Property Rights Freedom from
Corruption
Fiscal Freedom Government
Spending
Business Freedom Labor Freedom Monetary Freedom
Trade Freedom Investment Freedom Financial Freedom
Score Changes
Business Freedom Labor Freedom Monetary Freedom
REGULATORY EFFICIENCY
OPENMARKETS Trade Freedom Investment Freedom Financial Freedom
LIMITED
GOVERNMENT Fiscal Freedom Government Spending
RULE OF LAW Property Rights Freedom from Corruption
0 20 40 60 80 100
0 20 40 60 80 100
0 20 40 60 80 100
0 20 40 60 80 100
Country World Average Rank
RULE OF LAW LIMITED
GOVERNMENT REGULATORY
EFFICIENCY OPEN MARKETS 0
+3.0
–0.2 –2.9
+3.2 +20.0 –3.7
–0.6 0 0 94th 140th
155th 36th
154th 126th 102nd
131st 164th 159th 30.0
24.0
64.7 82.4
44.7 51.2 74.6
68.8 15.0 20.0
THE TEN ECONOMIC FREEDOMS
Political stability has improved since the smooth transfer of power to President Dhoinine in June 2011, but the judicial system is ineffective, contracts are weakly enforced, and courts are relatively inexperienced in commercial litigation. The government lacks the capacity to enforce intellectual property rights laws. Officials often engage in corrupt practices with impunity.
The overall regulatory framework remains poor. Establishing a business costs more than the level of average annual income. Retail services are the largest source of employment, and for- mal-sector employment is negligible. Inflation began to increase in 2012, exacerbated by the rising cost of imports caused primarily by high global fuel prices and depreciation of the euro- pegged Comorian franc against the dollar.
The trade-weighted average tariff rate is 8.1 percent, and myriad non-tariff barriers undermine trade freedom. Non-transparent investment regulations and underdeveloped markets inhibit investment. The small financial sector, dominated by banks, has recorded modest growth in recent years. With two new banks coming into operation, the small banking sector has expand- ed, but many people and businesses still rely on informal lending.
The top income tax rate is 30 percent, and the top corporate tax rate is 50 percent. Other taxes include a value-added tax (VAT) and an insurance tax. The overall tax burden equals 11.4 percent of total domestic income. Government spending is equivalent to 24.3 percent of total domestic output. With continuing budget surpluses, Comoros is on track to complete the Heavily Indebted Poor Countries Initiative, paving the way for multilateral debt reduction.
COmOROS
(continued)171 How Do We Measure Economic Freedom?
See page 477 for an explanation of the methodology
or visit the Index Web site at heritage.org/index. 2011 data unless otherwise noted.
Data compiled as of September 2012.
Quick Facts
population: 72.6 million gdp (ppp): $25.3 billion 6.9% growth in 2011
5-year compound annual growth 5.8%
$348 per capita unemployment: n/a inflation (cpi): 15.5%
fdi inflow: $1.7 billion public debt: 32.0% of GDP
Economic Freedom Score
Least Most free free
25 7550
0 100
0 20 40 60 80 100
Country Comparisons Freedom Trend
Country World Average Regional Average EconomiesFree
2009 2010 2011 2012 2013 38 39 40 41 42 43 44
39.6 59.6 53.7
84.5
39.6
T
he Democratic Republic of Congo (DRC) has an economic freedom score of 39.6, making it the 171st freest economy in the 2013 Index. Its overall score is 1.5 points lower than last year, reflecting significant deterioration in control of govern- ment spending that is only partially mitigated by an increase in monetary freedom. The DRC is ranked 44th out of 46 coun- tries in the Sub-Saharan Africa region, and its score is far below the regional average.The Congo’s extractive industries and exports have gener- ated high nominal rates of economic growth but little sus- tainable or broad-based development. Political risk remains high, severely undermining prospects for diversified growth and trapping a majority of the population in poverty. Infor- mal economic activity is rampant, and businesses have little recourse in law and little protection for their property.
Government economic activity lacks impact, and the basic supply of public goods, particularly infrastructure, is far below levels necessary to facilitate economic growth and entrepre- neurial opportunity. The slow pace of reform, coupled with ongoing political instability, has left the capacity of public institutions inadequate to support private-sector develop- ment and long-term economic expansion.
backgRound: Laurent Kabila, who seized power in 1997, was assassinated in 2001. His son Joseph assumed power and in 2006 won the first multi-party election in 40 years. He was re-elected in December 2011 in a largely flawed and violent election. Rebel groups that include the Lord’s Resistance Army, M23, and the Democratic Forces for the Liberation of Rwanda (FDLR) remain active in the northeastern region.
The DRC’s immense natural resources, including copper, cobalt, and diamonds, have fueled conflict rather than devel- opment. Political unrest has led foreign businesses to limit their operations, and corruption and mismanagement are disincentives to activity in the formal sector. Infrastructure is practically nonexistent in many areas.
