BY A STAFF REPORTER

28 August 2005

ABU DHABI - The UAE, Kuwait and Oman are the Arab world's freest economies, according to a report. The annual economic freedom report produced by the Cato Institute, a US think tank that promotes liberal economic policies, ranked the UAE 16th and Kuwait and Oman 18th out of 123 countries.

But despite the solid performance of the Gulf economies, the Arab region in general was ranked poorly by the report. Morocco was 83rd, Syria was 103rd and Algeria was 118th.

"It's fair to say that in general the Arab countries are weak on a whole range of issues, from trade policy to regulation of business and labour," said Ian Vasquez, director of the Project on Global Economic Liberty at the Cato Institute. "There's too much bureaucratic regulation, and the integrity of the rule of law is not so strong."

Vasquez cited Jordan as a country that has successfully reformed parts of its economy. Thanks to the recent stability of inflation rates and looser restrictions in international trade, Jordan climbed from 45th in 2003 to 36th this year.

Vasquez said that the Arab world must increase economic freedom before it can join the global economy. "I think that there's no surprise that there's widespread discontent among the populations of the Arab countries when they are so disconnected from the world economy and when they have not been given the possibility of participating in functioning economies," he said. "Freer economies are required."

The survey found that countries in the top fifth of the freedom rankings grew at 2.4 per cent in 2002 compared to the countries in the bottom fifth - including Syria and Algeria - which actually saw their economies shrink by 0.5 percent in the same year.

The report also suggested that countries with more economic freedom have substantially higher per capita incomes. Countries in the top fifth of the freedom rankings had a per capita income of $26,106 while countries in the bottom fifth of the rankings had a per capita income of $2,828.

"Many economists have long argued that economic growth and poverty reduction require an economic policy that encourages economic freedom," said John B. Taylor, an undersecretary for International Affairs at the US Treasury. "This report provides plenty of empirical evidence of that."