2018 Index of Economic Freedom

The world economy is “moderately free,” with another rise in economic liberty leading to a sixth annual global increase, according to the editors of the 2018 Index of Economic Freedom, released today by The Heritage Foundation.

The world average score of 61.1 is the highest recorded in the 24-year history of the Index. The world average is more than three points higher than that recorded in the first edition of the Index in 1995.

Among the 180 countries ranked, scores improved for 102 countries and declined for 75. Only three remained unchanged.

Six economies earned the Index’s designation of “free” (scores of 80 or above), while the next 90 are classified as “mostly free” (70-79.9) or “moderately free” (60-69.9).

“Thus, a total of 96 economies—more than half of all nations and territories graded in the 2018 Index—provide institutional environments in which individuals and private enterprises benefit from at least a moderate degree of economic freedom in the pursuit of greater economic development and prosperity,” the Index editors write.

Yet the number of economically “unfree” economies remains high: 63 are considered “mostly unfree” (50-59.9) and 21 are “repressed” (scores below 50).

Per capita incomes are much higher in nations that are more economically free, the Index editors note. Economies rated “free” or “mostly free” in the 2018 Index enjoy incomes more than double the average levels in other countries, and more than five times higher than the incomes of people living in “repressed” economies.”

 

The United States managed to halt its recent slide, recording a score of 75.7, more than half a point above its 2017 score (its lowest score in Index history). Ranked No. 18 globally, it remains “mostly free” and rose in the regional rankings, thanks in part to a 1.3-point decline in Chile’s score, to become the second-freest economy in the Americas region (behind Canada, which dipped to 9th place globally). “The decade-long decline in America’s economic freedom may have been halted,” the editors write.

Hong Kong and Singapore each logged increases in their Index scores, finishing first and second in the rankings for the 24th consecutive year. Three other frequent top 10 finishers — New Zealand (3rd globally), Switzerland (4th) and the United Kingdom (8th) — also saw their scores rise, though not nearly as much as Ireland(6th), which saw a 3.7-point increase.

Despite a modest 0.1-point dip in its score, Australia retained its hold on the No. 5 spot globally. Estonia’s score dropped as well, by 0.3 points, to give the former Soviet state a 7th place finish. Last year’s surprise newcomer to the top 10, the United Arab Emirates, improved its Index score by 0.7 points to take the 10th spot.

The Most Free

  1. Hong Kong
  2. Singapore
  3. New Zealand
  4. Switzerland
  5. Australia
  6. Ireland
  7. Estonia
  8. United Kingdom
  9. Canada
  10. United Arab Emirates

The Least Free

  1. North Korea
  2. Venezuela
  3. Cuba
  4. Rep. of Congo
  5. Eritrea
  6. Equatorial Guinea
  7. Zimbabwe
  8. Bolivia
  9. Algeria
  10. Djibouti

Launched in 1995, the Index evaluates countries in four broad policy areas that affect economic freedom: rule of law; government size; regulatory efficiency; and open markets. There are 12 specific categories: property rights, judicial effectiveness, government integrity, tax burden, government spending, fiscal health, business freedom, labor freedom, monetary freedom, trade freedom, investment freedom, and financial freedom. Scores in these categories are averaged to create an overall score.

Based on an average score, each of 180 countries graded in the 2018 Index is classified as “free” (i.e., combined scores of 80 or higher); “mostly free” (70-79.9); “moderately free” (60-69.9); “mostly unfree” (50-59.9); or “repressed” (under 50).

The Index groups the world’s countries into five regions: the Americas, Asia-Pacific, Europe, Middle East/North Africa and Sub-Saharan Africa. Individual rankings and write-ups for each country can be found online at heritage.org/index/ranking.

Americas (15 economies improved, 17 declined):

  • The Americas has no “free” economies. Three (CanadaChileUnited States) are “mostly free.” Five (EcuadorSurinameBoliviaCubaVenezuela) are “repressed.” The remaining 24 are either “moderately free” or “mostly unfree.”
  • Across the region, economies have expanded at an average rate of 1.7 percent over the past five years. The regional average rate of unemployment is 6.9 percent, while the average inflation rate is 14.4 percent.
  • The rule of law and regulatory efficiency are major problem areas, reflecting long-standing weakness in the protection of property rights, ineffectiveness in the judiciary, and lack of government integrity.

Asia-Pacific (31 economies improved, 12 declined):

  • Four of the world’s “free” economies are in this region (Hong KongSingaporeAustraliaNew Zealand), but so are three “repressed” economies (Timor-LesteTurkmenistan, North Korea). Five are “mostly free” (TaiwanMalaysia, South KoreaJapan and Macau).
  • Many of the Asia-Pacific countries are performing well in controlling the size of government, maintaining the rule of law, and regulating economic activity efficiently, the Index editors note. The regional fiscal health and labor freedom scores are about five points above the world average.

Europe (32 economies improved, 11 declined, 1 unchanged, 1 ungraded):

  • Eighteen of the world’s 34 freest economies (overall scores above 70) are in this region, and two of the six world economies rated as “free” (Switzerland and Ireland).
  • Most of Europe’s economies rated either “mostly free” or “moderately free.” Five—MoldovaRussiaBelarusGreece and Ukraine—are “mostly unfree.”
  • The region’s average scores on property rights and investment freedom lead the world averages by more than 15 points, and it is at least 10 points ahead on judicial effectiveness, business freedom and several other measures. Yet Europe struggles with costly labor regulations, higher tax burdens, an expanding public sector, and a variety of market-distorting subsidies.