World Rank:
171
Regional Rank:44
DEmOCRATIC REPuBLIC OF CONGO
172 2013 Index of Economic Freedom Property Rights
Freedom from Corruption
Fiscal Freedom Government
Spending
Business Freedom Labor Freedom Monetary Freedom
Trade Freedom Investment Freedom Financial Freedom
Score Changes
Business Freedom Labor Freedom Monetary Freedom
REGULATORY EFFICIENCY
OPENMARKETS Trade Freedom Investment Freedom Financial Freedom
LIMITED
GOVERNMENT Fiscal Freedom Government Spending
RULE OF LAW Property Rights Freedom from Corruption
0 20 40 60 80 100
0 20 40 60 80 100
0 20 40 60 80 100
0 20 40 60 80 100
Country World Average Rank
RULE OF LAW LIMITED
GOVERNMENT REGULATORY
EFFICIENCY OPEN MARKETS 0
0
–1.1 –16.0
0 –2.7 +5.3
0 0 0 165th 165th
131st 109th
164th 165th 172nd
148th 154th 159th 10.0
20.0
71.4 60.1
38.7 36.3 56.5
63.0 20.0 20.0
THE TEN ECONOMIC FREEDOMS
Despite a recently adopted constitution, protection of property rights is hampered by dysfunc- tional public administration. Enforcement of the complex legal code is selective. Human rights abuses and banditry deter economic activity. A culture of corruption institutionalized during the 30-year tenure of former President Mobutu Sese Seko limits the state’s ability to fulfill essential obligations of government.
Despite recent efforts to modernize the regulatory framework, launching a business still takes more than the world averages of seven procedures and 30 days. Much of the workforce is employed in the agricultural sector, and informal labor activity is widespread. Many prices are controlled by the state. Inflation is likely to rise due to the central bank’s injection of millions in new banknotes into the economy to fight dollarization.
The trade-weighted average tariff rate is relatively high at 11 percent, and inefficient customs procedures constrain dynamic growth in trade. The investment regime, hampered by govern- ment controls, lacks transparency. The private sector suffers from inadequate access to credit, particularly long-term loans, and overall use of financial services is highly constrained. Credit to the private sector amounts to less than 10 percent of GDP.
The top income tax rate is 30 percent, and the top corporate tax rate is 40 percent. Other taxes include a rental tax and a tax on vehicles. The overall tax burden equals 18.9 percent of total domestic income. Tax enforcement is arbitrary. Government spending equals 36.5 percent of domestic output, and the budget deficit is over 6 percent of GDP. Much of the public debt was cancelled in 2010 under the Heavily Indebted Poor Countries Initiative.
DEmOCRATIC REPuBLIC OF CONGO
(continued)173 How Do We Measure Economic Freedom?
See page 477 for an explanation of the methodology
or visit the Index Web site at heritage.org/index. 2011 data unless otherwise noted.
Data compiled as of September 2012.
Quick Facts
population: 4.0 million gdp (ppp): $18.3 billion 4.5% growth in 2011
5-year compound annual growth 4.9%
$4,589 per capita unemployment: n/a inflation (cpi): 1.9%
fdi inflow: $2.9 billion public debt: 22.2%
Economic Freedom Score
Least Most free free
25 7550
0 100
0 20 40 60 80 100
Country Comparisons Freedom Trend
Country World Average Regional Average EconomiesFree
2009 2010 2011 2012 2013 42 43 44 45 46 47
43.5 59.6 53.7
84.5
43.5
T
he Republic of Congo’s economic freedom score is 43.5, making its economy the 167th freest in the 2013 Index.Its overall score is 0.3 point worse than than last year, with improved scores in monetary freedom and the control of pub- lic spending counterbalanced by a substantial loss in business freedom. Congo is ranked 42nd out of 46 countries in the Sub- Saharan Africa region, and its overall score is much lower than the global and regional averages.
The foundations of economic freedom are fragile and uneven- ly established across the country. Widespread corruption and poor protection of property rights discourage entrepreneur- ial activity, undermining prospects for long-term economic expansion. The rule of law is weak, and the judicial system remains susceptible to substantial political interference.
In other key policy areas, heavy state involvement in the lead- ing economic sectors has dampened private-sector dynamism and led to uneven economic development. The government restricts foreign investment to a few handpicked partners, and the underdeveloped financial system continues to limit potential entrepreneurs’ access to credit. Burdensome and opaque regulatory systems further hinder the development of a vibrant private sector.
backgRound: Congo has endured recurring coups since becoming independent in 1960. After seizing power in 1979, President Denis Sassou-Nguesso governed the country as a Marxist–Leninist state before moderating economic policy and allowing multi-party elections in 1992. Sassou-Nguesso lost the 1992 election to Pascal Lissouba. Then, backed by Angolan troops, he again seized power following a 1997 civil war, won a flawed 2002 election, and was re-elected in July 2009 in a slightly more open political environment. The 2003 and 2007 peace agreements with rebel groups have curtailed unrest in the Pool region, but many of the rebels have turned to banditry and criminality.
World Rank: