The recently released 2012 version of the Economic Freedom of the World report by the Frazer Institute provides an unfair and unqualified ranking to most Gulf Cooperation Council (GCC) countries. For instance, the report ranks Saudi Arabia number 65 globally, a distant position from Oman, which is regarded as the fifth freest GCC economy and ranked No 20 internationally.
At any rate, the report issued by the Frazer Institute, a Canadian research body, relies on a sizeable number of variables, and more specifically on 42 different ones. These variables are grouped into five broad areas, namely 1) size of the government in terms of expenditure, taxes and enterprises; 2) legal system and property rights; 3) sound monetary policy; 4) freedom to trade internationally; and 5) regulation of credit, labour and business.
Conversely, a major shortcoming of the index relates to the way statistics and information is compiled — there is a great deal of subjectivity. This is reflected in the fact that the report relies on secondary or third-party data rather than primary research. Use of secondary data is constrained by being generated for other purposes. Certainly, the challenge on relying on primary data cannot be overlooked.
Moreover, the study depends on 2010 statistics despite figures relating to the GCC’s economic performance in 2011 being largely available. Yet, much to its credit, Bahrain stands out for being exceptionally forthcoming in releasing data and statistics.
Interestingly enough, the 2012 version ranks Bahrain as the freest Arab economy, continuing the path ever since the inception of the first report in 2002. Clearly, the researchers continue to overlook evolving developments in GCC economies. Bahrain is ranked as the seventh freest economy in the world, ahead of the UAE, Qatar, Kuwait and Oman, which in turn are ranked 11, 17, 19 and 20 respectively.
Why Bahrain ranks high
Understandably, Bahrain scores a high grade for labour market regulations as an amended law grants migrant workers the right to change their sponsors under certain conditions. These circumstances include the sponsor’s failure in providing wages for several months in a row. Also, migrant workers can change their sponsors upon completion of their contracts. Nevertheless, expatriates need to have sponsors in order to work in the country.
Understandably, foreign workers should have the right to change their sponsors as an intrinsic right, something other fellow GCC countries need to follow suit.
Subscribing to market system principles, the report regards governmental involvement in the economy as something negative. This can be understood by the notion that big governments tend to cause dislocation of resources. Against this principle, the report applies a harsh judgment on Qatar vis-a-vis to the government’s size. True, the government is a big player in the petroleum sector, but this is mainly due to the absence of a culture of private sector involvement in the oil and gas field.
As proof, the 2012-13 Global Competitiveness Report ranks Qatar No. 11 in its Global Competitiveness Index, the best performance for any Arab and Islamic nation. This outstanding ranking partly relies on growing innovation and sophistication of private sector investors in developing commercial enterprises such as hotels and smart residential projects throughout the country.
Nevertheless, GCC economies cannot afford overlooking international comparative studies with all their pluses and minuses as international investors consider such indices while evaluating options for their investments. In the age of globalisation, ranking of countries is an essential part of doing business.
— The writer is a Member of Parliament in Bahrain
