MalawiÃ¢â‚¬â„¢s economy inched up five places on the 2012 Index of Economic Freedom compiled by The Heritage Foundation and The Wall Street Journal from position 119 in 2011 to 114 in 2012, with a score of 56.4, but was 3.1 percent shy of the 59.5 world average.
The index, realised on Thursday, shows that MalawiÃ¢â‚¬â„¢s economic freedom marginally improved by 0.6 percentage points from last year, primarily reflecting modest improvements in the control of government spending and in freedom from corruption.
The 2012 Index of Economic Freedom has also ranked Malawi on position 18th out of 46 countries in the Sub-Saharan Africa region.
The Index measures economic freedom in 10 specific categories: labour freedom, business freedom, trade freedom, fiscal freedom, government spending, monetary freedom, investment freedom, financial freedom, property rights and freedom from corruption. Scores in these categories are averaged to create an overall score.
The slight improvement from 55.8 points on the 2011 Index of Economic Freedom has been attributed to relatively sound and consistent macroeconomic management which has enabled Malawi to achieve annual economic growth of around seven percent over the past five years.
“However, such economic expansion remains fragile in the absence of a dynamic private sector. A tradition of direct government involvement in economic activity continues to crowd out private-sector development.
“By and large, Malawi lags in competitiveness and promotion of the broad-based economic activity that is critical to the reduction of poverty. The poor quality of physical as well as legal infrastructure, exacerbated by the governmentÃ¢â‚¬â„¢s inefficiency in delivering public goods, has been a serious impediment to long-term economic development,” reads the report.
Analysts observed that MalawiÃ¢â‚¬â„¢s improvement on the economic freedom index is of great significance as it boosts the countryÃ¢â‚¬â„¢s chances of attracting foreign direct investment.
They, however, noted that the country needs not become complacent, but build on the reforms implemented in recent years to achieve a significant climb on the economic freedom ladder.
“Though not enough, but any movement in the right direction deserves an applause. We just hope that Capital Hill will continue implementing more reforms to take Malawi very high on the ladder next year.
“However, recent pronouncements by authorities in as far as issues of foreign investors are concerned has not done the country any good and many will not be amazed to see the country slipping down on the ladder come next year,” said Nation Publications Limited (NPL) business and economic analyst Taonga Sabola.
President Bingu wa Mutharika on December 29 2011 blamed foreign investors for some of the economic problems Malawi is facing, claiming they are keeping millions of MalawiÃ¢â‚¬â„¢s money in foreign banks. The President singled out international chain stores Shoprite, Game Stores and Mr Price and some banks he did not name as investors that have caused the forex shortage, which has subsequently led to the current fuel crisis.
Mutharika then ordered the Trade and Industry Minister not to allow a new foreign firm to open business in the country until they specify where they would be keeping their forex.
On the 2012 Index of Economic Freedom, Hong Kong and Singapore finished first and second in the rankings for the 18th straight year. Australia and New Zealand ranked third and fourth, and Switzerland fifth. Canada finished sixth, slipping almost a full point and falling out of the group of “free” economies into the “mostly free” category.
Mauritius was eighth with an overall score of 77 and became the first Sub-Saharan country to rank among the top 10. Ireland finished ninth to best the United States, which dropped to tenth.
Zimbabwe finished next to last among the 179 countries rated but showed the biggest gains in economic freedom. Its score jumped 4.2 points to move within two points of Cuba at 26.3. Guinea-Bissau jumped 3.6 points, and Iceland improved by 2.7 points.
The Index also studies economic freedom on a regional basis.