly above the regional
and world averages.
63
Over the past five years, economic freedom in Kuwait has
declined by 2.4 points. Score declines have occurred in six 62
of the 10 economic freedoms, led by deteriorations in the
control of government spending, business freedom, and
61
trade freedom.
2011 2012 2013 2014 2015
High oil revenues have excused policymakers from making
tough choices to liberalize the economy, including privatiz-
ing some state-owned enterprises. Structural reforms remain Country Comparisons
critically necessary to spur dynamic growth and ensure long-
term economic development. While Kuwait continues to Country 62.5
benefit from an open trading regime that attracts investment
flows, rising protectionism must be controlled in order to World
Average 60.4
maintain international trade linkages.
Regional
BACKGROUND: Kuwait, one of the richest Arab nations, is a Average 61.6
constitutional monarchy ruled by the al-Sabah dynasty. Dur-
ing the Arab Spring of 2011, young activists called for political Free
Economies 84.6
reforms, and residents unlawfully in the country demanded
0 20 40 60 80 100
citizenship and jobs. After Islamists scored major gains in par-
liamentary elections in February 2012, Amir Sabah al-Ahmad
al-Jabr al-Sabah annulled the results and changed the elec-
tion laws. This sparked protests and triggered a boycott of the Quick Facts
new election in December. The results of that election were Population: 3.9 million
annulled by the Constitutional Court, and in new balloting GDP (PPP): $154.5 billion
held in July 2013, pro-government Sunni candidates achieved 0.8% growth in 2013
a significant majority. Kuwait controls roughly 6 percent of 5-year compound annual growth 0.6%
the world’s oil reserves. The oil and gas sector accounts for $39,706 per capita
nearly 50 percent of GDP and 95 percent of export revenues. Unemployment: 3.1%
275
KUWAIT (continued)
1–Year

0 20 40 60 80 100
Five opposition members of parliament resigned in May 2014 after they were denied a request
to question the prime minister about corruption. There are occasional accusations of attempt-
ed bribery in the government’s lengthy procurement process. The legal framework is not well
developed, and the rule of law remains weak. Foreigners face difficulties enforcing contract
provisions in the local courts.

0 20 40 60 80 100
Kuwait has no individual income tax. Foreign-owned companies are subject to a 15 percent tax.
Taxes make up a small portion of government revenue, with most financing coming from oil
and gas windfalls. Overall tax revenue is less than 1 percent of domestic output. Public expen-
ditures equal 36 percent of domestic production, and government debt amounts to 5 percent

0 20 40 60 80 100
Progress in improving Kuwait’s regulatory framework has been uneven. Incorporating a busi-
ness still takes more than 30 days, and bureaucratic hurdles continue to add to the cost of
business. Overall labor regulations lack flexibility. The government has an extensive system
of subsidies and price controls through state-owned utilities and enterprises, although diesel
fuel subsidies were cut in 2014.

0 20 40 60 80 100
Kuwait’s average tariff rate is 4.4 percent. Government procurement may favor domestic firms,
and imports of books and media deemed detrimental to public morals are not allowed. The rela-
tively well-developed financial system offers a wide range of services. Restrictions on foreign
banks include a ban on competing in the retail sector. Foreign banks are limited to providing
investment banking services.

Property Rights –45.0 Fiscal Freedom –2.2 Business Freedom –26.4 Trade Freedom –0.8

KYRGYZ REPUBLIC
50
25 75
Least Most
free 0 100 free
Tscorehemaking
Kyrgyz Republic’s economic freedom score is 61.3,
its economy the 82nd freest in the 2015 Index. Its
has increased by 0.2 point since last year, with improve-
Freedom Trend
63
ments in trade freedom, freedom from corruption, and labor
freedom outweighing declines in the control of government 62
spending, fiscal freedom, and business freedom. The Kyr-
gyz Republic is ranked 15th out of 42 countries in the Asia– 61
Pacific region, and its overall score is above the regional and
world averages.
60
Over the past two years, the Kyrgyz Republic has re-estab-
lished the positive growth in economic freedom it had 59
achieved prior to 2010. Solid gains have been made in opening
the economy to trade and investment, but the control of gov-
58
ernment spending continues to deteriorate.
2011 2012 2013 2014 2015
Compared to transitioning economies in Eastern Europe, the
Kyrgyz Republic lags behind in key indicators of economic
freedom. Trade freedom has only recently surpassed the Country Comparisons
global average, and the rule of law remains weak. Corruption,
particularly surrounding the president’s family and office, has Country 61.3
been well documented. Courts remain largely unreformed,
and property rights are weak. World
Average 60.4
BACKGROUND: The Kyrgyz Republic is one of Central Asia’s Regional
poorest and least stable countries and is sharply divided along Average 58.8
ethnic lines. Former Prime Minister Almazbek Atambayev,
elected president in 2011 with Moscow’s support, has used Free
Economies 84.6
questionable legal maneuvers to persecute opponents. Weak
0 20 40 60 80 100
governance has encouraged extremist threats, organized
crime, and corruption. The government has accumulated high
levels of external debt and is heavily dependent on foreign
aid. The economy depends heavily on gold exports and remit- Quick Facts
tances from Kyrgyzstani migrant workers, primarily in Rus- Population: 5.6 million
sia. Cotton, tobacco, wool, and meat are the main agricultural GDP (PPP): $14.7 billion
products, but only tobacco and cotton are exported in any 10.5% growth in 2013
quantity. There has been strong foreign investment, particu- 5-year compound annual growth 3.5%
larly from Russia. In May 2014, Atambayev signed a road map $2,611 per capita
for membership in the Russia-dominated Eurasian Economic Unemployment: 7.9%
Union, saying that his country has little choice but to join. Inflation (CPI): 6.6%
277
KYRGYZ REPUBLIC (continued)
1–Year

0 20 40 60 80 100
Corruption is pervasive, and despite many rounds of constitutional and statutory changes, the
Kyrgyz Republic has been trapped in a cycle in which political elites rotate from opposition to
power and use government resources to reward clients. Government anti-corruption efforts
mostly target the opposition. The courts are largely unreformed, judges are often corrupt, and
the legal framework is weak.

0 20 40 60 80 100
The Kyrgyz Republic’s individual and corporate income tax rates are a flat 10 percent. Other
taxes include a value-added tax and excise taxes. The overall tax burden corresponds to 21
percent of domestic production. Non-tax revenue from gold deposits is sizeable. Government
expenditures equal 39.5 percent of domestic output, and public debt is equivalent to 48 percent

0 20 40 60 80 100
Requirements for starting a business have been simplified, but regulatory inefficiency and
lack of transparency persist. Completing licensing requirements still takes over 140 days. The
labor market remains inefficient, and informal labor activity is high. The 12-month inflation
rate reached 6.3 percent in March 2014, but core inflation has been in the single digits since
May 2013.

0 20 40 60 80 100
The Kyrgyz Republic’s average tariff rate is 2.4 percent. Tariffs on imported clothing are rela-
tively high. The legal and regulatory environment is challenging for foreign investors. Financial
intermediation has increased, but high credit costs severely undermine private-sector develop-
ment. Credits provided by a banking sector that remains vulnerable to state interference equal
less than 15 percent of GDP.


LAOS
50
25 75
Least Most
free 0 100 free
L0.2aos’s economic freedom score is 51.4, making its econo-

my the 150th freest in the 2015 Index. Its overall score is
point higher than last year, reflecting improvements in
Freedom Trend
53
freedom from corruption and labor freedom that outweigh
declines in investment freedom, business freedom, and mon-
52
etary freedom. Laos is ranked 33rd out of 42 countries in the
Asia–Pacific region, and its overall score is below the world
51
Economic freedom in Laos has scarcely budged over the past
five years, highlighting the apparent lack of commitment
to economic reform in the East Asian economy. While the 50
country did register its highest score ever in the 2015 Index,
progress has been inconsequential. Five-year improvements
49
in half of the 10 economic freedoms, including the control of
government spending and labor freedom, have been counter- 2011 2012 2013 2014 2015
balanced by deteriorations in property rights, government
spending, monetary freedom, and trade freedom. Country Comparisons
Laos remains largely absent from the East Asian trading net-
work, and its trade freedom remains well below the global Country 51.4
average. Government corruption is widespread, and the judi-
ciary is largely ineffective. Businesses, especially entrepre- World
Average 60.4
neurs, find that business formation and capital accumulation
are difficult because of regulatory costs and underdeveloped Regional
58.8
financial markets. Average
BACKGROUND: The Communist government of Laos, in Free

Economies 84.6
power since 1975, wrecked the economy in the early years of
0 20 40 60 80 100
its rule. Slow liberalization, begun in 1986, has yielded limited
success. Corruption is endemic, laws are applied erratically,
and the country remains highly dependent on international
aid. Basic civil liberties are heavily restricted. Seventy-five Quick Facts
percent of the workforce is employed in subsistence farming. Population: 6.8 million
In 2013, following a 15-year negotiation process, Laos became GDP (PPP): $20.8 billion
a member of the World Trade Organization. 8.2% growth in 2013
$3,068 per capita
Unemployment: 1.4%
279
LAOS (continued)
1–Year

0 20 40 60 80 100
Widespread corruption among government officials fuels public discontent and causes prob-
lems in tax collection and degraded public services. In late 2013, more than 50 officials in a
provincial government were investigated for fraud. Senior civilian and military officials are
often involved in logging, mining, and other extractive enterprises. The judicial system is inef-
ficient, and protections for property rights are weak.

0 20 40 60 80 100
Laos’s top individual and corporate income tax rates are 24 percent. Other taxes include a
vehicle tax and excise taxes. The overall tax burden equals 24 percent of domestic produc-
tion. Government expenditures are equal to 21 percent of domestic output, and public debt is
equivalent to 62 percent of gross domestic product.

0 20 40 60 80 100
Regulatory efficiency remains poor, and the application of regulations is inconsistent and
non-transparent. On average, it requires over 90 days to incorporate a company, and obtain-
ing necessary permits takes over two months. The labor market lacks flexibility and hinders
job growth. Monetary stability has strengthened somewhat. The government influences many
prices through subsidies and state-owned enterprises and utilities.

0 20 40 60 80 100
Laos has an average tariff rate of 13.2 percent. Some goods are subject to import licensing, and
foreign-based service providers may face barriers. Foreign investors typically must overcome
multiple regulatory hurdles. The financial system is underdeveloped and subject to political
interference. Three state-owned banks dominate the banking sector, and the government con-
trols credit allocation.

Property Rights +5.0 Fiscal Freedom +53.9 Business Freedom +19.5 Trade Freedom –22.4

LATVIA
50
25 75
Least Most
free 0 100 free
L1.0atvia’s economic freedom score is 69.7, making its economy

point since last year, with improvements in freedom from
Freedom Trend
71
corruption, the management of government spending, and 70
monetary freedom outweighing declines in labor freedom,
business freedom, and fiscal freedom. Latvia is ranked 17th 69
out of 43 countries in the Europe region, and its overall score
is above the regional and world averages. 68
Commitment to pursuing greater economic freedom has 67
pushed Latvia higher in the “moderately free” category over 66

the past five years. Since 2011, economic freedom in Latvia
has increased by 3.9 points, the second highest overall score 65
increase in Europe during that period. Most impressive, Lat-
64
via recorded no score declines, sustaining improvements in
all 10 economic freedoms except property rights and financial 2011 2012 2013 2014 2015
freedom, scores for which were unchanged. In the 2015 Index,
Latvia has recorded its highest economic freedom score ever. Country Comparisons
Latvia’s ongoing transition to a free-market economy has
been facilitated by openness to global commerce and efficient Country 69.7
regulation. Prudent fiscal policies and low taxes have limited
the government’s presence in the economy and fostered a World
Average 60.4
dynamic private sector. Although Latvia remains poised to
continue to reap the benefits of advancing economic freedom, Regional
67.0
more institutional reforms must be implemented to shore up Average
a weak judiciary and the property rights regime and to tackle Free
pervasive corruption effectively. Economies 84.6
0 20 40 60 80 100
BACKGROUND: Latvia regained its independence from the
Soviet Union in 1991 and joined the European Union and
NATO in 2004. Prime Minister Laimdota Straujuma of the
conservative Union Party heads a four-party coalition that Quick Facts
also includes the National Alliance, the Reform Party, and the Population: 2.0 million
Union of Greens and Farmers. Latvia’s economic standing and GDP (PPP): $38.9 billion
credit rating have improved following pro-market reforms. 4.1% growth in 2013
Low productivity remains a problem, and there is a large 5-year compound annual growth –1.3%
underground economy. Latvia joined the eurozone in 2014. $19,120 per capita
Unemployment: 10.9%
281
LATVIA (continued)
1–Year

0 20 40 60 80 100
In a 2013 Transparency International poll, 25 percent of Latvians reported paying bribes to
government officials. In late 2013, the long-time prime minister resigned after suspicions that
a supermarket collapse in Riga that killed over 50 people was due in part to corruption in the
construction safety permit process. The judicial system is independent, but improvements
are needed.

0 20 40 60 80 100
Latvia’s top individual income tax rate is 24 percent, and its top corporate tax rate is 15 percent.
Other taxes include a value-added tax and a tax on capital gains. The overall tax burden equals
27.6 percent of gross domestic product. Public expenditures correspond to 36.9 percent of total
domestic production, and public debt equals 32 percent of gross domestic output.

0 20 40 60 80 100
Incorporating a business takes four procedures on average, and no paid-in minimum capital
is required, but completing licensing requirements remains time-consuming. Despite reform
efforts, the relatively rigid labor market hinders dynamic job growth. The government created
a social support mechanism for poor households to limit potential increases in rates following
full opening of the electricity market in 2014.

0 20 40 60 80 100
the EU is relatively open to external trade. Latvia generally welcomes foreign investment, but
foreign ownership of agricultural land is restricted. The banking sector, largely recapitalized
since the recent global financial crisis, has recovered its financial stability. The number of non-
performing loans has declined.


LEBANON
50
25 75
Least Most
free 0 100 free
Lunchanged
ebanon’s economic freedom score is 59.3, making its econo-
from last year, with a loss of 0.1 point reflecting
Freedom Trend
62
declines in the control of government spending, monetary
freedom, and business freedom that offset improvements in
61
freedom from corruption, labor freedom, and fiscal freedom.
Lebanon is ranked 10th out of 15 countries in the Middle
East/North Africa region, and its overall score is below the
60
world average.
Political instability and diminishing confidence in the domes-
tic economy reflect the slow degradation of Lebanon’s eco- 59
nomic freedom over the past five years. A decline of 0.8 point
since 2011 reflects deteriorations in four of the 10 economic
58
freedoms, including property rights, monetary freedom, and
trade freedom. 2011 2012 2013 2014 2015
These declines have weakened the already fragile structural

and institutional environment. Restrictive business and labor Country Comparisons
regulations inhibit business formation and the development
of a dynamic private sector. Prevalent corruption has under- Country 59.3
mined the basic political institutions of society. The banking
sector is relatively well developed, but the economy remains World
Average 60.4
more closed to trade and investment than many of its region-
al peers. Regional
61.6
Average
BACKGROUND: Since 1975, Lebanon’s economy has been
disrupted by civil war, Syrian occupation, Hezbollah clashes Free
Economies 84.6
with Israel, political uncertainty, and sectarian tensions.
0 20 40 60 80 100
Syria was forced to withdraw its army in 2005 after its gov-
ernment was implicated in the assassination of former Leba-
nese Prime Minister Rafiq Hariri. In 2006, Lebanon-based
Hezbollah forces instigated a conflict with Israel. Hariri’s son, Quick Facts
Saad Hariri, was elected prime minister in June 2009, but his Population: 4.5 million
government collapsed in January 2011 when Hezbollah engi- GDP (PPP): $66.3 billion
neered the elevation of Najib Mikati as prime minister. Mikati 1.0% growth in 2013
resigned in March 2013, and Tammam Salam was asked to 5-year compound annual growth 4.5%
form a caretaker government until new elections slated for $14,845 per capita
November 2014. Economic growth has fallen dramatically due Unemployment: 6.6%
to the civil war in neighboring Syria and growing instability Inflation (CPI): 3.2%
triggered by rising Sunni–Shia sectarian tensions. FDI Inflow: $2.8 billion
283
LEBANON (continued)
1–Year

0 20 40 60 80 100
Corruption pervades the public sector, and Lebanon’s proximity to the Syrian crisis heightens
political instability. The sectarian political system and the powerful role of foreign patrons
limit elected officials’ accountability to the public. Lebanon’s judicial system is in need of root-
and-branch reform to change both its procedures and many of its junior, middle-ranking, and
senior personnel.

0 20 40 60 80 100
Lebanon’s top individual income tax rate is 20 percent, and its top corporate tax rate is 15
percent. Other taxes include an inheritance tax and a value-added tax. The overall tax burden
equals 15.7 percent of domestic production. Public expenditures are equal to 31.3 percent of
domestic output, and public debt is equivalent to 139 percent of gross domestic product.

0 20 40 60 80 100
Launching a business takes slightly more than a week, and minimum capital requirements cost
about one-third of the level of average annual income. Obtaining necessary licenses takes over
eight months on average. Outmoded labor laws undermine the development of a dynamic labor
market. The state-owned and heavily subsidized electricity sector’s annual deficit consumes
about a third of government revenue.

0 20 40 60 80 100
Lebanon’s average tariff rate is 4.8 percent. Imports of used cars and goods from Israel are
restricted, as is foreign investment in several sectors of the economy. The financial sector is
not well diversified and is dominated by banks. Competition among private banks has contrib-
uted to greater efficiency. With a high degree of resilience, banking remains the cornerstone
of the economy.


LESOTHO
50
25 75
Least Most
free 0 100 free
Ltheesotho’s economic freedom score is 49.6, making its econo-

same as last year’s, with a change of 0.1 point reflecting
Freedom Trend
51
improvements in freedom from corruption, labor freedom,
50
and fiscal freedom that outweigh declines in property rights,
investment freedom, and trade freedom. Lesotho is ranked
49
38th out of 46 countries in the Sub-Saharan Africa region, and
its overall score is below the world average.
48
Over the past five years, economic freedom in Lesotho has
advanced by 2.1 points, reflecting marked improvements in six 47
of the 10 economic freedoms, but a gain of over 20 points in
fiscal freedom has been more than offset by a decline of over 46
20 points in the management of government spending.

45
Corruption remains a serious problem and pervades all levels 2011 2012 2013 2014 2015
of government. High tariffs on agricultural and other products
exacerbate food security issues and increase costs. Outmod-
ed labor laws undermine the development of a formal labor Country Comparisons
market, and inefficient business regulations inhibit busi-
ness formation. Country 49.6
BACKGROUND: Following independence from the United World

60.4
Kingdom in 1966, Lesotho was subject to frequent coups and Average
foreign military interventions for nearly three decades. Leso- Regional
tho is a parliamentary constitutional monarchy. King Letsie Average 54.9
III is ceremonial head of state. Thomas Thabane, elected
prime minister in May 2012, was forced to flee in August Free
Economies 84.6
2014 following an attempted coup by a renegade general. He
0 20 40 60 80 100
was reinstated following a peace deal brokered by the South
African government. Geographically surrounded by and eco-
nomically integrated with South Africa, Lesotho relies on
customs duties from the Southern Africa Customs Union for Quick Facts
government revenue and remittances from laborers employed Population: 1.9 million
in South Africa for much of its national income. Principal GDP (PPP): $4.3 billion
exports include diamonds and water. In 2012, one of the worst 5.8% growth in 2013
food crises in human history hit Lesotho after its crops failed 5-year compound annual growth 5.2%
due to extraordinary weather circumstances. Lesotho has the $2,255 per capita
world’s third-highest HIV rate. Unemployment: 27.0%
285
LESOTHO (continued)
1–Year

0 20 40 60 80 100
In 2013, the water minister became the first cabinet member ever to be dismissed because of
corruption. Corruption pervades all sectors of public service, and cronyism is prevalent in state
bidding procedures. The judiciary is relatively independent but politicized and chronically
underfunded. Protection of private property rights is ineffective, but expropriation is unlikely.

0 20 40 60 80 100
Lesotho’s top individual income tax rate is 35 percent, and its top corporate tax rate is 25 per-
cent. Other taxes include a value-added tax and a tax on dividends. Tax revenue equals about
36.1 percent of domestic output, and public expenditures have reached 61.1 percent of domestic
production. Public debt is equivalent to about 40 percent of gross domestic product.

0 20 40 60 80 100
Starting a business takes seven procedures, and no minimum capital is required, but complet-
ing licensing requirements still takes over 150 days on average. The labor market remains stag-
nant. A large portion of the workforce is in the informal sector. The government influences
prices through state-owned enterprises. Monetary stability is affected by inflationary pres-
sures in South Africa.

0 20 40 60 80 100
Lesotho’s average tariff rate is 12.7 percent. Imports of agricultural products or used clothing
and cars may require a license. Foreign and domestic investments are treated equally under
the law. The financial system is closely linked to South Africa’s and dominated by South Afri-
can–owned banks. Much of the population lacks adequate access to banking services. There is
no stock exchange.


LIBERIA
50
25 75
Least Most
free 0 100 free
Lhigher
iberia’s economic freedom score is 52.7, making its econo-
my the 141st freest in the 2015 Index. Its score is 0.3 point
than last year, reflecting improvements in freedom
Freedom Trend
56
from corruption and trade freedom that offset declines in six
of the 10 economic freedoms, including property rights, labor 54
freedom, and business freedom. Liberia is ranked 31st out of
46 countries in the Sub-Saharan Africa region, and its overall 52
rating remains below the world and regional averages.

50
Liberia’s high economic growth rates have corresponded with
five years of strong advances in economic freedom. With Sub- 48
Saharan Africa’s third largest increase in economic freedom
over the past half-decade, Liberia’s score has advanced by 46
6.2 points. Progress in reducing corruption, improving fis-
cal accounts, and opening the economy to trade and invest- 44
ment have further cemented Liberia’s progression out of the 2011 2012 2013 2014 2015
“repressed” category.
Nevertheless, the judicial system and the property rights Country Comparisons
regime remain weak. Efforts to reform land titling are pro-
gressing but not fully implemented. Business and labor reg- Country 52.7
ulations are becoming more efficient, but more progress is
needed to promote sustained entrepreneurial and job growth. World
60.4
Average
BACKGROUND: In the 1990s, civil war killed a quarter of a
million Liberians. A peace agreement was reached in 1995, Regional
Average 54.9
and Charles Taylor was elected president. He was forced to
step down and was subsequently found guilty of war crimes in Free
84.6
April 2012. Ellen Johnson Sirleaf, elected president in 2005 Economies
and re-elected in 2011, was awarded the Nobel Peace Prize in 0 20 40 60 80 100
2011. The country remains fragile. In 2013, the United Nations
Refugee Agency repatriated 155,000 Liberians who had fled
during the civil war. Rampant corruption, high unemploy- Quick Facts
ment, and widespread illiteracy hinder development. Politi- Population: 4.1 million
cal instability and international sanctions have destroyed GDP (PPP): $2.9 billion
most large businesses and driven out many foreign investors. 8.0% growth in 2013
Liberia is rich in natural resources including rubber, mineral 5-year compound annual growth 7.0%
resources, and iron ore. It has suffered significantly from the $703 per capita
2014 Ebola virus outbreak in West Africa. Unemployment: 3.8%
287
LIBERIA (continued)
1–Year

0 20 40 60 80 100
The Senate candidacy of the president’s son in the October 2014 elections focused public
attention on claims of nepotism and graft. Despite government efforts to fight it, corruption
is endemic. Property rights are not strongly protected, and the rule of law remains uneven
across the country. The judiciary lacks adequate facilities. Legislation to reconcile statutory
and customary land tenure systems is pending.

0 20 40 60 80 100
Liberia’s top individual and corporate income tax rates are 25 percent. Other taxes include a
property tax and a goods and services tax. The overall tax burden equals 21.1 percent of gross
domestic product. Government expenditures are equivalent to 31.7 percent of the domestic
economy, and public debt is equal to around 30 percent of domestic output.

0 20 40 60 80 100
Reform measures have streamlined the procedures for establishing a business, but start-ups
are discouraged by other institutional deficiencies such as pervasive corruption and very lim-
ited access to credit. Obtaining necessary licenses remains time-consuming. The labor market
remains underdeveloped. The effectiveness of Liberian monetary policy is limited in the near
term, given the high dollarization of the economy.

0 20 40 60 80 100
Liberia’s average tariff rate is 5.3 percent. Imports may face customs delays, and state-owned
enterprises may distort the economy. Foreign investment in several sectors is restricted. The
rate of nonperforming loans is high. The high cost of credit and scarce access to financing hold
back private-sector development. A large part of the population remains outside of the formal
banking sector.


LIBYA
50
25 75
Least Most
free 0 100 free
N umerical grading of Libya’s overall economic freedom

remains suspended for the third year in a row in the 2015
Index because ongoing political turmoil has resulted in deteri-
Freedom Trend
40
oration in the quality of publicly available economic statistics.
Facets of economic freedom for which data are still available 39
have been individually scored. As a “repressed” economy with
a score of 35.9, Libya was ranked last in the Middle East/North 38
Africa region when it was last graded in the 2012 Index.

37
Political unrest, violence, and militia rule have continued to
plague Libya ever since Muammar Qadhafi’s ouster in 2011. 36
Years of dictatorial rule left the economy largely depen-
dent on oil resources. Structural and institutional mecha- 35
nisms to guarantee sustained growth have been absent.
Limited efforts to diversify the economy away from oil have 34
been unsuccessful. 2011 2012 2013 2014 2015
Libya faces serious long-term and short-term challenges. In

the short term, a political transition must be achieved that Country Comparisons
limits violence and political instability. Establishing the rule
of law and effective governance will be critical if the weak cen- Country n/a
tral government is to repair the crumbling economic infra-
structure destroyed during the civil war. World
60.4
Average
BACKGROUND: Dictator Muammar Qadhafi was overthrown
in 2011, and elections were held in July 2012. The new gov- Regional
Average 61.6
ernment under President Mohammed Magarief and Prime
Minister Ali Zeidan struggled to rein in militias fighting for Free
84.6
control of territory and resources. Zeidan stepped down in Economies
March 2014 and was replaced by Ahmed Maiteg in May. As 0 20 40 60 80 100
fighting between militias and Islamist terrorist groups con-
tinued, Libya held legislative elections in June. Oil and natu-
ral gas provide about 80 percent of GDP, 95 percent of export Quick Facts
revenues, and 99 percent of government revenues. Economic Population: 6.1 million
recovery began in 2012, and the energy sector is producing at GDP (PPP): $70.4 billion
pre-war levels. The government faces major challenges in dis- –9.4% growth in 2013
arming and demobilizing militias, improving the rule of law, 5-year compound annual growth –6.0%
and reforming the state-dominated socialist economy. $11,498 per capita
Unemployment: 9.0%
Public Debt: n/a
289
LIBYA (continued)
1–Year

0 20 40 60 80 100
Institutional effectiveness continues to be undermined by security problems. Many experi-
enced technocrats who served under the Qadhafi regime are blocked from assuming leadership
roles in which they might be able to execute effective policy. In 2014, numerous investigations
of foreign companies allegedly complicit in improper business practices in Libya under the
Gaddafi regime continued.

0 20 40 60 80 100
Libya’s top individual income tax rate is 10 percent, and its corporate tax rate is 20 percent (plus
a 4 percent surcharge for a Jihad Fund). Oil revenue makes up 96 percent of all government
revenue, and security concerns make tax administration erratic. Overall tax revenue amounts
to less than one percent of gross domestic product, and expenditures equal 45.7 percent of GDP.

0 20 40 60 80 100
The business environment, lacking transparency and efficiency, remains very poor and frag-
ile. The labor market, which already suffered from state interference and control, has been
severely affected by political instability and uncertainty. In the 2014 budget, the government
committed to subsidy reform by January 2015, starting with the conversion of goods and fuel
subsidies into cash subsidies.
OPEN Trade Freedom 80.0 70th n/a

0 20 40 60 80 100
Libya has a 0 percent average tariff rate. The country’s regulatory regime interferes with trade.
State-owned enterprises distort the economy, and political unrest discourages international
trade and investment. The financial sector has many shortcomings in its diversification and
scope. The central bank owns four of the major banks that dominate the banking sector.


LIECHTENSTEIN
50
25 75
Least Most
free 0 100 free
Ldata.iechtenstein’s economic freedom score remains unrated in

the 2015 Index because of a lack of sufficient comparable
Those aspects of economic freedom for which data are
Freedom Trend
available have been individually scored. The country will
receive an overall economic freedom score and ranking in
future editions as more information becomes available.
Liechtenstein is a modern and diversified economy that has
made dynamic engagement with global commerce the corner-
stone of its economic policy. An efficient regulatory environ-
ment that is open to trade and investment has contributed
to the development of a robust banking sector. Tax rates are
competitive, and labor laws allow employers and employees
to respond efficiently to changing market dynamics.
Enhanced levels of political and social stability have facili-
tated the development of a high-value service industry that 2011 2012 2013 2014 2015
has capitalized on a well-entrenched rule of law. Property
rights are respected, and the judicial system is transparent.
The absence of corruption minimizes potential drags on the
Country Comparisons
economy and encourages entrepreneurialism.
Country n/a
BACKGROUND: Prince of Liechtenstein Hans-Adam II is
head of state, but his son Prince Alois wields considerable World
60.4
power as regent. The center-right Progressive Citizens’ Party Average
won the March 2013 parliamentary elections, and Prime Min- Regional
ister Adrian Hasler now heads the government. Liechtenstein Average 67.0
has a vibrant free-enterprise economy. Low taxes and tradi-
tions of strict bank secrecy (though less secret than before) Free
Economies 84.6
have helped financial institutions to attract funds. Still, the
0 20 40 60 80 100
worldwide financial crisis led to a sharp contraction in the
banking sector. In 2009, the Organisation for Economic Co-
operation and Development removed Liechtenstein from its Quick Facts
list of uncooperative tax havens. The principality’s economy Population: 37,313
is closely linked to Switzerland, whose currency it shares, and GDP (nominal): $5.8 billion (2012)
the European Union. Liechtenstein is a member of the Euro- 1.8% growth in 2012
pean Free Trade Association and the European Economic 5-year compound annual growth n/a
Area but not the EU. $158,976 per capita (nominal, 2012)
Unemployment: 2.3% (2012)
Inflation (CPI): -0.7% (2012)
FDI Inflow: n/a
Public Debt: n/a
291
LIECHTENSTEIN (continued)
1–Year

LAW Freedom from Corruption n/a — n/a
0 20 40 60 80 100
Liechtenstein is largely free of corruption, although as an offshore banking center, it must con-
tinue to work to prevent money laundering in its banking system. The judiciary is independent
and impartial despite the appointment of judges by the hereditary monarch. Property rights
and contracts are secure. Intellectual property laws are based on Switzerland’s IPR protec-
tion regimes.

SIZE Government Spending n/a — n/a
0 20 40 60 80 100
Tax reform that went into effect in 2011 lowered rates, modernized administration, and
improved transparency. The top individual income tax rate is 7 percent, and the top corporate
tax rate is 12.5 percent. A value-added tax is administered by Switzerland. Although the fiscal
system lacks some transparency, government fiscal management has been relatively sound.
REGULATORY Business Freedom n/a — n/a

EFFICIENCY Labor Freedom n/a — n/a
Monetary Freedom n/a — n/a
0 20 40 60 80 100
The efficient regulatory framework facilitates entrepreneurial activity. Government generally
takes a hand-off approach in sectors dominated by small businesses. Unemployment has been
low, and labor market policies have focused on minimizing youth unemployment. Liechten-
stein has a de facto monetary union with Switzerland but no vote in the Swiss National Bank’s
monetary policy.

0 20 40 60 80 100
Liechtenstein has a 0 percent average tariff rate. The government maintains an open trade and
investment regime and generally does not discriminate against foreign investors. There are no
restrictions on repatriation of profits or currency transfers. Liechtenstein is a major financial
center, particularly in private banking. The banking sector remains stable under a prudent
regulatory regime.


LITHUANIA
50
25 75
Least Most
free 0 100 free
Lbyithuania’s economic freedom score is 74.7, making its econ-

omy the 15th freest in the 2015 Index. Its overall score is up
1.7 points from last year, reflecting improvements in half
Freedom Trend
76
of the 10 economic freedoms including freedom from corrup-
75
tion, the management of public spending, labor freedom, and
monetary freedom. Lithuania is ranked 6th out of 43 coun-
74
tries in the Europe region, and its overall score is well above
73
Recording its fifth straight year of advancing economic free-
dom, Lithuania achieved its highest score ever in the 2015 72
Index. Since 2011, its economic freedom has advanced by
3.4 points, with gains in seven of the 10 economic freedoms 71
driven by prudent fiscal and monetary policies and declining

70
levels of perceived corruption. Remarkably, Lithuania has
experienced no score declines in any factor over this period. 2011 2012 2013 2014 2015
Lithuania’s transition to a dynamic economy open to global

commerce is facilitated by low tariff barriers and open finan- Country Comparisons
cial markets. Investors are attracted by an efficient regulatory
environment with low barriers to entry. The economy scores Country 74.7
above average on rule of law, but institutional issues in the
judiciary and property rights regime persist. World
Average 60.4
BACKGROUND: Lithuania, largest of the three Baltic States, Regional
regained its independence from the Soviet Union in 1991. It Average 67.0
joined the European Union and NATO in 2004. Lithuania
is a parliamentary republic with some attributes of a semi- Free
Economies 84.6
presidential system. Under President Dalia Grybauskaite,
0 20 40 60 80 100
re-elected in May 2014, the country has worked to improve
transparency in parliamentary elections, on judicial reforms,
and on energy and financial security. Prime Minister Algir-
das Butkevicius of the Social Democratic Party presides over Quick Facts
a center-left coalition. Lithuania is heavily dependent on Population: 3.0 million
Russia for natural gas and is building the region’s largest off- GDP (PPP): $67.6 billion
shore liquefied natural gas terminal to access other sources of 3.3% growth in 2013
energy. The construction, financial services, and retail sectors 5-year compound annual growth –0.4%
have grown. $22,747 per capita
Unemployment: 12.1%
293
LITHUANIA (continued)
1–Year

0 20 40 60 80 100
Corruption is present at all levels of state governance and public administration. State procure-
ment is also a problem; it is often claimed that tender requirements, for example, are tailored to
fit specific bidders. In 2013, a court found four Labor Party officials guilty of a fraud scheme to
benefit the party. EU membership has strengthened judicial independence, but many improve-
ments are still needed.

0 20 40 60 80 100
The top individual and corporate income tax rates are 15 percent. Some small businesses quali-
fy for a reduced rate of 5 percent. Other taxes include an inheritance tax and a value-added tax.
Total revenue is equal to 16 percent of domestic production. Public expenditures amounts to
35.9 percent of domestic output, and public debt equals 39 percent of gross domestic product.

0 20 40 60 80 100
Incorporating a firm involves three procedures, and no minimum capital is required. Labor
market dynamics have improved, and a ceiling on unemployment benefits has been introduced.
The government used its EU presidency in 2013 to push for reductions in EU Common Agri-
cultural Policy subsidies, but it must further reduce its own state subsidies when it joins the
eurozone in 2015.

0 20 40 60 80 100
EU is relatively open to external trade. Lithuania’s policies welcome investment, but foreign
purchases of agricultural land are restricted. The financial sector remains stable. Although a
mid-sized domestic bank failed in 2013, financial stability has not been impaired.


LUXEMBOURG
50
25 75
Least Most
free 0 100 free
Lhasuxembourg’s economic freedom score is 73.2, making its

decreased by 1.0 point since last year, with declines in the
Freedom Trend
78
management of government spending, freedom from corrup-
tion, and business freedom outweighing improvements in 77
monetary freedom and trade freedom. Luxembourg is ranked
10th out of 43 countries in the Europe region, and its overall 76
score continues to be above the world and regional averages.

75
Luxembourg’s economic freedom score has fallen steadily for
five years. A decline of 3.0 points has been led by double-digit 74
drops in the management of public finance and in policy areas
related to regulatory efficiency. Once a “free” economy, Lux- 73
embourg has dropped to well within the ranks of the “most-
ly free.” 72
2011 2012 2013 2014 2015
Small and landlocked, Luxembourg has made engagement
with the global economy the cornerstone of its economic
policy. Investment freedom, the world’s most highly ranked, Country Comparisons
has led to the development of a robust banking sector. Regula-
tions are relatively efficient, but labor markets are somewhat Country 73.2
inelastic. Fiscal accounts must be managed more prudently
for the economy to promote growth and return to the top World
60.4
ranks of the Index. Average
BACKGROUND: A founding member of the European Union Regional

Average 67.0
in 1957 and the euro in 1999, the Grand Duchy of Luxembourg
continues to promote European integration. Prime Minister Free
84.6
Xavier Bettel of the Democratic Party was elected in Decem- Economies
ber 2013, defeating the Christian Social People’s Party that 0 20 40 60 80 100
had been in power since 1979. Luxembourgers have one of the
world’s highest income levels, although the global economic
crisis provoked the first recession in 60 years in 2009. During Quick Facts
the 20th century, Luxembourg evolved into a mixed manufac- Population: 0.5 million
turing and services economy with incredibly strong financial GDP (PPP): $42.6 billion
services. The government is trying to diversify the economy 2.0% growth in 2013
by promoting Luxembourg as an information technology and 5-year compound annual growth 0.2%
e-commerce hub. The country has a skilled workforce and $78,670 per capita
well-developed infrastructure. Unemployment: 5.7%
295
LUXEMBOURG (continued)
1–Year

0 20 40 60 80 100
The government is largely free from corruption, but the prime minister resigned in July 2013
amid disclosures of abuses by the State Intelligence Service, including secret recordings of
politicians taking payments in return for access to local officials. The judiciary is independent,
and the legal framework strongly supports the rule of law. Private property rights are protected,
and contracts are secure.

0 20 40 60 80 100
The top individual income tax rate is 43.6 percent, and the top corporate tax rate is 21 percent.
Other taxes include a surtax for the unemployment fund, a value-added tax, and an inheritance
tax. Overall tax revenues amount to 37.8 percent of domestic output, and public expenditures
are equivalent to 43.9 percent of domestic production. Public debt equals about 23 percent of
gross domestic product.

0 20 40 60 80 100
The regulatory framework generally facilitates entrepreneurial activity. Launching a business
takes six procedures, but obtaining necessary permits remains time-consuming. Hiring and
dismissal regulations are burdensome, with generous fringe benefits among the world’s
costliest. Monetary stability has been well maintained. The agricultural sector is highly
subsidized by the government and through the EU’s Common Agricultural Policy.

0 20 40 60 80 100
the EU is relatively open to external trade. Luxembourg treats foreign and domestic inves-
tors equally under the law. The competitive financial sector provides a wide range of financing
options. As a global financial hub, the sophisticated banking sector remains well capitalized.
The capital market is vibrant.


MACAU
50
25 75
Least Most
free 0 100 free
M acau’s economic freedom score is 70.3, making its econ-

is 1.0 point lower than last year, reflecting declines in labor
Freedom Trend
75
freedom and monetary freedom that outweigh small improve-
74
ments in the management of government spending and fiscal
freedom. Macau is ranked 9th out of 42 countries in the Asia–
73
Pacific region, and its overall score is well above the world and
regional averages.
72
Macau has one of the world’s highest economic growth rates,
driven largely by gambling and tourism. However, over the 71
past five years, its economic freedom has declined by nearly
3.0 points, led by large declines in labor and monetary free- 70
doms. Its economy is now well down in the ranks of the

69
“mostly free,” and prospects for more diversified development
are unclear. 2011 2012 2013 2014 2015
Despite this disappointing trend, Macau’s long-standing his-

tory as a free port city and its openness to international trade Country Comparisons
and investment provide strong foundations for economic
freedom. The judiciary largely respects property rights, and Country 70.3
the government has stepped up enforcement of anti–money
laundering efforts. Taxes are low, and government spending World
Average 60.4
is prudent.
Regional
BACKGROUND: Macau was colonized by the Portuguese in Average 58.8
the 16th century and became the first European settlement
in the Far East. It became a Special Administrative Region Free
Economies 84.6
of China in 1999, and its chief executive is appointed by Bei-
0 20 40 60 80 100
jing. Under China’s “one country, two systems” policy, Macau
enjoys a high degree of autonomy except in matters of nation-
al defense and foreign policy. Macau is one of the world’s larg-
est gaming centers, and gaming-related taxes accounted for 85 Quick Facts
percent of government revenue in 2013. Much of the island’s Population: 0.6 million
economic activity is driven by Chinese tourists. Manufactur- GDP (PPP): $51.7 billion
ing of textiles and apparel, once the mainstay of the economy, 11.9% growth in 2013
has largely migrated to the mainland. Macau’s currency is 5-year compound annual growth n/a
fully convertible into the Hong Kong dollar, which in turn is $88,700 per capita
pegged to the U.S. dollar. Unemployment: 2.0%
297
MACAU (continued)
1–Year

0 20 40 60 80 100
Beijing’s crackdown on corruption and tax evasion caused casino revenues to decline in 2014.
A proposed law that would grant outgoing chief executives immunity from criminal charges
sparked public demonstrations and was dropped in May 2014. Macau has its own judicial sys-
tem with a high court; the legal framework is based largely on Portuguese law. Property rights
and commercial contracts are secure.

0 20 40 60 80 100
Macau’s top individual income tax rate is 12 percent, and its top corporate tax rate is 39 percent.
Gaming and gambling account for a large portion of both tax and overall revenue, which is equal
to 34 percent of domestic production. Public expenditures are 16.5 percent of gross domestic
product, and there is no public debt.

0 20 40 60 80 100
Macau’s overall regulatory framework is relatively efficient, but reform efforts are largely
absent. On average, it takes three to four weeks to incorporate a business. Licensing require-
ments vary by type of economic activity. The labor market lacks dynamic growth and remains
highly segmented. Monetary stability has been relatively well maintained, but government
subsidies to households quadrupled between 2008 and 2014.

0 20 40 60 80 100
Macau has a 0 percent average tariff rate. Non-tariff barriers are low. Foreign investors receive
national treatment. A relatively small financial sector, dominated by banks, provides a range of
financial services. The banking system, dominated by banks owned by China and Hong Kong,
remains stable and well capitalized, with a very low rate of nonperforming loans.

Property Rights 0 Fiscal Freedom –7.5 Business Freedom 0 Trade Freedom 0


MACEDONIA
50
25 75
Least Most
free 0 100 free
M acedonia’s economic freedom score is 67.1, making its

economy the 53rd freest in the 2015 Index. Its over-
all score has decreased by 1.5 points since last year, with
Freedom Trend
70
improvements in freedom from corruption and trade freedom
outweighed by declines in labor freedom, business freedom, 69
the management of government spending, and monetary
freedom. Macedonia is ranked 24th out of 43 countries in the
68
Europe region, and its overall score is above the world and
regional averages.
67
Macedonia’s transition to a more market-based economy has
been facilitated by relatively high social and political stabil-
66
ity that has enabled the economy to adapt to comprehen-
sive reform measures. Over the past five years, Macedonia’s
economic freedom has advanced by 1.1 points with notable 65
score improvements in half of the 10 economic freedoms, 2011 2012 2013 2014 2015
including business freedom, freedom from corruption, and
trade freedom.
Country Comparisons
Macedonia has made considerable progress in income growth
and overall poverty reduction. Competitive flat tax rates and Country 67.1
a permissive trade regime, buttressed by a relatively efficient
regulatory framework, have encouraged the emergence of a World
60.4
dynamic private sector. Implementation of deeper institu- Average
tional reforms will be critical to ensuring more dynamic long- Regional
term development. Average 67.0
BACKGROUND: The Republic of Macedonia gained its Free

84.6
independence from the former Yugoslavia in 1991 and has Economies
achieved considerable political and economic stability. Prime 0 20 40 60 80 100
Minister Nikola Gruevski of the conservative party VMRO-
DPMNE prevailed in the April 2014 presidential and parlia-
mentary elections in a coalition with the Democratic Union Quick Facts
for Integration. Macedonia completed NATO’s Membership Population: 2.1 million
Action Plan in 2008, but Greece continues to block its acces- GDP (PPP): $22.6 billion
sion to the alliance because it objects to Macedonia’s name. 3.1% growth in 2013
This dispute is delaying Macedonia’s accession to the Euro- 5-year compound annual growth 1.5%
pean Union as well. Macedonia is a developing country with a $10,904 per capita
substantial fiscal deficit, but its economy is growing. Improve- Unemployment: 29.7%
ments in the legal framework are creating a stable environ- Inflation (CPI): 2.8%
ment for foreign and domestic investment. FDI Inflow: $333.9 million
299
MACEDONIA (continued)
1–Year

0 20 40 60 80 100
Corruption and cronyism are prevalent in public administration and procurement procedures,
increasing costs for businesses and chilling foreign investment. Macedonia remains an impor-
tant transit and destination point for human trafficking to Western Europe, as well as for the
smuggling of arms, drugs, and stolen cars. Registering real property and obtaining land titles
continue to be difficult.

0 20 40 60 80 100
Individual and corporate income tax rates are a flat 10 percent. Other taxes include a value-
added tax and a property transfer tax. Tax revenue constitutes 25.6 percent of domestic income,
and government spending accounts for 33.8 percent of the domestic economy. Public debt is
equal to about 36 percent of gross domestic product.

0 20 40 60 80 100
Forming a business takes two procedures and two days, with no minimum capital required, but
completing licensing requirements remains relatively time-consuming. The labor market lacks
flexibility, hindering more dynamic job growth. The state has tried to maintain fiscal discipline
to bolster its case for eventual membership in the eurozone, but spending on agricultural sub-
sidies increased again in 2014.

0 20 40 60 80 100
Macedonia’s average tariff rate is 1.9 percent. The country has worked to reduce trade barriers
since joining the WTO. Non-tariff barriers are relatively low, and foreign and domestic inves-
tors are generally treated equally. The financial sector has been restructured. The banking
sector is more open to foreign banks and has withstood the global financial turmoil relatively
well. The capital market is evolving.


MADAGASCAR
50
25 75
Least Most
free 0 100 free
M adagascar’s economic freedom score is 61.7, making its

unchanged from last year, with improvements in six of the
Freedom Trend
64
10 economic freedoms, including property rights, the control
of government spending, and monetary freedom, offset by
63
significant deteriorations in trade freedom and investment
freedom. Madagascar is ranked 7th out of 46 countries in the
Sub-Saharan Africa region, and its overall score is above the
62
Over the past five years, Madagascar’s economic freedom
has advanced by 0.6 point. Although the country remains in 61
the ranks of the “moderately free,” the absence of commit-
ted reforms has undermined overall competitiveness, turned
60
away investors, and eroded the rule of law.
2011 2012 2013 2014 2015
Corruption is pervasive and has contributed to political
unrest and a general distrust of the ruling elite. Economic
losses from corruption inhibit the development of a strong Country Comparisons
entrepreneurial environment, a situation that is compounded
by inefficient business and labor regulations. Because finan- Country 61.7
cial services have not proliferated, the expansion of small
businesses and entrepreneurs is stunted. World
Average 60.4
BACKGROUND: The former French colony of Madagascar Regional
has endured decades of military coups, political violence, and Average 54.9
corruption but has stabilized in recent years. Following four
years of political stalemate and a mediation process led by the Free
Economies 84.6
Southern African Development Community, Hery Rajaonari-
0 20 40 60 80 100
mampianina was elected president in January 2014. In April,
Roger Kolo was appointed prime minister, and a new govern-
ment was established. Following a coup in 2009, international
organizations and foreign donors severed ties with Madagas- Quick Facts
car, but in light of the last election, many have expressed their Population: 23.0 million
willingness to normalize economic relations. Madagascar’s GDP (PPP): $22.3 billion
economy is largely agricultural. Sitting just off the east coast 2.4% growth in 2013
of Africa, it is highly vulnerable to natural disasters and 5-year compound annual growth 0.6%
weather shocks. The World Bank estimates that 92 percent of $970 per capita
Malagasy live on less than $2 a day. Unemployment: 3.8%
301
MADAGASCAR (continued)
1–Year

0 20 40 60 80 100
After a democratically elected government took office in 2014, the prime minister announced
that 40 percent of his country’s budget is lost to graft and pledged to fight it. In June 2014, the
Extractive Industries Transparency Initiative reinstated Madagascar’s membership, which had
been suspended in the wake of a coup in 2009. The judiciary remains susceptible to corruption
and executive influence.

0 20 40 60 80 100
Madagascar’s individual and corporate income tax rates are 20 percent. Other taxes include a
value-added tax and a capital gains tax. The overall tax burden is 10.3 percent of domestic out-
put. Government expenditures are equivalent to 13.3 percent of domestic production. Public
debt is equal to about 39 percent of gross domestic product.

0 20 40 60 80 100
Previous reforms have reduced the number of days and procedures required to launch a new
business, but completing licensing requirements still takes over four months on average. Much
of the workforce is employed in the informal sector. In a 2014 IMF agreement, the government
pledged to maintain fiscal and monetary discipline and reduce costly fuel price subsidies with
better-targeted anti-poverty programs.

0 20 40 60 80 100
Madagascar’s average tariff rate is 9.1 percent. The government relies on tariffs for revenue
but maintains few non-tariff barriers. Investors face an unsettled political environment. The
financial system includes over 40 credit institutions and 11 banks. There is no stock exchange,
and financing for new businesses is not readily available. State-issued treasury bills are used
to bridge budget deficits.


MALAWI
50
25 75
Least Most
free 0 100 free
M alawi’s economic freedom score is 54.8, making its econo-

lower than last year, reflecting declines in property rights,
Freedom Trend
58
the control of government spending, monetary freedom,
and trade freedom that outweigh gains in business freedom, 57
investment freedom, and freedom from corruption. Malawi
is ranked 25th out of 46 countries in the Sub-Saharan Africa
56
region, and its overall score is below the world average.
Malawi has yet to develop the basic institutional framework to 55
improve economic freedom and address poverty. Government
efforts to reverse some anti-market policies in an attempt to
54
attract donors have largely been offset by high levels of gov-
ernment spending and soaring inflation.
53
A weak institutional foundation and structural shortcomings 2011 2012 2013 2014 2015
keep Malawi “mostly unfree.” The independence of the judi-
ciary is recognized in the constitution but not always observed
in practice. Business regulations are among the world’s most Country Comparisons
inefficient, and the labor market is rigid. The financial sector
is underdeveloped and does not effectively allocate capital to Country 54.8
productive means. Trade freedom is below the world average.
World
BACKGROUND: Malawi achieved independence from the Average 60.4
British in 1964 and was ruled as a one-party state by Dr. Hast-
ings Kamuzu Banda for 30 years. President Bingu wa Muth- Regional
Average 54.9
arika, elected in 2004 and re-elected in 2009, died in April
2012 and was replaced by Vice President Joyce Banda. In Free
84.6
May 2014, Peter Mutharika, brother of the late president, was Economies
elected president in elections regarded as flawed. Malawi is 0 20 40 60 80 100
one of Africa’s most densely populated countries. More than
half of the population lives below the poverty line, and over 85
percent depend on subsistence agriculture. Tobacco, tea, and Quick Facts
sugar are the most important exports. In late 2013, interna- Population: 17.1 million
tional donors suspended aid to protest a scandal that involved GDP (PPP): $15.0 billion
the public looting of roughly 1 percent of Malawi’s annual GDP 5.0% growth in 2013
over six months. 5-year compound annual growth 5.3%
$879 per capita
Unemployment: 7.6%
303
MALAWI (continued)
1–Year

0 20 40 60 80 100
Treason charges against President Mutharika citing efforts to block the democratic accession
of his predecessor, Joyce Banda, to the presidency were quickly dropped following his May
2014 election victory, raising concerns about the judiciary’s independence. Corruption remains
endemic, with an estimated 30 percent of Malawi’s budget lost to fraud (e.g., through “Cash-
gate” transactions using the government’s automated payments system).

0 20 40 60 80 100
Malawi’s individual and corporate income tax rates are 30 percent. Other taxes include a value-
added tax and a capital gains tax. The overall tax burden has reached 18.8 percent of gross
domestic product. Public expenditures are equal to 41.2 percent of total domestic economic
activity, and public debt is equivalent to about 69 percent of GDP.

