It should be noted that free-market capitalism, which is built on the principles of economic freedom, is not just preservation. Hayek foresaw decades ago: “The guiding principle in any effort to create a world of free people must be this: A policy of liberty for the individual is the only truly progressive policy.” The best path to prosperity is the path of freedom: letting individuals decide for themselves how best to achieve their dreams and aspirations and those of their families.
FOSTERING INCLUSIVE AND SUSTAINABLE GROWTH
WITH ECONOMIC FREEDOM COMES PROSPERITY AND
The evidence is overwhelming that any benefits from such strategies will be transitory at best. This is too high a price to pay for any short-term benefits such strategies may bring.
ECONOMIC FREEDOM
MORE THAN A GOOD BUSINESS ENVIRONMENT
AND MORE RAPID GROWTH
THE STRUGGLE CONTINUES
The fight for economic freedom is a fight against those who want to preserve special privileges for pedestrians. This is a recipe for economic freedom—and the opportunity to escape poverty and build lasting prosperity.
EXECUTIVE HIGHLIGHTS T he Index of Economic Freedom provides
KEY FINDINGS OF THE 2017 INDEX
THE GROWTH OF ECONOMIC FREEDOM
Of the 180 economies whose economic freedom has been assessed and ranked in the 2017 Index, only five (Hong Kong, Singapore, New Zealand, Switzerland and Australia) have maintained very high levels of free freedom. A total of 92 economies, just over half of the economies included in the 2017 Index, have earned the rating of moderately free.
THE INTANGIBLE BENEFITS OF ECONOMIC FREEDOM
WHAT’S NEW IN THE 2017 INDEX?
Presentation of Country Pages by Re- gion. The country pages in the 2017 Index
2017 INDEX OF ECONOMIC FREEDOM WORLD RANKINGS
Rijinal ranking Kɔntri Tɔtɔl skɔ Chenj frɔm 2016 Prɔpati rayt Ligal ɛfɛktiv Pɔblik intɛgriti Taks lod Pɔblik kɔnsɔmshɔn Fiskal wɛlbɔdi Biznɛs Fridɔm Leba Fridɔm Mɔni tary Fri tred Fridɔm Invɛstmɛnt Fridɔm Faynanshɛl fridɔm.
THE GROWTH AND IMPACT OF ECONOMIC FREEDOM
GAINS AND LOSSES
GLOBAL ECONOMIC FREEDOM SCORE
Of the 180 economies whose economic freedom was assessed and ranked in the 2017 Index, only five remained very high. At the opposite end of the spectrum, nearly half of the countries assessed in the Index – 88 economies – recorded economic freedom scores below 60.
REPRESSED MOSTLY
Seven developing countries (Fiji, Tonga, Indonesia, Swaziland, Kyrgyz Republic, Uganda and Bosnia and Herzegovina) have advanced to the ranks of "moderately free" and another 10 (Belarus, Democratic Republic of Congo, Solomon Islands, Laos, Burma) , Uzbekistan, Central African Republic, Kiribati, Iran and Argentina) have escaped the status of economically "oppressed". Despite the global progress recorded during the 23-year history of the Index, the number GLOBAL ECONOMIC FREEDOM IN 2017.
UNFREE MODERATELY
Notably, Macedonia and Armenia have joined the "mostly free" ranks, with Macedonia ranked "mostly free" for the first time ever and Armenia regaining a level of economic freedom not experienced since 2006. These economies provide institutional environments in which individuals and private enterprises benefit from at least a moderate degree of economic freedom in pursuit of greater competition, growth and prosperity.
ECONOMIC FREEDOM AND PER CAPITA INCOME
More than half of these people live in just two countries, China and India, where progress toward greater economic freedom has been limited and uneven. In the two most populous economies, structural reforms in a few key sectors have sometimes spurred growth, but governments have failed to institutionalize the open environments that foster broad-based and sustainable improvements in the economic well-being of the population as a whole. .
ECONOMIC FREEDOM AROUND THE GLOBE
THE PROVEN IMPACT OF ECONOMIC FREEDOM
Countries that allow private property rights protected by an effective legal system encourage more entrepreneurial initiative than countries that require collective or state ownership or control of economic resources. Policies that promote economic freedom, whether through improvements to the rule of law, promotion of efficiency and openness, or appropriate limits on the size and reach of government, therefore provide the environment that can best inspire people to develop practical solutions to economic and social challenges , which our world is facing.
AS ECONOMIC FREEDOM RISES, THE GLOBAL ECONOMY EXPANDS AND POVERTY FALLS
Open competition, facilitated by regulatory efficiency, promotes greater productivity and ensures a better organized allocation of resources than systems of central planning. Countries that practice some version of free-market capitalism, with economies open to global trade, investment and financial markets, fare better than those that are protectionist or that avoid economic relations with others.
ECONOMIC FREEDOM ALLEVIATES POVERTY
FACILITATES INNOVATION AND BETTER ENVIRONMENTAL
GREATER ECONOMIC
FREEDOM MEANS GREATER HUMAN DEVELOPMENT
ECONOMIC FREEDOM, INNOVATION, AND THE ENVIRONMENT
ECONOMIC FREEDOM ENSURES GREATER SOCIETAL PROGRESS
ECONOMIC FREEDOM AND SOCIAL PROGRESS
As shown in Figure 7, countries that embrace economic freedom to a greater degree have provided the institutional environments most conducive to societal progress. Countries that have improved their competitiveness and opened their societies to new ideas have largely achieved the high levels of societal progress that their citizens demand.
