Rwanda a top free economy - new report

Rwanda is among the most economically free economies in Africa, according to the latest Fraser Institute’s annual World Economic Freedom Report. The report released Tuesday measures economic freedom (levels of personal choice, ability to enter markets, security of privately owned property and rule of law) by analysing policies and institutions in 151 countries, including Hong Kong. In East Africa, Rwanda is the freest economy, with Uganda in second position. Rwanda also ranks second in Africa after Mauritius and 29th globally. The report’s unadjusted summary indicates that Rwanda improved its ranking from 2011 when it occupied 35th position. Five key parameters: size of government; legal system and property rights; sound money; freedom to trade internationally; and regulation, were taken into account in the report’s assessment of what constitutes economic freedom. Hannington Namara, the Country Manager of TradeMark East Africa, said that the report confirms Rwanda’s ever improving doing business environment. He noted that the ratings would even have been better had the authors of the report factored in latest statistics; because a lot has changed for the better since 2012. Namara, who was until recently the chief executive of the Private Sector Federation, said that ranking can be used to build confidence among investors who are still not aware of what Rwanda’s economy has to offer. The Minister of Justice and Attorney General, Johnston Busingye, agrees with Namara’s assessment, saying that a lot has indeed changed, especially in the legal system and property rights. “We have done many things – we reformed our system, our judiciary, our prosecution, our structures, our personnel, our education system, our approaches to criminal law, and we have improved demonstrably from 2004 after putting all these institutions in place,” Busingye said. The minister added: “No system is perfect in this world, but these things they say about interference or partiality are not true. We consistently build capacity to deliver as a truly independent and impartial justice system”. For Rwanda, no data was gathered on freedom to trade internationally, but with regard to size of government, the country has a score of 6.41 and ranked 64th in 2012. In the legal system and property rights category, it scored 3.71 and ranked number 104 globally while under sound money the country has a score of 8.82 and ranked number 58. The country is ranked third in regulation with a score of 8.79 out of 10. Size of government is about aspects such as government consumption, transfers and subsidies, government enterprises and investment and top marginal tax rates. The area of legal system and property rights is about independence of the judiciary, protection of property rights, military interference in rule of law and politics, and the integrity of the legal system, among others. Sound money considers issues such as money growth, standard deviation of inflation, and freedom to own foreign currency bank accounts. Regulation, on the other hand, looks into credit market, labour market, and business regulations, in general – including administrative requirements, bureaucracy costs, starting a business, and cost of tax compliance. Meanwhile, Kenya comes in 77th place, Tanzania in 94th while DR Congo and Burundi are locked near the bottom in 144th and 145th respectively. Hong Kong emerged the most economically free jurisdiction in the world. “The link between economic freedom and prosperity is undeniable. The most economically free countries offer the highest quality of life and personal freedoms while the lowest-ranked countries, are usually burdened by oppressive regimes that limit the freedom and opportunity of their citizens,” said Fred McMahon, Research Chair at the Economic Freedom with the Fraser Institute. According to the report, which is based on 2012, the top 10 most economically free jurisdictions are Hong Kong (which continues its streak of number one rankings), Singapore, New Zealand, Switzerland, Mauritius, United Arab Emirates, Canada, Australia, Jordan and (tied for 10th) Chile and Finland. The United States, once considered a stronghold of economic freedom, now ranks 12th in the world, tied with the United Kingdom. Michael Walker, Fraser Institute’s Senior Fellow and co-founder of the Economic Freedom of the World project, explained that the US suffered from weakened rule of law, the ramifications of wars on terrorism and drugs, and a confused regulatory environment. “Consequently, it’s dropped from second place in the world rankings in 2000 to 12th place this year, behind countries such as Jordan and the UAE,” he said. The 10 lowest-ranked countries are Myanmar, DR Congo, Burundi, Chad, Iran, Algeria, Argentina, Zimbabwe, Republic of Congo and Venezuela, which retains the title of the world’s least economically free country.

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Rwanda a top free economy - new report