On a worldwide basis, the advance of economic

Chapter 1 Economic Freedom: Global and Regional Patterns Ambassador Terry Miller and Anthony B. Kim On a worldwide basis, the advance of economic freedom has ground to a halt. Since peaking in 2008, when the average economic freedom score reached 60.2 on the Index 0 100 scale, global economic freedom has failed to advance, and this year s average score of 59.6 is no better than the score achieved a full decade ago in 2003. Still, there are bright spots around the world: Four Asia Pacific economies and Switzerland earned designation as truly free economies in the 2013 Index. Each achieved a score above 80 on the grading scale. Hong Kong was able to hold its position as the world s freest economy, a position it has held for 19 consecutive years. With another strong advance in economic freedom, Singapore remains a close second and has narrowed the gap between it and Hong Kong. Australia, New Zealand, and Switzerland maintained their previous standings of 3rd, 4th, and 5th, respectively. The relative strength of these five free economies is no accident. Their continuing commitment to rule of law, limited government, regulatory efficiency, and open markets has been the source of impressive resilience during uncertain economic times. Seven emerging economies and one advanced economy joined those considered mostly free in the 2013 Index, raising the number of countries in that category to 30. The eight countries are Georgia, United Arab Emirates, Czech Republic, Botswana, Norway, Jordan, South Korea, and the Bahamas. Notably, in the 2013 Index, Jordan became a mostly free economy for the first time, and Georgia recorded the largest score improvement over the past year. The scores of 91 countries improved, and 24 recorded their highest scores ever in the Index. Of the 91 economies that recorded score gains, 71 are considered developing or emerging economies. Of those developing economies, 23 come from the Sub-Saharan Africa region, 16 are from Europe, and 15 are from the Asia Pacific region. Five emerging economies have recorded notable increases in economic freedom Chapter 1 9

61 Global Average Economic Freedom Average Score in the Index of Economic Freedom Since 1995 60.2 60 59.6 59.6 59 59.4 58 57.6 57 57.1 56 1995 2000 2005 2010 2013 Source: Terry Miller, Kim R. Holmes, and Edwin J. Feulner, 2013 Index of Economic Freedom (Washington, D.C.: The Heritage Foundation and Dow Jones & Company, Inc., 2013), http://www./index. Chart 1 over the past five years, maintaining high economic growth rates despite the difficult international economic environment. The five countries are Colombia, Indonesia, Jordan, Poland, and the United Arab Emirates. With a five-year cumulative score increase of 3.5 points or more, each of these countries has achieved five consecutive years of improving economic freedom since 2008 and turned the global economic crisis into an opportunity to upgrade its economic system. Every region continues to be represented by at least one of the top 20 freest economies, but some notable reshuffling has occurred in the 2013 Index. Half of the leading economies are in Europe, led by Switzerland and Denmark. The Danish economy has climbed to the 9th spot, overtaking the United States and Ireland. Losing its status of one of the world s 10 freest economies, Ireland has fallen to 11th place. Germany and Sweden have replaced Macau and Cyprus in the top 20. Five top performers are in the Asia Pacific region, with Taiwan, just squeaking in at number 20, joining world leaders Hong Kong, Singapore, Australia, and New Zealand. Canada and the U.S. represent North America. The other regions are represented by one country each: Chile (South and Central America/Caribbean 10 2013 Index of Economic Freedom

region); Mauritius (Sub- Saharan Africa region); and Bahrain (Middle East and North Africa region). Economic Leaders in Decline The overall stagnation observed in worldwide levels of economic freedom has coincided with significant setbacks in countries previously regarded as leaders in economic freedom. In particular, the United States and Ireland, which had risen in previous years as high as 4th place in the rankings, have seen their scores drop substantially in recent years. Both suffered declines in economic freedom again this year. Seventy-eight countries registered declines in economic freedom in the 2013 Index, and another eight recorded no change in overall score. It remains to be seen whether the global economy is undergoing the leading edge of a fundamental realignment of countries along the continuum of economic freedom or whether the breaks in progress in many countries are just transitory manifestations of a loss of commitment to advancing economic freedom. Limited Government Enhances Economic Dynamism A pleasant surprise in the Index rankings this year was the strong evidence that many countries are putting substantial effort into getting their fiscal houses in order. The Index category that measures restraint in government spending showed one of the largest improvements of any of the 10 economic freedoms, with the worldwide average score rising from 59.8 to 61.1. Fiscal Higher Government Spending Equals Lower Economic Growth Change in GDP, 2008 2011 10% 5% 0 Trend Line, Advanced Economies 5% 20% 15% 10% 5% 0 5% 10% 15% 20% 25% 30% Sources: Terry Miller, Kim R. Holmes, and Edwin J. Feulner, 2013 Index of Economic Freedom (Washington, D.C.: The Heritage Foundation and Dow Jones & Company, Inc., 2013), http://www./index; World Bank Group, World Development Indicators Online, http://econ.worldbank.org/wbsite/ EXTERNAL/EXTDEC/0,,menuPK: 476823~pagePK:64165236~piPK: 64165141~theSitePK:469372,00.html (accessed November 5, 2012); and International Monetary Fund, World Economic Outlook Databases, http://www.imf.org/external/ns/cs.aspx?id=28 (accessed November 5, 2012). Chart 2 Trend Line, Developing Economies Change in Government Spending as a Percentage of GDP, 2008 2011 freedom improved as well, with many countries continuing efforts to streamline tax systems and lower marginal rates. Three years of data are now available on the impact of government stimulus on economic growth rates. The 2011 Index first reported the negative impact of government spending in the early days of the global recession for advanced economies that are members of the Organisation for Economic Co-operation and Development (OECD). The full data set now available for a much greater number of countries shows a similar negative relationship between increases in government spending and economic growth. Interestingly, the relationship is far more negative in the case of advanced economies than it is for developing and emerging economies Chapter 1 11

$50,000 $44,488 Greater Economic Freedom, Higher Standard of Living GDP per Capita (Purchasing Power Parity) 40,000 $35,228 30,000 20,000 $15,822 10,000 $5,475 $5,462 0 Free Mostly Free Moderately Free Mostly Unfree Repressed Freedom Category in the 2013 Index of Economic Freedom Sources: Terry Miller, Kim R. Holmes, and Edwin J. Feulner, 2013 Index of Economic Freedom (Washington, D.C.: The Heritage Foundation and Dow Jones & Company, Inc., 2013), http://www./index, and International Monetary Fund, World Economic Outlook Databases, http://www.imf.org/external/ns/cs.aspx?id=28 (accessed November 6, 2012). Chart 3 (correlation coefficient 0.46 versus 0.09). Over the past three years, countries that have increased government spending have tended to record lower economic growth rates. Market-Opening Measures Continue, but Regulatory Efficiency Declines The economic freedom category that improved the most in the 2013 Index is investment freedom. Average scores in this category increased to 52.2 from 50.7 in the 2012 Index. Countries clearly continue to recognize the benefits of integrating as fully as possible into global economic markets. Regulatory efficiency, by contrast, declined significantly. Average scores dropped in every economic freedom related to regulatory efficiency, with labor freedom suffering the most. Many countries apparently believe that improvements in well-being for poorer workers can be achieved through legislative fiat. Even top-ranked Hong Kong has experimented with a minimum wage, and labor market rigidities and bureaucratic and costly business regulations continue to drive many people into informal types of economic activity, particularly in developing countries. The Rule of Law The 2013 Index focuses on the impact on economic growth and social well-being of the rule of law, one of the four pillars of economic freedom. The five essays included in a Special Focus Section provide a comprehensive overview of the subject. Measures in the Index related to the rule of law include indices related to the protection of property rights and corruption, and the composite of these two indicators is even more highly correlated than overall economic freedom scores with high levels of per capita GDP. Those countries that have improved the rule of law over the past five years show an average growth rate of 4.4 percent over the period, while those economies where the rule of law has declined have grown less than 3 percent per year on average. 12 2013 Index of Economic Freedom