0 20 40 60 80 100
The inefficient business environment continues to impede broader economic development.
Incorporating a business takes over a month on average, although there is no minimum capital
requirement. In the absence of a well-functioning labor market, informal labor activity persists
in many sectors. The new government has embraced higher subsidies, and the inflation rate
is over 25 percent.

0 20 40 60 80 100
Malawi’s average tariff rate is 6.4 percent. Importing goods can take weeks. Foreign and domes-
tic investments are generally treated equally under the law, but investors face bureaucratic
hurdles. The financial sector is underdeveloped, and less than 20 percent of the population
has access to banking services. The high cost of credit suppresses business formation. The state
owns the two largest banks.


MALAYSIA
50
25 75
Least Most
free 0 100 free
M alaysia’s economic freedom score is 70.8, making its

economy the 31st freest in the 2015 Index. Its score has
increased by 1.2 points since last year, with improvements in
Freedom Trend
72
freedom from corruption, business freedom, and trade free- 71
dom outweighing declines in labor freedom and the manage-
ment of government spending. Malaysia is ranked 8th out of 70
42 countries in the Asia–Pacific region, and its overall score is
above the world and regional averages. 69
Malaysia has risen to the “mostly free” category. Since 2011, 68
its economic freedom has advanced by 4.5 points, the third 67

largest point increase in the Asia–Pacific region. Gains in six
of the 10 economic freedoms have been led by double-digit 66
increases in investment, financial, and business freedoms.
65
A relatively open economy, Malaysia is a vital part of the 2011 2012 2013 2014 2015
East Asian manufacturing network. The business environ-
ment encourages the development of a vibrant private sector.
Malaysia scores well in the area of open markets measured Country Comparisons
by trade freedom, investment freedom, and financial free-
dom compared to the global averages. The financial sector is Country 70.8
robust, and foreign investment is being permitted to a greater
degree. While the rule of law remains weak, the government World
Average 60.4
has taken steps to tackle corruption more effectively.
Regional
BACKGROUND: The United Malays National Organization Average 58.8
(UMNO) has ruled the ethnically and religiously diverse con-
stitutional monarchy of Malaysia since independence in 1957. Free
Economies 84.6
Dissatisfaction with pro-Malay affirmative-action programs
0 20 40 60 80 100
and corruption generated important opposition gains in the
March 2008 elections. In the 2013 elections, the UMNO-led
coalition retained power but failed for the first time to win
more than 50 percent of the popular vote. The government Quick Facts
maintains investments in such key sectors as banking, media, Population: 29.6 million
automobiles, and airlines. In 2014, a Malaysia Airlines plane GDP (PPP): $525.7 billion
was lost in the Indian Ocean, and another was shot down in 4.7% growth in 2013
Ukraine. Malaysia is a leading exporter of electronics and 5-year compound annual growth 4.2%
information technology products; other industries include $17,748 per capita
agricultural products and automobiles. Unemployment: 3.2%
305
MALAYSIA (continued)
1–Year

0 20 40 60 80 100
The continuous 50-year hold on power by the United Malays National Organization and the
other parties in the ruling coalition, government favoritism, blurred distinctions between pub-
lic and private enterprises, and the imperfections of the bureaucratic system have encouraged
the perpetuation of corruption in political and economic life. Judicial independence is com-
promised by extensive executive influence.

0 20 40 60 80 100
Malaysia’s top individual income tax rate is 26 percent, and its top corporate tax rate is 25 per-
cent. Other taxes include a sales tax and a capital gains tax. Overall tax revenue amounts to 16.1
percent of domestic income. Government spending amounts to 29.5 percent of the domestic
economy, and public debt is equal to 58 percent of gross domestic product.

0 20 40 60 80 100
The regulatory framework generally facilitates entrepreneurial activity. With no minimum
capital required, incorporating a business takes three procedures. Relatively flexible labor
regulations support the development of an efficient labor market. In 2013, the government
cut fuel subsidies and later hiked electricity tariffs to reduce budget deficits. Other economi-
cally distortionary subsidies and price controls remain in place.

0 20 40 60 80 100
Malaysia’s average tariff rate is 4.0 percent. Malaysia has benefited from unilateral tariff cuts
and trade agreements that have reduced trade barriers. Foreign investment in many econom-
ic sectors is capped. Measures to open the financial sector to greater competition have been
implemented, but state-owned enterprises retain sizable shares in the banking sector, includ-
ing the two largest banks.


MALDIVES
50
25 75
Least Most
free 0 100 free
Tincreased
he Maldives’ economic freedom score is 53.4, making its
by 2.4 points, reflecting improvements in six of the
Freedom Trend
56
10 economic freedoms, including the control of government
spending, investment freedom, property rights, and mone- 54
tary freedom. The country has recorded its highest economic
freedom score ever in this year’s Index. Ranked 28th out of 42
52
countries in the Asia–Pacific region, its overall score remains
below the world and regional averages.
50
The Maldives is heavily dependent on fishing and tourism
and has yet to achieve the benefits of diversification that
48
follow from higher levels of economic freedom. A 5.0-point
advance in its economic freedom score over the past five
years has enabled the country to move out of the “repressed” 46
category, but this advance has been led in large measure by 2011 2012 2013 2014 2015
a nearly 50-point improvement in government spending,
meaning that improvements have been concentrated and not
broad-based.
Country Comparisons
Weaknesses in the rule of law and protectionist measures Country 53.4
that keep the domestic economy relatively closed continue
to hold back economic development in the Maldives. Tariffs World
60.4
are over 20 percent. Political unrest and a strict investment Average
regime deter potential foreign investors. The island econo- Regional
my’s political situation undermines the judiciary and has led Average 58.8
to increased perceptions of corruption. A more broad-based
Free
commitment to institutional and structural reforms is neces- Economies 84.6
sary to allow the progress made in advancing economic free-
0 20 40 60 80 100
dom in recent years to bear fruit.
BACKGROUND: The military forced President Mohammed
Nasheed to step down in February 2012 after several weeks of Quick Facts
anti-government street protests instigated by former dictator Population: 0.3 million
Maumoon Abdul Gayoom. In November 2013, Gayoom’s half- GDP (PPP): $3.1 billion
brother Abdulla Yameen was elected, putting an end to nearly 3.7% growth in 2013
two years of political turmoil. Tourism is the centerpiece of 5-year compound annual growth 2.8%
the economy, contributing 28 percent of GDP and over 90 per- $9,173 per capita
cent of government tax revenue. Unemployment: 11.7%
307
MALDIVES (continued)
1–Year

0 20 40 60 80 100
The government has been functioning more normally, allowing the democratic election in late
2013 of a president from the political opposition. In recent years, a new, independent auditor
general has provided greater transparency and shed light on pervasive corruption. Neverthe-
less, the rule of law remains uneven across the country, and the inefficient judicial system is
subject to political influence.

0 20 40 60 80 100
The Maldives has no individual or corporate income taxes. Commercial banks are subject to a
tax rate of 25 percent. Other taxes include taxes on foreign-source income and tourism goods
and services. The overall tax burden equals 21.2 percent of domestic income. Government
expenditures equal 40.6 percent of domestic output, and public debt equals about 81 percent
of GDP.

0 20 40 60 80 100
Incorporating a business takes five procedures and nine days on average, but completing
licensing requirements takes over 100 days. The labor market is underdeveloped. Much of the
labor force is employed in the large public sector. Although high public spending has moder-
ated, increases in state-funded pensions and health benefits added to fiscal pressures in 2014.

0 20 40 60 80 100
The Maldives’ average tariff rate is 20.6 percent. The government relies on tariffs for revenue.
Quotas restrict some agricultural imports. The government reviews proposed new foreign
investment. The financial sector remains rudimentary, and much of the population operates
outside of the formal banking sector. High credit costs and scarce access to financing continue
to constrain the small private sector.

Freedom from –11.1 Government +50.6 Labor Freedom –16.7 Investment Freedom 0

MALI
50
25 75
Least Most
free 0 100 free
M ali’s economic freedom score is 56.4, making its economy

the 119th freest in the 2015 Index. Its score has increased
by 0.9 point since last year, with improvements in property
Freedom Trend
58
rights, monetary freedom, investment freedom, and the con-
trol of government spending outweighing a notable loss in
labor freedom. Mali is ranked 21st out of 46 countries in the 57
Sub-Saharan Africa region, and its score is below the world
average but higher than the regional average.
56
Over the past five years, improvements in investment free-
dom and fiscal freedom have been offset by declines in labor
freedom and property rights. Mali’s weak institutional frame- 55
work traps many of its citizens in subsistence agriculture and
poverty. Political instability and the struggle against Islamist
rebels in the North have distracted policymakers from mak- 54
ing much-needed reforms to spur growth and reduce poverty. 2011 2012 2013 2014 2015
Mali has yet to open its domestic economy to global markets.

Tariff rates remain high, and political unrest and security Country Comparisons
concerns deter foreign investment. These issues are exacer-
bated by a weak rule of law. Corruption is present in all levels Country 56.4
of government and has spilled over into the judiciary, which
remains notoriously inefficient. World
60.4
Average
BACKGROUND: After President Amadou Toumani Touré was
ousted in a March 2012 military coup, Tuareg separatists and Regional
Average 54.9
militants linked to al-Qaeda took control of Northern Mali
and declared independence. French armed forces restored Free
84.6
government control in the major cities in January 2013, and Economies
Tuareg rebels signed a peace accord in June. In August 2013, 0 20 40 60 80 100
former Prime Minister Ibrahim Boubacar Keita won the
presidential election in a second-round ballot. In May 2014,
peace talks with Tuareg separatists in the North broke down, Quick Facts
and rebels seized control of several northern cities. Approxi- Population: 16.9 million
mately 1,500 French troops remain in the country along with GDP (PPP): $18.6 billion
a U.N. peacekeeping operation. The economy depends on 1.7% growth in 2013
agricultural exports such as cotton for revenue, and price fluc- 5-year compound annual growth 2.9%
tuations and drought have contributed to poverty and politi- $1,103 per capita
cal instability. Unemployment: 8.5%
309
MALI (continued)
1–Year

0 20 40 60 80 100
Mali held presidential and parliamentary elections in 2013 after a coup in 2012. The new presi-
dent has pledged to restore his predecessor’s anti-corruption initiatives, including creation of
a general auditor’s office. Nevertheless, corruption remains a problem in government, public
procurement, and both public and private contracting. The judicial system is inefficient and
prone to corruption.

0 20 40 60 80 100
Mali’s top individual income tax rate is 40 percent, and its top corporate tax rate is 35 per-
cent. Other taxes include a value-added tax. The overall tax burden equals 14.5 percent of gross
domestic product. Government expenditures are equal to 19 percent of domestic production,
and government debt is equivalent to about 32 percent of domestic output.

0 20 40 60 80 100
The non-transparent and costly regulatory framework continues to discourage entrepreneur-
ial dynamism. Labor regulations are not enforced effectively, and the informal sector employs
a large share of the workforce. As Mali seeks to return to political stability with the help of the
international community, the government is trying to strengthen public financial management
to help accelerate economic growth.

0 20 40 60 80 100
Mali’s average tariff rate is 8.4 percent, and importing goods can be expensive. Foreign and
domestic investors are generally treated equally under the law. The environment for foreign
investment has improved. The financial sector is concentrated in urban areas and remains
underdeveloped. The small banking sector provides a limited range of financial services. The
cost of long-term financing is high.


MALTA
50
25 75
Least Most
free 0 100 free
M alta’s economic freedom score is 66.5, making its econ-

is up by 0.1 point from last year, with improvements in free-
Freedom Trend
69
dom from corruption, labor freedom, monetary freedom, and
trade freedom offsetting declines in the control of govern- 68
ment spending, business freedom, and fiscal freedom. Malta
is ranked 28th out of 43 countries in the Europe region, and
67
its overall score is below the regional average but above the
world average.
66
Unlike some other eurozone countries, Malta has advanced
its economic freedom over the past five years. A 0.8-point
65
improvement since 2011 has been led by gains in seven of the
10 factors, with losses only in business freedom and labor
freedom. Dependent on imports for most foodstuffs, Malta 64
has created a relatively open economy with low tariffs and 2011 2012 2013 2014 2015
efficient investment rules.
Budget shocks have alerted authorities to serious structural Country Comparisons
problems that stem largely from an inefficient bureaucracy, a
weak public pension system, and persistent fiscal imbalances. Country 66.5
Taxes remain high, and government spending makes up over
two-fifths of the domestic economy. World
60.4
Average
BACKGROUND: Malta joined the European Union in 2004
and the eurozone in 2008. Labour Party leader Joseph Mus- Regional
Average 67.0
cat won the March 2013 elections and became prime minis-
ter. With few natural resources, Malta imports most of its food Free
84.6
and fresh water and 100 percent of its energy. The economy Economies
depends on tourism, trade, and manufacturing. Well-trained 0 20 40 60 80 100
workers, low labor costs, and membership in the EU attract
foreign investment, but the government maintains a sprawl-
ing socialist bureaucracy, with the majority of spending allo- Quick Facts
cated to housing, education, and health care. Unemployment Population: 0.4 million
is relatively low. Early in 2013, excessive public borrowing led GDP (PPP): $11.6 billion
to an EU warning to reduce the budget deficit, which exceeded 2.4% growth in 2013
EU guidelines. Since then, the government has taken steps to 5-year compound annual growth 1.1%
reduce the deficit. Substantial immigration from North Africa $27,840 per capita
remains a concern. Unemployment: 6.5%
311
MALTA (continued)
1–Year

0 20 40 60 80 100
A 2013 Eurobarometer survey revealed that 83 percent of Maltese saw corruption as a major
problem in politics and business. Malta still lacks appropriate institutions to implement and
monitor anti-corruption activities. The judiciary is independent both constitutionally and in
practice. Property rights are protected, and expropriation is unlikely. Foreigners do not have
full rights to buy property.

0 20 40 60 80 100
Malta’s individual and corporate income tax rates are 35 percent. Other taxes include a value-
added tax and a capital gains tax. Tax revenue is equal to 35.2 percent of domestic income, and
government expenditures are equivalent to 43.1 percent of gross domestic product. Public debt
equals 72 percent of total domestic output.

0 20 40 60 80 100
Malta has adopted transparent and effective regulations to foster competition, but the pace of
reform has slowed. Business regulations are relatively straightforward and applied uniformly
most of the time. The labor market remains relatively rigid. Although it maintained macroeco-
nomic stability during the eurozone crisis, Malta faces deteriorating public finances and needs
to reform pension and health care subsidies.

0 20 40 60 80 100
the EU is relatively open to external trade. Malta generally welcomes foreign investment, but
some state-owned enterprises have yet to be privatized. The financial sector is dominated by
banks. The large banking sector, which consists of subsidiaries of foreign banks, has shown
notable resilience.


MAURITANIA
50
25 75
Least Most
free 0 100 free
M auritania’s economic freedom score is 53.3, making its

essentially unchanged from last year, with improvements in
Freedom Trend
55
business freedom, freedom from corruption, and monetary
freedom offset by declines in fiscal freedom and labor free-
54
dom and a collapse in the control of government spending.
Mauritania is ranked 28th out of 46 countries in the Sub-
Saharan Africa region, and its overall score is below the world
53
Mauritania’s trend in economic freedom has been character-
ized by alternating years of advances and losses, but the over- 52
all change has been positive over the past five years. Since
2011, economic freedom has improved by over 1.0 point. A
51
double-digit improvement in investment freedom has led
advances concentrated in four of the 10 economic freedoms. 2011 2012 2013 2014 2015
The modest gain in overall economic freedom has occurred

despite a weak institutional framework that has yet to expe- Country Comparisons
rience measureable reform. Corruption remains endemic,
and political instability has undermined society’s basic insti- Country 53.3
tutions. The judicial system’s lack of independence makes it
vulnerable to political influence. Mauritania scores below the World
Average 60.4
global average in all policy areas of open markets measured
by trade freedom, investment freedom, and financial freedom. Regional
54.9
Average
BACKGROUND: A military junta ruled the former French col-
ony of Mauritania from 1978 until 1992, when the first multi- Free
Economies 84.6
party elections were held. In 2008, General Mohamed Ould
0 20 40 60 80 100
Abdel Aziz overthrew President Sidi Ould Cheikh Abdallahi.
Aziz won elections in July 2009 and again in June 2014, but
opposition groups boycotted the elections. There are recur-
ring ethnic tensions within the mixed population of Moors Quick Facts
and black Africans. Mauritania faces the growing threat of al- Population: 3.7 million
Qaeda terrorists in the Islamic Maghreb who have kidnapped GDP (PPP): $8.2 billion
and killed several foreigners. Mining and fishing dominate the 6.7% growth in 2013
economy. Mauritania is one of Africa’s newest oil producers, 5-year compound annual growth 4.1%
and offshore gas production is expected to begin in 2015. $2,218 per capita
Unemployment: 30.9%
313
MAURITANIA (continued)
1–Year

0 20 40 60 80 100
Corruption is a serious problem. In recent years, for the first time, several senior officials have
been charged with corruption, but either these cases have been dismissed or officials have
been ordered to reimburse the government for the amount they supposedly embezzled with
no further legal consequences. The judicial system is chaotic, corrupt, and heavily influenced
by the government.

0 20 40 60 80 100
Mauritania’s top individual income tax rate is 30 percent, and its top corporate tax rate is 25
percent. Other taxes include a value-added tax. Taxes consume about 21.3 percent of gross
domestic product, and government expenditures amount to about 36.6 percent of domestic
output. Government debt equals approximately 88 percent of the size of the domestic economy.

0 20 40 60 80 100
The regulatory environment remains burdensome. The minimum capital required to launch
a business is about three times the level of average annual income, and completing licensing
requirements takes over 100 days. The labor market remains underdeveloped. The government
has acknowledged the need to shrink the public sector and reduce food and fuel subsidies but
has yet to act.

0 20 40 60 80 100
Mauritania’s average tariff rate is 10.1 percent. Customs procedures have been improved, but
importing goods can still be time-consuming. The slow-moving court system may deter foreign
investment. Commercial banks, regulated by the central bank, dominate the small financial
sector, and diversification remains limited. Less than 5 percent of the population has access
to banking services.

Freedom from 0 Government –20.5 Labor Freedom +5.1 Investment Freedom +20.0

MAURITIUS
50
25 75
Least Most
free 0 100 free
M auritius’s economic freedom score is 76.4, making its

score is essentially unchanged from last year, with a negative
Freedom Trend
79
score change of 0.1 point reflecting a significant decline in
labor freedom that overshadows gains in the control of gov-
ernment spending, business freedom, and monetary freedom. 78
Mauritius is ranked 1st out of 46 countries in the Sub-Saharan
African region, and it scores well above the regional and glob-
77
al averages.
Adherence to stable fiscal policy and openness to global trade
and investment have established Mauritius as one of the 76
world’s 10 freest economies. Since 2007, Mauritius has led the
Sub-Saharan Africa region in economic freedom.
75
Economic development in Mauritius has been facilitated by 2011 2012 2013 2014 2015
a stable macroeconomic environment, prudent policy deci-
sions, and openness to competition. Adoption of open-market
policies has been accompanied by the development of grow- Country Comparisons
ing financial and tourism sectors that have helped to supplant
traditional subsistence agriculture. The rule of law has been Country 76.4
enforced effectively within a framework of transparency and
accountability, although corruption remains a concern. World
60.4
Average
BACKGROUND: Independent since 1968, Mauritius is the only
African country ranked as a “full democracy” in the Econo- Regional
Average 54.9
mist Intelligence Unit’s Democracy Index. Navin Ramgoolam
of the Mauritius Labour Party has been prime minister since Free
84.6
2005, and Rajkeswur Purryag has been president since 2012. Economies
The government is trying to encourage modernization of the 0 20 40 60 80 100
sugar and textile industries while promoting diversification
into such areas as information and communications technol-
ogy, financial and business services, seafood processing, and Quick Facts
exports. Services and tourism remain the main economic Population: 1.3 million
drivers. Mauritius has made maritime security a priority and GDP (PPP): $20.9 billion
in 2012 signed a deal with Britain’s Royal Navy for the transfer 3.1% growth in 2013
of suspected pirates captured by Britain to Mauritius for pros- 5-year compound annual growth 3.5%
ecution. Both Mauritius and Seychelles claim control of the $16,056 per capita
Chagos Islands, administered by Britain and home to a U.S. Unemployment: 8.1%
military base. Inflation (CPI): 3.5%
315
MAURITIUS (continued)
1–Year

0 20 40 60 80 100
A generally positive reputation for transparency and accountability has been hurt by sever-
al high-profile scandals. Critics allege, for example, that in its August 2013 investigation of
the minister of higher education, the government’s anti-corruption commission was used as
a political tool. The judiciary continues to be independent, however, and the legal system is
generally non-discriminatory and transparent.

0 20 40 60 80 100
The top individual and corporate income tax rates in Mauritius are 15 percent. Other taxes
include a value-added tax. The overall tax burden amounts to about 18.9 percent of the size of
the domestic economy. Government expenditures equal about 20.5 percent of domestic output,
and public debt is equivalent to about 54 percent of gross domestic product.

0 20 40 60 80 100
No minimum capital is required to start a business, and the start-up process has been simpli-
fied. The labor market remains relatively flexible, but the mismatch between demand for and
supply of labor persists. Inflation is well controlled, and the government is trying to promote
private sector–led economic growth, but it needs to make more progress in reducing subsidies.

0 20 40 60 80 100
Mauritius has an average tariff rate of 0.8 percent and has cut tariffs unilaterally. The govern-
ment generally welcomes foreign investment, although new investment is subject to review.
The competitive financial system provides a range of financing tools. Banking is resilient and
open to competition. The Stock Exchange of Mauritius is considered one of the most innova-
tive in the region.


MEXICO
50
25 75
Least Most
free 0 100 free
M exico’s economic freedom score is 66.4, making its

declined by 0.4 point since last year, with improvements in
Freedom Trend
69
three of the 10 economic freedoms, including freedom from
corruption and labor freedom, offset by declines in the man- 68
agement of government spending, fiscal freedom, and busi-
ness freedom. Mexico is ranked 3rd out of three countries
67
in the North America region, but its score is well above the
world average.
66
Over the past five years, economic freedom in Mexico has
declined by 1.4 points. Deteriorations in the fiscal and regula-
65
tory environments have occurred in an environment of slow
economic growth despite a reform-minded leadership bent
on increasing competition and opening the economy to trade 64
and investment. 2011 2012 2013 2014 2015
Mexico’s economic growth has been driven largely by inte-

gration with Canada and the U.S. in NAFTA, but economic Country Comparisons
performance remains far below potential. Despite a more
open economic environment, business regulations continue Country 66.4
to undermine economic efficiency. Ensuring more dynamic
growth will require broader-based reforms to improve the World
60.4
investment climate and enhance the rule of law. Average
BACKGROUND: President Enrique Peña Nieto took office Regional

Average 74.0
in December 2012 and has made solid progress in reform-
ing the constitution in the areas of education, energy, and Free
84.6
telecommunications, but whether new legislation will boost Economies
competition is unclear. The government has moved to cen- 0 20 40 60 80 100
tralize power further with a fiscal reform that raised taxes
and promised a return to deficit spending. A new anti-trust
law has increased investor uncertainty. Efforts to reform the Quick Facts
criminal justice system and combat endemic corruption that Population: 118.4 million
began in 2008 have lagged and are not expected to meet 2016 GDP (PPP): $1.8 trillion
targets. The recent migration crisis on the border with the 1.1% growth in 2013
United States and the rise of citizen militias in Michoacán 5-year compound annual growth 1.8%
highlight weaknesses in Mexico’s security forces. The Peña $15,563 per capita
Nieto administration contends that the homicide rate has Unemployment: 5.0%
declined, but conflicting government findings indicate other- Inflation (CPI): 3.8%
wise. Organized crime is endemic. FDI Inflow: $38.3 billion
317
MEXICO (continued)
1–Year

0 20 40 60 80 100
Corruption is deeply embedded culturally and remains pervasive at all levels of society, fed by
and entrenching the power of monopolists, party bosses, and other mafias. Billions of narco-
dollars that enter Mexico each year from the U.S. affect politics, particularly at the state and
local levels. Contracts are generally upheld, but courts are inefficient and vulnerable to politi-
cal interference.

0 20 40 60 80 100
The top individual income tax rate has been raised to 35 percent, and the corporate tax rate is
a flat 30 percent. Other taxes include a value-added tax. Tax revenues are equivalent to 10 per-
cent of domestic income, and public expenditures equal 27.1 percent of domestic production.
Public debt is equal to 46 percent of gross domestic product.

0 20 40 60 80 100
Previous reforms have enhanced the regulatory framework, but the pace of reform has slowed
in comparison to other emerging economies. Completing licensing requirements still takes
about three months. Rigid and outdated labor codes create incentives for firms to operate out-
side of the formal sector. The government has implemented extensive energy and fiscal reforms
but must further reduce subsidies and inflation.

0 20 40 60 80 100
Mexico has a 2.2 percent average tariff rate. It has reduced tariff and non-tariff barriers unilat-
erally and through trade agreements like the Pacific Alliance. A law passed in December 2013
will partially open the energy sector to foreign investment. The financial sector is relatively
small and lacks dynamism. Mexico needs to build a deeper and more accessible banking system.


MICRONESIA
50
25 75
Least Most
free 0 100 free
M icronesia’s economic freedom score is 49.6, making its

decreased by 0.2 points since last year, reflecting declines in
Freedom Trend
52
business freedom and fiscal freedom that outweigh improve-
ments in labor freedom and monetary freedom. Micronesia is
51
ranked 35th out of 42 countries in the Asia–Pacific region, and
Over the past five years, economic freedom has declined in the 50
archipelago, pushing the Micronesian economy further into
the “repressed” category. Higher taxes, inflation, and the lack
of progress in reforming the entrepreneurial environment 49
have gradually undermined Micronesia’s economic freedom.
A weak institutional foundation is holding back advance- 48
ments in economic freedom. Enforcing the rule of law evenly 2011 2012 2013 2014 2015
on over 600 islands remains a challenge, exacerbated by the
prevalence of corruption that undermines effective gover-
nance. The underdeveloped financial system hampers the Country Comparisons
emergence of a vibrant private sector, leading to high financ-
ing costs and denying many Micronesians access to formal Country 49.6
banking services. The restrictive investment regime makes
capital accumulation from outside sources unlikely. World
Average 60.4
BACKGROUND: Politically organized as a confederation of Regional
four states—the island groups of Pohnpei, Chuuk, Yap, and Average 58.8
Kosrae—the 607-island South Pacific archipelago of Micro-
nesia has a central government with limited powers. The Free
Economies 84.6
president is elected by the small unicameral legislature from
0 20 40 60 80 100
among its at-large members. Formerly administered by the
United States as a U.N. Trust Territory, Micronesia became
independent in 1986 and signed a Compact of Free Associa-
tion with the United States. Under an amended compact, it Quick Facts
receives about $130 million annually in direct assistance from Population: 0.1 million
the U.S. The government sector employs more than half of the GDP (PPP): $0.8 billion
workforce, and economic development is hampered by poor 0.6% growth in 2013
infrastructure in electricity and water. 5-year compound annual growth 1.3%
$7,288 per capita
Unemployment: n/a
319
MICRONESIA (continued)
1–Year

LAW Freedom from Corruption 30.0 121st 0
0 20 40 60 80 100
Official corruption remains a major source of public discontent. The government awarded
a contract to a Chinese consortium to build a 10,000-room casino and tourism complex on
the island of Yap, but the head of the company disappeared unexpectedly in 2014 during an
anti-corruption investigation. Corruption and political influence are serious problems in the
chronically underfunded judicial system.

0 20 40 60 80 100
Micronesia administers a 10 percent tax on individual income and a 21 percent tax on corpo-
rate income. Other taxes include regional sales taxes and import taxes. The overall tax burden
equals 11.6 percent of the domestic economy. Government expenditures amount to 65.2 per-
cent of domestic production, and public debt is equal to 26 percent of gross domestic product.

0 20 40 60 80 100
Procedures for establishing a business are opaque. Regulations are not applied consistently,
and the non-transparent regulatory framework continues to discourage private-sector devel-
opment. Labor regulations are not enforced effectively, and the labor market is rudimentary.
Pressure for public-sector reforms has been reduced as a result of continued large flows of U.S.
foreign aid.

0 20 40 60 80 100
Micronesia’s average tariff rate was 4.5 percent as of 2006, and imports can face delays. Foreign
investors may not own land, and the government caps most foreign investments. The finan-
cial sector remains underdeveloped, leaving much of the population without formal access to
banking services. Constrained access to financing severely impedes entrepreneurial activity
and private-sector development.

Property Rights 0 Fiscal Freedom –4.2 Business Freedom –8.8 Trade Freedom 0
Freedom from 0 Government 0 Labor Freedom –3.2 Investment Freedom –5.0

MOLDOVA
50
25 75
Least Most
free 0 100 free
M oldova’s economic freedom score is 57.5, making its

economy the 111th freest in the 2015 Index. Its score
has increased by 0.2 point since last year, with gains in free-
Freedom Trend
59
dom from corruption, labor freedom, and monetary freedom
outweighing declines in business freedom and the control 58
of government spending. Moldova is ranked 39th among 43
countries in the Europe region, and its overall score is below 57
the regional and world averages.

56
Reversing a previous sharp drop in economic freedom, Mol-
dova has experienced three straight years of gains. Since 2011, 55
Moldova has advanced its economic freedom by 1.8 points.
Modest score improvements highlight a continued effort 54
to transform the formerly Communist economy into a free-
market system. 53
2011 2012 2013 2014 2015
Nonetheless, the weak rule of law and a lack of progress in
implementing open-market policies continue to prevent
broader and more dynamic economic development. Economic Country Comparisons
performance is far below potential. Lingering state interfer-
ence in the private sector increases economic risk in a volatile Country 57.5
political environment. Political instability has left fiscal policy
fragmented, and there is significant corruption in most areas World
60.4
of the bureaucracy. Average
BACKGROUND: Moldova gained independence after the Regional

Average 67.0
collapse of the Soviet Union in 1991 but faces a secessionist
pro-Russian movement in its Transnistria region. The coun- Free
84.6
try is poor, and excessive dependence on Russia threatens its Economies
sovereignty. In April 2013, the center-right Liberal Democrat 0 20 40 60 80 100
Party (LDP) government of Prime Minister Vlad Filat lost a
no-confidence vote. He was replaced by Iurie Leancă, also of
the LDP, who put together a slightly different coaltion. Leancă Quick Facts
supports European integration and favors EU candidate sta- Population: 3.6 million
tus for Moldova in 2015. Association Agreements signed GDP (PPP): $13.3 billion
with the EU in June 2014 include Deep and Comprehensive 8.9% growth in 2013
Free Trade Area (DCFTA) accords, and exports to the EU are 5-year compound annual growth 3.0%
increasing. Foodstuffs, wine, and agricultural products are the $3,736 per capita
main exports, although the technology sector is developing Unemployment: 5.9%
slowly. Corruption undermines public trust in government. Inflation (CPI): 4.6%
321
MOLDOVA (continued)
1–Year

0 20 40 60 80 100
Most Moldovans see corruption as one of the country’s major challenges. Corruption is sys-
temic and deeply embedded in Moldova’s public institutions, especially in law enforcement,
the judicial system, public service, political parties, the educational system, and the legislature.
The constitution provides for an independent judiciary, but the legal framework is ineffective,
and lack of funds undermines reform efforts.

0 20 40 60 80 100
Other taxes include a value-added tax. The overall tax burden amounts to 32 percent of domes-
tic income. Government expenditures are equivalent to 40.1 percent of domestic output, and
public debt equals approximately 24 percent of gross domestic product.

0 20 40 60 80 100
Bureaucracy and lack of transparency can make the formation and operation of private enter-
prises burdensome. The non-salary cost of employing a worker is relatively high, and restric-
tions on work hours are stringent. The government has increased agricultural subsidies in
support of eventual EU membership. The rapid depreciation of the leu in 2014 and looser fiscal
policy threaten the inflation target.

0 20 40 60 80 100
Moldova has a 2.6 percent average tariff rate. Some products are subject to import quotas.
Foreign and domestic investments are generally treated equally under the law. The financial
system still faces major challenges stemming from a poor regulatory environment and weak
governance. The banking sector remains underdeveloped and does not offer a range of readily
available financing options.


MONGOLIA
50
25 75
Least Most
free 0 100 free
M ongolia’s economic freedom score is 59.2, making its

score has increased by 0.3 point since last year, with improve-
Freedom Trend
63
ments in four of the 10 economic freedoms, led by freedom
62
from corruption and fiscal freedom, outweighing declines in
business freedom, the management of public spending, and
61
monetary freedom. Mongolia is ranked 19th out of 42 coun-
tries in the Asia–Pacific region, and its overall score is above
60
the regional average but below the world average.
A massive investment boom has reshaped Mongolia’s economy 59
into a leading coal exporter. However, gains in economic free-
dom made after 2011 have been undermined by a subsequent 58
decline that revealed underlying structural weaknesses and has

57
pushed Mongolia into the “mostly unfree” category.
2011 2012 2013 2014 2015
At the root of this negative development are increasing fiscal
indiscipline and weak rule of law. The government’s direct
interest in the coal project has exposed it to cyclical revenue Country Comparisons
changes. The budgetary outlook discounts benefits from
future mining windfalls by expanding spending in the short Country 59.2
term. The judicial framework remains vulnerable to political
influence, and the perceived level of corruption is still high. World
Average 60.4
BACKGROUND: Mongolia emerged from the shadow of the Regional
former Soviet Union in 1990 with a new constitution and a Average 58.8
multi-party system. Its transition to democracy has been
accompanied by the gradual introduction of free-market Free
Economies 84.6
reforms. Despite political tensions exacerbated by the 2009
0 20 40 60 80 100
economic crisis, Mongolia has enjoyed relative political sta-
bility in recent years. President Tsakhiagiin Elbegdorj, whose
Democratic Party coalition controls parliament, is serving
his second term and cannot run for re-election. Agriculture Quick Facts
and mining are the most important sectors of the economy, Population: 2.9 million
although uncertainty over investment rules has caused invest- GDP (PPP): $17.1 billion
ment in the mineral sector to ebb and flow. While improving 11.7% growth in 2013
overall relations with the U.S., Japan, and South Korea, Mon- 5-year compound annual growth 9.2%
golia has maintained strong ties with Russia and China. $5,885 per capita
Unemployment: 4.9%
Public Debt: 63% of GDP
323
MONGOLIA (continued)
1–Year

0 20 40 60 80 100
Corruption is viewed as pervasive. Graft is endemic, and weak institutions do not enforce anti-
corruption measures effectively. The judiciary is independent but inefficient and vulnerable
to political interference. Corruption persists among judges. Property and contractual rights
are recognized, but enforcement is weak. The government lacks the capacity to enforce intel-
lectual property rights laws.

0 20 40 60 80 100
Mongolia’s top individual income tax rate is 10 percent, and its top corporate tax rate is 25 per-
cent. Other taxes include a value-added tax and an excise tax. The total tax burden equals 29.8
percent of domestic income, and public spending equals 46.3 percent of domestic production.
Public debt has increased to over half the size of the economy.

0 20 40 60 80 100
The minimum capital requirement for incorporating has been removed, and starting a busi-
ness takes only five procedures, but completing licensing requirements still takes over 130
days. Despite some progress, the labor market still lacks dynamism and remains segmented.
The central bank’s large mortgage subsidy program and liquidity injection in 2013 distorted
markets and ratcheted up inflation.

0 20 40 60 80 100
Mongolia has a 5.1 percent average tariff rate. Importing goods is time-consuming. The 2012
Strategic Entities Foreign Investment Law limits investment in some sectors of the economy.
The financial system, dominated by banks, has undergone restructuring and modernization.
In recent years, the banking sector has had vulnerabilities arising from highly concentrated
loan portfolios and high loan-to-deposit ratios.

Freedom from –12.0 Government +18.3 Labor Freedom +12.3 Investment Freedom –20.0

MONTENEGRO
50
25 75
Least Most
free 0 100 free
M ontenegro’s economic freedom score is 64.7, making its

economy the 66th freest in the 2015 Index. Its score is 1.1
points higher than last year, with gains in half of the 10 eco-
Freedom Trend
66
nomic freedoms, including labor freedom, freedom from cor-
ruption, and trade freedom, slightly offset by declines in the 65
management of government spending and business freedom.
Montenegro is ranked 31st out of 43 countries in the Europe 64
region, and its overall score is above the world average but
below the regional average.
63
Economic freedom in Montenegro has expanded by 2.2 points
during the past five years and has reached its highest level 62
ever in the 2015 Index. Improvements in seven of the 10 eco-
nomic freedoms include strong gains in investment freedom
61
and the control of government spending that help to offset a
double-digit decline in labor freedom. 2011 2012 2013 2014 2015
Fallout from the global financial and eurozone crisis has

hurt growth, but economic reforms have proceeded and have Country Comparisons
become more broad-based. Open-market policies continue to
facilitate privatization of state-owned enterprises. The pace Country 64.7
of judicial reform has been sluggish, and the perceived level
of corruption remains high. World
Average 60.4
BACKGROUND: The Republic of Montenegro declared its Regional
independence from Serbia in 2006. Upon gaining indepen- Average 67.0
dence, it introduced significant privatization and adopted
the euro as its currency despite not being a member of the Free
Economies 84.6
eurozone. Milo Ðukanovic, leader of the Coalition for Euro-
0 20 40 60 80 100
pean Montenegro, an alliance between the Democratic Party
of Socialists of Montenegro and two other center-left parties
that won the October 2012 parliamentary elections, became
prime minister in December 2012. Montenegro was invited Quick Facts
to launch a NATO Membership Action Plan in 2009, became Population: 0.6 million
a candidate for membership in the European Union in 2010, GDP (PPP): $7.4 billion
and joined the World Trade Organization in 2011. Its economy 3.4% growth in 2013
relies heavily on tourism and exports of refined metals, but 5-year compound annual growth 0.1%
real estate is gaining importance. Unprofitable state compa- $11,913 per capita
nies burden public finances, and unemployment is high. Unemployment: 19.7%
325
MONTENEGRO (continued)
1–Year

0 20 40 60 80 100
Corruption remains pervasive. According to a 2013 European Commission report, graft and
misconduct are widespread in such key areas as health care and public procurement, convic-
tions in high-profile cases are low, and oversight of conflicts of interest is relatively weak. Orga-
nized crime significantly influences both the public and private sectors. Politicization of the
judiciary is a long-standing problem.

0 20 40 60 80 100
Montenegro’s individual and corporate income tax rates are a flat 9 percent. Other taxes include
a value-added tax and an inheritance tax. Tax revenue equals 24 percent of domestic produc-
tion, and public expenditures are equal to 45.9 percent of the size of the domestic economy.
Public debt is equivalent to about 57 percent of gross domestic product.

0 20 40 60 80 100
Starting a business now takes six procedures and slightly less than a week, with no minimum
capital required. However, licensing requirements continue to be costly and time-consuming.
The labor market continues to evolve, but unemployment and underemployment remain high.
Ongoing massive subsidies for a bankrupt, state-supported Communist-era aluminum factory
have distorted the economy.

0 20 40 60 80 100
Montenegro’s average tariff rate is 2.6 percent. Foreign and domestic investors are treated
equally under the law, but the court system moves slowly. The financial system has gradu-
ally become more open and diversified. However, the system, particularly the banking sec-
tor, remains plagued by low profitability, and nonperforming loans have increased to about 20
percent of total loans.


MOROCCO
50
25 75
Least Most
free 0 100 free
M orocco’s economic freedom score is 60.1, making its

points better than last year, with a very large improvement in
Freedom Trend
62
trade freedom and smaller gains in freedom from corruption,
labor freedom, and monetary freedom outweighing declines 61
in business freedom and the management of government
spending. Morocco is ranked 9th out of 15 countries in the 60
Middle East/North Africa region, and its overall score is just
below the world average.
59
Committed to economic reform, Morocco remained largely
immune from significant Arab Spring protests. Over the past 58
five years, gains in five of the 10 economic freedoms, including
labor freedom, monetary freedom, and investment freedom,
57
have offset declines in the management of public spending
and business freedom. Morocco has regained “moderately 2011 2012 2013 2014 2015
free” status in the 2015 Index.
Proximity to Europe and a free trade agreement with the Unit- Country Comparisons
ed States have helped to establish a foundation for dynamic
economic growth. Openness to global trade and investment Country 60.1
has facilitated the development of a modern and competitive
financial sector. Relatively prudent fiscal policy has encour- World
Average 60.4
aged macroeconomic stability and greater structural reform.
Regional
BACKGROUND: Morocco, a constitutional monarchy with an Average 61.6
elected parliament, has been a key ally in the struggle against
Islamist extremism. Constitutional amendments proposed Free
Economies 84.6
by a commission authorized by King Mohammed VI and
0 20 40 60 80 100
approved by referendum in 2011 are designed to increase
the power and independence of the prime minister and pro-
vide greater civil liberties. In November 2011, the Justice and
Development Party became the first Islamist party to lead the Quick Facts
government, but the king retains significant power as chief Population: 32.9 million
executive. Reforms were adopted in 2014 to reduce govern- GDP (PPP): $179.2 billion
ment subsidies. In addition to a large tourism industry and a 4.5% growth in 2013
growing manufacturing sector, a nascent aeronautics indus- 5-year compound annual growth 4.1%
try is attracting new foreign direct investment. Agriculture $5,456 per capita
accounts for about 15 percent of GDP and employs almost 45 Unemployment: 9.2%
percent of the labor force. Inflation (CPI): 1.9%
327
MOROCCO (continued)
1–Year

0 20 40 60 80 100
Widespread corruption undermines investor sentiment and raises the cost of operating a busi-
ness. Recent cases have involved the embezzlement of millions by public servants. In addition
to his public role, the king is the majority stakeholder in a vast array of private and public-sector
firms. The courts are inadequate and cannot be relied upon to rule quickly or fairly.

0 20 40 60 80 100
Morocco’s top individual income tax rate is 38 percent, and its corporate tax rate is a flat 30
percent. Other taxes include a value-added tax and a gift tax. Overall tax revenue equals 23.7
percent of gross domestic product. Public expenditures equal 36.1 percent of domestic produc-
tion, and public debt corresponds to 62 percent of the size of the domestic economy.

0 20 40 60 80 100
Incorporating a business takes five procedures and less than a week, with no minimum capital
required, but completing licensing requirements still takes about three months on average.
Labor market rigidity continues to discourage dynamic job growth. In January 2014, the gov-
ernment ended costly gasoline and fuel oil subsidies, but it maintained some food subsidies.

0 20 40 60 80 100
The average tariff rate is 3.4 percent. Tariffs have fallen, but regulatory issues may delay trade.
Foreign investors cannot buy agricultural land, and investment in some economic sectors is
regulated. The financial system has undergone modernization and expansion. Morocco’s bank-
ing sector is one of the most liberalized in North Africa. The stock market does not restrict
foreign participation.


MOZAMBIQUE
50
25 75
Least Most
free 0 100 free
M ozambique’s economic freedom score is 54.8, making its

score has declined by 0.2 point since last year, with improve-
Freedom Trend
59
ments in freedom from corruption, government spending,
labor freedom, and monetary freedom outweighed by size- 58
able declines in business freedom and investment freedom.
Mozambique is ranked 24th out of 46 countries in the Sub- 57
Saharan Africa region, and its overall score is just below the
56
regional average.
Relative peace after years of civil war and the discovery of 55
promising natural gas reserves have propelled Mozambique’s
economic growth in recent years, but improvements in eco- 54
nomic freedom have not followed. Over the past five years,
economic freedom in Mozambique has declined by 2.0 points, 53
with losses in a majority of the 10 factors. Particularly worry- 2011 2012 2013 2014 2015
ing is a large score decline in the management of government
spending. Continued fiscal intransigence could undermine
the productive use of commodity windfalls.
Country Comparisons
This downward trend undermines an already weak economic Country 54.8
foundation. The judiciary remains ineffective and vulnerable
to political influence, and corruption remains pervasive in the World
60.4
public sector. Much of the population is stuck in subsistence Average
agriculture due to burdensome business regulations that Regional
inhibit entrepreneurship, and the rigid labor market exacer- Average 54.9
bates unemployment and underemployment.
Free
Economies 84.6
BACKGROUND: The Frelimo party, currently headed by
President Armando Guebuza, has been in power since inde- 0 20 40 60 80 100
pendence from Portugal in 1975. Following independence,
there was a 16-year civil war between Frelimo and the rebel
movement Renamo that ended with the Rome Peace Accords Quick Facts
in 1992. In October 2013, after several clashes with Freli- Population: 25.9 million
mo, Renamo announced that it was pulling out of the peace GDP (PPP): $28.2 billion
accord. Both parties reached a peace deal in September 2014 7.1% growth in 2013
ahead of the country’s national elections in October. Despite 5-year compound annual growth 7.0%
political instability, Mozambique has emerged as one of the $1,090 per capita
world’s fastest-growing economies and is expected to become Unemployment: 8.5%
one of the world’s largest exporters of coal and gas. Inflation (CPI): 4.2%
329
MOZAMBIQUE (continued)
1–Year

0 20 40 60 80 100
Corruption remains pervasive in government and business despite the passing of a new anti-
corruption law and the delegation of new powers to the Central Office for Combating Corrup-
tion in 2012. The police and judicial bodies in charge of enforcing anti-corruption measures
are themselves often corrupt. Property rights are not strongly respected, and law enforcement
is inefficient and uneven.

0 20 40 60 80 100
added tax and an inheritance tax. The overall tax burden equals 20.8 percent of the domestic
economy. Government expenditures are equal to 33.4 percent of gross domestic product, and
public debt is equivalent to 43 percent of annual domestic output.

0 20 40 60 80 100
With no minimum capital required, forming a business takes nine procedures and 13 days on
average, but completing licensing requirements still takes over 140 days on average. The public
and energy sectors employ much of the formal labor force. The labor market lacks flexibility.
The government maintains administered prices for fuels and subsidizes state-owned enter-
prises such as the electricity company.

0 20 40 60 80 100
Mozambique’s average tariff rate is 4.8 percent. Customs delays may interfere with trade. Land
is state-owned, and the government screens new foreign investment. The financial system
remains underdeveloped. About 10 percent of Mozambicans have access to formal financial
services, and less than 5 percent have access to credit. The three largest banks, all foreign-
owned, dominate the system.


NAMIBIA
50
25 75
Least Most
free 0 100 free
N amibia’s economic freedom score is 59.6, making its econ-

omy the 93rd freest in the 2015 Index. Its score is up by 0.2
point from last year, reflecting improvements in labor free-
Freedom Trend
64
dom, investment freedom, and freedom from corruption that
63
outweigh declines in half of the 10 economic freedoms led by a
significant deterioration in trade freedom. Namibia is ranked
62
10th out of 46 countries in the Sub-Saharan Africa region,
and its overall score is below the world average but above the
61
regional average.
Over the past five years, Namibia’s economic freedom has 60
been on a downward trend, declining by 3.1 points, the third
biggest score drop in the Sub-Saharan Africa region. Deterio- 59
rations have largely been concentrated in the management of

58
government spending and trade freedom, which have declined
by 15 points and 18 points, respectively. 2011 2012 2013 2014 2015
Overall, Namibia’s progress toward greater economic freedom

has been patchy. Open-market policies have been advanced Country Comparisons
only marginally, with layers of tariff and non-tariff barriers as
well as lingering regulatory restrictions continuing to under- Country 59.6
cut productivity growth and impede diversification of the
economy. The absence of an independent and fair judiciary World
Average 60.4
weakens the rule of law and undermines prospects for long-
term economic development. Corruption is pervasive, and the Regional
54.9
effectiveness of government services is poor. Average
BACKGROUND: Namibia has enjoyed political stability since Free

Economies 84.6
independence from South Africa in 1990. President Hifike-
0 20 40 60 80 100
punye Pohamba won a second five-year term in 2009. The
next elections are scheduled for 2014. Namibia benefits from
good governance and a market-led economy. The economy
is centered on agriculture, which is vulnerable to external Quick Facts
shocks. It is also closely linked to South Africa’s economy, Population: 2.2 million
with the Namibian dollar pegged to the South African rand GDP (PPP): $17.8 billion
since 1993. There has been official pressure on white and for- 4.3% growth in 2013
eign landowners to sell their property to the government so 5-year compound annual growth 4.0%
that “historically disadvantaged” and landless Namibians can $8,191 per capita
be resettled. Unemployment: 17.7%
331
NAMIBIA (continued)
1–Year

0 20 40 60 80 100
According to an April 2014 Ernest & Young survey, nearly 80 percent of Namibian businesses
view fraud and corruption as a significant risk to their operations. The rule of law remains weak,
and access to justice is obstructed by economic and geographic barriers, a shortage of public
defenders, and delays. Property rights are not protected effectively.

0 20 40 60 80 100
Namibia’s top individual income tax rate is 37 percent, and its top corporate tax rate is 34 per-
cent. Other taxes include a value-added tax. Overall tax revenue is equal to 28.4 percent of the
domestic economy, and public expenditures are equivalent to 38.3 percent of domestic output.
Public debt equals approximately 27 percent of gross domestic product.

0 20 40 60 80 100
The regulatory environment is not conducive to business formation and operation. Launching a
business takes 10 procedures and 66 days on average, and licensing takes over four months. The
labor market is underdeveloped. Much of the labor force is employed in the public sector. Infla-
tion remained high in 2013, spurred by a 13 percent increase in the tariff for bulk electricity.

0 20 40 60 80 100
Namibia, a member of the Southern African Customs Union, has a 6.9 percent average tar-
iff rate. Government procurement policies can be challenging for foreign firms. Foreign and
domestic investments are generally treated equally under the law. Limited access to credit
and the high costs of financing impede entrepreneurial activity. Progress in modernizing the
financial sector has been sluggish and limited.


NEPAL
50
25 75
Least Most
free 0 100 free
N epal’s economic freedom score is 51.3, making its economy

the 152nd freest in the 2015 Index. Its score has increased
by 1.2 points since last year, driven mainly by improvements
Freedom Trend
53
in freedom from corruption and business freedom that out-
weigh a decline in monetary freedom. Nepal is ranked 34th
52
out of 42 countries in the Asia–Pacific region, and its score
remains below the world and regional averages.
Much of Nepal’s population has been trapped in poverty for 51
years. A failure to implement consistent economic reforms
has perpetuated this condition and left the Nepalese econ-
omy barely above the “repressed” category in terms of eco- 50
nomic freedom.
Although economic freedom has advanced by 1.2 points over 49
the past five years, seven of the 10 categories measured still 2011 2012 2013 2014 2015
score below the global averages. Improvements have occurred
only in freedom from corruption and business freedom. The
rule of law is not evenly enforced, and this has deterred inves- Country Comparisons
tors from investing in Nepal’s promising hydroelectric indus-
try. Even small entrepreneurs and laborers are inhibited from Country 51.3
entering the formal marketplace due to inefficient and exces-
sive regulation. World
Average 60.4
BACKGROUND: Eight years after the end of a Maoist insur- Regional
gency and abolition of the monarchy, Nepal still has only Average 58.8
an interim constitution. In May 2012, the first Constituent
Assembly was dissolved after failing to produce a new con- Free
Economies 84.6
stitution. Elections were postponed for nearly 18 months. In
0 20 40 60 80 100
November 2013, the Nepali Congress party won enough seats
to form a coalition government headed by Prime Minister
Sushi Koirala, who pledged to complete a new constitution
within a year with a goal of making the transition from a con- Quick Facts
stitutional monarchy to a federal republic. The reintegration Population: 27.9 million
of former Maoist fighters into the national army remains con- GDP (PPP): $42.1 billion
troversial. A poor, landlocked country bordering the Himala- 3.6% growth in 2013
yan Mountains, Nepal attracts little foreign direct investment. 5-year compound annual growth 4.3%
Agriculture accounts for one-third of GDP. $1,508 per capita
Unemployment: 2.7%
333
NEPAL (continued)
1–Year

0 20 40 60 80 100
Corruption is endemic in politics and government. Many legislators have been accused or con-
victed of corruption, but high-level officials are rarely prosecuted. Graft is particularly preva-
lent in the judiciary, with payoffs to judges for favorable rulings, and in the police force, which
has been accused of extensive involvement in organized crime. Protections for property rights
are not enforced effectively.

