325

How Do We Measure Economic Freedom?

See page 471 for an explanation of the methodology
or visit the Index Web site at heritage.org/index.
2012 data unless otherwise noted.
Data compiled as of September 2013.
Quick Facts
Population: 22.5 million
GDP (PPP): $26.3 billion
7.5% growth in 2012
5-year compound annual growth 7.0%
$1,169 per capita
Unemployment: 17.0% (2007)
Ination (CPI): 2.1%
FDI Inow: $5.2 billion
Public Debt: 46.6% of GDP
Economic Freedom Score
Least Most
free free
50
25 75
0 100
0 20 40 60 80 100
Country Comparisons
Freedom Trend
Country
World
Average
Regional
Average
Free
Economies
2010 2011 2012 2014 2013
54
55
56
57
58
59
55.0
60.3
54.6
84.1
55.0
M
ozambiques economic freedom score is 55.0, making
its economy the 128th freest in the 2014 Index. Its over-
all score is unchanged from last year, with improvements in
monetary freedom, business freedom, and trade freedom
offset by declines in investment freedom, labor freedom, fis-
cal freedom, and freedom from corruption. Mozambique is
ranked 25th out of 46 countries in the Sub-Saharan Africa
region, and its overall score is just above the regional average.
Over the 20-year history of the Index, Mozambique has
advanced its economic freedom score by nearly 10 points.
Scores have improved in eight of the 10 economic freedoms,
with a decline only in the management of public spending.
Most notable is a 37-point improvement in monetary free-
dom. No longer rated economically repressed, Mozambique
moved into the mostly unfree category as of 2000.
Institutional problems continue to limit overall economic
freedom and long-term economic development. The judiciary
is subject to corruption and political influence. The inefficient
regulatory environment, despite some progress in recent
years, remains burdensome, and a dynamic labor market has
not been fully developed.
BACKGROUND: Mozambique promotes itself as a model for
development. However, when President Armando Guebuza
was re-elected in 2009, the elections were widely regarded
as corrupt and unfair, and Freedom House has removed
Mozambique from its list of electoral democracies. In 2012,
the government passed a law restricting the personal busi-
ness activities of politicians and public servants. Economic
growth has been generally strong since the mid-1990s, but
the economy is burdened by state-sanctioned monopolies and
inefficient public services. Small-scale agriculture, fishing,
and forestry employ about 80 percent of the workforce, but
more than 90 percent of the arable land is still uncultivated.
The informal sector accounts for most employment. Major
exports include aluminum, shrimp, and cash crops. Signifi-
cant natural gas reserves are being developed.
World Rank: 128 Regional Rank: 25
MOZAMBIQUE
326 2014 Index of Economic Freedom
Property Pights
lreedom rom
Corruption
liscul lreedom
Covernment
Spending
8usiness lreedom
Lubor lreedom
Monetury lreedom
1rude lreedom
nvestment lreedom
linunciul lreedom
Business Freedom
Labor Freedom
Monetary Freedom
RCUlATCRY
ffICINCY
CPN
MARkTS
Trade Freedom
Investment Freedom
Financial Freedom
CCVRNMNT
SIZ
Fiscal Freedom
Government Spending
RUl Cf
lAW
Property Rights
Freedom from Corruption
0 20 40 0 80 00
0 20 40 0 80 00
0 20 40 0 80 00
0 20 40 0 80 00
Country World Average Rank Change
1Year
Score
RUl Cf lAW
CCVRNMNT
SIZ
RCUlATCRY
ffICINCY
CPN MARkTS
0
+l6.2
+l5.2
l0.2
+l0.2
+l.6
+36.9
+0.5
+l5.0
+20.0
93rd
125th
116th
101st
90th
173rd
24th
94th
125th
69th
30.0
26.2
75.7
64.6
65.2
36.7
80.8
75.5
45.0
50.0
0
0.8
0.5
0.l
l.3
l.2
6.l
0.l
5.0
0
Long-Term Score Change (since 1995)
THE TEN ECONOMIC FREEDOMS
The top individual income and corporate tax rates are 32 percent. Other taxes include a value-
added tax (VAT) and an inheritance tax. The overall tax burden equals 19.6 percent of gross
domestic income. Government spending accounts for 34 percent of GDP. Public debt equals
about 47 percent of gross domestic income. Recent discoveries of large natural gas reserves off
the coast should bolster public finances.
Considerable efforts have been made to modernize the regulatory framework. The business
start-up process is now more straightforward, and no minimum capital is required. Licensing
requirements, though still costly, have been eased. The government maintains administered
prices for fuels and subsidizes state-owned enterprises such as the electricity company.
Mozambique has a 4.8 percent average tariff rate. The government is involved in several agri-
cultural sectors where trade barriers remain high. There are domestic ownership requirements
for some new foreign investment. Dominated by banking, the small financial sector has been
evolving, but most people and businesses lack adequate access to financial services. High bor-
rowing costs discourage entrepreneurship.
Corruption in government and business remains pervasive. Corruption, scarce resources, and
poor training undermine judicial independence. The judicial system is further challenged by
a lack of qualified judges and a backlog of cases. Without an efficient legal framework, court
rulings can be arbitrary and inconsistent. Property rights are not strongly respected, and law
enforcement is inefficient and uneven.
MOZAMBIQUE
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continued
)