Middle East/North Africa (6 economies improved, 8 declined, 4 ungraded):

  • The Middle East/North Africa has no “free” economies. Three (United Arab EmiratesQatar and Israel) are “mostly free,” but most of the other 11 graded economies are either “moderately free” or “mostly unfree” (and one, Algeria, is repressed).
  • Many countries in this region, the editors note, have been grappling since 2011 with fallout from socio-economic upheaval or outright conflict growing out of citizen’s demands for more freedoms. Private-sector growth lags far behind levels needed to provide adequate opportunities for growing populations.
  • Middle East/North Africa does lead the world in one area, however: tax burden. Its score on this Index factor beats the world average by more than 10 points.

Sub-Saharan Africa (18 economies improved, 27 declined, 2 unchanged):

  • Sub-Saharan has no “free” economies. Only one (Mauritius) is “mostly free,” with Botswana’s 0.2-point drop causing it to drop into the “moderately free” category. Most of the region’s 47 graded nations are “mostly unfree”, and more than half of the world’s “repressed” economies (12 out of 21) are in Sub-Saharan Africa.
  • The population-weighted average GDP per capita is only $3,891, the lowest level for any region. Unemployment hovers at 7.5 percent.
  • The single factor where Sub-Saharan Africa scores above the world average is government spending. But the region is plagued with a weak rule of law, inadequate protection of property rights, cronyism and endemic corruption.

“It is not massive redistributions of wealth or government dictates that produce the most positive social outcomes,” the editors write. “Instead, mobility and progress require lower barriers to market entry, freedom to engage with the world, and less government intrusion.”

The 2018 Index was edited by Ambassador Terry Miller, Director of Heritage’s Center for International Trade and Economics; Anthony B. Kim, Research Manager Center for International Trade and Economics; and James M. Roberts, Research Fellow for Economic Freedom and Growth in the Center for International Trade and Economics.

 

Budget for the Ashrafia

Pakistan is controlled and ruled by ashrafiya (elites) – comprising indomitable military complex, civil bureaucracy, higher judiciary, landed aristocracy and its cronies, industrialist-turned politicians, religious and spiritual leaders (sic), media tycoons and their powerful employees, and unscrupulous businessmen. Flouting the rule of law with shameless impunity is the hallmark of ashrafiya.

The Finance Bill 2012 presented by Dr Abdul Hafeez Shaikh amid worst ever pandemonium n the Parliament on 1 June 2012, confirms how unprecedented tax concessions have been secured by the ashrafiya. Not a single tax was levied on the rich and mighty to bridge the fiscal deficit of over Rs 1400 billion. On the contrary, the shameless borrowing from banks and elsewhere is to continue to push the nation in dark ‘debt prison’. There is no inclination whatsoever to make Pakistan a self-reliant economy. The budget 2012-13, as all earlier budgets of this government, favours the rich and taxes the poor to the extent of extinction.

In his book Pakistan: Economy of Elitist State, Dr Ishrat Husain has observed that in sharp contrast to the East Asian model of ‘shared growth’, based on rapid economic development coupled with a rapid reduction in poverty and more equitable distribution of the benefits of development in Pakistan, the elitist model confers political and economic powers to a small coterie of elite (parasites)i. While commenting upon Dr Ishrat’s work, Dr Khalil Ahmad of Alternate Solutions Institute, in his recent book, Pakistan Main Riasti Ashrafia ka Urooj (Rise of State Elitism in Pakistan), published in February 2012, has also concluded that Pakistan is presently owned and exploited by ‘state elites’ whereas it should belong to all.

There are no two opinions that the ruling trio – mighty military complex and its civilian cronies, corrupt politicians and unscrupulous businessmen – imposes its will on members of parliament in all matters. The entire budget making process is an epitome of apathy of parliamentarians towards the masses of this country, who vote them into power with the hope that they would do something for their socio-economic uplifting or at least provide them basic essential services – housing, transport, education and health, to say the least. Even the Standing Committees on Finance of both the Houses do not know what policies and tax measures would be presented. Hafeez Shaikh even did not bother to give them any briefing before, during and before the presentation of the budget.

The worthy members of national assembly (MNAs) never bother to ponder about the impact of regressive taxation on the ailing economy and its devastating burden on the poor of this Land of the Pure. Time and again, we have been emphasising that democracy is not electioneering per se. Establishment of a responsible government caring for the needs of its people is a prerequisite for true democratic dispensation which is only possible if the Parliament performs its Constitutional role, implements flawless process of accountability and ensures good governance. Theoretically, the Cabinet is answerable to the Parliament! But the stark reality is that MNAs merely run after ministers for personal favours and gains.

In the coming days, the coalition government will get the Finance Bill 2012 passed in utter haste ignoring suggestions and amendments by Opposition and Senate, disregarding all norms of parliamentary process and transparency, as it did last year. The treasury benches in Parliament will once again prove nothing more than rubber stamps as far as formulation of budget and approving of tax measures by FBR are concerned.

In every civilised and democratic society, it is the sole prerogative of elected members to initiate the process of law-making and devising of national policies after taking public input. It is the prime rule of a democratic process that no law or policy should be made unless a thorough debate is held in the parliament. In Pakistan, the rulers, military and civilian alike, always try to bypass parliamentary processes and then complain about lack of “democratic behaviour and culture” on the part of the opposition. Every year, budget-making exercise is entrusted to bureaucrats sitting in the Ministry of Finance and Board of Revenue while the Parliament conveniently restricts its role to a silent approver.

Due to non-participation of public representatives in budget-making, the financial managers and tax collectors have persistently failed to overcome fiscal deficit and remove fiscal imbalances as their tax policies are narrowly based on collecting taxes at source, without bringing mighty sections of society within the tax net or collecting what is actually due from them.

Sole stress on indirect taxation [even under the garb of income taxation through presumptive tax regime on a number of transactions] without evaluating its impact on the economy and life of the poor masses is a serious cause for concern. According to official figures, the contribution of income tax (although major portion of it is now composed of indirect levies or expenditure taxes) as percentage of GDP is continuously declining; it was merely 1.9% in 2010-11, 2.2% in 2009-10, 2.6% in 2008-09, 2.9% in 2007-08, 3.0% in 2006-07, 3.01% in 2005-2006, whereas in 2004-2005 it was 3.15% [YEAR BOOKS 2004-05 to 2010-11 of FBR and Economic Surveys].