Economic Freedom Promotes Prosperity GDP per Capita (Purchasing Power Parity) $50,000 40,000 $43,140 $41,577 $35,848 $35,403 Five Freest Countries Five Least Free Countries 30,000 20,000 $13,723 10,000 $5,357 $7,732 $8,948 $7,459 $5,093 0 Asia-Pacific Middle East/ North Africa Europe Americas Sub-Saharan Africa Sources: Terry Miller, Kim R. Holmes, and Edwin J. Feulner, 2013 Index of Economic Freedom (Washington, D.C.: The Heritage Foundation and Dow Jones & Company, Inc., 2013), http://www./index; World Bank Group, World Development Indicators Online, http://econ.worldbank.org/wbsite/external/extdec/0,,menupk: 476823~pagePK:64165236~piPK:64165141~theSitePK:469372,00.html (accessed November 8, 2012); International Monetary Fund, World Economic Outlook Databases, http://www.imf.org/external/ns/cs.aspx?id=28 (accessed November 8, 2012). Chart 4 Not surprisingly, the rule-of-law indicators are highly correlated with high levels of investment and job growth. Their impact is more striking within the developing and emerging countries than it is for more advanced economies (coefficient of correlation 0.70 versus 0.53), perhaps because there is more variability in scores among the developing and emerging countries. The Index thus regards the rule of law as a foundational aspect of economic freedom, essential for achieving economic progress and societal prosperity. Economic Freedom and Prosperity The results of the 2013 Index reinforce the conclusion that advancing economic freedom in the areas of rule of law, limited government, regulatory efficiency, and open markets is the most effective way to generate broad-based economic dynamism, creating more opportunities for people to work, higher levels of productivity, and gains from market opening and trade that elevate prosperity and reduce human poverty. This multidimensional relationship between economic freedom and true human progress has been empirically documented in the Index over the past 19 years, and other similar studies have confirmed its findings. The most basic benefit of economic freedom, confirmed now with data covering 19 years, is the strong relationship between economic freedom and levels of per capita income. For countries that achieve scores that reflect even moderate levels of economic freedom (60 or above), the relationship between economic freedom and per capita GDP is highly significant. Countries moving up the economic freedom scale show increasingly high levels of average income. Chapter 1 13

Four Clear Trends: Economic Freedom Is Key to Overall Well-Being Variables Calibrated to 0-to-1 Scale 1.0 Health Per Capita Income Education Environment 0.5 This graphic shows trend lines for four variables related to the quality of life and economic freedom. Together they present a clear trend: nations with more economic freedom enjoy greater overall well-being. The first three trends are from the U.N. s Human Development reports; the fourth is from Yale University s Environmental Performance Index. 0 0 25 50 75 100 Overall Score in 2013 Index of Economic Freedom Sources: Terry Miller, Kim R. Holmes, and Edwin J. Feulner, 2013 Index of Economic Freedom (Washington, D.C.: The Heritage Foundation and Dow Jones & Company, Inc., 2013), http://www./index; J.W. Emerson, A. Hsu, M.A. Levy, A. de Sherbinin, V. Mara, D.C. Esty, and M. Jaiteh, 2012 Environmental Performance Index and Pilot Trend Environmental Performance Index (New Haven: Yale Center for Environmental Law and Policy, 2012), http://epi.yale.edu/downloads (accessed November 7, 2012); and United Nations, Human Development reports, http://hdr.undp.org/en/reports (accessed November 7, 2012). Chart 5 Given the strength and empirical durability of the relationship between higher levels of economic freedom and greater prosperity, it can only be regarded as a human tragedy that the majority of the world s people still live in countries where economic freedom is either repressed or heavily regulated. The governments of China and India bear a special responsibility in this regard. The policy environments that they set for economic activity affect the lives of more than 2.5 billion people. Both economies are considered mostly unfree. Greater levels of economic freedom have had a major positive impact on poverty levels over the past decade. Based on the United Nations Multidimensional Poverty Index, the intensity of poverty in countries whose economies are considered mostly free or moderately 14 2013 Index of Economic Freedom

Economic Freedom, Economic Growth, and Poverty 10 Year Average Growth Rate in Per Capita Income, 2001 2011 3.8% Poverty Intensity 0.24 2.9% 2.2% 2.5% 0.06 First Quartile Second Quartile Third Quartile Fourth Quartile Improvement in Overall Index of Economic Freedom Scores, 2003 2013 Mostly Free and Moderately Free Mostly Unfree and Repressed Categories in the 2013 Index of Economic Freedom Sources: Terry Miller, Kim R. Holmes, and Edwin J. Feulner, 2013 Index of Economic Freedom (Washington, D.C.: The Heritage Foundation and Dow Jones & Company, Inc., 2013), http://www./index; United Nations, Human Development Report 2011, Multidimensional Poverty Index, http://hdr.undp.org/en/reports/global/hdr2011/ (accessed November 7, 2012); World Bank Group, World Development Indicators Online, http://econ.worldbank.org/ WBSITE/EXTERNAL/EXTDEC/0,,menuPK:476823~pagePK:64165236~piPK:64165141~theSitePK:469372,00.html (accessed November 7, 2012); and International Monetary Fund, World Economic Outlook Databases, http://www.imf.org/external/ns/cs.aspx?id=28 (accessed November 7, 2012). Chart 6 free is only one-fourth the level in countries that are rated less free. Poverty rates have declined more significantly in freer countries as well. The societal benefits of economic freedom extend far beyond higher incomes or reductions in poverty. Countries with higher levels of economic freedom enjoy higher levels of human development, including better education and more comprehensive health care. They live in cleaner environments and do a better job of making the most efficient use of energy and other natural resources. Regional Variations Economic freedom varies noticeably by region, with inhabitants of North America and Europe continuously enjoying greater levels of economic freedom on average than those who live in other regions of the world. In the 2013 Index, Europe and North America were the only two regions that recorded score improvements from last year, with improvements of 0.5 point and 0.3 point, respectively. In the other four regions of the Index, economic freedom declined. The South and Central America/Caribbean region recorded the largest average loss of economic freedom: 0.6 point. The Middle East and North Africa region showed the second-largest decline: 0.3 point, a number that would likely have been even higher had grading been possible for Libya and Syria. Both the Asia Pacific region and Sub-Saharan Africa lost onetenth of a point of economic freedom. Chapter 1 15

