Saudi Arabia 60th in global economic freedom index

Jeddah: Saudi Arabia ranks 60th in the world in terms of economic freedom, said a report by The Heritage Foundation, a Washington-based think-tank and The Wall Street Journal.

This year's Index of Economic Freedom report also ranked the kingdom 6th out of 17 countries in the Middle East and North Africa region.

The kingdom's overall score is above the regional average, the report said. It's economy is 62.8 per cent free. Its overall score is 1.2 percentage points higher than last year, reflecting improved scores in 4 of the 10 economic freedoms, the report said.

Saudi Arabia scored very well in fiscal freedom, labour freedom and business freedom. Except for a 2.5 per cent Islamic zakat charitable contribution, the government imposes no taxes on personal or corporate income. The labour market is flexible, the report noted.

This year, overall tax revenue as a percentage of GDP was 5.1 per cent.

However, the report said that more should be done for investment freedom, though some aspects of foreign investment have seen liberalisation.

The kingdom joining the World Trade Organisation in 2005 has led to gradual economic reforms, and the government has sought to attract foreign investment and promote diversification.

Moreover, the report said overall freedom to start, operate, and close a business is relatively well protected by Saudi Arabia's regulatory environment.

Starting a business takes an average of 15 days, compared to the world average of 43 days. Obtaining a business licence takes less than the world average of 19 procedures and 234 days. Bankruptcy proceedings are relatively straightforward.

Government expenditures in Saudi Arabia, including consumption and transfer payments, are high. In the most recent year, government spending equalled 32.1 per cent of GDP. State participation in the economy remains substantial, the report said.

The report said the kingdom's inflation is low.

The report noted that the kingdom has eased restrictions on foreign equity in telecoms and several other sectors. Regulations clarifying and liberalising investment in insurance and tourism were issued in 2003 and 2006, respectively. There are no controls or restrictions on payments and transfers although credit operations need approval.

The health of the kingdom's banking sector is largely tied to oil earnings. The report noted that regulatory, supervisory, and accounting standards are generally consistent with international norms.