ADVANCING ECONOMIC FREEDOM: THE SOURCE
Not surprisingly, societies based on economic freedom are those that have shown the strongest social progress.
DEFINING ECONOMIC FREEDOM
A society that places equality – in the sense of equality of outcome – before freedom will end up with neither equality nor freedom. The use of force to achieve equality will destroy freedom, and force, introduced for good purposes, will end up in the hands of people who use it to promote their own interests.1.
MEASURING
Such restrictions, although sometimes imposed in the name of equality or some other seemingly noble societal purpose, are in fact most often imposed for the benefit of societal elites or special interests. The government's excessive intrusion into broad spheres of economic activity entails high costs for society as a whole.
RULE OF LAW
Unwavering government enforcement of private contracts is essential to guarantee equity and integrity in the marketplace. In the never-ending struggle to improve the human condition and achieve greater prosperity, an institutional commitment to maintaining and advancing judicial effectiveness is critical.
GOVERNMENT SIZE
Individual and corporate income tax rates are an important and direct limitation of an individual's economic freedom and are reflected in the index as such, but they are not a comprehensive measure of the tax burden. This cost is the value of the consumption or investment that would have occurred if the funds involved had remained in the private sector.
REGULATORY EFFICIENCY
Together, the cost, size, and intrusiveness of government is a central issue of economic freedom, which is measured in various ways in the index (see, for example, Tax Burden and Regulatory Effectiveness). This applies equally to the labor market and the goods market.
MARKET OPENNESS
ECONOMIC FREEDOM: A FORMULA FOR SUCCESS
ENDNOTE
ECONOMIC FREEDOM BY REGION AND COUNTRY
ECONOMIC FREEDOM: REGIONAL VARIATIONS (REGIONAL AVERAGE)
THE AMERICAS
THE AMERICAS: QUICK FACTS
THE AMERICAS T he countries of the Americas range from
AMERICAS
THE AMERICAS: ECONOMIC FREEDOM SUMMARY
REPRESSED 6
MOSTLY UNFREE
MODERATELY FREE 16
MOSTLY FREE 3
TOTAL 32 COUNTRIES
THE AMERICAS: GDP PER CAPITA, BY ECONOMIC FREEDOM CATEGORY
FREE MOSTLY FREE
THE AMERICAS: COMPONENTS OF ECONOMIC FREEDOM
OVERALL
GOVERNMENT SIZE
MARKET OPENNESS
NOTABLE COUNTRIES
ECONOMIC FREEDOM AND SOCIAL PROGRESS
ECONOMIC FREEDOM IN THE AMERICAS
ECONOMIC FREEDOM SCORE
MOSTLY UNFREE
ARGENTINA
REGULATORY EFFICIENCY OPEN MARKETS
12 ECONOMIC FREEDOMS | ARGENTINA ARGENTINA
MODERATELY FREE
THE BAHAMAS
Government spending has reached 23.3 percent of gross domestic product (GDP) over the past three years, and budget deficits have averaged 5.5 percent of GDP. Trade is important to the economy of the Bahamas; the value of exports and imports taken together is 93 percent of GDP.
12 ECONOMIC FREEDOMS | THE BAHAMAS THE B
Subsidies to the state-owned Bahamas Electricity Corporation and the Water and Sewerage Corporation continue to be a drag on government finances. Government finances are heavily dependent on tariffs, and the average applied tariff rate is 19.7 percent.
BARBADOS
Public expenditure has accounted for 45.1 percent of total output (GDP) over the past three years, and the budget deficit has averaged 9.1 percent of GDP. Public finances are heavily dependent on tariffs, and the average applied tariff rate is 13.9 percent.
12 ECONOMIC FREEDOMS | BARBADOS B ARB
The top income tax rate is 35 percent, and the top corporate tax rate is 25 percent. Trade is important to Barbados' economy; the value of exports and imports together is equal to 81 percent of GDP.
BELIZE
In the last three years, government spending amounted to 32.3 percent of total production (GDP), and budget deficits averaged 4.2 percent of GDP. The non-salary costs of hiring an employee are relatively low, and terminating an employment contract is not complicated.
12 ECONOMIC FREEDOMS | BELIZE BELIZE
Since 2009, Transparency International has not had access to sufficient data to include Belize in its annual Corruption Perceptions Index. The government maintains price controls on various products such as rice, sugar and flour and subsidizes the cost of electricity.
REPRESSED
BOLIVIA
Government spending has amounted to 41.2 percent of total output (GDP) over the past three years, and budget deficits have averaged 3.1 percent of GDP. Trade is important to Bolivia's economy; the value of exports and imports together is equal to 85 percent of GDP.
12 ECONOMIC FREEDOMS | BOLIVIA B OLIVIA
The business environment is burdened by red tape, corruption and inconsistent enforcement of commercial regulations. The cost of state subsidies for gasoline, diesel, kerosene, natural gas, liquefied petroleum gas, jet fuel and heating oil is nearly 8 percent of GDP.
BRAZIL
In the last three years, government spending amounted to 39.5 percent of total production (GDP), and budget deficits averaged 6.4 percent of GDP. The financial sector is diverse and competitive, but government involvement remains significant and public banks now account for more than 50 percent of all lending to the private sector.