The Ten Economic Freedoms: A Global Look Score Changes RULE OF LAW Property Rights Freedom from Corruption 0 +0.2 LIMITED GOVERNMENT Fiscal Freedom Government Spending +0.3 +1.3 REGULATORY EFFICIENCY Business Freedom Labor Freedom Monetary Freedom 0.1 0.8 0.7 OPEN MARKETS Trade Freedom 0 Investment Freedom +1.5 Financial Freedom +0.2 RULE OF LAW Property Rights Freedom from Corruption 43.4 40.6 0 20 40 60 80 100 The rule of law continues to be undermined by political instability, particularly in the Middle East and North Africa. Corruption has worsened in some countries as state interference in economic activity has grown, and perceptions of corruption in Europe and the South America/Caribbean region have increased significantly. Respect for property rights declined in 16 countries; only nine countries improved their property rights scores. LIMITED GOVERNMENT Fiscal Freedom Government Spending 77.2 61.1 0 20 40 60 80 100 Despite the challenging economic and political environments, tax-system reform has progressed, and the growth of government spending was at least marginally restrained in a number of countries. The average top individual income tax rate is 28.4 percent, and the average top corporate tax rate is 24.3 percent. The average overall tax burden as a percentage of GDP is 22.4 percent, and average government spending as a share of GDP is 35.1 percent. REGULATORY EFFICIENCY Business Freedom Labor Freedom Monetary Freedom 64.6 60.6 73.7 0 20 40 60 80 100 While some countries have continued to streamline and modernize their business frameworks, reforms have stalled in many others, seemingly as a result of some combination of reform fatigue and complacency. For the world as a whole, labor freedom has declined significantly. In a large number of countries, increases in the minimum wage have exceeded labor productivity growth. Inflationary pressures have inched up around the world. OPEN MARKETS Trade Freedom Investment Freedom Financial Freedom 74.5 52.2 48.8 0 20 40 60 80 100 Trade freedom remained essentially unchanged, with little apparent momentum for further liberalization. Investment freedom improved substantially as many countries sought to ease the foreign investment process. Progress in financial freedom was largely stagnant, reflecting a lack of reform in developing countries and uncertainty in advanced economies. The global financial system remains highly vulnerable to the ongoing European sovereign debt crisis. 16 2013 Index of Economic Freedom

85 80 75 70 65 60 55 50 Population: 768 million Economic Freedom by Region, with Population Average Score in the 2013 Index of Economic Freedom Sub- Saharan Africa 53.7 Asia-Pacific 57.4 3.7 billion Central and South America/ Caribbean 59.4 460 million Middle East/ North Africa 61.8 334 million Europe 66.6 813 million North America 74.1 443 million Population = 500 million Sources: Terry Miller, Kim R. Holmes, and Edwin J. Feulner, 2013 Index of Economic Freedom (Washington, D.C.: The Heritage Foundation and Dow Jones & Company, Inc., 2013), http://www./index; World Bank Group, World Development Indicators Online, http://econ.worldbank.org/wbsite/external/extdec/0,,menupk: 476823~pagePK:64165236~piPK:64165141~theSitePK:469372,00.html (accessed November 7, 2012); and International Monetary Fund, World Economic Outlook Databases, http://www.imf.org/external/ns/cs.aspx?id=28 (accessed November 7, 2012). Chart 7 Comparing Regional Average Scores to the Global Average Above Global Average Below Global Average North America Europe Middle East/ North Africa South and Central America/ Caribbean Asia- Pacific Sub- Saharan Africa GLOBAL AVERAGE Overall 74.1 66.6 61.8 59.4 57.4 53.7 59.6 Rule of Law Property Rights 75.0 61.2 43.7 40.2 38.5 30.9 43.4 Freedom from Corruption 62.7 55.3 42.3 38.1 36.7 29.9 40.6 Limited Government Fiscal Freedom 76.7 72.5 88.4 79.2 79.7 74.6 77.2 Government Spending 57.3 41.1 66.6 68.1 65.0 70.2 61.1 Regulatory Efficiency Business Freedom 87.9 77.6 67.5 61.7 65.2 51.2 64.6 Labor Freedom 79.2 61.2 63.1 59.7 65.4 54.3 60.6 Monetary Freedom 76.0 77.1 73.3 74.2 72.2 71.3 73.7 Open Markets Trade Freedom 85.1 85.5 74.8 73.5 71.0 67.1 74.5 Investment Freedom 71.7 71.2 49.3 51.6 38.9 46.4 52.2 Financial Freedom 70.0 63.3 48.7 47.9 41.7 40.7 48.8 Sources: Terry Miller, Kim R. Holmes, and Edwin J. Feulner, 2013 Index of Economic Freedom (Washington, D.C.: The Heritage Foundation and Dow Jones & Company, Inc., 2013), http://www./index. Table 1 Chapter 1 17

North America United States Canada Economic Freedom Scores 80 100 Free 70 79.9 Mostly Free 60 69.9 Moderately Free 50 59.9 Mostly Unfree 0 49.9 Repressed Not Ranked United States Mexico Source: Terry Miller, Kim R. Holmes, and Edwin J. Feulner, 2013 Index of Economic Freedom (Washington, D.C.: The Heritage Foundation and Dow Jones & Company, Inc., 2013), http://www./index. Map 1 In every region, however, the evidence continues to show that economic freedom is the key to greater prosperity and overall human development. NORTH AMERICA North America continues to be the world s economically freest region in the 2013 Index. The region recorded a score improvement of 0.3 point from last year, with Mexico s notable score improvement outweighing economic freedom declines in Canada and the United States. With Canada continuing to be the region s freest economy since 2010, the North American region has two mostly free economies (Canada and the U.S.) and one moderately free economy (Mexico). North America scores above the world averages in rule of law, regulatory efficiency, and open markets but continues to lag in the pillar of limited government, which consists of fiscal freedom and the management of government spending. Compared to last year, on average, the region has improved in the areas of investment freedom, trade freedom, and the management of public spending while registering score declines in business freedom and monetary freedom. EUROPE Narrowing the gap with North America, the European region has the world s second-highest level of economic freedom. Europe is the most improved region in the 2013 Index, with a 18 2013 Index of Economic Freedom

World Rank Region Rank Country Economic Freedom in North American Countries Overall Score Change from 2012 Property Rights Freedom from Corruption Fiscal Freedom Government Spending Business Freedom Labor Freedom Monetary Freedom Trade Freedom Investment Freedom Financial Freedom 6 1 Canada 79.4-0.5 90.0 87.0 79.8 44.8 91.7 82.3 75.2 88.2 75.0 80.0 10 2 United States 76.0-0.3 85.0 71.0 69.3 47.8 90.5 95.5 75.0 86.4 70.0 70.0 50 3 Mexico 67.0 1.7 50.0 30.0 81.1 79.4 81.4 59.7 77.7 80.6 70.0 60.0 Table 2 score gain of 0.5 point. The scores of 32 countries improved, while just nine countries lost economic freedom. Switzerland continues to be the only free economy in the region, and about 81 percent of the 43 European countries score between 60 and 80 and are considered either moderately free or mostly free. Europe has two repressed economies that score below 50: Ukraine and Belarus. There are five European countries whose economic freedom status has changed notably in the 2013 Index. Georgia, Norway, and the Czech Republic have become mostly free economies. Cyprus has dropped into the moderately free category, while Italy has regained that status. Georgia achieved the largest score improvement in the 2013 Index, and two other countries, Estonia and Poland, were among the world s 10 most improved. Taken as a whole, the European region scores higher than the world averages in rule of law, regulatory efficiency, and open markets. Despite some progress in constraining government spending over the past year, European countries fall almost five points below the world average in fiscal freedom and more than 20 points below the world average in government spending scores a reflection of continuing problems in public finance management that result from years of financing the growth of the public sector. Europe has been undergoing tumultuous and uncertain times epitomized by the ongoing sovereign debt crisis in the eurozone. Stagnant growth continues to exacerbate debt levels, leaving many European countries with no choice but to cut spending to reduce unsustainable fiscal deficits. In comparison to last year, Europe has improved on average in the areas of management of public spending and investment freedom while showing deteriorations in monetary One-Year Freedom Score Change Region Europe North America Sub-Saharan Africa Asia-Pacific Middle East/North Africa South and Central America/Caribbean Change in Score Since 2012 Index of Economic Freedom +0.5 +0.3 No change 0.1 0.3 0.6 Source: Terry Miller, Kim R. Holmes, and Edwin J. Feulner, 2013 Index of Economic Freedom (Washington, D.C.: The Heritage Foundation and Dow Jones & Company, Inc., 2013), http://www./index. Chart 8 Chapter 1 19