0 20 40 60 80 100
Nepal’s top individual and corporate income tax rates are 25 percent. Other taxes include a
value-added tax and a property tax. The overall tax burden is equivalent to 13.9 percent of
domestic income. Government expenditures equal 19.2 percent of gross domestic product, and
public debt stands at 31 percent of the size of the domestic economy.

0 20 40 60 80 100
Commercial regulations are not implemented or enforced effectively. Economic diversification
has lagged, and much private-sector activity takes place outside of the formal economy. Labor
regulations, although not fully enforced, are relatively rigid and outmoded. Inflation increased
in late 2013 due to higher import bills caused by depreciation of the Nepali rupee against the
Chinese yuan and the U.S. dollar.

0 20 40 60 80 100
Nepal’s average tariff rate is 11.6 percent. Some goods may be subject to export taxes, and beef
imports are restricted. New foreign investment is screened by the government. The financial
sector, dominated by banking, remains underdeveloped, and a full range of modern financ-
ing tools is not readily available. Capital transactions and foreign exchange accounts are
also limited.


NETHERLANDS
50
25 75
Least Most
free 0 100 free
Tdecreased
he Netherlands’ economic freedom score is 73.7, making
its economy the 17th freest in the 2015 Index. Its score has
by 0.5 point since last year, reflecting declines in
Freedom Trend
76
four of the 10 economic freedoms, including business freedom
and freedom from corruption, that outweigh a significant gain
in labor freedom. The Netherlands is ranked 8th out of 43 75
countries in the Europe region.
The Netherlands has a long history of openness to global com- 74
merce and economic freedom. Its port of Rotterdam is among
the busiest in the world and serves as a primary entry point
for goods to Europe. However, over the past five years, the 73
country’s traditional commitment to the free market has been
under stress. Since 2011, economic freedom has declined by
1.0 point, largely as a result of excessive government spending 72
and increased perceptions of corruption. 2011 2012 2013 2014 2015
Despite some negative trends, The Netherlands’ economy

still rests on strong foundations of economic freedom. The Country Comparisons
property rights and investment regimes are the second fre-
est in the world. Business regulations are more efficient than Country 73.7
those of regional peers, providing a comparative advantage.
However, fiscal policy does remain a concern. Taxes are high, World
60.4
but government spending is even higher, pushing up levels of Average
public debt. Regional
Average 67.0
BACKGROUND: The center-right coalition led by Prime Min-
ister Mark Rutte collapsed in April 2012 when the Freedom Free
84.6
Party’s Geert Wilders refused to back Rutte’s austerity pack- Economies
age. Rutte’s party and its principal coalition partner, the cen- 0 20 40 60 80 100
ter-left Labor Party, won increased support to maintain power
during elections in September 2012. The Netherlands is a
founding member of the European Union and under Rutte’s Quick Facts
leadership has been one of the most outspoken supporters of Population: 16.8 million
turning power back to EU member states. The Netherlands is GDP (PPP): $700.5 billion
a center of international commerce. –0.8% growth in 2013
$41,711 per capita
Unemployment: 6.7%
335
NETHERLANDS (continued)
1–Year

0 20 40 60 80 100
The Netherlands has few problems with corruption. Effective anti-corruption measures ensure
government integrity, and public tolerance for graft is low. A new campaign financing law took
effect in May 2013. The legal framework ensures strong protection of private property rights
and enforcement of contracts. Independent of political interference, the judiciary is respected
and provides fair adjudication of disputes.

0 20 40 60 80 100
The Netherlands’ top individual income tax rate is 52 percent, and its top corporate tax rate
is 25 percent. Other taxes include a value-added tax, environmental taxes, and inheritance
taxes. Overall tax revenue equals 38.6 percent of domestic income, and government expendi-
tures equal 50.4 percent of domestic output. Public debt is equivalent to 75 percent of gross
domestic product.

0 20 40 60 80 100
It takes four procedures and four days to start a business on average, with no minimum capi-
tal required, but completing licensing requirements remains time-consuming. The non-salary
cost of employing a worker is high, although severance payments are not overly burdensome.
Monetary stability has been well maintained, and the government has cut subsidies to offshore
wind power projects.

0 20 40 60 80 100
EU is relatively open to external trade. The Netherlands generally treats foreign and domes-
tic investors equally. The competitive financial sector offers a wide range of financing instru-
ments. The government has nationalized several banks in recent years but is planning to sell
some of its holdings.


NEW ZEALAND
50
25 75
Least Most
free 0 100 free
N ew Zealand’s economic freedom score is 82.1, making its

economy the 3rd freest in the 2015 Index. Its score is up
by 0.9 point, with improvements in the management of gov-
Freedom Trend
84
ernment spending, monetary freedom, and labor freedom
outweighing declines in freedom from corruption, fiscal free-
83
dom, and business freedom. New Zealand is ranked 3rd out of
42 countries in the Asia–Pacific region and 3rd in the world.
New Zealand’s economic development over the past few 82
decades has been built on principles of market openness
and free trade. Reforms in the 1980s opened the economy
to imports, reduced the size of government, and lowered the 81
tax burden. These changes, enhanced in recent decades, have
solidified the economy’s ranking among the world’s freest,
80
with a high standard of living and low rates of poverty.
2011 2012 2013 2014 2015
New Zealand’s prosperity rests on its well-established rule of
law. The economy is the least corrupt in the world, and prop-
erty rights, including intellectual property, are strongly pro- Country Comparisons
tected. Entrepreneurs generally find regulations efficient, and
the labor market is efficient in allocating labor. Despite having Country 82.1
one of the world’s most open financial sectors, New Zealand
banks avoided the worst effects of the global financial crisis. World
Average 60.4
BACKGROUND: New Zealand is a parliamentary democracy Regional
and one of the Asia–Pacific region’s most prosperous coun- Average 58.8
tries. After 10 years of Labor Party–dominated governments,
the center-right National Party, led by Prime Minister John Free
Economies 84.6
Key, returned to power in November 2008 and was re-elected
0 20 40 60 80 100
in November 2011. Far-reaching deregulation and privatiza-
tion in the 1980s and 1990s largely liberated the economy,
which is powered mainly by agriculture but also benefits from
a flourishing manufacturing sector, thriving tourism, and a Quick Facts
strong renewable geothermal energy resource base. Following Population: 4.5 million
a sizable contraction during the global economic recession, GDP (PPP): $136.6 billion
the economy has been expanding since 2010. 2.4% growth in 2013
$30,493 per capita
Unemployment: 6.4%
337
NEW ZEALAND (continued)
1–Year

0 20 40 60 80 100
New Zealand is tied with Denmark for first place out of 177 countries in Transparency Inter-
national’s 2013 Corruption Perceptions Index. It is renowned for its efforts to penalize bribery
and ensure a transparent, competitive, and corruption-free government procurement system.
The judicial system is independent and functions well. Private property rights are strongly
protected, and contracts are notably secure.

0 20 40 60 80 100
Other taxes include a goods and services tax and environmental taxes. Overall tax revenue
equals 32.9 percent of gross domestic product. Public expenditures equal 43.6 percent of GDP,
and public debt is equivalent to approximately 35 percent of annual economic activity.

0 20 40 60 80 100
The entrepreneurial framework is transparent and efficient. Starting a business takes one pro-
cedure and one day on average. The labor market is flexible, with moderate non-salary costs
and flexible work-hours regulations. New Zealand has the lowest subsidies of any OECD coun-
try. It removed all farm subsidies two decades ago and spurred the development of a diversified
agriculture sector.
OPEN Trade Freedom 86.8 42nd 0

0 20 40 60 80 100
New Zealand’s average tariff rate is 1.6 percent. Non-tariff barriers are low as a result of uni-
lateral trade liberalization and participation in trade agreements. Foreign investment is wel-
comed, but the government may screen some large investments. The open financial sector is
highly competitive and well developed. Prudent regulations allowed firms to withstand the
global financial turmoil with little disruption.


NICARAGUA
50
25 75
Least Most
free 0 100 free
N icaragua’s economic freedom score is 57.6, making its

0.8 point lower than last year due to declines in half of the
Freedom Trend
60
10 economic freedoms, including property rights, monetary
freedom, labor freedom, and the management of government 59
spending, that outweigh modest improvements in business
freedom and freedom from corruption. Nicaragua is ranked
58
18th out of 29 countries in the South and Central America/
Caribbean region.
57
On a net basis, economic freedom in Nicaragua has dropped
by 1.2 points over the past half-decade. Declines in half of the
56
10 economic freedoms include large drops in property rights,
labor freedom, and investment freedom.
55
Nicaragua’s shaky institutional infrastructure makes any 2011 2012 2013 2014 2015
score declines potentially damaging. Protections for contracts
and property rights are uneven, reflecting the incompetence
of the judiciary. Corruption remains pervasive, and attempts Country Comparisons
to target corrupt officials have turned into political battles.
Entrepreneurs find it hard to do business, and the labor mar- Country 57.6
ket is rigid. This forces many small businesses into the infor-
mal sector. The inefficiency of the financial sector inhibits World
60.4
capital formation. Average
BACKGROUND: Despite a constitutional prohibition, Sand- Regional

Average 59.7
inista President Daniel Ortega was re-elected in November
2011, and constitutional changes approved by the National Free
84.6
Assembly early in 2014 will allow him to stay in power indefi- Economies
nitely. Ortega has weathered domestic opposition thanks to 0 20 40 60 80 100
economic assistance from Venezuela, divisions among his
opponents, and a policy agenda that maintains relative eco-
nomic openness. The Central America–Dominican Repub- Quick Facts
lic–United States Free Trade Agreement (CAFTA–DR) has Population: 6.1 million
helped to diversify the economy. Agricultural goods and tex- GDP (PPP): $27.9 billion
tile production account for 50 percent of exports. Nicaragua 4.2% growth in 2013
is the second poorest nation in the Americas. Much of the 5-year compound annual growth 3.2%
workforce is underemployed in the formal sector. The gov- $4,554 per capita
ernment has granted a Chinese company a concession to con- Unemployment: 7.2%
struct a transatlantic canal, but the feasibility of the project Inflation (CPI): 7.4%
has been questioned. FDI Inflow: $848.7 million
339
NICARAGUA (continued)
1–Year

0 20 40 60 80 100
Democracy was further weakened in 2014 by Daniel Ortega’s authoritarian tendencies and
efforts to subvert the constitution for political benefit. Ortega’s significant influence over all
state organs, including the Supreme Court and the Supreme Electoral Council, has undermined
checks on the executive. Protection of private property rights is not enforced effectively, and
contracts are not always secure.

0 20 40 60 80 100
Nicaragua’s top individual and corporate income tax rates are 30 percent. Other taxes include
a value-added tax and a capital gains tax. With adjustments in the income tax thresholds, rev-
enue generation has reached 18.9 percent of domestic income. Public expenditures equal 28
percent of gross domestic product, and public debt equals approximately 42 percent of the
domestic economy.

0 20 40 60 80 100
Requirements for launching a business are not time-consuming, but the licensing process still
takes more than 200 days to complete. Labor regulations are not efficient enough to support
a vibrant labor market. Substantial energy and cash subsidies from Venezuela have distorted
domestic prices, although the level of that aid could fall because of Venezuela’s growing eco-
nomic problems.

0 20 40 60 80 100
Nicaragua’s average tariff rate is 2.3 percent. Imports of used cars and genetically modified
food are restricted. The legal and regulatory environment may be difficult for foreign investors.
The small financial sector has been evolving, particularly in the urban areas. A limited num-
ber of commercial credit instruments are available to the private sector, and capital markets
are rudimentary.


NIGER
50
25 75
Least Most
free 0 100 free
N iger’s economic freedom score is 54.6, making its economy

the 127th freest in the 2015 Index. Its score has decreased
by 0.5 point since last year, reflecting declines in monetary
Freedom Trend
57
freedom, the management of government spending, and labor
freedom that outweigh gains in freedom from corruption and 56
business freedom. Niger is ranked 26th out of 46 countries in
the Sub-Saharan Africa region, and its overall score is slightly
55
above the regional average.
Niger has experienced fast growth in recent years thanks 54
to an expansion of its mining and uranium sectors, but eco-
nomic freedom has not followed this trend. Over the past five
53
years, broad gains have been largely offset by a sharp decline
in trade freedom.
52
Nearly half of the government’s budget comes from foreign 2011 2012 2013 2014 2015
donors, political unrest has undermined the rule of law, and
the post-coup civilian government is working to combat wide-
spread corruption and judicial incompetence. A high level of Country Comparisons
monetary freedom provides some economic stability, but a
poor entrepreneurial environment, ineffective capital alloca- Country 54.6
tion, and closed domestic markets keep the majority of citi-
zens in poverty. World
60.4
Average
BACKGROUND: President Mamadou Tandja was overthrown
in a military coup in February 2010. A year later, in March Regional
Average 54.9
2011, opposition leader Mahamadou Issoufou won presiden-
tial elections that were deemed free and fair by the interna- Free
84.6
tional community, and his Social Democratic Party coalition Economies
won a majority in the National Assembly. A Tuareg rebellion 0 20 40 60 80 100
in northern Niger, spillover violence from conflicts in Libya
and Mali, and the growing presence of groups linked to al-
Qaeda are serious threats. Niger has one of the world’s fast- Quick Facts
est population growth rates. Poor infrastructure and frequent Population: 16.6 million
weather disasters contribute to economic hardship. With the GDP (PPP): $13.8 billion
exception of uranium and (as of 2011) oil, substantial mineral 3.6% growth in 2013
resources, including gold, have yet to be exploited. Accord- 5-year compound annual growth 4.8%
ing to a 2014 United Nations report, Niger currently hosts $829 per capita
upwards of 50,000 refugees from Mali and Nigeria. Unemployment: 5.0%
341
NIGER (continued)
1–Year

0 20 40 60 80 100
Corruption remains a serious problem in Niger. In 2014, a court in Niamey lifted the immunity
of former President Tandja, opening the way for a possible investigation into the disappearance
of nearly $800 million of public money. The rule of law is hampered by an ineffective judicial
framework, and a weak court system remains vulnerable to political interference.

0 20 40 60 80 100
Niger’s top individual income tax rate is 35 percent, and its top corporate tax rate is 30 percent.
Other taxes include a value-added tax and a tax on interest and capital gains. The overall tax
burden equals 14.5 percent of domestic income, and government expenditures equal 23.4 per-
cent of domestic output. Public debt amounts to 34 percent of gross domestic product.

0 20 40 60 80 100
The inadequate regulatory framework hampers private-sector development. Onerous and
inconsistent regulations impose substantial costs on business. The minimum capital required
to incorporate a business is still nearly five times the level of annual average income. The labor
market is poorly developed, and much of the labor force works in the informal sector. The state
influences prices through state-owned utilities.

0 20 40 60 80 100
Niger’s average tariff rate is 9.7 percent. Importing goods may be time-consuming and costly.
In most cases, domestic and foreign investors are treated equally under the law. Despite some
progress toward modernizing the financial sector, financing options for starting and expanding
private businesses are limited. Overall bank credit to the private sector remains low.


NIGERIA
50
25 75
Least Most
free 0 100 free
N igeria’s economic freedom score is 55.6, making its econ-

omy the 120th freest in the 2015 Index. Its score has
increased by 1.3 points since last year, with improvements in
Freedom Trend
58
five of the 10 economic freedoms, including labor freedom,
freedom from corruption, and the management of govern- 57
ment spending, outweighing a decline in monetary freedom.
Nigeria is ranked 22nd out of 46 countries in the Sub-Saharan
56
Africa region, and its overall score is below the world average.
Attempts to diversify Nigeria’s economy away from oil and gas 55
have fallen flat. Over the past five years, economic freedom in
Nigeria has declined by 1.1 points, with losses concentrated
54
largely in the regulatory area.
Nigeria’s rule of law remains weak, and the corruption that 53
accompanies high levels of government spending and per- 2011 2012 2013 2014 2015
vades the oil sector inhibits private-sector growth. Strong
linkage to global markets through the trade in crude oil is the
only bright spot in trade and investment regimes that are pro- Country Comparisons
tectionist and adverse to competition.
Country 55.6
BACKGROUND: Nigeria achieved independence from Britain
in 1960. Goodluck Jonathan became president after the sud- World
den death of President Umaru Yar’Adua in 2010. Jonathan’s Average 60.4
re-election in 2011 was heavily criticized among northern
Muslims for not following the traditional Muslim–Christian Regional
Average 54.9
rotating power agreement. In 2013, the government declared
a state of emergency in three northern states and deployed Free
84.6
security forces to combat the terrorist group Boko Haram. Economies
In April 2014, the al-Qaeda–linked Boko Haram kidnapped 0 20 40 60 80 100
nearly 300 schoolgirls. Nigeria is Africa’s most populous
nation and leading oil producer and has sub-Saharan Africa’s
largest natural gas reserves. Security issues in the Niger Delta, Quick Facts
political instability, corruption, and mismanagement hinder Population: 169.3 million
energy production. In 2014, Nigeria surpassed South Africa as GDP (PPP): $479.3 billion
the continent’s largest economy, but an estimated 61 percent 6.3% growth in 2013
of Nigerians live on less than $1 a day. Nigeria suffered from 5-year compound annual growth 7.0%
the 2014 Ebola virus outbreak in West Africa. $2,831 per capita
Unemployment: 7.5%
343
NIGERIA (continued)
1–Year

0 20 40 60 80 100
Moderately strengthened institutional capacity has checked some of the more blatant forms of
corruption, but rent-seeking officials and politicians have found more subtle ways to defraud
the Treasury with continued corrosive effects on politics and economic management. The pub-
lic sector remains overstaffed, highly bureaucratic, and largely ineffective. One of the world’s
least efficient property registration systems weakens property rights.

0 20 40 60 80 100
Other taxes include a value-added tax and a capital gains tax. Overall tax revenue accounts for 3
percent of domestic income. Government expenditures equal 28.2 percent of domestic output,
and public debt is equivalent to 19 percent of gross domestic product.

0 20 40 60 80 100
Although the business environment has improved, regulatory procedures remain time-con-
suming and costly. The minimum capital requirement for starting a business has been elimi-
nated, but completing licensing requirements still takes over 100 days. Much of the formal
labor force is employed in the public or energy sectors. The state subsidizes and administers
the prices of imported fuel and electricity.

0 20 40 60 80 100
Nigeria’s average tariff rate is 10.6 percent. Additional barriers restrict some agricultural
imports, and imports may face customs delays. The legal and regulatory bureaucracies may be
challenging for foreign investors. With 24 commercial banks, the financial sector continues to
grow. The Nigerian Stock Exchange, with about 200 companies listed, has become a desirable
financing option.


NORWAY
50
25 75
Least Most
free 0 100 free
N orway’s economic freedom score is 71.8, making its

increased by 0.9 point since last year, with solid improvements
Freedom Trend
73
in six of the 10 economic freedoms, including labor freedom,
72
monetary freedom, and the management of public spending,
outweighing a decline in freedom from corruption. Norway is
71
overall score is well above the world and regional averages.
70
Improvements in the regulatory environment and trade free-
dom have caused Norway’s economic freedom score to expand 69
by 1.1 points over the past five years. The only decline was in
government spending as the government responded to low 68
economic growth with additional spending.

67
Steady improvements in the 10 economic freedoms have 2011 2012 2013 2014 2015
underlined Norway’s development of strong institutions. A
small, open economy, Norway has low barriers to entry for
foreign businesses and an investment regime that encour- Country Comparisons
ages international participation. The business environment
is welcoming to new entrepreneurs, although the labor code Country 71.8
remains rigid. High taxes and government spending are sup-
plemented by the world’s largest sovereign wealth fund. The World
Average 60.4
property rights regime is the world’s second best.
Regional
BACKGROUND: Norway has been a member of NATO since Average 67.0
1949. Voters have twice rejected membership in the European
Union, but Norway is a party to a European Free Trade Asso- Free
Economies 84.6
ciation agreement. Prime Minister Erna Solberg of the Con-
0 20 40 60 80 100
servative Party was elected in September 2013 to lead a new
center-right coalition minority government. Solberg’s gov-
ernment has promised to lower taxes, decrease reliance on oil
production, increase investment in infrastructure, and curtail Quick Facts
immigration. Norway is one of the world’s most prosperous Population: 5.1 million
countries. Fisheries, metal, and oil are the most important GDP (PPP): $280.0 billion
commodities. Norway saves a large portion of its petroleum- 0.8% growth in 2013
sector revenues, including dividends from the partially state- 5-year compound annual growth 0.8%
owned Statoil and taxes from oil and gas companies operating $54,947 per capita
in Norway, in its Government Pension Fund–Global. Unemployment: 3.5%
345
NORWAY (continued)
1–Year

0 20 40 60 80 100
Norway is ranked 5th out of 177 countries in Transparency International’s 2013 Corruption
Perceptions Index. Well-established anti-corruption measures reinforce a cultural emphasis
on government integrity. The judiciary is independent, and the court system operates fairly at
the local and national levels. Private property rights are securely protected, and commercial
contracts are reliably enforced.

0 20 40 60 80 100
Norway’s top individual income tax rate is 47.8 percent, and its top corporate tax rate is 27 per-
cent. Other taxes include a value-added tax, a tax on net wealth, and environmental taxes. The
overall tax burden equals 42.2 percent of the domestic economy. Public expenditures amount
to 43.3 percent of domestic production, and public debt is equal to 30 percent of GDP.

0 20 40 60 80 100
The efficient and transparent business framework supports private-sector development.
Incorporating a business costs about 1 percent of the level of average annual income and takes
four procedures. The non-salary cost of employing a worker is high, but severance payments
are not overly burdensome. Monetary stability has been well maintained, although the govern-
ment subsidizes numerous renewable energy projects.

0 20 40 60 80 100
Norway has a 0.3 percent average tariff rate, but the agricultural sector is subsidized and pro-
tected from competition. There are few government barriers to international trade and invest-
ment, and foreign investors generally receive national treatment. The well-developed financial
system provides a wide range of services. Banking remains generally well capitalized. The state
retains ownership of the largest financial institutions.

Corruption Spending Monetary Freedom 0 Financial Freedom +10.0

OMAN
50
25 75
Least Most
free 0 100 free
O man’s economic freedom score is 66.7, making its econo-

lower than last year due to declines in the management of gov-
Freedom Trend
71
ernment spending, trade freedom, and freedom from corrup-
70
tion that outweigh improvements in four of the 10 economic
freedoms, including property rights and monetary freedom.
69
Oman is ranked 6th out of 15 countries in the Middle East/
North Africa region, and its overall score is above the world
68
Oman’s efforts to diversify beyond a declining oil and gas sec- 67
tor have been undermined by what seems to have become
an aversion to economic freedom. Over the past five years, 66
economic freedom in Oman has declined by 3.1 points. Dou-

65
ble-digit declines in labor freedom and management of gov-
ernment spending have headlined reductions in half of the 2011 2012 2013 2014 2015
economic freedoms.
Serious reforms to improve the rule of law and market access Country Comparisons
for goods and capital are needed to return Oman to higher lev-
els of economic freedom. The judiciary lacks independence Country 66.7
and is subordinate to the sultan. Property rights differ for
foreign and domestic property holders, as foreigners are not World
Average 60.4
allowed to own land.
Regional
BACKGROUND: In early 2011, in response to turmoil through- Average 61.6
out the region, Sultan Qabus bin Said changed cabinet minis-
ters and promised political and economic reforms and more Free
Economies 84.6
government jobs. A Consultative Council elected in October
0 20 40 60 80 100
2011 has been given expanded regulatory and legislative pow-
ers. Municipal councils were elected in December 2012 to
advise the executive branch on local needs. Oman is a rela-
tively small oil exporter. The government is trying to expand Quick Facts
exports of liquefied natural gas, develop gas-based industries, Population: 3.2 million
and encourage foreign investment in petrochemicals, electric GDP (PPP): $95.0 billion
power, and telecommunications. It also stresses “Omaniza- 5.1% growth in 2013
tion” (replacing foreign workers with local staff to reduce 5-year compound annual growth 4.7%
chronically high unemployment). Oman joined the World $29,813 per capita
Trade Organization in 2000 and signed a free trade agreement Unemployment: 8.0%
with the United States in 2006. Inflation (CPI): 1.3%
347
OMAN (continued)
1–Year

0 20 40 60 80 100
A crackdown on corruption that began in 2012 has led to prosecutions of company execu-
tives and government officials. In May 2014, a former commerce minister was sentenced
to three years in prison for corruption and fined $2 million. The judiciary is not indepen-
dent and remains subordinate to the sultan and the Ministry of Justice. Property rights are
well protected.

0 20 40 60 80 100
Oman has no individual income tax. The corporate tax rate is 12 percent, but income from
petroleum sales is subject to a 55 percent rate. There is no value-added tax or consumption
tax. Formal tax revenue equals 2.5 percent of domestic income. Public spending is equal to 43.1
percent of domestic production, and government debt equals 7 percent of GDP.

0 20 40 60 80 100
Starting a business takes an average of five procedures and one week, but licensing require-
ments remain burdensome. The labor laws enforce the “Omanization” policy requiring firms to
meet quotas for hiring native Omani workers. The state influences prices through an extensive
subsidy system, which grew by 8 percent in 2013, driven mainly by subsidies for petroleum
products and electricity.

0 20 40 60 80 100
Oman’s average tariff rate is 4.1 percent. “Morally objectionable” imports may be restricted.
Foreign investors may not buy land. The state dominates a significant portion of the bank-
ing sector. Most credit is offered at market rates, but subsidized loans are used to promote
investment. The capital market is not fully developed, but the stock exchange is open to for-
eign investors.


PAKISTAN
50
25 75
Least Most
free 0 100 free
Pincreased
akistan’s economic freedom score is 55.6, making its
by 0.4 point since last year, reflecting improvements
Freedom Trend
57
in investment freedom and freedom from corruption that are
largely counterbalanced by deteriorations in labor freedom
and business freedom. Pakistan is ranked 25th out of 42 coun- 56
tries in the Asia–Pacific region, and its overall score is below
55
Pakistan’s economic freedom has advanced modestly in
recent years. Since 2011, economic freedom in Pakistan has
increased by 0.5 point, led by advances in investment free- 54
dom, monetary freedom, and freedom from corruption. How-
ever, gains have been outnumbered by losses among the 10
economic freedoms. 53
2011 2012 2013 2014 2015
Large sections of the population live in poverty and sur-
vive through subsistence agriculture. Inefficient regulatory
agencies inhibit business formation. Access to bank credit Country Comparisons
also undermines entrepreneurship, and the financial sec-
tor’s seclusion from the outside world has slowed innovation Country 55.6
and growth.
World
BACKGROUND: Prime Minister Nawaz Sharif took office in Average 60.4
June 2013 and has had to contend with terrorism, sectarian
violence, and a well-organized insurgency along the border Regional
Average 58.8
with Afghanistan. The army stepped up its military operations
in North Waziristan in June 2014 following a major attack on Free
84.6
the Karachi airport that killed nearly 36 people. Sustained Economies
street demonstrations in August and September 2014 led by 0 20 40 60 80 100
Tehreek-e-Insaf party chief Imran Khan and religious leader
Tahir ul-Qadri have weakened Sharif and increased civil–mili-
tary tensions. Pakistan has privatized some state-run indus- Quick Facts
tries, but the economy is still heavily regulated, and poor Population: 182.6 million
security discourages foreign investment. GDP (PPP): $575.0 billion
3.6% growth in 2013
$3,149 per capita
Unemployment: 5.2%
349
PAKISTAN (continued)
1–Year

0 20 40 60 80 100
Corruption, lack of accountability, and lack of transparency continue to pervade all levels of
government, politics, and the military despite some improvements in democratic processes.
Oversight mechanisms remain weak. Property rights are not protected effectively. The func-
tioning of the higher judiciary has improved, but delays, corruption, intimidation, and political
interference are endemic in the broader justice system.

0 20 40 60 80 100
Pakistan’s top individual income tax rate is 35 percent. The rate for salaried employment is
lower. The top corporate tax rate is 35 percent. Other taxes include a value-added tax and a tax
on interest. Overall tax revenue equals 10.4 percent of domestic income. Public expenditures
amount to 21.5 percent of domestic output, and public debt equals 63 percent of GDP.

0 20 40 60 80 100
Starting a business takes an average of 19 days and 10 procedures. Completing licensing require-
ments still takes about 250 days. The rigid labor market keeps a large portion of the workforce
in the informal sector. The government controls fuel prices but in 2014 reduced electric power
subsidies to narrow the budget deficit and meet the terms of IMF conditionality.

0 20 40 60 80 100
Pakistan’s average tariff rate is 9.5 percent. Imports may face additional bureaucratic barriers.
Pakistan’s “Investment Policy 2013” was designed to facilitate foreign direct investment, but
the security environment is a deterrent. The financial system remains subject to government
interference, and the state retains considerable ownership in the banking sector. The govern-
ment often directs banks’ lending to priority sectors.


PANAMA
50
25 75
Least Most
free 0 100 free
Pincreased
anama’s economic freedom score is 64.1, making its
Freedom Trend
67
six of the 10 economic freedoms, led by trade freedom and
66
labor freedom, outweighing a decline in business freedom.
Panama is ranked 14th out of 29 countries in the South and
65
Central America/Caribbean region, and its overall score is
above the world average.
64
Panama’s economic freedom has stagnated over the past five
years. Large declines in property rights and the management 63
of government spending have undercut a substantial increase
in investment freedom, and Panama has dropped from 59th to 62
68th place in the rankings.

61
Development of a vibrant logistics, financial, and interna- 2011 2012 2013 2014 2015
tional business sector has been facilitated by openness to
international trade and investment. The financial sector
remains open to investment and has been shielded from the Country Comparisons
global financial crisis by prudent regulations. However, a rigid
labor market and corruption undermine the entrepreneurial Country 64.1
environment. Business regulations and the rule of law need
to be improved to enable the non-urban population to escape World
Average 60.4
from poverty.
Regional
BACKGROUND: Panama’s incumbent Vice President Juan Average 59.7
Carlos Varela won the May 2014 presidential election and
took office in July. Varela’s win was unexpected, and the rul- Free
Economies 84.6
ing Panameñista Party has only 11 of the 71 seats in Congress.
0 20 40 60 80 100
A week after inauguration, the center-right Varela announced
price controls on 22 items in the basic food basket, generating
concerns about his economic policy plans. Since the opening
of the Panama Canal in 1914, Panama has been a strategic hub Quick Facts
for commerce and security in the Americas, with transpor- Population: 3.7 million
tation, services, and banking serving as the main engines of GDP (PPP): $62.0 billion
economic growth. Following a series of setbacks, the Panama 8.0% growth in 2013
Canal Authority hopes to complete its expansion by late 2015. 5-year compound annual growth 8.2%
A third set of locks will enable the canal to handle post-Pana- $16,658 per capita
max ships, essentially doubling its capacity. Unemployment: 4.0%
351
PANAMA (continued)
1–Year

0 20 40 60 80 100
President Juan Carlos Varela took office in July 2014, promising to fight corruption and return
strength and credibility to Panama’s democracy and institutions. The judicial system remains
overburdened, inefficient, politicized, and prone to corruption. Its capacity to resolve con-
tractual and property disputes is weak. Most land in Panama (and almost all land outside of
Panama City) is not titled.

0 20 40 60 80 100
Panama’s top individual and corporate income tax rates are 25 percent. Other taxes include
a value-added tax and a capital gains tax. Overall tax revenue equals 17.4 percent of domestic
income. Public expenditures are equivalent to 26.6 percent of domestic production, and public
debt equals 41 percent of gross domestic product. A canal-funded sovereign wealth fund helps
to support public spending.

0 20 40 60 80 100
The overall regulatory environment is efficient, but the pace of reform has slowed in recent
years. With no minimum capital requirements, starting a business takes six days and five pro-
cedures. Despite some improvement, the labor market lacks flexibility. The new president
announced that one of his first orders would be to regulate prices for staple food products.

0 20 40 60 80 100
Panama’s average tariff rate is 7.6 percent, and the country is relatively open to international
trade. The government generally welcomes foreign investment, but investment levels in sev-
eral sectors are capped. The financial sector, vibrant and generally well-regulated as a regional
financial hub, provides a wide range of financing options. Capital markets are relatively sophis-
ticated and continue to expand.


PAPUA NEW GUINEA
50
25 75
Least Most
free 0 100 free
P0.8apua New Guinea’s economic freedom score is 53.1, making

its economy the 137th freest in the 2015 Index. Its score is
point lower than last year, with declines in the manage-
Freedom Trend
55
ment of government spending, business freedom, and mon-
etary freedom outweighing improvements in freedom from
54
corruption and labor freedom. Papua New Guinea is ranked
29th out of 42 countries in the Asia–Pacific region, and its
overall score is lower than the world and regional averages.
53
Papua New Guinea’s commodity-based economy has record-
ed only modest improvements in economic freedom over
the past five years. Failure to pursue a more vigorous reform 52
agenda has contributed to the persistence of poverty, subsis-
tence economic activity, and a large informal sector. Rapid
51
expansion of the mining and petroleum sector has increased
the risk of rent-seeking and cronyism among the elite and 2011 2012 2013 2014 2015
politically connected.
The judiciary lacks independence and a well-defined insti- Country Comparisons
tutional framework. Corruption is prevalent, and nepotism
undermines effective governance. An externally oriented Country 53.1
commodity sector has taken advantage of low tariffs and the
lack of non-tariff barriers. However, new investments require World
Average 60.4
government approval, and an underdeveloped financial sector
limits domestically funded capital formation. Regional
58.8
Average
BACKGROUND: Papua New Guinea is a parliamentary democ-
racy with nearly 7 million people and over 840 different lan- Free
Economies 84.6
guages. A year-long constitutional crisis subsided in August
0 20 40 60 80 100
2012 with the re-election of Prime Minister Peter O’Neill,
whose People’s National Congress Party won the most seats
in parliament. Sir Michael Somare, O’Neill’s chief rival,
announced that they would form a joint government. O’Neill Quick Facts
is currently embroiled in a legal battle over alleged misuse of Population: 7.0 million
government funds. Gold and copper mining, oil, and natural GDP (PPP): $19.8 billion
gas dominate the formal economy, but the vast majority of 4.6% growth in 2013
Papua New Guineans depend on subsistence hunting or agri- 5-year compound annual growth 7.4%
culture and the informal economy. Australia provides around $2,834 per capita
US$480 million a year in assistance. Corruption, weak gover- Unemployment: 2.4%
nance, crime, and poverty are endemic. Inflation (CPI): 3.8%
353
PAPUA NEW GUINEA (continued)
1–Year

0 20 40 60 80 100
Prime Minister O’Neill pledged to fight widespread official abuse and corruption fueled by
large foreign investment windfalls in mining and petroleum, but the government’s “Taskforce
Sweep” anti-corruption unit alleged in 2014 that O’Neill himself authorized $30 million in
illegal payments to a law firm. A modern, well-functioning judicial framework is not firmly in
place. Land is often held communally.

0 20 40 60 80 100
Other taxes include a value-added tax and an excise tax. The overall tax burden amounts to 25.4
percent of domestic income. Public expenditures equal 32.3 percent of domestic production,
and public debt equals 33 percent of gross domestic product.

0 20 40 60 80 100
Incorporating a business and completing licensing requirements continue to be onerous and
time-consuming. A small share of the labor force participates in the formal economy, and the
public sector is the major source of employment. The government heavily subsidizes state-
owned enterprises that provide substandard service in such areas as power, water, banking,
telecommunications, air travel, and seaports.
OPEN Trade Freedom 85.0 51st –0.1

0 20 40 60 80 100
Papua New Guinea’s average tariff rate is 2.5 percent. Government procurement policies can
favor domestic firms. The government screens new foreign investment. The financial sector
remains underdeveloped, leaving much of the population without formal access to banking
services. Constrained access to financing severely impedes entrepreneurial activity and the
sustained development of a vibrant private sector.


PARAGUAY
50
25 75
Least Most
free 0 100 free
Pdecreased
araguay’s economic freedom score is 61.1, making its
economy the 83rd freest in the 2015 Index. Its score has
Freedom Trend
64
freedom from corruption, business freedom, and trade free-
dom counterbalanced by declines in the management of gov-
63
ernment spending, monetary freedom, and labor freedom.
Paraguay is ranked 15th out of 29 countries in the South and
Central America/Caribbean region. As a “moderately free”
62
economy, its overall score is above the world average.
Over the past five years, Paraguay’s economic freedom has
fallen by 1.2 points with declines in five of the 10 economic 61
freedoms, including the control of public finance and business
freedom. The government has pursued a series of structural
60
reforms to enhance the entrepreneurial environment, but
inefficient business and labor regulations force much of the 2011 2012 2013 2014 2015
population into the informal sector.
Economic freedom in Paraguay remains particularly chal- Country Comparisons
lenged by the weak rule of law. Political instability has under-
mined efforts to combat corruption and improve governance. Country 61.1
The previous president’s promises to address corruption have
been undermined by his constitutional removal from power. World
Average 60.4
Soya remains a vital export, facilitated by a commitment to
open trade and investment policies. Regional
59.7
Average
BACKGROUND: President Horacio Cartes of the tradition-
ally dominant Colorado Party was elected in 2013, succeed- Free
Economies 84.6
ing Federico Franco, who served temporarily following the
0 20 40 60 80 100
impeachment of left-leaning Fernando Lugo in 2012. Para-
guay was suspended from the MERCOSUR regional trade
bloc after Lugo’s impeachment. In 2013, Cartes made a deal
in which Paraguay voted to approve Venezuela as a new mem- Quick Facts
ber in exchange for readmission. Paraguay had also been sus- Population: 6.8 million
pended from summits of the South American Union but was GDP (PPP): $46.4 billion
welcomed back that same year. After a recession in 2012, the 13.0% growth in 2013
economy rebounded strongly in 2013. Corruption is pervasive, 5-year compound annual growth 4.8%
and government attempts to reduce smuggling and scrutinize $6,823 per capita
suspected terrorist groups in the tri-border area with Brazil Unemployment: 5.2%
and Argentina have met with little success. Inflation (CPI): 2.7%
355
PARAGUAY (continued)
1–Year

0 20 40 60 80 100
President Cartes took office in August 2013 pledging to end the corruption and cronyism that
pervades the government, the judiciary, and the police. Yet the president himself is suspected
of money laundering and involvement in Paraguay’s growing drug trafficking network. A lack
of consistent property surveys and registries often makes it difficult to acquire title documents
for land.

0 20 40 60 80 100
Paraguay’s top individual and corporate income tax rates are 10 percent. Other taxes include a
value-added tax and a property tax. Overall tax revenues are equal to 14.3 percent of domestic
income. Public spending equals 24.6 percent of domestic production, and public debt is equiva-
lent to 15 percent of gross domestic product.

0 20 40 60 80 100
There is no minimum capital requirement, but starting a business takes over a month, and
obtaining necessary permits takes more than 130 days on average. The labor market lacks flex-
ibility, hurting job growth. In 2014, labor unions blocked partial privatization and renovation
of the airport and water treatment plants and construction of badly needed toll roads to neigh-
boring countries.

0 20 40 60 80 100
The average tariff rate is 4.3 percent. Domestic companies are favored in government procure-
ment bids. Foreign and domestic investors are generally treated equally under the law, and
investors may repatriate profits. Banking remains relatively sound and dominates the financial
system. Financial intermediation continues to be low, and most lending is short-term. The
capital market is not fully developed.


PERU
50
25 75
Least Most
free 0 100 free
Ptereru’s economic freedom score is 67.7, making its economy

the 47th freest in the 2015 Index. Its score is 0.3 point bet-
than last year, with improvements in freedom from cor-
Freedom Trend
70
ruption, labor freedom, and monetary freedom outweighing
declines in business freedom, the management of govern-
ment spending, and fiscal freedom. Peru is ranked 8th out of 69
region, and its overall score is above the world average.
68
Despite rapid growth and a more business-friendly govern-
ment, economic freedom in Peru has declined by 0.9 point
since 2011. Scores have fallen in four of the 10 factors, includ- 67
ing fiscal freedom, the management of government spending,
business freedom, and labor freedom.
66
Reforms, openness to international trade, and burgeoning 2011 2012 2013 2014 2015
tourism and mining industries have facilitated rapid growth
in the past. Numerous free trade agreements have helped
provide a catalyst for domestic reforms and to build insti- Country Comparisons
tutions, but underlying structures remain weak. The judi-
ciary is vulnerable to political interference, and corruption Country 67.7
remains pervasive.
World
BACKGROUND: Economic liberalization begun under former Average 60.4
President Alberto Fujimori in the 1990s and continued by suc-
cessive administrations, including that of current President Regional
Average 59.7
Ollanta Humala of the leftist Peruvian Nationalist Party, has
attracted significant foreign investment and lifted millions Free
84.6
out of poverty. Humala, who once led a failed military coup Economies
against Fujimori, ran for office on a platform of more state 0 20 40 60 80 100
intervention in the economy but has governed moderately
and has respected the rule of law. Significant natural resourc-
es include gold, copper, and silver. Whether the economy can Quick Facts
withstand a commodity-price downturn remains a source of Population: 30.9 million
concern. Less than 30 percent of Peruvians now live below GDP (PPP): $344.2 billion
the poverty line, and economic growth has been well above 5.0% growth in 2013
the Latin American average. The U.S.–Peru Free Trade Agree- 5-year compound annual growth 5.5%
ment has expanded trade and employment. Peru has entered $11,124 per capita
into numerous other free trade agreements and is a founding Unemployment: 3.8%
member of the Pacific Alliance. Inflation (CPI): 2.8%
357
PERU (continued)
1–Year

0 20 40 60 80 100
Very poor institutions open the door to illegal activities, especially in rural areas. Corruption in
the security forces, the judiciary, customs agencies, and ports facilitates shipments of cocaine
and other contraband. Abuses of intellectual property rights remain commonplace, enforce-
ment is patchy and slow, and punishments are often disproportionately lax. The dysfunctional
judiciary is widely distrusted and prone to corruption scandals.

0 20 40 60 80 100
Peru’s top individual and corporate income tax rates are 30 percent. Other taxes include a
value-added tax and a financial transactions tax. Total tax revenue amounts to 18.5 percent
of the domestic economy, and government spending is equivalent to 19.6 percent of domestic
production. Public debt is equal to 20 percent of gross domestic product.

0 20 40 60 80 100
With no minimum capital required, it now takes six procedures to start a business, but com-
pleting licensing requirements remains burdensome, still taking over five months on average.
Employment regulations continue to evolve, with more flexibility gradually being introduced
into the labor market. The government subsidizes electricity and automotive and cooking fuels.

0 20 40 60 80 100
Peru’s average tariff rate is 1.5 percent. Trade barriers have been reduced through the Pacif-
ic Alliance, but imports of used clothing and cars are restricted. Foreign investors generally
receive national treatment, but there are sectoral limits. The financial sector has undergone
gradual modernization. Credit to the private sector has increased steadily, and foreign owner-
ship in the financial sector is growing.


PHILIPPINES
50
25 75
Least Most
free 0 100 free
Tincreased
he Philippines’ economic freedom score is 62.2, making
its economy the 76th freest in the 2015 Index. Its score has
by 2.1 points since last year, with notable improve-
Freedom Trend
66
ments in financial freedom, freedom from corruption, and
labor freedom outweighing declines in business freedom and 64
the management of public spending. The Philippines ranks
13th out of 42 countries in the Asia–Pacific region, and its 62
overall score is above the world and regional averages.

60
Registering one of the 10 best score improvements in the 2015
Index, the Philippines has charted an upward trajectory of 58
economic freedom for the past five years, further advancing
into the “moderately free” category. Wide-ranging reforms to 56
address structural weaknesses and improve overall economic
competitiveness have put greater emphasis on improving reg- 54
ulatory efficiency, enhancing regional competitiveness, and 2011 2012 2013 2014 2015
liberalizing the banking sector. Demonstrating a high level of
resilience and overcoming the devastating impact of the mas-
sive typhoon that ripped through the central part of the coun-
Country Comparisons
try, the Philippine economy has recorded an average growth
rate exceeding 5 percent over the past half-decade. Country 62.2
Despite notable progress since 2011, however, lingering insti- World

60.4
tutional challenges will require a deeper commitment to Average
reform. Corruption continues to be a serious cause for con- Regional
cern, jeopardizing prospects for long-term economic develop- Average 58.8
ment. The inefficient judiciary, which remains susceptible to
Free
political interference, does not provide effective protection Economies 84.6
for property rights or strong and transparent enforcement of
0 20 40 60 80 100
the law.
BACKGROUND: The Philippines’ diverse population, speak-
ing more than 80 languages and dialects, is spread over 7,000 Quick Facts
islands in the Western Pacific. Democracy was restored in Population: 97.5 million
1986 after two decades of autocratic rule. President Benigno GDP (PPP): $456.4 billion
Aquino III took office in 2010 with a mandate to root out 7.2% growth in 2013
corruption. While agriculture is still a significant part of the 5-year compound annual growth 5.2%
economy, industrial production in areas like electronics, $4,682 per capita
apparel, and shipbuilding has been growing rapidly. Remit- Unemployment: 7.3%
tances from overseas workers are equivalent to more than 10 Inflation (CPI): 2.9%
percent of GDP. FDI Inflow: $3.9 billion
359
PHILIPPINES (continued)
1–Year

0 20 40 60 80 100
Corruption, state plunder, cronyism, and a culture of impunity remained in the spotlight in
2014 as numerous instances of malfeasance were exposed. Several senators, for example, were
arrested on charges of embezzlement of billions of pesos from the Priority Development Assis-
tance Fund. Judicial independence has traditionally been strong, but the rule of law is gener-
ally weak.

0 20 40 60 80 100
Other taxes include a value-added tax and environmental taxes. The overall tax burden equals
12.9 percent of domestic income. Public expenditures are equivalent to 18.9 percent of the
domestic economy, and public debt equals 38 percent of gross domestic product.

0 20 40 60 80 100
Incorporating a business takes 16 procedures and 34 days. Completing licensing requirements
remains time-consuming, taking about three months on average. The labor market remains
structurally rigid, with varying degrees of flexibility across economic sectors and regions of the
country. Subsidies to state-owned and state-controlled corporations in the power, food, health
care, and agriculture sectors were reduced in 2014.

Financial Freedom 60.0 39th +10.0
0 20 40 60 80 100
The average tariff rate is 4.8 percent. Domestic companies are favored in government procure-
ment bids. Rice producers are subsidized and protected from competition. Foreign investment
in several sectors is restricted. The financial system continues to undergo modernization and
liberalization. A new law removing all limits on foreign participation in the banking sector was
implemented in 2014.


POLAND
50
25 75
Least Most
free 0 100 free
Pbetter
oland’s economic freedom score is 68.6, making its econo-
my the 42nd freest in the 2015 Index. Its score is 1.6 points
than last year, driven by improvements in half of the
Freedom Trend
70
10 economic freedoms, especially freedom from corruption,
69
fiscal freedom, the management of government spending,
and monetary freedom. Poland is ranked 19th out of 43 coun- 68
tries in the Europe region, and its overall score is above the
world average. 67
Over the past five years, Poland’s economic freedom score 66

has advanced by 4.5 points, the largest improvement in the
65
region. Gains in eight of the 10 economic freedoms include
double-digit strides in financial freedom and freedom from 64
corruption. In the 2015 Index, Poland has recorded its highest
economic freedom score ever. 63
2011 2012 2013 2014 2015
While Poland’s transition to a market-based economy has
accelerated, some structural foundations still need rein-
forcement. The labor market remains rigid, and business Country Comparisons
regulations still lag behind standards in some Western and
Northern European countries. Enforcement of the rule of law Country 68.6
is hindered by delays in the court system. Membership in the
European Union helps to ease trade restrictions and attract World
60.4
investment, and openness to capital contributes to a budding Average
financial sector. Regional
Average 67.0
BACKGROUND: Poland joined NATO in 1999 and the Euro-
pean Union in 2004. Prime Minister Donald Tusk of the Free
84.6
center-right Civic Platform party was re-elected in October Economies
2011. In 2014, his government survived a vote of no confidence 0 20 40 60 80 100
after secret audio tapings of Foreign Minister Radek Sikorski
sparked a political scandal. With a flexible exchange rate, an
IMF credit line, access to international markets, and healthy Quick Facts
economic policies, Poland was the only country in Europe Population: 38.5 million
to experience economic growth during the 2009 credit cri- GDP (PPP): $817.5 billion
sis. Low investment rates in agriculture have made Poland 1.6% growth in 2013
uncompetitive in food production, but the automotive, phar- 5-year compound annual growth 2.7%
maceutical, aviation, steel, and machinery sectors have made $21,214 per capita
it one of the EU’s strongest economic performers. The private Unemployment: 10.4%
sector now accounts for two-thirds of GDP. Inflation (CPI): 0.9%
361
POLAND (continued)
1–Year

0 20 40 60 80 100
Slow progress in improving the transparency and accountability of public administration con-
tinues to hamper efforts to combat corruption. The legal system protects rights to acquire and
dispose of property, and the judiciary is independent, but the courts are notorious for delays
in adjudicating cases. Slow action on corruption investigations has prompted concerns that
prosecutors are subject to political pressure.

0 20 40 60 80 100
Poland’s top individual income tax rate is 32 percent, and its top corporate tax rate is 19 percent.
Other taxes include a value-added tax and a property tax. Overall tax revenue amounts to 20.1
percent of domestic income. Public expenditures equal 42 percent of domestic production, and
public debt is equivalent to 57 percent of gross domestic product.

EFFICIENCY Labor Freedom 60.4 101st 0
0 20 40 60 80 100
Despite measures to further streamline start-up procedures and facilitate private-sector
development, it still takes about a month to launch a business, although the cost of completing
licensing requirements is now significantly lower. Relatively stringent labor codes continue to
hinder job growth. The government plans to cut renewable energy subsidies by $780 million
in 2015 to reduce power costs.

0 20 40 60 80 100
the EU is relatively open to external trade. Poland generally treats foreign and domestic inves-
tors equally under the law. The financial sector consists mainly of private banks, although
the government continues to retain some ownership in the banking sector. Capital markets
are expanding.


PORTUGAL
50
25 75
Least Most
free 0 100 free
Pimproved
ortugal’s economic freedom score is 65.3, making its
by 1.8 points since last year, with improvements
Freedom Trend
67
in seven of the 10 economic freedoms led by labor freedom,
monetary freedom, and business freedom. Portugal is ranked 66
30th out of 43 countries in the Europe region, and its overall
score is above the world average.
65
A difficult external environment and a domestic banking cri-
sis have not prevented Portugal from advancing its economic 64
freedom. Over the past five years, it has gained 1.3 points and
moved up five spots in the rankings. Improvements in five of
63
the 10 factors have been led by a notable easing of business
and labor regulations.
62
Portugal still lags behind other European countries in many 2011 2012 2013 2014 2015
areas. Government spending accounts for over half of the
domestic economy, and bailouts of financial firms have
severely strained government finances. Rigid labor regula- Country Comparisons
tions prevent the market from adjusting efficiently to changes
in labor demand. The rule of law is generally respected, but Country 65.3
budgeting problems have led to backlogs in the court system.
World
BACKGROUND: Portugal joined the European Union in Average 60.4
1986 and the eurozone in 2002. A sovereign debt crisis in
2011 threatened to sink the economy. Pedro Passos Coelho’s Regional
Average 67.0
center-right Social Democrats defeated Prime Minister Jose
Socrates’s Socialist Party in the 2011 general elections. In May Free
84.6
2011, Portugal accepted a €78 billion European Union–Inter- Economies
national Monetary Fund bailout plan that included demands 0 20 40 60 80 100
for structural reforms that would reduce public debt and
increase incentives for private investment. In 2014, the coun-
try’s highest court blocked the government from making the Quick Facts
public spending cuts required to receive the last installment Population: 10.6 million
of the bailout. The economy is based primarily on services GDP (PPP): $244.8 billion
and industrial production. Some state enterprises have been –1.4% growth in 2013
privatized. Overall unemployment decreased from 2013 to the 5-year compound annual growth –1.4%
first quarter of 2014 but remains well above pre-crisis levels. $23,068 per capita
Unemployment: 16.9%
363
PORTUGAL (continued)
1–Year

0 20 40 60 80 100
In 2013, the OECD expressed concern over Portugal’s reluctance to crack down on foreign brib-
ery, particularly in regard to its former colonies Brazil, Angola, and Mozambique. Since 2001,
Portugal had officially acknowledged only 15 bribery allegations, and there had been no pros-
ecutions. The judiciary is constitutionally independent, but staff shortages and inefficiency
contribute to a considerable backlog of pending trials.