In the face of declining direct tax-to-GDP ratio, Hafeez Shaikh and FBR stalwarts are making tall claims about “impressive” (sic) 25% increase in taxes that was directly the result of rise in imports – the contribution of POL products alone stood at 43%. A brazen misrepresentation of figures is committed by the Ministry of Finance and FBR in Economic Survey and Budget documents. In fact, FBR has conveniently ignored the quantum of taxes collected at source on goods, contracts, supplies and rent, which being full and final discharge, are in substance indirect levies, even in some cases, encroachment on the rights of provinces.

Reliance on indirect taxes that constitute 75% of total collection proves beyond any doubt that the tax system is emphatically contributing to rising poverty as people who earn enormous income and possess immense wealth are not being subjected to income taxation in Pakistan. Thus the very purpose of redistribution of wealth as the main object of taxation is being defeated and nullified. It is pertinent to mention that in 2011, the government of Sweden collected taxes at 53% of GDP, almost twice as high as the total tax revenue of America and Japan, with both collecting around 25% of GDP. In the Euro area, tax revenue, on average, reaches 40% of GDP. In contrast we have collected taxes at 8.4% of GDP.

The present tax policies of the government are detrimental for economy, social justice, business and industry. Those who possess more economic power (income and wealth) should contribute more to the public exchequer and vice versa. The ability-to-pay principle is regarded as the most equitable and just method of taxation and emphasised upon primarily for its redistributive role. In Pakistan, our rulers have completely deviated from this principle, which is in fact, a constitutional obligation of the government. The existing tax system protects the establishment and exploitative elements that have complete monopoly over economic resources. There is no political will to tax the privileged classes. Pakistan has been facing a variety of crises specifically in areas of: resources for its developmental policies, meeting trade deficits, fiscal deficits and balance of payments, in addition to numerous others. One of the factors responsible for the present situation is the accelerating speed with which black money is being generated.

FBR is directly responsible for this phenomenon as its mafia-like operations has helped the people to avoid tax on incomes by paying it “due share”. Through the infamous system of SROs [Statutory Regulator Orders], FBR’s top officials provide “legal” ways and means to mighty sections of the society (ashrafiya) to amass huge wealth that is now threatening the State’s very survival. It is worth mentioning that even before presenting the Finance Bill, 2012, FBR issued notification 569(I)/2012 on 26th May 2012 saying that government officials in Grade 20-22 will pay just 5% tax on monetized transport allowance. This benefit of reduced rate taxation, blatantly bypassing the Parliament, portrays how bureaucrats hoodwink the nation and cause exchequer loss of revenue through SROs. Needless to say it is discriminatory and violative of Article 25 of the Constitution as private sectors employees for the same allowance are subjected to normal rate of taxation.

Reduction of duties for cartels possessing enormous money has been extended by using executive authority in the form of SROs. Pakistan is a unique country where the executive authority can conveniently undo laws made by the Parliament under so-called delegated powers which gross violation of Article 162 of the Constitution of Pakistan, which reads as under:

“162. Prior sanction of President required to Bills affecting taxation in which Provinces are interested: – No Bill or amendment which imposes or varies a tax or duty the whole or part of the net proceeds whereof is assigned to any Province, or which varies the meaning of the expression “agricultural income” as defined for the purposes of the enactments relating to income-tax, or which affects the principles on which under any of the foregoing provisions of this Chapter, moneys are or may be distributable to Provinces, shall be introduced or moved in the National Assembly except with the previous sanction of the President.”

Article 162 debars even the National Assembly to grant exemptions without the prior approval of the President but interestingly, this power has been delegated unconstitutionally to an executive authority by the Parliament. How can Parliament delegate a power which it cannot exercise itself without the prior sanction of the President? By delegating powers under tax codes, the Legislature has violated Article 162 of the Constitution.

We have repeatedly pointed out this brazen violation of the Constitution requesting Supreme Court to take suo motu action under Article 189. It is sad to note that till today our pleadings have fallen on deaf ears. We were expecting that Bar Councils, taxpayers, tax advisers, civil society, and businessmen would raise their voices on this issue, but till today there is complete silence from their side. No wonder any dictator-military or civilian-can play havoc with the supreme law of land as he knows that those who claim to be champions of rule of law keep mum when it suits them. We remain the lone fighters against this flagrant violation of constitution that has serious ramification for the federation as a whole. History will never forgive those who have deprived the smaller provinces from exercising their constitutional right of fair and equitable fiscal jurisdiction.

The common man is subjected to exorbitant sales tax and federal excise duty of 16% (tax incidence is 35% on finished imported goods after applicable customs duty, sales tax, federal excise, mandatory value addition and income tax) on essential commodities [even salt sold under brand names is subjected to 16% sales tax] but the mighty sections of society such as generals, high-raking bureaucrats, judges getting plots from the State are not paying any wealth tax/income tax on their colossal assets/incomes. The same is the case with big industrialists and landed classes that get concessions and exemption through SROs.

It is tragic that in a country where billions of rupees are being made in speculative transactions at stock exchanges and in the real estate sector, tax-to-GDP ratio is one of the lowest in the world [consistently below 10% for the last 10 years] and the government is least bothered to tax undocumented economy and benami (name-lender) transactions¡ªrather, generously give amnesties to tax evaders and looters of national wealth. The mighty sections of society are widely engaged in these transactions while rulers of the day, getting due share from them, are not at all inclined to tax them. The present tax policies of government are violative of Constitutional provisions that require the State to provide social justice to all.