Europe Finland Norway Sweden Estonia Iceland Economic Freedom Scores 80 100 Free 70 79.9 Mostly Free 60 69.9 Moderately Free 50 59.9 Mostly Unfree 0 49.9 Repressed Not Ranked Ireland Luxembourg Switzerland United Kingdom Belgium France Denmark Netherlands Liechtenstein Germany Italy Czech Republic Austria Croatia Poland Slovakia Hungary Serbia Latvia Lithuania Romania Bulgaria Belarus Moldova Spain Slovenia Greece Portugal Malta Bosnia & Herzegovina Montenegro Source: Terry Miller, Kim R. Holmes, and Edwin J. Feulner, 2013 Index of Economic Freedom (Washington, D.C.: The Heritage Foundation and Dow Jones & Company, Inc., 2013), http://www./index. Albania Macedonia Kosovo Ukraine Black Sea Turkey Cyprus Russia Sea of Azov Caspian Sea Georgia Armenia Map 2 20 2013 Index of Economic Freedom

Economic Freedom in European Countries World Rank Region Rank Overall Score Change from 2012 Property Rights Freedom from Corruption Country 5 1 Switzerland 81.0-0.1 90.0 88.0 68.1 63.8 75.8 87.9 86.2 90.0 80.0 80.0 9 2 Denmark 76.1-0.1 90.0 94.0 39.8 5.9 98.4 91.1 80.0 86.8 85.0 90.0 11 3 Ireland 75.7-1.2 90.0 75.0 73.8 28.8 83.4 76.6 82.8 86.8 90.0 70.0 13 4 Estonia 75.3 2.1 85.0 64.0 79.7 56.2 78.2 56.0 77.1 86.8 90.0 80.0 14 5 United Kingdom 74.8 0.7 90.0 78.0 57.0 27.7 94.1 71.6 72.4 86.8 90.0 80.0 15 6 Luxembourg 74.2-0.3 90.0 85.0 65.0 47.1 74.8 39.0 79.3 86.8 95.0 80.0 16 7 Finland 74.0 1.7 90.0 94.0 66.9 12.2 94.8 45.3 79.5 86.8 90.0 80.0 17 8 Netherlands 73.5 0.2 90.0 89.0 52.1 24.7 83.0 58.6 81.1 86.8 90.0 80.0 18 9 Sweden 72.9 1.2 90.0 93.0 39.6 21.0 93.2 53.6 82.1 86.8 90.0 80.0 19 10 Germany 72.8 1.8 90.0 80.0 61.8 37.3 92.1 43.8 81.2 86.8 85.0 70.0 21 11 Georgia 72.2 2.8 45.0 41.0 88.2 68.9 90.6 91.1 72.6 89.2 75.0 60.0 22 12 Iceland 72.1 1.2 90.0 83.0 72.7 36.2 91.5 58.9 75.8 87.8 65.0 60.0 23 13 Lithuania 72.1 0.6 60.0 48.0 92.8 53.6 77.6 64.1 78.3 86.8 80.0 80.0 25 14 Austria 71.8 1.5 90.0 78.0 51.1 23.5 73.6 80.4 79.3 86.8 85.0 70.0 29 15 Czech Republic 70.9 1.0 70.0 44.0 82.0 43.5 65.8 85.5 81.7 86.8 70.0 80.0 31 16 Norway 70.5 1.7 90.0 90.0 51.0 40.3 92.6 44.7 76.9 89.3 70.0 60.0 38 17 Armenia 69.4 0.6 30.0 26.0 88.0 82.1 87.6 77.1 73.0 85.4 75.0 70.0 40 18 Belgium 69.2 0.2 80.0 75.0 45.0 14.5 91.6 69.8 79.3 86.8 80.0 70.0 41 19 Cyprus 69.0-2.8 70.0 63.0 79.8 32.7 80.7 62.8 84.1 81.8 75.0 60.0 42 20 Slovakia 68.7 1.7 50.0 40.0 84.7 58.0 71.0 72.2 79.1 86.8 75.0 70.0 43 21 Macedonia 68.2-0.3 35.0 39.0 91.4 69.1 80.3 78.4 84.0 84.6 60.0 60.0 46 22 Spain 68.0-1.1 70.0 62.0 53.9 43.0 80.3 54.3 79.9 86.8 80.0 70.0 47 23 Malta 67.5 0.5 75.0 56.0 61.2 44.1 61.1 65.4 80.4 86.8 85.0 60.0 48 24 Hungary 67.3 0.2 65.0 46.0 79.7 29.7 79.1 64.4 77.1 86.8 75.0 70.0 55 25 Latvia 66.5 1.3 50.0 42.0 84.4 53.6 75.7 64.4 78.3 86.8 80.0 50.0 57 26 Poland 66.0 1.8 60.0 55.0 76.0 43.0 64.0 62.9 77.7 86.8 65.0 70.0 58 27 Albania 65.2 0.1 30.0 31.0 92.6 75.1 81.0 49.0 78.4 79.8 65.0 70.0 59 28 Romania 65.1 0.7 40.0 36.0 87.9 62.2 70.4 63.5 74.7 86.8 80.0 50.0 60 29 Bulgaria 65.0 0.3 30.0 33.0 94.0 64.2 73.6 74.8 78.6 86.8 55.0 60.0 62 30 France 64.1 0.9 80.0 70.0 53.0 5.6 84.0 50.5 81.1 81.8 65.0 70.0 Fiscal Freedom Government Spending Business Freedom Labor Freedom Monetary Freedom Trade Freedom Investment Freedom Financial Freedom (continued on next page) Table 3 Chapter 1 21

