2015 Economic Freedom Index: Pakistan’s economy rated ‘mostly unfree’

Kazim Alam

KARACHI: Pakistan’s economy is ‘mostly unfree’ as people are not empowered enough to work, produce, consume, own, trade and invest as per their personal choices, according to a recent study conducted by a leading Washington-based think tank.

The 2015 Index of Economic Freedom, which is developed by the Heritage Foundation in partnership with The Wall Street Journal, ranks Pakistan 121st among 178 countries of the world when it comes to economic freedom.

The index categorises countries in five groups: free, mostly free, moderately free, mostly unfree and repressed. Pakistan ranks in the second last category with the likes of Nigeria (120), Kenya (122), India (128) and Bangladesh (131).

“Pakistan has privatised some state-run industries, but the economy is still heavily regulated, and poor security discourages foreign investment,” the Heritage Foundation said in its brief commentary on the state of economic freedom in Pakistan.

Reaction in Pakistan to the index and Pakistan’s poor ranking in it was somewhat mixed. Some economic experts were cognisant of the fact that the government’s regulation of the economy has many shortcomings. But many on the left of the political spectrum chose to delight at Pakistan’s absence of economic liberty.

Speaking to The Express Tribune, taxation expert Dr Ikramul Haq said a poor regulatory framework is eating away at the economic freedom of the average Pakistani citizen.

“Regulatory shortcomings and enforcement issues have curtailed economic liberty in Pakistan,” he said.

Taking into account national policies that improve or hurt economic freedom of ordinary citizens, the index assesses an economy via 10 broad indicators, namely property rights, freedom from corruption, fiscal freedom, government spending, business freedom, labour freedom, monetary freedom, trade freedom, investment freedom and financial freedom.

In Pakistan’s case, four of the 10 indicators showed improvement over the last year, four showed deterioration while two remained flat.

Pakistan’s score went up by 0.4 points over the last year, which is reflective of improvements in the categories of investment freedom and freedom from corruption. However, these improvements are counterbalanced by deteriorations in labour freedom and business freedom.

With its overall score below the world and regional averages, Pakistan is ranked 25th among 42 countries of the Asia-Pacific region.

The Heritage Foundation says inefficient regulatory agencies inhibit business formation in Pakistan. “Access to bank credit also undermines entrepreneurship, and the financial sector’s seclusion from the outside world has slowed innovation and growth,” it noted.

The Index of Economic Freedom is not the only index that paints Pakistan’s economy in a bad light. For example, the World Bank Group’s Doing Business 2015 report also ranked Pakistan 128th out of 189 economies of the world in terms of the ease of doing business that it offers to entrepreneurs.

However, the collective weight of the Heritage Foundation’s research and observations from the World Bank mean little to an economist like Kaiser Bengali who has strong leftist leanings. It may arguably be one of the most prominent think tanks internationally, but Bengali says its research and findings stand discredited because of a clear right-wing bias.

“By economic freedom, Heritage Foundation actually means the liberty of multinational companies to loot and plunder in developing countries. I’m happy that it doesn’t consider Pakistan to be economically free,” Bengali said.

Bengali currently serves as the head of the Balochistan Chief Minister’s Policy Reform Unit and has previously served as an economic advisor to the Sindh government.

Balochistan, with its abundant mineral resources, would stand to benefit tremendously if its mining laws were liberalised to become more investor friendly, but leftist populism like that of Bengali has so far prevented that from happening. Indeed, it was a populist uproar that forced Chilean mining company Antofagasta and Canadian mining giant Barrick Gold to abandon their planned $3 billion joint venture to develop the Reko Diq copper and gold mine.

Published in The Express Tribune, January 28th, 2015.

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