EconomyPolitics 3rd annual Index of Economic Efficiency of the World

The top ten countries in terms of economic efficiency for 2011:


This is the first in a three part series where we identify the most attractive international investment opportunities for the next ten years. We start out by looking at economic efficiency, i.e. the fundamental freedoms and legal framework, which facilitates successful investing.

In doing country analysis for international investments, it is often a first step to look at sovereign bond ratings from Moody's, Fitch or S&P. However, many smaller developing countries get very little if any play at the agencies. CDS spreads, another measure of investor risk only covers 80 countries. Our index covers 127 countries. To do so, we have looked at business and freedom indexes which assign values to sovereign attributes to gauge risk and assess opportunity. These indices attempt to measure economic freedom and a legal clarity.

There are plenty of indices by many different sources, each one looks at important factors which could influence returns and hurdle rates. But which index do you use? We have looked into four of such indices and compiled an index of indices to measure efficiency.

I have included information on five of such indices and compiled our own index of economic efficiency. The indices include:

  • Heritage Foundation: Index of Economic Freedom 
  • Fraser Institute: Economic Freedom of the World 
  • World Economic Forum: Global Competitiveness Report 
  • World Bank: Doing Business 
  • Euromoney Country Risk 


EconomyPolitics Methodology To come up with an effective way of comparing the different indices, we first eliminated any countries that were not covered on all indices. We then scaled them, with the lowest common country rank set to zero (which happens to be Zimbabwe) and the highest country set to one. Then their relative positions are weighted by the corresponding score, not the ranking. The indexes are all given equal weighting. That score is the EconomyPolitics index of Economic Efficiency. The results can be seen below:

Rank
Country
Heritage
Fraser
WEF
World Bank
Euro-money
Average
Change in Rank
1
Singapore
96.3%
93.3%
95.4%
100.0%
94.3%
0.959
+1
2
Hong Kong
100.0%
100.0%
84.2%
96.9%
89.4%
0.941
-1
3
Switzerland
88.5%
80.1%
100.0%
71.1%
96.4%
0.872
+0
4
Denmark
83.6%
69.8%
85.9%
91.3%
92.4%
0.846
+2
5
New Zealand
89.1%
83.6%
66.4%
94.6%
89.0%
0.845
0
6
Canada
86.8%
75.7%
83.0%
78.3%
92.8%
0.833
-2
7
United States
82.4%
71.4%
87.1%
91.0%
82.0%
0.828
0
8
Australia
89.3%
79.1%
73.9%
82.0%
88.8%
0.826
0
9
Finland
76.8%
71.2%
88.8%
83.6%
92.4%
0.826
+1
10
Sweden
73.7%
64.1%
94.6%
82.4%
91.6%
0.813
+1
11
United Kingdom
77.5%
73.6%
85.5%
86.9%
80.3%
0.808
-2
12
Norway
71.3%
65.3%
76.8%
87.4%
100.0%
0.802
0
13
Germany
73.5%
68.4%
86.3%
71.7%
88.8%
0.778
+3
14
Netherlands
77.8%
65.7%
86.3%
65.2%
91.7%
0.773
-1
15
Japan
75.0%
68.2%
85.9%
71.1%
72.6%
0.746
-1
16
Austria
73.7%
69.4%
75.1%
64.0%
88.0%
0.740
+2
17
Luxembourg
80.0%
69.2%
70.5%
54.7%
94.9%
0.739
0
18
Taiwan
72.0%
66.7%
80.1%
69.8%
80.0%
0.737
+2
19
South Korea
70.6%
65.7%
70.1%
84.7%
70.6%
0.723
+2
20
Chile
81.8%
74.8%
56.8%
62.7%
79.9%
0.712
-1
21
Belgium
71.2%
62.3%
77.6%
64.7%
75.3%
0.702
+1
22
France
62.9%
62.5%
75.1%
66.4%
81.1%
0.696
+1
23
Ireland
83.7%
66.9%
59.8%
81.5%
55.6%
0.695
-8
24
United Arab Emirates
67.6%
70.2%
64.7%
63.5%
65.9%
0.664
+3
25
Estonia
78.6%
69.8%
53.5%
71.7%
55.8%
0.659
+0
26
Malaysia
65.4%
52.7%
72.6%
73.4%
62.7%
0.654
+12
27
Iceland
68.2%
55.4%
58.9%
83.1%
56.3%
0.644
+1
28
Oman
70.6%
66.1%
54.4%
57.0%
66.1%
0.628
+7
29
Cyprus
75.7%
69.6%
42.7%
59.4%
66.5%
0.628
-3
30
Israel
68.6%
49.7%
72.2%
58.4%
64.4%
0.627
-1
31
Bahrain
82.2%
71.2%
50.2%
62.3%
46.9%
0.626
-7
32
Mauritius
80.0%
72.8%
40.7%
72.5%
44.7%
0.622
+7
33
Lithuania
72.8%
67.3%
44.8%
68.8%
52.0%
0.611
-1
34
Slovakia
70.1%
70.6%
35.7%
53.3%
72.5%
0.604
-4
35
Spain
71.2%
59.0%
50.2%
59.3%
61.6%
0.603
-4
36
Czech Republic
71.4%
61.9%
49.4%
43.5%
73.7%
0.600
-2
37
Thailand
63.0%
56.6%
49.4%
75.7%
52.8%
0.595
-4
38
Slovenia
62.9%
54.8%
40.2%
62.9%
73.9%
0.589
-1
39
Kuwait
63.3%
61.3%
53.5%
43.7%
68.5%
0.581
+1
40
Poland
62.1%
59.2%
46.9%
44.4%
69.8%
0.565
+5
41
Hungary
65.8%
69.8%
42.7%
54.3%
49.8%
0.565
+2
42
Georgia
71.4%
66.5%
25.7%
77.7%
40.5%
0.564
-1
43
Peru
68.8%
65.5%
36.5%
57.2%
53.1%
0.562
-1
44
Portugal
62.0%
57.8%
44.4%
67.6%
48.5%
0.561
-8
45
Panama
63.3%
67.5%
42.3%
47.5%
56.0%
0.553
+3
46
Latvia
64.6%
57.6%
37.8%
70.2%
45.8%
0.552
0
47
Mexico
67.6%
54.0%
39.8%
49.2%
57.0%
0.535
-3
48
South Africa
60.1%
48.9%
41.9%
59.0%
57.2%
0.534
-1
49
Colombia
67.9%
43.2%
36.1%
54.3%
58.8%
0.521
+4
50
Botswana
69.1%
55.8%
29.9%
51.6%
53.5%
0.520
+12
51
Bulgaria
63.3%
66.1%
34.4%
48.3%
45.7%
0.516
-1
52
Italy
56.5%
55.4%
45.6%
36.5%
63.8%
0.516
-3
53
Turkey
62.3%
54.0%
39.4%
44.9%
54.2%
0.510
-1
54
Macedonia
64.9%
56.8%
29.9%
69.6%
33.0%
0.509
+6
55
China
44.2%
47.7%
65.1%
35.7%
60.5%
0.507
-4
56
Kazakhstan
59.2%
58.6%
35.3%
55.1%
38.9%
0.494
0
57
Tunisia
53.8%
47.1%
47.3%
60.0%
37.0%
0.490
-3
58
Uruguay
70.9%
57.2%
38.2%
33.3%
44.7%
0.489
+5
59
Costa Rica
66.9%
62.7%
39.0%
23.3%
46.9%
0.478
+2
60
Jordan
69.2%
57.2%
35.7%
36.2%
40.4%
0.477
-5
61
Romania
63.0%
60.9%
31.1%
41.6%
41.8%
0.477
-3
62
Armenia
70.4%
62.3%
23.2%
48.4%
32.9%
0.474
-5
63
Montenegro
59.8%
64.7%
39.0%
48.8%
21.5%
0.468
+9
64
Croatia
57.7%
48.3%
31.1%
43.1%
49.8%
0.460
+1
65
Azerbaijan
55.6%
49.1%
40.7%
44.6%
34.9%
0.450
+2
66
Namibia
60.1%
56.4%
27.8%
40.1%
39.1%
0.447
-2
67
Rwanda
60.1%
44.8%
35.7%
59.2%
20.5%
0.441
+22
68
Albania
62.0%
65.7%
30.3%
35.6%
26.5%
0.440
-2
69
Trinidad and Tobago
65.7%
59.0%
27.8%
42.2%
24.2%
0.438
N/A
70
Brazil
50.6%
42.8%
41.1%
20.5%
63.1%
0.436
+2
71
Mongolia
55.3%
65.1%
22.0%
38.8%
35.9%
0.434
+10
72
El Salvador
69.1%
62.3%
23.2%
25.9%
32.7%
0.426
-12
73
Sri Lanka
51.8%
41.4%
41.5%
35.1%
43.3%
0.426
+6
74
Indonesia
50.1%
49.1%
43.6%
19.2%
49.7%
0.423
-3
75
Ghana
55.2%
55.4%
13.3%
46.5%
39.2%
0.419
+7
76
Morocco
55.5%
42.2%
34.4%
35.3%
41.6%
0.418
0
77
Guatemala
58.9%
60.6%
27.8%
33.4%
24.4%
0.410
+3
78
Russia
42.0%
50.1%
36.5%
24.2%
48.7%
0.403
-4
79
India
48.1%
47.1%
40.2%
14.7%
50.0%
0.400
-1
80
Zambia
55.6%
64.5%
14.1%
37.7%
27.2%
0.398
+5
81
Vietnam
43.6%
48.7%
37.8%
34.5%
33.5%
0.396
-4
82
Jamaica
64.5%
60.6%
17.8%
38.4%
15.1%
0.393
-7
83
Philippines
50.4%
48.3%
31.1%
17.3%
44.8%
0.384
+3
84
Serbia
53.1%
47.9%
22.8%
35.3%
31.5%
0.381
-1
85
Paraguay
59.5%
50.5%
8.3%
34.2%o:p>
35.7%
0.376
+2
86
Greece
56.5%
50.1%
24.5%
33.2%
22.2%
0.373
-17
87
Kenya
52.2%
58.6%
20.3%
26.1%
29.0%
0.372
+4
88
Honduras
54.0%
60.4%
27.0%
17.7%
26.9%
0.372
0
89
Belize
61.7%
58.2%
7.9%
35.1%
20.7%
0.367
N/A
90
Egypt
54.7%
47.5%
22.8%
27.9%
29.2%
0.364
-19
91
Dominican Republic
56.1%
52.7%
16.6%
29.9%
23.2%
0.357
+4
92
Moldova
49.7%
44.8%
23.2%
36.9%
20.3%
0.350
+1
93
Uganda
58.6%
59.4%
9.5%
20.3%
26.5%
0.349
-3
94
Kyrgyzstan
57.7%
55.4%
5.0%
43.4%
9.2%
0.341
-9
95
Nicaragua
54.3%
55.6%
11.6%
21.9%
18.4%
0.323
-1
96
Argentina
43.8%
36.9%
27.4%
24.6%
28.6%
0.323
0
97
Tanzania
51.6%
39.8%
9.5%
20.8%
30.0%
0.303
+4
98
Nigeria
51.2%
41.4%
5.0%
15.4%
33.2%
0.292
+9
99
Bosnia and Herzegovina
52.4%
43.6%
20.7%
16.9%
12.2%
0.292
0
100
Bangladesh
45.7%
42.4%
16.6%
19.9%
20.3%
0.290
0
101
Ethiopia
42.0%
31.2%
17.8%
30.8%
20.7%
0.285
+9
102
Pakistan
48.8%
39.6%
10.4%
26.7%
15.3%
0.282
-5
103
Ecuador
37.0%
39.8%
20.3%
19.9%
20.4%
0.275
+5
104
Malawi
49.9%
42.4%
10.4%
11.9%
21.8%
0.273
+5
105
Iran
29.6%
42.2%
38.6%
10.9%
14.7%
0.272
-2
106
Bolivia
41.3%
44.4%
20.3%
6.0%
23.2%
0.271
-4
107
Madagascar
57.8%
44.8%
1.2%
13.5%
17.9%
0.271
-2
108
Guyana
40.4%
41.0%
16.6%
27.9%
8.8%
0.269
-10
109
Ukraine
35.1%
32.9%
27.8%
7.4%
28.0%
0.262
-5
110
Algeria
44.8%
26.0%
26.1%
6.3%
23.7%
0.254
+1
111
Syria
43.2%
35.5%
21.6%
12.7%
13.3%
0.253
+3
112
Burkina Faso
57.0%
37.7%
-3.3%
11.0%
21.0%
0.247
+1
113
Senegal
49.7%
33.5%
15.4%
4.8%
17.3%
0.241
-1
114
Mali
50.6%
38.5%
2.5%
10.7%
15.5%
0.236
+1
115
Cameroon
43.9%
38.3%
11.6%
5.1%
16.0%
0.230
+3
116
Nepal
41.4%
28.8%
5.8%
29.0%
8.5%
0.227
+3
117
Benin
50.1%
38.1%
18.7%
-3.6%
10.1%
0.227
-1
118
Mozambique
51.3%
29.4%
-0.8%
11.3%
20.4%
0.223
-12
119
Lesotho
37.6%
41.2%
-2.9%
8.9%
22.5%
0.214
-2
120
Côte d'Ivoire
49.3%
36.1%
1.7%
0.9%
10.8%
0.197
0
121
Haiti
44.4%
56.0%
-17.8%
0.0%
-0.9%
0.163
N/A
122
Mauritania
44.4%
40.0%
-5.4%
8.1%
-17.6%
0.139
0
123
Angola
35.7%
13.8%
-15.4%
-0.1%
25.9%
0.120
+1
124
Venezuela
22.9%
4.1%
7.5%
-5.5%
25.2%
0.108
-1
125
Burundi
40.7%
21.1%
-15.8%
-1.1%
-13.9%
0.062
0
126
Chad
34.3%
25.2%
-19.1%
-10.7%
-6.3%
0.047
0
127
Zimbabwe
0.0%
0.0%
0.0%
0.0%
0.0%
0.000
0
EconomyPolitics 3rd annual index of Economic Efficiency of the World

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