World Rank Region Rank Country Economic Freedom in European Countries (continued) Overall Score Change from 2012 Property Rights Freedom from Corruption Fiscal Freedom Government Spending Business Freedom Labor Freedom Monetary Freedom Trade Freedom Investment Freedom Financial Freedom 67 31 Portugal 63.1 0.1 70.0 61.0 61.6 28.3 82.8 31.0 79.4 86.8 70.0 60.0 69 32 Turkey 62.9 0.4 50.0 42.0 77.0 64.9 68.2 43.1 73.3 85.2 65.0 60.0 70 33 Montenegro 62.6 0.1 40.0 40.0 92.4 41.5 72.7 71.4 79.9 83.0 55.0 50.0 76 34 Slovenia 61.7-1.2 60.0 59.0 65.7 22.3 80.7 40.4 81.6 86.8 70.0 50.0 78 35 Croatia 61.3 0.4 40.0 40.0 75.4 48.7 63.0 42.4 81.1 87.5 75.0 60.0 83 36 Italy 60.6 1.8 50.0 39.0 55.5 25.3 76.9 52.0 80.2 86.8 80.0 60.0 94 37 Serbia 58.6 0.6 40.0 33.0 84.2 40.3 60.2 70.4 65.3 77.9 65.0 50.0 103 38 Bosnia and Herzegovina 57.3 0.0 20.0 32.0 83.2 26.9 54.3 61.2 79.0 86.4 70.0 60.0 115 39 Moldova 55.5 1.1 40.0 29.0 87.2 50.1 69.7 40.9 73.4 80.0 35.0 50.0 117 40 Greece 55.4 0.0 40.0 34.0 66.2 24.7 77.1 42.1 73.4 81.8 65.0 50.0 139 41 Russia 51.1 0.6 25.0 24.0 86.9 54.4 69.2 52.6 66.7 77.4 25.0 30.0 154 42 Belarus 48.0-1.0 20.0 24.0 88.8 43.5 75.2 76.9 40.7 80.8 20.0 10.0 161 43 Ukraine 46.3 0.2 30.0 23.0 78.2 29.4 47.6 49.9 71.0 84.4 20.0 30.0 N/A N/A Kosovo N/A N/A 30.0 29.0 93.5 73.0 52.4 77.7 N/A N/A 65.0 N/A N/A N/A Liechtenstein N/A N/A N/A N/A N/A N/A 70.0 N/A N/A 90.0 N/A 80.0 Table 3 freedom and financial freedom. Europe s rule of law also has been undermined by a higher level of perceived corruption and the weakened protection of property rights. MIDDLE EAST/NORTH AFRICA The Middle East/North Africa region has experienced widespread turmoil. The region s overall economic freedom has decreased by 0.3 point since the 2012 Index, and grading of economic freedom for Libya and Syria has had to be suspended. Many of the region s economies remain only moderately free or mostly unfree. Algeria and Iran are considered repressed, scoring below 50. Structural and institutional problems abound, and the regional unemployment rate, which averages more than 10 percent, is among the highest in the world and is most pronounced among younger members of the labor force. Many countries in the region have been undergoing political and economic upheaval since early 2011, and the gradual rise in economic freedom observed in prior years has come to a halt. Unfortunately, economic problems will not be solved simply by holding elections or allowing greater expressions of dissent. Policies and practices that restrict economic freedom are deeply ingrained, and it remains to be seen whether the region s new political leaders have the political will to undertake the fundamental economic reforms that are needed. Scores for most of the 15 countries in the region are concentrated between 50 and 70. In the 2013 Index, seven of the region s 15 economies 22 2013 Index of Economic Freedom

Middle East/North Africa Caspian Sea Morocco Tunisia Lebanon Israel Jordan Syria Iraq Iran Algeria Libya Egypt Kuwait Bahrain Qatar Saudi Arabia Oman United Arab Emirates Economic Freedom Scores 80 100 Free 70 79.9 Mostly Free 60 69.9 Moderately Free 50 59.9 Mostly Unfree 0 49.9 Repressed Not Ranked Yemen Source: Terry Miller, Kim R. Holmes, and Edwin J. Feulner, 2013 Index of Economic Freedom (Washington, D.C.: The Heritage Foundation and Dow Jones & Company, Inc., 2013), http://www./index. Map 3 Chapter 1 23

World Rank Region Rank Economic Freedom in Middle East/North African Countries Country Overall Score Change from 2012 Property Rights Freedom from Corruption Fiscal Freedom Government Spending Business Freedom Labor Freedom Monetary Freedom Trade Freedom Investment Freedom Financial Freedom 12 1 Bahrain 75.5 0.3 55.0 51.0 99.9 72.4 75.8 90.4 72.5 82.8 75.0 80.0 27 2 Qatar 71.3 0.0 70.0 72.0 99.8 81.2 69.4 63.4 80.3 82.5 45.0 50.0 28 3 United Arab Emirates 71.1 1.8 55.0 68.0 99.9 85.1 74.0 77.6 83.9 82.6 35.0 50.0 33 4 Jordan 70.4 0.5 60.0 45.0 93.6 68.8 69.2 75.5 82.0 79.6 70.0 60.0 45 5 Oman 68.1 0.2 50.0 48.0 98.5 69.1 68.1 80.9 72.7 78.7 55.0 60.0 51 6 Israel 66.9-0.9 70.0 58.0 60.2 39.3 66.1 63.7 78.6 83.0 80.0 70.0 66 7 Kuwait 63.1 0.6 50.0 46.0 99.9 61.5 57.7 62.8 71.6 76.8 55.0 50.0 82 8 Saudi Arabia 60.6-1.9 40.0 44.0 99.6 52.2 68.2 69.2 65.7 77.3 40.0 50.0 90 9 Morocco 59.6-0.6 40.0 34.0 71.4 64.3 76.4 30.1 78.9 70.8 70.0 60.0 91 10 Lebanon 59.5-0.6 20.0 25.0 90.8 74.6 50.3 57.2 76.5 80.4 60.0 60.0 107 11 Tunisia 57.0-1.6 40.0 38.0 74.5 63.7 82.8 70.1 77.8 58.1 35.0 30.0 113 12 Yemen 55.9 0.6 30.0 21.0 91.5 72.8 61.3 55.3 65.7 81.5 50.0 30.0 125 13 Egypt 54.8-3.1 35.0 29.0 85.6 69.4 63.3 43.3 58.4 73.8 50.0 40.0 145 14 Algeria 49.6-1.4 30.0 29.0 80.4 44.1 65.2 52.6 76.6 67.8 20.0 30.0 168 15 Iran 43.2 0.9 10.0 27.0 80.8 80.5 65.3 55.0 58.0 45.7 0.0 10.0 N/A N/A Iraq N/A N/A N/A 18.0 N/A N/A 47.0 70.1 N/A N/A N/A N/A N/A N/A Libya N/A N/A 10.0 20.0 N/A N/A N/A N/A 64.8 85.0 10.0 20.0 N/A N/A Syria N/A N/A 20.0 26.0 86.2 N/A 59.3 48.9 71.5 72.8 10.0 20.0 Table 4 improved their economic freedom, and the same number of countries lost economic freedom. Five countries in the region recorded notable changes in their economic freedom status. The United Arab Emirates and Jordan have advanced into the mostly free category, while Lebanon and Morocco have slid back into mostly unfree status. Algeria has become a repressed economy for the first time in its Index history. While no countries in the region were among the world s 10 most improved in the 2013 Index, Egypt recorded the third-largest score decline. The Middle East/North Africa region has scores that are lower than the global average in half of the 10 economic freedoms, including property rights, freedom from corruption, monetary freedom, investment freedom, and financial freedom. Reflecting the fragile foundations of economic freedom in the region, the scores for rule of law have continued to deteriorate. Business freedom, labor freedom, trade freedom, and investment freedom have also declined. SOUTH AND CENTRAL AMERICA/ CARIBBEAN With mixed progress toward greater economic freedom in the region s individual countries, the South and Central America/Caribbean region is ranked fourth out of the six regions in 24 2013 Index of Economic Freedom

Guatemala Belize El Salvador Nicaragua Costa Rica South and Central America/Caribbean Cuba Honduras Panama Jamaica The Bahamas St. Vincent & The Grenadines Colombia Haiti Dominican Republic Venezuela Dominica St. Lucia Barbados Trinidad & Tobago Guyana Suriname Ecuador Peru Brazil Economic Freedom Scores 80 100 Free 70 79.9 Mostly Free 60 69.9 Moderately Free 50 59.9 Mostly Unfree 0 49.9 Repressed Not Ranked Bolivia Paraguay Chile Argentina Uruguay Note: French Guiana not depicted because it is French territory. Source: Terry Miller, Kim R. Holmes, and Edwin J. Feulner, 2013 Index of Economic Freedom (Washington, D.C.: The Heritage Foundation and Dow Jones & Company, Inc., 2013), http://www./index. Map 4 Chapter 1 25

