Lebanon Receives Mixed Marks on World Economic Freedom Scale

By T.K.Maloy

Beirut: American think-tank report, The Heritage Foundation 2013 Index of Economic Freedom rated the Levant at 91st in terms of economic freedoms, out of the 177 countries included in this year’s report.

Of the 15 ranked countries in the Middle East/North Africa region, Lebanon and Morocco slid back into the “mostly unfree” group,” Heritage, a DC-based think tank, said in a release.

According to the report, Lebanon’s economic freedom score is 59.5, making its economy the 91st freest in this year’s tally. The report said that its score has decreased by 0.6 point since last year, mostly because of declines in property rights, business freedom, and labor freedom.

At least two Beirut financial experts had differing views on the report — one concurring and the other deeming it “overly pessimistic.”

Nassib Ghobril, Chief Economist for the Byblos Bank Group, said: “The prevailing lack of political will to implement structural reforms is a direct cause for Lebanon’s slide in economic freedoms both regionally and globally. The price of politicians’ and officials’ complacency and lack of accountability is that Lebanon, which is the oldest free-market economy in the Arab world, ranks currently so low in the region and has slipped into the “mostly unfree” category.”
Ghobril added that, “This is another negative for the perception of the Lebanese economy and its competitiveness. We should not be surprised at this outcome when the government does not implement reforms, monopolizes entire sectors, and allows the public sector to grow unchecked. This is just one of many global benchmarks where Lebanon’s ranking has slipped recently.”

Simon Neaime, AUB economics professor and Director the school’s Institute of Financial Economics, said he did not agree entirely with the report.

“I believe it is overly pessimistic. I do not agree with the assessment of some of the indices that have been used to asses economic freedom in Lebanon,” Neaime said. “Relative to other countries in the region, Lebanon I believe is doing much better (on economic freedom) than Jordan for example.”

Among the top criticisms in the Heritage report were problems with the Rule of Law category in Lebanon.

“The government-appointed prosecuting magistrate exerts considerable influence on judges. Trials, particularly of commercial cases, drag on for years. Lebanese law provides for some protection of intellectual property rights, but piracy remains a significant problem,” the report said.

Also, in its critique of Regulatory Efficiency, the report said there is little impetus toward entrepreneurship.
Heritage noted that completing licensing requirements takes more than 200 days and costs over three times the level of average annual income. Additionally bankruptcy procedures remain burdensome and costly.

On the plus side, under the Open Markets category, Lebanon was rated as “relatively open.”
The report noted: “The trade-weighted average tariff rate is 4.8 percent. The trade system is relatively open, and efforts to join the World Trade Organization are progressing ….The financial sector is relatively well developed for the region. The state retains no ownership in any commercial banks.”

Hong Kong topped the list for greatest amount of economic freedom – with a score of 89.3 – while the United States came in at tenth place this year.

Lowest at 177th was North Korea.
For more information: http://www.heritage.org/index/ranking