The latest Economic Freedom of the World report issued by the Frazer Institute of Canada provides mixed results for the (Persian) Gulf Cooperation Council countries.
The UAE stands out for having achieved the fifth best standing worldwide, a ranking shared with the likes of Canada and only behind Hong Kong, Singapore, New Zealand and Switzerland. Some 159 economies are ranked in the report, and hence the UAE’s ranking says a great deal about its economic policies, Albawaba reported.
Dubai has established renown at the global level for being a free economy. Qatar is ranked 12th. The UAE and Qatar are ranked ahead of most European states and the US.
Bahrain is ranked 26th globally, certainly an outstanding performance for the smallest economy in the Persian Gulf Arab states. Oman emerges in the 59th position, considerably behind the UAE, Qatar and Bahrain. But the report grants positions of only 71 and 85 for Kuwait and Saudi Arabia.
The UAE’s economic strengths entail limited business regulation and freedom to engage freely in international trade. Bahrain receives high marks for labor market regulations, as an amended law grants migrant workers the right to change sponsors under certain conditions. These circumstances include failure by the sponsor to provide salaries for several months in a row.
Expatriates need to have sponsors to work but they have the right to change sponsors when contracts expire and without leaving the country.
Limitations on Economic Freedom
The report continues to regard Saudi Arabia as the least free among (P)GCC Arab countries, possibly because it relies on published data rather than carrying out field studies. Ostensibly, the report does not take into account economic changes sweeping the kingdom on the backdrop of Vision 2030.
New measures call for privatizing airports by seeking the involvement of investors, local and international. Plans are underway to develop major projects throughout the kingdom with the government providing oversight but not management of these.
The heavy involvement by the government, with its spending comprising a major component of GDP, places limitations on economic freedom throughout the Persian Gulf Arab states. This translates into private sector establishments competing with public sector entities for banking facilities.
This is changing in the ongoing environment of low oil prices, as the authorities seek to strengthen role of private sector investors. Oil prices remain low ever since mid-2014 with no end in sight.
Economic Slowdown
Saudi Arabia recently cancelled bonus payments for state employees and cut ministers’ salaries by 20%, steps that further spread the burden of shoring up public finances to a population accustomed to years of government largesse.
The government also decided to suspend wage increases for the lunar year starting next month and curbed allowances for public-sector employees.
The salaries of members of a legislative body that advises the monarchy were cut by 15%.
By curbing what many Saudis had for years taken for granted, the government is signaling a determination to reduce the highest budget deficit among the world’s 20 biggest economies amid low oil prices and a lingering war in neighboring Yemen.
The measures, however, risk deepening the kingdom’s economic slowdown by damaging consumer confidence.
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