BAHRAIN has maintained its leading position among Arab countries as the freest economy in the Arab World, according to the 2023 Economic Freedom of the World report published by the Fraser Institute. Bahrain obtained full scores in nine indicators within the report, and was ranked 45th globally among 165 countries.
The index published in Economic Freedom of the World measures the degree to which the policies and institutions of countries are supportive of economic freedom. The cornerstones of economic freedom are personal choice, voluntary exchange, freedom to enter markets and compete, and security of the person and privately-owned property. Forty-five data points are used to construct a summary index, along with a Gender Legal Rights Adjustment to measure the extent to which women have the same level of economic freedom as men. The degree of economic freedom is measured in five broad areas.
Area 1: Size of Government—As government spending, taxation, and the size of government-controlled enterprises increase, government decision-making takes the place of individual choice and economic freedom is reduced.
Area 2: Legal System and Property Rights—Protection of persons and their rightfully acquired property is a central element of both economic freedom and civil society. Indeed, it is the most important function of government. If property is not secure, if individuals are not safe, if the judiciary is not impartial, or if the rule of law is undermined, then, again, economic freedom is reduced.
Area 3: Sound Money—Inflation erodes the value of rightfully earned wages and savings. Sound money is thus essential to protect property rights. When inflation is not only high but also volatile, it becomes difficult for individuals to plan for the future and thus use economic freedom effectively.
Area 4: Freedom to Trade Internationally—Freedom to exchange—in its broadest sense, buying, selling, making contracts, and so on—is the essence of economic freedom. And this freedom is reduced when government impediments to trade make it costly or even impossible to exchange with businesses and individuals in other nations.
Area 5: Regulation—Governments not only use a number of tools to limit the right to exchange internationally, they may also impose onerous regulations, domestically as well as on international trade, that limit the right to exchange, gain credit, hire or work for whomever one wishes, or freely operate one’s business. As these limits multiply, economic freedom decreases.