0 20 40 60 80 100
Portugal’s top individual income tax rate is 48 percent, and its top corporate tax rate is 23 per-
cent (small and medium-sized enterprises pay a lower rate). Other taxes include a value-added
tax. Total tax revenue equals 32.5 percent of domestic production. Public expenditures amount
to 48.7 percent of the domestic economy, and public debt is equal to about 130 percent of GDP.

0 20 40 60 80 100
Rules regarding the formation of private enterprises are now more straightforward. There is no
minimum capital requirement for launching a business, which now takes less than five days and
three procedures on average. Measures to reduce severance payments and revise the unem-
ployment insurance system have been implemented. The state maintains a generous mortgage
subsidy program to encourage homeownership.

0 20 40 60 80 100
EU is relatively open to external trade. The government screens foreign investment in several
sectors. The overall financial system has endured uncertainty without significant disruption,
but banking continues to be under considerable strain, highly dependent on liquidity support
from the European Central Bank.


QATAR
50
25 75
Least Most
free 0 100 free
Q atar’s economic freedom score is 70.8, making its economy

the 32nd freest in the 2015 Index. Its score has declined by
0.4 point since last year, with improvements in trade freedom
Freedom Trend
73
and labor freedom outweighed by declines in five of the 10
economic freedoms including freedom from corruption, mon-
72
etary freedom, and business freedom. Qatar is ranked 3rd out
of 15 countries in the Middle East/North Africa region, and its
overall score is above the world average.
71
With vast oil and gas reserves, Qatar enjoys one of the world’s
highest standards of living. Efforts to diversify the economy
and reduce reliance on the energy sector have been only mod- 70
erately successful. The oil and gas industries still contribute
about half of GDP. Building on open-market policies, the gov-
69
ernment is trying to position Qatar as a future logistics and
financial hub. 2011 2012 2013 2014 2015
Efforts to advance economic freedom have been notable, but

momentum has flagged. Respect for the rule of law is tainted Country Comparisons
by allegations of corruption surrounding a 2022 World Cup
bid. The rigid regulatory environment inhibits the growth of Country 70.8
small and medium-size enterprises.
World
60.4
BACKGROUND: The Al-Thani family has ruled Qatar since Average
independence from Great Britain in 1971. Sheikh Tamim bin Regional
Hamad Al-Thani, in power since 2013, has focused on domes- Average 61.6
tic issues such as improving infrastructure and providing
better health care and educational institutions. Qatar has 25 Free
Economies 84.6
billion barrels of proven oil reserves and the world’s third-
0 20 40 60 80 100
largest natural gas reserves. Oil and gas account for about
85 percent of export revenues and more than 50 percent of
GDP. Qatar has permitted extensive foreign investment in its
natural gas industry and is the world’s largest exporter of liq- Quick Facts
uefied natural gas. With one of the world’s highest per capita Population: 2.0 million
incomes and almost no poverty, Qatar has largely avoided the GDP (PPP): $199.6 billion
instability generated by the Arab Spring uprisings, but it has 6.1% growth in 2013
come under fire for its alleged support of radical groups. 5-year compound annual growth 10.7%
$98,814 per capita
Unemployment: 0.6%
FDI Inflow: –$840.4 million
365
QATAR (continued)
1–Year

0 20 40 60 80 100
Although critics cite a lack of transparency in government procurement, Qatar’s anti-corrup-
tion record is among the best in the Middle East. The rule of law is respected. The legal system,
however, has been biased against foreign businesses. The judiciary is susceptible to political
influence and can be bureaucratic. Foreigners are generally not allowed to own property.

0 20 40 60 80 100
Qatar has no individual income tax. The corporate tax rate is a flat 10 percent (the rate for
companies in the oil and gas sector is 35 percent). Other taxes include customs duties. Overall
tax revenue amounts to 5.1 percent of domestic output. Government expenditures equal 30.6
percent of domestic production, and public debt equals 34 percent of gross domestic product.

0 20 40 60 80 100
Forming a business takes eight procedures, and the minimum capital required exceeds half the
level of average annual income. Obtaining necessary permits remains relatively time-consum-
ing. The non-salary cost of employing a worker is moderate, but the labor market lacks flex-
ibility. Government subsidies are very high: The IMF estimates that pre-tax energy subsidies
alone exceed spending on health and education.

0 20 40 60 80 100
Qatar’s average tariff rate is 4.1 percent. Non-tariff barriers are low, but some lines of imports
face special import procedures, and others are prohibited. In most cases, foreign investment in
a business is capped at 49 percent. The modernized and expanded financial sector is attracting
more foreign firms, but the government retains considerable ownership. The capital market
continues to grow.


ROMANIA
50
25 75
Least Most
free 0 100 free
R omania’s economic freedom score is 66.6, making its

points better than last year, reflecting improvements in free-
Freedom Trend
68
dom from corruption, labor freedom, and the management
of government spending that outweigh a decline in busi- 67
ness freedom. Romania is ranked 27th out of 43 countries
in the Europe region, and its overall score is higher than the
66
world average.
With a steady five-year increase in economic freedom, Roma- 65
nia joins a growing trend in Eastern Europe. Since 2011, eco-
nomic freedom in Romania has improved by nearly 2.0 points.
64
Advances in six of the 10 economic freedoms include particu-
larly impressive gains in reducing corruption and loosening
labor regulations. In the 2015 Index, Romania has achieved its 63
highest economic freedom score ever. 2011 2012 2013 2014 2015
However, even with these improvements and membership in

the European Union, Romania’s status as a transitional econ- Country Comparisons
omy is still apparent. Judicial independence is precarious, and
the government has struggled to meet EU anti-corruption Country 66.6
requirements. Despite progress, the business environment
remains inefficient, a remnant of the country’s Commu- World
60.4
nist past. Average
BACKGROUND: Romania’s transition to a free-market econ- Regional

Average 67.0
omy began with the adoption of its new constitution in 1991.
In the post–Cold War period, Romania developed closer ties Free
84.6
with Western Europe and was accepted into NATO in 2004 Economies
and the EU in 2007. President Traian Basescu has served since 0 20 40 60 80 100
2004 and has survived multiple impeachment attempts. After
years of growth, Romania experienced a deep recession as a
result of the 2008 global financial crisis. Modest growth has Quick Facts
resumed, and the government has made progress in reducing Population: 21.3 million
the public debt and budget deficit. Privatization of major state GDP (PPP): $285.1 billion
corporations has contributed materially to private-sector 3.5% growth in 2013
growth. In addition to its strategic position on the Black Sea, 5-year compound annual growth –0.3%
Romania has extensive natural resources, a productive agri- $13,396 per capita
culture sector, and the potential for strong growth in industry Unemployment: 7.4%
and tourism. Inflation (CPI): 4.0%
367
ROMANIA (continued)
1–Year

0 20 40 60 80 100
Despite some improvement, corruption remains a serious problem. According to the European
Commission, there is a lack of “best practices for public procurement,” and the “competent
administrative bodies do not apply effective controls to detect conflict of interest and corrup-
tion.” The courts continue to suffer from such chronic problems as corruption, political influ-
ence, staffing shortages, and inefficient resource allocation.

0 20 40 60 80 100
Romania’s top individual and corporate income tax rates are 16 percent. Other taxes include
a value-added tax and environmental taxes. The overall tax burden is equal to 28.2 percent of
gross domestic product, and government expenditures amount to 35.4 percent of domestic
production. Public debt is equivalent to 39 percent of the domestic economy.

0 20 40 60 80 100
Launching a business takes five procedures and slightly more than a week on average, but effi-
cient bankruptcy procedures and rules have not been fully implemented. Labor regulations
remain rigid, although there have been amendments to improve the labor code’s flexibility.
The government listed privatization and market liberalization as major priorities for 2014 but
took no action to end distorting subsidies.

0 20 40 60 80 100
the EU is relatively open to external trade. Despite bureaucratic challenges, Romania does not
generally discriminate against foreign investment. Overall, the financial sector has coped well
with the effects of the economic downturn. Banking supervision has been enhanced, but the
level of nonperforming loans remains high.


RUSSIA
50
25 75
Least Most
free 0 100 free
R ussia’s economic freedom score is 52.1, making its economy

the 143rd freest in the 2015 Index. Its score has improved
by 0.2 point since last year, with gains in business freedom,
Freedom Trend
54
freedom from corruption, and labor freedom largely offset by
declines in monetary freedom, property rights, and the man- 53
agement of government spending. Russia is ranked 41st out
of 43 countries in the Europe region, and its overall score is 52
Despite increased political and economic isolation and fall- 51
ing gas prices, Russia’s economic freedom score has increased
by 1.6 points since 2011, with gains in half of the 10 economic 50
freedoms led by a particularly notable improvement in busi-
ness freedom. Significant declines in financial freedom and
49
property rights have held back overall progress.
2011 2012 2013 2014 2015
The foundations of economic freedom in Russia remain weak.
Apart from connections with Europe, Russia remains relative-
ly closed to trade and investment. The government screens Country Comparisons
foreign investment, and subsidized state-owned businesses
limit competition and market opportunities. Corruption and Country 52.1
respect for property rights have improved little since the fall
of Communism. The business environment is constrained by World
Average 60.4
suffocating bureaucracy and a rigid labor market.
Regional
BACKGROUND: Former President and Prime Minister Vladi- Average 67.0
mir Putin was re-elected president in March 2012 on the heels
of hotly disputed December 2011 Duma elections. Under Free
Economies 84.6
Putin’s leadership, Russia illegally annexed Ukraine’s Autono-
0 20 40 60 80 100
mous Republic of Crimea early in 2014. Moscow’s support of
Russian separatists in Ukraine has led to capital outflows and
targeted sanctions by the United States and European Union.
Russia’s Gazprom cut gas supplies to Ukraine after violence Quick Facts
between Ukrainians and Russian separatists increased in the Population: 142.9 million
eastern region of the country. The Russian economy remains GDP (PPP): $2.6 trillion
heavily dependent on gas exports. Russia became a mem- 1.3% growth in 2013
ber of the World Trade Organization in August 2012, but its 5-year compound annual growth 1.0%
bid to join the Organisation for Economic Co-operation and $17,884 per capita
Development has been postponed due to its recent actions Unemployment: 5.8%
in Ukraine. Inflation (CPI): 6.8%
369
RUSSIA (continued)
1–Year

0 20 40 60 80 100
Corruption is rampant. Small elites control most of the nation’s assets, and state institutions
have been corroded. Anti-corruption campaigns are used to ensure elite loyalty and under-
mine political opponents. The rule of law is not uniform across the country, and the judiciary
is vulnerable to political pressure and inconsistent in applying the law. Protection of private
property rights is weak.

0 20 40 60 80 100
Russia’s top individual income tax rate is 13 percent, and its top corporate tax rate is 20 per-
cent. Other taxes include a value-added tax and an environmental tax. The overall tax burden
equals 28.7 percent of domestic income. Government expenditures amount to 37.5 percent of
domestic production, and public debt is equal to 13 percent of gross domestic product.

0 20 40 60 80 100
Bureaucratic obstacles and inconsistent enforcement of regulations continue to suppress the
private sector. Although forming a business can take less than four procedures on average,
completing licensing requirements still takes over 200 days. The outmoded labor code limits
employment growth. The government uses extensive subsidies, state-owned companies, export
taxes on petroleum products, and other means to influence prices.

0 20 40 60 80 100
Russia’s average tariff rate is 5.0 percent. Informal barriers further interfere with trade. The
government can discriminate against foreign investment, and investment in several sectors of
the economy is restricted. The financial sector remains subject to considerable state interfer-
ence. The government retains some ownership in the banking sector, and the central bank has
become a single financial market regulator.


RWANDA
50
25 75
Least Most
free 0 100 free
R wanda’s economic freedom score is 64.8, making its econ-

omy the 65th freest in the 2015 Index. Its score remains
essentially the same as last year’s, with improvements in half
Freedom Trend
66
of the 10 economic freedoms, including freedom from corrup-
tion and trade freedom, undermined by a significant decline 65
in business freedom. Rwanda is ranked 4th out of 46 countries
in the Sub-Saharan Africa region, and its score exceeds the 64
world average.
Over the past five years, economic freedom in Rwanda has 63
advanced by 2.1 points, led by 20-point and 15-point improve-
ments in freedom from corruption and investment freedom, 62
respectively. Efforts to reform the economy have contributed
to sustained economic growth and poverty reduction.
61
However, the government’s reform efforts have not yet fully 2011 2012 2013 2014 2015
restored the institutions and structures previously under-
mined by political unrest and civil war. An increasingly
authoritarian president has restricted judicial independence. Country Comparisons
Meanwhile, corruption continues to undermine public trust.
An underdeveloped financial system leads to a high cost of Country 64.8
financing and discourages many of Rwanda’s citizens from
opening formal bank accounts. World
Average 60.4
BACKGROUND: Paul Kagame’s Tutsi-led Rwandan Patriot- Regional
ic Front (RPF) seized power in July 1994 in the wake of the Average 54.9
state-sponsored genocidal slaughter of an estimated 800,000
Tutsis. Kagame was elected president in 2000 and re-elected Free
Economies 84.6
in August 2010 amid allegations of fraud, intimidation, and
0 20 40 60 80 100
violence. His RPF won a resounding victory in the September
2013 parliamentary elections. In July 2012, the U.N. accused
Kagame of supporting the M23 rebels in the Democratic
Republic of Congo. The U.S., the Netherlands, and Germany Quick Facts
subsequently suspended aid. In 2014, the DRC and Rwanda Population: 10.6 million
deployed troops to their shared border in response to cross- GDP (PPP): $16.4 billion
border violence. The economy is still recovering from the 5.0% growth in 2013
genocide and civil war. Rwanda remains highly dependent on 5-year compound annual growth 6.9%
foreign aid and has a goal of transforming its economy from $1,538 per capita
agriculture-based to service-oriented by 2020. Unemployment: 0.6%
371
RWANDA (continued)
1–Year

0 20 40 60 80 100
Measures to foster a better business environment and improve government transparency
and accountability have helped to limit corruption, though graft remains a problem. Recent
improvements in the judicial system include improved training and revisions of the legal code,
but the judiciary has yet to secure full independence from the executive. A nationwide land
registration program is being implemented.

0 20 40 60 80 100
Rwanda’s top individual and corporate income tax rates are 30 percent. Other taxes include
a value-added tax and a property transfer tax. Total tax revenue amounts to 13.6 percent of
domestic output, and government expenditures are equal to 26.3 percent of domestic produc-
tion. Public debt is equivalent to 29 percent of gross domestic product.

0 20 40 60 80 100
Incorporating a business takes eight procedures and about a week on average, with no mini-
mum capital required, but regulatory reform has slowed. Labor regulations are more flexible,
but a more vibrant formal labor market has yet to develop. The state sets maximum prices
for automotive fuels and subsidizes power for the 20 percent of the population with access
to electricity.

0 20 40 60 80 100
Rwanda’s average tariff rate is 4.6 percent. Non-tariff barriers are relatively low. There are con-
cerns that an “abandoned property” law enacted in 2014 may make it easier for the government
to expropriate property. Financial markets consist mainly of banks, which have been expanding
their services. The capital market continues to grow, but the cost of financing remains rela-
tively high.


SAINT LUCIA
50
25 75
Least Most
free 0 100 free
Sdecreased
aint Lucia’s economic freedom score is 70.2, making its
by 0.5 point since last year, reflecting considerable
Freedom Trend
73
declines in business freedom and labor freedom that outweigh
modest improvements in five other economic freedoms. Saint
72
Lucia is ranked 3rd out of 29 countries in the South and Cen-
tral America/Caribbean region, and its overall score is above
the world average.
71
Saint Lucia’s successful tourism industry depends in part
on the country’s commitment to economic freedom and a
competitive business environment. Over the past five years, 70
advances in five of the 10 economic freedoms, including a
particularly large advance in investment freedom, have been
69
more than offset by sizeable declines in the control of govern-
ment spending, business freedom, and labor freedom. If this 2011 2012 2013 2014 2015
downward trend is not reversed, Saint Lucia could fall into the
“moderately free” category. Country Comparisons
There is plenty of room for policy improvements. With high
tariffs, Saint Lucia remains relatively closed to international Country 70.2
trade, and new laws require some approval for investments.
Financial freedom is far less than some other Caribbean World
Average 60.4
islands provide.
Regional
BACKGROUND: In late 2011, former Prime Minister Kenny Average 59.7
D. Anthony and his Saint Lucia Labour Party defeated Prime
Minister Stephenson King’s more business-friendly United Free
Economies 84.6
Workers Party. Saint Lucia is a member of the Community of
0 20 40 60 80 100
Latin American and Caribbean States (CELAC) and the Carib-
bean Community (CARICOM) and home to the Organization
of Eastern Caribbean States. The economy depends primar-
ily on tourism (65 percent of GDP), banana production, and a Quick Facts
diversified light manufacturing sector. An educated workforce Population: 0.2 million
and reliable infrastructure and port facilities attract foreign GDP (PPP): $2.1 billion
investment in tourism, petroleum storage, and transship- –1.5% growth in 2013
ment. A decline in tourism that began during the recession in 5-year compound annual growth –0.4%
2009, fluctuations in banana prices, and reduced European $12,730 per capita
Union banana trade preferences have forced greater eco- Unemployment: n/a
nomic diversification in cocoa, mangos, and avocados. Violent Inflation (CPI): 1.5%
crime threatens the tourism industry. FDI Inflow: $87.9 million
373
SAINT LUCIA (continued)
1–Year

0 20 40 60 80 100
Saint Lucia has low levels of corruption, although the prime minister was criticized in 2013
for having signed an allegedly unlawful contract with a Texas-based oil exploration company.
Access to information is legally guaranteed, and government officials are required to report
their financial assets annually to the Integrity Commission. The judicial system is independent
and conducts generally fair public trials.

0 20 40 60 80 100
The top individual and corporate income tax rates are 30 percent. Other taxes include a tax
on consumption and a property transfer tax. The overall tax burden is equal to 20.8 percent of
domestic income. Government spending is equivalent to 33.8 percent of gross domestic prod-
uct, and public debt equals approximately 80 percent of the size of the economy.

0 20 40 60 80 100
The pace of reform has slowed, but business start-up procedures remain relatively straightfor-
ward, with no minimum capital required. A well-functioning labor market has not been fully
developed, and much of the labor force is employed in agriculture and tourism. In 2014, the
government removed sugar subsidies altogether and increased state-controlled fuel prices to
reduce budgetary pressures.

0 20 40 60 80 100
Saint Lucia’s average tariff rate is 9.0 percent. Some agricultural imports face additional bar-
riers. The government screens new foreign investment, and investment in some sectors of the
economy is restricted. The developing financial system is dominated by banking. Credit to the
private sector has been expanding slowly, but a rise in the number of nonperforming loans
deters new lending.

Property Rights 0 Fiscal Freedom +3.7 Business Freedom –12.1 Trade Freedom 0

SAINT VINCENT AND THE GRENADINES
50
25 75
Least Most
free 0 100 free
68.0

Freedom Trend
69
S aint Vincent and the Grenadines’ economic freedom score

is 68.0, making its economy the 44th freest in the 2015
Index. Its score is 1.0 point higher than last year, with improve- 68
ments in half of the 10 economic freedoms, led by investment
freedom, the management of government spending, and
monetary freedom, that outweigh a decline in business free- 67
dom. Saint Vincent and the Grenadines is ranked 6th out of
region, and its score is above the world and regional averages. 66
Over the past five years, economic freedom in Saint Vincent

and the Grenadines has advanced by 1.1 points, a result of 65
increases in five of the 10 economic freedoms. Leading the
2011 2012 2013 2014 2015
way have been impressive gains in both government spend-
ing and investment freedom, each of which has advanced by
double digits. Country Comparisons
Despite duty-free access to the U.S. market, Saint Vincent and
Country 68.0
the Grenadines’ trade and investment regimes remain rela-
tively closed. High tariff rates discourage imports and protect World
inefficient domestic businesses. Licensing is required for Average 60.4
businesses with majority foreign ownership. The economy is
vulnerable to global price fluctuations, particularly prices of Regional
Average 59.7
petroleum products, and drug-related corruption and money-
laundering charges have held back development of the islands’ Free
84.6
legitimate financial sector. Economies
0 20 40 60 80 100
BACKGROUND: Prime Minister Ralph Gonsalves’ Unity
Labour Party retained a slim majority in the December 2010
parliamentary elections. Saint Vincent and the Grenadines is Quick Facts
a parliamentary democracy. It is a member of the Caribbean
Community (CARICOM) and the Organization of Eastern
Caribbean States. The export sector benefits from the Carib-
2.1% growth in 2013
bean Basin Initiative, which provides duty-free access to the
U.S. market. Agriculture and tourism employ a significant por-
$12,207 per capita
tion of the workforce, but high formal-sector unemployment
Unemployment: n/a
has caused many to emigrate. Public debt has been growing,
and weak recovery in the tourism and construction sectors
has limited economic growth.
375
SAINT VINCENT AND THE GRENADINES (continued)
1–Year

0 20 40 60 80 100
The rule of law remains strong for the region, and corruption is not pervasive. There have been
some allegations of money laundering through Saint Vincent banks and drug-related corrup-
tion within the government and police, but the government has taken action to prosecute
such crimes. The relatively independent and efficient judicial system is based on British com-
mon law.

0 20 40 60 80 100
The top individual and corporate income tax rates are 32.5 percent. Other taxes include a value-
added tax and a property tax. The overall tax burden amounts to 23 percent of domestic produc-
tion. Government expenditures are equal to 28.7 percent of the domestic economy, and public
debt is equivalent to approximately 76 percent of gross domestic product.

0 20 40 60 80 100
Establishing a business is generally not burdensome or costly. There is no minimum capital
requirement, and it takes seven procedures to start a business, but licensing procedures can
be time-consuming. Labor regulations are flexible, but application of labor laws is uneven.
Subsidy programs benefit agricultural products such as bananas and state-owned enterprises
such as a coconut water bottling plant.

0 20 40 60 80 100
Saint Vincent and the Grenadines’ average tariff rate is 10.8 percent. Agricultural imports face
relatively high tariffs. Foreign and domestic investors are generally treated equally under the
law. The financial sector is underdeveloped and dominated by banks. A considerable portion
of the population does not use the formal banking sector, and access to financing is limited for
potential entrepreneurs.

Property Rights 0 Fiscal Freedom +8.6 Business Freedom –7.4 Trade Freedom –5.2

SAMOA
50
25 75
Least Most
free 0 100 free
S0.8amoa’s economic freedom score is 61.9, making its economy

point since last year, with considerable gains in monetary
Freedom Trend
63
freedom and the management of government spending out- 62
weighing a decline in labor freedom. Samoa is ranked 14th out
of 42 countries in the Asia–Pacific region, and its overall score 61
is above the world and regional averages.
60
Samoa’s efforts to expand its manufacturing sector, open
the economy to global investment and financial flows, and 59
encourage tourism correspond to an improvement in its eco- 58

nomic freedom, which has risen by 1.3 points over the past five
years. Gains in five of the 10 economic freedoms have been led 57
by a 25-point improvement in investment freedom. Following
56
a short drop into the “mostly unfree” category in 2013, Samoa
has firmly re-established itself as “moderately free.” 2011 2012 2013 2014 2015
Nevertheless, key structural and institutional problems

persist. Despite a common-law legal system, the property Country Comparisons
rights regime is poorly laid out and ineffectively enforced.
The government is responsible for much economic activity, Country 61.9
and international aid to government services helps to fund a
broad range of subsidies. Further gains will be needed to make World
Average 60.4
Samoa an attractive destination for foreign investment.
Regional
BACKGROUND: Samoa is a small South Pacific archipelago Average 58.8
with a population of less than 200,000. Independent since
1962, it is now a multi-party democracy dominated politically Free
Economies 84.6
by the Human Rights Protection Party (HRPP). A few politi-
0 20 40 60 80 100
cians were found guilty of bribery in the 2011 parliamentary
elections, but the HRPP remains in power. The economy is
based on fishing, agriculture, and tourism. Remittances from
Samoans working abroad account for about 24 percent of Quick Facts
national income. A sizable tsunami in 2009 killed over 200 Population: 0.2 million
people and significantly damaged infrastructure and proper- GDP (PPP): $1.1 billion
ty. To facilitate better trade with Australia and New Zealand, –0.3% growth in 2013
Samoa officially moved west of the International Date Line 5-year compound annual growth –0.2%
in 2011. $6,210 per capita
Unemployment: n/a
Public Debt: 58.2% of GDP (2012)
377
SAMOA (continued)
1–Year

LAW Freedom from Corruption 38.0 83rd 0
0 20 40 60 80 100
The Finance Minister was forced to resign in 2014 over alleged mismanagement of govern-
ment finances. The judiciary is independent and upholds the right to a fair trial, but a well-
functioning legal framework for land ownership and enforcement of property rights is not
firmly in place. More than 80 percent of the land is owned by extended families represented
by their chiefs.

0 20 40 60 80 100
added tax and an excise tax. The overall tax burden equals 22.9 percent of the domestic econ-
omy. Public expenditures are equal to 42.2 percent of domestic production, and government
debt is equivalent to approximately 58 percent of gross domestic product.

0 20 40 60 80 100
The regulatory framework generally supports entrepreneurial activity, but application of the
commercial codes is not always straightforward. Completing licensing requirements takes 18
procedures and over two months on average. A well-functioning modern labor market is not
fully developed, and informal labor activity remains substantial. The government increased
subsidies for fuel and health care in 2014.

0 20 40 60 80 100
Samoa’s average tariff rate is 7.1 percent. Foreign investment in several sectors of the economy
is capped. The small financial sector is rudimentary. Despite some progress, scarce access to
banking and financial services continues to keep much of the population outside of the for-
mal banking sector. Reflecting the lack of financial efficiency and depth, capital markets are
poorly developed.


SÃO TOMÉ AND PRÍNCIPE
50
25 75
Least Most
free 0 100 free
53.3
Freedom Trend
SItsãomaking
Tomé and Príncipe’s economic freedom score is 53.3,
its economy the 136th freest in the 2015 Index.
score has increased by 4.5 points from last year, reflect-
56
ing impressive improvements in seven of the 10 economic 54

freedoms related to regulatory efficiency, the management
of public finance, and the rule of law. São Tomé and Príncipe
52
has recorded the largest score improvement of any country
graded in the 2015 Index, yet it is still ranked 29th out of 46
countries in the Sub-Saharan Africa region, and its score is 50
48
This year’s gains in economic freedom have erased losses
recorded in 2013. An improvement of 3.8 points since 2011 has
been led by a gain of over 30 points in business freedom, mov- 46
ing São Tomé and Príncipe out of the “repressed” category. 2011 2012 2013 2014 2015
Despite these improvements, however, economic freedom is

not firmly established. Rampant corruption is exacerbated by Country Comparisons
oil exploration and development aid. The government domi-
nates the domestic economy, and the bureaucracy hinders Country 53.3
business formation and labor market efficiency. Efforts to
attract capital for oil exploration have not translated into a World
60.4
well-crafted investment regime, hindering chances for devel- Average
opment of a competitive financial system.
Regional
Average 54.9
BACKGROUND: Manual Pinto da Costa, who served as presi-
dent for 15 years following independence from Portugal in Free
84.6
1975, returned to office in 2011.Under São Tomé and Prín- Economies
cipe’s democratic constitution, the president shares power 0 20 40 60 80 100
with a prime minister who requires the confidence of the
parliament to retain power. In 2012, Prime Minister Patrice
Trovoada won legislative elections, but he received a vote of Quick Facts
no confidence and was replaced by current Prime Minister Population: 0.2 million
Gabriel Costa. São Tomé’s economy, one of Africa’s smallest, GDP (PPP): $0.4 billion
is agriculture-based and highly vulnerable to external shocks. 4.0% growth in 2013
São Tomé remains dependent on foreign assistance. Oil pro- 5-year compound annual growth 4.3%
duction is expected to begin in late 2015, but both São Tomé $2,194 per capita
and Nigeria claim unexploited offshore oil fields. Unemployment: n/a
379
SÃO TOMÉ AND PRÍNCIPE (continued)
1–Year

0 20 40 60 80 100
Although the government has undertaken numerous reforms (e.g., an August 2013 anti–money
laundering law), development aid and offshore oil exploration have fueled corruption among
the ruling elite. Bribery, embezzlement, and mismanagement of public funds are regarded as
endemic. The judiciary is independent but weak, underfunded, understaffed, inefficient, and
susceptible to political influence. Property rights are not protected effectively.

0 20 40 60 80 100
Other taxes include a sales tax and a dividend tax. Overall tax revenues equal approximately
14 percent of gross domestic product. Government spending equals 44.2 percent of domestic
production, and public debt is equivalent to 85 percent of the economy.

0 20 40 60 80 100
The time needed to start a company has been reduced to four days, and licensing requirements
have been simplified. In the absence of a well-functioning labor market, informal labor activity
remains significant. The government stated its intention to cut fuel and power subsidies and
fix problems in the state-owned water and electricity firms in 2014 but took no action.

0 20 40 60 80 100
The average tariff rate for São Tomé and Principe, a member of the Economic Community
of Central African States, was 7.4 percent as of 2008. Pork imports are not allowed. Foreign
investment generally receives national treatment. The underdeveloped financial sector, con-
sisting of eight firms, does not provide adequate access to banking services for a large portion
of the population.


SAUDI ARABIA
50
25 75
Least Most
free 0 100 free
Sessentially
audi Arabia’s economic freedom score is 62.1, making its
unchanged since last year, with improvements in
Freedom Trend
70
trade freedom and freedom from corruption offset by declines
in labor freedom, business freedom, and the management of 68
public spending. Saudi Arabia is ranked 8th out of 15 countries
in the Middle East/North Africa region, and its overall score 66
remains above the world average.

64
Only one of Saudi Arabia’s economic freedom scores has
increased over the past five years. Since 2011, a drop of 4.1 62
points has been led by decreases in five of the 10 economic
freedoms, with notable declines of 12 points in government 60
spending and 20 points in business freedom. This has set
Saudi Arabia’s economy apart from the economies of some of 58
its more freedom-minded Persian Gulf neighbors. 2011 2012 2013 2014 2015
These trends undermine an already uneven institutional and

structural economic framework. Government spending and Country Comparisons
taxation remain relatively well-maintained, with oil profits
contributing well over two-thirds of government revenues. Country 62.1
However, the rule of law remains weakly enforced, and the
judiciary is strongly influenced by the royal family. A closed World
60.4
economy and investment regime limit technology transfers Average
and the investment needed for economic diversification. Regional
Average 61.6
BACKGROUND: Saudi Arabia is an absolute monarchy ruled
by King Abdallah bin Abdul Aziz Al Saud. Pro-reform Arab Free
84.6
Spring demonstrations in 2011 drew few crowds outside of Economies
eastern Saudi Arabia, where the Shia minority population 0 20 40 60 80 100
is concentrated. Most of the Sunni majority appeared to be
satisfied with increased economic handouts and the king’s
promise of greater political participation. Saudi Arabia is the Quick Facts
world’s largest oil exporter and dominates the Organization Population: 30.0 million
of Petroleum Exporting Countries. Oil revenues account for GDP (PPP): $937.2 billion
about 90 percent of export earnings and about 80 percent of 3.8% growth in 2013
government revenues. Saudi Arabia joined the World Trade 5-year compound annual growth 5.5%
Organization in 2005 as part of an effort to promote foreign $31,245 per capita
investment and economic diversification. Unemployment: 5.5%
381
SAUDI ARABIA (continued)
1–Year

0 20 40 60 80 100
The public is aware of schemes by which oil wealth is systematically appropriated by members
of the royal family (e.g., payments to “facilitators,” which are often seen as required to con-
duct business). The slow and non-transparent judiciary is not independent and must coordi-
nate its decisions with the executive branch. Laws protecting private property are subject to
Islamic practices.

0 20 40 60 80 100
Saudi nationals and citizens of Gulf Cooperation Council countries pay no income taxes, but
net worth is subject to a 2.5 percent religious tax. Foreigners pay income taxes, and non-Saudi
companies pay a 20 percent corporate tax. Tax revenue equals 3.7 percent of domestic income,
and public spending amounts to 35.7 percent of domestic output. Public debt equals approxi-
mately 3 percent of GDP.

0 20 40 60 80 100
The regulatory framework is relatively sound. With no minimum capital required, starting
a business takes nine procedures, but licensing requirements are time-consuming. There is
no mandated minimum wage, but wage increases have exceeded labor productivity. Subsidies
cover nearly 80 percent of the retail cost of electricity and fuel—one of the world’s biggest
such schemes.
OPEN Trade Freedom 76.4 93rd +2.4

0 20 40 60 80 100
Saudi Arabia’s average tariff rate is 4.3 percent. Government procurement processes favor
domestic businesses. Foreign investment in many sectors of the economy is restricted. The
government retains considerable ownership in the financial sector, but licensing requirements
for foreign investment have gradually been eased. Foreign financial firms have established a
strong presence in the local investment banking and brokerage sector.


SENEGAL
50
25 75
Least Most
free 0 100 free
Sincreased
enegal’s economic freedom score is 57.8, making its
by 2.4 points since last year, driven by improve-
Freedom Trend
59
ments in half of the 10 economic freedoms, including freedom
from corruption, business freedom, and fiscal freedom, that 58
outweigh declines in labor freedom and the management of
government spending. Senegal is ranked 16th out of 46 coun-
57
tries in the Sub-Saharan Africa region, and its score is below
the world average.
56
After four years of little progress, economic freedom in Sen-
egal has advanced by 2.1 points since 2011, and the country has
55
recorded the fourth highest score improvement of any coun-
try graded in the 2015 Index.
54
However, the Senegalese economy remains “mostly unfree.” 2011 2012 2013 2014 2015
Senegal’s economic freedom remains suppressed by weak rule
of law and a poor regulatory environment. The judiciary lacks
the resources to prevent corruption and move cases efficient- Country Comparisons
ly. Registering a business is expensive, and the rigid labor code
confines many to informal employment. Country 57.8
BACKGROUND: Former President Abdoulaye Wade amended World

Senegal’s constitution over a dozen times to augment execu- Average 60.4
tive power and weaken the opposition, but his run for a third
term ended in his defeat by Macky Sall in March 2012. In Sep- Regional
Average 54.9
tember 2012, lawmakers voted to abolish the Senate and the
vice presidency to save money for disaster management. Sall Free
84.6
appointed Aminata Touré prime minister in 2013. After more Economies
than 30 years of conflict between the government and south- 0 20 40 60 80 100
ern separatists, the rebel leader of the Movement of Demo-
cratic Forces of Casamance declared a unilateral cease-fire in
May 2014. Economic reforms have proceeded slowly. Some 75 Quick Facts
percent of the workforce is engaged in agriculture or fishing. Population: 14.1 million
High formal-sector unemployment is a major factor in high GDP (PPP): $27.7 billion
rates of emigration to Europe. Senegal remains heavily depen- 4.0% growth in 2013
dent on foreign aid and has suffered from the 2014 Ebola virus 5-year compound annual growth 3.2%
outbreak in West Africa. $1,958 per capita
Unemployment: 9.9%
383
SENEGAL (continued)
1–Year

0 20 40 60 80 100
Despite steps to fight corruption, there still are few checks and balances. Several large-scale
scandals have involved government construction contracts, but high-ranking officials remain
largely unaccountable, and there have been few bribery or corruption convictions. The judi-
ciary is independent but under-resourced and subject to external influences. Property titling
procedures are uneven across the country.

0 20 40 60 80 100
Senegal’s top individual income tax rate has been lowered to 40 percent, but its top corporate
tax rate has increased to 30 percent. Other taxes include a value-added tax and an insurance
tax. Tax revenue equals 19.2 percent of domestic income, and government spending is equal to
29.1 percent of domestic output. Public debt equals 46 percent of GDP.

0 20 40 60 80 100
Administrative procedures have been streamlined, and the minimum capital required has been
reduced, but the overall cost of launching a business remains high. The underdeveloped labor
market still traps much of the labor force in informal economic activity. Electricity subsidies
exceed 2.5 percent of GDP, reflecting prices that are about 40 percent below production costs.

0 20 40 60 80 100
Senegal’s average tariff rate is 8.0 percent. Non-tariff barriers restrict some agricultural
imports. The government does not typically discriminate against foreign investment but may
screen new investment. With 19 banks and two financial institutions, the financial sector is
underdeveloped and dominated by foreign banks. The capital market remains rudimentary,
and few firms have access to credit.


SERBIA
50
25 75
Least Most
free 0 100 free
Spointerbia’s economic freedom score is 60.0, making its econo-

my the 90th freest in the 2015 Index. Its score is up by 0.6
from last year, reflecting improvements in five of the
Freedom Trend
61
10 economic freedoms, including freedom from corruption,
property rights, and monetary freedom, that outweigh a large
60
deterioration in the control of government spending. Serbia is
overall score is below the world and regional averages.
59
Reaching the “moderately free” category for the first time,
Serbia has made substantive institutional improvements in
its transition to a more market-driven economy. Over the 58
past five years, its economic freedom has risen by 2.0 points.
Gains have occurred in six of the 10 economic freedoms, with
57
investment freedom, freedom from corruption, and monetary
freedom highlighting the upward trend. 2011 2012 2013 2014 2015
Serbia’s ongoing transition to a more open and dynamic mar-

ket economy will continue to require a sustained commit- Country Comparisons
ment to deep institutional and structural reforms. Corruption
remains widespread, and the judicial system’s lack of indepen- Country 60.0
dence and transparency continues to undermine the rule of
law and investors’ confidence in the economy. World
Average 60.4
BACKGROUND: Serbia signed a Stability and Association Regional
Agreement with the European Union in 2008 and applied for Average 67.0
membership in 2009. Accession talks were contingent on the
arrest of wartime leader Ratko Mladic, who was apprehended Free
Economies 84.6
in May 2011. An agreement between Serbia and Kosovo nor-
0 20 40 60 80 100
malized relations in April 2013. The center-right Progres-
sive Party won the early parliamentary elections in March
2014, making Aleksandar Vucic prime minister. Floods in
the Balkans severely affected Serbian infrastructure in 2014 Quick Facts
and hampered growth. Vucic continues to reform the budget Population: 7.2 million
and move toward an increasingly privatized economy and GDP (PPP): $81.1 billion
EU membership. Serbia’s economy has attracted significant 2.5% growth in 2013
investment in manufacturing and services as it has integrated 5-year compound annual growth 0.0%
into the international economic system. However, growth $11,269 per capita
remains sluggish, and unemployment is high. Unemployment: 22.6%
385
SERBIA (continued)
1–Year

0 20 40 60 80 100
Since 2013, the government has adopted an anti-corruption action plan, prosecuted several
high-profile corruption cases, and made progress in combating organized crime and criminal
networks, but corruption remains a serious concern. Despite a reform strategy that seeks to
improve independence, competence, and efficiency, the courts remain vulnerable to political
influence. Enforcement of property rights can be extremely slow.

0 20 40 60 80 100
Serbia’s top individual and corporate income tax rates are 15 percent. Other taxes include a
value-added tax and a property tax. The overall tax burden amounts to 36.2 percent of domes-
tic output. Public expenditures equal 49.3 percent of domestic production, and public debt is
equivalent to 66 percent of gross domestic product.

0 20 40 60 80 100
Despite some progress, regulatory efficiency is weak. Launching a business takes slightly less
than a week on average, but licensing requirements are time-consuming. Labor regulations are
relatively flexible but not enforced effectively. To secure a loan from the IMF, the government
abolished incentive payments to foreign investors and cut other discretionary subsidies for
about 200 loss-making state firms.

0 20 40 60 80 100
The average tariff rate is 5.9 percent, and efforts are being made to reduce trade barriers in
order to join the WTO. Legal barriers to international trade and investment have been reduced.
Foreign investment generally receives national treatment. Banking is largely stable, although
two state-owned banks failed in 2013. Nonperforming loans amount to around 20 percent of
total loans.


Victoria
SEYCHELLES
50
25 75
Least Most
free 0 100 free
Sincreased
eychelles’ economic freedom score is 57.5, making its
by 1.3 points since last year, with declines in labor
Freedom Trend
60
freedom and the management of government spending out-
weighed by considerable improvements in trade freedom and 58
freedom from corruption that have enabled the island econ-
omy to achieve its highest economic freedom score ever. Sey- 56
chelles is ranked 20th among 46 countries in the Sub-Saharan

54
Africa region.
Seychelles has posted the fourth best record for advancing 52
economic freedom over the past half-decade. Since 2011,
Seychelles has increased its economic freedom score by 6.1 50
points, with scores advancing in eight of the 10 economic free-
doms. Most impressively, economic freedom has not declined 48
in any of the factors. Led by monetary stabilization and robust 2011 2012 2013 2014 2015
trade reforms, Seychelles has propelled itself to the upper tier
of the “mostly unfree” category.
Country Comparisons
Seychelles’ recent reform success has helped to improve a
weak and uncompetitive economic framework. Despite recent Country 57.5
improvements in government accounts, however, Seychelles
was forced to accept an IMF loan in 2011 to handle its over- World
60.4
all debt and spending levels, and the economy remains one Average
of the most closed in the world, reducing competition and Regional
holding back investment. A restrictive business environment Average 54.9
and strict labor regulations limit business formation and for-
Free
mal employment. Economies 84.6
BACKGROUND: The People’s Progressive Front has ruled Sey- 0 20 40 60 80 100

chelles since 1977, when France Albert René seized power in a
bloodless coup. In 2004, René ceded power to Vice President
James Michel. Michel was elected to a third five-year term Quick Facts
in May 2011. Seychelles enjoys a relatively stable economic Population: 0.1 million
environment as a high-middle-income country with a lucra- GDP (PPP): $2.5 billion
tive fishing and tourism industry. Piracy remains a signifi- 3.6% growth in 2013
cant threat off the coast of Seychelles. In early 2013, tropical 5-year compound annual growth 3.8%
cyclone Felleng brought torrential rain, flooding, and land- $26,492 per capita
slides that destroyed hundreds of houses. Unemployment: n/a
387
SEYCHELLES (continued)
1–Year

0 20 40 60 80 100
Corruption and extensive drug trafficking and money-laundering continue to plague the archi-
pelago. Concerns over government corruption have focused on a lack of transparency in the
privatization and allocation of government-owned land as well as dysfunction in government
finances, illegal procedures, and embezzlement. Judges generally decide cases fairly but face
interference in high-level economic and political cases.

0 20 40 60 80 100
Other taxes include a vehicle tax, a tax on interest, and a new value-added tax. Overall tax rev-
enues equal 26.6 percent of domestic income, and government expenditures amount to 36.8 of
percent domestic production. Public debt is equivalent to 62 percent of GDP.

0 20 40 60 80 100
The requirements for incorporating a business have been simplified, but regulatory inefficien-
cy and lack of transparency still hamper the regulatory environment. The labor market remains
inefficient, and the public sector is the main source of employment. Inflation stabilized at a
low level in 2013, aided by exchange rate strength, and the state rebalanced utility prices to
cut implicit subsidies.

0 20 40 60 80 100
The average tariff rate was 28.3 percent as of 2007. Reliance on tariff revenues has declined
but remains relatively high. Foreign investors can repatriate profits. Foreign investment in
many sectors is restricted. The financial sector, dominated by banks, offers offshore services.
The government owns two of the largest banks. The capital market is evolving, and there is a
stock exchange.


SIERRA LEONE
50
25 75
Least Most
free 0 100 free
Sincreased
ierra Leone’s economic freedom score is 51.7, making its
by 1.2 points since last year, with improvements in
Freedom Trend
53
labor freedom, freedom from corruption, and the control of
52
government spending outweighing deteriorations in property
rights and business freedom. Sierra Leone is ranked 36th out
51
of 46 countries in the Sub-Saharan Africa region, and its over-
all score is below the world average.
50
Advances in the past two years have lifted Sierra Leone out
of the “repressed” category for the first time since 1996. Over 49
the past five years, economic freedom in Sierra Leone has
advanced by 2.1 points, led by improvements in half of the 48
10 economic freedoms, including trade freedom and invest-

47
ment freedom.
2011 2012 2013 2014 2015
Years of civil war, disease, and political unrest have left prop-
erty rights either nonexistent or poorly established, with no
land-titling system. The poor entrepreneurial environment is Country Comparisons
exacerbated by underdeveloped capital markets and restric-
tions on trade and investment. Strict labor market regula- Country 51.7
tions undermine efforts to improve formal employment
and prosperity. World
Average 60.4
BACKGROUND: In 2002, Sierra Leone emerged from a decade Regional
of civil war that displaced more than 2 million people. Opposi- Average 54.9
tion candidate Ernest Bai Koroma, elected president in 2007
in the first peaceful transition of power since independence Free
Economies 84.6
from Britain in 1961, was re-elected in 2012. Despite some
0 20 40 60 80 100
institutional progress since the end of the civil war, living
standards remain very low. According to the U.N.’s Human
Development Index, which measures things like infant mor-
tality, literacy, and life expectancy, Sierra Leone ranks 177th Quick Facts
out of 187 countries. Infrastructure is inadequate, corruption Population: 6.1 million
is pervasive, and the population is mostly poor. Mining is the GDP (PPP): $9.4 billion
primary industry. Mineral exports are the principal foreign 16.3% growth in 2013
exchange source, with gem-quality diamonds accounting for 5-year compound annual growth 9.1%
nearly half of exports and high rates of economic growth. In $1,542 per capita
2014, West Africa’s Ebola virus spread to Sierra Leone. Unemployment: 3.2%
389
SIERRA LEONE (continued)
1–Year

0 20 40 60 80 100
Corruption remains rampant throughout government and the economy, with high-profile
allegations of corruption against bankers, police officers, and government officials and long-
standing accounting irregularities that led to a one-year suspension in 2013 from the Extractive
Industries Transparency Initiative. There is no land titling system, and judicial corruption is
significant. Traditional tribal justice systems prevail in rural areas.

0 20 40 60 80 100
Sierra Leone’s top individual and corporate income tax rates are 30 percent. Other taxes
include a goods and services tax and a tax on interest. The overall tax burden is equivalent
to 11.1 percent of domestic output, and government expenditures equal 20.4 percent of GDP.
Public debt equals approximately 33 percent of gross domestic product.

0 20 40 60 80 100
The procedure for establishing a business has been simplified, but licensing requirements
remain burdensome. Rudimentary labor regulations have little impact, as much of the labor
force is employed in the informal sector. Consumer price inflation has receded to single digits,
underpinned by increased food supply, but the government still subsidizes electricity produc-
tion, health care, and education.

0 20 40 60 80 100
Sierra Leone’s average tariff rate is 9.9 percent. The government is working to modernize cus-
toms procedures in order to facilitate trade. Sierra Leone does not allow foreign investors to
own land. Modernization and strengthening of the banking sector, defunct during the civil war,
is ongoing. A small stock exchange has been in operation since 2007.


SINGAPORE
50
25 75
Least Most
free 0 100 free
Sunchanged
ingapore’s economic freedom score is 89.4, making its
economy the 2nd freest in the 2015 Index. Its score is
from last year, with gains in the management of
Freedom Trend
91
government spending, monetary freedom, and labor freedom
offset by a slightly lower score for freedom from corruption. 90
Only 0.2 point behind Hong Kong, Singapore ranks 2nd out of
42 countries in the Asia–Pacific region. 89
Already benefiting from one of the world’s highest levels of
economic freedom, Singapore has reinforced its commitment 88
to continued reform. Over the past five years, the small city
economy has advanced its economic freedom by 2.1 points, 87
the largest score increase among the 10 freest economies. Sus-
tained efforts to build a world-class financial center and fur-
86
ther open its market to global commerce have led to advances
in four of the 10 economic freedoms, including financial free- 2011 2012 2013 2014 2015
dom and investment freedom.
A highly educated and motivated workforce has added to the Country Comparisons
economy’s dynamism and resilience, reinforcing Singapore’s
innovative capacity. Singaporean society has a low tolerance Country 89.4
for corruption, and the effective rule of law strongly under-
girds all aspects of economic development. More work to World
Average 60.4
reduce the state’s involvement in key sectors will be necessary
to realize continued advances in economic freedom. Regional
58.8
Average
BACKGROUND: Singapore is a nominally democratic state
that has been ruled by the People’s Action Party (PAP) since Free
Economies 84.6
independence in 1965. The PAP won 81 out of 87 seats in the
0 20 40 60 80 100
legislature in the May 2011 elections, although its percentage
of the vote ( just over 60 percent) was the lowest in history.
The opposition won another seat in 2013 during a special
election. Certain civil liberties, such as freedom of assembly Quick Facts
and freedom of speech, remain restricted, but the PAP has Population: 5.4 million
embraced economic liberalization and international trade. GDP (PPP): $348.7 billion
Singapore is one of the world’s most prosperous nations. Its 4.1% growth in 2013
economy is dominated by services, but the country is also a 5-year compound annual growth 5.2%
major manufacturer of electronics and chemicals. $64,584 per capita
Unemployment: 3.1%
391
SINGAPORE (continued)
1–Year

0 20 40 60 80 100
Singapore has traditionally been lauded for its lack of corruption. As in most countries, there
are ongoing concerns over issues of transparency and the power of deeply entrenched groups.
Political speech is regulated, inhibiting organized pressure for policy changes. Contracts are
secure, there is no expropriation, and commercial courts function well. Singapore has one of
Asia’s best intellectual property regimes.

0 20 40 60 80 100
Other taxes include a value-added tax and a tax on property. The overall tax burden equals 14
percent of domestic production. Government expenditures are equivalent to 14.4 percent of
the domestic economy, and public debt equals 104 percent of gross domestic product.

0 20 40 60 80 100
Singapore’s regulatory framework is one of the world’s most efficient. Starting a business takes
three days, and required procedures are straightforward. No minimum wage is enforced, but
wage adjustments are guided by the National Wage Council. The state funds housing, educa-
tion, transport, and health care subsidy programs and influences other prices through regula-
tions and state-linked enterprises.

0 20 40 60 80 100
The average tariff rate is 0 percent. Imports of chewing gum and “objectionable” publications
are restricted, and some service industries face barriers. Foreign investment is welcomed, but
investment in several sectors is restricted. The banking-dominated financial system is well
supported by liquid capital markets. As of 2014, 119 of 124 banks were foreign. The state retains
some ownership in the financial sector.


SLOVAKIA
50
25 75
Least Most
free 0 100 free
Sincreased
lovakia’s economic freedom score is 67.2, making its
by 0.8 point from last year, with improvements in
Freedom Trend
71
freedom from corruption, business freedom, and labor free-
70
dom outweighing declines in monetary freedom and the man-
agement of government spending. Slovakia is ranked 22nd out
69
of 43 countries in the Europe region, and its overall score is
higher than the world average.
68
Economic freedom has not fared as well in Slovakia as it has in
other Eastern European countries in recent years. In fact, over 67
the past five years, economic freedom in Slovakia has declined
by 2.3 points. Score declines have been concentrated largely in 66
the fiscal and regulatory spheres, led by drops of 8.0 points in

65
the control of government spending and labor freedom.
2011 2012 2013 2014 2015
Slovakia’s basic economic environment still needs improve-
ment. The rule of law is weak, allowing corruption to flour-
ish, and there is a lack of transparency in the government Country Comparisons
and state-owned sector. Despite some progress, business
regulations remain inefficient, and labor market rigidity has Country 67.2
prolonged the downside of business cycles. The financial
crisis and the weak regional environment have undermined World
Average 60.4
public finances. The government’s long-term commitment
to economic freedom must be renewed to boost prosperity Regional
67.0
and competition. Average
BACKGROUND: After Slovakia gained independence in 1993, Free

Economies 84.6
market reforms made it one of Europe’s most attractive des-
0 20 40 60 80 100
tinations for capital. Slovakia entered the European Union in
2004 and has been part of the eurozone since 2009. Andrej
Kiska was elected president in 2014 and reappointed Robert
Fico, who had been serving since 2012, as prime minister. Fico Quick Facts
has enacted new measures aimed at reducing tax evasion and Population: 5.4 million
fraud. In 2014, there were divisions within the government GDP (PPP): $133.1 billion
about the role of NATO and the correct response to the crisis 0.9% growth in 2013
in Ukraine. 5-year compound annual growth 1.0%
$24,605 per capita
Unemployment: 14.0%
393
SLOVAKIA (continued)
1–Year

0 20 40 60 80 100
Corruption is significant, notably in public procurement and health care. Many state-owned
companies do not publish even basic information. The constitution provides for an indepen-
dent judiciary, but notwithstanding some reforms, the court system continues to be burdened
by corruption, intimidation of judges, and a significant backlog of cases. Secured interests in
property and contractual rights are enforced.