12 ECONOMIC FREEDOMS | BRAZIL BRAZIL
Corruption scandals have undermined trust in both public and private institutions and contributed to Brazil's decline in the World Economic Forum's 2016 Global Competitiveness Index. The standard corporate rate is 15 percent, but other taxes, including a financial transaction tax, bring the effective rate to 34 percent.
MOSTLY FREE
CANADA
In the last three years, government spending amounted to 39.9 percent of total production (GDP), and budget deficits averaged 1.4 percent of GDP. Trade is important to the Canadian economy; the value of exports and imports together amounts to 65 percent of GDP.
12 ECONOMIC FREEDOMS | CANADA C ANAD
Many non-bank financial companies operate in a prudent business environment, and securities markets are well developed.
CHILE
In the last three years, government spending amounted to 24.3 percent of total production (GDP), and budget deficits averaged 1.4 percent of GDP. Trade is important to Chile's economy; the value of exports and imports together amounts to 60 percent of GDP.
12 ECONOMIC FREEDOMS | CHILE CHILE
The top individual income tax rate has been cut to 35 percent, but the top corporate tax rate has risen to 25 percent. The financial system remains one of the region's most stable and developed, and foreign and domestic banks compete on an equal footing.
COLOMBIA
Public expenditure has accounted for 29.3 percent of total output (GDP) over the past three years, and the budget deficit has averaged 1.8 percent of GDP. Trade is moderately important to Colombia's economy; the value of exports and imports together equals 39 percent of GDP.
12 ECONOMIC FREEDOMS | COLOMBIA C OL
Drug trafficking and the violence and corruption it causes continue to erode institutions. The top income tax rate is 33 percent, and the top corporate tax rate is 25 percent.
COSTA RICA
Government expenditures amounted to 19.6 percent of total output (GDP) over the past three years, and budget deficits averaged 5.8 percent of GDP. Trade is important to Costa Rica's economy; the value of exports and imports together equals 72 percent of GDP.
12 ECONOMIC FREEDOMS | COSTA RICA C O S
The top personal income tax rate is 25 percent, and the top corporate tax rate is 30 percent. Banking remains dominated by state-owned institutions, but they have ceded a significant market share to private sector banks.
CUBA
Government expenditures amounted to 63.3 percent of total output (GDP) over the past three years, and budget deficits averaged 3.2 percent of GDP. Trade is only moderately important to the Cuban economy; the value of exports and imports together equals 26.4 percent of GDP.
12 ECONOMIC FREEDOMS | CUBA CUB
Corruption is a serious problem, with widespread illegality permeating both the limited private enterprise and the large state-owned economy. The top individual income tax rate is 50 percent, and the top corporate tax rate is 30 percent.
DOMINICA
Government expenditures amounted to 32.9 percent of total output (GDP) over the past three years, and budget deficits averaged 2.9 percent of GDP. Trade is important to Dominica's economy; the value of exports and imports together equals 81 percent of GDP.
12 ECONOMIC FREEDOMS | DOMINICA DOMINIC
The top individual income tax rate is 35 percent and the top corporate tax rate is 30 percent. Dominica has made progress in eliminating regulatory barriers and reducing the overall cost of doing business.
DOMINICAN REPUBLIC
Government spending has amounted to 18.1 percent of total output (GDP) over the past three years, and budget deficits have averaged 2.2 percent of GDP. The cost of completing licensing requirements has been reduced, and the process of starting a business has been streamlined.
12 ECONOMIC FREEDOMS | DOMINICAN REPUBLIC
The Medina government still finances electricity subsidies estimated at about 2 percent of GDP, and has yet to make progress with reforms in the energy sector. Trade is important to the Dominican Republic's economy; the value of exports and imports together equals 54 percent of GDP.
ECUADOR
Government expenditures amounted to 42.4 percent of total output (GDP) over the past three years, and budget deficits averaged 5.1 percent of GDP. Trade is of reasonable importance to Ecuador's economy; the value of exports and imports together equals 45 percent of GDP.
12 ECONOMIC FREEDOMS | ECUADOR ECU
The top personal income tax rate is 35 percent and the corporate income tax rate is 22 percent. The number of non-performing loans has increased and state interference in the banking system has increased.
EL SALVADOR
Trade is important to El Salvador's economy; the value of exports and imports together equals 68 percent of GDP. The banking sector is highly concentrated: four private banks account for more than 70 percent of total assets.
12 ECONOMIC FREEDOMS | EL SALVADOR EL S AL
In the last three years, government spending amounted to 21.7 percent of total production (GDP), and budget deficits averaged 3.4 percent of GDP. In its report on El Salvador's fiscal deficit in 2016, the IMF noted the government's failure to reform poorly targeted subsidies, particularly for electricity, liquefied petroleum gas and transportation.
GUATEMALA
Government spending has been 13.1 percent of total output (GDP) over the past three years, and budget deficits have averaged 1.8 percent of GDP. Trade is important to Guatemala's economy; the value of exports and imports together is equal to 51 percent of GDP.
12 ECONOMIC FREEDOMS | GUATEMALA GU A
GUYANA
The top personal income tax rate is 33.3 percent and the top corporate tax rate is 40 percent. Public expenditure has accounted for 30.1 percent of total output (GDP) over the past three years, and the budget deficit has averaged 3.0 percent of GDP.
12 ECONOMIC FREEDOMS | GUYANA GUY
Guyana's property law system is overly bureaucratic and complex, with regulations that are overlapping and competing, overloaded and opaque. The legal system is generally seen as slow and ineffective in enforcing contracts or resolving disputes.