The existing tax system protects the ashrafiya and exploitative elements that have monopoly over economic resources – those who own 95% of national resources are paying less than 2% of overall tax collection. This shows why there is no political will to tax the privileged classes. Unfair taxation and inequitable distribution of resources is the root cause of our multiple socio-economic ills. State policies induce massive tax evasion (section 111(4) of the Income Tax Ordinance, 2001 is a permanent tool for whitening of untaxed money).

Determination of a tax base capable of measuring an individual’s ability-to-pay is a major problem of our tax system. This rule is incorporated in the form of progressive rate schedule for personal income tax, estate duty, and property tax worldwide. In Pakistan we have moved from this positive policy to unequal sacrificial rule where the mighty civil and military bureaucrats (now an integral part of our landed aristocracy by earning State lands as meritorious awards and rewards), rich industrialists and greedy businessmen are paying meagre personal taxes whereas the poor people are compelled to pay sales tax and federal excise duty of 16%. The incidence of regressive taxes on the poor is making their lives a misery beyond imagination.

Pakistan has about 118.5 million mobile usersii who pay both income tax and sales tax but even then only 1.3 million taxpayers file income tax returns – if statements filed for presumptive taxes are excluded, the actual number is below 750,000. Majority of mobile users may not have taxable income (Rs 350,000, raised to 400,000 from tax year 2013) yet they are burdened with undue liability. On the contrary, many rich people just pay a fraction of income tax (withheld at source) on their actual taxable incomes without bothering to file their income tax returns – in Pakistan less than 250,000 non-salaried return filers admitted that their annual income was more than Rs one million!

If out of total population of 180 million, we have 10 million individuals having taxable income of Rs 1.5 million (a very conservative estimate), total income tax collection from them at the current rate for tax year 2012 should have been Rs 3750 billion. If we add income tax collected from corporate bodies, other non-individual taxpayers and individuals having income between Rs 400,000 to Rs 100,000, the gross figure would be nearly Rs 5000 billion. FBR collected only Rs 560 billion as income tax plus Rs 20 billion as other direct taxesiii during fiscal year 2010-11 and figure for this year would be around Rs 665 billion. This shows a whopping tax gap of over 600 percent. Similarly, in sales tax, federal excise and custom duties, due to rampant corruption, the total collection is only 20% of actual potential. In fiscal year 2010-11, FBR collected Rs 633.4 billion under the head sales tax, Rs 137.4 billion under federal excise duty and Rs 180.8 billion under custom duties. Total indirect collection of Rs 951.6 billion was pathetically low. It should have been at least Rs 3500 billion.

If tax gap is bridged, the total revenue collection of Pakistan would be Rs 8500 billion (Rs 5000 billion direct taxes and Rs 3500 billion indirect taxes) which would change the entire fiscal scene. We would have enough money for current expenditure, development and public welfare outlays – government would retire debts in just a few years and we can easily become a self-reliant nation free from political subjugation. However, this dream for Pakistan can never be realised unless the mighty sections of society (ashrafiya) are taxed according to their ability to pay. Tax policy must be used as tool for rapid industrialisation and creation of job opportunities. It is imperative to tax the unproductive sectors to divert money to productive sectors and ensure redistributive charter of tax system – taxing the rich for the benefit of the poor. At present, we are taxing the poor for the benefit of the rich. This trend must be reversed before it is too late.

i. The main theme of the book rests upon the premise that the respective roles of the state and the market have been reversed in the case of Pakistan, with the result that benefits are reaped by the elite classes only. As the market has remained non-competitive in structure and distortion was rampant in the country, its economic development did not achieve the efficiency and productivity gains that the country ought to have attained in relation to its potential, compared to other countries. The instruments of state were also directed to provide benefits to the same small group, rather than apply correctives to the inequalities inevitably created by market forces. The small elitist minority continues to enjoy the unjust accumulation of wealth in the midst of widespread poverty and underdevelopment.

ii. As per official website of Pakistan Telecommunication Authority.

iii. FBR Year Book 2010-11 [Page 11]

iv. FBR Year Book 2010-11 [Page 6]

(The writers, tax lawyers and partners in HUZAIMA & IKRAM (Tax and Pakistan), are Adjunct Professors at Lahore University of Management Sciences) 

Published in Business Recorder, 

 

Economic Freedom Report 2008: Pakistan ranks 104 out of 141 countries

The 2008 edition of the Economic Freedom of the World report includes new research, examining the role of economic freedom in eliminating poverty with a particular focus on sub-Saharan Africa. Numerous studies have shown that countries with more economic freedom grow more rapidly and achieve higher per-capita income levels than those that are less free; therefore, it would seem that this growth should also help reduce poverty.


Economic Freedom Report 2008: Pakistan ranks 104 out of 141 countries

Judicial independence and integrity of legal system declines

Government spending and inflation increases

Rule of law and property rights weaker in Islamic nations

India inches up from 6.55 to 6.59; Hong Kong and Singapore rated best for economic freedom, Angola and Zimbabwe rank worst

Lahore September 25, 2008: The report ranks Hong Kong number one, followed by Singapore then New Zealand. Zimbabwe once again has the lowest level of economic freedom followed by Angola and Myanmar, according to the Economic Freedom of the World: 2008 Annual Report, released today by Pakistan’s first free market think tank, Alternate Solutions Institute.

“Weakness in the rule of law and property rights is particularly pronounced in sub-Saharan Africa, among Islamic nations, and for many nations that were part of the former Soviet bloc,” said James Gwartney, lead author of the report and professor of economics at Florida State University.

Pakistan ranked 104 out of 141 countries this year, after ranking 102 (out of 141 countries) in the last year’s report. In 2007 Report Pakistan scored 6.08 points out of 10; while this year its scored fell to 6.05. The areas that caused a decline in Pakistan’s overall performance are: size of government; legal structure and security of property rights; and, access to sound money. The areas in which Pakistan improved are: freedom to trade internationally; and, regulation of credit, labor, and business.

