Heritage Foundation | Index of Economic Freedom 2008

(We today noticed that we forgot to post this earlier -- apologies!)

The Heritage Foundation provides visitors with the 2008 Index of Economic Freedom, which covers 162 countries across 10 specific freedoms such as trade freedom, business freedom, investment freedom, and property rights. The 2008 Index provides an even clearer picture of economic freedom by using data-driven equations which allows countries to be graded between scores of 0 and 100.

According to the 2008 assessment, Azerbaijan’s economy is 55.3% free, which makes it 107^th in the world. If we look at the distribution, Azerbaijan falls into Mostly Unfree category.

Azerbaijan has considerable challenges in Investment Freedom, Financial Freedom, Property Rights and Freedom from Corruption. Its overall score is insignificantly different (0.5% points) than the last year. Azerbaijan is ranked 18^th out of 30 countries in the Asia-Pacific region, and its overall score is below the world average.

For more info on Azerbaijan, click _here.

Georgia is in a much better situation than Azerbaijan, having a 69.2% free economy, which makes it the world’s 32^nd freest economy. Its overall score is 0.1% point lower than last year. Similar to Azerbaijan, two categories remain significantly below the world average: Property Rights and Freedom from Corruption. Property Rights may reflect the 2006 and 2007 situation, in which old (illegally, as the government alleged) privatizations were rescinded. As for corruption, is the data really plausible? According to the CRRC Data Initiative (DI) 2007, only 1% of the respondents in Georgia say they had to pay a bribe in the previous year.

Moreover, Georgia is ranked 18^th out of 41 counties in the European Region, and its overall score is equal to the regional average. For more info on Georgia, click here.

From the South Caucasus countries Armenia has the best score. It ranks 28^th with 70.3% freedom, just narrowly beating Georgia.

But Armenia, like Georgia, scores way below the world average in Property rights and Freedom from Corruption categories. In Georgia's case, we are not convinced by the accuracy of the score on Freedom from Corruption. Note a further post on this issue, for more detail.

To view scores and rankings for any country, or to find out which are the top ten countries, along with detailed data and background analysis, click here.

Remittances in the Caucasus: EBRD Releases Results

EBRD has released the results of its study on remittances in Azerbaijan, Georgia and Moldova. A
unique aspect of the study in Post-Soviet territory is that it not only surveys migrants in Georgia, Azerbaijan and Armenia, but it also carried out interviews with migrants themselves in Russia.
Many results, at first glance replicate findings from other studies as well as the Global Development Network study we are currently working on (stay tuned for more).

• Remittance money sent is generally only spent on basic needs.
• Migrants to Russia tend to be younger and male.
• Most migrants use the banking sector to transfer money (though many don’t have bank accounts) – but there is an extensive courier trade for remittances.
• Few migrants are interested in business or economic development in their countries of origin.
  

These findings have significant policy implications, not least because it shows that Caucasus migration varies from, say, Latin American patterns. Your comments on possible policy implications are welcome.

Bendixen & Associates, renowned for their polling of Latinos in the United States and the across Spanish-speaking world, carried out the study. Undoubtedly, B&A won the bid as the result of their expertise in carrying out remittance studies in Latin America. However, some facts of the study are curious and we would like to find out more than the scant information on methodology available online (particularly compared to EBRD’s amazingly documented Life in Transition Survey).

1. There is no mention of the sampling frame used in any of the countries. What strategy did B&A use to find households? Census lists are extremely outdated in both Georgia and Azerbaijan.
2. The report mentions a wide variety of interview languages employed for the study in Azerbaijan – including Tat and Farsi. B&A says, however, that all interviews were conducted in Georgian in Georgia. We find this surprising, since non-Russian speaking minorities in Azerbaijan are a very small percentage of the population and linguistically well integrated. This is not the case in Georgia were sizable ethnically homogeneous communities do not speak the titular language (Georgian). As the study specifically mentions the particular status of Armenian families in Samtskhe-Javekheti, it would be interesting to find out how the interviewers communicated with these households.
   