HAITI
Public expenditure has accounted for 25.2 percent of total output (GDP) over the past three years, and the budget deficit has averaged 5.4 percent of GDP. Trade is important to Haiti's economy; the value of exports and imports together equals 70 percent of GDP.
12 ECONOMIC FREEDOMS | HAITI HAITI
The justice system functions poorly due to an outdated criminal and penal code, opaque court procedures, lack of judicial oversight, and widespread corruption in the judiciary. Many economic transactions are carried out outside the formal banking sector, and scarce access to finance severely hampers entrepreneurial activity.
HONDURAS
Public expenditure has accounted for 29.1 percent of total output (GDP) over the past three years, and the budget deficit has averaged 4.4 percent of GDP. Trade is extremely important to the Honduran economy; the value of exports and imports together equals 109 percent of GDP.
12 ECONOMIC FREEDOMS | HONDURAS HONDURA
Resolution of title disputes in court often takes years, partly due to the weakness of the legal system. The top individual income and corporate tax rates are 25 percent (27.5 percent for corporations with an additional social contribution tax).
JAMAICA
Public expenditure has accounted for 27.4 percent of total output (GDP) over the past three years, and the budget deficit has averaged 0.3 percent of GDP. Trade is important to Jamaica's economy; the value of exports and imports together equals 77 percent of GDP.
12 ECONOMIC FREEDOMS | JAMAICA JAMAIC A
An ineffective legal system undermines the security of property rights and the rule of law. The entire process for obtaining permits and setting up a business has been simplified, and enforcement of the commercial code is relatively strong.
MEXICO
Government spending has amounted to 27.9 percent of total output (GDP) over the past three years, and budget deficits have averaged 4.1 percent of GDP. Trade is important to Mexico's economy; the value of exports and imports together is equal to 73 percent of GDP.
12 ECONOMIC FREEDOMS | MEXICO MEXIC O
The top individual income tax rate is 35 percent and the corporate tax rate is 30 percent. Mexico did not enforce formal price controls in mid-2016, although the government did issue price recommendations for drugs.
NICARAGUA
Government expenditures amounted to 25.3 percent of total output (GDP) over the past three years, and budget deficits averaged 1.1 percent of GDP. Trade is important to Nicaragua's economy; the value of exports and imports together equals 93 percent of GDP.
12 ECONOMIC FREEDOMS | NICARAGUA NIC ARA
The authoritarian and unfinished rule of President Daniel Ortega and his family is the greatest threat to the rule of law. The judicial and regulatory systems hinder foreign investment, and state-owned enterprises distort the economy.
PANAMA
In the last three years, government spending amounted to 23.8 percent of total production (GDP), and the budget deficit averaged 2.7 percent of GDP. Trade is extremely important to the Panamanian economy; the value of exports and imports together amounts to 115 percent of GDP.
12 ECONOMIC FREEDOMS | PANAMA P ANAMA
The overall freedom to form and run a business is relatively well protected within an effective regulatory environment. The labor market lacks flexibility and the unpaid costs of hiring a worker are relatively high.
PARAGUAY
Government spending has been 23.8 percent of total output (GDP) over the past three years, and budget deficits have averaged 1.5 percent of GDP. Trade is important to Paraguay's economy; the value of exports and imports together is equal to 82 percent of GDP.
12 ECONOMIC FREEDOMS | PARAGUAY P ARA
Officials at all levels of government, the judiciary and the police often engage in corrupt practices with impunity, especially in the Ciudad del Este area. Financial intermediation has been gradually improving as credit to the private sector has increased and the number of non-performing loans has decreased.
PERU
The top personal income tax rate is 30 percent and the top corporate tax rate is 28 percent. Public expenditure has accounted for 22.3 percent of total output (GDP) over the past three years, and the budget deficit has averaged 0.6 percent of GDP.
12 ECONOMIC FREEDOMS | PERU PERU
Corruption is a serious problem in government, security forces, the judiciary, customs agencies and ports, as well as in local governments, where the influence of drug traffickers has increased. Most price controls had been eliminated since mid-2016, except for the regulation of tariffs set by private companies in telecommunications, energy and mining, public transport and sanitation services.
SAINT LUCIA
Saint Lucia has one of the lowest corruption rates in the West Indies, but enforcement of anti-corruption laws is not always effective. Trade is important to the economy of Saint Lucia; the value of exports and imports together amounts to 95 percent of GDP.
12 ECONOMIC FREEDOMS | SAINT LUCIA S AINT L
Saint Lucia has an extensive legislative framework to protect property rights, although enforcement of intellectual property rights is generally weak. Government spending has reached 30.7 percent of gross domestic product (GDP) over the past three years, and the budget deficit has averaged 4.5 percent of GDP.
SAINT VINCENT AND THE GRENADINES
Saint Vincent and the Grenadines' relatively independent and effective legal system, based on English common law, protects property rights and enforces contracts. Public expenditure has accounted for 30.7 percent of total output (GDP) over the past three years, and the budget deficit has averaged 3.7 percent of GDP.
12 ECONOMIC FREEDOMS | SAINT VINCENT AND THE GRENADINES
In 2015, the IMF estimated that limiting subsidies and transfers to state-owned enterprises would save more than 3 percent of GDP in the period 2015-2019. Trade is important to the economy of Saint Vincent and the Grenadines; the value of exports and imports together amounts to 78 percent of GDP.
