Egypt is still struggling to liberate its economy, as shown by its mediocre standing in the Economic Freedom Index. Sherine Abdel-Razek keeps score How open is Egypt's economy after years of liberal policies adopted by the reform-minded Ahmed Nazif government? Almost in the middle of the road, scoring 59 per cent in the Economic Freedom Index for 2008. The index is prepared by the US-based Heritage Foundation in collaboration with the Wall Street Journal, and grades countries according to different factors on a scale from 0-100. The higher the score, the lower the level of government interference in the economy. Egypt has the world's 85th freest economy with a four percentage point increase in its overall score during 2008 -- the largest improvement recorded among the 162 countries surveyed. Progress in business, financial and trade freedom were significant, and it ranked 11th out of 17 countries in the Middle East/North Africa region. Altogether, its overall score is above the regional average. The report attached to the index notes that despite recent reforms, Egypt remains weak in most of the 10 economic freedoms, scoring above average only in fiscal freedom, government size and labour freedom. It adds that while Egypt is not too far below average, it needs to work on financial freedom, corruption and weak property rights -- the three criteria where it recorded the lowest scores. On financial freedom, the country scored 40 out of 100 compared to a world average of 51.7 per cent. This criterion measures how independent the banking sector is from the government. In general, most governments worldwide "continue to impose a heavy burden of bank regulation on the private sector, reducing opportunities and restricting economic freedom," stated the report. The financial freedom scores of about 80 countries were between 50 and 70 per cent. In the case of Egypt, there are other problems as well, including significant non-performing loans and new banks facing constraints on acquiring licences. Bankers are reluctant to lend privately because of loan scandals and the lack of an institution capable of judging credit- worthiness. Freedom from corruption seems a far- fetched goal even on a global level, judging by the fact that the scores of 114 countries fell below 50. Corruption is Egypt's worst impediment to becoming a free economy. "Bribery of low-level civil servants seems to be a part of daily life," emphasised the report, "and there are allegations of significant corruption among high-level officials." Egypt ranked 70th out of 163 countries in Transparency International's Corruption Perceptions Index for 2006. Moreover, the findings revealed that the enforcement of intellectual property rights is seriously deficient in Egypt, especially that judicial procedures are protracted, costly and subject to political pressure. On a positive note, the report praised reforms already engineered by Nazif's cabinet and admits they were translated into good performance in fiscal freedoms, freedom from the government and trade freedom. Egypt's best score was in fiscal freedom, which measures the different taxes on personal income and corporate profits, since it has low personal income and corporate tax rates. Both the top income tax rate and the top corporate tax rate are 20 per cent, compared to a world average of 31 per cent on individual income and 26 per cent on corporate income averages. Another point of praise was the overall freedom to start and operate a business. Launching a business takes an average of nine days, according to the report, compared to the world average of 43 days. However, obtaining a business licence requires more than the world average of 19 procedures in 234 days and closing a business can be burdensome. Despite recent trade liberalisation efforts, trade freedom in Egypt came at 66 per cent on the index scale. "Import restrictions, service market access restrictions, some high tariffs, burdensome and non-transparent sanitary measures, cumbersome bureaucracy and non- transparent regulations, weak enforcement of intellectual property rights, and non-transparent customs administration add to the cost of trade," the report explained. An additional 10 percentage points is deducted from Egypt's trade freedom score to account for non-tariff barriers. Surprisingly enough, freedom from government -- which measures the size of government's spending -- is Egypt's second best, and at 73 per cent is above the world average of 67 per cent. The report attributed this to modernity of total government expenditures, including consumption and transfer payments, around 30 per cent of GDP. However, subsidy spending caused significant fiscal deficits. In most recent year, government spending equalled 30 per cent of GDP. With these scores, Egypt ranked 17th in the region which has Israel and Bahrain in the lead, each with an overall average score of 68 per cent. The Middle East does not have any countries in the ranks of the world's 20 most free -- Israel is ranked 37 globally, Bahrain 39th and Jordan 53rd. Meanwhile, Oman, Kuwait and Tunisia are bottom countries in the top 70. At the other end of the index, Hong Kong had the highest level of economic freedom for the 14th year running. Singapore remained close as second. This means that the Asia-Pacific region is home to three of the world's top five liberated economies.
