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2011 Index of Economic Freedom

2011 Index of Economic Freedom

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Source: http://www.heritage.org/Index/
Source: http://www.heritage.org/Index/

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Published by: jdfogg on Apr 08, 2011
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World Rank: 161

Regional Rank: 40

Angola’s economic freedom score is 46.2, making its econ-
omy the 161st freest in the 2011 Index. Its overall score
has declined by 2.2 points, primarily because of worsened
scores in business freedom, government spending, and
labor freedom. Angola is ranked 40th out of 46 countries in
the Sub-Saharan Africa region.

The Angolan economy remains heavily dependent on oil
production, with growth vulnerable to global oil prices. The
drop in oil prices triggered by the global economic slow-
down had a significant effect on government revenue.

Despite the government’s plan to diversify its economic
base away from oil and diamonds, progress in stimulating
development of the non-oil private sector has been sluggish.
Pervasive corruption and a lack of institutional momentum
undermine the implementation of other important reform
policies. Monetary stability remains fragile, regulation
chokes private business investment, and the judiciary is
politically influenced. Inconsistent and confusing regula-
tions make entrepreneurial activity costly and difficult.
Monopolies and quasi-monopolies still dominate the lead-
ing sectors of the economy.

BACKGROUND: Since the end of a 27-year civil war in 2002,
Angola has been repairing and improving its ravaged infra-
structure and weak political and social institutions. Presi-
dent José Eduardo dos Santos has ruled since 1979, and his
Popular Movement for the Liberation of Angola (MPLA)
won a strong victory in the 2008 parliamentary elections.
Despite promising to hold presidential elections in 2009,
dos Santos has made an election date contingent on the
drafting of a new constitution. Angola has extensive oil
and gas resources, diamonds, hydroelectric potential, and
rich agricultural land, but many Angolans remain poor and
dependent on subsistence agriculture. The recent decline in
international oil prices has depressed economic growth and
strained the budget. Corruption and public-sector misman-
agement are pervasive, particularly in the oil sector, which
accounts for approximately 85 percent of GDP, 95 percent of
exports, and 80 percent of government revenue.

Quick Facts

Population: 17.3 million
GDP (PPP): $105.9 billion
–0.4% growth in 2009
12.6% 5-year compound annual growth
$6,117 per capita
Unemployment: 40% (2006)
Inflation (CPI): 14.0%
FDI Inflow: $13.1 billion

Economic Freedom Score

Country’s Score Over Time

Country Comparisons

Least Most
free free

50
25 75

0 100

46.2

1995 ’97 ’99 ’01 ’03 ’05 ’07 ’09 2011

10

20

30

40

50

0

20

40

60

80

100

46.2

Country

59.7

World
average

53.5

Regional
average

84.1

Free
economies

80

2011 Index of Economic Freedom

ANGOLA (continued)

THE TEN ECONOMIC FREEDOMS

Business Freedom

No. 157

Trade Freedom

No. 123

Fiscal Freedom

No. 41
Government Spending No. 137
Monetary Freedom

No. 168

Investment Freedom

No. 123

Financial Freedom

No. 106

Property Rights

No. 146
Freedom from Corruption No. 164
Labor Freedom

No. 155

COUNTRY’S WORLD RANKINGS

BUSINESS FREEDOM: 41.4

2.0

Despite some progress, burdensome regulations continue
to hinder private-sector development. The regulatory sys-
tem lacks transparency and clarity, and regulations are
inconsistently enforced.

TRADE FREEDOM: 70.2

0.2

Angola’s weighted average tariff rate was 7.4 percent in
2009. Angola is the first Southern African Development
Community country to publish a consolidated customs
code. Barriers to free trade include preferential treatment
for domestic companies with respect to government pro-
curement, variable and high customs fees and taxes, import
licensing, government import authorizations, the unclear
regulatory environment, inadequate customs capacity,
and issues involving enforcement of intellectual property
rights. Fifteen points were deducted from Angola’s trade
freedom score to account for non-tariff barriers.