SURINAME
Government spending has reached 31.8 percent of gross domestic product (GDP) over the past three years, and budget deficits have averaged 8.1 percent of GDP. Trade is important to Suriname's economy; the value of exports and imports taken together is 91 percent of GDP.
12 ECONOMIC FREEDOMS | SURINAME SURINAME
The trial of Suriname's president for the 1982 killing of political opponents was cleared to resume in 2016 after a military court invalidated an amnesty law. The top personal income tax rate is 38 percent, and the top corporate tax rate is 36 percent.
TRINIDAD AND TOBAGO
Government expenditures amounted to 37.6 percent of total output (GDP) over the past three years, and budget deficits averaged 5.2 percent of GDP. Trade is important to the economy of Trinidad and Tobago; the value of exports and imports together equals 60 percent of GDP.
12 ECONOMIC FREEDOMS | TRINIDAD AND TOBAGO
Rising crime rates and very high levels of violent crime, much of it drug-related, have led to delays in the justice system. The quality of the bureaucracy remains relatively poor and drug-related graft is endemic in the police force.
UNITED STATES
Government spending at all levels has reached 38.3 percent of gross domestic product (GDP) over the past three years, and federal budget deficits have averaged 4.1 percent of GDP. Trade is moderately important to the United States economy; the value of exports and imports taken together is 28 percent of GDP.
12 ECONOMIC FREEDOMS | UNITED STATES UNITED S
The Pew Research Center reported in late 2015 that only 19 percent of Americans always or most of the time trust the government. The entire financial sector remains competitive, but the banking sector remains vulnerable to the uncertainty and bureaucratic interference associated with the 2,300-page Dodd–.
URUGUAY
Government expenditures amounted to 31.9 percent of total output (GDP) over the past three years, and budget deficits averaged 3.1 percent of GDP. Trade is of reasonable importance to Uruguay's economy; the value of exports and imports together equals 45 percent of GDP.
12 ECONOMIC FREEDOMS | URUGUAY URUGU
The government has eliminated most price controls, but it continues to regulate prices for electricity, fuel, interstate transportation, medicine, natural gas, pasteurized milk, taxi fares, tolls, and water. Although the financial sector continues to evolve, capital markets are underdeveloped and concentrated in government debt.
VENEZUELA
Government spending has reached 40.2 percent of gross domestic product (GDP) over the past three years, and budget deficits have averaged 16.1 percent of GDP. Trade is moderately important to Venezuela's economy; the value of exports and imports taken together is 37 percent of GDP.
12 ECONOMIC FREEDOMS | VENEZUELA VENEZUELA
Both the top income tax rate and the top corporate tax rate are 34 percent.
ASIA-PACIFIC
ASIA-PACIFIC: QUICK FACTS
ASIA–PACIFIC T he Asia–Pacific region spans the world’s
Nevertheless, the foundations of economic freedom remain fragile in both countries, with reforms often blocked by those with a political interest in. As shown in Figure 3, it is clear that greater economic freedom is also strongly correlated. ed with overall well-being, which takes into account factors such as health, education, safety and personal freedom.
ASIA-PACIFIC: ECONOMIC FREEDOM SUMMARY
REPRESSED 4
MODERATELY FREE 11
MOSTLY FREE
TOTAL 43 COUNTRIES
ASIA-PACIFIC: GDP PER CAPITA, BY ECONOMIC FREEDOM CATEGORY
ASIA-PACIFIC: COMPONENTS OF ECONOMIC FREEDOM
ECONOMIC FREEDOM AND OVERALL WELL-BEING
ECONOMIC FREEDOM IN ASIA-PACIFIC
AFGHANISTAN
Government expenditures amounted to 26.4 percent of total output (GDP) over the past three years, and budget deficits averaged 1.3 percent of GDP. Trade is important to the Afghan economy; the value of exports and imports together equals 53 percent of GDP.
12 ECONOMIC FREEDOMS | AFGHANISTAN
Property rights protection is weak due to the lack of a comprehensive land tenure system, contentious land titles and the incapacity of commercial courts. Due to the serious underdevelopment of the Afghan financial system, the government has very limited influence over monetary policy.
FREE
AUSTRALIA
Australia's regulatory environment is one of the most transparent and efficient in the world and is highly conducive to entrepreneurship. Trade is moderately important to Australia's economy; the value of exports and imports together equals 41 percent of GDP.
12 ECONOMIC FREEDOMS | AUSTRALIA
Australia's stable political environment supports transparent and well-established political processes, a strong legal system, competent governance and an independent bureaucracy. Public consumption has accounted for 37 percent of total production (GDP) over the past three years, and the budget deficit has averaged 2.8 percent of GDP.
AZERBAIJAN
Government spending has amounted to 37.6 percent of total output (GDP) over the past three years, and budget surpluses have averaged 0.3 percent of GDP. Trade is important to Azerbaijan's economy; the value of exports and imports together is equal to 73 percent of GDP.
12 ECONOMIC FREEDOMS | AZERBAIJAN
The top income tax rate is 25 percent, and the top corporate tax rate is 20 percent. The average applied tariff rate is 5.3 percent, and bureaucratic and regulatory barriers hinder international trade and investment.
BANGLADESH
Government spending has been 14.1 percent of total output (GDP) over the past three years, and budget deficits have averaged 3.4 percent of GDP. Trade is moderately important to Bangladesh's economy; the value of exports and imports together is equal to 42 percent of GDP.