World Rank Region Rank Country 7 1 Chile 79.0 0.7 90.0 72.0 77.6 83.7 70.5 74.2 84.6 82.0 85.0 70.0 32 2 Saint Lucia 70.4-0.9 70.0 70.0 76.9 63.6 85.3 76.4 84.7 71.9 65.0 40.0 35 3 The Bahamas 70.1 2.1 70.0 73.0 97.0 84.9 71.3 81.6 75.8 47.0 30.0 70.0 36 4 Uruguay 69.7-0.2 70.0 70.0 84.2 68.3 73.4 70.7 72.5 82.9 75.0 30.0 37 5 Colombia 69.6 1.6 50.0 34.0 76.1 75.2 90.2 79.3 78.7 72.2 70.0 70.0 39 6 Barbados 69.3 0.3 80.0 78.0 74.5 54.2 74.8 84.4 72.1 60.5 55.0 60.0 44 7 Peru 68.2-0.5 40.0 34.0 79.9 89.1 72.3 67.1 84.3 85.0 70.0 60.0 49 8 Costa Rica 67.0-1.0 50.0 48.0 82.9 90.1 58.3 60.4 75.4 85.1 70.0 50.0 52 9 Jamaica 66.8 1.7 40.0 33.0 77.5 67.7 84.3 69.3 76.1 75.0 85.0 60.0 53 10 El Salvador 66.7-2.0 40.0 34.0 85.7 85.4 61.8 62.0 79.6 79.0 70.0 70.0 54 11 Saint Vincent and The Grenadines Economic Freedom in South and Central America/ Caribbean Countries Overall Score Change from 2012 Property Rights Freedom from Corruption 66.7 0.2 70.0 58.0 74.2 67.1 77.6 76.6 80.3 73.3 50.0 40.0 64 12 Dominica 63.9 2.3 60.0 52.0 72.0 50.1 77.0 68.8 85.3 74.3 70.0 30.0 71 13 Panama 62.5-2.7 30.0 33.0 86.2 77.8 72.5 40.1 75.9 74.8 65.0 70.0 72 14 Trinidad and Tobago 62.3-2.1 50.0 32.0 84.9 60.4 55.1 76.7 73.7 69.9 60.0 60.0 80 15 Paraguay 61.1-0.7 30.0 22.0 95.9 85.4 59.1 25.6 79.8 82.7 70.0 60.0 85 16 Guatemala 60.0-0.9 30.0 27.0 79.6 93.6 50.8 48.7 75.5 85.2 60.0 50.0 87 17 Dominican Republic 59.7-0.5 30.0 26.0 83.7 92.6 53.7 55.6 72.9 77.8 65.0 40.0 96 18 Honduras 58.4-0.4 30.0 26.0 85.3 79.2 61.0 26.8 73.9 77.1 65.0 60.0 100 19 Brazil 57.7-0.2 50.0 38.0 70.3 54.8 53.0 57.2 74.4 69.7 50.0 60.0 102 20 Belize 57.3-4.6 30.0 0.0 82.2 72.6 72.6 71.4 77.3 77.2 40.0 50.0 110 21 Nicaragua 56.6-1.3 15.0 25.0 78.7 65.1 51.2 62.2 73.2 85.4 60.0 50.0 129 22 Guyana 53.8 2.5 30.0 25.0 67.9 61.1 66.3 75.4 75.9 71.2 35.0 30.0 135 23 Suriname 52.0-0.6 40.0 30.0 71.6 72.5 40.2 77.5 66.7 66.3 25.0 30.0 152 24 Haiti 48.1-2.6 10.0 18.0 80.7 66.3 33.4 63.6 74.2 74.8 30.0 30.0 156 25 Bolivia 47.9-2.3 10.0 28.0 88.8 64.1 55.8 30.8 67.4 74.3 10.0 50.0 159 26 Ecuador 46.9-1.4 20.0 27.0 80.1 47.3 51.5 48.0 66.9 68.1 20.0 40.0 160 27 Argentina 46.7-1.3 15.0 30.0 64.3 52.1 60.1 47.4 60.4 67.6 40.0 30.0 174 28 Venezuela 36.1-2.0 5.0 19.0 75.6 50.6 45.6 34.5 47.3 58.8 5.0 20.0 176 29 Cuba 28.5 0.2 10.0 42.0 62.7 0.0 10.0 20.0 67.4 62.7 0.0 10.0 Fiscal Freedom Government Spending Business Freedom Labor Freedom Monetary Freedom Trade Freedom Investment Freedom Financial Freedom Table 5 26 2013 Index of Economic Freedom

$100,000 $10,000 $1,000 $100 the 2013 Index. The economic freedom scores of 20 of the region s 29 countries declined, and the region recorded the second-largest overall loss of economic freedom (0.6 point) of any region. Half of the 10 largest declines in economic freedom registered in the 2013 Index came from this region, recorded by Belize, Panama, Haiti, Bolivia, and Trinidad and Tobago. Five countries in the region have changed their economic freedom status. Bolivia and Haiti are now considered repressed. The Bahamas has improved to mostly free, while Belize and the Dominican Republic have fallen from moderately free to the mostly unfree category. On average, the countries in the South and Central America/Caribbean region perform better than the world averages in only three of the 10 components of economic freedom: fiscal freedom, control of government spending, and monetary freedom. The region continues to lag behind world averages in the other seven areas of economic freedom, particularly freedom from corruption and property rights, both of which are critical to sustaining the rule of law and stable long-term economic development. Corruption and a lack of protection for property rights are major problem areas, reflecting long-standing issues of poor governance and political instability in the region. Noticeably, the South and Central America/ Caribbean region s countries are distributed throughout the rankings in a more balanced fashion than are the countries of any other Asian Giants Lag in Economic Freedom GDP per Capita (Purchasing Power Parity) Correlation: 0.66 R2 = 0.44 China Trend Line 60 or less: Mostly Unfree or Repressed Each circle represents a nation in the Index of Economic Freedom India 20 30 40 50 60 70 80 90 Overall Score in the 2013 Index of Economic Freedom Sources: Terry Miller, Kim R. Holmes, and Edwin J. Feulner, 2013 Index of Economic Freedom (Washington, D.C.: The Heritage Foundation and Dow Jones & Company, Inc., 2013), http://www./index; World Bank Group, World Development Indicators Online, http://econ.worldbank.org/wbsite/external/extdec/0,,menupk: 476823~pagePK:64165236~piPK:64165141~theSitePK:469372,00.html (accessed November 5, 2012); and International Monetary Fund, World Economic Outlook Databases, http://www.imf.org/external/ns/cs.aspx?id=28 (accessed November 5, 2012). Chart 9 Population (millions) 500 250 100 10 region, almost like a bell curve. All but nine countries receive an economic freedom score between 50 and 70, and 13 countries fall in the middle category of moderately free. ASIA PACIFIC The Asia Pacific region is distinguished by the extraordinary disparity in levels of economic freedom among its economies. Four of the world s 10 freest economies Hong Kong, Singapore, Australia, and New Zealand are in this region, Chapter 1 27

