Economists throughout the world believe that there is a strong relation between prosperity, liberty and economic freedom. The Heritage Foundation and the Wall Street Journal annually publish the Index of Economic Freedom. The index uses 10 benchmarks to gauge the economic freedom of 184 countries throughout the world. The 2012 index has ranked Pakistan 122nd out of the 184 countries. With an economic freedom score of 54.7 Pakistan has been categorised in the mostly unfree category. Pakistans score is below the world (59.7) and the regional (57.5) average. In the Asia-Pacific region Pakistan is ranked 24th out of the 41 countries. Despite a very low score, Pakistan was able to beat India and Bangladesh. In 2012 Pakistans score came down by 0.4 points, this decline is mainly attributed to the decline in the freedom from corruption (-1), investment freedom (-5) and trade freedom (-1) sub index. The deterioration in the score is linked to the governments little commitment to the much needed reforms. The poorly institutionalized legal system and the costly and politically influenced judicial procedures are the main reasons for the decline in the freedom from corruption score. The ineffective property (including intellectual property) right protection is also considered as one of the reasons for the decline in score. On the fiscal freedom, government spending and the business freedom heads, Pakistan managed to outperform the world average. However, poor tax administration and high public debt continue to threaten Pakistans economic freedom. The bureaucratic delays, sectarian conflicts, political instability and overnight changes in policies are also matters of high concern. The investment freedom index which fell by 5 points over the last year reflects these issues. The 5 points decline is the largest compared to any other index, and is putting a lot of pressure on currency. To improve the economic freedom, government should try to develop high quality legal framework which provides property protection and supports rule of law. In addition there should be minimum regulation and high economic interaction with the rest of the world.
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