12 ECONOMIC FREEDOMS | BANGLADESH
The top income tax rate is 25 percent, and the top corporate tax rate is 45 percent. The average applied tariff rate is 10.7 percent, and the government has taken steps to reduce bureaucratic barriers to trade and investment.
BHUTAN
The law provides criminal penalties for corruption by officials, and the government generally enforces those laws effectively, although there are isolated reports of government corruption. Government spending has reached 29.6 percent of gross domestic product (GDP) over the past three years, and the budget deficit has averaged 3.4 percent of GDP.
12 ECONOMIC FREEDOMS | BHUTAN
Since 2007, Bhutan has moved decisively towards a rule of law based on justice, and its judiciary is now widely regarded as independent. India supplies subsidized LPG and kerosene to Bhutan and co-finances many hydroelectric projects.
BRUNEI
Government spending has reached 36 percent of gross domestic product (GDP) over the past three years, and budget surpluses have averaged 1.9 percent of GDP. The government provides huge price-distorting subsidies for almost everything the average citizen needs (for example, fuel, energy, food, health care, and education).
12 ECONOMIC FREEDOMS | BRUNEI
In 2016, the government slowed the planned full implementation of Sharia (Islamic) law because it could jeopardize Brunei's entry into the Trans-Pacific Partnership trade pact. The registration requirements for starting a business have been simplified, and a one-stop shop now facilitates the overall operation of small and medium-sized businesses.
BURMA
Government expenditures amounted to 24.8 percent of total output (GDP) over the past three years, and budget deficits averaged 2.2 percent of GDP. The government plans to make public spending more efficient, improve budget transparency and privatize a number of loss-making state-owned enterprises.
12 ECONOMIC FREEDOMS | BURMA
The top individual income tax rate is 20 percent and the top corporate tax rate is 30 percent. Several sectors, including land ownership, are closed to foreign investment, and state-owned enterprises significantly disrupt the economy.
CAMBODIA
In the last three years, government spending amounted to 19.9 percent of total production (GDP), and budget deficits averaged 1.1 percent of GDP. Trade is extremely important to the Cambodian economy; the value of exports and imports together amounts to 142 percent of GDP.
12 ECONOMIC FREEDOMS | CAMBODIA
In 2016, drought conditions led the government to impose de facto subsidies by exempting agricultural products from value added tax. The bank has become more market-oriented and credit to the private sector has increased.
CHINA
Overall, trade is only moderately important to China's economy; the value of exports and imports together equals 41 percent of GDP. Several state-owned companies distort the economy, and the state maintains its tight grip on the financial system.
12 ECONOMIC FREEDOMS | CHINA
The top personal income tax rate is 45 percent, and the top corporate tax rate is 25 percent. Government spending has reached 30 percent of gross domestic product (GDP) over the past three years, and the budget deficit has averaged 1.5 percent of GDP.
FIJI
Government spending has amounted to 30.3 percent of total output (GDP) over the past three years, and budget deficits have averaged 2.7 percent of GDP. Trade is extremely important to Fiji's economy; the value of exports and imports together is equal to 137 percent of GDP.
12 ECONOMIC FREEDOMS | FIJI
The parliamentary opposition is pushing for more transparent governance, but the government's heavy-handed tactics seriously undermine democratic accountability. The government budget for the fiscal year 2016-2017 included subsidies on imported construction materials for the reconstruction of roads, bridges, water supplies, sanitation and rural electrification after the cyclone.
HONG KONG
Private ownership of property is enshrined in the Basic Law, which is Hong Kong's constitution. Trade is extremely important to Hong Kong's economy; the value of exports and imports combined is equal to 400 percent of GDP.
12 ECONOMIC FREEDOMS | HONG KONG
The judiciary is independent, but Beijing reserves the right to make final interpretations of the Basic Law, effectively limiting the power of Hong Kong's Court of Final Appeal. Hong Kong has very few price controls, but does fund some subsidies and regulate housing rents and telecommunications, public transport and electricity prices.
INDIA
In the last three years, government spending amounted to 27.4 percent of total production (GDP), and budget deficits averaged 7.3 percent of GDP. Although the IMF reported in 2016 that India's "major subsidies" (eg for fuel and fertilizers) had fallen below 2 percent of GDP, the government is introducing a new subsidy for staple foods for about two-thirds of the population.
12 ECONOMIC FREEDOMS | INDIA
Labor laws continue to evolve and the informal economy is an important source of employment. Despite some liberalization and modernization, state-owned institutions dominate the banking sector and capital markets.
INDONESIA
Government spending has reached 18.4 percent of gross domestic product (GDP) over the past three years, and the budget deficit has averaged 2.3 percent of GDP. Trade is moderately important to Indonesia's economy; the value of exports and imports taken together is 42 percent of GDP.
12 ECONOMIC FREEDOMS | INDONESIA
The top individual income tax rate is 30 percent, and the top corporate tax rate is 25 percent. Indonesia's overall regulatory environment has improved over the years, but more commitment to reform is needed to promote private investment and increase job opportunities.
JAPAN
The highest corporate tax rate is 23.9 percent, which local taxes and corporation tax can increase significantly. Government spending has reached 39.9 percent of gross domestic product (GDP) over the past three years, and budget deficits have averaged 6.6 percent of GDP.