3. The Azerbaijan sample provides statistics based on regions. However, four regions out of eleven appear to be omitted. Guba-Khachmaz, which is in Northern Azerbaijan; Naxcivan, Azerbaijan’s exclave, which borders Turkey, and Kalbajar-Lachin and Dagliq Qarabag, which are both currently partially occupied – though there are regions under Azerbaijani control. If there was no sampling done in these regions, it should be stated, as the sample may then have certain biases in the national remitances picture. Naxcivan has distinct migration patterns with Turkey and many non-ethnic Azerbaijanis live in Guba-Khachmaz.
   
4. On the follow up study in Russia, B&A’s explanation of the sampling frame is also opaque. It states in one of the reports posted on the Internet that it got its information from the Federal State Statistics Service and that this information was updated. In another report, it claims that the data on households was gleaned from household surveys. Either way they report the following numbers: 903,000 Azerbaijanis, 344,000 Moldovans and 283,000 Georgians. There may be a confounding factors in these counterintutive numbers. Many migrants, as the study notes, are already citizens of Russia. Yet many of those who migrate to Russia and now have citizenship were ethnic Russians, who themselves may have been born in Russia and migrated to the Caucasus during Soviet times. Furthermore, many ethnic Armenians from Azerbaijan fled not to Armenia but to Russia after the Nagorno-Karabakh conflict. Many of these ethnic Russian and Armenian families may have fewer (or no) connections with their former country of residence and this may yield very different dynamics. Again, some information on this would also be interesting.

We hope that the EBRD will release more information soon and even the data. So stay tuned for further updates.

Index of Economic Freedom: a critical time lag?

Yesterday the Heritage Foundation released the Index of Economic Freedom 2009. The Index is published annually by the Heritage Foundation together with the Wall Street Journal for over 150 countries of the world (183 in 2009).

But the Index may be misleading, as the analysis of one of the index components reveals that some data that goes into it seem to be outdated. The index is calculated as an average of 10 indicators that measure the level of the economic freedom of a country. The indicators include: business, trade, fiscal, monetary, investment, financial and labor freedoms, as well as government size, property rights, and freedom from corruption.

To measure the last indicator, the Heritage Foundation uses the Corruption Perception Index produced annually by Transparency International. Data sources for CPI are surveys of business people and expert assessments. The authors of the Index of Economic Freedom take CPI and multiply it by 10, since the other 9 indicators that make up the Index are measured on a scale from 0 to 100.

One would expect that the Index published early in the year is based on the data from the previous year. We can expect that the 2009 index reflects the 2008 situation, even though calling this “a 2009 index” is misleading. However, the data goes back even further than 2008.

Compare the Index of Economic Freedom’s Freedom from Corruption score and CPI, which is used as the basis for the former, for Azerbaijan:
The CPI 2007 methodology explains that CPI combines assessments from the last two years – 2007 and 2006. This means that the Freedom from Corruption indicator in the 2009 Index of Economic Freedom is based on the figures of 2007 and 2006.

The authors of the Index use June 30 as the cut-off date for the inclusion of any information in the next year’s report. This means that all information that became available after June 30, 2008 was not included in the 2009 Index. That’s why the most recent CPI data, released by Transparency International in September 2008, did not go into the 2009 Index.

The Index of Economic Freedom is widely accepted as an annual assessment of a country’s performance. As such, it stirs discussion within society, and usually country’s previous scores are used for comparison. The FAQ section of the homepage for the Index states that “some factors are based on historical information." But what is the chance that an Azeri journalist or an ordinary citizen, who learns about the country’s Index for a given year, read the FAQ?

Also, one may ask how consistent and representative a mix of historical and current information (some Index components are based on the recent figures) is?

The credibility of international assessments like this and their impact on the governments, media and civil society across the world would only increase if they are consistent and based on an updated analysis.

Cell Phone Data | Figures for the South Caucasus

Cell phones seem to have become indispensable in the West. The number of cell phones in the UK, for instance, has already exceeded the number of its people. Throughout the world, the total amount of cell phone owners increases every year.

So how does this trend look in the South Caucasus? It appears that more than half the adult population across the three countries already owns a mobile phone. Furthermore, the South Caucasus is one of the top growing global regions for usage of mobile phones since the percentage of cell phone users has grown faster than in the nominally largest growing markets of Brazil, Russia, India and China (the BRIC countries).

