The UAE economy is 62.8 per cent free and is ranked as the world's 63rd freest economy, according to the 2008 Index of Econ-omic Freedom (IEF), which covers 162 countries, GN reported.
Out of the six countries in the Middle East, the UAE economy is the fifth freest, still lagging behind its counterparts such as Bahrain, Kuwait, Oman and Saudi Arabia.
Across the Middle East and North Africa, which covers 17 countries, the UAE is the seventh freest economy, garnering an overall score higher than the region's average.
The index, produced by the Heritage Foundation and Wall Street Journal, evaluates each country by grading 10 factors of econ-omic freedom using a scale from 0 to 100. A score of 100 represents the maximum freedom and signifies an economic environment or set of policies that is most conducive to a free economy.
The UAE's score is above the global average in six out of 10 factors. Its fiscal freedom, labour freedom, monetary freedom, freedom from corruption, government size and trade freedom are high, with scores ranging from 62 to 99.9.
However, the UAE economy showed some weaknesses. Its business freedom, investment freedom, financial freedom and property rights are low, due to certain regulations and policies.
Dr. Belaid Rettab, director of Data Management and Business Research of the Dubai Chamber of Commerce and Industry, the UAE's overall score is something to feel good about.
"It is a good score whereby 63 over 162 place Dubai amongst the top tier. However, there is of course sufficient room for the UAE to excel further and climb up the ladder," Rettab told Gulf News.
"In concrete, UAE needs to do more to improve particularly its investment freedom, financial freedom, property rights and business freedom," Rettab added.
Marios Maratheftis, regional head of research for Standard Chartered, said the UAE economy and regulatory environment are constantly evolving and moving forward, so the country will likely climb up the rankings in the coming years.
"The recommended reforms we have seen so far, such as the plans to allow foreign ownership in the UAE, are clear indications that the authorities want to make the UAE an even more attractive destination for investment," Maratheftis said.
According to the IEF report, the UAE's regulatory environment doesn't seem to be very appealing to people who intend to start, operate and close a company. The country's business freedom only got a 47.9 score.
"Starting a business takes an average of 62 days, compared to the world average of 43 days. The minimum capital requirement to launch a business is costly. Obtaining a business licence takes less than the world average of 234 days. Bankruptcy proceedings are lengthy and cumbersome," the IEF said.
The UAE's investment freedom got the lowest rating (30). The report said foreign investors do not receive national treatment. Except for those who set up offices in the free zones, the UAE requires that at least 51 per cent of a business must be owned by a UAE national.
Goods have to be distributed through an Emirati partner, although "liberalised" items may be brought in without the agent's approval.
The UAE's financial freedom also scored low at 40. The report cited that while the UAE's two stock markets are open to foreign investment, foreign ownership of listed firms is limited to only 49 per cent, while some companies shun foreign ownership.
Likewise, the country got an equally low score (40) in property rights. The government owns all land in Abu Dhabi.
"Mortgages have been introduced for select Dubai-based five-star property developments and are otherwise generally unavailable," the report said.