Asia and the Pacific Uzbekistan Tajikistan Kyrgyz Republic Caspian Sea Kazakhstan Mongolia North Korea Australia Azerbaijan Turkmenistan Afghanistan Pakistan Maldives India Nepal Sri Lanka Burma Thailand Bhutan Bangladesh Laos China Cambodia Vietnam Malaysia South Korea Taiwan Hong Kong Macau Philippines Japan Micronesia Kiribati Singapore Indonesia Timor-Leste Papua New Guinea Solomon Islands Source: Terry Miller, Kim R. Holmes, and Edwin J. Feulner, 2013 Index of Economic Freedom (Washington, D.C.: The Heritage Foundation and Dow Jones & Company, Inc., 2013), http://www./index. Vanuatu Samoa Fiji Tonga New Zealand Economic Freedom Scores 80 100 Free 70 79.9 Mostly Free 60 69.9 Moderately Free 50 59.9 Mostly Unfree 0 49.9 Repressed Not Ranked Map 5 28 2013 Index of Economic Freedom

Economic Freedom in Asia Pacific Countries World Rank Region Rank Country Overall Score Change from 2012 Property Rights Freedom from Corruption Fiscal Freedom Government Spending Business Freedom Labor Freedom Monetary Freedom Trade Freedom Investment Freedom Financial Freedom 1 1 Hong Kong 89.3-0.6 90.0 84.0 92.9 88.9 98.9 86.2 82.1 90.0 90.0 90.0 2 2 Singapore 88.0 0.5 90.0 92.0 91.1 91.3 97.1 91.4 82.0 90.0 75.0 80.0 3 3 Australia 82.6-0.5 90.0 88.0 66.4 62.8 95.5 83.5 83.8 86.2 80.0 90.0 4 4 New Zealand 81.4-0.7 95.0 95.0 71.5 33.2 99.9 89.5 83.3 86.8 80.0 80.0 20 5 Taiwan 72.7 0.8 70.0 61.0 80.5 84.9 94.3 53.3 82.9 85.0 65.0 50.0 24 6 Japan 71.8 0.2 80.0 80.0 69.2 45.0 81.3 80.3 90.6 81.8 60.0 50.0 26 7 Macau 71.7-0.1 60.0 51.0 73.5 91.5 60.0 55.0 81.3 90.0 85.0 70.0 34 8 South Korea 70.3 0.4 70.0 54.0 73.0 72.8 93.6 48.7 77.9 72.6 70.0 70.0 56 9 Malaysia 66.1-0.3 55.0 43.0 85.1 73.5 79.9 72.3 79.8 77.0 45.0 50.0 61 10 Thailand 64.1-0.8 45.0 34.0 78.9 83.7 73.2 72.9 68.3 75.2 40.0 70.0 68 11 Kazakhstan 63.0-0.6 35.0 27.0 93.2 84.5 71.8 88.4 72.2 78.2 30.0 50.0 75 12 Mongolia 61.7 0.2 30.0 27.0 82.5 62.6 70.4 79.2 75.6 79.8 50.0 60.0 81 13 Sri Lanka 60.7 2.4 40.0 33.0 84.7 86.5 77.0 60.8 69.1 76.2 40.0 40.0 88 14 Azerbaijan 59.7 0.8 25.0 24.0 85.5 67.8 69.2 79.4 73.5 77.2 55.0 40.0 89 15 Kyrgyz Republic 59.6-0.6 20.0 21.0 94.8 56.4 73.2 88.6 66.7 75.4 50.0 50.0 95 16 Cambodia 58.5 0.9 30.0 21.0 90.9 88.4 39.4 54.2 81.3 70.2 60.0 50.0 97 17 The Philippines 58.2 1.1 30.0 26.0 79.3 90.2 53.1 51.0 76.6 75.5 50.0 50.0 105 18 Fiji 57.2-0.1 25.0 20.0 78.0 78.0 65.7 74.9 72.8 68.0 40.0 50.0 106 19 Samoa 57.1-3.4 60.0 39.0 80.6 34.3 72.4 80.4 78.5 66.0 30.0 30.0 108 20 Indonesia 56.9 0.5 30.0 30.0 83.4 89.2 50.2 50.8 75.5 75.0 35.0 50.0 109 21 Vanuatu 56.6 0.0 40.0 35.0 97.3 80.5 56.4 57.7 81.4 48.0 30.0 40.0 112 22 Tonga 56.0-1.0 20.0 31.0 87.1 64.7 76.6 84.4 71.1 75.6 30.0 20.0 119 23 India 55.2 0.6 50.0 31.0 78.3 77.9 37.3 73.6 65.3 63.6 35.0 40.0 121 24 Pakistan 55.1 0.4 30.0 25.0 80.5 89.0 70.7 47.9 67.0 66.0 35.0 40.0 122 25 Bhutan 55.0-1.6 60.0 57.0 82.7 38.8 60.5 84.4 67.3 49.5 20.0 30.0 130 26 Papua New Guinea 53.6-0.2 20.0 22.0 67.4 72.3 58.3 73.4 72.4 85.0 35.0 30.0 131 27 Tajikistan 53.4 0.0 20.0 23.0 92.8 78.1 61.7 55.5 64.6 78.2 20.0 40.0 132 28 Bangladesh 52.6-0.6 20.0 27.0 72.7 92.1 68.0 51.9 65.4 54.0 55.0 20.0 136 29 China 51.9 0.7 20.0 36.0 70.2 83.3 48.0 62.6 71.6 72.0 25.0 30.0 140 30 Vietnam 51.0-0.3 15.0 29.0 75.6 72.4 63.8 65.5 65.3 78.6 15.0 30.0 (continued on next page) Table 6 Chapter 1 29

Economic Freedom in Asia Pacific Countries (continued) World Rank Region Rank Country Overall Score Change from 2012 Property Rights Freedom from Corruption Fiscal Freedom Government Spending Business Freedom Labor Freedom Monetary Freedom Trade Freedom Investment Freedom Financial Freedom 141 31 Nepal 50.4 0.2 30.0 22.0 85.8 89.2 57.2 44.3 75.1 60.8 10.0 30.0 143 32 Laos 50.1 0.1 15.0 22.0 79.7 85.8 62.1 54.7 73.0 58.7 30.0 20.0 144 33 Micronesia 50.1-0.6 30.0 30.0 97.5 0.0 54.1 82.5 76.1 81.0 20.0 30.0 149 34 Maldives 49.0-0.2 25.0 25.0 98.8 14.5 88.7 64.0 70.4 43.7 30.0 30.0 162 35 Uzbekistan 46.0 0.2 15.0 16.0 90.2 67.8 71.2 61.0 63.0 66.1 0.0 10.0 163 36 Kiribati 45.9-1.0 30.0 31.0 71.2 0.0 59.2 78.5 78.4 55.4 25.0 30.0 165 37 Solomon Islands 45.0-1.2 30.0 27.0 66.2 6.1 66.6 66.4 75.4 72.6 10.0 30.0 166 38 Timor-Leste 43.7 0.4 20.0 24.0 64.7 0.0 44.8 81.2 69.3 73.0 40.0 20.0 169 39 Turkmenistan 42.6-1.2 5.0 16.0 94.0 91.7 30.0 30.0 70.6 79.2 0.0 10.0 172 40 Burma 39.2 0.5 10.0 15.0 81.9 96.8 20.0 20.0 65.1 73.6 0.0 10.0 177 41 North Korea 1.5 0.5 5.0 10.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 N/A N/A Afghanistan N/A N/A N/A 15.0 N/A 83.2 59.7 75.8 69.5 N/A 65.0 N/A Table 6 yet most of the other countries remain mostly unfree. Countries such as Turkmenistan and Burma have economies that are repressed. North Korea, which continues to reject any form of free-market activity, remains the least free economy in both the region and the world. In comparison to last year, the region s economic freedom has declined by one-tenth of a point. In the 2013 Index, the scores of 19 countries in the region have improved, and those of 20 have declined. About 63 percent of the 41 countries in the Asia Pacific region score between 40 and 60 on the economic freedom scale, remaining either mostly unfree or repressed. Four countries have adjusted their economic freedom status. South Korea and Sri Lanka have moved up into the mostly free and moderately free categories, respectively. On the other hand, both the Kyrgyz Republic and Samoa have become mostly unfree economies. While Sri Lanka recorded the third-largest score improvement in the 2013 Index, Samoa registered the second-biggest score decline. Although its overall economic freedom score is below the world average of 59.6 in the 2013 Index, the Asia Pacific region continues to score higher than the world averages in four of the 10 economic freedoms related to limited government and regulatory efficiency: fiscal freedom, government spending, business freedom, and labor freedom. Typically lower government expenditures result in a regional government spending score that is over four points better than the world average. The region s labor freedom score beats the world average by about five points, although many small Pacific island economies still lack fully developed formal labor markets. India and China are ranked 119th and 136th, respectively, in the world, and both remain mostly unfree. The two countries high econom- 30 2013 Index of Economic Freedom

