The UAE slipped a few positions this year on the global economic freedom radar, while maintaining its lead in fiscal freedom.
Overall, the country has been ranked 63rd this year as against 59th last year, according to the 2008 Index of Economic Freedom released by The Heritage Foundation in collaboration with The Wall Street Journal.
The index declares the UAE economy as 62.8 per cent free, making it the world’s 63rd freest economy.
The country’s overall economic score fell by 0.1 percentage points compared to last year.
The figures also reflect lower scores in three of the 10 economic freedoms.
The Middle East overall has emerged as the most fiscally free region. While the 2008 index rates the UAE, Bahrain and Kuwait equally with 99.9 per cent fiscal freedom each, Qatar and Saudi Arabia are close at 99.8 per cent and 99.7 per cent respectively.
Oman is also not too far behind at 98.5 per cent fiscal freedom, followed by Lebanon at 91.4 per cent and Egypt at 90.8 per cent.
The UAE, meanwhile, is ranked seventh out of 17 countries in the Middle East and North Africa region, and its overall score is higher than the regional average.
Though the country scores above the world average in fiscal freedom, labour freedom, freedom from corruption, government size, and trade freedom, the index rates the UAE as weak in business freedom, investment freedom, financial freedom and property rights.
According to The Heritage Foundation report, foreign investment in the UAE is restricted, and majority Emirati ownership is mandated even in the free zones.
“The UAE is a regional financial hub, but its financial sector is subject to considerable government interference,” the report said.
Meanwhile, the average tariff rate in the country is not high, but general import licences are issued only to nationals, according to the Foundation’s report.
It said: “Individual emirates impose their own corporate taxes, but there are no income or corporate taxes at the federal level.
The labour market is highly flexible, and there is no minimum wage. The level of corruption is admirably low for a developing nation,” the detailed report said.
The 2008 Index highlights that the global economic freedom
continues to hold steady while progressing more slowly than one might hope. The global economic freedom score is 60.3 per cent for this year, which is essentially the same as last year.
Asia, meanwhile, retains its reputation this year as the leading
region – home to the freest and the most repressed economies. Hong Kong (first) and Singapore (second) continue to lead the world, along with Australia and New Zealand.
10 economic freedoms
47.9% BUSINESS FREEDOM: Starting a business takes an average of 62 days, compared to the world average of 43 days. The capital requirement to launch a business is costly.
99.9% FISCAL FREEDOM: The UAE has no income tax and no federal-level corporate tax, but different corporate tax rates exist in some emirates.
80.2% GOVERNMENT FREEDOM: Total government expenditures, including consumption and transfer payments, are moderate. Last year government spending equalled 25.7 per cent of GDP.
70.9% MONETARY FREEDOM: The 2008 Index rates inflation in the UAE is “high”, averaging 9.1 per cent between 2004 and 2006.
30% INVESTMENT FREEDOM: Foreign investors do not receive national treatment. Except for companies in the free zones. At least 51 per cent of a business must be owned by a UAE national.
40% FINANCIAL FREEDOM: There are 21 Emirati banks and 25 foreign bank entities among others. Six major banks account for 70 per cent of assets.
40% PROPERTY RIGHTS: Some people exercise considerable influence on the judiciary. Incompetence and corruption are rarely challenged.
62% FREEDOM FROM CORRUPTION: The UAE stands at 31 out of 163 countries in Transparency International’s Corruption Perceptions Index for 2006.
76.2% LABOUR FREEDOM: The labour market operates under relatively flexible employment regulations that could be improved to enhance overall productivity growth and job creation. Non-salary cost of employing a worker is moderate.