The CRRC Data Initiative (DI) indicates that the number of mobile phones per household in Azerbaijan reached 76 % in 2007, the highest percentage in the region. Armenia followed up on second place with 70 % cell phones per household and Georgia came on third place with 61 %.
As for the distribution across the country, there are (predictably) more phones in the capitals than in the countryside, as shown below in the chart.

However, recent growth has been particularly pronounced in rural areas. This has decreased the cell phone ownership gap between rural and urban areas. For example, rural Azerbaijan went from having cell phones in 32 % of households in 2006 to 64 % in 2007, a doubling of numbers in a single year. Rural Armenia increased from 47 % in 2006 to 66 % in 2007, an increase of nearly 20 % in a year, and rural Georgia reached the 50 % level in 2007 from having had 38 % the previous year, which still is a 12 % increase.

Although you could do the maths, CRRC household data does not provide direct figures on the total number of cell phones. This statistic is offered by the International Telecommunication Union (click on “Statistics”). With slightly older data, it shows Armenia as the country with the highest density of cell phones in the South Caucasus with 62,5 cell phones per 100 inhabitants (41,8 in 2006). Georgia follows up on second place with 59,1 cell phones per 100 inhabitants (38,4 in 2006) followed by Azerbaijan with 53,3 cell phones per 100 inhabitants (39,2 in 2006). Their data is based on an annual questionnaire sent to government agencies responsible for telecommunication. Caveat emptor (it may, for example, include inactive phones). It might be interesting to reconcile the numbers from various sources.

For a refreshing anthropological view on mobile phone usage in developing countries, in the New Scientist, click here.

Want to investigate this topic further? Check out our datasets!

Freedom in the Caucasus | Freedom House 2008 Summary

Freedom House has just released its Freedom in the World report, for the year 2008. The report quantifies political rights and civil liberties. Civil liberties reflect four components: freedom of expression, associational rights, rule of law, and individual rights. Political rights focuses on three main components: electoral process, political pluralism and functioning of government. These indicators are then taken together to determine whether a country is free, partly free, or not free.

It's a mixed picture for the Caucasus. Armenia and Georgia are seen as Partially Free. In both countries civil liberties are rated as 4, on a scale where 1 means most free, and 7 least free. On political rights, Georgia also gets a score of 4. Armenia, by contrast, gets a score of 6 on political rights, down from the previous 5. This is unhappy company: 6 puts Armenia on a level with Russia, Tajikistan, Kazakhstan but also Congo. Azerbaijan, on political rights also gets a score of 6, just one up from the worst possible level of seven (Uzbekistan, Turkmenistan, Saudi Arabia). By comparison, even Afghanistan gets 5, and Turkey gets 3.


On civil liberties, Azerbaijan is also ranked as 5. That puts it squarely in the Not Free category, with the same scores as Russia. The overall map captures the context.

Painfully, Georgia has been removed from the list of electoral democracies. Yet this maybe does not mark quite the change that some people suggest: previously, Georgia was trading on the hopes that elections would work just fine. 2008 provided a hard test, and there was some (ultimately) unsurprising reverting back to old forms of managing things.

A more detailed look shows that Georgia already received a significant downgrade last year, when its 2007 performance brought it down from 3 to a score of 4 on both political rights and civil liberties. Time, maybe, for the government to do its homework in building institutional checks and balances (as they have said they would) but also for the opposition to get off their soapbox to make themselves relevant to the political process.

Generally, when looking at the methodology, we found it broadly plausible. Sure, we could always quibble with details (are political rights and civil liberties always as correlated as Freedom House suggests?) but it's a reasonable way of making the state of freedom comparable across the world.

Check out the website for detailed maps, a good essay summary, some (horrible) pie charts. You want to know how Freedom House rated General Pinochet in the 1970s? Check the comprehensive Excel sheet giving you the scores over time.

Georgian Perspectives on Aid | Survey Data

How do Georgians look at the influx of foreign aid? And how do they interpret what is coming in? How should it be spent? These are questions that Transparency International wanted to find out about last November. We added the questions to an ongoing survey. The results, in the meantime, have also been published in the Caucasus Analytical Digest, a new online publication that summarizes key findings, and combines them with short analysis pieces.


If the image is too small, click on it to increase it in size.


Interested in more? Check out the Caucasus Analytical Digest, and, for the thoughtful and engaging Transparency International report go directly to their website.