Angola's economy is 43.5 percent free, according to our 2007 assessment, which makes it the world's 149th freest economy. Its overall score is 0.1 percentage point higher than last year, partially reflecting new methodological detail. Angola is also ranked 38th out of 40 countries in the sub-Saharan Africa region. Data are spotty for Angola because of a protracted civil war, but the country has attained a moderate degree of economic freedom despite a devastated infrastructure and a fledgling government. Angola scores high in fiscal freedom and receives fairly positive scores in trade, but it receives overwhelmingly negative scores for most of its policies. The income tax rate is low, and overall tax revenues are low as a percentage of GDP. Trade freedom is progressing, but significant non-tariff barriers on imports are still imposed.
Angola faces serious economic problems in other areas. Inflation is high, regulation chokes business, investment is basically unwelcome, government size is excessive, corruption is crippling, and political influence mars the judiciary. Commercial regulations are a major hindrance to opening and closing a business, and inconsistent, confusing regulations make operating a successful company difficult.
Background:
Despite extensive oil and gas resources, diamonds, hydroelectric potential, and rich agricultural land, Angola remains poor. Since 2002, when the country's economically devastating 27-year civil war ended, the government has worked to repair and improve Angola's ravaged infrastructure and its weakened political and social institutions. High international oil prices and rising oil production have led to strong economic growth in recent years, but corruption and public-sector mismanagement remain common, particularly in the oil sector, which accounted for over 50 percent of gross domestic product and 78 percent of government revenues in 2005.
Business Freedom - 33.9%
Starting a business takes an average of 124 days, compared to the world average of 48 days. This makes entrepreneurship far too difficult to enable a dynamic official economy. Obtaining a business license can be very difficult because of regulations, and closing a business is also very difficult. Inconsistently enforced, the regulatory system has been vague and complicated. The overall freedom to start, operate, and close a business is seriously limited by the national regulatory environment.
Trade Freedom - 68.0%
Angola's weighted average tariff rate was 6 percent in 2005. While Angola has made solid progress in reforming its trade regime, non-tariff barriers still impose a cost on trade. Some non-tariff barriers include subsidies, import controls, customs barriers, some prohibitive regulations and standards, and issues involving the enforcement and protection of intellectual property rights. Consequently, an additional 20 percent is deducted from Angola's trade freedom score.
Fiscal Freedom - 90.0%
Angola has a low income tax rate but a high corporate tax rate. The top income tax rate is 15 percent, and the top corporate tax rate is 35 percent. Other taxes include a fuel tax and a consumption tax. In the most recent year, overall tax revenue as a percentage of GDP was 6.9 percent.
Freedom from Government - 38.4%
Total government expenditures, including consumption and transfer payments, are high. In the most recent year, government spending equaled 38.9 percent of GDP, and the government received 79 percent of its total revenues from state-owned enterprises and government ownership of property.
Monetary Freedom - 47.7%
Inflation in Angola is high and unstable, averaging 34.8 percent between 2003 and 2005. Relatively high and unstable prices explain most of the monetary freedom score. Government price controls are pervasive in many sectors of the economy, including fuel and electricity. Consequently, an additional 15 percent is deducted from Angola's monetary freedom score to adjust for the high economic cost of these price control measures.
Investment Freedom - 20.0%
Angola's Law on Private Investment provides equal treatment to foreign investors, simplifies investment regulations, and lowers the required investment. However, procedures to register a foreign investment remain burdensome. Capital and money market transactions, capital repatriation, real estate transactions, and personal capital movements are subject to strict controls. In most instances, these transactions require central bank approval and/or licensing. Foreign investment in defense, internal public order, state security, certain banking activities, and the administration of ports and airports is not explicitly prohibited but is somewhat off-limits.
Financial Freedom - 40.0%
Angola's financial system is small and underdeveloped but growing. The banking sector in 2003 consisted of seven commercial banks, of which three were foreign-owned. The two state-owned banks, which are slated for privatization, control approximately 45 percent of banking assets. Angola has been liberalizing the banking and insurance sectors in accordance with International Monetary Fund and World Bank advice, but financial governance remains poor. Available financial instruments are limited by the overall economic environment. The state remains heavily involved in the insurance sector. The government has formally constituted Angola's stock exchange with plans for it to be fully operational by the end of 2006.
Property Rights - 20.0%
The rule of law cannot be guaranteed through the local justice system, which suffers from political interference. Angola's legal and judicial system is not efficient in handling commercial disputes. Legal fees are high, and most businesses avoid taking disputes to court.
Freedom from Corruption - 20.0%
Corruption is perceived as widespread and hinders all other economic freedoms. Angola ranks 151st out of 158 countries in Transparency International's Corruption Perceptions Index for 2005.
Labor Freedom - 56.7%
The labor market operates under restrictive employment regulations that hinder employment and productivity growth. The non-salary cost of employing a worker is low, but dismissing a redundant employee is relatively costly. Angola has very rigid restrictions on increasing or contracting the number of working hours.