The annual peer-reviewed report uses 42 different measures to create an index ranking countries around the world based on policies that encourage economic freedom. The cornerstones of economic freedom are personal choice, voluntary exchange, freedom to compete, and security of private property. The report is produced by Canada’s Fraser Institute in cooperation with independent institutes in 76 nations and territories including the Alternate Solutions Institute in Pakistan.

Research shows that individuals living in countries with high levels of economic freedom enjoy higher levels of prosperity, greater individual freedoms, and longer life spans. This year’s report also contains new research showing the impact of economic freedom on poverty reduction.

“Economic freedom is one of the key building blocks of the most prosperous nations around the world. Countries with high levels of economic freedom are those in which people enjoy high standards of living and personal freedoms. Countries at the bottom of the index face the opposite situation; their citizens are often mired in poverty, are governed by totalitarian regimes and have few if any, individual rights or freedoms,” said Alternate Solutions Institutes’ Executive Director, Dr. Khalil Ahmad.

The full report is available here.

Pakistan scores in key components of economic freedom (from 1 to 10 where a higher value indicates a higher level of economic freedom):

• Size of government: changed to 7.01 from 7.26 in
the last year’s report
• Legal structures and security of property rights:
changed to 4.31 from 4.35
• Access to sound money: changed to 6.45 from 6.50
• Freedom to trade internationally: changed to 5.91
from 5.78
• Regulation of credit, labour and business: changed
to 6.56 from 6.49

Economic Freedom and World Poverty

The 2008 edition of the Economic Freedom of the World report includes new research from Gwartney and Seth W. Norton, professor of business at Wheaton College, examining the role of economic freedom in eliminating poverty with a particular focus on sub-Saharan Africa. They point out that numerous studies have shown that countries with more economic freedom grow more rapidly and achieve higher per-capita income levels than those that are less free; therefore, it would seem that this growth should also help reduce poverty.

Gwartney and Norton note that since economic growth is the driving force underlying reductions in poverty, countries such as Chile, Peru, Thailand, Malaysia, South Korea, China, and India have seen their poverty rates decrease in recent decades because these countries have achieved rapid economic growth.

“If a country adopts reforms supportive of economic freedom, will the wellbeing of the poor improve? Theory indicates that the answer to this question is “yes,” but substantial reductions in poverty are likely to take some time,” Norton said.

“It will take time for the new policy direction to acquire credibility, investors and other decision-makers to respond to the more attractive environment, and the rate of growth to increase. As the higher level of economic freedom is sustained and the more rapid growth persists, poverty rates will fall, and they will fall by larger amounts with the passage of time.”

The authors conclude that the institutions and policies of most sub-Saharan African nations are highly inconsistent with economic growth. The failure of the legal system to protect property rights, the roadblocks imposed by trade restrictions, and the heavy regulation and administrative costs imposed on business undermine economic growth because they stifle the gains from trade, entrepreneurship, and investment. Given that most of the sub-Saharan countries are relatively small, the high trade barriers are particularly damaging.

In order to encourage economic growth in Africa, Norton and Gwartney recommend that African nations reduce and eliminate trade barriers and business regulations; improve their legal system; and develop an interstate highway system through Africa.

About the Economic Freedom Index

This year’s publication ranks 141 nations representing 95% of the world’s population for 2006, the most recent year for which data are available. The report also updates data in earlier reports in instances where data have been revised.

To download the data sets, and previous Economic Freedom of the World reports, visit http://freetheworld.com

For more information, contact the Alternate Solutions Institute at
info@asinstitute.org

Property Rights Index 2008: Poor need property laws to create wealth

People in countries that protect their physical and intellectual property enjoy a GDP per capita up to nine times greater than those without legal protection, the 2008 edition of the International Property Rights Index (IPRI), reveals. Countries that protect property rights provide an essential foundation for peace, stability and prosperity, the Index shows: its calculations cover 115 countries, representing 96 per cent of the world’s GDP.


Pakistan lags behind 92 countries; ranked at 93 with weakest property rights

Far behind neighboring India’s position at 36

In IPR even Bangladesh is ahead of Pakistan

In Gender Equality, Pakistan is ranked at 86th out of 90 countries

People in countries that protect their physical and intellectual property enjoy a GDP per capita up to nine times greater than those without legal protection, the 2008 edition of the International Property Rights Index (IPRI), reveals. Countries that protect property rights provide an essential foundation for peace, stability and prosperity, the Index shows: its calculations cover 115 countries, representing 96 per cent of the world’s GDP. Alternate Solutions Institute, Lahore, and 40 organizations from six continents joined the Property Rights Alliance in Washington, DC and its Hernando de Soto Fellowship program to disseminate the report that is released today.

“Property is an extension of one’s self and life. Without its protection, we are just in a state of social and existential nothingness,” said Dr. Khalil Ahmad, Executive Director of the Institute. “What happened in the wake of Benazir Bhutto’s assassination, and how both public and private property was plundered is sufficient to prove the state’s criminal negligence in protecting its own property and the property of its citizens,” he added.

That is why for Pakistan not only protection of property rights but protection of property itself continues to be a great challenge. The 2008 IPRI Report shows that Pakistan lags behind 92 countries with weakest property rights and is ranked at 93rd position (score: 3.9 out of 10) along with Nepal and Ecuador. It is far behind India’s position at 36.

