Economic Freedom

Tenth in MENA, 90th worldwide on 2012 Economic Freedom Index

The 2012 Index of Economic Freedom ranked Lebanon in the 90th place worldwide and in the tenth place out of 17 countries in the MENA region.

The index, published by the Heritage Foundation on January 12, assigned the country a freedom score of 60.1 points, unchanged from last year’s score. Lebanon’s score is just above the world average of 59.5 points and the regional average of 59.9 points. Among Arab states, Lebanon was outdone by Bahrain (12th worldwide), Qatar (25th), Jordan (32nd), Kuwait (71st), and Saudi Arabia (74th).

According to the index, the Lebanese economy has weathered the impact of the global economic turmoil over the past five years relatively well. The index noted that continued economic expansion “was facilitated by open-market trade policies and low corporate tax rates.”

However, the index mentioned that the country’s overall entrepreneurial environment remains unfavorable to more dynamic growth in private investment. This is attributable, according to the index, to political instability, regulatory inefficiency, and burdensome commercial regulations.

Lebanon was ranked 25th worldwide on the fiscal freedom sub-index due to relatively low tax rates. The index noted that the overall tax burden constitutes around 17.2 percent of GDP (individuals' income tax rate is up to 20 percent, while corporate tax rate is 15 percent).

In terms of regulatory efficiency, the index cited the relatively high licensing costs, which it said could cost over three times the level of annual average income. It said that the process for closing a business is lengthy and costly and that labor regulations remain relatively rigid.

Addressing the trade freedom indicator, the index noted that Lebanon is working to join the World Trade Organization. It said, however, that political instability and the arbitrary and non-transparent interpretation of laws continue to impede foreign investment.