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June 2020, No. 94


Foreign Trade

 In ďProsperityĒ Race

 We Lag Behind Our Counterparts


Gap between Strongest and Weakest Performing Countries Continues to Widen


 

According to Legatum Prosperity Index 2019 the world is more prosperous than it has ever been. Nearly 90 percent of world countries experience more prosperity than they did 10 years ago. The London based Legatum Institute analysts say the improvement in global prosperity has been driven by more open economies and improvements to peopleís lived experiences. Peopleís lived experiences have improved due to better health, education, and living conditions.

Using the Prosperity Index framework, nations around the world can assess their strengths and weaknesses in order to determine the economic and strategic choices that need to be made to further build inclusive societies, open economies, and empowered people to drive greater levels of prosperity.

The key findings from 2019 report are:

  •  Global prosperity continues to improve, but the gap between the strongest and weakest performing countries continues to widen

  •  The improvement in global prosperity has been driven by more open economies and improvements to peopleís lived experiences

  •  Economies are more open due to the improvement in the investment environment and digital connectivity, as well as a reduction in administrative burdens

  •  Peopleís lived experiences have improved due to better health, education, and living conditions

  •  Stagnating institutions are holding back further improvements to global prosperity

  •  People are more tolerant, although there is less freedom to speak, associate, and assemble

 

Overall, the world is more prosperous than it has ever been, with Denmark overtaking Norway as the strongest performer. North America remains the most prosperous region, although, as a result of its prosperity stagnating, the gap with Western Europe has narrowed.

Iranís prosperity record in 2019 like the previous years is not so bright. Iran is 119th in the overall Prosperity Index rankings. Since 2009, Iran has remained at the same position. In none of the Legatum reports you will see the name of Iran in the list of countries that have marked a significant improvement in any pillars of prosperity. It is frustrating to know that Iranian prosperity is lower than those of Kenya and Zambia in Africa.

Of the 167 countries measured and tracked for prosperity in this yearís index, 148 (containing 88% of the worldís population) have seen an improvement in their prosperity since 2009. Although Myanmar (124th) has seen the most improvement in prosperity, government treatment of the Rohingya Muslims is cause for concern. Togo (144th) and Kyrgyzstan (88th) are the second and third most improved countries, rising 14 and 18 ranks respectively.

The framework of the index captures prosperity through three domains: inclusive societies, open economies and empowered people.

The Inclusive Societies domain captures the relationship structures within a society, between individuals and broader institutions, and the degree to which they either enable or obstruct societal cohesion and collective development. 

These social and legal institutions are essential in protecting the fundamental freedoms of individuals and their ability to flourish. This domain rests on the pillars of safety and security, personal freedom, governance and social capital.

 

Inclusive Societies Domain

Iranís overall score of Inclusive Societies domain dropped from 40 in 2009 to 39.3 in 2019. The country ranked 151 in this domain in 2019, which indicates no change compared with 10 years ago. In the MENA region, Iran ranks 14.   

The safety and security pillar of Inclusive Societies domain measures the degree to which war, conflict, terror and crime have destabilized the security of individuals, both immediately and through longer lasting effects. 

Iranís score in this pillar improved from 54 in 2009 to 56.8 and the countryís ranking improved by seven places to 131 in 2019. The countryís ranking in the MENA region was 12th in the 2019 report. 

The personal freedom pillar measures progress toward basic legal rights, individual liberties and social tolerance. Iranís score rose from 15.5 in the past decade to 16.9 and its ranking improved by two places to 163. In the MENA region, the country ranked 17th among 19 countries. 

The governance pillar measures the extent to which there are checks and restraints on power and whether governments operate effectively and without corruption. Iranís score dropped from 38.8 to 38.3 over the 10 years and its ranking dropped by four places to 138 among 167 countries. The country ranked 14th in the MENA region. 

The social capital pillar measures the strength of personal and social relationships, institutional trust, social norms and civic participation in a country. Iranís score slid from 51.8 in 2009 to 45.2 in 2019 and its ranking plummeted by 71 places to 129. The countryís ranking in the MENA region was 12th. 

 

Open Economies Domain

The Open Economies domain captures the extent to which an economy is open to competition, encourages innovation and investment, promotes business and trade, and facilitates inclusive growth. 