Sub-Saharan Africa The Gambia Senegal Mauritania Guinea Guinea- Bissau Sierra Leone Cape Verde Cote d'ivoire Liberia Mali Burkina Faso Ghana Benin Togo Sao Tome & Principe Niger Nigeria Equatorial Guinea Republic of Congo Cameroon Gabon Chad Central African Republic Democratic Republic of Congo Sudan Ethiopia Uganda Kenya Tanzania Eritrea Djibouti Somalia Rwanda Burundi Comoros Seychelles Note: Western Sahara is not depicted because its economy is not in the Index of Economic Freedom. Economic Freedom Scores 80 100 Free 70 79.9 Mostly Free 60 69.9 Moderately Free 50 59.9 Mostly Unfree 0 49.9 Repressed Not Ranked Angola Namibia South Africa Zambia Botswana Zimbabwe Malawi Mozambique Swaziland Madagascar Lesotho Mauritius Source: Terry Miller, Kim R. Holmes, and Edwin J. Feulner, 2013 Index of Economic Freedom (Washington, D.C.: The Heritage Foundation and Dow Jones & Company, Inc., 2013), http://www./index. Map 6 ic growth has not been deeply rooted in policies that promote economic freedom. The foundations for long-term economic development continue to be fragile in the absence of effectively functioning legal frameworks. Progress with market-oriented reforms has been uneven and has often backtracked under the influence of those with a political interest in maintaining the status quo. SUB-SAHARAN AFRICA Sub-Saharan Africa s overall level of economic freedom remains weaker than that of any other region. With a score decline of 0.1 point that ended two years of steady improvement, the region s movement toward greater economic freedom has stalled. Unlike other regions that have a more diverse range of free economies, in Sub-Saharan Chapter 1 31

World Rank Region Rank Country Economic Freedom in Sub-Saharan Africa Countries Overall Score Change from 2012 Property Rights Freedom from Corruption Fiscal Freedom Government Spending Business Freedom Labor Freedom Monetary Freedom Trade Freedom Investment Freedom Financial Freedom 8 1 Mauritius 76.9-0.1 70.0 51.0 92.1 81.9 78.2 72.3 75.4 87.9 90.0 70.0 30 2 Botswana 70.6 1.0 70.0 61.0 79.5 65.1 69.0 69.8 72.0 79.7 70.0 70.0 63 3 Rwanda 64.1-0.8 30.0 50.0 80.4 75.9 65.6 80.3 75.5 78.0 65.0 40.0 65 4 Cape Verde 63.7 0.2 70.0 55.0 77.9 65.4 58.9 40.3 78.0 66.9 65.0 60.0 73 5 Madagascar 62.0-0.4 40.0 30.0 90.0 94.6 63.5 47.4 74.9 74.6 55.0 50.0 74 6 South Africa 61.8-0.9 50.0 41.0 70.5 69.2 74.7 55.6 75.8 76.3 45.0 60.0 77 7 Ghana 61.3 0.6 50.0 39.0 86.0 52.5 61.5 61.6 64.8 67.8 70.0 60.0 79 8 Uganda 61.1-0.8 30.0 24.0 80.6 84.3 48.4 87.9 77.2 73.6 55.0 50.0 84 9 Namibia 60.3-1.6 30.0 44.0 66.4 71.5 68.4 76.7 74.9 81.5 50.0 40.0 86 10 Burkina Faso 59.9-0.7 30.0 30.0 81.4 82.0 61.2 56.4 80.6 72.5 55.0 50.0 92 11 The Gambia 58.8 0.0 30.0 35.0 75.1 82.7 59.5 59.3 71.1 60.5 65.0 50.0 93 12 Zambia 58.7 0.4 30.0 32.0 72.9 80.3 60.4 58.4 66.0 82.3 55.0 50.0 98 13 Tanzania 57.9 0.9 30.0 30.0 79.9 77.9 48.6 61.9 71.8 73.5 55.0 50.0 99 14 Gabon 57.8 1.4 40.0 30.0 74.2 80.1 56.5 63.1 77.5 61.1 55.0 40.0 101 15 Benin 57.6 1.9 30.0 30.0 76.1 86.1 45.4 49.7 79.9 59.3 70.0 50.0 104 16 Swaziland 57.2 0.0 40.0 31.0 74.4 51.3 66.0 70.3 74.7 69.7 55.0 40.0 111 17 Mali 56.4 0.6 30.0 28.0 69.6 83.9 50.1 64.6 79.9 73.2 45.0 40.0 114 18 Kenya 55.9-1.6 30.0 22.0 77.5 73.5 58.0 57.1 73.8 66.7 50.0 50.0 116 19 Senegal 55.5 0.1 40.0 29.0 65.2 75.6 56.7 41.3 79.6 72.2 55.0 40.0 118 20 Malawi 55.3-1.1 40.0 30.0 78.4 60.0 41.1 58.8 72.5 71.8 50.0 50.0 120 21 Nigeria 55.1-1.2 30.0 24.0 82.6 74.6 55.7 67.2 73.3 63.9 40.0 40.0 123 22 Mozambique 55.0-2.1 30.0 27.0 76.2 64.5 63.9 37.9 74.7 75.4 50.0 50.0 124 23 Seychelles 54.9 1.9 50.0 48.0 77.6 56.9 69.2 63.5 75.6 33.4 45.0 30.0 126 24 Côte d'ivoire 54.1-0.2 25.0 22.0 77.9 79.8 43.3 54.6 77.8 70.3 40.0 50.0 127 25 Djibouti 53.9 0.0 30.0 30.0 79.4 48.8 30.0 59.6 76.6 59.6 65.0 60.0 128 26 Niger 53.9-0.4 30.0 25.0 77.0 80.1 35.2 39.3 85.4 71.7 55.0 40.0 133 27 Cameroon 52.3 0.5 30.0 25.0 69.3 87.1 46.8 55.5 69.9 54.9 35.0 50.0 134 28 Mauritania 52.3-0.7 25.0 24.0 80.3 74.7 43.3 51.1 75.1 64.8 45.0 40.0 137 29 Guinea 51.2 0.4 20.0 21.0 69.6 82.6 46.1 63.8 62.8 61.2 45.0 40.0 138 30 Guinea-Bissau 51.1 1.0 20.0 22.0 89.1 82.0 41.3 54.0 72.7 65.3 35.0 30.0 (continued on next page) Table 7 32 2013 Index of Economic Freedom