By Oxford Business Group
A series of international surveys published recently point towards the kingdom’s open and conducive investment environment as a key competitive advantage.
On November 2, the Canadian public policy research the Fraser Institute released its latest study on economic freedom in the Arab world, with Bahrain ranked the most liberal of the 22 economies covered in the report.
Published in conjunction with Germany’s Friedrich Naumann Foundation for Liberty and the Oman-based International Research Foundation, the report used data collected under broad headings such as size of government, commercial and economic law and security of property rights, and access to sound money. It also covered freedom to trade internationally and the regulation of credit, labor and business.
Of the five categories, Bahrain was first or second in three, only missing out on a top spot in the areas of size of government and security of property rights.
Bahrain’s performance in 2010 may come as no surprise to many observers, as the Kingdom was placed first in the rankings in each of the research group’s six previous studies on regional economic freedoms.
Overall, out of a maximum of 10, Bahrain was given a score of eight, with Kuwait next on the ladder with 7.8, Lebanon with 7.6 and Jordan and Qatar tying with an average of 7.4.
Commenting on the report on the day of its release, Sheikh Mohammed bin Essa Al Khalifa, the chief executive of the Bahrain Economic Development Board (EDB), said the consistent top of the table ranking by the study was a reflection of a decade of social and economic reforms.
“The link between economic freedom, economic growth, development and other positive outcomes is well documented,” he said. “And individuals living in countries with high levels of economic freedom enjoy higher levels of prosperity and greater individual freedoms. This report reflects the prudent steps that we in Bahrain have taken to build an open economy based on ethical values.”
This year’s Index of Economic Freedom, produced by the conservative Washington-based policy research centre the Heritage Foundation and the Wall Street Journal, also ranked Bahrain top in the Middle East and North African region, and 13th globally.
According to the Heritage Foundation’s index, structural reforms and openness to global commerce have made Bahrain a financial hub and a regional leader in economic freedoms.
“One of the region’s least oil-dependent economies, it has a competitive tax regime and a sophisticated financial sector that facilitates the flow of capital and foreign investment,” the Heritage Foundation said in April. “The government has modernized the regulatory framework and continues to focus on diversifying the productive base.”
The report said that while there had been a slowing of the economy due to the international financial crisis, Bahrain had managed to improve its average on the index by implementing reforms that saw improvements in trade freedom, investment freedom, labor freedom, and freedom from corruption.
However, another report, the World Economic Forum’s (WEF) Arab World’s Economic Competitiveness Review 2010, issued in October, drew different conclusions, commenting that the Kingdom still had work to do in terms of strengthening its economy.
The WEF recommended that Bahrain do more to promote business and research innovation in order to support its efforts to broaden the base of the economy, including doing more to encourage collaboration between business and academia.
While there are undoubtedly some issues that need to be addressed, the findings of the surveys of Bahrain’s economy suggest the long-term economic reform program being implemented by the government is well on track – and bearing fruit.