FISCAL FREEDOM: 84.5

0.6

Angola has a relatively low income tax rate but a burden-
some corporate tax rate. The top income tax rate has been
raised to 17 percent. The top corporate tax rate is 35 per-
cent, though the mining and oil industries are subject to
rates as high as 50 percent, while agriculture benefits from
a 20 percent rate. Other taxes include a fuel tax and a con-
sumption tax. In the most recent year, overall tax revenue
as a percentage of GDP remained steady at 6.1 percent.

GOVERNMENT SPENDING: 48.1

14.7

Increased oil revenue has funded rising expenditures,
though external financing still accounts for most public
infrastructure investment. Government interference in the
economy is widespread. In the most recent year, total gov-
ernment spending, including consumption and transfer
payments, rose to 41.6 percent of GDP. The fiscal deficit
reached 9 percent of GDP. Debt management capacity is
fragmented and weak.

MONETARY FREEDOM: 61.8

0.8

Inflation rose to an average of 13.7 percent in 2009. Mon-
etary and exchange-rate policy has been politicized as a
result of the loss in May 2010 of central bank indepen-
dence in setting interest rates, and inflation is forecast to
remain above 13 percent through 2011. Key sectors remain
government-owned, and price controls are pervasive in
many sectors, including fuel and electricity. Fifteen points
were deducted from Angola’s monetary freedom score to
account for measures that distort domestic prices.

INVESTMENT FREEDOM: 35

no change

Foreign investors receive equal treatment, but investment
in certain sectors is restricted. Government approval is
needed for foreign investments exceeding $100,000 and
investments that require a concession (such as oil and min-

ing). The regulatory system is non-transparent and time-
consuming, lacks capacity, and is subject to corruption.
There are few specific performance requirements on for-
eign investments, but “Angolanization” of companies and
greater use of Angolan suppliers are encouraged. Reforms
have improved local access to foreign exchange, and repa-
triation of profits for officially approved foreign investment
is guaranteed, subject to some restrictions. Land generally
must be obtained from the state. Direct expropriation of
foreign investors’ assets is relatively unlikely.

FINANCIAL FREEDOM: 40

no change

Banking is relatively well capitalized, and foreign banks
have driven growth. There are 18 commercial banks, but
three major banks (two of them government-owned) still
dominate the system. The granting of credit to the private
sector, which had increased sharply before the global finan-
cial crisis, has slowed. Banking services remain rudimen-
tary. Complicated administrative procedures for obtaining
a loan or opening a bank account have limited access to
financial services. After years of delay, the Luanda Stock
Exchange was expected to open during 2010 with 10 com-
panies listed. The insurance sector has only five companies
and is funded primarily from the oil and gas sector.

PROPERTY RIGHTS: 20

no change

Angola’s legal and judicial system is inefficient and sub-
ject to executive influence. Legal fees are high, and most
businesses avoid taking commercial disputes to court. All
non-urban and some urban land is ultimately state-owned
but can be leased to private entities. Regulations to imple-
ment the 2004 land-tenure law have not been issued. Prop-
erty registration is lengthy and expensive. Angola ranked
114th out of 115 countries in the 2009 International Prop-
erty Rights Index.

FREEDOM FROM CORRUPTION: 19

no change

Corruption is perceived as rampant, especially among gov-
ernment officials at all levels, and investigations and prose-
cutions of government officials are practically nonexistent.
Angola ranks 162nd out of 180 countries in Transparency
International’s Corruption Perceptions Index for 2009.

LABOR FREEDOM: 42.3

2.9

Restrictive labor regulations hinder employment and
productivity growth. The non-salary cost of employing
a worker is low, but dismissing a redundant employee is
relatively costly.

81

How Do We Measure Economic Freedom?

See page 447 for an explanation of the methodology
or visit the Index Web site at heritage.org/index.

2009 data unless otherwise noted.
Data compiled as of September 2010.

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