0 20 40 60 80 100
Slovakia’s top individual income tax rate is 25 percent, and its top corporate tax rate has been
reduced to 22 percent. Other taxes include a value-added tax and a property tax. Tax revenues
equal approximately 28.5 percent of domestic income. Public expenditures amount to 38.7
percent of gross domestic production, and government debt equals 55 percent of GDP.

0 20 40 60 80 100
Despite progress in streamlining the process for launching a business, other time-consuming
requirements reduce the efficiency of the regulatory system. Rigid labor regulations hamper
dynamic employment growth. In 2013, the government adopted the new EU agricultural policy
for 2014–2020 that will reduce per hectare subsidies for large farms but increase them for
smaller ones.

0 20 40 60 80 100
EU is relatively open to external trade. Slovakia generally treats foreign and domestic invest-
ment equally under the law. The relatively well-regulated financial market continues to grow.
The predominantly foreign-owned banking sector is well capitalized, but the recently doubled
bank levy discourages dynamic lending.


SLOVENIA
50
25 75
Least Most
free 0 100 free
Sdecreased
lovenia’s economic freedom score is 60.3, making its
by 2.4 points since last year, reflecting a combined
Freedom Trend
66
decline in the management of public spending, business free- 65
dom, and freedom from corruption that dwarfs improvements
in labor freedom and monetary freedom. Slovenia is ranked 64
36th out of 43 countries in the Europe region, and its overall
score is just below the world average. 63
Over the past five years, economic freedom in Slovenia has 62
fallen by 4.3 points, the biggest decline in Europe other than 61

in Greece and Cyprus. A decline of more than 40 points in the
control of government spending has led to a deterioration of 60
fiscal soundness that has pushed Slovenia close to losing its
59
status as a “moderately free” economy.
2011 2012 2013 2014 2015
Slovenia’s rising government spending and failure to priva-
tize industries after its transition from Communism under-
line its structural problems. The labor market remains rigid Country Comparisons
despite reform efforts, and the lack of overall regulatory effi-
ciency limits private-sector growth. While property rights are Country 60.3
respected, the level of perceived corruption has increased.
World
60.4
BACKGROUND: The government of Slovenian Democratic Average
Party Prime Minister Janez Janša collapsed in February 2013. Regional
Janša was subsequently convicted of corruption and began Average 67.0
serving a two-year prison sentence in June 2014. In July 2014,
Miro Cerar’s new SMC party won a plurality of seats in par- Free
Economies 84.6
liament with about 35 percent of the popular vote. Privatiza-
0 20 40 60 80 100
tions and efforts to reduce the public sector have been slowed
by instability. The government still controls about half of the
economy. A government bailout of over €3 billion went to
banks carrying bad loans in December 2013. Slovenia joined Quick Facts
the European Union and NATO in 2004, adopted the euro in Population: 2.1 million
2007, and joined the Organisation for Economic Co-operation GDP (PPP): $57.4 billion
and Development in 2010. The country has excellent infra- –1.1% growth in 2013
structure and an educated workforce. 5-year compound annual growth –2.0%
$27,900 per capita
Unemployment: 10.6%
FDI Inflow: –$678.6 million
395
SLOVENIA (continued)
1–Year

0 20 40 60 80 100
Corruption, while less extensive than in some other Central European countries, remains a
problem, usually involving conflicts of interest and contracting links between government offi-
cials and private businesses. The judicial system is sound and transparent but remains com-
paratively inefficient, understaffed, and plagued by a large case backlog. Private property rights
are constitutionally guaranteed, but enforcement is slow.

0 20 40 60 80 100
Slovenia’s top individual income tax rate is 50 percent, and its corporate tax rate has increased
to 17 percent. Other taxes include a value-added tax and a property transfer tax. The overall
tax burden equals 37.4 percent of the domestic economy. Public expenditures amount to 59.4
percent of domestic income, and government debt is equal to 73 percent of GDP.

0 20 40 60 80 100
The overall regulatory framework has undergone a series of reforms aimed at facilitating
entrepreneurial activity, but the pace of reform has slowed. A labor market reform in 2013
has reduced the costs of hiring and layoffs. The IMF urged the government to cut numerous
subsidies and transfers, but renewable energy subsidies were increased by over 30 percent.

0 20 40 60 80 100
EU is relatively open to external trade. Slovenia generally treats foreign and domestic inves-
tors equally. With economic stagnation continuing, nonperforming loans have increased and
undermine overall banking soundness. The state continues to retain ownership in the bank-
ing sector.


SOLOMON ISLANDS
50
25 75
Least Most
free 0 100 free
TscoreheingSolomon Islands’ economic freedom score is 47.0, mak-

its economy the 159th freest in the 2015 Index. Its
is up by 0.8 point from last year, reflecting gains in the
Freedom Trend
48
management of government spending, labor freedom, and
business freedom that outweigh losses in monetary freedom
and fiscal freedom. The Solomon Islands is ranked 36th out 47
of 42 countries in the Asia–Pacific region. Although it has
registered its highest economic freedom score ever in the
46
2015 Index, its overall score continues to be far below the
world average.
Failure to fully embrace the principles of economic freedom 45
has exacerbated poverty and undermined sustained devel-
opment on the Solomon Islands. However, over the past five
years, economic freedom in the island economy has advanced 44
by 1.1 points. Efforts to open the economy to trade and invest- 2011 2012 2013 2014 2015
ment have more than offset declines in the fiscal environment
and freedom from corruption.
Country Comparisons
Nevertheless, the trade and investment environment remains
weak. Trade restrictions are present on exports and imports, Country 47.0
and the government screens foreign investment. The inde-
pendence of the judicial system is threatened by corruption World
60.4
and political meddling. The government controls more than Average
half of the domestic economy. Regional
Average 58.8
BACKGROUND: The Solomon Islands is a parliamentary
democracy and one of Asia’s poorest nations. Danny Philip’s Free
84.6
election as prime minister in 2010 stabilized a chaotic politi- Economies
cal environment, but allegations of corruption forced Philip 0 20 40 60 80 100
to resign in 2011 rather than face a motion of no confidence.
Gordon Darcy Lilo won the next election, held shortly there-
after. In recent years, Australia has had to intervene several Quick Facts
times to defuse ethnic conflict, which holds back economic Population: 0.6 million
development. Australia, the European Union, Japan, New GDP (PPP): $1.9 billion
Zealand, and Taiwan provide significant financial aid. Most of 2.9% growth in 2013
the population lives in rural communities, and three-fourths 5-year compound annual growth 4.2%
of the workforce is engaged in subsistence farming and fish- $3,455 per capita
ing. Growth depends largely on logging and timber exports. Unemployment: 3.9%
397
SOLOMON ISLANDS (continued)
1–Year

0 20 40 60 80 100
Corruption is pervasive, and public offices are seen as opportunities for personal enrichment.
Many current and former lawmakers have faced corruption charges. Threats against judges and
prosecutors have weakened the judicial system’s independence and rigor. Judges and prosecu-
tors have been implicated in scandals relating to corruption and abuse of power. Land owner-
ship is reserved for Solomon Islanders.

0 20 40 60 80 100
The Solomon Islands’ top individual income tax rate is 40 percent, and its top corporate tax
rate is 30 percent. Other taxes include a property tax and a sales tax. The overall tax burden
amounts to 37.3 percent of the domestic economy. Government spending equals 49.8 percent
of domestic output, and public debt is equivalent to 15 percent of gross domestic product.

0 20 40 60 80 100
Implementation of a simplified registration process has improved the business environment
but only marginally. The regulatory process continues to be undermined by uneven enforce-
ment of existing laws. The labor market is underdeveloped, and informal labor activity remains
substantial. About one-third of total public spending subsidizes infrastructure development
projects, many of them funded by international donors.

0 20 40 60 80 100
The Solomon Islands’ average tariff rate is 8.5 percent. Some natural resources are subject to
export taxes. Foreign investment is screened, and investment in many sectors is restricted.
A small number of banks dominate the underdeveloped financial sector. The level of finan-
cial intermediation remains low, and access to credit for small and medium-sized companies
remains very limited.


SOMALIA
50
25 75
Least Most
free 0 100 free
Sinstability.
omalia’s economic freedom remains unrated due to a
severe lack of reliable data caused by ongoing political
The last time Somalia was fully graded and ranked
Freedom Trend
was in the 2000 Index when it received a score of only 27.8.
Violence and political unrest have prevented Somalia from
developing a coherent and coordinated domestic marketplace.
The central government controls only part of the country, and
formal economic activity is largely relegated to urban areas
like Mogadishu. Progress toward economic normalization
is continuing as the government takes back more land from
the rebels.
Lack of central authority makes the rule of law inconsistent
and fragmented, with different militias, authorities, and tribes
applying varying legal frameworks. Traditional customs,
like Sharia law, have become more entrenched. Corruption 2011 2012 2013 2014 2015
remains high, and a lack of transparency and formal book-
keeping means that government revenues are easily embez-
zled. Establishment of government control and security will
Country Comparisons
be vital for fostering broad-based economic freedom based on
consistent rules and regulations. Country n/a
BACKGROUND: Somalia has been in chaos since the collapse World

60.4
of the Siad Barre regime in 1991 and the subsequent civil war. Average
When a U.N. humanitarian mission’s mandate ended in 1995, Regional
the transitional government was forced to rely on the African Average 54.9
Union’s peacekeeping mission to protect civilians. A provi-
sional constitution was passed in August 2012, and Hassan Free
Economies 84.6
Sheikh Mohamud was elected president in September. The
0 20 40 60 80 100
Islamist terrorist organization al-Shabaab remains a potent
threat. There was an upsurge in attacks by maritime pirates
off the coast in 2013 and 2014. Somalia’s GDP and living stan- Quick Facts
dards are among the lowest in the world. The population is Population: 10.4 million
dependent on foreign aid. Economic growth is slowly expand- GDP (PPP): $5.9 billion (2010)
ing beyond Mogadishu, which has been recovering since al- 2.6% growth in 2010
Shabaab retreated to rural areas in 2011. In September 2014, 5-year compound annual growth n/a
the leader of al-Shabaab, Ahmed Abdi Godane, was killed in a $600 per capita (2010)
U.S. airstrike; he was replaced by Ahmed Omar. Unemployment: n/a
Inflation (CPI): n/a
FDI Inflow: n/a
Public Debt: n/a
399
SOMALIA (continued)
1–Year

0 20 40 60 80 100
Somalia is tied with North Korea and Afghanistan for last place among 177 countries in Trans-
parency International’s 2013 Corruption Perceptions Index. According to a 2013 U.N. Monitor-
ing Group report, government officials used the central bank as a “slush fund,” with an average
of 80 percent of withdrawals made for private purposes. There is no functioning national judi-
cial system.

0 20 40 60 80 100
Somalia’s central government lacks the ability to administer taxes or provide basic services
effectively. Little effective fiscal policy exists, although some duties and taxes are collected.
Most government expenditures are financed through aid. Warlords and militias continue to
collect levies from the population, particularly in the south of the country.
REGULATORY Business Freedom n/a — n/a

EFFICIENCY Labor Freedom n/a — n/a
0 20 40 60 80 100
Institutional shortcomings, including absence of the rule of law, severely impede any mean-
ingful and sustained economic activity. A functioning formal labor market is nearly absent,
and much of the labor force is employed in the informal sector. Despite almost nonexistent
national governance, the informal agricultural, financial, and telecommunications sectors have
prospered without subsidies.

MARKETS Investment Freedom n/a — n/a
0 20 40 60 80 100
Violence in Somalia has deterred international trade and investment flows. Political instabil-
ity, an outmoded regulatory environment, and inadequate infrastructure continue to suppress
development of the financial sector, which has been under reconstruction following the civil
war. A large portion of the population remains outside of the formal banking sector, and access
to credit remains severely inadequate.


SOUTH AFRICA
50
25 75
Least Most
free 0 100 free
Sessentially
outh Africa’s economic freedom score is 62.6, making its
economy the 72nd freest in the 2015 Index. Its score is
unchanged from last year, with a 0.1-point gain
Freedom Trend
64
reflecting improvements in labor freedom, fiscal freedom,
trade freedom, and freedom from corruption that are largely
63
offset by declines in investment freedom, business freedom,
and the management of government spending. South Africa
62
region, and its overall score is higher than the world and
regional averages.
South Africa’s large domestic market and natural resource 61
base make it a promising candidate for economic freedom–led
growth. However, recent labor unrest and falling commodity
60
prices have undermined growth and tarnished the economy’s
investment reputation. 2011 2012 2013 2014 2015
More committed structural and institutional reform is need-

ed. Pervasive corruption jeopardizes the rule of law. Rigid Country Comparisons
labor market regulations and the inefficient regulatory frame-
work perpetuate high unemployment and underemploy- Country 62.6
ment. Non-tariff barriers constrict gains from global trade.
The regionally significant financial sector has been helped by World
Average 60.4
deregulation and remains a model for further reforms.
Regional
BACKGROUND: Jacob Zuma of the African National Con- Average 54.9
gress was elected president by the National Assembly in 2009
and re-elected by an ANC-dominated parliament for another Free
Economies 84.6
five years in May 2014. The ANC has directed politics since
0 20 40 60 80 100
the end of apartheid in 1994. South Africa is sub-Saharan
Africa’s second-largest economy and one of the world’s larg-
est producers and exporters of gold and platinum. Mining,
services, manufacturing, and agriculture rival similar sec- Quick Facts
tors in the developed world. Many South Africans are poor, Population: 53.0 million
and the country has high formal-sector unemployment and GDP (PPP): $596.5 billion
crime, low-quality public education, and a lack of access to 1.9% growth in 2013
infrastructure and basic services. Strikes by miners in 2014 5-year compound annual growth 1.9%
brought platinum mining to a halt. In June 2014, Zuma and $11,269 per capita
the ANC announced a National Development Plan that was Unemployment: 25.3%
claimed would stimulate economic growth using a market- Inflation (CPI): 5.8%
based, long-term strategy. FDI Inflow: $8.2 billion
401
SOUTH AFRICA (continued)
1–Year

0 20 40 60 80 100
Notwithstanding more than 700 charges of fraud and corruption controversially dropped
before his first election in 2009, President Zuma was re-elected in 2014. Public procurement is
often politically driven and opaque, and enforcement of anti-corruption statutes is inadequate.
Although judicial and prosecutorial independence is under political pressure, property rights
are relatively well protected. Contracts are generally secure.

0 20 40 60 80 100
Other taxes include a value-added tax and a capital gains tax. The overall tax burden equals 25.8
percent of domestic income. Public expenditures amount to 32.6 percent of domestic produc-
tion, and government debt equals 45 percent of gross domestic product.

0 20 40 60 80 100
With no minimum capital required, it takes five procedures and 19 days to launch a company.
Completing licensing requirements still takes more than a month on average. Labor regula-
tions are not applied effectively, and the labor market lacks flexibility. The government has
eliminated price controls on all but a few items such as gasoline, coal, and paraffin.

0 20 40 60 80 100
South Africa’s average tariff rate is 4.2 percent. Government procurement favors domestic
firms. The government cancelled bilateral investment treaties with Germany, Spain, and sev-
eral other countries in 2013. The financial system has undergone modernization, and banking
has been resilient and sound. Four big banks account for over 80 percent of banking-sector
assets. The capital market is well developed.


SPAIN
50
25 75
Least Most
free 0 100 free
Sby pain’s economic freedom score is 67.6, making its economy

the 49th freest in the 2015 Index. Its score has increased
0.4 point since last year, reflecting improvements in six of
Freedom Trend
72
the 10 economic freedoms, driven by investment freedom,
71
monetary freedom, and the management of government
spending, that outweigh declines in freedom from corrup-
70
tion and fiscal freedom. Spain is ranked 21st out of 43 coun-
tries in the Europe region, and its overall score is above the
69
world average.
Over the past five years, a 2.6-point drop in economic free- 68
dom has pushed Spain’s economy into the “moderately free”
category. Deteriorations in six of the 10 economic freedoms 67
have been led by declines in the management of government

66
spending and financial freedom.
2011 2012 2013 2014 2015
Nevertheless, Spain’s most recent uptick in economic freedom
reverses three straight years of declines. The rule of law is
respected, and export growth is encouraged by an open trade Country Comparisons
and investment framework.
Country 67.6
BACKGROUND: In 2008, Spain’s housing sector was highly
leveraged, and the bursting of the housing bubble led in part World
60.4
to the recession beginning in 2009 and saddled banks with Average
bad debt. Responses by the Spanish Socialist Workers Party, Regional
then in power, made the situation worse. Mariano Rajoy’s Average 67.0
conservative Popular Party won the November 2011 election
and introduced the largest budget deficit-reduction plan in Free
Economies 84.6
Spain’s history, including crucial structural and labor reforms.
0 20 40 60 80 100
In 2012, the EU bailed out Spain’s banking sector with a €41
billion loan. However, Rajoy’s government has dismissed
recent warnings that more government austerity measures
are needed and has demurred from tackling pension reform. Quick Facts
Upcoming elections make further reforms unlikely until at Population: 46.6 million
least 2016. In the first quarter of 2014, Spain experienced its GDP (PPP): $1.4 trillion
largest GDP increase since the 2008 recession. However, debt –1.2% growth in 2013
rose to over 90 percent of GDP in 2013. Spain’s unemploy- 5-year compound annual growth –1.4%
ment rate has declined slightly to about 25 percent, and youth $29,851 per capita
unemployment hovers around 55 percent. Unemployment: 26.7%
403
SPAIN (continued)
1–Year

0 20 40 60 80 100
A wave of scandals exposed systematic corruption within the political class during the years
of easy credit and economic boom and caused a severe erosion of institutional credibility. The
judicial system is slow-moving and somewhat politicized, limiting redress for firms that have
had contractual obligations breached. Protection of intellectual property meets or exceeds
EU standards.

0 20 40 60 80 100
Spain’s top individual income tax rate is 52 percent, and its top corporate tax rate is 30 percent.
Other taxes include a value-added tax and a capital gains tax. The overall tax burden equals
32.9 percent of gross domestic product. Government expenditures amount to 44.8 percent of
domestic production, and public debt equals 94 percent of domestic output.

0 20 40 60 80 100
Procedures for establishing a business have been streamlined, and licensing requirements have
been reduced. Bankruptcy proceedings are fairly straightforward. Labor market reforms have
made it less costly to dismiss a permanent worker. Spain subsidizes fuel for high-seas fishing
fleets, but a 2013 clean energy bill cut renewable-energy subsidies and capped the earnings of
existing renewable-power plants.

0 20 40 60 80 100
EU is relatively open to external trade. Like other EU member states, Spain generally treats
foreign and domestic investors equally. Banking has experienced deep restructuring and a
notable turnaround. The number of cajas (savings banks) has declined after several rounds
of consolidation.


SRI LANKA
50
25 75
Least Most
free 0 100 free
Sdecreased
ri Lanka’s economic freedom score is 58.6, making its
by 1.4 points since last year, with modest gains in
Freedom Trend
62
freedom from corruption and the management of government
61
spending outweighed by declines in half of the 10 economic
freedoms, including investment freedom, property rights, and
60
trade freedom. Sri Lanka is ranked 21st out of 42 countries in
the Asia–Pacific region, and its score is just below the world
59
The return to relative political stability has precipitated a rise 58
in Sri Lanka’s economic freedom. Over the past five years,
economic freedom on the island has advanced by 1.5 points, 57
with improvements in half of the 10 factors led by double-digit

56
gains in fiscal freedom.
2011 2012 2013 2014 2015
Overall, however, the foundations of economic freedom
remain weak. Property rights are hard to enforce because of
fraud, and a weak judiciary fails to mediate disputes effective- Country Comparisons
ly. Government industrial policies distort trade and shelter
domestic industry from competition. The central bank is not Country 58.6
fully independent, raising the fear of inflation and monetized
government deficits. World
Average 60.4
BACKGROUND: In May 2009, the Sri Lankan military defeat- Regional
ed the rebel Liberation Tigers of Tamil Eelam (LTTE), end- Average 58.8
ing a 26-year civil war and contributing to President Mahinda
Rajapakse’s April 2010 re-election. In March 2014, the U.N. Free
Economies 84.6
Human Rights Council adopted a resolution mandating a
0 20 40 60 80 100
comprehensive investigation into human rights violations
by both the government and the rebels. In September 2013,
for the first time in 25 years, Sri Lanka held elections for its
Northern Provincial Council, a step that can be seen as an Quick Facts
effort to begin addressing grievances of the Tamil communi- Population: 20.8 million
ty. Agriculture, apparel, and tourism are the main economic GDP (PPP): $136.0 billion
sectors. Sri Lanka depends heavily on foreign assistance and 7.3% growth in 2013
remittances from workers abroad, primarily in the Middle 5-year compound annual growth 6.7%
East. China has become a significant lender for infrastruc- $6,531 per capita
ture projects. Unemployment: 4.2%
405
SRI LANKA (continued)
1–Year

0 20 40 60 80 100
The government’s populist rhetoric and harsh treatment of critics since 2013 have raised con-
cerns about the erosion of democratic institutions. Some observers charge that the president’s
authoritarian rule (he and his family control approximately 70 percent of the national budget)
has led to a lack of transparent and inclusive policy formulation. Judicial independence has
weakened significantly.

0 20 40 60 80 100
Sri Lanka’s top individual income tax rate is 24 percent, and its top corporate tax rate is 28 per-
cent. Other taxes include a value-added tax. Overall tax revenue equals 12 percent of domestic
production. Public expenditures account for 19.7 percent of the domestic economy, and govern-
ment debt is equivalent to approximately 80 percent of gross domestic product.

0 20 40 60 80 100
With no minimum capital required, launching a business takes nine procedures and less than
a week. The cost of completing licensing requirements has been reduced, but it still takes more
than five months on average. Labor regulations are rigid, though enforcement can be lax. An
extensive system of price controls and subsidies distorts most sectors of the economy.

0 20 40 60 80 100
Sri Lanka’s average tariff rate is 6.7 percent. Imports are further impeded by government poli-
cies designed to promote import substitution and agricultural self-sufficiency. Investment
levels in several sectors of the economy are capped. Despite some improvement, nonperform-
ing loans remain a problem. The state continues to influence the allocation of credit, and the
non-banking financial sector remains underdeveloped.


SUDAN
Southern 50
Sudan 25 75
Least Most
free 0 100 free
Swhich
udan’s economic freedom remains unrated due to the lack
of reliable data. Those facets of economic freedom for
data are available have been individually scored. The
Freedom Trend
last time Sudan was fully graded and ranked was in the 2000
Index, when it received a score of 47.2.
Civil war, political conflict, and unrest have undermined the
development of a stable society ready for sustained economic
growth. Although the petroleum sector provides some eco-
nomic stability and foreign exchange earnings, other parts of
the economy are underdeveloped and face serious structural
and institutional headwinds. Continued conflict with reb-
els and South Sudan promotes uncertainty and undermines
investor confidence.
Further diversification of the economy is undermined by
poor governance and inefficient regulations. A large informal 2011 2012 2013 2014 2015
economy remains trapped by business regulations that inhibit
registration and a rigid labor market that discourages formal
hiring. High tariffs discourage imports and protect domestic
Country Comparisons
industry, while investment remains largely reserved for the
hydrocarbon sector. Country n/a
BACKGROUND: Omar Hassan al-Bashir, who came to power World

60.4
in a 1989 military coup and still rules the country, faces two Average
international arrest warrants on charges of genocide in the Regional
conflict in Western Darfur, where over 2 million people were Average 54.9
displaced and over 200,000 killed. In October 2013, 30 mem-
bers of al-Bashir’s National Congress Party broke away and Free
Economies 84.6
formed a new opposition party. Cross-border violence, politi-
0 20 40 60 80 100
cal instability, poor infrastructure, weak property rights, and
corruption hinder development. Export growth, other than
with respect to oil, is largely stagnant, and 80 percent of the Quick Facts
workforce is employed in agriculture. Following the secession Population: 34.4 million
of South Sudan in 2011, Sudan lost two-thirds of its oil revenue GDP (PPP): $90.5 billion
to the South. Subject to multiple comprehensive sanctions, 3.4% growth in 2013
Sudan has begun austerity measures to reduce government 5-year compound annual growth 1.3%
spending. Reports of an upsurge of violence in Darfur have $2,631 per capita
raised concerns. Unemployment: 15.3%
407
SUDAN (continued)
1–Year

0 20 40 60 80 100
Sudan is considered one of the world’s most corrupt countries. Power and resources are con-
centrated in and around Khartoum, leaving outlying states impoverished. Members of the rul-
ing party control the national economy and use their wealth to buy political support. There is
little respect for private property, and the legal framework is severely hampered by years of
political conflict.

0 20 40 60 80 100
Sudan’s top individual income tax rate is now 10 percent. The top corporate tax rate is 35 per-
cent for the oil and gas sector. Other taxes include a value-added tax and a capital gains tax. The
total tax burden is 5.7 percent of domestic income. Public expenditures are equivalent to 13.6
percent of domestic output, and public debt equals 91 percent of GDP.

0 20 40 60 80 100
Political instability, a poor regulatory environment, and inadequate infrastructure significantly
deter business formation and operation. The labor market is dominated by the agricultural sec-
tor and informal hiring practices. Violent protests in September 2013 against dramatic cuts in
fuel subsidies prompted the state to reduce some subsidies to investors to free more revenue
for social services.

0 20 40 60 80 100
Sudan’s average tariff rate is 14.7 percent. International trade and investment flows are imped-
ed by regional instability. The underdeveloped financial system is dominated by banks that
practice Islamic banking, which prevents banks from charging interest. The government is
heavily involved in the system, and the banking penetration rate is very low and uneven across
the country.


SURINAME
50
25 75
Least Most
free 0 100 free
Sremains
uriname’s economic freedom score is 54.2, making its
economy the 129th freest in the 2015 Index. Its score
the same as last year, with improvements in half of
Freedom Trend
56
the 10 economic freedoms, including monetary freedom and
freedom from corruption, offset by declines in property rights 55
and the management of government spending. Suriname
is ranked 23rd out of 29 countries in the South and Central 54
America/Caribbean region, and its overall score is lower than
the regional average.
53
Over the past five years, Suriname’s overall economic freedom
score has risen by 1.1 points, with advances in half of the 10 52
economic freedoms. Large gains in investment freedom have
been offset by declines in the control of government spending
51
and property rights.
2011 2012 2013 2014 2015
Despite an export-oriented economy focused on commod-
ity and mineral trade, Suriname has yet to benefit fully
from global trade and investment. High tariff rates protect Country Comparisons
domestic businesses from competition, and regulatory inef-
ficiency often impedes overseas investment. The rule of law Country 54.2
is undermined by a growing domestic drug trade that encour-
ages corruption. World
Average 60.4
BACKGROUND: In 2010, former dictator and convicted narco- Regional
trafficker Desire “Dési” Bouterse of the National Democratic Average 59.7
Party was re-elected president for a five year term. Bouterse
first took power in 1980 when he led the “Sergeants Coup” Free
Economies 84.6
that overthrew the civilian government and installed a mili-
0 20 40 60 80 100
tary regime that ruled until 1987. In 2012, Suriname’s legisla-
ture gave him amnesty for the 1982 murders of 15 prominent
young Surinamese men who had criticized the military dicta-
torship. In 2013, Bouterse’s son Dino was arrested in Panama Quick Facts
and extradited to New York, where he pleaded guilty in 2014 Population: 0.5 million
to charges of drug-trafficking and providing material support GDP (PPP): $7.2 billion
to a terrorist organization. Suriname remains one of South 4.7% growth in 2013
America’s poorest and least-developed countries. The econ- 5-year compound annual growth 4.4%
omy is dominated by exports of natural resources, especially $13,116 per capita
alumina, oil, and gold, which are subject to boom-and-bust Unemployment: 12.4%
price fluctuations. Inflation (CPI): 1.9%
409
SURINAME (continued)
1–Year

0 20 40 60 80 100
Organized crime and drug networks undermine governance and the judicial system. Corrup-
tion is most pervasive in government procurement, license issuance, land policy, and taxa-
tion. In 2013, despite a pledge to do so, the government did not establish a constitutional court
to review the revised amnesty law’s constitutionality. The judiciary is susceptible to political
influence. Property rights are not well protected.

0 20 40 60 80 100
Other taxes include a property tax, a tax on dividends, and an excise tax. The overall tax bur-
den equals 18.3 percent of domestic output. Public expenditures amount to 29.5 percent of the
domestic economy, and government debt equals 29 percent of GDP.

0 20 40 60 80 100
Incorporating a business takes six procedures and 10 days, with no minimum capital required,
but licensing takes more than 200 days on average. Although labor codes are favorable to flex-
ibility, an efficient labor market has not been developed, and informal activity remains sub-
stantial. The government supports state-owned utility companies through a complicated web
of cross subsidies and transfers.

0 20 40 60 80 100
Suriname’s average tariff rate is 11.9 percent. Imports of used cars are restricted, and foreign
firms may face barriers when bidding for government contracts. The government reviews new
foreign investment. The financial system is underdeveloped, and credit decisions are subject
to state influence. Reflecting the system’s lack of depth and efficiency, the capital market
remains rudimentary.


SWAZILAND
50
25 75
Least Most
free 0 100 free
Sby waziland’s economic freedom score is 59.9, making its

economy the 91st freest in the 2015 Index. Its score is down
1.3 points from last year, with improvements in freedom
Freedom Trend
63
from corruption, fiscal freedom, and monetary freedom off- 62
set by deteriorations in five of the 10 economic freedoms,
including a 10-point drop in investment freedom. Swaziland 61
region, and its overall score is just above the world average. 60
Swaziland’s economy has risen briefly to “moderately free” in 59
recent years only to fall back to “mostly unfree.” Nonetheless, 58

over the past five years, its economic freedom has advanced
by 0.8 point, with a 9.0-point increase in the fiscal freedom 57
score offset by declines in three of the 10 economic freedoms,
56
including business freedom and trade freedom.
2011 2012 2013 2014 2015
Swaziland has not fully embraced the principles of economic
freedom. Rule of law remains weak and ineffective. A dual
judicial system can rule based on either customary laws or Country Comparisons
European laws. The inefficient business environment dis-
courages formal business formation. Recent success in the Country 59.9
apparel industry, however, has been a testament to Swazi-
land’s slowly opening economy. World
Average 60.4
BACKGROUND: King Mswati III rules Africa’s last monar- Regional
chy. September 2013 parliamentary elections were disputed Average 54.9
because candidates were handpicked by the king. Banned
political parties have called for greater democracy and limits Free
Economies 84.6
on the king’s power. In June 2014, as a result of crackdowns
0 20 40 60 80 100
on peaceful demonstrations and lack of protection of workers’
rights, the U.S. disqualified Swaziland from receiving the mar-
ket-access benefits available under the African Growth and
Opportunity Act. Swaziland’s currency is pegged to the South Quick Facts
African rand, and South Africa is its largest trading partner. Population: 1.1 million
The soft-drink concentrate, textile, and cane sugar industries GDP (PPP): $6.8 billion
are the leading export earners and largest private-sector man- 2.8% growth in 2013
ufacturers. Coal and diamonds are also exported. Fiscal prof- 5-year compound annual growth 1.4%
ligacy and the high HIV/AIDS rate undermine development. $6,218 per capita
Unemployment: 22.9%
411
SWAZILAND (continued)
1–Year

0 20 40 60 80 100
Government corruption was widely blamed for contributing to Swaziland’s financial crisis. The
dual judicial system includes courts based on Roman–Dutch law and traditional courts using
customary law. The judiciary is independent in most civil cases, though the king has ultimate
judicial powers, and the royal family and government often refuse to respect rulings with which
they disagree.

0 20 40 60 80 100
Swaziland’s top individual income tax rate is 33 percent, and its top corporate rate is down
to 27.5 percent. Other taxes include a fuel and sales tax. Overall tax revenue amounts to 22.7
percent of domestic income, and government expenditures are equivalent to 32.4 percent of
domestic output. Government debt equals 19 percent of gross domestic product.

0 20 40 60 80 100
Many regulatory requirements increase the overall cost of entrepreneurial activity. It still
takes about a month to establish a business. Labor regulations are not enforced effectively,
and there is no efficient countrywide labor market. A large share of the workforce is employed
in the informal sector. The state continues to influence prices through numerous state-owned
enterprises and utilities.

0 20 40 60 80 100
The average tariff rate is 7.0 percent. Informal barriers further impede trade. Foreign invest-
ment is allowed in most sectors of the economy. The underdeveloped financial system is closely
linked to South Africa. Three commercial banks owned by South African institutions account
for over 80 percent of total assets. The capital market is nascent, and the stock market is large-
ly inactive.


SWEDEN
50
25 75
Least Most
free 0 100 free
Sdecreased
weden’s economic freedom score is 72.7, making its
economy the 23rd freest in the 2015 Index. Its score has
Freedom Trend
75
four of the 10 economic freedoms outweighed by deteriora-
tions in freedom from corruption, business freedom, and the 74
management of government spending. Sweden is ranked 12th
out of 43 countries in the Europe region, and its overall score 73
is above the world and regional averages.
Despite its well-established welfare state and large govern- 72
ment budget, Sweden has made marginal changes to improve
its economic freedom and competitiveness. Over the past five 71
years, economic freedom in Sweden has advanced by 0.8 point
with gains in five of the 10 economic freedoms, including fiscal
70
freedom, the management of government spending, monetary
freedom, trade freedom, and investment freedom. 2011 2012 2013 2014 2015
Sweden’s high-performing economy has built its success on

openness to global trade and investment. Reforms over the Country Comparisons
past two decades reduced the role of government and intro-
duced market mechanisms that set the foundations for today’s Country 72.7
competitive economy. Sweden’s business freedom score is one
of the highest in the world. Fiscal responsibility remains cen- World
Average 60.4
tral to the new government’s policy proposals, but plans to
reverse some of the previous government’s tax cuts in order Regional
67.0
to fund higher spending could hurt growth. Average
BACKGROUND: Sweden joined the European Union in 1995 Free

Economies 84.6
but rejected adoption of the euro in 2003. The public remains
0 20 40 60 80 100
opposed to eurozone membership. The economic downturn
in 2009 led to a slight increase in unemployment, but unem-
ployment levels appeared to be stabilizing in 2014. A general
election was held in September 2014. After difficult negotia- Quick Facts
tions, a new center-left coalition government consisting of Population: 9.6 million
the Social Democratic Party and the Green Party took office. GDP (PPP): $396.8 billion
Banks are well capitalized, and Sweden has weathered the 1.5% growth in 2013
financial crisis relatively well. Sweden’s economy is export- 5-year compound annual growth 1.3%
oriented; principal exports include automobiles, telecom- $41,188 per capita
munications products, construction equipment, and other Unemployment: 8.0%
investment goods. Inflation (CPI): 0.0%
413
SWEDEN (continued)
1–Year

LAW Freedom from Corruption 89.0 3rd –3.3
0 20 40 60 80 100
Sweden is ranked 3rd out of 177 countries in Transparency International’s 2013 Corruption
Perceptions Index. Effective anti-corruption measures discourage bribery of public officials
and uphold government integrity. The rule of law is well maintained. The judicial system oper-
ates independently and impartially, with consistent application of laws. Property rights and
contract enforcement are very secure.

0 20 40 60 80 100
Sweden’s top individual income tax rate is 57 percent, and its top corporate tax rate is 22 per-
cent. Other taxes include a value-added tax and a capital gains tax. The overall tax burden
equals approximately 44.3 percent of the domestic economy. Public expenditures account for
51.9 percent of domestic output, and government debt is equal to 49 percent of gross domes-
tic product.

0 20 40 60 80 100
The regulatory framework facilitates entrepreneurial activity, allowing efficient business for-
mation. The government generally takes a hands-off approach in sectors dominated by small
businesses. The labor market is dynamic, although the non-salary cost of hiring a worker is
high. Sweden has continued to lead the fight to eliminate all European Union farm subsidies
while also limiting green energy support.

0 20 40 60 80 100
EU is relatively open to external trade. Sweden generally treats foreign and domestic investors
equally. The number of state-owned enterprises is relatively large. The modern and efficient
financial system provides a wide range of financing instruments for foreign and domestic inves-
tors. Banks remain well-capitalized.


SWITZERLAND
50
25 75
Least Most
free 0 100 free
Sdecreased
witzerland’s economic freedom score is 80.5, making its
by 1.1 points since last year, with modest improve-
Freedom Trend
83
ments in business freedom, fiscal freedom, and monetary
freedom overwhelmed by a large decline in labor freedom and
82
smaller declines in freedom from corruption and the manage-
ment of government spending. Switzerland is ranked 1st out
of 43 countries in the Europe region.
81
Switzerland has enjoyed economically “free” status since
2010. With an economy that benefits from sound fundamen-
tals that include monetary stability, low public debt, and a 80
vibrant employment market, the Swiss economy has weath-
ered the global economic uncertainty well.
79
Switzerland continues to be a regional leader in economic 2011 2012 2013 2014 2015
freedom. Efficient and transparent regulations underpin an
efficient business environment and support diversified eco-
nomic growth. Openness to global trade and investment is Country Comparisons
firmly institutionalized, buttressed by a dynamic financial
sector and a well-functioning independent judiciary. Switzer- Country 80.5
land has a strong tradition of reliable protection of property
rights, and the legal system is transparent and evenly applied. World
Average 60.4
Effective anti-corruption measures are in force.
Regional
BACKGROUND: Switzerland’s federal system of government Average 67.0
disperses power widely, and executive authority is exercised
collectively by the seven-member Federal Council. Switzer- Free
Economies 84.6
land has a long tradition of openness to the world but jeal-
0 20 40 60 80 100
ously guards its independence and neutrality. It did not join
the United Nations until 2002, and two referenda on mem-
bership in the European Union have failed by wide margins.
Membership in the European Economic Area was rejected by Quick Facts
referendum in 1992. Switzerland is one of the world’s richest Population: 8.0 million
and most investment-friendly countries. It has a well-devel- GDP (PPP): $371.6 billion
oped financial services industry. In addition to banking, the 2.0% growth in 2013
economy relies heavily on precision manufacturing, metals, 5-year compound annual growth 1.2%
pharmaceuticals, chemicals, and electronics. $46,430 per capita
Unemployment: 4.4%
415
SWITZERLAND (continued)
1–Year

0 20 40 60 80 100
Switzerland was ranked 7th out of 177 countries in Transparency International’s 2013 Corrup-
tion Perceptions Index. Protection of property rights is strongly enforced, and an independent
and fair judicial system is institutionalized throughout the economy. Commercial and bank-
ruptcy laws are applied consistently and efficiently. Intellectual property rights are respected
and enforced.

0 20 40 60 80 100
Switzerland’s tax system operates mostly on the cantonal level. The top effective federal income
tax rate is 11.5 percent, and the combined rate can be over 40 percent. The federal corporate tax
rate is 8.5 percent, but the combined rate can reach 24 percent. The tax burden is equal to 28.2
percent of the economy, and public expenditures are equivalent to 34.1 percent of domestic
production. Public debt equals 50 percent of GDP.

0 20 40 60 80 100
The competitive regulatory framework promotes business formation and operational effi-
ciency. With no minimum capital required, starting a business involves six procedures. Labor
regulations are still relatively flexible. Proportionately, Switzerland’s agricultural subsidies are
among the highest in the world and dampen innovation in agriculture, but the government did
cut solar subsidies by 10 percent in 2014.

0 20 40 60 80 100
Switzerland has a 0 percent average tariff rate and is a member of the European Free Trade
Association. Agricultural subsidies are significant. Foreign and domestic investments are gen-
erally treated equally. The highly competitive and well-developed financial sector offers a wide
range of financial services and encourages entrepreneurial activity. Banking regulations are
sensible, and lending practices are prudent.


SYRIA
50
25 75
Least Most
free 0 100 free
G rading of Syria’s overall economic freedom remains sus-

pended in the 2015 Index due to the political turmoil that
has led to civil war and a significant deterioration in the quali-
Freedom Trend
54
ty of publicly available economic statistics. Facets of economic
freedom for which data are still available have been individu-
53
ally scored. As a “mostly unfree” economy with a score of 51.2,
Syria was ranked fourth lowest in the Middle East/North Afri-
ca region when it was last graded in the 2012 Index.
52
Civil war has left Syria’s economy in ruins. The government
does not control portions of the major cities, and the war has
killed nearly 200,000 people and displaced millions. The rule 51
of law has been ravaged by extrajudicial killings, kidnappings,
and torture. Inflation has grown as the Syrian pound has
50
become an unreliable medium of exchange.
2011 2012 2013 2014 2015
The little formal economic activity that continues is impeded
by weak structural and institutional foundations. The presi-
dent, his cabinet, and close family members dominate many Country Comparisons
of the major economic sectors. Rampant corruption has
destroyed any entrepreneurial dynamism. Continuing con- Country n/a
flict limits trade and investment, and currency controls limit
the free flow of capital. World
Average 60.4
BACKGROUND: The Assad family’s iron grip on Syria, which Regional
it has ruled since Hafez al-Assad’s military coup in 1970, faces Average 61.6
serious challenges. Bashar al-Assad, who succeeded his father
in 2000, has failed to deliver on promises to reform Syria’s Free
Economies 84.6
socialist economy and ease political repression. Arab Spring
0 20 40 60 80 100
protests in 2011 were met with brutal crackdowns. By 2012,
the uprising against Assad had spiraled into a sectarian civil
war with Sunni-dominated rebels pitted against the Alawite-
dominated regime. By mid-2014, the terrorist group Islamic Quick Facts
State of Iraq and Syria (ISIS) had gained control of much of Population: 19.1 million
the northern half of the country. The conflict has triggered a GDP (PPP): $70.0 billion
severe economic recession. Before the conflict, Syria’s econ- –20.6% growth in 2013
omy was hobbled by a large state bureaucracy, falling oil pro- 5-year compound annual growth n/a
duction, rising budget deficits, and inflation. $3,640 per capita
Unemployment: n/a
FDI Inflow: n/a
Public Debt: n/a
417
SYRIA (continued)
1–Year

0 20 40 60 80 100
Even before the armed conflict and ongoing disintegration of Syria, government institutions
lacked public accountability and were plagued by corruption. Members of the ruling family
and their inner circle are said to own and control a major portion of the economy. Corrup-
tion is also present in rebel-held areas on a smaller scale. The judiciary is neither transparent
nor independent.

0 20 40 60 80 100
Syria’s top individual income tax rate is 22 percent, and its top corporate tax rate is 28 percent.
Other taxes include a tax on inheritance and a property tax. Ongoing civil conflict has rendered
fiscal policy and tax administration (if any) opaque. It has been reported that budget deficits
have been on the rise.

0 20 40 60 80 100
The repressive business environment, severely impaired by the ongoing civil war and uncer-
tainty, suppresses entrepreneurial activity and prolongs economic stagnation. The labor
market is heavily state-controlled and undermined by instability. The Assad regime spent 45
percent of its 2014 budget on subsidies and attempted to “suppress” the inflation rate, which
is one of the world’s highest, with price controls.

0 20 40 60 80 100
Syria has a 6.1 percent average tariff rate, and foreign investment is subject to government
screening. The ongoing political turmoil is a major deterrent to international trade and invest-
ment, and the financial system has been under significant strain. The stock market has been
running out of monetary resources, and bank deposits have dwindled, especially with capital
fleeing the country.


TAIWAN
50
25 75
Least Most
free 0 100 free
Tpoints
aiwan’s economic freedom score is 75.1, making its econo-
my the 14th freest in the 2015 Index. Its score is up by 1.2
from last year, with improvements in seven of the 10
Freedom Trend
78
economic freedoms led by investment freedom, the control of
government spending, and labor freedom. Taiwan is ranked 76
5th out of 42 economies in the Asia–Pacific region, and its
overall score is well above the world average.
74
Prudent macroeconomic policy within a stable legal and
monetary environment has been the key to rising levels of 72
economic freedom over the past five years. Commitment to
structural reforms and openness to global commerce have
70
enabled Taiwan to advance far into the “mostly free” category.
Recording uninterrupted years of growth in economic free-
dom since 2009, Taiwan has achieved its highest score ever in 68
the 2015 Index. 2011 2012 2013 2014 2015
Taiwan’s export-driven, dynamic economy benefits from a

well-functioning legal framework and a tradition of private- Country Comparisons
sector entrepreneurship. The efficient business environment
is facilitated by a competitively low corporate tax rate and the Country 75.1
elimination of minimum capital requirements for incorpo-
rating a company. Despite progress, however, a relatively high World
60.4
level of perceived corruption and a rigid labor market still Average
restrain Taiwan’s overall economic freedom. Regional
Average 58.8
BACKGROUND: Taiwan is a dynamic multi-party democracy,
and its economy is one of the richest in Asia. President Ma Free
84.6
Ying-jeou, re-elected in 2012 on a platform that promised Economies
economic revitalization, has relaxed cross-Strait barriers with 0 20 40 60 80 100
the People’s Republic of China and negotiated a multi-stage
formal economic agreement with Beijing. Taiwan is excluded
from membership in the United Nations, other international Quick Facts
organizations, and a variety of free trade arrangements as part Population: 23.4 million
of Beijing’s efforts to pressure it into unification. Although GDP (PPP): $929.5 billion
internal opposition to engaging with China is considerable 2.1% growth in 2013
because of fears that sovereignty will be lost, recent eco- 5-year compound annual growth 3.3%
nomic arrangements bind the island much closer to the PRC. $39,767 per capita
The government’s possible ratification of a Trade in Services Unemployment: 4.1%
Agreement with China is controversial. Inflation (CPI): 0.8%
419
TAIWAN (continued)
1–Year

0 20 40 60 80 100
Though less pervasive than in the past, connections remain between politics and big business,
and corruption is still a problem. In June 2014, a senior local official was indicted for accepting
bribes from a construction company. The judiciary is independent, and the court system is free
of political interference. Property rights are generally protected, and the judiciary enforces
contracts effectively.

0 20 40 60 80 100
Taiwan’s top individual income tax rate is 40 percent, and its top corporate tax rate is 17 per-
cent. Other taxes include a value-added tax and a tax on interest. The overall tax burden is
equal to 8.7 percent of domestic income. Government spending amounts to 20.7 percent of the
domestic economy, and public debt equals 41 percent of gross domestic product.

0 20 40 60 80 100
With no minimum capital required, it takes three procedures to incorporate a company. Bank-
ruptcy proceedings are straightforward. However, completing licensing requirements remains
relatively time-consuming. Labor mobility is impeded in the rigid labor market. Prices are mar-
ket-determined for the most part, but the government does influence some prices and controls
prices for electricity and pharmaceutical products.

0 20 40 60 80 100
The average tariff rate is 1.8 percent. Tariff-rate quotas restrict many agricultural imports. The
government screens new investments. Investment in some sectors is restricted. The evolving
financial sector provides a wide range of financial instruments and services, and the state has
stepped back from its previously dominant role. Liberalization has progressed, but the foreign
bank presence remains relatively small.


TAJIKISTAN
50
25 75
Least Most
free 0 100 free
Tby 0.7
ajikistan’s economic freedom score is 52.7, making its
economy the 140th freest in the 2015 Index. Its score is up
point since last year, with improvements in six of the
Freedom Trend
55
10 economic freedoms, including business freedom, the con-
trol of government spending, and freedom from corruption,
54
offsetting a large decline in financial freedom. Tajikistan is
ranked 31st out of 42 countries in the Asia–Pacific region, and
its overall score is lower than the world average.
53
Tajikistan’s relatively stable overall level of economic freedom
in recent years masks large score declines in financial free-
dom and labor freedom that offset more modest gains in other 52
areas. Over the past five years, economic freedom in Tajikistan
has declined by 0.8 point, with losses in four of the 10 econom-
51
ic freedoms.
2011 2012 2013 2014 2015
A five-year civil war destroyed much of Tajikistan’s economic
infrastructure and institutions. The rule of law is extremely
weak, and the president’s family dominates key positions in Country Comparisons
government and business. Poverty is rampant, and inefficient
business regulations inhibit individuals from lifting them- Country 52.7
selves from poverty. The trade environment limits investment
and the transfer of productive technologies. World
Average 60.4
BACKGROUND: The 1992–1997 civil war between an Islamist/ Regional
democratic coalition and the ruling Communists severely Average 58.8
damaged an already weak economy and caused a sharp decline
in industrial and agricultural production. Emomali Rahmon, Free
Economies 84.6
president since 1994 and re-elected to another seven-year
0 20 40 60 80 100
term in November 2013 in an election that was neither free
nor fair, controls all three branches of government. Corrup-
tion, Islamic terrorism, and narco-trafficking are endemic.
Most Tajiks survive by working in the underground economy. Quick Facts
Relations with neighboring Uzbekistan are strained. Govern- Population: 8.1 million
ment abuses of human rights are widespread. Tajikistan is GDP (PPP): $19.1 billion
heavily dependent on revenues from aluminum and cotton 7.4% growth in 2013
exports. The illegal drug trade and remittances from migrant 5-year compound annual growth 6.5%
workers, primarily in Russia, account for over 45 percent of $2,354 per capita
GDP. Tajikistan became a member of the World Trade Orga- Unemployment: 10.8%
nization in 2013. Inflation (CPI): 5.0%
421
TAJIKISTAN (continued)
1–Year

0 20 40 60 80 100
Corruption is pervasive. Patronage networks are central to political life. At least two of Presi-
dent Rahmon’s children hold senior government posts, and various family members reportedly
maintain extensive business interests in the country. The judiciary lacks independence. Many
judges are poorly trained and inexperienced, and bribery is reportedly widespread. Under Tajik
law, all land belongs to the state.

0 20 40 60 80 100
Some companies, including foreign entities, pay different rates. Other taxes include a value-
added tax and a sales tax. The overall tax burden is equal to 19.9 percent of domestic produc-
tion. Government spending equals 24.6 percent of domestic output, and public debt equals 29
percent of GDP.

0 20 40 60 80 100
The business environment has improved with implementation of more simplified business
registration in recent years, but entrepreneurial activity remains seriously hampered by incon-
sistent bureaucracy. The labor market remains underdeveloped. The government influences
prices through regulation and large subsidies to numerous state-owned and state trading enter-
prises. Nearly half of the recipients of social protection subsidies are “non-poor.”

Financial Freedom 30.0 131st –10.0
0 20 40 60 80 100
Tajikistan’s average tariff rate is 5.2 percent. Goods may face delays clearing customs, and it
is expensive to import products into the country. Foreign investors may not own land, and
proposed new investments may be subject to review by government agencies. Financial-sector
assets have grown rapidly, but continuing state interference seriously handicaps private-sec-
tor development.