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The government continued its efforts to reduce institutionalized agricultural subsidies and to liberalize electricity markets. Many agricultural imports are restricted and foreign investment in some sectors of the economy is screened by the government.
KAZAKHSTAN
Government expenditures amounted to 21.8 percent of total output (GDP) over the past three years, and budget surpluses averaged 0.5 percent of GDP. Trade is important to Kazakhstan's economy; the value of exports and imports together equals 53 percent of GDP.
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The flat personal income tax rate is 10 percent and the standard corporate tax rate is 20 percent. Kazakhstan is subsidizing renewable energy with the goal of meeting 10 percent of its renewable energy needs by 2030.
KIRIBATI
Public expenditure has accounted for 94.9 percent of total output (GDP) over the past three years, and budget surpluses have averaged 9.4 percent of GDP. The inflow of development assistance and aid amounts to a whopping 25 percent of GDP.
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The court system is modeled on English common law and provides due process rights, but the rule of law remains uneven across the country. Foreign investors may not own land, and investment in other sectors of the economy is controlled by the government.
NORTH KOREA
Bribery is ubiquitous and corruption is endemic at every level of the state and economy. The ruling Workers' Party, the Korean People's Army and members of the cabinet run businesses that compete to earn foreign exchange.
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Government control even extends to movable property (domestic manufactured goods and all imports and exports). The government sets production levels for most products, and state ownership accounts for almost all of GDP.
SOUTH KOREA
In the last three years, government spending amounted to 32.2 percent of total output (GDP), and budget surpluses averaged 0.3 percent of GDP. Trade is important to the South Korean economy; the value of exports and imports together amounts to 85 percent of GDP.
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Despite the government's anti-corruption efforts, encounters with graft, influence peddling and extortion continue to occur. The government subsidizes rice farmers and imposes price controls on items including fuel, rice and electricity.
KYRGYZ REPUBLIC
Government expenditures amounted to 38.7 percent of total output (GDP) over the past three years, and budget deficits averaged 2.7 percent of GDP. In 2016, the government told the IMF that it plans to cut subsidies and transfers to 3 percent of GDP.
12 ECONOMIC FREEDOMS | KYRGYZ REPUBLIC
The overall regulatory environment is still hampered by bureaucratic barriers to private sector production and investment. Trade is extremely important to the economy of the Kyrgyz Republic; the value of exports and imports taken together is 125 percent of GDP.
LAOS
Public expenditure has accounted for 27.9 percent of total output (GDP) over the past three years, and the budget deficit has averaged 4.4 percent of GDP. To promote its socialist "state-controlled market-oriented economy", the government influences many prices through subsidies and state-owned enterprises, especially in the hydropower and mining sectors.
12 ECONOMIC FREEDOMS | LAOS
Several anti-corruption laws have been passed, but enforcement remains weak and no high-profile cases have been brought to trial. Trade is important to Laos' economy; the value of exports and imports taken together is 79 percent of GDP.
MACAU
The top personal income tax rate is 12 percent and the top corporate income tax rate is 39 percent. Government expenditures amounted to 15.5 percent of total output (GDP) over the past three years, and budget surpluses averaged 21.4 percent of GDP.
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The overall regulatory environment is relatively transparent and efficient, with license requirements varying by type of economic activity. There are few non-tariff barriers to trade and Macau is relatively open to foreign investment.
MALAYSIA
Government spending has been 25.8 percent of total output (GDP) over the past three years, and budget deficits have averaged 3.2 percent of GDP. Trade is extremely important to Malaysia's economy; the value of exports and imports together is equal to 134 percent of GDP.
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A multi-billion dollar corruption scandal involving the Prime Minister has dominated the headlines in the past year. Banking supervision has been strengthened and measures to liberalize the capital markets have progressed.
MALDIVES
Government spending has reached 40.2 percent of gross domestic product (GDP) over the past three years, and budget deficits have averaged 8.6 percent of GDP. Trade is extremely important to the Maldivian economy; the value of exports and imports taken together is 201 percent of GDP.
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Property rights are generally weak; most of the land is owned by the government and then leased to private landlords or developers. As the government faces an overall budget deficit of over 8 percent of GDP in 2016, the IMF recommended that it find better ways to target welfare and food subsidies and eliminate electricity subsidies.
MICRONESIA
Public expenditure has accounted for 60.2 percent of total output (GDP) over the past three years, and budget surpluses have averaged 5.7 percent of GDP. Trade is important to Micronesia's economy; the value of exports and imports together equals 78 percent of GDP.
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The government generally respects the constitutionally independent judiciary, but the justice system is chronically underfunded and subject to political influence. Given the poor development of the physical and regulatory infrastructure, establishing or operating private companies is not easy.
MONGOLIA
Government expenditures amounted to 37.6 percent of total output (GDP) over the past three years, and budget deficits averaged 9.4 percent of GDP. Trade is important to Mongolia's economy; the value of exports and imports together equals 87 percent of GDP.
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The income tax rate is a flat 10 percent, and the highest corporate income tax rate is 25 percent. Judicial and regulatory systems hinder foreign investment, and state-owned enterprises distort the economy.
NEPAL
In the last three years, government spending amounted to 18.7 percent of total output (GDP), and budget surpluses averaged 1.5 percent of GDP. Trade is important to Nepal's economy; the value of exports and imports together amounts to 53 percent of GDP.
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The law provides for an independent judiciary, but the courts remain vulnerable to political pressure, bribery and intimidation. Despite some progress in streamlining the process of starting a business, other time-consuming requirements reduce the effectiveness of the regulatory system.
