Ethiopia sits at 148th place out of 186 countries, on the global ranking of 2016 Index of Economic Freedom, labeled as “mostly un-free”. Economic freedom, as defined by the Index, is the fundamental right of every human to control his or her own labor and property.
The Index states that in an economically free society, individuals are free to work, produce, consume, and invest in any way they please. In economically free societies, governments allow labor, capital, and goods to move freely, and refrain from coercion or constraint of liberty beyond the extent necessary to protect and maintain liberty itself.
Ethiopia scored 51.5 two years in a row globally and ranks 37th in sub-Saharan Africa. The Index states that weak rule of law and lack of effective implementation undercut policies aimed at promoting open markets. Endless red tape and an underdeveloped financial sector continue to deter investors and prevent the emergence of vibrant entrepreneurial activity. The informal economy provides most jobs for the relatively unskilled labor force.
Looking into the rule of law in the country, the report states that corruption remains a significant problem. “Ruling EPRDF officials who dominate state institutions reportedly enjoy preferential access to credit, land leases, and jobs. Lower-level officials solicit bribes in return for processing documents. The judiciary is officially independent, but its judgments rarely deviate from government policy,” it reads.
The country’s regulatory efficiency is also put into question with examples of the high cost of conducting business. Findings show that the underdeveloped labor market continues to trap much of the labor force in the informal sector.
Looking at the overall sub-Saharan Africa Region, findings show that level of economic freedom remains low, but the region experienced the most widespread improvement over the last year.
Launched in 1995, the Economic Freedom Index evaluates countries in four broad policy areas that affect economic freedom: rule of law; limited government; regulatory efficiency; and open markets. There are 10 specific categories: property rights, freedom from corruption, fiscal freedom, government spending, business freedom, labor freedom, monetary freedom, trade freedom, investment freedom, and financial freedom.