Sunday, October 2, 2011

Fraser's Unfair Ranking Of GCC Economies

Strangely enough, the report provides no rankings whatsoever of Qatar and Saudi Arabia
By Jasim Ali
Abu Dhabi skyline
The Abu Dhabi skyline. GCC countries cannot afford to overlook international comparative studies which could help attract investment to the region.
The recently released Economic Freedom in the World 2011 issued by Fraser Institute provides unfair characteristics of Gulf Cooperation Council (GCC) economies. The Fraser Institute in based in Canada.
Strangely enough, the report provides no rankings whatsoever of Qatar and Saudi Arabia; in essence, one third of GCC member states are not included in the study. A simple logic for that is absence of a consistent amount of data on a sustained basis.
This is a regular problem in GCC countries, a practice that should come to an end one way or the other. The best way forward is for GCC countries to commit themselves to publishing statistics and reports on economic developments at certain dates of the year, with no intervention from the authorities for political purposes if only to ensure credibility. This is the practice in a number of Western countries.
Much to its credit, the report relies on a sizable number of variables or points; a total of 42 separate ones, in turn grouped into five broad areas. These are: 1) the size of government in terms of expenditures, taxes and enterprises; 2) the legal structure and notably property rights; 3) access to sound money; 4) the freedom to trade internationally; and 5) regulation of credit, labour and business.
However, one such shortcoming of the report is its reliance on 2009 statistics despite the fact that figures relating to the GCC's economic performance in 2010 are available. Also, it is fair to conclude that a great deal of subjectivity goes into assigning figures. So is the case because the study relies on secondary data rather than conducting actual field research. Use of secondary data is constrained by being generated for other purposes. One can hope that future reports need to be modified with regards to some of its basic assumptions, possibly relying on a lesser number of variables but ones supported with statistics for all reviewed economies.
The Economic Freedom in the World 2011 gives ranking numbers 11, 14, 28 and 47 for Bahrain, the UAE, Oman and Kuwait, respectively among 141 economies. Interestingly, the latest report ranks Bahrain as the freest Arab economy for eight years in a row, or since the inception of the first report in 2002. Probably, the researchers conveniently overlook evolving developments in GCC economies or just rely on past practices.
The suggestion that the level of economic freedom in the UAE compares unfavourably with Bahrain is a hard sell. Among others, the UAE is known for being uniquely open to international trade, with Dubai serving as the region's leading entry port for trade.
The UAE and Bahrain received ranking numbers 25 and 37 respectively in 2011-2012 version of the Global Competitiveness Index (GCI). Still, Bahrain's ranking is the worst among GCC countries after Kuwait. A primary problem for Bahrain is the limited size of its economy. The value of Bahrain's gross domestic product (GDP) amounts to nearly $22 billion (Dh80.8 billion), hence it is unpopular with some firms. By comparison, the UAE's GDP is valued around $268 billion.
The GCI forms an integral part of the Global Competitiveness Report 2011-2012, published by the World Economic Forum. Yet the same GCI gives ranking numbers 14 and 17 for Qatar and Saudi Arabia, respectively. As indicated above, these two GCC countries are not ranked in the latest Fraser Institute's report.
Nevertheless, GCC economies cannot afford overlooking international comparative studies with all their pluses and minuses. Undoubtedly, international investors consider such indexes while evaluating options for placement of their investments. In turn, foreign investments are needed to help address local economic challenges.
-This commentary was published in The Gulf News on 02/10/2011
-The writer is a Member of Parliament in Bahrain

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