For a society to be truly prosperous, it requires an economy that embodies these ideals. This domain rests on the pillars of investment environment, enterprise conditions, market access and infrastructure, and economic quality. 

Iranís overall score in the Open Economies domain has improved from 38.4 in 2009 to 41.2 in 2019 and the countryís ranking has increased by four spots to 124. In the MENA region, Iran ranked 14th in this domain. 

The investment environment pillar of Open Economies domain measures the extent to which investments are adequately protected and readily accessible. Iranís score has dropped from 42.8 in the past decade to 42.7 and its ranking has deteriorated by seven places to 126 in 2019. In the MENA region, the country ranks 14th. 

The pillar of enterprise conditions measures the degree to which regulations enable businesses to start, compete and expand. Iranís score has improved from 37.9 to 39.4 over 10 years but its score has dropped by five positions. Iran ranks 16th in the region. 

The market access and infrastructure pillar measures the quality of the infrastructure that enables trade, and distortions in the market for goods and services. The countryís score has jumped from 28.9 to 39.7 and its ranking has improved by 18 places to 110 over the period. The country ranks 15th in the MENA region.  

The economic quality pillar measures how well a stateís economy is equipped to generate wealth sustainably and with the full engagement of its workforce. Iranís score has plunged from 44.1 to 42.8 and its ranking has dropped by six positions to 101 while it ranks 10th in the region. 

 

Empowered People Domain

The Empowered People domain captures the quality of peopleís living experience and associated aspects that enable individuals to reach their full potential through autonomy and self-determination. This domain rests on the pillars of living conditions, health, education and natural environment.

Iranís overall score in this domain improved from 61.7 to 64.5 while its ranking remained unchanged at 90 over the 10-year period. The country was placed 11th in the MENA region. 

The pillar of living conditions measures the degree to which a reasonable quality of life is experienced by all, including material resources, shelter, basic services and connectivity. Iranís score has improved from 74.3 to 77.1 over the past decade but its ranking has dropped by two spots to 73. In the MENA region, Iran ranks 12th. 

The health pillar measures the extent to which people are healthy and have access to services essential for maintaining good health, including health outcomes, health systems, illness, risk factors and mortality rates. The countryís score has improved from 70.3 to 71.3 over 10 years while its ranking has slid by three positions to 88 in 2019. The country ranks 12th in the MENA region. 

Iran performed most strongly in terms of education and living conditions, but was weakest in personal freedom. The biggest improvement compared to a decade ago came in market access and infrastructure. 

The education pillar measures enrolment, outcomes and quality across four stages of education (pre-primary, primary, secondary and tertiary education), as well as skills in the adult population. The countryís score has climbed from 58.3 to 65.5 over the past decade and its ranking has jumped by 14 places to 71. The country ranks sixth in the region vis-ŗ-vis education.  

The natural environment pillar measures aspects of the physical environment, which have a direct effect on people in their daily lives and changes that might impact the prosperity of future generations. The countryís score has increased from 43.9 to 44.1 over the past decade but its ranking has remained unchanged at 152. The country ranks 14th in the region.  

It is important to note that the pillars within each domain do not only associate with other pillars in the domain, but interrelate with pillars across other domains and each pillar should therefore be understood in the wider context of the index.

The highest ranking went to Denmark, Norway and Switzerland. Sweden, Finland, the Netherlands, New Zealand, Germany, Luxembourg and Iceland are also among the top 10 countries in the ranking. The poorest countries are the Central African Republic, Yemen and South Sudan. It would be unfortunate if you knew that only four countries - Yemen, Eritrea, Sudan and Syria - are worse off than Iran. Even South Sudan - at the bottom of the table - experiences individual freedom three steps higher than Iran.

It is not difficult to see the decline of the two components of personal freedom and social capital that has made Iran unable to make good use of its human resources capacity for the sake of prosperity.

The story of Iranís prosperity, however, has become boring. While the economy of our middle-income country has the potential to create greater prosperity for its citizens, the inefficiency of bureaucracy, the weakness of governance, and the tightening of the scope for individual freedoms have made Iran lag behind its counterparts in the prosperity race. It is a fact that, without realizing it, we still have to see Iranís prosperity decline and falling in the world rankings.  

 

By: Moloud Pakravan

 

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  June 2020
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