What does it actually mean to be grouped among the 'mostly unfree' countries in an international survey on economic freedom? It is customary that Bangladesh figures prominently, albeit from the bottom, in many of the surveys conducted on the basis of a host of economic and social parameters. So labelling it 'unfree economically' may not apparently sound too severe to attract serious attention, given its not-too-pleasant state of economic and financial governance.
One of the less publicised surveys done on a global basis is the 'Economic Freedom Index'. According to the survey, conducted by the Washington-based Heritage Foundation and The Wall Street Journal, Bangladesh's economic freedom score is 53.9, and the country is ranked 131st among 186 countries. Although there has been slight improvement in areas such as labour, productivity and monetary indicators, the country continues to languish as one of the most unfree ones, not only globally, but in the Asia-Pacific region also, where the country is ranked 27th among 42 countries.
For over 20 years the Heritage Foundation, in partnership with The Wall Street Journal, has been tracking the state of economic freedom, measured broadly in terms of economic opportunity and prosperity around the world with its Index of Economic Freedom. There is nothing unique as parameters in the index. The survey indicators are designed to reflect the state of a country keeping in view all relevant factors and their inter-relationship. The ideals of economic freedom are strongly associated with healthier societies, cleaner environments, greater per capita wealth, human development, governance and democracy, and poverty elimination. Assessment of economic freedom, according to the survey guideline, is dependent on the degree to which people in a society are capable of upholding their rights to control their own labour and property. In an economically free society, individuals are expected to be free to work, produce, consume and invest in any way they want. More importantly, in economically free societies, governments allow labour, capital, goods and infrastructure to move freely, and refrain from imposing compulsions or causing constraints to liberty beyond the extent necessary to protect and maintain liberty itself.
The Index covers 10 freedoms - from property rights to entrepreneurship, grouped into four broad categories. The ten freedoms are: property rights, freedom from corruption, fiscal freedom, government spending, business freedom, labour freedom, monetary freedom, trade freedom, investment freedom and financial freedom. Each of the ten economic freedoms is graded on a scale of 0 to 100. A country's overall score is derived by averaging these ten economic freedoms, with equal weight to each. Because of the inclusive nature of the 'freedoms', each of the categories is weighted equally in determining the country score. Countries considering economic reforms may find significant opportunities for improving economic performance in those factors in which they score the lowest. These factors may indicate significant binding constraints on economic growth and prosperity.
The level of economic freedom is measured by the aggregate country score. A country is categorised as free with a total score of 80 or more. A score of 70 to 79.9 places a country as 'mostly free', while the scores of 60 to 69.9, 50 to 59.9 and below 50 represent countries as 'moderately free', 'mostly unfree' and 'repressed' respectably. Over the last five years, Bangladesh's economic freedom hovered around the lower end of the "mostly unfree" category, according to the survey findings. Globally, however, economic freedom has increased for the third year in a row, the survey report mentions.
Some of the persistently nonperforming areas affecting economic freedom in Bangladesh include property rights (due to poor record-keeping systems and complications in property transactions), corruption, and lack of institutional accountability and governance. According to the survey report, Bangladesh's score in property rights is 20 on a scale of 0-100. The score in freedom from corruption indicator is 27. "Government effectiveness is undermined by pervasive graft. Contract enforcement and dispute settlement procedures are inefficient. Obsolete property laws and poor governance is one of the main barriers to foreign direct investment", the report says. It further mentions that a sense of general disregard for the rule of law, rampant corruption, political interference with the judiciary, hurdles for foreign investment, and low stock market capitalisation leave little scope for a quick recovery towards economic modernisation.
The report acknowledges the efforts currently underway in Bangladesh to modernise the customs administration and the financial sector but considers those far from adequate. Despite slight improvement in labour and monetary freedom, business freedom as a whole is far below the functionally effective level due to, among others, invasive corruption and poor access to credit. This has also impacted investment freedom. The survey findings show a threateningly mounting public debt accounting for around 40 per cent of the gross domestic product (GDP), while public expenditure accounts for 16.3 per cent of the size of the domestic economy.
The purpose of the survey is not to cause shocks, though many governments are not well disposed to accept the findings in good grace. Recognising the problems identified in such surveys does help take corrective actions in appropriate areas and thus loosen the shackles of 'unfreedom'.
wasiahmed.bd@hotmail.com
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