October 2, 2021
In the Economic Freedom of the World report by Canada’s Fraser Institute Iran has ranked among the ten worst countries, scoring 160 among 165 in the world.
The group of experts who compiled and supervised the report say that measures such as size of government, legal system and property rights, sound money, freedom to trade internationally and regulations were considered in deciding the rankings. The data used was from 2019, but the report was published last month. The report is issued every five years, with the previous one published in 2015.
“The index published in Economic Freedom of the World measures the degree to which the policies and institutions of countries are supportive of economic freedom. The cornerstones of economic freedom are personal choice, voluntary exchange, freedom to enter markets and compete, and security of the person and privately owned property,” Fraser Institute said.
Iran ranked at the very bottom of the scale in freedom to own foreign currency bank accounts, and most notably in freedom of foreigners to invest and even travel to Iran. This has been detrimental to Iran’s economy especially in its oil and gas sectors, where infusion of new capital and technologies are sorely needed. Iranian officials have said that more than $50 billion is needed immediately to upgrade decaying infrastructure.
While the Iranian government has been blaming international sanctions in early 2010s and US sanctions since 2018 for its economic problems, the report sheds light on the need to reform legal, banking and other regulations by the government to boost investments and productivity.
Data in the report show that Iran has a closed economic system with a big government sector and huge subsidies that limit the government’s ability to invest. What is not well reflected in the data is the size of state ownership, since Iran presents most of its large industries and companies as privately held, while they are in fact hybrid entities controlled by the government and owned by powerful insiders and state banks or “charities”.
The data in the report also show a high degree of “military interference in rule of law and politics,” over the years. In fact, the Islamic Revolutionary Guard Corps (IRGC) is one the largest business conglomerates in the country, stifling competition and any chance of foreign investments.
In the section about ‘Freedom to trade internationally’, Iran received low scores in tariff rates and the gap between official and black market currency exchange rates.
The regulatory landscape also received low marks, with credit market regulation, including interest rate controls, and labor laws hitting low scores.
An overall observation shows little change in economic freedom since the last report was issued in 2015. The bottom ten countries in the study were: Central African Republic, Democratic Republic of Congo, Syria, Republic of Congo, Iran, Zimbabwe, Algeria, Libya, Sudan, and Venezuela.