NEW ZEALAND
Government expenditures amounted to 42.2 percent of total output (GDP) over the past three years, and budget deficits averaged 0.5 percent of GDP. Trade is important to New Zealand's economy; the value of exports and imports together equals 55 percent of GDP.
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The top income tax rate is 33 percent, and the top corporate tax rate is 28 percent.
PAKISTAN
Government spending has been 20.6 percent of total output (GDP) over the past three years, and budget deficits have averaged 6.2 percent of GDP. The IMF has praised Pakistan for significant progress in reducing unintended energy subsidies from 2.3 percent of GDP in FY 2011–2012 to a budgeted 0.4 percent for FY 2015–2016, but also says additional cuts are needed.
12 ECONOMIC FREEDOMS | PAKISTAN
The top personal income tax rate is 30 percent, and the top corporate tax rate is 33 percent. Trade is moderately important to Pakistan's economy; the value of exports and imports taken together is 28 percent of GDP.
PAPUA NEW GUINEA
Government expenditures amounted to 34.4 percent of total output (GDP) over the past three years, and budget deficits averaged 7.6 percent of GDP. Trade is important to Papua New Guinea's economy; the value of exports and imports together equals 57 percent of GDP.
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The top individual income tax rate is 42 percent, and the top corporate tax rate is 30 percent. Heavily subsidized state-owned enterprises provide substandard services for energy, water, banking, telecommunications, air travel and seaports.
THE PHILIPPINES
In the last three years, government spending amounted to 18.8 percent of total production (GDP), and budget surpluses averaged 0.4 percent of GDP. Trade is important to the Philippine economy; the value of exports and imports together amounts to 61 percent of GDP.
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The top individual income tax rate is 32 percent, and the top corporate tax rate is 30 percent. Gradual improvement of the business regulatory environment includes reducing the time and costs associated with complying with licensing requirements.
SAMOA
The non-salary costs of employing a worker are not expensive, but the formal labor market is not fully developed. Trade is important to Samoa's economy; the value of exports and imports together is equal to 78 percent of GDP.
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Government spending has amounted to 40 percent of total output (GDP) over the past three years, and budget deficits have averaged 4.1 percent of GDP. The application of commercial codes is not always straightforward, and bureaucratic uncertainty continues to hinder the emergence of a vibrant private sector.
SINGAPORE
Public expenditure has accounted for 18.2 percent of total output (GDP) over the past three years, and budget surpluses have averaged 3.3 percent of GDP. Trade is extremely important to Singapore's economy; the value of exports and imports together equals 326 percent of GDP.
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Singapore is one of the world's least corrupt countries, although the power of deeply entrenched political elites remains a concern. The average applied tariff rate is 0.0 percent, and most sectors of the economy are open to foreign investment.
SOLOMON ISLANDS
In the last three years, government spending amounted to 46.8 percent of total production (GDP), and budget surpluses averaged 1.9 percent of GDP. Trade is important to the Solomon Islands economy; the value of exports and imports together amounts to 98 percent of GDP.
12 ECONOMIC FREEDOMS | SOLOMON ISLANDS
The top personal income tax rate is 40 percent and the top corporate tax rate is 30 percent. About a third of total public spending subsidizes infrastructure development projects, many of which are financed by international donors.
SRI LANKA
Government spending has been 18.1 percent of total output (GDP) over the past three years, and budget deficits have averaged 6.0 percent of GDP. Trade is moderately important to Sri Lanka's economy; the value of exports and imports together is equal to 48 percent of GDP.
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In 2016, the IMF recommended that the government phase out some of its extensive systems of price controls and subsidies that distort most sectors of the economy. Investments in some sectors of the economy are limited, and state-owned enterprises distort the economy.
TAIWAN
Public expenditure has accounted for 18.7 percent of total output (GDP) over the past three years, and the budget deficit has averaged 2.9 percent of GDP. The financial sector continues to develop and the stock market is generally open to foreign participation.
12 ECONOMIC FREEDOMS | TAIWAN
The overall freedom to conduct business is relatively well protected in the transparent regulatory environment. Taiwan's law mandates price controls for electricity and salt, and the government regulates prices for fuels and pharmaceuticals.
TAJIKISTAN
The government influences prices through regulation and large subsidies to numerous state-owned and state-owned trading companies. Continued government interference and the limited capacity of the financial sector are serious obstacles to private sector development.
12 ECONOMIC FREEDOMS | TAJIKISTAN
Government spending has amounted to 29.4 percent of total output (GDP) over the past three years, and budget deficits have averaged 1.0 percent of GDP. Trade is important to Tajikistan's economy; the value of exports and imports together is equal to 55 percent of GDP.
THAILAND
In the last three years, government spending amounted to 22.2 percent of total production (GDP), and budget deficits averaged 0.1 percent of GDP. Trade is extremely important to the Thai economy; the value of exports and imports together amounts to 132 percent of GDP.
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The independent judiciary has generally been effective in enforcing property and contractual rights, but has been criticized for political bias. The top personal income tax rate is 35 percent, and the top corporate tax rate is 20 percent.
TIMOR-LESTE
Government spending has risen to more than 50 percent of total output (GDP) over the past three years, and budget deficits average 46.6 percent of GDP. Trade is extremely important to East Timor's economy; the value of exports and imports together equals 111 percent of GDP.
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