The 2017 Index of Economic Freedom displays position shifts for the Gulf countries, with the UAE replacing Bahrain as the freest economy within the GCC and the MENA region at large. The report confirms improved standings for four GCC member states, with Oman and Bahrain being the exceptions.

The Heritage Foundation and the “Wall Street Journal” publish the report, and a notable one for placing emphasis on the role of the private sector and not just public sector entities in the economy. It ranks 180 economies.

Much to its credit, the index relies on a number of factors, made up of the rule of law, property rights and freedom from corruption; regulatory efficiency on labour and monetary freedom; limited government in spending and fiscal freedom; and open markets for trade and investment. Each variable carries 10 points in the 100-point maximum scale.

The UAE is ranked the 8th freest economy in the world, having advanced by 17 notches. This result places the UAE only behind Hong Kong, Singapore, New Zealand, Switzerland, Australia, Estonia and Canada. Not surprisingly, the report assigns the UAE near full marks for fiscal soundness. There is appreciation for the liberal business environment, in turn deemed essential for sustaining economic growth.

Qatar saw its ranking up five notches to the 29th ranking. A major drawback for Qatar concerns vulnerability to external shocks because of reliance on the petroleum sector. Bahrain saw its ranking erode 25 notches to the 44th position, with fiscal imbalance blamed for the plunge. The budgetary deficit, with the shortage around 40 per cent of budget, is exceptionally high due to the relatively low oil prices since mid-2014. Traditionally, the annual reports tend to be generous with Bahrain, with the authorities using it as evidence of standing out in regional competition. This is not true in the 2017 study.

Kuwait managed to advance 13 notches to secure the 61st ranking. The report notes the openness of commercial activity in Kuwait but worries about absence of progress on enhancing efficiency in business laws. A constant challenge in Kuwait relates to reaching timely compromise between the appointed government and elected parliament.

Saudi Arabia succeeded in improving its rankings by 15 notches to the 64th position. The study is delighted with implementation of Vision 2030, notably its emphasis on enticing foreign investments. The planned partial sale of Aramco is a plus with regards to enhancing the role of private sector investors, local and otherwise.

Oman suffered from a plunge of 30 positions to the 82nd rank. The study contends that the sultanate needs to improve its business environment, partly via overcoming bureaucratic regulations.

Only UAE and Qatar are placed in the mostly-free category, with the rest in the moderately-free grouping. This suggests that most GCC countries need to enhance their economic environment and business laws.

The writer is a Member of Parliament in Bahrain.