This year the top country is Finland with 8.6 score whereas the bottom country is Bangladesh with 2.9. It is important to note that Pakistan falls in the bottom quintile that includes countries like Bangladesh and Ethiopia. It is no better than its last year’s performance when it was ranked at 59th position out of 70 countries with a score of 3.3. As regards Intellectual Property Rights, Pakistan is ranked at 103rd with 2.8 score whereas Bangladesh fares better at 101st with 2.9. In Gender Equality regarding property rights, Pakistan is ranked at 86th out of 90 countries with a score of 2.4. In other components of the Index, Pakistan’s performance is as follows:

Legal and Political Environment: score 3.0; rank 106th; Last year’s score 1.9
Physical Property Rights: score 5.8; rank 56th; Last year’s score 5.1
Intellectual Property Rights: score 2.8; rank 103rd; Last year’s score 2.8
Gender Equality: score 2.4; rank: 86th out of 90 countries; Last year’s score 2.0 and rank 63rd out of 65 countries

Hernando De Soto, whose seminal work on property rights led to the conception of the IPRI, said this year’s results “provide further proof of the relationship between the robustness of a country’s property rights system and its economic development, revealing that much still needs to be done to extend property rights to more people, especially the poor.”

In order to incorporate and grasp the important aspects related to property rights protection, the 2008 IPRI focuses on three areas: Legal and Political Environment (LP), Physical Property Rights (PPR), and Intellectual Property Rights (IPR). The 115 countries represent 96% of world GDP: the study demonstrates that countries in the top quartile of the Index have an average GDP per capita more than nine times higher than those in the bottom quartile.

The International Property Rights Index provides the public, researchers and policymakers, from across the globe, with a tool for comparative analysis and research on global property rights. The Index seeks to assist underperforming countries to develop robust economies through an emphasis on sound property law.

Download the Report (PDF)

For more information, such as a country-by-country analysis, list of global partner organizations, visit www.InternationalPropertyRightsIndex.org

UN Climate Change Report Unfounded

Independent assessment of UN climate change report refutes alarmist claims made in official “Summary for Policymakers”


Alternate Solutions Institute: LAHORE, PAKISTAN — An independent review of the science of climate change contradicts in many respects the official Policymakers Summary released on Friday February 2, 2007 in Paris – calling into question the validity of the claims made by the UN.

The new report was produced for the renowned Fraser Institute, a member of the Civil Society Coalition on Climate Change. Written by a panel of 10 internationally-recognized experts, it is an assessment of a draft of the first section of the forthcoming report from the UN Intergovernmental Panel on Climate Change (IPCC).

“The debate around climate change has become highly politicized and alarmist. So we asked a team of highly qualified scientists to look at the IPCC report and produce a summary that they felt communicates the real state of knowledge. Our intent with this document is to allow people to see for themselves what is known and what remains highly uncertain within climate change science.” said Dr. Ross McKitrick, coordinator of the report.

This “Independent Summary for Policymakers” concludes:

On the basis of the most accurate measures available – weather satellites – there is little evidence of atmospheric warming since 1979 (when satellite records begin).

No compelling evidence that dangerous or unprecedented changes in the climate are underway.

No globally-consistent pattern in long-term precipitation trends, snow-covered area, or snow depth.

Current data suggest a global mean sea level rise of between two and three millimeters per year.

Observed climate change cannot be attributed to a specific cause, such as increased atmospheric greenhouse gas concentrations. Attribution studies relying on computer simulations do not take into account the uncertainty inherent in climate models, nor do they adequately account for many potentially important influences such as aerosols, solar activity, and land use changes.


Download the Fraser Institute Report (PDF)

Alternate Solutions Institute is a member institute of Civil Society Coalition on Climate Change.

Economic Freedom and Devopment – Applying the Lessons

When a citizen of South Asia looks eastward, to East and Southeast Asia, he will see the benefits of fast economic growth over the past half century. Many places, such as Singapore, Kuala Lumpur, Hong Kong, Taiwan and Shanghai, have followed Japan and left the third for the first world.

by Wolfgang Kasper

When a citizen of South Asia looks eastward, to East and Southeast Asia, he will see the benefits of fast economic growth over the past half century. Many places, such as Singapore, Kuala Lumpur, Hong Kong, Taiwan and Shanghai, have followed Japan and left the third for the first world. Trade, expert knowledge and investments flow freely to and from the affluent countries of America, Australia and Europe. Most people embrace the amenities and challenges of the modern age. Technical and organisational skills are being developed rapidly. There is an atmosphere of pragmatic cooperation and spirit of can-do optimism.

Read complete PDF of Economic Freedom and Devopment – Applying the Lessons

Property Rights Index 2007: Pakistan ranks at 59th position with weakest property rights

A new international index reveals how laws on physical and intellectual property stimulate growth while the weakest economies have the weakest laws. Today’s first annual International Property Rights Index (IPRI) measures seventy countries’ performance in the protection of land titles and copyrights, assets and patents showing the direct effect on economic well-being.


Lahore March 06, 2007: A new international index reveals how laws on physical and intellectual property stimulate growth while the weakest economies have the weakest laws. Today’s first annual International Property Rights Index (IPRI) measures seventy countries’ performance in the protection of land titles and copyrights, assets and patents showing the direct effect on economic well-being.

In the developing world these “essential legal mechanisms easily available to the elite entrepreneurs in their country and all business people in advanced nations” are what the poor need to “allow them to do business in markets outside the limited confines of family and acquaintances,” says world-leading economist Hernando de Soto in his introduction.

The 2007 IPRI analyses Legal and Political Environment (LP), Physical Property Rights (PPR), and Intellectual Property Rights (IPR) in 70 countries accounting for 95% of world GDP: the countries in the top quartile of the Index have an average GDP per capita more than seven times those in the bottom quartile. The final results show an 89 percent correlation between GDP per capita and the IPRI score for each country: the stronger the rights of ownership, the better off the people.

The report by Property Rights Alliance in Washington, DC and its Hernando de Soto Fellowship program is distributed by 38 organizations from six continents, including Alternate Solutions Institute Pakistan.