TANZANIA
50
25 75
Least Most
free 0 100 free
Tdecreased
anzania’s economic freedom score is 57.5, making its
by 0.3 point since last year due to declines in trade
Freedom Trend
60
freedom and business freedom that outweigh improvements
in half of the 10 economic freedoms, including freedom from
corruption and monetary freedom. Tanzania is ranked 17th 59
out of 46 countries in the Sub-Saharan Africa region, and its
overall score is lower than the world average.
58
Productive economic growth in recent years has helped to
promote prosperity, but widespread poverty still plagues an
economy that lacks fundamental aspects of economic free- 57
dom. A greater commitment to structural and institutional
reforms is needed to create an efficient entrepreneurial envi-
ronment and open markets. 56
2011 2012 2013 2014 2015
Tanzania lacks an effective rule of law. Corruption remains
pervasive and has been especially noticeable in energy and
mining, which have experienced rapid growth in recent years. Country Comparisons
Business and labor regulations remain stringent and prohibi-
tively difficult for new job-creating activities. Entrepreneurs Country 57.5
find it hard to register businesses legally, and the formal labor
market’s barriers to entry inhibit full employment. Efforts to World
60.4
open the economy have experienced some success, but gov- Average
ernment bureaucracy still delays some investment. Regional
Average 54.9
BACKGROUND: President Jakaya Kikwete was elected in
December 2005 and re-elected in October 2010. Kikwete’s Free
84.6
Chama Cha Mapinduzi party has been in power since the Economies
emergence of multi-party politics in 1961. The adoption of 0 20 40 60 80 100
a limited number of market-based policies has stimulated
moderate growth, but property rights are still uncertain, and
corruption is endemic. Tanzania also has a high HIV/AIDS Quick Facts
rate and poor infrastructure. Foreign investments have led Population: 46.3 million
to improvements in efficiency. A 50-year border dispute with GDP (PPP): $79.4 billion
Malawi recently resurfaced when Malawi gave a British firm 7.0% growth in 2013
exploration rights for oil in Lake Malawi. Tanzania hosts more 5-year compound annual growth 6.7%
than half a million refugees, mainly from the Democratic $1,715 per capita
Republic of Congo and Burundi, and is a transit point for both Unemployment: 3.5%
human and drug trafficking. Inflation (CPI): 7.9%
423
TANZANIA (continued)
1–Year

0 20 40 60 80 100
Corruption is pervasive in all aspects of political and commercial life, but especially in the
energy and natural resources sectors. Tanzania’s judiciary remains under political influence
and suffers from underfunding and corruption, in part due to increasing problems stemming
from narcotics trafficking. Complex land laws have been accompanied by a high incidence of
land disputes.

0 20 40 60 80 100
Tanzania’s top individual and corporate income tax rates are 30 percent. Other taxes include
a value-added tax and a sales tax. The tax burden amounts to 14.4 percent of domestic produc-
tion. Public spending is equal to 26.3 percent of the domestic economy, and government debt
has reached 41 percent of gross domestic product.

0 20 40 60 80 100
The business environment remains hampered by a lack of efficiency. Requirements for launch-
ing a business are not time-consuming, but licensing remains costly. Labor regulations are
not modern and flexible enough to support a vibrant labor market. In late 2013, in line with
IMF recommendations, the government curbed power subsidies and raised electricity tariffs
to sustain growth and ease fiscal pressures.

0 20 40 60 80 100
The average tariff rate is 11.5 percent. Imports may face customs delays. All land is the property
of the government. The small financial sector remains shallow, dominated by commercial banks.
Banking is relatively sound, but the rate of banking penetration across the country remains low.
A stock exchange has been in operation, but the capital market remains underdeveloped.


THAILAND
50
25 75
Least Most
free 0 100 free
Tdecreased
hailand’s economic freedom score is 62.4, making its
by 0.9 point since last year, with deteriorations in
Freedom Trend
66
financial freedom, property rights, and the control of govern-
ment spending outweighing small improvements in six of the 65
10 economic freedoms, including labor freedom, fiscal free-
dom, and freedom from corruption. Thailand is ranked 12th 64
out of 42 countries in the Asia–Pacific region, and its overall
score is higher than the world and regional averages.
63
Thailand’s economic freedom score has declined for three
years in a row. Since 2011, economic freedom in Thailand 62
has fallen by 2.3 points. Score declines in a majority of the 10
economic freedoms have been led by double-digit declines in
61
investment freedom and labor freedom and a nearly double-
digit drop in the control of government spending. 2011 2012 2013 2014 2015
Political unrest and conflict between rural and urban vot-

ers have led to increased perceptions of corruption and an Country Comparisons
unsteady investment climate. A growing foreign automobile
manufacturing industry provides evidence of the benefits of Country 62.4
increasing economic openness, but the business environment
for small entrepreneurs remains difficult due to inefficient World
Average 60.4
business and labor regulations.
Regional
BACKGROUND: Thailand has experienced 19 military coups Average 58.8
since becoming a constitutional monarchy in 1932. The gov-
ernment returned to democratic civilian control in December Free
Economies 84.6
2007, but political turmoil continues. In the July 2011 parlia-
0 20 40 60 80 100
mentary elections, Pheu Thai, the opposition party of exiled
leader Thaksin Shinawatra, won an outright majority, and
Shinawatra’s sister, Yingluck Shinawatra, became prime min-
ister. In spring 2014, Yingluck Shinawatra was ousted from Quick Facts
power in a military coup led by Army General Prayuth Chan- Population: 68.2 million
Ocha. Elections are not expected until October 2015. Since the GDP (PPP): $673.7 billion
coup, freedom of speech and freedom of association have been 2.9% growth in 2013
severely restricted, and leading politicians have been placed 5-year compound annual growth 2.9%
under house arrest. About 40 percent of the population is $9,875 per capita
engaged in agriculture, but a thriving manufacturing sector Unemployment: 0.8%
contributes significantly to the economy. Inflation (CPI): 2.2%
425
THAILAND (continued)
1–Year

0 20 40 60 80 100
Corruption and graft are widespread at all levels of government and society amid unprecedent-
ed levels of political instability. Before a May 2014 military coup replaced the democratically
elected government, the independent judiciary had been generally effective in enforcing prop-
erty and contractual rights but remained vulnerable to political interference. Private property
has generally been protected, but the legal process is slow.

0 20 40 60 80 100
Thailand’s top individual income tax rate has been reduced from 37 percent to 35 percent. The
top corporate tax rate is 20 percent. Other taxes include a value-added tax and a property tax.
Overall tax revenues equates to 15 percent of the domestic economy. Government spending
amounts to 24.9 percent of domestic production, and public debt equals 45 percent of gross
domestic product.

0 20 40 60 80 100
Forming a business takes almost a month, but no minimum capital is required. Licensing
requirements remain onerous. Reform of the relatively rigid labor market has lagged. The
new military government imposed price controls and expanded its power over state-owned
enterprises (e.g., in the utility, energy, telecommunications, banking, agriculture, and transport
sectors) that account for more than 40 percent of GDP.

0 20 40 60 80 100
Thailand’s average tariff rate is 4.9 percent. Tariffs on agricultural imports are especially high.
The government restricts foreign investment in many sectors of the economy. The financial
system is under strain caused by political instability. Revisions in the Foreign Business Act,
intended to open capital markets further to foreign investors, have been largely cosmetic. The
banking sector remains relatively stable.


TIMOR-LESTE
50
25 75
Least Most
free 0 100 free
Tincreased
imor-Leste’s economic freedom score is 45.5, making its
by 2.3 points from last year, with improvements
Freedom Trend
47
in trade freedom, business freedom, and freedom from cor-
46
ruption that more than offset declines in labor freedom and
investment freedom. Timor-Leste is ranked 40th out of 42
45
countries in the Asia–Pacific region, and its overall score is
well below the world and regional averages.
44
Timor-Leste remains one of the world’s least economically
free countries. Its economic freedom has increased by 2.7 43
points over the past five years, but improvements have come
from such a low base that economic activity remains sup- 42
pressed. Efforts to spur investment and increase regulatory

41
efficiency have led gains in four of the 10 economic freedoms.
2011 2012 2013 2014 2015
Economic institutions and infrastructure remain weak.
Residual instability following violence surrounding indepen-
dence from Indonesia has slowed or even prevented much Country Comparisons
economic reform. The rule of law is weakly respected, and
vast oil and gas reserves encourage corruption and nepotism. Country 45.5
Timor-Leste’s trade freedom is among the worst in the world,
and a slow-moving bureaucracy hampers investment that World
Average 60.4
could diversify the economy.
Regional
BACKGROUND: The Democratic Republic of Timor-Leste Average 58.8
became independent in 2002, and successive governments
have struggled to pacify the country. Revolutionary leader Free
Economies 84.6
Xanana Gusmao, its first president, has been prime minis-
0 20 40 60 80 100
ter since 2007 but has stated his intention to step down at
the end of 2014. Economic liberalization has mostly stalled,
and the economy depends heavily on foreign aid. Infrastruc-
ture is very poor, and corruption is pervasive. The economy Quick Facts
remains primarily agricultural. Oil and gas profits account Population: 1.2 million
for more than 95 percent of government revenue. The gov- GDP (PPP): $25.8 billion
ernment deposits all oil income in a Petroleum Fund that is 8.4% growth in 2013
not counted as part of GDP but is reflected in government 5-year compound annual growth 10.4%
revenue figures. In 2011, with Indonesia’s support, Timor- $21,705 per capita
Leste applied for membership in the Association of Southeast Unemployment: 4.5%
Asian Nations. Inflation (CPI): 10.6%
427
TIMOR-LESTE (continued)
1–Year

0 20 40 60 80 100
President Taur Matan Rauk reportedly has said that corruption exists at all levels in society.
Increasing allegations of petty corruption against the police force and a perception that gov-
ernment contracts generally go to those with the right connections have raised concerns about
endemic public-sector corruption. Rule of law is weak. Land reform remains an unresolved
and contentious issue.

0 20 40 60 80 100
Timor-Leste’s top individual and corporate income tax rates are 10 percent. Other taxes include
a sales tax. The majority of tax revenue, which is equal to 69.1 percent of gross domestic prod-
uct, comes from offshore oil and gas production in the Timor Sea. Government expenditures
are equivalent to 86.4 percent of domestic production.

0 20 40 60 80 100
The regulatory environment remains burdensome and costly. The minimum capital required
to establish a business still costs more than the level of average annual income. The public
sector accounts for around half of non-agricultural employment, and the formal labor market
remains underdeveloped. The government uses its substantial oil revenues to fund large sub-
sidy programs for food, power, and fuel.

0 20 40 60 80 100
The simple average tariff rate for Timor-Leste was 6.0 percent as of 2007. New foreign invest-
ment is subject to government screening. The investment environment is significantly limited
by inadequate institutional capacity, complex licensing requirements, and poor infrastructure.
The financial sector is very small and underdeveloped. Less than 2 percent of the population
has access to financial services.

Property Rights 0 Fiscal Freedom 0 Business Freedom +12.8 Trade Freedom +6.6

TOGO
50
25 75
Least Most
free 0 100 free
Tpoints
ogo’s economic freedom score is 53.0, making its economy
the 138th freest in the 2015 Index. Its score is up by 3.1
from last year, reflecting improvements in six of the
Freedom Trend
54
10 economic freedoms, including investment freedom, busi- 53
ness freedom, freedom from corruption, and trade freedom.
Togo is ranked 30th out of 46 countries in the Sub-Saharan 52
Africa region, and its overall score is well below the world and
regional averages. 51
Steady improvements in economic freedom have boosted 50
Togo from the “repressed” category for the first time, and it 49
has recorded its highest score ever in the 2015 Index. Over
the past five years, economic freedom in Togo has advanced 48
by 3.9 points, with relatively broad-based improvements led
47
by gains of 25 points in investment freedom and 15 points in
business freedom. 2011 2012 2013 2014 2015
Togo has one of West Africa’s largest natural harbors, but its
institutional framework is not fully consistent with the freer Country Comparisons
standards expected in the international marketplace. The rule
of law remains weakly enforced, and corruption is prevalent. Country 53.0
Rigid and inefficient business regulations encourage the use
of graft to expedite bureaucratic delays. World
Average 60.4
BACKGROUND: The military appointed Faure Gnassingbé Regional
to the presidency in 2005 following the death of his father. Average 54.9
Faced with sanctions by the Economic Community of West
African States and the African Union, he stepped down two Free
Economies 84.6
months later and called for an election, which he won despite
0 20 40 60 80 100
electoral irregularities. Gnassingbé was re-elected in 2010,
and his Union of Forces for Change won a majority of seats
in flawed parliamentary elections in 2013. Togo is the world’s
fourth-largest producer of phosphate. Cocoa, coffee, and cot- Quick Facts
ton generate about 40 percent of export earnings. With West Population: 6.8 million
Africa’s only deep-water port, its secure territorial waters GDP (PPP): $7.4 billion
have become a relatively safe zone for international shippers 5.6% growth in 2013
amid the regional surge in maritime piracy. Togo remains 5-year compound annual growth 4.8%
dependent on foreign assistance and continues to work on $1,084 per capita
International Monetary Fund–designed reforms. Unemployment: 8.5%
429
TOGO (continued)
1–Year

0 20 40 60 80 100
Although the government has taken some steps to reduce graft, it is still common practice to
provide cash or other gifts to expedite business transactions and shorten delays for obtaining
registrations, permits, and licenses. The judicial system lacks resources and is heavily influ-
enced by the presidency. Private property is not well protected, and enforcement of contracts
is difficult.

0 20 40 60 80 100
Togo’s top individual income tax rate is 45 percent, and its top corporate tax rate is 27 per-
cent. Other taxes include a value-added tax and a property tax. The overall tax burden equals
16.5 percent of the domestic economy, and government expenditures amount to 27 percent of
domestic production. Public debt is equivalent to 43 percent of gross domestic product.

0 20 40 60 80 100
Togo lags behind other developing countries in easing regulatory constraints. The process
for launching a business has been streamlined, but getting necessary licenses takes over five
months. The labor market remains underdeveloped, and the informal sector employs much
of the workforce. In 2013, the IMF recommended that Togo reduce fuel subsidies to allow for
higher social and infrastructure spending.

0 20 40 60 80 100
The average tariff rate is 11.1 percent. Togo adopted a new customs code in 2014 and is imple-
menting a single window to facilitate trade. Foreign and domestic investors are generally
treated equally under the investment code. The underdeveloped legal infrastructure impedes
the development of a modern financial sector. Much of the population operates outside of the
formal banking sector.


TONGA
50
25 75
Least Most
free 0 100 free
Tteronga’s economic freedom score is 59.3, making its economy

the 95th freest in the 2015 Index. Its score is 1.1 points bet-
than last year, with improvements in investment freedom,
Freedom Trend
61
the control of government spending, and monetary freedom 60
outweighing declines in trade freedom and business freedom.
Tonga is ranked 18th out of 42 countries in the Asia–Pacific 59
region, and its score is below the world average.
58
Tonga is relatively well developed compared to some of its
South Pacific island neighbors. Underpinned by a relatively 57
open trading environment, it has cultivated agricultural 56

exports to boost incomes and lower poverty. These improve-
ments are reflected in Tonga’s overall economic freedom 55
score, which has advanced by 3.5 points since 2011. Gains in
54
half of the 10 factors have been led by large improvements in
trade and investment freedom. In the 2015 Index, Tonga has 2011 2012 2013 2014 2015
recorded its highest score ever.
Despite these gains, however, Tonga’s economic framework is Country Comparisons
still weak, and the government relies heavily on foreign aid to
balance the books. While the judicial system is based on Brit- Country 59.3
ish common law and relatively independent, judicial proce-
dures are inefficient. Corruption is pervasive, and nepotism World
Average 60.4
and favoritism benefit the elite and royals. Investment is lim-
ited and screened by the government, limiting non-aid–based Regional
58.8
financial flows. Average
BACKGROUND: The island Kingdom of Tonga, the South Free

Economies 84.6
Pacific’s last Polynesian monarchy, has been independent
0 20 40 60 80 100
since 1970. The royal family, hereditary nobles, and a few
other landholders control politics. Tonga held its first elec-
tions in November 2010 under its newly formed constitu-
tional monarchy. The Friendly Islands Democratic Party won Quick Facts
a plurality in parliament, and Lord Siale’ataonga Tu’ivakano Population: 0.1 million
became Tonga’s first elected prime minister. Tonga boasts a GDP (PPP): $0.8 billion
99 percent literacy rate, although more than half of the popu- 1.0% growth in 2013
lation lives abroad, mostly in New Zealand. Agriculture is the 5-year compound annual growth 2.0%
principal productive sector of the economy, and remittances $8,168 per capita
from abroad are the primary source of income. Unemployment: n/a
431
TONGA (continued)
1–Year

LAW Freedom from Corruption 28.6 131st 0
0 20 40 60 80 100
Corruption is widespread, with royals, nobles, and their top associates allegedly having used
state assets for personal benefit, and transparency and accountability are lacking. An Anti-
Corruption Commission established in 2007 lacks power and resources to operate. The judi-
ciary is generally independent, but a shortage of judges has caused long case backlogs. Property
rights are uncertain, and enforcement is weak.

0 20 40 60 80 100
Other taxes include a sales tax and a tax on interest. The total tax burden amounts to 15.9 per-
cent of domestic production. Government expenditures equal 26.4 percent of domestic output,
and public debt is equivalent to 40.8 percent of gross domestic product.

0 20 40 60 80 100
Launching a company takes four procedures, and no minimum capital is required. The regula-
tory framework generally supports entrepreneurial activity, but application of the commercial
codes is not always straightforward. A well-functioning modern labor market is not fully devel-
oped. The government influences prices through subsidies for electricity and to loss-making
state-owned enterprises.

0 20 40 60 80 100
Tonga’s average tariff rate is 5.8 percent. Foreign investment in some sectors of the economy is
prohibited. The government screens new foreign investment. In the absence of a modern and
efficient financial system, much of the population has no access to financial services. Nonper-
forming loans remain a problem in the banking system. Capital markets are almost nonexistent.


TRINIDAD AND TOBAGO
50
25 75
Least Most
free 0 100 free
64.1
Freedom Trend
Tis 1.4rinidad and Tobago’s economic freedom score is 64.1, mak-
ing its economy the 67th freest in the 2015 Index. Its score
points higher than last year, with gains in the manage-
68
67
ment of government spending, business freedom, and free-
dom from corruption outweighing a loss in fiscal freedom. 66
Trinidad and Tobago is ranked 13th out of 29 countries in the
South and Central America/Caribbean region, and its score is 65
above the world average.
64
Trinidad and Tobago has become one of the most prosper-
63
ous countries in the Caribbean Basin. Endowed with hydro-
carbon reserves, the island group has been struggling against 62
slow growth and an uptick in violence in recent years. Despite
this year’s gain, economic freedom in Trinidad and Tobago 61
has declined since 2001 by 2.4 points, largely reflecting fall- 2011 2012 2013 2014 2015
ing scores in financial freedom, government spending, and
fiscal freedom.
Country Comparisons
Drug-related violence undermines the rule of law, and cor-
ruption has infiltrated the police force and increases the Country 64.1
daily cost of living. The regulatory environment remains
relatively inefficient. The economy is fairly open to trade and World
60.4
Average
investment. The financial system is undergoing moderniza-
tion in response to the recent financial upheaval and govern- Regional
59.7
ment bailouts. Average
BACKGROUND: Trinidad and Tobago is one of the Caribbe- Free

84.6
Economies
an’s richest nations, with hydrocarbons accounting for more
than 40 percent of GDP and 80 percent of exports. Oil pro- 0 20 40 60 80 100
duction has declined over the past decade as the country has
focused on natural gas, but the government is providing fiscal
incentives for investments in onshore and deep-water acreage Quick Facts
to boost oil reserves. Prime Minister Kamla Persad-Bissessar Population: 1.3 million
has remained popular since her election in 2010 but has had GDP (PPP): $27.5 billion
to contend with a surge in drug-related corruption and violent 1.6% growth in 2013
crime. A Heritage and Stabilisation Fund was established in 5-year compound annual growth –0.8%
2007 to provide a countercyclical backstop for government $20,438 per capita
accounts when global energy prices fall. Financial services Unemployment: 6.6%
and construction have been among the strongest non-energy Inflation (CPI): 5.2%
subsectors. Tourism has the potential for significant growth. FDI Inflow: $1.7 billion
433
TRINIDAD AND TOBAGO (continued)
1–Year

0 20 40 60 80 100
Corruption, much of it drug-related, diverts resources and damages the rule of law. Narcotics-
related corruption in the police force is endemic. The judicial branch is independent but sub-
ject to some political pressure and corruption. Rising rates of crime and very high levels of
violent crime have produced long delays in the court system. Property rights are well protected.

0 20 40 60 80 100
Trinidad and Tobago’s top individual and top corporate income tax rates are 25 percent. Other
taxes include a value-added tax and a property tax. Tax revenue amounts to about 29.2 percent
of the domestic economy. Government spending, supported partly by hydrocarbon revenues,
equals approximately 32 percent of domestic production. Public debt equals 31 percent of gross
domestic product.

0 20 40 60 80 100
With no minimum capital required, it takes about 12 days to start a company, but licensing
requirements remain time-consuming. The relatively flexible labor market facilitates the
matching of supply and demand in the labor market. The government’s 2013–2014 budget
proposal included large subsidies for natural gas, education, and the environment, but it also
reduced the national fuel subsidy.

0 20 40 60 80 100
Trinidad and Tobago’s average tariff rate is 5.7 percent. Cars and many agricultural goods
require import licenses. Over 40 companies are 100 percent state-owned. The financial sys-
tem has regained its stability after strain caused by the collapse of a large financial group. State
influence is not substantial, and banking remains relatively well capitalized, with the number
of nonperforming loans declining.


TUNISIA
50
25 75
Least Most
free 0 100 free
Thigher
unisia’s economic freedom score is 57.7, making its econo-
than last year, with improvements in the control of
Freedom Trend
60
government spending, freedom from corruption, and busi-
ness freedom largely offset by declines in labor freedom and
monetary freedom. Tunisia is ranked 11th out of 15 countries 59
in the Middle East/North Africa region.
Tunisia’s transition to a more open and inclusive economy 58
has been hurt by political instability and indecisiveness in
implementing critical reforms. Over the past five years, eco-
nomic freedom in Tunisia has declined by 0.8 point, with 57
deteriorations in four of the 10 economic freedoms, includ-
ing property rights, the control of government spending, and
monetary freedom. 56
2011 2012 2013 2014 2015
Inconsistent rule of law and regulatory inefficiency weaken
Tunisia’s fragile economic framework. Years of corruption
under the Ben Ali regime instilled a culture of nepotism and Country Comparisons
cronyism that prevented much-needed market liberalization.
Following through on structural and institutional reforms will Country 57.7
be critical to the success of Tunisia’s ongoing transition to a
functioning market economy. World
60.4
Average
BACKGROUND: Tunisia, birthplace of the Arab Spring, oust-
ed President Zine al-Abidine Ben Ali in January 2011. Short- Regional
Average 61.6
ly thereafter, the formerly banned Islamist Ennahda Party
won the largest number of seats in the National Constituent Free
84.6
Assembly. The Ennahda government stepped aside in 2014 Economies
following the ratification of a new constitution in January, 0 20 40 60 80 100
and an interim technocratic government was installed, led
by Interim Prime Minister Mehdi Jomaa. The Nidaa Tounes
party headed by Béji Caïd Essebsi won the most seats in par- Quick Facts
liamentary elections in late 2014. Tunisia’s diverse economy is Population: 10.9 million
based on manufacturing, tourism, agriculture, and mining. An GDP (PPP): $108.4 billion
association agreement with the European Union has helped 2.7% growth in 2013
to create jobs and modernize the economy, but the EU eco- 5-year compound annual growth 2.1%
nomic slowdown has depressed demand for Tunisian-made $9,932 per capita
goods. Salafi Islamist violence has undermined foreign invest- Unemployment: 17.5%
ment and tourism. Political stability is also threatened by high Inflation (CPI): 6.1%
formal-sector unemployment. FDI Inflow: $1.1 billion
435
TUNISIA (continued)
1–Year

0 20 40 60 80 100
Tunisia’s handling of commercial disputes is fairly efficient by regional standards, but only
slow progress has been made in reforming the judiciary. A majority of citizens say that corrup-
tion has increased during the past two years as the breakdown of authority has encouraged
graft at lower levels of government and in law enforcement. Property rights are not protect-
ed effectively.

0 20 40 60 80 100
Tunisia’s top individual income tax rate is 35 percent, and its top corporate tax rate is 30 per-
cent. Other taxes include a value-added tax and a property tax. The overall tax burden equals 21
percent of domestic output. Government expenditures amount to 31.2 percent of gross domes-
tic product, and public debt equals 44 percent of the domestic economy.

0 20 40 60 80 100
Previous regulatory reforms have proven to be largely cosmetic, failing to create momentum
for entrepreneurial growth. In the absence of a well-functioning labor market, informal labor
persists in many sectors. The state decreased subsidies for bread, sugar, and other basic mate-
rials in 2014 but ultimately reversed an effort to raise subsidized gasoline prices to reduce the
fiscal deficit.

0 20 40 60 80 100
Tunisia’s average tariff rate is 14.4 percent. Some agricultural imports face additional barriers.
In most cases, foreign investment is capped by the government. Foreign investors may not own
agricultural land. The financial sector is weak, fragmented, and dominated by the government.
Financing options for start-ups and small and medium-sized companies remain very limited,
with capital markets underdeveloped.


TURKEY
50
25 75
Least Most
free 0 100 free
Tdecreased
urkey’s economic freedom score is 63.2, making its
by 1.7 points since last year, with declines in five of
Freedom Trend
66
the 10 economic freedoms, including labor freedom, business
freedom, the control of government spending, and property 65
rights, outweighing improvements in freedom from corrup-
tion and investment freedom. Turkey is ranked 32nd out of 43 64
countries in the Europe region, and its overall score is higher
than the world average.
63
Turkey’s economic freedom score has declined by 1.0 point
since 2011. A 26-point decline in the management of gov- 62
ernment spending has offset a double-digit gain in financial
freedom. Scores for five other economic freedoms, including
61
business freedom and property rights, have also dropped.
2011 2012 2013 2014 2015
Turkey’s commitment to economic freedom is vital given
its position as an important emerging market. Its economic
freedom rests on relatively stable but fragile foundations. The Country Comparisons
judiciary is subject to government influence, and corruption
charges have reached high-level officials close to the govern- Country 63.2
ment. While the economy is open and boasts a burgeoning
manufacturing sector, regulatory inefficiencies and a rigid World
Average 60.4
labor market hinder business formation and full employment,
undermining more vibrant private-sector growth. Regional
67.0
Average
BACKGROUND: Turkey is a constitutionally secular repub-
lic, but Prime Minister Recep Tayyip Erdogan’s Justice and Free
Economies 84.6
Development Party is pushing an Islamist agenda and erod-
0 20 40 60 80 100
ing Turkey’s Euro–Atlantic connections. Large-scale protests
resulting from unpopular government decisions continued
sporadically in 2014. Economic modernization is progressing
despite clashes with the media and the slow pace of judicial Quick Facts
reform. Turkey has been a member of NATO since 1952. The Population: 76.5 million
European Union granted Turkey candidate status in 1999, GDP (PPP): $1.2 trillion
but there is strong opposition from France, Germany, and 4.3% growth in 2013
Austria. Turkey’s dispute with Cyprus has also delayed nego- 5-year compound annual growth 3.8%
tiations. Turkey’s economy has been growing steadily for the $15,353 per capita
past decade and weathered the 2008 global financial crisis Unemployment: 9.9%
relatively well. Principal exports include foodstuffs, textiles, Inflation (CPI): 7.5%
clothing, iron, and steel. FDI Inflow: $12.9 billion
437
TURKEY (continued)
1–Year

0 20 40 60 80 100
Corruption, cronyism, and nepotism persist in government and daily life. An October 2013
report noted weaknesses related to transparency, with government ministries refusing to hand
over information to the Court of Accounts and pressuring the court to alter its reports on cor-
ruption. The judiciary is only nominally independent. Property rights are generally enforced,
but the courts are slow.

0 20 40 60 80 100
Other taxes include a value-added tax and an environment tax. Tax revenues account for
approximately 27.7 percent of the domestic economy. Government expenditures equal 37.6
percent of domestic production, and public debt is equivalent to 36 percent of gross domes-
tic product.

0 20 40 60 80 100
The regulatory framework remains cumbersome. There is a minimum capital requirement for
incorporating a business, and licensing requirements consume over five months on average.
The labor market lacks flexibility and hinders dynamic job growth. The state introduced a sub-
sidy program intended to nearly double agricultural crop production by 2023 and maintains
subsidies for fuel, electricity, and health care.

0 20 40 60 80 100
Turkey’s average tariff rate is 2.7 percent. Government procurement may favor domestic firms.
Turkey, while generally very open to foreign investment, restricts investment in some sectors.
The evolving financial sector remains dominated by the concentrated banking sector, in which
the 10 largest banks account for over 80 percent of total lending. The number of nonperforming
loans has increased.


TURKMENISTAN
50
25 75
Least Most
free 0 100 free
Tdeclined
urkmenistan’s economic freedom score is 41.4, making its
economy the 172nd freest in the 2015 Index. Its score has
Freedom Trend
45
freedom from corruption, trade freedom, and the control of
government spending outweighed by a combined decline in 44
labor freedom, monetary freedom, and fiscal freedom. Turk-
menistan is ranked 41st out of 42 countries in the Asia–Pacif- 43
ic region, and its overall score is significantly lower than the
42
Turkmenistan is one of the world’s most closed and most cen-
tralized countries. Apart from natural gas exports, it engages 41
little with the outside world, and a large proportion of its soci-
ety lives in poverty. Since 2011, economic freedom in Turkmen-
40
istan has declined by 2.2 points, reflecting a further worsening
of already strict labor rules and increasing inflation. 2011 2012 2013 2014 2015
Turkmenistan ranks last in the world for its investment

regime, and state-owned enterprises dominate much of the Country Comparisons
domestic economy and formal sector. The executive controls
all three branches of government, making judicial indepen- Country 41.4
dence impossible. Corruption and nepotism limit the eco-
nomic prospects of those who are not well connected. World
Average 60.4
BACKGROUND: In 2012, President Gurbanguly Berdymuk- Regional
hammedov was re-elected to a second five-year term with 97 Average 58.8
percent of the vote in elections that international observers
regarded as flawed. The presidency tightly controls all three Free
Economies 84.6
branches of government, the economy, social services, and the
0 20 40 60 80 100
mass media. Berdymukhammedov’s policies are somewhat
more open than those of his predecessor, President-for-Life
Saparmurad Niyazov, but the government still tends toward
isolationism. Most statistics on Turkmenistan’s inefficient Quick Facts
and highly corrupt economy are state secrets. Turkmeni- Population: 5.7 million
stan has intensive agriculture in irrigated oases, sizeable oil GDP (PPP): $54.2 billion
resources, and the world’s fifth largest natural gas reserves. 10.2% growth in 2013
Berdymukhammedov has encouraged some foreign invest- 5-year compound annual growth 10.2%
ment in the energy sector, especially from Russia, China, and $9,510 per capita
Iran. Turkmenistan’s gas currently accounts for around one- Unemployment: 10.7%
sixth of China’s total gas consumption, with Russia the next Inflation (CPI): 6.6%
biggest buyer. FDI Inflow: $3.1 billion
439
TURKMENISTAN (continued)
1–Year

0 20 40 60 80 100
Corruption is widespread, and public officials often bribe their way into their positions. The
president appoints and removes judges without legislative review. The legal system does not
enforce contracts and property rights effectively. Laws are poorly developed, and judges are
poorly trained and open to bribery. All land is owned by the government, and other ownership
rights are limited.

0 20 40 60 80 100
The top individual income tax rate is 10 percent. The top corporate tax rate is 8 percent (other
entities pay 20 percent under the petroleum law). Other taxes include a value-added tax and
a property tax. The tax burden equals 21 percent of domestic output. Government spending
amounts to approximately 15 percent of domestic production, and public debt equals 21 per-
cent of GDP.

0 20 40 60 80 100
Regulatory codes are outmoded, and cutting through red tape often requires personal rela-
tions with government officials. The public sector provides most jobs, but the informal sector
remains an important source of employment. Although some fuel subsidies were scrapped in
2014, subsidies as a percentage of GDP are still among the world’s highest. Natural gas is free
to citizens.

0 20 40 60 80 100
There are no general tariffs on most imports, but the excise tax system is biased against imports.
Imports face customs delays, and government procurement favors domestic firms. Foreign
investors face several regulatory and bureaucratic hurdles. Foreign exchange accounts and all
international transfers require state approval. The financial system is heavily government-
controlled, with loans typically directed to state-owned enterprises.


UGANDA
50
25 75
Least Most
free 0 100 free
U ganda’s economic freedom score is 59.7, making its

economy the 92nd freest in the 2015 Index. Its score has
decreased by 0.2 point since last year, with improvements in
Freedom Trend
63
half of the 10 economic freedoms, including monetary free-
dom and freedom from corruption, outweighed by declines in 62
fiscal freedom and property rights. Uganda is ranked 9th out
of 46 countries in the Sub-Saharan Africa region, and its over- 61
all score is below the world average.
Once a model for reform and a favored investment destina- 60
tion, Uganda has recorded a decline of 2.0 points in economic
freedom over the past five years as the momentum for reform 59
has slowed. This diminishment has occurred in six of the 10
economic freedoms, including a 20-point decline in financial
58
freedom. A 15-point improvement in the investment regime
is one bright spot. 2011 2012 2013 2014 2015
Uganda has mostly recovered from its past civil and political
unrest, but moderate reforms have not been enough to put Country Comparisons
the economy on the path to sustainable growth. The executive
exerts serious influence on the judiciary, and foreign aid has Country 59.7
been frozen in recent years due to corruption allegations. The
business environment impedes the formation of new busi- World
Average 60.4
nesses, and most of the largely impoverished and agricultural
population works in the informal sector. Regional
54.9
Average
BACKGROUND: President Yoweri Museveni, who seized
power in a military coup in 1986, was elected to a fourth term Free
Economies 84.6
in 2011. Museveni has been accused of aiding rebels in the
0 20 40 60 80 100
Democratic Republic of Congo. Limited market reforms have
produced more than a decade of relatively strong economic
growth. Uganda has substantial natural resources, includ-
ing copper, gold, and newly discovered oil. Infrastructure Quick Facts
projects in the transport and energy sectors have increased Population: 36.8 million
domestic demand and stimulated growth. Instability in South GDP (PPP): $54.6 billion
Sudan, Uganda’s main export partner, threatens to desta- 6.0% growth in 2013
bilize the economy. Uganda continues to play an important 5-year compound annual growth 5.1%
role in peacekeeping operations in Somalia and in the fight $1,484 per capita
against terrorism. Unemployment: 3.8%
441
UGANDA (continued)
1–Year

0 20 40 60 80 100
Uganda has laws and institutions tasked with combating corruption, but enforcement is very
weak. In 2013, government harassment of anti-corruption activists increased, and the Consti-
tutional Court suspended the Anti-Corruption Court. The rule of law is weak. Land disputes
in northern Uganda escalated in 2014, often due to the absence of title deeds in areas where
customary tenure is still common.

0 20 40 60 80 100
Uganda’s top individual income tax rate has increased from 30 percent to 40 percent. The top
corporate tax rate is 30 percent. Other taxes include a value-added tax and a property tax.
Overall tax revenues equal 13.1 percent of the domestic economy. Government expenditures
are equivalent to 19.1 percent of domestic production, and public debt equals 36 percent of GDP.

0 20 40 60 80 100
The overall regulatory framework has undergone a series of reforms, but the pace of reform has
slowed. Despite some progress, the labor market lacks dynamism because of lingering rigidi-
ties. A large informal sector persists. Inflation was low in 2014, with monetary stability rela-
tively well maintained, and the government embarked on a four-year project to improve the
targeting of electricity subsidies.

0 20 40 60 80 100
Uganda’s average tariff rate is 6.7 percent. Importing goods can be time-consuming. The Ugan-
da Investment Authority has implemented a one-stop shop to facilitate foreign direct invest-
ment. The small financial markets are dominated by commercial banks and regulated by the
central bank. The economy is still largely cash-based, and the limited availability of financing
options precludes more vibrant private-sector development.


UKRAINE
50
25 75
Least Most
free 0 100 free
U kraine’s economic freedom score is 46.9, making its econ-

omy the 162nd freest in the 2015 Index. Its score is 2.4
points lower than last year, reflecting declines in eight of the
Freedom Trend
51
10 economic freedoms with especially grave deteriorations 50
in property rights, the management of government spend-
ing, and investment freedom. Ukraine is ranked last out of 43 49
countries in the Europe region, and its overall score is lower
than the world average. 48
Ukraine has registered the second largest score decline of any 47
country graded in the 2015 Index. Previously, its economic 46

freedom had advanced by 1.1 points, with improvements in
half of the 10 economic freedoms driven largely by gains in 45
business freedom and monetary freedom.
44
Ukraine’s economy remains “repressed.” The rule of law is 2011 2012 2013 2014 2015
particularly weak. The investment regime remains closed,
with foreign investment competing with large state-owned
enterprises. A rigid labor market and bureaucratic busi- Country Comparisons
ness regulations inhibit the development of a dynamic pri-
vate sector. Country 46.9
BACKGROUND: Ukraine gained independence after the col- World

60.4
lapse of the Soviet Union in 1991. In February 2014, Presi- Average
dent Victor Yanukovych was ousted by pro-Euro–Atlantic Regional
members of parliament after he used security forces to crack Average 67.0
down on popular protests against his attempt to tighten ties
with Russia. Petro Poroshenko was elected to replace him Free
Economies 84.6
in May 2014. After Yanukovych was unseated, Russia ille-
0 20 40 60 80 100
gally annexed the Autonomous Republic of Crimea, and pro-
Russian separatists increased their efforts to destabilize the
eastern part of the country. In 2014, Ukraine accepted $30 bil-
lion in aid from the IMF, World Bank, EU, and other bilateral Quick Facts
donors. Ukraine has signed an Association Agreement with Population: 45.4 million
the EU that includes Deep and Comprehensive Free Trade GDP (PPP): $336.8 billion
Area (DCFTA) accords. Ukraine has well-developed agricul- 0.1% growth in 2013
tural and industrial sectors, but dependence on steel exports 5-year compound annual growth –1.3%
and natural gas imports makes it vulnerable to global finan- $7,423 per capita
cial turmoil and Russian pressure. Ukraine joined the World Unemployment: 7.9%
Trade Organization in 2008 and the EU’s Eastern Partnership Inflation (CPI): –0.3%
in 2009. FDI Inflow: $3.8 billion
443
UKRAINE (continued)
1–Year

0 20 40 60 80 100
Pro-Western Ukrainians hoped their 2014 Euromaidan revolution would dismantle the oli-
garchic politics and deeply rooted cronyism that allowed business owners to amass wealth
by exploiting their access to those in power rather than through efficient management, but
that corrupt system is still largely in place under the Poroshenko government. The judiciary
remains weak, and contracts may not be well enforced.

0 20 40 60 80 100
Ukraine’s top individual income tax rate is 17 percent, and the top corporate tax rate is 18 per-
cent. Other taxes include a value-added tax and a property tax. The total tax burden equals 38.9
percent of domestic income. Government spending amounts to 49 percent of GDP, and public
debt equals 41 percent of domestic output. The IMF is helping to bolster public finances.

0 20 40 60 80 100
Complexity often creates uncertainty in commercial transactions. The business start-up pro-
cess has been streamlined, but completing licensing requirements is still time-consuming.
Modern and efficient bankruptcy procedures are not in place. The labor code is outmoded and
lacks flexibility. Massive and price-skewing government subsidies (7 percent of GDP on natural
gas subsidies alone) have caused deep economic distortions.

0 20 40 60 80 100
Ukraine’s average tariff rate is 2.1 percent. Trade and investment flows have been disrupted as
a result of disputes with Russia. Foreign investors may not purchase agricultural land. Bureau-
cratic requirements deter much-needed growth in private investment. The primarily cash-
based economy suffers from a lack of sufficient capitalization. Nonperforming loans continue
to be a drag on the banking system.


UNITED ARAB EMIRATES
50
25 75
Least Most
free 0 100 free
TIts hemaking
United Arab Emirates’ economic freedom score is 72.4,
its economy the 25th freest in the 2015 Index.
score has increased by 1.0 point since last year, driven by
Freedom Trend
76
improvements in investment freedom, the management of
government spending, and freedom from corruption that out- 74
weigh a small combined decline in monetary freedom, trade
freedom, and fiscal freedom. The UAE is ranked 2nd out of 72
15 countries in the Middle East/North Africa region, and its

70
overall score is higher than the world and regional averages.
Over the past five years, economic freedom in the UAE has 68
advanced by 4.6 points, the region’s largest increase. Score
improvements in seven of the 10 economic freedoms have 66
been led by sizeable gains in the regulatory environment and
monetary freedom. 64
2011 2012 2013 2014 2015
Improved economic freedom has corresponded with mod-
erate levels of growth. Economic reforms have cemented
the UAE’s position as a commercial, financial, and logistical Country Comparisons
Persian Gulf hub. However, institutional reforms have not
been comprehensive. The perceived level of corruption has Country 72.4
declined, but the relatively inefficient judicial system remains
vulnerable to political influence. World
60.4
Average
BACKGROUND: The United Arab Emirates is a federation of
seven monarchies: Abu Dhabi, Ajman, Dubai, Fujairah, Ras Regional
Average 61.6
Al-Khaimah, Sharjah, and Umm al-Qaiwain. The government
responded to the Arab Spring protests with a $1.6 billion pro- Free
84.6
gram to improve the infrastructure in the poorer northern Economies
emirates and by expanding the number of people allowed 0 20 40 60 80 100
to vote in September 2011 elections for the Federal Nation-
al Council. The UAE clamped down on Internet activism in
2012 and imprisoned 68 Islamists for allegedly attempting to Quick Facts
seize power in 2013. Abu Dhabi accounts for about 90 percent Population: 9.0 million
of oil production; Dubai is the center of finance, commerce, GDP (PPP): $272.0 billion
transportation, and tourism. Free trade zones that permit 100 4.8% growth in 2013
percent foreign ownership with zero taxation help to diversify 5-year compound annual growth 1.9%
the economy. Oil and gas exports account for roughly 80 per- $30,122 per capita
cent of government revenues. Unemployment: 3.8%
445
UNITED ARAB EMIRATES (continued)
1–Year

0 20 40 60 80 100
Although the UAE is considered one of the Middle East’s least corrupt countries, most decisions
of any significance are made by the ruling families of the various emirates. The judiciary is not
independent, and the political leadership reviews court rulings, but the rule of law is generally
well maintained. All land in Abu Dhabi, largest of the seven emirates, is government-owned.

0 20 40 60 80 100
The UAE has no federal-level individual or corporate income taxes. Some emirates apply cor-
porate taxes for different business entities. There are few other taxes. Overall tax revenues are
equal to 7.2 percent of domestic income. Government spending, supported by significant oil
and gas revenues, amounts to 21.8 percent of domestic output, and government debt equal to
12 percent of gross domestic product.

0 20 40 60 80 100
Regulatory efficiency has improved. With no minimum capital required, establishing a busi-
ness involves six procedures. Licensing has been streamlined and is less costly. The non-salary
cost of employing a worker is moderate, and labor codes generally facilitate labor market effi-
ciency. The government plans to reduce fuel and power subsidies to help limit energy consump-
tion and imports of natural gas.

0 20 40 60 80 100
The UAE’s average tariff rate is 3.8 percent. Foreign firms are disadvantaged in government
procurement. In general, foreign investment in UAE companies is capped at 49 percent. The
competitive and modern financial sector provides a full range of services, although the state’s
presence remains considerable. Capital markets are open and vibrant, with a number of foreign
firms in operation.


UNITED KINGDOM
50
25 75
Least Most
free 0 100 free
Tscorehemaking
United Kingdom’s economic freedom score is 75.8,
its economy the 13th freest in the 2015 Index. Its
has increased by 0.9 point since last year, reflecting
Freedom Trend
77
improvements in half of the 10 economic freedoms, including
fiscal freedom and labor freedom, that outweigh declines in
business freedom and freedom from corruption. The U.K. is 76
overall score is above the world and regional averages.
75
Over the past five years, economic freedom in the U.K. has
advanced by 1.3 points. Led by a sizeable improvement stem-
ming from corporate tax rate cuts in recent years, score 74
improvements have occurred in four of the 10 economic free-
doms, including fiscal freedom and property rights.
73
Historically a champion of economic freedom in Europe, 2011 2012 2013 2014 2015
the United Kingdom has developed its economy based on a
strong rule of law, an open trading environment, and one of
the world’s most advanced financial sectors. A relatively lib- Country Comparisons
eral labor market by European standards complements one
of the world’s most efficient business environments. Large Country 75.8
government spending, which still takes up nearly half of the
domestic economy, has consumed resources that could have World
60.4
enabled additional private-sector growth. Average
BACKGROUND: Following the market reforms instituted Regional

Average 67.0
by Prime Minister Margaret Thatcher in the 1980s, Britain
experienced steady economic growth throughout the 1990s, Free
84.6
but government spending grew significantly under successive Economies
Labour governments. Since 2010, Prime Minister David Cam- 0 20 40 60 80 100
eron’s Conservative–Liberal Democrat coalition government
has made government austerity the core of its economic pol-
icy. Last year, the U.K. experienced its strongest growth since Quick Facts
2007. In 2014, the GDP surpassed pre-crisis levels due to bull- Population: 64.1 million
ish performances by its three main sectors: services, manufac- GDP (PPP): $2.4 trillion
turing, and construction. Unemployment is at a five-year low, 1.8% growth in 2013
and retail sales are robust. Euro-skepticism is on the rise in 5-year compound annual growth –0.1%
the U.K., and the United Kingdom Independence Party won $37,307 per capita
the most seats in the 2014 European Parliament elections. Unemployment: 7.5%
447
UNITED KINGDOM (continued)
1–Year

0 20 40 60 80 100
Corruption is not pervasive, although a few high-profile scandals have damaged political repu-
tations in both major parties. The 2011 Bribery Act is considered one of the world’s most sweep-
ing anti-bribery laws. Rule of law is well established within an independent legal framework.
Private property rights and contracts are secure, and the court system is efficient. Protection
of intellectual property rights is effective.

0 20 40 60 80 100
The top individual income tax rate is now 45 percent, and the top corporate tax rate is now 21
percent. Other taxes include a value-added tax and an environment tax. The overall tax burden
equals 35.2 percent of the domestic economy. Public expenditures amount to 48.2 percent of
domestic output, and government debt equals 90 percent of gross domestic product.

0 20 40 60 80 100
The regulatory environment is transparent. With no minimum capital required, starting a busi-
ness takes six procedures and less than a week. Bankruptcy proceedings are straightforward.
The labor market is relatively efficient, and non-salary costs are moderate. Inflation has fallen
rapidly, reflecting the end of administered price increases, and the government has pledged to
end subsidies for onshore wind farms.

0 20 40 60 80 100
EU is relatively open to external trade. The U.K. generally treats foreign and domestic investors
equally. The government still holds substantial stakes in the banking sector but is trying to sell
its shares. A bank levy applied to both domestic and foreign banks has been in place.


UNITED STATES
50
25 75
Least Most
free 0 100 free
Tis 0.7heingpoint
United States’ economic freedom score is 76.2, mak-
its economy the 12th freest in the 2015 Index. Its score
higher than last year, with modest gains in six of
Freedom Trend
79
the 10 economic freedoms, including control of government
spending, outweighing a slight decline in business freedom. 78
Although the precipitous downward spiral in U.S. economic

freedom since 2008 has come to a halt in the 2015 Index, a 1.6- 77
point decline in overall economic freedom over the past five
years reflects broad-based deteriorations in key policy areas, 76
particularly those related to upholding the rule of law and lim-
ited government. Continuing to trail such comparable econo-
75
mies as Australia, New Zealand, Switzerland, and Canada,
America has been ranked “mostly free” since 2010.
74
The anemic post-recession recovery has been characterized 2011 2012 2013 2014 2015
by slow growth, high unemployment, a decrease in the num-
ber of Americans seeking work, and great uncertainty that
has held back investment. Increased tax and regulatory bur- Country Comparisons
dens, aggravated by favoritism toward entrenched interests,
have undercut America’s historically dynamic entrepreneur- Country 76.2
ial growth.
World
BACKGROUND: President Barack Obama’s second-term Average 60.4
efforts to expand government spending and regulation have
been thwarted to some extent by Republican Party opposi- Regional
Average 74.0
tion in Congress. Economic policy leadership has devolved by
default to the Federal Reserve, whose attempts to use mon- Free
84.6
etary policy to stimulate economic activity have not restored Economies
robust growth. Implementation of the 2010 health care law, 0 20 40 60 80 100
which has reduced competition in most health insurance
markets, remains a drag on job creation and full-time employ-
ment. Overall, the U.S. economy continues to underperform, Quick Facts
despite a private sector–led energy boom that has made the Population: 316.4 million
U.S. the world’s largest producer of oil and natural gas. The GDP (PPP): $16.8 trillion
weak economic recovery and uncertain responses to foreign 1.9% growth in 2013
policy challenges, particularly in the Middle East, in Ukraine, 5-year compound annual growth 1.2%
and along the southern U.S. border, have contributed to a loss $53,101 per capita
of support for the President and his party and Republican Unemployment: 5.9% (September 2014)
majorities in both chambers of Congress as a result of 2014 Inflation (CPI): 1.5%
midterm elections. FDI Inflow: $187.5 billion
449
UNITED STATES (continued)
1–Year

0 20 40 60 80 100
Corruption in government and the political process remains a concern. High levels of govern-
ment spending and the expansion and complexity of the government’s regulatory agenda have
increased opportunities for political favoritism and cronyism. The judiciary functions indepen-
dently. Protection of property rights has been uneven, with instances of regulatory overreach
by the executive branch requiring court adjudication.

0 20 40 60 80 100
The top individual income tax rate is 39.6 percent, and the top corporate tax rate remains
among the world’s highest at 35 percent. Other taxes include a capital gains tax and excise taxes.
Tax revenue is equal to 24.3 percent of gross domestic product, and government spending is
well over one-third of GDP. Public debt exceeds the value of the economy’s annual production.

0 20 40 60 80 100
The regulatory burden has been mounting. Since 2009, over 150 new major regulations have
been imposed at an annual cost of more than $70 billion. As of 2014, 125 new regulations were
in the pipeline. The labor market, primarily regulated at the state level, remains flexible. Sub-
sidies for agriculture, health care, and renewable energy have bred economic distortions.

0 20 40 60 80 100
The average tariff rate is 1.5 percent. Tariffs on clothing are high, sugar imports face tariff-rate
quotas, and petroleum and liquefied natural gas exports are restricted. Foreign investment in
some sectors is capped. The financial market is well developed, but the 2010 Dodd–Frank Act
has instituted more federal regulation, socializing the cost of financial risk-taking and increas-
ing the likelihood of future financial crises and bailouts.

Freedom from –17.0 Government –6.0 Labor Freedom +3.1 Investment Freedom 0

URUGUAY
50
25 75
Least Most
free 0 100 free
U ruguay’s economic freedom score is 68.6, making its

economy the 43rd freest in the 2015 Index. Its score
has decreased by 0.7 point since last year, with declines in
Freedom Trend
71
six of the 10 economic freedoms, including labor freedom
and the management of government spending, outweigh-
70
ing an improvement in freedom from corruption. Uruguay
America/Caribbean region, and its overall score is above the
69
world average.
Over the past five years, economic freedom in Uruguay has
declined by 1.4 points, with losses in half of the 10 economic 68
freedoms. A double-digit improvement in business freedom
has been more than offset by declines in labor freedom and
67
the control of government spending.
2011 2012 2013 2014 2015
Uruguay has a history of economic openness and relies on
international markets for its agricultural exports. A liberal
labor market, strong rule of law, and prudent government size Country Comparisons
distinguish Uruguay from neighboring Brazil and Peru. Eco-
nomic reforms have largely turned around an economy that Country 68.6
sought IMF help for its fiscal problems in the early 2000s.
More sustained efforts are needed to rein in growing govern- World
Average 60.4
ment spending and fix an increasingly rigid labor market.
Regional
BACKGROUND: Former leftist guerrilla Jose Mujica was Average 59.7
elected president in 2009. After strong growth in 2010 and
2011, the economy has slowed. Trade has been hurt by com- Free
Economies 84.6
mercial restrictions in Argentina. State involvement in the
0 20 40 60 80 100
economy is substantial, and deregulation is needed in tele-
communications, energy, and public utilities. Crime and
violence are increasing, and drug trafficking is a problem in
urban areas. Uruguay is a founding member of MERCOSUR Quick Facts
and signed a Trade and Investment Framework Agreement Population: 3.4 million
with the United States in 2007. The economy is still based GDP (PPP): $56.7 billion
largely on exports of commodities like milk, beef, rice, and 4.2% growth in 2013
wool. Despite excellent banking services, including branches 5-year compound annual growth 5.1%
of some of the world’s largest banks, an information-sharing $16,723 per capita
agreement with Argentina has reduced consumer confidence Unemployment: 6.3%
in Uruguay as a safe haven for assets. Inflation (CPI): 8.6%
451
URUGUAY (continued)
1–Year

0 20 40 60 80 100
Corruption is low by regional standards, and by 2013, government institutions had established
a fairly strong record of accountability to the electorate. The Transparency Law criminalizes a
broad range of potential abuses of power by officeholders. The judiciary is relatively indepen-
dent, but the court system remains severely backlogged. Private property is generally secure,
expropriation is unlikely, and contracts are enforced.

