The peaceful transition of authoritarian regimes toward democracy and a market economy poses enormous challenges for citizens and politicians alike. Around the world, under widely differing conditions and with varying degrees of success, reform-oriented groups are struggling to democratize their countries and to strengthen the market economy. Good governance is the decisive factor for the success or failure of any transition process. This is the third edition of the Bertelsmann Transformation Index (BTI), which is published every two years. The global ranking measures and compares transition processes worldwide on the basis of detailed country reports. Comparing systematically the status of democracy and market economy on an international basis, the BTI also provides comprehensive data on the quality of political management in 125 transition and developing countries from 2005 to 2007. The country reports and data are documented on the enclosed CD-ROM.