With regard to Pakistan, the protection of property rights continues to be a challenge. The IPR Index 2007 ranks Pakistan (along with Kenya, Guatemala and Ecuador) at 59th position out of 70 countries with a score of 3.3. The top country is Norway with a score of 8.3 out of 10, whereas the bottom country is Bangladesh with a score of 2.2. As to Gender Equality regarding the property rights, Pakistan has been assigned a score of 2.2 with ranking at 63. Here it is no better than Ethiopia and Kenya. In the area of Legal and Political Environment, Pakistan’s score is 1.9; in Physical Property Rights, it is 5.1; and, in Intellectual Property Rights, it is 2.8.

Secure property rights are the most effective incentive towards both domestic and foreign investment, and stimulate growth, says Dr. Khalil Ahmad of Alternate Solutions Institute.

The International Property Rights Index seeks to assist underperforming countries to develop robust economies through an emphasis on sound property law, creating social and economic stability and the freedom to trade in goods and ideas. The Index gives researchers, policymakers and the public around the globe a tool for comparative analysis and future research.

Download the Report (PDF)

For more information, such as a country-by-country analysis, list of global partner organizations, visit www.InternationalPropertyRightsIndex.org

The 2007 IPRI partner organizations include:

Alternate Solutions Institute (Pakistan)
Asociación de Consumidores Libres (Costa Rica)
Centre for Free Enterprise (Korea)
Centro de Investigaciones Económicas Nacionales (Guatemala)
CEPOS (Denmark)
Competere (Italy)
Circulo Liberal (Uruguay)
CIVITA (Norway)
ESEADE University (Argentina)
Eudoxa (Sweden)
European Center for Economic Growth (Belgium/Austria)
FREE (Poland)
Friedrich A. v. Hayek Institut (Austria)
Friedrich Naumann Foundation (East and Southeast Asia Regional Office)
Fundación Atlas 1853 (Argentina)
Fundación IDEA (Mexico)
Fundación Libertad (Panama)
Fundación Libertad y Democracia (Bolivia)
IMANI: The Centre for Humane Education (Ghana)
Initiative for Public Policy Analysis (Nigeria)
Instituto de Libre Empresa (Peru)
Instituto Ecuatoriano de Economía Política (Ecuador)
Instituto Liberdade (Brazil)
Instituto Libertad y Progreso (Colombia)
Instituto Para La Libertad y el Analisis de Politicas (Costa Rica)
Institut Constant de Rebecque (Switzerland)
Institute for Free Enterprise (Germany)
Institute for Public Affairs (Australia)
Inter Region Economic Network (Kenya)
International Policy Network (United Kingdom)
Jerusalem Institute for Market Studies (Israel)
Libertad y Desarrollo (Chile)
Liberty Institute (India)
Property Rights Alliance (United States)
RSE – Centre for Social and Economic Research (Iceland)
The Center for Institutional Analysis and Development (Romania)
The Free Market Foundation (South Africa)
The Lion Rock Institute (Hong Kong)

New Report: Global “Over-population” a Myth

On World Population Day, July 11th, the UNFPA will call for men to be more involved in family planning and women’s reproductive healthcare. Underlying this fine-sounding campaign is the UN Population Fund’s belief that we must stabilise and decrease world population in order to save the planet and promote economic growth.


On World Population Day, July 11th, the UNFPA will call for men to be more involved in family planning and women’s reproductive healthcare. Underlying this fine-sounding campaign is the UN Population Fund’s belief that we must stabilise and decrease world population in order to save the planet and promote economic growth.

On World Population Day, July 11th, the UNFPA will call for men to be more involved in family planning and women’s reproductive healthcare. Underlying this fine-sounding campaign is the UN Population Fund’s belief that we must stabilise and decrease world population in order to save the planet and promote economic growth.

But according to a new report title “Too Many People” by Professor Nicholas Eberstadt, an expert in population and demography, the UNFPA and other alarmists provide no credible evidence to justify this belief. The research paper has been released in Pakistan by the Alternate Solutions Institute, a partner organization of the Sustainable Development Network UK, publisher of the Eberstadt’s research report.

There is no causative link between population density and poverty – wealthy Monaco is forty times more densely populated than impoverished Bangladesh.

Nor is it true that the planet is struggling to feed and accommodate increasing numbers of people. Over the last century, global life expectancy has increased from 30 years to over 60 years; while maize, rice and wheat have become far more abundant and other natural resources have become more easily available.

Nevertheless, the UN and many other influential individuals and groups, and NGOs – such as in Pakistan – are calling for government-mandated population-planning schemes globally. But according to Eberstadt, such schemes historically have had almost zero effect on family sizes and fertility rates:

“Globally, there is no causative link between the availability of contraception and fertility levels – the rate of contraception use is virtually identical in Jordan and Japan, for instance, but Jordan’s fertility rate is more than three times higher.”

According to Eberstadt, the only thing that can affect fertility rates is parental choice – unless one opts for the Chinese approach of forced sterilisations and abortions.

“Whether they recognize it or not, advocates of anti-natal population programs must make a fateful choice. They must either opt for voluntarism, in which case their population targets will be meaningless. Or else they must opt for attempting to meet their population targets – in which case they must embrace coercive measures, like China’s one-child policy. There is no third way.”

Click here for full text of the report pdf

The 25 sponsoring organisations of “Too Many People?” by Professor Nicholas Eberstadt are as follows:

Ag Bio World Foundation, USA, www.agbioworld.org
Africa Fighting Malaria, South Africa, www.fightingmalaria.org
Alternate Solutions Institute, Pakistan, www.asinstitute.org
Asociación de Consumidores Libres, Costa Rica, www.consumidoreslibres.org
Association for Liberal Thinking, Turkey, www.liberal-dt.org.tr/
CEDICE, Venezuela, www.cedice.org
CEES, Guatemala, www.cees.org.gt/
CEPPRO, Paraguay, www.ceppro.org.py/
Circulo Liberal, Uruguay, www.circuloliberal.org
Centro de Innovación y Desarrollo Humano, Uruguay
ESEADE University, Argentina, www.esade.es/
Fundación Libertad, Panama, www.fundacionlibertad.org.pa
Free Market Foundation, South Africa, www.freemarketfoundation.com
FULIDE, Bolivia, www.fulide.org.bo/
Instituto Ecuatoriano de Economía Política, Ecuador, www.ieep.org.ec
International Policy Network, UK, www.policynetwork.net
Imani – the Centre for Humane Education, Ghana, www.imanighana.org
INLAP, Costa Rica, www.inlap.org
Instituto de Libre Empresa, Peru, www.ileperu.org
Instituto Liberdade, Brazil, www.il-rs.com.br
Institute for Public Policy Analysis, Nigeria, www.ippanigeria.org
Jerusalem Institute for Market Studies, Israel, www.jims-israel.org/
Liberty Institute, India, www.libertyindia.org
Lion Rock Institute, Hong Kong, www.lionrockinstitute.org
RSE – Centre for Social and Economic Research, Iceland, www.rse.is/

Research: Let the Poor Have Water, not Ideology

This year’s World Water Week will see activists gather in Stockholm to discuss ways of getting clean water to the 1 billion people around the world who are currently without it. The new research by Alex Nash argues that if water activists remain blinkered by ideology and continue to oppose private water provision, this goal will not be met.


This year’s World Water Week will see activists gather in Stockholm to discuss ways of getting clean water to the 1 billion people around the world who are currently without it. The new research by Alex Nash argues that if water activists remain blinkered by ideology and continue to oppose private water provision, this goal will not be met. This research paper has been released in Pakistan by the Alternate Solutions Institute, a partner organization of the Sustainable Development Network UK, publisher of the Nash’s research report.

Even though private water provision sees clean and safe water delivered to millions around the world, many politicians and NGOs remain irrationally opposed to the idea that profit should be made from “essential resources” like water. According to the paper’s author, Alex Nash, a water engineer with experience of public and private sector water projects in less-developed countries, this mindset is actively hindering universal access to water and with it the achievement of several Millennium Development Goals.

The truth is that many public utilities in less-developed countries suffer from endemic corruption and rarely deliver services equitably – even refusing to recognize and connect slum-dwellers: “The reality of many state run utilities is not pretty. Bribes, extortion, kickbacks, nepotism, patronage, shoddy technical standards; it’s all in a day’s work.”

Meanwhile, it is the private sector – from individual water porters to larger companies – that fill in the gaps left by dysfunctional state utilities.

The World Bank estimates that in most cities in less developed countries, more than half the population get their water from suppliers other than the public utility. But political opposition to private water could spell the end of such vital services. “The net result of these ideologues’ well-meaning efforts is a staunch defense of the corrupt, lazy or incompetent utility managers and mayors. It is a defense of the comfortable middle classes in developing countries who have cheap water while their poorer compatriots queue and walk all day.”

“Water Provision for the Poor- How ideology muddies the debate”
by Alex Nash

Download the paper (PDF)

The 26 sponsoring organizations of “Water Provision for the Poor- How ideology muddies the debate” by Alex Nash are as follows:

Ag Bio World Foundation, USA
Africa Fighting Malaria, South Africa
Alternate Solutions Institute, Pakistan
Asociación de Consumidores Libres, Costa Rica
Association for Liberal Thinking
CEDICE, Venezuela
CEPPRO, Paraguay
Centro de Innovación y Desarrollo Humano, Uruguay
ESEADE University, Argentina
Fundación Atlas 1853, Argentina
Fundación Libertad, Panamá
Free Market Foundation, South Africa
Forum on China’s Economic Growth and Business Cycle, China
Instituto Ecuatoriano de Economía Política, Ecuador
International Policy Network, UK
IMANI Center for Policy and Education, Ghana
INLAP, Costa Rica
Instituto de Libre Empresa, Peru
Instituto Liberdade, Brazil
Instituto Libertad y Progreso
Institute of Public Affairs, Australia
Jerusalem Institute for Market Studies, Israel
Liberty Institute, India
Lion Rock Institute, Hong Kong
RSE – Centre for Social and Economic Research, Iceland
Zambia Institute for Public Policy Analysis, Zambia

Economic Freedom of the World 2004 Annual Report: Special Pakistan Edition

Economic Freedom of the World is the most comprehensive index of economic freedom in the world and the only that uses reproducible measures for peer-reviewed research. The 2004 Annual Report explores the evolution of economic freedom over the last quarter century and the impact of economic freedom on people’s lives.


As it is, to be successful or profitable, a business venture needs certain freedoms out of which economic freedom is the most crucial. In simple words, economic freedom means, on the one hand, freedom to engage in any economic activity; and on the other, freedom from any external control, be it government or any such authority, which it exerts by regulating and taxing the businesses. Excessive government control results in less and less economic freedom and an unpleasant environment for the growth of overall economy and individual prosperity as well.

The state of economic freedom in Pakistan is not encouraging. Too much regulation and too much taxation and their red-taped implementation are sitting at the entry point of any business activity and hinder their growth. Not only does it interfere with the personal choice of the people; intervenes in the voluntary exchange; and thus restricts the freedom to compete on the part of producers and traders; it increases the cost of starting a business also, and thus creates such an environment that is not conducive to the development of private economic activity in Pakistan catering freely to the needs of people.

Economic Freedom of the World is the most comprehensive index of economic freedom in the world and the only that uses reproducible measures for peer-reviewed research. The 2004 Annual Report explores the evolution of economic freedom over the last quarter century and the impact of economic freedom on people’s lives.

It answers many important questions, including:

• Has economic freedom been increasing or decreasing?

• Do poor people benefit when countries become economically free?

• What countries have made big gains in economic freedom in recent years?

• What effect does economic freedom have on prosperity?

• How does economic freedom influence investment?

• How does economic freedom influence productivity?

• What impact does economic freedom have on income inequality?

Download the Economic Freedom of the World 2004 Annual Report (PDF)