0 20 40 60 80 100
Other taxes include a value-added tax and a capital gains tax. The overall tax burden amounts to
27.6 percent of gross domestic product. Government spending equals 34.1 percent of domestic
output, and public debt equals approximately 60 percent of the domestic economy.

0 20 40 60 80 100
With no minimum capital required, incorporating a business takes five procedures and less
than a week, but licensing requirements are still time-consuming. Although the non-salary cost
of hiring a worker is moderate, the labor market remains relatively rigid. The state resorted to
unsustainable measures (e.g., a supermarket price freeze agreement) in early 2014 to prevent
inflation from rising above 10 percent.

0 20 40 60 80 100
The average tariff rate is 4.1 percent. Uruguay, a member of the MERCOSUR Common Market,
requires import licenses for some goods. Foreign and domestic investors are generally treated
equally under the law. The financial system has become more stable, but significant state pres-
ence continues in many parts of the system including the banking sector. Government-owned
commercial banks pose systemic vulnerabilities.


UZBEKISTAN
50
25 75
Least Most
free 0 100 free
U zbekistan’s economic freedom score is 47.0, making its

economy the 160th freest in the 2015 Index. Its score is up
by 0.5 point from last year, with improvements in trade free-
Freedom Trend
48
dom, freedom from corruption, and labor freedom outweigh-
ing declines in the management of government spending and
business freedom. Uzbekistan is ranked 37th out of 42 coun- 47
tries in the Asia–Pacific region, and its overall score is much
lower than the world average.
46
A stagnant economic reform environment over the past
five years has turned more positive recently, but gains have
not been strong enough to propel the economy out of the 45
“repressed” category. Since 2011, economic freedom in
Uzbekistan has increased by 1.2 points, with modest improve-
ments in business freedom, labor freedom, monetary free- 44
dom, and trade freedom. 2011 2012 2013 2014 2015
Despite sustained rapid growth on the back of high commod-

ity prices and relative stability, the underlying foundations Country Comparisons
of Uzbekistan’s economy are weak. The rule of law is weak-
ly enforced, a holdover from the Soviet past. Investment is Country 47.0
restricted in many industries, and financial markets are shal-
low, preventing the capital accumulation necessary for sus- World
60.4
tained growth. The state-owned banks and industries tend to Average
respond to the government’s political priorities. Regional
Average 58.8
BACKGROUND: Uzbekistan has one of the world’s most
repressive governments. President Islam Karimov, in power Free
84.6
since the late 1980s, has hinted that he may seek re-election Economies
in 2015. Karimov rose through the ranks of the Soviet-era 0 20 40 60 80 100
State Planning Committee (Gosplan) and remains wedded to
a command economy, which discourages foreign investment.
Uzbekistan is dry and landlocked; 11 percent of the land is Quick Facts
cultivated in irrigated river valleys. More than 60 percent of Population: 30.2 million
the population lives in densely populated rural communities. GDP (PPP): $113.8 billion
Production of cotton and grain has relied on overuse of agro- 8.0% growth in 2013
chemicals and has depleted water supplies. Much of the agri- 5-year compound annual growth 8.2%
cultural land is degraded, and the Aral Sea and certain rivers $3,762 per capita
are half dry. Uzbekistan is heavily dependent on natural gas, Unemployment: 10.8%
oil, gold, and uranium exports. Inflation (CPI): 11.2%
453
UZBEKISTAN (continued)
1–Year

0 20 40 60 80 100
The president appoints all judges and can remove them at any time. Court procedures fall short
of international standards, and powerful figures can expropriate property with impunity. Cor-
ruption is rampant. Property ownership, although generally respected by local and central
authorities, can be subverted by the government. There is no general system for registration
of liens on chattel property.

0 20 40 60 80 100
Uzbekistan’s top individual income tax rate is 22 percent, and its top corporate tax rate is 9
percent. Other taxes include a value-added tax and a property tax. The overall tax burden equals
20.3 percent of domestic income. Public spending is equivalent to 33 percent of domestic pro-
duction, and government debt equals approximately 9 percent of gross domestic product.

0 20 40 60 80 100
The regulatory system lacks clarity and consistent enforcement, injecting considerable uncer-
tainty into business decision-making. The start-up process has been streamlined, but licensing
requirements remain time-consuming. The labor market lacks flexibility, and employment in
the informal sector is substantial. The state administers the prices of many basic staples, such
as petroleum products, natural gas, utilities, and bread.

0 20 40 60 80 100
Uzbekistan’s average tariff rate is 5.1 percent. Uzbekistan is not yet a member of the WTO.
The government screens foreign investment. Foreign investors may not purchase land. The
financial sector is subject to heavy state intervention. Along with the high costs of financing,
the banking sector’s limited capacity for financial intermediation is a key barrier to private-
sector development.


VANUATU
50
25 75
Least Most
free 0 100 free
V anuatu’s economic freedom score is 61.1, making its econo-

my the 84th freest in the 2015 Index. Its score is 1.6 points
better than last year, with a substantial improvement in trade
Freedom Trend
64
freedom outweighing a combined decline in labor freedom
and business freedom. Vanuatu is ranked 16th out of 42 coun- 62
tries in the Asia–Pacific region, and its overall score is above
60
With few natural resources and an isolated geography, Vanu-
atu has increasingly embraced economic freedom to drive 58
growth. Over the past five years, its economic freedom has
advanced by 4.4 points, reflecting advances in six of the 10
56
economic freedoms. Recording its highest economic freedom
score ever in the 2015 Index, Vanuatu has become a “mod-
erately free” economy for the first time since it was initially 54
graded in 2009. 2011 2012 2013 2014 2015
Despite notable progress, more structural and institutional

reforms remain critical to spurring sustained growth and Country Comparisons
long-term economic development. Rule of law, based on Brit-
ish common law, remains unevenly enforced, and corruption Country 61.1
is widespread. Despite its size and isolation, the economy is
largely closed to the outside world, with lingering non-tariff World
60.4
barriers and restricted investment. Average
BACKGROUND: The South Pacific island Republic of Vanuatu Regional

Average 58.8
achieved independence in 1980 and is today a parliamentary
democracy that remains divided between its English-speaking Free
84.6
and French-speaking citizens. In the 2012 elections, 18 par- Economies
ties won seats in the legislature, with the Vanua’aku Pati party 0 20 40 60 80 100
winning the most seats at eight. Sato Kilman served as prime
minister until being forced to resign in March 2013. The leg-
islature subsequently elected Moana Carcasses Kalosil of the Quick Facts
Green Confederation party as prime minister. In late May Population: 0.3 million
2014, parliament ousted Carcasses through a vote of no confi- GDP (PPP): $1.3 billion
dence, bringing Joe Natuman to power as prime minister. The 2.8% growth in 2013
economy is dominated by tourism and agriculture, and over 5-year compound annual growth 2.1%
80 percent of the population is involved in farming, which $4,718 per capita
accounts for roughly 20 percent of GDP. Unemployment: n/a
455
VANUATU (continued)
1–Year

0 20 40 60 80 100
Thirty years of debilitating corruption have had widespread damaging effects on Vanuatu’s
development. This corruption manifests itself in many ways, including political cronyism,
“islandism,” and nepotism; settlement of costly and fabricated “deeds of release” lawsuits
against the government; and passport sales. The largely independent judiciary lacks the
resources to hire and retain qualified judges and prosecutors.

0 20 40 60 80 100
Vanuatu has no individual or corporate income taxes. Most tax revenue comes from a value-
added tax and import duties. The overall tax burden is equal to about 16.6 percent of the domes-
tic economy. Government spending is equivalent to approximately 23.2 percent of the domestic
economy, and public debt equals 20 percent of gross domestic product.

0 20 40 60 80 100
No minimum capital is required, but starting a business takes more than a month, and licens-
ing remains onerous. Labor codes are rigid and outmoded, and the formal labor market is not
fully developed. Fiscal and monetary policies have kept deficits, sovereign debt, and inflation
low, but a bloated public sector crowds out funding needed to improve health care, education,
and infrastructure.

0 20 40 60 80 100
Vanuatu’s average tariff rate is 4.8 percent. Investment in some sectors is restricted, and foreign
investors may not own land. Inadequate infrastructure and heavy state involvement deter long-
term investment. The financial system remains rudimentary and subject to state interference.
Access to financing is still poor, and less than 15 percent of rural adults have access to formal
banking services.


VENEZUELA
50
25 75
Least Most
free 0 100 free
V enezuela’s economic freedom score is 34.3, making its

decreased by 2.0 points since last year, reflecting declines in
Freedom Trend
40
half of the 10 economic freedoms including labor freedom,
39
monetary freedom, investment freedom, and business free-
dom. Venezuela is ranked 28th out of 29 countries in the 38
South and Central America/Caribbean region, and its overall
score is far below the world and regional averages. 37
Over the past five years, economic freedom in Venezuela 36

has declined by 3.3 points, primarily due to deteriorations
35
in the management of government spending, labor freedom,
business freedom, and investment freedom. Recording the 34
fifth largest score drop of any country graded, Venezuela
has registered its lowest economic freedom score ever in the 33
2015 Index. 2011 2012 2013 2014 2015
Venezuela’s economic collapse has been preceded by blatant

disregard for the basic foundations of the rule of law and lim- Country Comparisons
ited government. The administration of Nicolás Maduro has
pushed government finances to the brink despite some of the Country 34.3
world’s largest petroleum reserves. Price controls and import
barriers have expanded the informal sector. With monetary World
60.4
stability severely eroded by high inflation, the livelihood of Average
the poor and middle class has deteriorated severely. Regional
Average 59.7
BACKGROUND: In 2014, 15 years after the “21st-century
socialist revolution” began, Venezuela was rocked by anti- Free
84.6
government student-led protests in which over 40 Venezue- Economies
lans were killed, many by government security forces or their 0 20 40 60 80 100
proxies. Hugo Chávez’s legacy of free-spending social pro-
grams and socialist economic policies has led to skyrocketing
inflation. There have been significant reductions in civil liber- Quick Facts
ties and economic freedom. Under Chávez’s successor, Nico- Population: 30.0 million
lás Maduro, the economy has collapsed, and personal security GDP (PPP): $407.9 billion
is at an all-time low. In mid-2014, Venezuela announced plans 1.0% growth in 2013
to raise the retail price of gasoline, currently the lowest in the 5-year compound annual growth 1.2%
world at 5 cents a gallon, but such reforms fall far short of $13,605 per capita
what is needed to ameliorate an unsustainable financial and Unemployment: 7.6%
political situation. Inflation (CPI): 40.7%
457
VENEZUELA (continued)
1–Year

0 20 40 60 80 100
Political power is concentrated in the executive, with many opportunities for corruption. Capi-
tal controls, for example, allow officials to purchase U.S. dollars at a fixed peg and then sell them
on the black market for as much as a 1,100 percent profit. The government has expropriated
nearly 1,300 businesses since 2002. The dysfunctional judiciary is completely controlled by
the executive.

0 20 40 60 80 100
Venezuela’s top individual and corporate income tax rates are 34 percent. Other taxes include
a value-added tax. The overall tax burden amounts to 13.6 percent of the domestic economy.
Government expenditures, bolstered by oil revenues, are equivalent to 40 percent of domestic
production, and public debt is equal to 50 percent of the domestic economy.

0 20 40 60 80 100
The overall freedom to engage in entrepreneurial activity is constrained by government control
and inconsistent enforcement of regulations. Most contracts are awarded without competition.
The labor market remains stagnant and controlled by the state. President Maduro has used
dictatorial emergency decree powers to fight rampant inflation with price controls instead of
addressing such causes as money printing and a fixed currency.

0 20 40 60 80 100
Venezuela’s average tariff rate is 8.6 percent. Non-tariff barriers limit competition from foreign
companies and agricultural producers. Private investment remains hampered by state interfer-
ence in the economy, and hostility to foreign investment, coupled with threats of expropriation,
persists. The financial sector is tightly controlled by the state and often allocates credit based
on political expediency.

Property Rights –45.0 Fiscal Freedom –5.0 Business Freedom –43.4 Trade Freedom –2.2

VIETNAM
50
25 75
Least Most
free 0 100 free
V ietnam’s economic freedom score is 51.7, making its

increased by almost 1.0 point since last year, with improve-
Freedom Trend
53
ments in the control of government spending, freedom from
corruption, and monetary freedom outweighing declines in
52
labor freedom and business freedom. Vietnam is ranked 32nd
out of 42 countries in the Asia–Pacific region. Although the
Vietnamese economy has achieved its highest economic free-
51
dom score ever in the 2015 Index, its overall score continues
to be lower than the world and regional averages.
Vietnam’s rapidly expanding links to the global marketplace 50
have failed to materialize into a comprehensive program of
economic reform. Over the past five years, economic free-
49
dom in Vietnam has stagnated, with advances over the past
year mitigating three years of deteriorating scores. A worry- 2011 2012 2013 2014 2015
ing expansion of inflation has undercut potential gains from
advances in trade freedom. Country Comparisons
A member of the Trans-Pacific Partnership talks, Vietnam
has steadily opened its market and reduced other tariff and Country 51.7
non-tariff barriers. However, other factors of economic free-
dom remain less entrenched. The ruling Communist Party World
Average 60.4
controls the judiciary, corruption and bribery are common,
and the government lacks transparency. The government’s Regional
58.8
suspicion of private business is reflected in inefficient busi- Average
ness regulations. State-owned enterprises dominate many Free
economic sectors. Economies 84.6
0 20 40 60 80 100
BACKGROUND: The Socialist Republic of Vietnam remains
a Communist dictatorship characterized by political repres-
sion and an absence of civil liberties. Economic liberalization
began in 1986 with its doi moi reforms, and Vietnam joined the Quick Facts
World Trade Organization in 2007. In 2012, Prime Minister Population: 89.7 million
Nguyen Tan Dung acknowledged mismanagement of the Viet- GDP (PPP): $359.8 billion
namese economy and affirmed his commitment to reform- 5.4% growth in 2013
ing the state sector, but the Vietnamese are still waiting for 5-year compound annual growth 5.7%
action. Vietnam’s economy is driven primarily by tourism and $4,012 per capita
exports. Inflation is a problem, and the country has struggled Unemployment: 1.9%
to attract investment in the absence of a transparent legal and Inflation (CPI): 6.6%
regulatory system. FDI Inflow: $8.9 billion
459
VIETNAM (continued)
1–Year

0 20 40 60 80 100
Corruption blights all levels of the Vietnamese government and judiciary. Factionalism and
bureaucratic rivalries, nepotism and vast corruption within the Communist Party of Vietnam,
and a general lack of accountability ensure that many agencies are run as fiefdoms, perpetuat-
ing the culture of payoffs. Private property rights are not strongly respected, and resolution of
disputes can take years.

0 20 40 60 80 100
Vietnam’s top individual income tax rate is 35 percent, and its top corporate tax rate is 22
percent. Other taxes include a value-added tax and a property tax. Overall tax revenue equals
19.6 percent of the domestic economy, and government spending amounts to 27.6 percent of
domestic production. Public debt is equivalent to 55 percent of gross domestic product.

0 20 40 60 80 100
Despite ongoing reform efforts, the regulatory framework lacks efficiency. No minimum capital
is required to start a business, but the process still takes over a month, and licensing require-
ments remain time-consuming. The labor market remains rigid, and informal labor activity is
considerable. Although inflation has moderated, the state continues to influence prices though
controls and state-owned and state-subsidized firms.

0 20 40 60 80 100
Vietnam’s average tariff rate is 5.7 percent. Tariff-rate quotas affect imports of goods like eggs
and sugar. The government screens new foreign investment and restricts investment in some
sectors. Directed lending by state-owned commercial banks has been scaled back in recent
years. Foreign equity in domestic banks remains capped at 30 percent, but it can be higher for
weak banks.


YEMEN
50
25 75
Least Most
free 0 100 free
Y emen’s economic freedom score is 53.7, making its econo-

my the 133rd freest in the 2015 Index. Its score is 1.8 points
lower than last year, with declines in five of the 10 economic
Freedom Trend
57
freedoms, led by the control of government spending, business
freedom, and trade freedom, outweighing improvements in 56
monetary freedom and labor freedom. Yemen is ranked 13th
out of 15 countries in the Middle East/North Africa region, and
55
Civil unrest and terrorism-related violence have undermined 54
economic growth. Overall, Yemen’s economic freedom has
declined by 0.5 point since 2011, primarily due to double-digit
53
drops in business freedom and monetary freedom. Yemen
has registered the eighth largest score decline of any country
graded in the 2015 Index. 52
2011 2012 2013 2014 2015
These declines undermine an already weak economic system.
Government corruption is standard. The judiciary is semi-
independent, but government weakness makes enforcing the Country Comparisons
law difficult. The economy is open to trade, but the invest-
ment regime remains closed. An underdeveloped financial Country 53.7
sector and strict business regulations make it difficult to form
and finance new ventures. World
60.4
Average
BACKGROUND: Yemen is one of the Arab world’s poorest
countries. Secessionists, unruly tribes, and Islamist extrem- Regional
Average 61.6
ists oppose its relatively moderate foreign policy and coop-
eration with the United States against al-Qaeda. President Free
84.6
Ali Abdullah Saleh, forced to resign in 2011 in a deal brokered Economies
by the Gulf Cooperation Council, transferred power to Vice 0 20 40 60 80 100
President Abd Rabbuh Mansur al-Hadi after a February 2012
election. The next reforms are supposed to include a constitu-
tion, a constitutional referendum, and national elections. The Quick Facts
government initiated an economic reform program in 2006, Population: 26.7 million
but declining oil production, terrorism, kidnappings, clashes GDP (PPP): $61.8 billion
between Sunni and Shia Muslims, tribal rivalries, a strong al- 4.4% growth in 2013
Qaeda presence, and water shortages have undermined for- 5-year compound annual growth 0.9%
eign investment, tourism, and economic growth. Yemen relies $2,316 per capita
heavily on foreign aid. Economic prospects will depend on Unemployment: 17.2%
progress on the political and security fronts and implementa- Inflation (CPI): 11.1%
tion of critical reforms. FDI Inflow: –$133.6 million
461
YEMEN (continued)
1–Year

0 20 40 60 80 100
The government has yet to fully tackle the pervasive network of corruption and patronage
built up over 30 years under former President Ali Abdullah Saleh. Auditing and investigative
bodies are not sufficiently independent of executive authorities. The judiciary is nominally
independent, but it is susceptible to interference from the executive branch. Authorities have
a poor record of enforcing judicial rulings.

0 20 40 60 80 100
Other taxes include a general sales tax and a property tax. The overall tax burden equals 7
percent of gross domestic product. Public expenditures amount to 36.6 percent of domestic
production, and government debt is equivalent to 51 percent of the domestic economy.

0 20 40 60 80 100
The regulatory efficiency needed for more vibrant private-sector development is not institu-
tionalized. While there is no minimum capital requirement, starting a business takes over a
month on average. The rigid labor market perpetuates high unemployment and underemploy-
ment. In 2014, government efforts to reduce energy subsidies, which are very high and a major
drain on the budget, sparked violent protests.

0 20 40 60 80 100
Yemen’s average tariff rate is 6.2 percent. Yemen joined the WTO in 2014. Courts do not resolve
business disputes in a timely manner. The underdeveloped financial system is dominated by
banks and subject to state influence. Nonperforming loans burden the banking sector. Obtain-
ing credit for entrepreneurial activity remains difficult. The capital market is rudimentary,
with no stock exchange in place.


ZAMBIA
50
25 75
Least Most
free 0 100 free
Zby ambia’s economic freedom score is 58.7, making its econ-

omy the 100th freest in the 2015 Index. Its score is down
1.7 points from last year due to deteriorations in half of
Freedom Trend
62
the 10 economic freedoms, including trade freedom, business
freedom, investment freedom, and the control of govern- 61
ment spending, that outweigh improvement in freedom from
corruption. Zambia is ranked 12th out of 46 countries in the 60
Sub-Saharan Africa region, and its overall score is below the
world average.
59
Over the past five years, Zambia’s commodity-linked economy
has grown, but policymakers have done little to boost overall 58
economic freedom. Bursts of reform have been followed by
declines. Led by score decreases in labor freedom and trade
57
freedom, Zambia’s overall economic freedom has declined by
1.0 point since 2011. 2011 2012 2013 2014 2015
A sharp decline in economic freedom over the past year has

returned the economy to the “mostly unfree” category. The Country Comparisons
rule of law is weak, and corruption is pervasive. The trad-
ing regime is relatively open, but an inefficient court system Country 58.7
undermines Zambia’s attractiveness to investors.
World
60.4
BACKGROUND: In 2011, Michael Sata of the Patriotic Front Average
was elected president after 20 years of rule by the Movement Regional
for Multiparty Democracy. In April 2012, Zambia released the Average 54.9
first draft of a new constitution that included press freedoms,
decentralized government, a bill of rights, and a 50 percent- Free
Economies 84.6
plus-1-vote requirement to win the presidency. The final draft,
0 20 40 60 80 100
due to be released in November 2013, was suppressed by the
government but leaked in early 2014 by a citizen watchdog
group. Parliament still has not voted on it. Zambia has experi-
enced a decade of rapid economic growth driven primarily by Quick Facts
mining. It is Africa’s largest copper producer. Recent increas- Population: 14.5 million
es in copper prices have boosted trade revenues and attracted GDP (PPP): $25.5 billion
foreign investment, particularly from China. The influx of 6.0% growth in 2013
Chinese workers has caused tensions between Zambians and 5-year compound annual growth 6.8%
the Chinese community. High rates of HIV/AIDS and unem- $1,754 per capita
ployment contribute to high poverty rates. Unemployment: 13.2%
463
ZAMBIA (continued)
1–Year

0 20 40 60 80 100
Corruption is perceived as widespread, although the government has taken some steps to fight
graft. The rule of law remains uneven across the country. The judicial system suffers from inef-
ficiency, government influence, and a lack of resources. Contract enforcement is weak, and
courts are relatively inexperienced in commercial litigation. The government lacks the capacity
to enforce intellectual property rights laws effectively.

0 20 40 60 80 100
Zambia’s top individual and corporate income tax rates are 35 percent. Other taxes include a
value-added tax and a property tax. Total tax revenue is equivalent to 19.1 percent of domestic
income, and public expenditures have reached 27.1 percent of domestic output. Public debt is
equal to 35 percent of gross domestic product.

0 20 40 60 80 100
The regulatory environment is still not conducive to entrepreneurial activity. No minimum
capital is required to start a business, but requirements for commercial licenses are time-con-
suming. Labor codes are not applied consistently, and workers are often hired on a short-term
basis. The central bank tightened monetary policy in 2013 to curb inflationary pressure from
cuts in fuel and agricultural subsidies.

0 20 40 60 80 100
Zambia’s average tariff rate is 4.1 percent. Agricultural imports may face additional barriers.
The government screens new foreign investment, but in general, it treats foreign and domes-
tic investment equally. The financial system is dominated by banking. Zambia has a relatively
advanced banking regime, and financial intermediation and credit to the private sector con-
tinue to expand.


ZIMBABWE
50
25 75
Least Most
free 0 100 free
Zincreased
imbabwe’s economic freedom score is 37.6, making its
by 2.1 points from last year, driven by a particu-
Freedom Trend
44
larly large gain in the control of government spending and
40
improvements in six other economic freedoms including
trade freedom and fiscal freedom. Nonetheless, Zimbabwe 36
is ranked last out of 46 countries in Sub-Saharan Africa, and
its overall score remains far below the world and region- 32
al averages.
28
After near economic collapse in the late 2000s, Zimbabwe has
24
experienced five consecutive years of improvements in eco-
nomic freedom. Over the past five years, economic freedom in 20
Zimbabwe has improved by 15.5 points, the largest improve-
ment of any nation. The biggest score gains have been in 16
monetary freedom and the control of government spending. 2011 2012 2013 2014 2015
A move to dollarize the economy has brought the hyperinfla-
tion of 2008 and 2009 under control.
Country Comparisons
Nevertheless, Zimbabwe remains one of the world’s least free
economies. President Robert Mugabe’s government is corrupt Country 37.6
and inefficient. The labor market is one of the most restricted
in the world, and business licensing forces most workers to World
60.4
seek employment in the informal sector. The violent seizure Average
of land has underscored poor government land reform poli- Regional
cies and upset investor confidence in a once-vibrant agricul- Average 54.9
tural sector.
Free
Economies 84.6
BACKGROUND: When it became independent in 1965, Zim-
babwe had a diversified economy, well-developed infrastruc- 0 20 40 60 80 100
ture, and an advanced financial sector. It is now one of Africa’s
poorest countries. In July 2013, President Robert Mugabe of
the Zimbabwe African National Union–Patriotic Front was Quick Facts
re-elected to his seventh five-year term, and his party won Population: 13.1 million
three-quarters of the seats in parliament in a peaceful but GDP (PPP): $10.3 billion
flawed election. In March 2013, voters approved a new consti- 3.0% growth in 2013
tution that would roll back presidential power. After decades 5-year compound annual growth 8.9%
of corruption and mismanagement, Zimbabwe now faces a $788 per capita
cash crisis and declining support from China. In 2014, poor Unemployment: 5.5%
harvests left 2.2 million people in need of food assistance. Inflation (CPI): 1.6%
465
ZIMBABWE (continued)
1–Year

0 20 40 60 80 100
Corruption remains endemic. Civil servants may make unpredictable demands for unofficial
payments for a variety of “services.” Pressure from the executive branch has substantially erod-
ed judicial independence. The government has repeatedly violated property rights. Its land
reform program, characterized by chaos and violence, badly damaged commercial farming.

0 20 40 60 80 100
The top individual income tax rate is 46.4 percent, and the top corporate tax rate is 25 per-
cent. Other taxes include a value-added tax and a capital gains tax. Overall tax revenue equals
approximately 26.3 percent of domestic income, and government spending is equal to 29.3
percent of gross domestic product. Public debt amounts to 55 percent of domestic output.

0 20 40 60 80 100
The regulatory framework remains costly and time-consuming. Incorporating a business costs
more than the level of average annual income, and completing licensing requirements takes
over 400 days. The formal labor market remains rudimentary. Dollarization, instituted in 2009
to end hyperinflation, now raises the specter of deflation as the U.S. dollar strengthens and the
government continues to delay meaningful structural reforms.

0 20 40 60 80 100
Zimbabwe’s average tariff rate is 13.3 percent. Imports may face significant delays. Foreign
ownership levels are capped by the government, and numerous state-owned enterprises dis-
tort the economy. The small, bank-dominated financial system is vulnerable to state interfer-
ence. Nonperforming loans have risen to over 15 percent of total loans. Much of the population
remains outside of the formal banking sector.


Appendix
467
Index of Economic Freedom Scores, 1995–2015
Country 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Afghanistan - - - - - - - - - - - - - - - - - - - - -
Albania 49.7 53.8 54.8 53.9 53.4 53.6 56.6 56.8 56.8 58.5 57.8 60.3 61.4 62.4 63.7 66.0 64.0 65.1 65.2 66.9 65.7
Algeria 55.7 54.5 54.9 55.8 57.2 56.8 57.3 61.0 57.7 58.1 53.2 55.7 55.4 56.2 56.6 56.9 52.4 51.0 49.6 50.8 48.9
Angola 27.4 24.4 24.2 24.9 23.7 24.3 - - - - - 43.5 44.7 46.9 47.0 48.4 46.2 46.7 47.3 47.7 47.9
Argentina 68.0 74.7 73.3 70.9 70.6 70.0 68.6 65.7 56.3 53.9 51.7 53.4 54.0 54.2 52.3 51.2 51.7 48.0 46.7 44.6 44.1
Armenia - 42.2 46.7 49.6 56.4 63.0 66.4 68.0 67.3 70.3 69.8 70.6 68.6 69.9 69.9 69.2 69.7 68.8 69.4 68.9 67.1
Australia 74.1 74.0 75.5 75.6 76.4 77.1 77.4 77.3 77.4 77.9 79.0 79.9 81.1 82.2 82.6 82.6 82.5 83.1 82.6 82.0 81.4
Austria 70.0 68.9 65.2 65.4 64.0 68.4 68.1 67.4 67.6 67.6 68.8 71.1 71.6 71.4 71.2 71.6 71.9 70.3 71.8 72.4 71.2
Azerbaijan - 30.0 34.0 43.1 47.4 49.8 50.3 53.3 54.1 53.4 54.4 53.2 54.6 55.3 58.0 58.8 59.7 58.9 59.7 61.3 61.0
The Bahamas 71.8 74.0 74.5 74.5 74.7 73.9 74.8 74.4 73.5 72.1 72.6 72.3 72.0 71.1 70.3 67.3 68.0 68.0 70.1 69.8 68.7
Bahrain 76.2 76.4 76.1 75.6 75.2 75.7 75.9 75.6 76.3 75.1 71.2 71.6 71.2 72.2 74.8 76.3 77.7 75.2 75.5 75.1 73.4
Bangladesh 40.9 51.1 49.9 52.0 50.0 48.9 51.2 51.9 49.3 50.0 47.5 52.9 46.7 44.2 47.5 51.1 53.0 53.2 52.6 54.1 53.9
Barbados - 62.3 64.5 67.9 66.7 69.5 71.5 73.6 71.3 69.4 70.1 71.9 70.0 71.3 71.5 68.3 68.5 69.0 69.3 68.3 67.9
Belarus 40.4 38.7 39.8 38.0 35.4 41.3 38.0 39.0 39.7 43.1 46.7 47.5 47.0 45.3 45.0 48.7 47.9 49.0 48.0 50.1 49.8
Belgium - 66.0 64.6 64.7 62.9 63.5 63.8 67.6 68.1 68.7 69.0 71.8 72.5 71.7 72.1 70.1 70.2 69.0 69.2 69.9 68.8
Belize 62.9 61.6 64.3 59.1 60.7 63.3 65.9 65.6 63.5 62.8 64.5 64.7 63.3 63.0 63.0 61.5 63.8 61.9 57.3 56.7 56.8
Benin - 54.5 61.3 61.7 60.6 61.5 60.1 57.3 54.9 54.6 52.3 54.0 55.1 55.2 55.4 55.4 56.0 55.7 57.6 57.1 58.8

Bhutan - - - - - - - - - - - - - - 57.7 57.0 57.6 56.6 55.0 56.7 57.4
Bolivia 56.8 65.2 65.1 68.8 65.6 65.0 68.0 65.1 64.3 64.5 58.4 57.8 54.2 53.1 53.6 49.4 50.0 50.2 47.9 48.4 46.8
Bosnia and
- - 29.4 29.4 45.1 36.6 37.4 40.6 44.7 48.8 55.6 54.4 53.9 53.1 56.2 57.5 57.3 57.3 58.4 59.0
Herzegovina
Botswana 56.8 61.6 59.1 62.8 62.9 65.8 66.8 66.2 68.6 69.9 69.3 68.8 68.1 68.2 69.7 70.3 68.8 69.6 70.6 72.0 69.8
Brazil 51.4 48.1 52.6 52.3 61.3 61.1 61.9 61.5 63.4 62.0 61.7 60.9 56.2 56.2 56.7 55.6 56.3 57.9 57.7 56.9 56.6
Brunei - - - - - - - - - - - - - - - - - - - 69.0 68.9
Bulgaria 50.0 48.6 47.6 45.7 46.2 47.3 51.9 57.1 57.0 59.2 62.3 64.1 62.7 63.7 64.6 62.3 64.9 64.7 65.0 65.7 66.8
Burkina Faso - 49.4 54.0 54.5 55.0 55.7 56.7 58.8 58.9 58.0 56.6 55.8 55.1 55.7 59.5 59.4 60.6 60.6 59.9 58.9 58.6
Burma - 45.1 45.4 45.7 46.4 47.9 46.1 45.5 44.9 43.6 40.5 40.0 41.0 39.5 37.7 36.7 37.8 38.7 39.2 46.5 46.9
Burundi - - 45.4 44.7 41.1 42.6 - - - - - 48.7 46.9 46.2 48.8 47.5 49.6 48.1 49.0 51.4 53.7
Cabo Verde - 49.7 47.7 48.0 50.7 51.9 56.3 57.6 56.1 58.1 57.8 58.6 56.5 57.9 61.3 61.8 64.6 63.5 63.7 66.1 66.4

Country 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Cambodia - - 52.8 59.8 59.9 59.3 59.6 60.7 63.7 61.1 60.0 56.7 55.9 55.9 56.6 56.6 57.9 57.6 58.5 57.4 57.5
Cameroon 51.3 45.7 44.6 48.0 50.3 49.9 53.3 52.8 52.7 52.3 53.0 54.6 55.6 54.3 53.0 52.3 51.8 51.8 52.3 52.6 51.9
Canada 69.4 70.3 67.9 68.5 69.3 70.5 71.2 74.6 74.8 75.3 75.8 77.4 78.0 80.2 80.5 80.4 80.8 79.9 79.4 80.2 79.1
Central African
- - - - - - - 59.8 60.0 57.5 56.5 54.2 50.6 48.6 48.3 48.4 49.3 50.3 50.4 46.7 45.9
Republic
Chad - - 45.1 46.6 47.2 46.8 46.4 49.2 52.6 53.1 52.1 50.0 50.1 47.8 47.5 47.5 45.3 44.8 45.2 44.5 45.9
Chile 71.2 72.6 75.9 74.9 74.1 74.7 75.1 77.8 76.0 76.9 77.8 78.0 77.7 78.6 78.3 77.2 77.4 78.3 79.0 78.7 78.5
China 52.0 51.3 51.7 53.1 54.8 56.4 52.6 52.8 52.6 52.5 53.7 53.6 52.0 53.1 53.2 51.0 52.0 51.2 51.9 52.5 52.7
Colombia 64.5 64.3 66.4 65.5 65.3 63.3 65.6 64.2 64.2 61.2 59.6 60.4 59.9 62.2 62.3 65.5 68.0 68.0 69.6 70.7 71.7
Comoros - - - - - - - - - - - - - - 43.3 44.9 43.8 45.7 47.5 51.4 52.1
Congo, Dem.
41.4 39.5 39.5 40.6 34.0 34.8 - - - - - - - - 42.8 41.4 40.7 41.1 39.6 40.6 45.0
Rep. of
Congo, Rep. of - 40.3 42.2 33.8 41.6 40.6 44.3 45.3 47.7 45.9 46.2 43.8 44.4 45.3 45.4 43.2 43.6 43.8 43.5 43.7 42.7
Costa Rica 68.0 66.4 65.6 65.6 67.4 68.4 67.6 67.5 67.0 66.4 66.1 65.9 64.0 64.2 66.4 65.9 67.3 68.0 67.0 66.9 67.2
Côte d’Ivoire 53.4 49.9 50.5 51.3 51.7 50.2 54.8 57.3 56.7 57.8 56.6 56.2 54.9 53.9 55.0 54.1 55.4 54.3 54.1 57.7 58.5
Appendix
Croatia - 48.0 46.7 51.7 53.1 53.6 50.7 51.1 53.3 53.1 51.9 53.6 53.4 54.1 55.1 59.2 61.1 60.9 61.3 60.4 61.5
Cuba 27.8 27.8 27.8 28.2 29.7 31.3 31.6 32.4 35.1 34.4 35.5 29.3 28.6 27.5 27.9 26.7 27.7 28.3 28.5 28.7 29.6
Cyprus - 67.7 67.9 68.2 67.8 67.2 71.0 73.0 73.3 74.1 71.9 71.8 71.7 71.3 70.8 70.9 73.3 71.8 69.0 67.6 67.9
Czech Republic 67.8 68.1 68.8 68.4 69.7 68.6 70.2 66.5 67.5 67.0 64.6 66.4 67.4 68.1 69.4 69.8 70.4 69.9 70.9 72.2 72.5
Denmark - 67.3 67.5 67.5 68.1 68.3 68.3 71.1 73.2 72.4 75.3 75.4 77.0 79.2 79.6 77.9 78.6 76.2 76.1 76.1 76.3
Djibouti - - 54.5 55.9 57.1 55.1 58.3 57.8 55.7 55.6 55.2 53.2 52.4 51.2 51.3 51.0 54.5 53.9 53.9 55.9 57.5
Dominica - - - - - - - - - - - - - - 62.6 63.2 63.3 61.6 63.9 65.2 66.1
Dominican
55.8 58.1 53.5 58.1 58.1 59.0 59.1 58.6 57.8 54.6 55.1 56.3 56.8 57.7 59.2 60.3 60.0 60.2 59.7 61.3 61.0
Republic
Ecuador 57.7 60.1 61.0 62.8 62.9 59.8 55.1 53.1 54.1 54.4 52.9 54.6 55.3 55.2 52.5 49.3 47.1 48.3 46.9 48.0 49.2
Egypt 45.7 52.0 54.5 55.8 58.0 51.7 51.5 54.1 55.3 55.5 55.8 53.2 54.4 58.5 58.0 59.0 59.1 57.9 54.8 52.9 55.2
El Salvador 69.1 70.1 70.5 70.2 75.1 76.3 73.0 73.0 71.5 71.2 71.5 69.6 68.9 68.5 69.8 69.9 68.8 68.7 66.7 66.2 65.7
Equatorial
- - - - 45.1 45.6 47.9 46.4 53.1 53.3 53.3 51.5 53.2 51.6 51.3 48.6 47.5 42.8 42.3 44.4 40.4
Guinea
469
Country 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Eritrea - - - - - - - - - - - - - - 38.5 35.3 36.7 36.2 36.3 38.5 38.9
Estonia 65.2 65.4 69.1 72.5 73.8 69.9 76.1 77.6 77.7 77.4 75.2 74.9 78.0 77.9 76.4 74.7 75.2 73.2 75.3 75.9 76.8
Ethiopia 42.6 45.9 48.1 49.2 46.7 50.2 48.9 49.8 48.8 54.5 51.1 50.9 53.6 52.5 53.0 51.2 50.5 52.0 49.4 50.0 51.5
Fiji 54.7 57.4 58.0 58.2 58.4 57.8 53.7 53.9 54.7 58.0 58.2 58.4 60.8 61.8 61.0 60.3 60.4 57.3 57.2 58.7 59.0
Finland - 63.7 65.2 63.5 63.9 64.3 69.7 73.6 73.7 73.4 71.0 72.9 74.0 74.6 74.5 73.8 74.0 72.3 74.0 73.4 73.4
France 64.4 63.7 59.1 58.9 59.1 57.4 58.0 58.0 59.2 60.9 60.5 61.1 62.1 64.7 63.3 64.2 64.6 63.2 64.1 63.5 62.5
Gabon 57.5 55.7 58.8 59.2 60.5 58.2 55.0 58.0 58.7 57.1 54.8 56.1 54.8 54.2 55.0 55.4 56.7 56.4 57.8 57.8 58.3
The Gambia - - 52.9 53.4 52.1 52.7 56.6 57.7 56.3 55.3 56.5 57.3 57.7 56.9 55.8 55.1 57.4 58.8 58.8 59.5 57.5
Georgia - 44.1 46.5 47.9 52.5 54.3 58.3 56.7 58.6 58.9 57.1 64.5 69.3 69.2 69.8 70.4 70.4 69.4 72.2 72.6 73.0
Germany 69.8 69.1 67.5 64.3 65.6 65.7 69.5 70.4 69.7 69.5 68.1 70.8 70.8 70.6 70.5 71.1 71.8 71.0 72.8 73.4 73.8
Ghana 55.6 57.7 56.7 57.0 57.9 58.1 58.0 57.2 58.2 59.1 56.5 55.6 57.6 57.0 58.1 60.2 59.4 60.7 61.3 64.2 63.0
Greece 61.2 60.5 59.6 60.6 61.0 61.0 63.4 59.1 58.8 59.1 59.0 60.1 58.7 60.6 60.8 62.7 60.3 55.4 55.4 55.7 54.0
Guatemala 62.0 63.7 65.7 65.8 66.2 64.3 65.1 62.3 62.3 59.6 59.5 59.1 60.5 59.8 59.4 61.0 61.9 60.9 60.0 61.2 60.4
Guinea 59.4 58.5 52.9 61.0 59.4 58.2 58.4 52.9 54.6 56.1 57.4 52.8 54.5 52.8 51.0 51.8 51.7 50.8 51.2 53.5 52.1
Guinea-Bissau - - - - 33.5 34.7 42.5 42.3 43.1 42.6 46.0 46.5 46.1 44.4 45.4 43.6 46.5 50.1 51.1 51.3 52.0
Guyana 45.7 50.1 53.2 52.7 53.3 52.4 53.3 54.3 50.3 53.0 56.5 56.6 53.7 48.8 48.4 48.4 49.4 51.3 53.8 55.7 55.5
Haiti 43.0 41.0 45.8 45.7 45.9 45.7 47.1 47.9 50.6 51.2 48.4 49.2 51.4 49.0 50.5 50.8 52.1 50.7 48.1 48.9 51.3

Honduras 57.0 56.6 56.0 56.2 56.7 57.6 57.0 58.7 60.4 55.3 55.3 57.4 59.1 58.9 58.7 58.3 58.6 58.8 58.4 57.1 57.4
Hong Kong 88.6 90.5 88.6 88.0 88.5 89.5 89.9 89.4 89.8 90.0 89.5 88.6 89.9 89.7 90.0 89.7 89.7 89.9 89.3 90.1 89.6
Hungary 55.2 56.8 55.3 56.9 59.6 64.4 65.6 64.5 63.0 62.7 63.5 65.0 64.8 67.6 66.8 66.1 66.6 67.1 67.3 67.0 66.8
Iceland - - 70.5 71.2 71.4 74.0 73.4 73.1 73.5 72.1 76.6 75.8 76.0 75.8 75.9 73.7 68.2 70.9 72.1 72.4 72.0
India 45.1 47.4 49.7 49.7 50.2 47.4 49.0 51.2 51.2 51.5 54.2 52.2 53.9 54.1 54.4 53.8 54.6 54.6 55.2 55.7 54.6
Indonesia 54.9 61.0 62.0 63.4 61.5 55.2 52.5 54.8 55.8 52.1 52.9 51.9 53.2 53.2 53.4 55.5 56.0 56.4 56.9 58.5 58.1
Iran - 36.1 34.5 36.0 36.8 36.1 35.9 36.4 43.2 42.8 50.5 45.0 45.0 45.0 44.6 43.4 42.1 42.3 43.2 40.3 41.8
Iraq - 17.2 17.2 17.2 17.2 17.2 17.2 15.6 - - - - - - - - - - - - -
Ireland 68.5 68.5 72.6 73.7 74.6 76.1 81.2 80.5 80.9 80.3 80.8 82.2 82.6 82.5 82.2 81.3 78.7 76.9 75.7 76.2 76.6
Israel 61.5 62.0 62.7 68.0 68.3 65.5 66.1 66.9 62.7 61.4 62.6 64.4 64.8 66.3 67.6 67.7 68.5 67.8 66.9 68.4 70.5
Italy 61.2 60.8 58.1 59.1 61.6 61.9 63.0 63.6 64.3 64.2 64.9 62.0 62.8 62.6 61.4 62.7 60.3 58.8 60.6 60.9 61.7

Country 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Jamaica 64.4 66.7 67.7 67.1 64.7 65.5 63.7 61.7 67.0 66.7 67.0 66.4 65.5 65.7 65.2 65.5 65.7 65.1 66.8 66.7 67.7
Japan 75.0 72.6 70.3 70.2 69.1 70.7 70.9 66.7 67.6 64.3 67.3 73.3 72.7 73.0 72.8 72.9 72.8 71.6 71.8 72.4 73.3
Jordan 62.7 60.8 63.6 66.8 67.4 67.5 68.3 66.2 65.3 66.1 66.7 63.7 64.5 64.1 65.4 66.1 68.9 69.9 70.4 69.2 69.3
Kazakhstan - - - 41.7 47.3 50.4 51.8 52.4 52.3 49.7 53.9 60.2 59.6 61.1 60.1 61.0 62.1 63.6 63.0 63.7 63.3
Kenya 54.5 56.4 60.1 58.4 58.2 59.7 57.6 58.2 58.6 57.7 57.9 59.7 59.6 59.3 58.7 57.5 57.4 57.5 55.9 57.1 55.6
Kiribati - - - - - - - - - - - - - - 45.7 43.7 44.8 46.9 45.9 46.3 46.4
North Korea 8.9 8.9 8.9 8.9 8.9 8.9 8.9 8.9 8.9 8.9 8.0 4.0 3.0 3.0 2.0 1.0 1.0 1.0 1.5 1.0 1.3
South Korea 72.0 73.0 69.8 73.3 69.7 69.7 69.1 69.5 68.3 67.8 66.4 67.5 67.8 68.6 68.1 69.9 69.8 69.9 70.3 71.2 71.5
Kosovo - - - - - - - - - - - - - - - - - - - - -
Kuwait - 66.1 64.8 66.3 69.5 69.7 68.2 65.4 66.7 63.6 64.6 66.5 66.4 68.1 65.6 67.7 64.9 62.5 63.1 62.3 62.5
Kyrgyz
- - - 51.8 54.8 55.7 53.7 51.7 56.8 58.0 56.6 61.0 60.2 61.1 61.8 61.3 61.1 60.2 59.6 61.1 61.3
Republic
Laos - 38.5 35.1 35.2 35.2 36.8 33.5 36.8 41.0 42.0 44.4 47.5 50.3 50.3 50.4 51.1 51.3 50.0 50.1 51.2 51.4
Latvia - 55.0 62.4 63.4 64.2 63.4 66.4 65.0 66.0 67.4 66.3 66.9 67.9 68.3 66.6 66.2 65.8 65.2 66.5 68.7 69.7
Lebanon - 63.2 63.9 59.0 59.1 56.1 61.0 57.1 56.7 56.9 57.2 57.5 60.4 60.0 58.1 59.5 60.1 60.1 59.5 59.4 59.3
Lesotho - 47.0 47.2 48.4 48.2 48.4 50.6 48.9 52.0 50.3 53.9 54.7 53.2 52.1 49.7 48.1 47.5 46.6 47.9 49.5 49.6
Appendix
Liberia - - - - - - - - - - - - - - 48.1 46.2 46.5 48.6 49.3 52.4 52.7
Libya - 31.7 28.9 32.0 32.3 34.7 34.0 35.4 34.6 31.5 32.8 33.2 37.0 38.7 43.5 40.2 38.6 35.9 - - -
Liechtenstein - - - - - - - - - - - - - - - n/a n/a N/A - - -
Lithuania - 49.7 57.3 59.4 61.5 61.9 65.5 66.1 69.7 72.4 70.5 71.8 71.5 70.9 70.0 70.3 71.3 71.5 72.1 73.0 74.7
Luxembourg - 72.5 72.8 72.7 72.4 76.4 80.1 79.4 79.9 78.9 76.3 75.3 74.6 74.7 75.2 75.4 76.2 74.5 74.2 74.2 73.2
Macau - - - - - - - - - - - - - - 72.0 72.5 73.1 71.8 71.7 71.3 70.3
Macedonia - - - - - - - 58.0 60.1 56.8 56.1 59.2 60.6 61.1 61.2 65.7 66.0 68.5 68.2 68.6 67.1
Madagascar 51.6 52.2 53.8 51.8 52.8 54.4 53.9 56.8 62.8 60.9 63.1 61.0 61.1 62.4 62.2 63.2 61.2 62.4 62.0 61.7 61.7
Malawi 54.7 56.2 53.4 54.1 54.0 57.4 56.2 56.9 53.2 53.6 53.6 55.4 52.9 52.7 53.7 54.1 55.8 56.4 55.3 55.4 54.8
Malaysia 71.9 69.9 66.8 68.2 68.9 66.0 60.2 60.1 61.1 59.9 61.9 61.6 63.8 63.9 64.6 64.8 66.3 66.4 66.1 69.6 70.8
Maldives - - - - - - - - - - - - - - 51.3 49.0 48.3 49.2 49.0 51.0 53.4
Mali 52.4 57.0 56.4 57.3 58.4 60.3 60.1 61.1 58.6 56.6 57.3 54.1 54.7 55.6 55.6 55.6 56.3 55.8 56.4 55.5 56.4
Malta 56.3 55.8 57.9 61.2 59.3 58.3 62.9 62.2 61.1 63.3 68.9 67.3 66.1 66.0 66.1 67.2 65.7 67.0 67.5 66.4 66.5
471
Country 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Mauritania - 45.5 47.0 43.7 42.8 46.0 48.5 52.5 59.0 61.8 59.4 55.7 53.6 55.2 53.9 52.0 52.1 53.0 52.3 53.2 53.3
Mauritius - - - - 68.5 67.2 66.4 67.7 64.4 64.3 67.2 67.4 69.4 72.6 74.3 76.3 76.2 77.0 76.9 76.5 76.4
Mexico 63.1 61.2 57.1 57.9 58.5 59.3 60.6 63.0 65.3 66.0 65.2 64.7 66.0 66.2 65.8 68.3 67.8 65.3 67.0 66.8 66.4
Micronesia - - - - - - - - - - - - - - 51.7 50.6 50.3 50.7 50.1 49.8 49.6
Moldova 33.0 52.5 48.9 53.5 56.1 59.6 54.9 57.4 60.0 57.1 57.4 58.0 58.7 57.9 54.9 53.7 55.7 54.4 55.5 57.3 57.5
Mongolia 47.8 47.4 52.9 57.3 58.6 58.5 56.0 56.7 57.7 56.5 59.7 62.4 60.3 63.6 62.8 60.0 59.5 61.5 61.7 58.9 59.2
Montenegro - - - - - - - 46.6 43.5 - - - - - 58.2 63.6 62.5 62.5 62.6 63.6 64.7
Morocco 62.8 64.3 64.7 61.1 63.8 63.2 63.9 59.0 57.8 56.7 52.2 51.5 56.4 55.6 57.7 59.2 59.6 60.2 59.6 58.3 60.1
Mozambique 45.5 48.4 44.0 43.0 48.9 52.2 59.2 57.7 58.6 57.2 54.6 51.9 54.7 55.4 55.7 56.0 56.8 57.1 55.0 55.0 54.8
Namibia - - 61.6 66.1 66.1 66.7 64.8 65.1 67.3 62.4 61.4 60.7 63.5 61.4 62.4 62.2 62.7 61.9 60.3 59.4 59.6
Nepal - 50.3 53.6 53.5 53.1 51.3 51.6 52.3 51.5 51.2 51.4 53.7 54.4 54.1 53.2 52.7 50.1 50.2 50.4 50.1 51.3
The Netherlands - 69.7 70.4 69.2 70.2 70.4 73.0 75.1 74.6 74.5 72.9 75.4 75.5 77.4 77.0 75.0 74.7 73.3 73.5 74.2 73.7
New Zealand - 78.1 79.0 79.2 81.7 80.9 81.1 80.7 81.1 81.5 82.3 82.0 81.4 80.7 82.0 82.1 82.3 82.1 81.4 81.2 82.1
Nicaragua 42.5 54.1 53.3 53.8 54.0 56.9 58.0 61.1 62.6 61.4 62.5 63.8 62.7 60.8 59.8 58.3 58.8 57.9 56.6 58.4 57.6
Niger - 45.8 46.6 47.5 48.6 45.9 48.9 48.2 54.2 54.6 54.1 52.5 53.2 52.9 53.8 52.9 54.3 54.3 53.9 55.1 54.6
Nigeria 47.3 47.4 52.8 52.3 55.7 53.1 49.6 50.9 49.5 49.2 48.4 48.7 55.6 55.1 55.1 56.8 56.7 56.3 55.1 54.3 55.6
Norway - 65.4 65.1 68.0 68.6 70.1 67.1 67.4 67.2 66.2 64.5 67.9 67.9 68.6 70.2 69.4 70.3 68.8 70.5 70.9 71.8

Oman 70.2 65.4 64.5 64.9 64.9 64.1 67.7 64.0 64.6 66.9 66.5 63.7 65.8 67.3 67.0 67.7 69.8 67.9 68.1 67.4 66.7
Pakistan 57.6 58.4 56.0 53.2 53.0 56.4 56.0 55.8 55.0 54.9 53.3 57.9 57.2 55.6 57.0 55.2 55.1 54.7 55.1 55.2 55.6
Panama 71.6 71.8 72.4 72.6 72.6 71.6 70.6 68.5 68.4 65.3 64.3 65.6 64.6 64.7 64.7 64.8 64.9 65.2 62.5 63.4 64.1
Papua New
- 58.6 56.7 55.2 56.3 55.8 57.2 - - - - - - - 54.8 53.5 52.6 53.8 53.6 53.9 53.1
Guinea
Paraguay 65.9 67.1 67.3 65.2 63.7 64.0 60.3 59.6 58.2 56.7 53.4 55.6 58.3 60.0 61.0 61.3 62.3 61.8 61.1 62.0 61.1
Peru 56.9 62.5 63.8 65.0 69.2 68.7 69.6 64.8 64.6 64.7 61.3 60.5 62.7 63.8 64.6 67.6 68.6 68.7 68.2 67.4 67.7
The Philippines 55.0 60.2 62.2 62.8 61.9 62.5 60.9 60.7 61.3 59.1 54.7 56.3 56.0 56.0 56.8 56.3 56.2 57.1 58.2 60.1 62.2
Poland 50.7 57.8 56.8 59.2 59.6 60.0 61.8 65.0 61.8 58.7 59.6 59.3 58.1 60.3 60.3 63.2 64.1 64.2 66.0 67.0 68.6
Portugal 62.4 64.5 63.6 65.0 65.6 65.5 66.0 65.4 64.9 64.9 62.4 62.9 64.0 63.9 64.9 64.4 64.0 63.0 63.1 63.5 65.3
Qatar - - - - 62.0 62.0 60.0 61.9 65.9 66.5 63.5 62.4 62.9 62.2 65.8 69.0 70.5 71.3 71.3 71.2 70.8
Romania 42.9 46.2 50.8 54.4 50.1 52.1 50.0 48.7 50.6 50.0 52.1 58.2 61.2 61.7 63.2 64.2 64.7 64.4 65.1 65.5 66.6

Country 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Russia 51.1 51.6 48.6 52.8 54.5 51.8 49.8 48.7 50.8 52.8 51.3 52.4 52.2 49.8 50.8 50.3 50.5 50.5 51.1 51.9 52.1
Rwanda - - 38.3 39.1 39.8 42.3 45.4 50.4 47.8 53.3 51.7 52.8 52.4 54.2 54.2 59.1 62.7 64.9 64.1 64.7 64.8
Saint Lucia - - - - - - - - - - - - - - 68.8 70.5 70.8 71.3 70.4 70.7 70.2
Saint Vincent
and the - - - - - - - - - - - - - - 64.3 66.9 66.9 66.5 66.7 67.0 68.0
Grenadines
Samoa - 47.6 51.5 49.9 58.7 60.8 63.1 - - - - - - - 59.5 60.4 60.6 60.5 57.1 61.1 61.9
São Tomé
- - - - - - - - - - - - - - 43.8 48.8 49.5 50.2 48.0 48.8 53.3
and Príncipe
Saudi Arabia - 68.3 68.7 69.3 65.5 66.5 62.2 65.3 63.2 60.4 63.0 63.0 60.9 62.5 64.3 64.1 66.2 62.5 60.6 62.2 62.1
Senegal - 58.2 58.1 59.7 60.6 58.9 58.7 58.6 58.1 58.9 57.9 56.2 58.1 58.3 56.3 54.6 55.7 55.4 55.5 55.4 57.8
Serbia - - - - - - - 46.6 43.5 - - - - - 56.6 56.9 58.0 58.0 58.6 59.4 60.0
Seychelles - - - - - - - - - - - - - - 47.8 47.9 51.2 53.0 54.9 56.2 57.5
Sierra Leone 49.8 52.3 45.0 47.7 47.2 44.2 - - 42.2 43.6 44.8 45.2 47.0 48.3 47.8 47.9 49.6 49.1 48.3 50.5 51.7
Singapore 86.3 86.5 87.3 87.0 86.9 87.7 87.8 87.4 88.2 88.9 88.6 88.0 87.1 87.3 87.1 86.1 87.2 87.5 88.0 89.4 89.4
Appendix
Slovak
60.4 57.6 55.5 57.5 54.2 53.8 58.5 59.8 59.0 64.6 66.8 69.8 69.6 70.0 69.4 69.7 69.5 67.0 68.7 66.4 67.2
Republic
Slovenia - 50.4 55.6 60.7 61.3 58.3 61.8 57.8 57.7 59.2 59.6 61.9 59.6 60.2 62.9 64.7 64.6 62.9 61.7 62.7 60.3
Solomon
- - - - - - - - - - - - - - 46.0 42.9 45.9 46.2 45.0 46.2 47.0
Islands
Somalia - 25.6 25.6 27.8 27.8 27.8 - - - - - - - - - - - - - - -
South Africa 60.7 62.5 63.2 64.3 63.3 63.7 63.8 64.0 67.1 66.3 62.9 63.7 63.5 63.4 63.8 62.8 62.7 62.7 61.8 62.5 62.6
Spain 62.8 59.6 59.6 62.6 65.1 65.9 68.1 68.8 68.8 68.9 67.0 68.2 69.2 69.1 70.1 69.6 70.2 69.1 68.0 67.2 67.6
Sri Lanka 60.6 62.5 65.5 64.6 64.0 63.2 66.0 64.0 62.5 61.6 61.0 58.7 59.4 58.4 56.0 54.6 57.1 58.3 60.7 60.0 58.6
Sudan 39.4 39.2 39.9 38.3 39.6 47.2 - - - - - - - - - - - - - - -
Suriname - 36.7 35.9 39.9 40.1 45.8 44.3 48.0 46.9 47.9 51.9 55.1 54.8 54.3 54.1 52.5 53.1 52.6 52.0 54.2 54.2
Swaziland 63.3 58.6 59.4 62.0 62.1 62.6 63.6 60.9 59.6 58.6 59.4 61.4 60.1 58.4 59.1 57.4 59.1 57.2 57.2 61.2 59.9
Sweden 61.4 61.8 63.3 64.0 64.2 65.1 66.6 70.8 70.0 70.1 69.8 70.9 69.3 70.8 70.5 72.4 71.9 71.7 72.9 73.1 72.7
Switzerland - 76.8 78.6 79.0 79.1 76.8 76.0 79.3 79.0 79.5 79.3 78.9 78.0 79.5 79.4 81.1 81.9 81.1 81.0 81.6 80.5
473
Country 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Syria - 42.3 43.0 42.2 39.0 37.2 36.6 36.3 41.3 40.6 46.3 51.2 48.3 47.2 51.3 49.4 51.3 51.2 - - -
Taiwan 74.2 74.1 70.0 70.4 71.5 72.5 72.8 71.3 71.7 69.6 71.3 69.7 69.4 70.3 69.5 70.4 70.8 71.9 72.7 73.9 75.1
Tajikistan - - - 41.1 41.2 44.8 46.8 47.3 46.5 48.7 50.4 52.6 53.6 54.4 54.6 53.0 53.5 53.4 53.4 52.0 52.7
Tanzania 57.3 57.5 59.3 59.6 60.0 56.0 54.9 58.3 56.9 60.1 56.3 58.5 56.8 56.5 58.3 58.3 57.0 57.0 57.9 57.8 57.5
Thailand 71.3 71.0 66.1 67.3 66.9 66.6 68.9 69.1 65.8 63.7 62.5 63.3 63.5 62.3 63.0 64.1 64.7 64.9 64.1 63.3 62.4
Timor-Leste - - - - - - - - - - - - - - 50.5 45.8 42.8 43.3 43.7 43.2 45.5
Togo - - - - 48.2 46.4 45.3 45.2 46.8 47.0 48.2 47.3 49.7 48.9 48.7 47.1 49.1 48.3 48.8 49.9 53.0
Tonga - - - - - - - - - - - - - - 54.1 53.4 55.8 57.0 56.0 58.2 59.3
Trinidad and
- 69.2 71.3 72.0 72.4 74.5 71.8 70.1 68.8 71.3 71.5 70.4 70.6 69.5 68.0 65.7 66.5 64.4 62.3 62.7 64.1
Tobago
Tunisia 63.4 63.9 63.8 63.9 61.1 61.3 60.8 60.2 58.1 58.4 55.4 57.5 60.3 60.1 58.0 58.9 58.5 58.6 57.0 57.3 57.7
Turkey 58.4 56.7 60.8 60.9 59.2 63.4 60.6 54.2 51.9 52.8 50.6 57.0 57.4 59.9 61.6 63.8 64.2 62.5 62.9 64.9 63.2
Turkmenistan - - - 35.0 36.1 37.6 41.8 43.2 51.3 50.7 47.6 43.8 43.0 43.4 44.2 42.5 43.6 43.8 42.6 42.2 41.4
Uganda 62.9 66.2 66.6 64.7 64.8 58.2 60.4 61.0 60.1 64.1 62.9 63.9 63.1 63.8 63.5 62.2 61.7 61.9 61.1 59.9 59.7
Ukraine 39.9 40.6 43.5 40.4 43.7 47.8 48.5 48.2 51.1 53.7 55.8 54.4 51.5 51.0 48.8 46.4 45.8 46.1 46.3 49.3 46.9
United Arab
- 71.6 71.9 72.2 71.5 74.2 74.9 73.6 73.4 67.2 65.2 62.2 62.6 62.6 64.7 67.3 67.8 69.3 71.1 71.4 72.4
Emirates

United
77.9 76.4 76.4 76.5 76.2 77.3 77.6 78.5 77.5 77.7 79.2 80.4 79.9 79.4 79.0 76.5 74.5 74.1 74.8 74.9 75.8
Kingdom
United States 76.7 76.7 75.6 75.4 75.5 76.4 79.1 78.4 78.2 78.7 79.9 81.2 81.2 81.0 80.7 78.0 77.8 76.3 76.0 75.5 76.2
Uruguay 62.5 63.7 67.5 68.6 68.5 69.3 70.7 68.7 69.8 66.7 66.9 65.3 68.4 67.9 69.1 69.8 70.0 69.9 69.7 69.3 68.6
Uzbekistan - - - 31.5 33.8 38.1 38.2 38.5 38.3 39.1 45.8 48.7 51.5 51.9 50.5 47.5 45.8 45.8 46.0 46.5 47.0
Vanuatu - - - - - - - - - - - - - - 58.4 56.4 56.7 56.6 56.6 59.5 61.1
Venezuela 59.8 54.5 52.8 54.0 56.1 57.4 54.6 54.7 54.8 46.7 45.2 44.6 47.9 44.7 39.9 37.1 37.6 38.1 36.1 36.3 34.3
Vietnam 41.7 40.2 38.6 40.4 42.7 43.7 44.3 45.6 46.2 46.1 48.1 50.5 49.8 50.4 51.0 49.8 51.6 51.3 51.0 50.8 51.7
Yemen 49.8 49.6 48.4 46.1 43.3 44.5 44.3 48.6 50.3 50.5 53.8 52.6 54.1 53.8 56.9 54.4 54.2 55.3 55.9 55.5 53.7
Zambia 55.1 59.6 62.1 62.7 64.2 62.8 59.5 59.6 55.3 54.9 55.0 56.8 56.2 56.2 56.6 58.0 59.7 58.3 58.7 60.4 58.7
Zimbabwe 48.5 46.7 48.0 44.6 47.2 48.7 38.8 36.7 36.7 34.4 35.2 33.5 32.0 29.5 22.7 21.4 22.1 26.3 28.6 35.5 37.6
Methodology
The Index of Economic Freedom focuses on four key aspects of the economic environment over
which governments typically exercise policy control:
• Rule of law,
• Government size,
• Regulatory efficiency, and
• Market openness.
In assessing conditions in these four categories, the Index measures 10 specific components of
economic freedom, each of which is graded on a scale from 0 to 100. Scores on these 10 components
of economic freedom, which are calculated from a number of sub-variables, are equally weighted and
averaged to produce an overall economic freedom score for each economy.
The following sections provide detailed descriptions of the formulas and methodology used to
compute the scores for each of the 10 components of economic freedom.
RULE OF LAW
Property Rights
The property rights component is a qualitative assessment of the extent to which a country’s legal
framework allows individuals to freely accumulate private property, secured by clear laws that are
enforced effectively by the government. It measures the degree to which a country’s laws protect
private property rights and the extent to which those laws are respected. It also assesses the likeli-
hood that private property will be expropriated by the state and analyzes the independence of the
judiciary, the existence of corruption within the judiciary, and the ability of individuals and busi-
nesses to enforce contracts.
The more effective the legal protection of property, the higher a country’s score. Similarly, the
greater the chances of government expropriation of property or the less independent the judiciary,
the lower a country’s score.
475
Each country’s property rights score is assessed according to the following criteria:
• 100—Private property is guaranteed by the government. The court system enforces contracts
efficiently and quickly. The justice system punishes those who unlawfully confiscate private
property. There is no corruption or expropriation.
efficiently. The justice system punishes those who unlawfully confiscate private property. Cor-
ruption is nearly nonexistent, and expropriation is highly unlikely.
efficiently but with some delays. Corruption is minimal, and expropriation is highly unlikely.
• 70—Private property is guaranteed by the government. The court system is subject to delays
and lax in enforcing contracts. Corruption is possible but rare, and expropriation is unlikely.
• 60—Enforcement of property rights is lax and subject to delays. Corruption is possible but rare,
and the judiciary may be influenced by other branches of government. Expropriation is unlikely.
• 50—The court system is inefficient and subject to delays. Corruption may be present, and the
judiciary may be influenced by other branches of government. Expropriation is possible but rare.
• 40—The court system is highly inefficient, and delays are so long that they deter resort to the
court system. Corruption is present, and the judiciary is influenced by other branches of gov-
ernment. Expropriation is possible.
• 30—Property ownership is weakly protected. The court system is highly inefficient. Corruption
is extensive, and the judiciary is strongly influenced by other branches of government. Expro-
priation is possible.
• 20—Private property is weakly protected. The court system is so inefficient and corrupt that
outside settlement and arbitration is the norm. Property rights are difficult to enforce. Judicial
corruption is extensive. Expropriation is common.
• 10—Private property is rarely protected, and almost all property belongs to the state. The coun-
try is in such chaos (for example, because of ongoing war) that protection of property is almost
impossible to enforce. The judiciary is so corrupt that property is not protected effectively.
Expropriation is common.
• 0—Private property is outlawed, and all property belongs to the state. People do not have the
right to sue others and do not have access to the courts. Corruption is endemic.
An intermediate score such as 75 or 45 may be assigned to countries whose property rights fall
between two adjacent categories.
Sources. Unless otherwise noted, the Index relies on the following sources for information on
property rights, in order of priority: Economist Intelligence Unit, ViewsWire; Freedom House, Free-
dom in the World, 2011–2014; U.S. Department of Commerce, Country Commercial Guide, 2011–2014;
U.S. Department of State, Investment Climate Statements, 2011–2014; U.S. Department of State, Coun-
try Reports on Human Rights Practices, 2010–2013; and various news and magazine articles.

Corruption erodes economic freedom by introducing insecurity and uncertainty into economic
relations. It also reduces economic vitality by increasing costs and shifting resources into unproduc-
tive activities.
The score for this component is derived directly from Transparency International’s Corruption
Perceptions Index (CPI), which measures the level of perceived corruption in 177 countries.
For countries that are not covered in the CPI, the freedom from corruption score is determined
by using the qualitative information from internationally recognized and reliable sources.1 This pro-
cedure considers the extent to which corruption prevails in a country.

informal market activities, in order of priority: Transparency International, Corruption Perceptions
Index, 2011–2013; U.S. Department of Commerce, Country Commercial Guide, 2011–2014; U.S. Depart-
ment of State, Investment Climate Statements, 2011–2014; Economist Intelligence Unit, ViewsWire
and Risk Briefing; Freedom House, Freedom in the World, 2011–2014; Office of the U.S. Trade Repre-
sentative, 2014 National Trade Estimate Report on Foreign Trade Barriers; various news and maga-
zine articles; and official government publications of each country.
GOVERNMENT SIZE
Fiscal Freedom
The fiscal freedom component is a composite measure of the burden of taxes that reflects both
marginal tax rates and the overall level of taxation, including direct and indirect taxes imposed by all
levels of government, as a percentage of GDP. The component score is derived from three quantita-
tive sub-factors:
• The top marginal tax rate on individual income,

• The top marginal tax rate on corporate income, and
• The total tax burden as a percentage of GDP.
Each of these numerical variables is weighted equally as one-third of the component score. This
equal weighting allows a country to achieve a score as high as 67 based on two of the factors even if it
receives a score of 0 on the third.
Fiscal freedom scores are calculated with a quadratic cost function to reflect the diminishing rev-
enue returns from very high rates of taxation. The data for each sub-factor are converted to a 100-
point scale using the following equation:
Fiscal Freedomij = 100 – α (Factorij)2

where Fiscal Freedomij represents the fiscal freedom in country i for factor j; Factorij represents the
value (a percentage expressed on a scale of 0 to 100) in country i for factor j; and α is a coefficient set
equal to 0.03. The minimum score for each sub-factor is zero, which is not represented in the printed
equation but was utilized because it means that no single high tax burden will make the other two
sub-factors irrelevant.
As an example, in the 2015 Index, Mauritius has a flat rate of 15 percent for both individual and
corporate tax rates, which yields a score of 93.3 for each of the two factors. Mauritius’s overall tax
burden as a portion of GDP is 18.9 percent, yielding a tax burden factor score of 89.7. When the three
factors are averaged together, Mauritius’s overall fiscal freedom score becomes 92.1.
Sources. Unless otherwise noted, the Index relies on the following sources for information on tax
rate data, in order of priority: Deloitte, International Tax and Business Guide Highlights; Internation-
al Monetary Fund, Staff Country Report, “Selected Issues and Statistical Appendix,” and Staff Country
Report, “Article IV Consultation,” 2011–2014; PricewaterhouseCoopers, Worldwide Tax Summaries,
2011–2014; countries’ investment agencies; other government authorities (embassy confirmations
and/or the country’s treasury or tax authority); and Economist Intelligence Unit, Country Commerce,
2010–2014.
For information on tax burden as a percentage of GDP, the primary sources are Organisation for
Economic Co-operation and Development data; Eurostat, Government Finance Statistics data; Afri-
can Development Bank and Organisation for Economic Co-operation and Development, African Eco-
nomic Outlook 2014; International Monetary Fund, Staff Country Report, “Selected Issues,” and Staff
Appendix 477
Country Report, “Article IV Consultation,” 2011–2014; Asian Development Bank, Key Indicators for
Asia and the Pacific, 2011–2014; United Nations Economic Commission for Latin America, Economic
Survey of Latin America and the Caribbean, 2011–2014; and individual contacts from government
agencies and multinational organizations such as the IMF and the World Bank.
Government Spending
The government spending component captures the burden imposed by government expendi-
tures, which includes consumption by the state and all transfer payments related to various entitle-
ment programs.
No attempt has been made to identify an optimal level of government spending. The ideal level
will vary from country to country, depending on factors that range from culture to geography to level
of economic development. However, government spending becomes an unavoidable burden at some
point as government grows in scope and size, resulting in both misallocation of resources and loss
of economic efficiency. Volumes of research have shown that excessive government spending that
causes chronic budget deficits and the accumulation of public debt is one of the most serious drags
on economic dynamism.
The Index methodology treats zero government spending as the benchmark. As a result, under-
developed countries, particularly those with little government capacity, may receive artificially high
scores. However, such governments, which can provide few if any public goods, are likely to receive
low scores on some of the other components of economic freedom (such as property rights, financial
freedom, and investment freedom) that measure aspects of government effectiveness.
Government spending has a major impact on economic freedom, but it is just one of many impor-
tant components. The scale for scoring government spending is non-linear, which means that gov-
ernment spending that is close to zero is lightly penalized, while levels of government spending that
exceed 30 percent of GDP lead to much worse scores in a quadratic fashion (for example, doubling
spending yields four times less freedom). Only extraordinarily large levels of government spending—
for example, over 58 percent of GDP—receive a score of zero.
The equation used for computing a country’s government spending score is:
GEi = 100 – α (Expendituresi)2

where GEi represents the government expenditure score in country i; Expendituresi represents the
total amount of government spending at all levels as a portion of GDP (between 0 and 100); and α is a
coefficient to control for variation among scores (set at 0.03). The minimum component score is zero.
In most cases, the Index uses general government expenditure data that include all levels of gov-
ernment such as federal, state, and local. In cases where data on general government spending are
not available, data on central government expenditures are used instead.
government intervention in the economy, in order of priority: Organisation for Economic Co-oper-
ation and Development data; Eurostat data; African Development Bank and Organisation for Eco-
nomic Co-operation and Development, African Economic Outlook 2014; International Monetary
Fund, Staff Country Report, “Selected Issues and Statistical Appendix,” Staff Country Report, “Article
IV Consultation,” 2011–2014, and World Economic Outlook Database 2014; Asian Development Bank,
Key Indicators for Asia and the Pacific, 2011–2014; African Development Bank, The ADB Statistics
Pocketbook 2014; official government publications of each country; and United Nations Economic
Commission for Latin America, Economic Survey of Latin America and the Caribbean, 2011–2014.

REGULATORY EFFICIENCY
Business Freedom
Business freedom is an overall indicator of the efficiency of government regulation of business.
The quantitative score is derived from an array of measurements of the ease of starting, operating,
and closing a business.
The business freedom score for each country is a number between 0 and 100, with 100 indicating
the freest business environment. The score is based on 10 sub-factors, all weighted equally, using data
from the World Bank’s Doing Business report:
• Starting a business—procedures (number);

• Starting a business—time (days);
• Starting a business—cost (% of income per capita);
• Starting a business—minimum capital (% of income per capita);
• Obtaining a license—procedures (number);2
• Obtaining a license—time (days);
• Obtaining a license—cost (% of income per capita);
• Closing a business—time (years);
• Closing a business—cost (% of estate); and
• Closing a business—recovery rate (cents on the dollar).3
Each of these sub-factors is converted to a scale of 0 to 100, after which the average of the con-
verted values is computed. The result represents the country’s business freedom score in compari-
son to those of other countries. Even if a country requires the highest number of procedures for
starting a business, which yields a score of zero in that factor, it could still receive a score as high
as 90 based on scores in the other nine factors. Canada, for instance, receives scores of 100 in nine
of these 10 factors, but the 14 licensing procedures required by the government equate to a score
of 64.5 for that factor.
Each sub-factor is converted to a scale of 0 to 100 using the following equation:
Factor Scorei = 50 factoraverage/factori

which is based on the ratio of the country data for each sub-factor relative to the world average, mul-
tiplied by 50. For example, on average worldwide, it takes 18 procedures to get necessary licenses.
Canada’s 14 licensing procedures are a factor value that is better than the average, resulting in a ratio
of 1.29. That ratio multiplied by 50 equals the final factor score of 64.5.
For the six countries that are not covered by the World Bank’s Doing Business report, business
freedom is scored by analyzing business regulations based on qualitative information from reliable
and internationally recognized sources.4
Sources. Unless otherwise noted, the Index relies on the following sources in determining busi-
ness freedom scores, in order of priority: World Bank, Doing Business 2015; Economist Intelligence
Unit, Country Commerce, 2011–2014; U.S. Department of Commerce, Country Commercial Guide,
2011–2014; and official government publications of each country.
Labor Freedom
The labor freedom component is a quantitative measure that considers various aspects of the legal
and regulatory framework of a country’s labor market, including regulations concerning minimum
wages, laws inhibiting layoffs, severance requirements, and measurable regulatory restraints on hir-
ing and hours worked.
Appendix 479
Six quantitative sub-factors are equally weighted, with each counted as one-sixth of the labor
freedom component:5
• Ratio of minimum wage to the average value added per worker,

• Hindrance to hiring additional workers,
• Rigidity of hours,
• Difficulty of firing redundant employees,
• Legally mandated notice period, and
• Mandatory severance pay.
Based on data collected in connection with the World Bank’s Doing Business report, these sub-
factors specifically examine labor regulations that affect “the hiring and redundancy of workers and
the rigidity of working hours.”6
In constructing the labor freedom score, each of the six sub-factors is converted to a scale of 0 to
100 based on the following equation:
Factor Scorei = 50 x factoraverage/factori

where country i data are calculated relative to the world average and then multiplied by 50. The six
sub-factor scores are then averaged for each country, yielding a labor freedom score in comparison
to other countries.
The simple average of the converted values for the six sub-factors is computed for the country’s
overall labor freedom score. Even if a country had the worst rigidity of hours in the world with a zero
score for that sub-factor, it could still get a score as high as 83.3 based on the other five sub-factors.
For the six countries that are not covered by the World Bank’s Doing Business report, the labor
freedom component is scored by looking at labor market flexibility based on qualitative information
from other reliable and internationally recognized sources.7
Sources. Unless otherwise noted, the Index relies on the following sources for data on labor free-
dom, in order of priority: World Bank, Doing Business 2015; Economist Intelligence Unit, Country
Commerce, 2011–2014; U.S. Department of Commerce, Country Commercial Guide, 2011–2014; and
official government publications of each country.
Monetary Freedom
Monetary freedom combines a measure of price stability with an assessment of price controls.
Both inflation and price controls distort market activity. Price stability without microeconomic
intervention is the ideal state for the free market.
The score for the monetary freedom component is based on two sub-factors:
• The weighted average inflation rate for the most recent three years and
• Price controls.
The weighted average inflation rate for the most recent three years serves as the primary input
into an equation that generates the base score for monetary freedom. The extent of price controls is
then assessed as a penalty deduction of up to 20 points from the base score. The two equations used
to convert inflation rates into the final monetary freedom score are:
Weighted Avg. Inflationi = θ1 Inflationit + θ2Inflationit–1 + θ3 Inflationit–2
Monetary Freedomi = 100 – α √Weighted Avg. Inflationi – PC penaltyi

where θ1 through θ3 (thetas 1–3) represent three numbers that sum to 1 and are exponentially smaller
in sequence (in this case, values of 0.665, 0.245, and 0.090, respectively); Inflationit is the absolute
value of the annual inflation rate in country i during year t as measured by the Consumer Price Index;
α represents a coefficient that stabilizes the variance of scores; and the price control (PC) penalty is
an assigned value of 0–20 penalty points based on the extent of price controls.
The convex (square root) functional form was chosen to create separation among countries
with low inflation rates. A concave functional form would essentially treat all hyperinflations as
equally bad, whether they were 100 percent price increases annually or 100,000 percent, whereas
the square root provides much more gradation. The α coefficient is set to equal 6.333, which con-
verts a 10 percent inflation rate into a freedom score of 80.0 and a 2 percent inflation rate into a
score of 91.0.
Sources. Unless otherwise noted, the Index relies on the following sources for data on monetary
policy, in order of priority: International Monetary Fund, International Financial Statistics Online;
International Monetary Fund, World Economic Outlook, 2014, and Staff Country Report, “Article IV
Consultation,” 2011–2014; Economist Intelligence Unit, ViewsWire; U.S. Energy Information Admin-
istration (EIA), Country Analysis Briefs; various country reports and blogs by the World Bank; various
news and magazine articles; and official government publications of each country.
OPEN MARKETS
Trade Freedom
Trade freedom is a composite measure of the extent of tariff and non-tariff barriers that affect
imports and exports of goods and services. The trade freedom score is based on two inputs:
• The trade-weighted average tariff rate and

• Non-tariff barriers (NTBs).
Different imports entering a country can, and often do, face different tariffs. The weighted aver-
age tariff uses weights for each tariff based on the share of imports for each good. Weighted average
tariffs are a purely quantitative measure and account for the calculation of the base trade freedom
score using the following equation:
Trade Freedomi = (((Tariffmax–Tariffi)/(Tariffmax–Tariffmin)) * 100) – NTBi

where Trade Freedomi represents the trade freedom in country i; Tariffmax and Tariffmin represent the
upper and lower bounds for tariff rates (%); and Tariffi represents the weighted average tariff rate
(%) in country i. The minimum tariff is naturally zero percent, and the upper bound was set as 50
percent. An NTB penalty is then subtracted from the base score. The penalty of 5, 10, 15, or 20 points
is assigned according to the following scale:
• 20—NTBs are used extensively across many goods and services and/or act to impede a signifi-
cant amount of international trade.
• 15—NTBs are widespread across many goods and services and/or act to impede a majority of
potential international trade.
• 10—NTBs are used to protect certain goods and services and impede some international trade.
• 5—NTBs are uncommon, protecting few goods and services, and/or have very limited impact
on international trade.
• 0—NTBs are not used to limit international trade.
Appendix 481
We determine the extent of NTBs in a country’s trade policy regime using both qualitative and
quantitative information. Restrictive rules that hinder trade vary widely, and their overlapping and
shifting nature makes their complexity difficult to gauge. The categories of NTBs considered in our
penalty include:
• Quantity restrictions—import quotas; export limitations; voluntary export restraints;

import–export embargoes and bans; countertrade, etc.
• Price restrictions—antidumping duties; countervailing duties; border tax adjustments; vari-
able levies/tariff rate quotas.
• Regulatory restrictions—licensing; domestic content and mixing requirements; sanitary and
phytosanitary standards (SPSs); safety and industrial standards regulations; packaging, label-
ing, and trademark regulations; advertising and media regulations.
• Customs restrictions—advance deposit requirements; customs valuation procedures; cus-
toms classification procedures; customs clearance procedures.
• Direct government intervention—subsidies and other aid; government industrial policies;
government-financed research and other technology policies; competition policies; govern-
ment procurement policies; state trading, government monopolies, and exclusive franchises.
As an example, Brazil received a trade freedom score of 69.6. By itself, Brazil’s weighted average
tariff of 7.7 percent would have yielded a score of 84.6, but the existence of NTBs in Brazil reduced
its score by 15 points.
Gathering tariff statistics to make a consistent cross-country comparison is a challenging task.
Unlike data on inflation, for instance, some countries do not report their weighted average tariff rate
or simple average tariff rate every year.
To preserve consistency in grading the trade freedom component, the Index uses the most recent-
ly reported weighted average tariff rate for a country from our primary source. If another reliable
source reports more updated information on the country’s tariff rate, this fact is noted, and the grad-
ing of this component may be reviewed if there is strong evidence that the most recently reported
weighted average tariff rate is outdated.
The World Bank publishes the most comprehensive and consistent information on weighted
average applied tariff rates. When the weighted average applied tariff rate is not available, the
Index uses the country’s average applied tariff rate; and when the country’s average applied tariff
rate is not available, the weighted average or the simple average of most favored nation (MFN)
tariff rates is used.8 In the very few cases where data on duties and customs revenues are not avail-
able, data on international trade taxes or an estimated effective tariff rate are used instead. In all
cases, an effort is made to clarify the type of data used in the corresponding write-up for the trade
freedom component.
Sources. Unless otherwise noted, the Index relies on the following sources to determine scores
for trade policy, in order of priority: World Bank, World Development Indicators 2014; World Trade
Organization, Trade Policy Review, 1995–2014; Office of the U.S. Trade Representative, 2014 National
Trade Estimate Report on Foreign Trade Barriers; World Bank, Doing Business 2013 and Doing Business
2014; U.S. Department of Commerce, Country Commercial Guide, 2009–2014; Economist Intelligence
Unit, Country Commerce, 2014; World Economic Forum, The Global Enabling Trade Report 2014; and
official government publications of each country.
Investment Freedom
In an economically free country, there would be no constraints on the flow of investment capital.
Individuals and firms would be allowed to move their resources into and out of specific activities,

both internally and across the country’s borders, without restriction. Such an ideal country would
receive a score of 100 on the investment freedom component of the Index.
In practice, however, most countries have a variety of restrictions on investment. Some have dif-
ferent rules for foreign and domestic investment; some restrict access to foreign exchange; some
impose restrictions on payments, transfers, and capital transactions; in some, certain industries are
closed to foreign investment.
The Index evaluates a variety of regulatory restrictions that are typically imposed on investment.
Points, as indicated below, are deducted from the ideal score of 100 for each of the restrictions found
in a country’s investment regime. It is not necessary for a government to impose all of the listed
restrictions at the maximum level to effectively eliminate investment freedom. Those few govern-
ments that impose so many restrictions that they total more than 100 points in deductions have had
their scores set at zero.
Investment restrictions:
National treatment of foreign investment

• No national treatment, prescreening 25 points deducted
• Some national treatment, some prescreening 15 points deducted
• Some national treatment or prescreening 5 points deducted
Foreign investment code

• No transparency and burdensome bureaucracy 20 points deducted
• Inefficient policy implementation and bureaucracy 10 points deducted
• Some investment laws and practices non-transparent
or inefficiently implemented 5 points deducted
Restrictions on land ownership

• All real estate purchases restricted 15 points deducted
• No foreign purchases of real estate 10 points deducted
• Some restrictions on purchases of real estate 5 points deducted
Sectoral investment restrictions

• Multiple sectors restricted 20 points deducted
• Few sectors restricted 10 points deducted
• One or two sectors restricted 5 points deducted
Expropriation of investments without fair compensation

• Common with no legal recourse 25 points deducted
• Common with some legal recourse 15 points deducted
• Uncommon but occurs 5 points deducted
Foreign exchange controls

• No access by foreigners or residents 25 points deducted
• Access available but heavily restricted 15 points deducted
• Access available with few restrictions 5 points deducted
Appendix 483
Capital controls
• No repatriation of profits; all transactions require
government approval 25 points deducted
• Inward and outward capital movements require
approval and face some restrictions 15 points deducted
• Most transfers approved with some restrictions 5 points deducted
Up to an additional 20 points may be deducted for security problems, a lack of basic investment
infrastructure, or other government policies that indirectly burden the investment process and limit
investment freedom.
Sources. Unless otherwise noted, the Index relies on the following sources for data on capital
flows and foreign investment, in order of priority: official government publications of each country;
U.S. Department of State, Investment Climate Statements 2014; Economist Intelligence Unit, Country
Commerce, 2011–2014; Office of the U.S. Trade Representative, 2014 National Trade Estimate Report
on Foreign Trade Barriers; World Bank, Investing Across Borders, 2012; Organisation for Economic
Co-operation and Development, Services Trade Restrictiveness Index; and U.S. Department of Com-
merce, Country Commercial Guide, 2011–2014.
Financial Freedom
Financial freedom is an indicator of banking efficiency as well as a measure of independence from
government control and interference in the financial sector. State ownership of banks and other
financial institutions such as insurers and capital markets reduces competition and generally lowers
the level of access to credit.
In an ideal banking and financing environment where a minimum level of government interfer-
ence exists, independent central bank supervision and regulation of financial institutions are limited
to enforcing contractual obligations and preventing fraud. Credit is allocated on market terms, and
the government does not own financial institutions. Financial institutions provide various types
of financial services to individuals and companies. Banks are free to extend credit, accept deposits,
and conduct operations in foreign currencies. Foreign financial institutions operate freely and are
treated the same as domestic institutions.
The Index scores an economy’s financial freedom by looking at five broad areas:
• The extent of government regulation of financial services,

• The degree of state intervention in banks and other financial firms through direct and indi-
rect ownership,
• Government influence on the allocation of credit,
• The extent of financial and capital market development, and
• Openness to foreign competition.
These five areas are considered to assess an economy’s overall level of financial freedom that
ensures easy and effective access to financing opportunities for people and businesses in the econo-
my. An overall score on a scale of 0 to 100 is given to an economy’s financial freedom through deduc-
tions from the ideal score of 100.
• 100—Negligible government interference.

• 90—Minimal government interference. Regulation of financial institutions is minimal but
may extend beyond enforcing contractual obligations and preventing fraud.

• 80—Nominal government interference. Government ownership of financial institutions is
a small share of overall sector assets. Financial institutions face almost no restrictions on their
ability to offer financial services.
• 70—Limited government interference. Credit allocation is influenced by the government,
and private allocation of credit faces almost no restrictions. Government ownership of financial
institutions is sizeable. Foreign financial institutions are subject to few restrictions.
• 60—Moderate government interference. Banking and financial regulations are somewhat
burdensome. The government exercises ownership and control of financial institutions with a
significant share of overall sector assets. The ability of financial institutions to offer financial
services is subject to some restrictions.
• 50—Considerable government interference. Credit allocation is significantly influenced by
the government, and private allocation of credit faces significant barriers. The ability of finan-
cial institutions to offer financial services is subject to significant restrictions. Foreign financial
institutions are subject to some restrictions.
• 40—Strong government interference. The central bank is subject to government influence,
its supervision of financial institutions is heavy-handed, and its ability to enforce contracts
and prevent fraud is weak. The government exercises active ownership and control of financial
institutions with a large minority share of overall sector assets.
• 30—Extensive government interference. Credit allocation is extensively influenced by the
government. The government owns or controls a majority of financial institutions or is in a
dominant position. Financial institutions are heavily restricted, and bank formation faces sig-
nificant barriers. Foreign financial institutions are subject to significant restrictions.
• 20—Heavy government interference. The central bank is not independent, and its super-
vision of financial institutions is repressive. Foreign financial institutions are discouraged or
highly constrained.
• 10—Near repressive. Credit allocation is controlled by the government. Bank formation is
restricted. Foreign financial institutions are prohibited.
• 0—Repressive. Supervision and regulation are designed to prevent private financial institu-
tions. Private financial institutions are nonexistent.
Sources. Unless otherwise noted, the Index relies on the following sources for data on banking
and finance, in order of priority: Economist Intelligence Unit, Country Commerce and Financial Ser-
vices, 2011–2014; International Monetary Fund, Staff Country Report, “Selected Issues,” and Staff
Country Report, “Article IV Consultation,” 2010–2014; Organisation for Economic Co-operation and
Development, Economic Survey; official government publications of each country; U.S. Department
of Commerce, Country Commercial Guide, 2011–2014; Office of the U.S. Trade Representative, 2014
National Trade Estimate Report on Foreign Trade Barriers; U.S. Department of State, Investment Cli-
mate Statements, 2011–2014; World Bank, World Development Indicators 2014; and various news and
magazine articles on banking and finance.
GENERAL METHODOLOGICAL ISSUES

Period of Study. For the current Index of Economic Freedom, scores are generally based on data
for the period covering the second half of 2013 through the first half of 2014. To the extent possi-
ble, the information considered for each variable was current as of June 30, 2014. It is important
to understand, however, that some component scores are based on historical information. For
example, the monetary freedom component uses a three-year weighted average rate of inflation from
January 1, 2011, to December 31, 2013.
Appendix 485
Equal Weight. In the Index of Economic Freedom, the 10 components of economic freedom
are equally weighted so that the overall score will not be biased toward any one component or
policy direction. It is clear that the 10 economic freedoms interact, but the exact mechanisms of
this interaction are not clearly definable: Is a minimum threshold for each one essential? Is it pos-
sible for one to maximize if others are minimized? Are they dependent or exclusive, complements
or supplements?
These are valid questions, but they are beyond the scope of our fundamental mission. The purpose
of the Index is to reflect the economic and entrepreneurial environment in every country studied in
as balanced a way as possible. The Index has never been designed specifically to explain economic
growth or any other dependent variable; that is ably done by researchers elsewhere. The raw data for
each component are provided so that others can study, weight, and integrate as they see fit.
Using the Most Currently Available Information. Analyzing economic freedom annually
enables the Index to include the most recent information as it becomes available country by country.
A data cutoff date is used so that all countries are treated fairly. As described above, the period of
study for the current year’s Index considers all information as of the last day of June of the previous
year (in this case, June 30, 2014). Any new legislative changes or policy actions effective after that
date have no positive or negative impact on scores or rankings.9

ENDNOTES
1. The following countries are not covered by the 5. The labor freedom assessment in the 2009 Index
2013 CPI: Belize, Fiji, Kiribati, Liechtenstein, expanded its factors to six from the four used in
Macau, Maldives, Micronesia, Samoa, Solomon previous editions. This refinement was applied
Islands, Tonga, and Vanuatu. In addition, in 2012, equally to past editions’ labor freedom scores to
Transparency International adopted a new CPI maintain consistency. The assessment of labor
methodology and indicated that country scores freedom dates from the 2005 Index because
computed with its revised methodology should of the limited availability of quantitative data
not be considered directly comparable to scores before that time.
for previous years. To accommodate the CPI 6. For more detailed information on the data, see
revision, the 2014 Index adopted a transitional “Employing Workers” in World Bank, Doing
methodology to phase in the change. As detailed Business, http://www.doingbusiness.org/
in the methodology chapter of the 2014 Index MethodologySurveys/EmployingWorkers.aspx.
of Economic Freedom, the 2014 Index used an Reporting only raw data, the Doing Business
average of current and previous years’ scores 2011 study discontinued all of the sub-indices of
to lessen the abruptness of any score changes Employing Workers: the difficulty of hiring index,
and maintain as much comparability as possible. the rigidity of hours index, and the difficulty
That transitional adjustment has served its of redundancy index. For the labor freedom
purpose and is no longer needed. The 2015 Index component of the 2014 Index, the three indices
thus directly reports the current CPI scores were reconstructed by Index authors according
where they are available. Because of these to the methodology used previously by the Doing
changes, the reader is urged to use caution in Business study.
comparing corruption scores over time. 7. See note 4.
2. Obtaining a license indicates necessary 8. MFN is now referred to as permanent normal
procedures, time, and cost in getting trade relations (PNTR).
construction permits.
9. Occasionally, because the Index is published
3. The recovery rate is a function of time and cost. several months after the cutoff date for
However, the business freedom component uses evaluation, more recent economic events
all three sub-variables to emphasize closing a cannot be factored into the scores. In the past,
business, starting a business, and dealing with such occurrences have been uncommon and
licenses equally. isolated to one region of the world. The Asian
4. The six countries that are not covered by financial crisis, for example, erupted at the
the World Bank’s Doing Business study are end of 1997 just as the 1998 Index was going to
Burma, Cuba, North Korea, Libya, Macau, and print. The policy changes in response to that
Turkmenistan. The methodology for business crisis, therefore, were not considered in that
freedom dates from the 2006 Index because year’s scoring, but they were included in the next
of the limited availability of quantitative data year’s scores. Similarly, this year, the impact of
before that date. For the 1995 through 2005 government policies and more recently available
editions, we used a subjective assessment with macroeconomic statistics since the second half
a score of 1–5. Those earlier scores have been of 2014 have not affected the rankings for the
converted by means of a simple formula to make 2015 Index but almost certainly will show up in
them comparable. Top scores were converted scores for the next edition.
to 100, the next best to 85, and so on. This
conversion formula is different from the one
used for other subjective factors, but it is unique
because those other factors are not bridging to a
new, data-driven methodology.
Appendix 487
Major Works Cited
The 2015 Index of Economic Freedom relies on data from multiple internationally recognized
sources to present a representation of economic freedom in each country that is as comprehensive,
impartial, and accurate as possible. The following sources provided the primary information for ana-
lyzing and scoring the 10 components of economic freedom. In addition, the authors and analysts
used supporting documentation and information from various government agencies and sites on
the Internet, news reports and journal articles, and official responses to inquiries. All statistical and
other information received from government sources was verified with independent, credible third-
party sources.
African Development Bank, Statistics Pocketbook 2014; available at

http://www.afdb.org/en/documents/publications/afdb-statistics-pocket-book/.
African Development Bank and Organisation for Economic Co-operation and Development,
African Economic Outlook 2014; available at http://www.africaneconomicoutlook.org/en/.
African Financial Markets Initiative, Country Profiles; available at
http://www.africanbondmarkets.org/en/country-profiles/.
Asian Development Bank, Asian Development Outlook 2014: Asian Development Outlook; available at
http://www.adb.org/publications/asian-development-outlook-2014-fiscal-policy-inclusive-growth.
, Key Indicators for Asia and the Pacific 2014; available at
http://www.adb.org/publications/key-indicators-asia-and-pacific-2014.
Country statistical agencies, central banks, and ministries of finance, economy, and trade;
available at http://unstats.un.org/unsd/methods/inter-natlinks/sd_natstat.asp;
http://www.census.gov/aboutus/stat_int.html; and http://www.bis.org/cbanks.htm.
Deloitte, International Tax and Business Guide, Country Highlights; available at
http://www.deloitte.com/view/en_PG/pg/insights-ideas/itbg/index.htm.
Economist Intelligence Unit, Ltd., Country Commerce, London, U.K., 2010–2014.
, Country Finance, London, U.K., 2010–2014.
, Country Report, London, U.K., 2010–2014.
European Bank for Reconstruction and Development, Country Strategies, 2010–2014; available at
http://www.ebrd.com/pages/country.shtml.
489
European Commission, Eurostat, European Statistics; available at
http://epp.eurostat.ec.europa.eu/portal/page/portal/statistics/themes.
International Monetary Fund, Article IV Consultation Staff Reports, various countries, Wash-
ington, D.C., 2010–2014; available at http://www.imf.org/external/ns/cs.aspx?id=51.
, Country Information; available at http://www.imf.org/external/country/index.htm.
, Selected Issues and Statistical Appendix, various countries, Washington, D.C., 2010–2014.
, World Economic Outlook Database, April 2014; available at
http://www.imf.org/external/pubs/ft/weo/2014/01/weodata/index.aspx.
Low Tax Network, various countries; available at http://www.lowtax.net.
Organisation for Economic Co-operation and Development, OECD Economic Outlook, No. 94
(May 2014); available at http://www.keepeek.com/Digital-Asset-Management/oecd/economics/
oecd-economic-outlook-volume-2014-issue-1_eco_outlook-v2014-1-en#page1.
, OECD Factbook 2014; available at http://www.oecd.org/publications/factbook/.
, OECD Statistics Portal; available at http://stats.oecd.org/source/.
, OECD Web site; available at www.oecd.org/home.
PricewaterhouseCoopers, Worldwide Tax Summaries; available with registration at
http://www.pwc.com/gx/en/tax/corporate-tax/worldwide-tax-summaries/taxsummaries.jhtml.
Transparency International, The Corruption Perceptions Index, Berlin, Germany, 2000–2013;
available at http://www.transparency.org/cpi2013/.
United Nations Conference on Trade and Development, World Investment Report 2014: Invest-
ing in the SDGs: An Action Plan; available at
http://unctad.org/en/pages/PublicationWebflyer.aspx?publicationid=937.
United States Central Intelligence Agency, The World Factbook 2014; available at
https://www.cia.gov/library/publications/the-world-factbook/index.html.
United States Department of Commerce, Country Commercial Guides, Washington, D.C.,
2010–2014; available at http://www.buyusainfo.net/adsearch.cfm?search_type=int&loadnav=no.
United States Department of State, Country Reports on Human Rights Practices for 2013,
released by the Bureau of Democracy, Human Rights, and Labor, February 2014; available at
http://www.state.gov/j/drl/rls/hrrpt/humanrightsreport/index.htm#wrapper.
, Investment Climate Statements: 2010–2014, released by the Bureau of Economic and Busi-
ness Affairs; available at http://www.state.gov/e/eb/rls/othr/ics/.
United States Trade Representative, Office of the, 2014 National Trade Estimate Report on For-
eign Trade Barriers, Washington, D.C., 2014; available at
http://www.ustr.gov/about-us/press-office/reports-and-publications/2014-NTE-Report.
World Bank, World Bank World Development Indicators Online, Washington, D.C., 2014; avail-
able at http://data.worldbank.org/data-catalog/world-development-indicators.
, Country Briefs and Trade-at-a-Glance (TAAG) Tables, Washington, D.C., available at
http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/TRADE/0,,contentMDK:22421950~pa
gePK:148956~piPK:216618~theSitePK:239071,00.html.
, Doing Business, 2005–2015; available at www.doingbusiness.org.
World Trade Organization, Trade Policy Reviews, 1996–2014; available at
http://www.wto.org/english/tratop_e/tpr_e/tpr_e.htm.

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Street Journal franchise, with a global audience of nearly 3.6 million, comprises The Wall
Street Journal, The Wall Street Journal Asia, and The Wall Street Journal Europe. The Wall
Street Journal Online at WSJ.com is the leading provider of business and financial news and
analysis on the Web with more than one million subscribers and 36 million visitors per month
worldwide. WSJ.com is the flagship site of The Wall Street Journal Digital Network, which also
includes MarketWatch.com, Barrons.com, AllThingsD.com, and SmartMoney.com. The Journal
holds 35 Pulitzer Prizes for outstanding journalism, and, in 2014, was ranked No. 1 in BtoB’s
Media Power 50 for the 15th consecutive year.
Global Economic Freedom
Average Score in the Index of Economic Freedom

61
60.4
60.2 60.3
MODERATELY FREE
60
59.6 59.6
59.4
59
58
57.6
57
57.1
56
1995 2000 2005 2010 2015
Economic Freedom: Opportunity and Empowerment

For more than two decades, the Index of Economic Freedom, an annual data-driven, cross-country
analysis by The Heritage Foundation in collaboration with The Wall Street Journal, has measured
the impact of liberty and the free markets around the globe.
Through analysis of diverse economies ranging from North Korea to Hong Kong, using metrics
examining government size, market openness, regulatory efficiency, and the rule of law, the 2015
Index confirms the strong relationship between economic freedom and progress. There is no single
formula for overcoming challenges to economic development, but one thing is clear: Around the
world, governments that respect and promote economic freedom provide greater opportunities for
innovation, progress, and human flourishing.
The 2015 Index—the 21st edition—includes:
• Updated economic freedom and macroeconomic data for 186 economies.
• Easy-to-read cross-country comparisons that highlight why economic freedom matters.
• Three informative chapters that explore topics of particular relevance to today’s policy debates,
including the importance of commitment to sound polices that promote greater prosperity, the
perils of cronyism, and the critical linkages between economic freedom and energy availability.
• Online tools, like customized comparison charts and an interactive heat map.
Visit Heritage.org/Index.
USD $24.95
ISBN 978-0-89195-287-9
52495
9 780891 952879
The Heritage Foundation • 214 Massachusetts Avenue, NE • Washington, DC 20002 • heritage.org

The Wall Street Journal • Dow Jones & Co. • 200 Liberty Street • New York, NY 10281 • www.wsj.com

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﻿

In partnership with Terry Miller

Senator Jim DeMint is President of The Heritage Foundation.

Paul A. Gigot is Editor of The Wall Street Journal Editorial Page.

Stephen Moore is Chief Economist at The Heritage Foundation.

Joel Griffith is Research Associate for the Chief Economist at The

Erik Churchill is a political analyst and consultant at the World Bank.

with James M. Roberts, Bryan Riley, and Ryan Olson

The Heritage Foundation The Wall Street Journal

Cover image © thinkstockphotos.com

Chapter 1: Principles of Economic Freedom. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Chapter 2: Why Economic Freedom Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Chapter 3: The Freedom Path to Economic Growth:

Chapter 5: Economic Freedom, Energy, and Development.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

Chapter 6: Global and Regional Trends in Economic Freedom.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69

Chapter 7: The Countries.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91

viii 2015 Index of Economic Freedom

x 2015 Index of Economic Freedom

xii 2015 Index of Economic Freedom

2 2015 Index of Economic Freedom

Freedom from Corruption

4 2015 Index of Economic Freedom

Freedom from Corruption

Freedom from Corruption

6 2015 Index of Economic Freedom

Freedom from Corruption

Freedom from Corruption

8 2015 Index of Economic Freedom

Freedom from Corruption

Principles of Economic Freedom

12 2015 Index of Economic Freedom

14 2015 Index of Economic Freedom

16 2015 Index of Economic Freedom

Why Economic Freedom Matters

20 2015 Index of Economic Freedom

GDP per Capita (Purchasing Power Parity)

Overall Score in the Index of Economic Freedom

GDP per Capita (Purchasing Power Parity)

Average Score in the Global GDP, in Trillions Percent of Global

22 2015 Index of Economic Freedom

Average Annual Growth in Real Per Capita GDP

Change in Economic Freedom Score, by Quartile

24 2015 Index of Economic Freedom

Overall Score in the Index of Economic Freedom

Environmental Performance Index

26 2015 Index of Economic Freedom

The Economist Intelligence Unit’s Index of Democracy

Overall Score in the Index of Economic Freedom

Social Progress Index

STAYING ON COURSE disease, and hunger. The link between economic

28 2015 Index of Economic Freedom

30 2015 Index of Economic Freedom

The Freedom Path to Economic

Combined Corporate Income Tax Rate

Average for OECD

32 2015 Index of Economic Freedom

34 2015 Index of Economic Freedom

GDP per $60,000

$40,000 $39,767 Taiwan