US Study Again Lauds Economic Freedom in Armenia

YEREVAN (RFE/RL)–Armenia continues to boast a more liberal and open economy than most countries in Europe and the former Soviet Union, according to an annual survey released by two conservative US institutions on Tuesday. "The Wall Street Journal" and the Washington-based Heritage Foundation rated the Armenian economy 32nd freest in the world in their 2007 Index of Economic Freedom covering 157 nations. They again praised the country’s liberal trade regime, low taxes and uncomplicated business registration procedures. "Armenia is ranked 19th freest among the 41 countries in the European region," concludes the study. "Armenia’s score puts it above Europe’s averagean impressive feat for an impoverished landlocked country." The rankings, topped by Hong Kong for a 13th consecutive year, are based on 10 factors of economic freedom such as the level of government intervention, trade and monetary policy, property rights and business regulations. Armenia’s overall score of 69.4 percent, measured on a scale of 100 percentage points, is considerably down last year’s level. Still, it remains the highest in the Commonwealth of Independent States. Even European economic powerhouses like France and Italy were assigned lower grade. "Low tax rates, low government expenditure, and low revenue from state-owned businesses contribute to its impressive fiscal and government freedom rankings," the study says. "Armenia has low inflation, and its banking sector is both wholly private and well regulated. "Commercial regulations are flexible and relatively simple. There are few restrictions on foreign investment, except for land ownership." Neighboring Georgia is 35th in the rankings. Two other regional states, Turkey Azerbaijan, fare much worse, occupying the 83rd and 107th spots respectively. The index primarily takes account of the legal framework for doing business in a particular country. Many analysts would argue that existing laws and regulations are often irrelevant to economic realities in Armenia where virtually all wealthy businessman are still dependent on government connections due to serious problems with the rule of law. WSJ/Heritage researchers appear to have partly acknowledged this fact, putting Armenia’s scores in the Property Rights and Freedom from Corruption categories well below the world’s average. "The [Armenian] judiciary is influenced by the executive and is also underdeveloped and corrupt, substantially impeding the enforcement of contracts," they said. Critics will also counter that the low level of tax revenues, worth between 15 and 17 percent of Gross Domestic Product, is in fact a major deficiency that results in a highly uneven distribution of the benefits of Armenia’s double-digit economic growth. The International Monetary Fund and the World Bank have long been pressing the Armenian government to tackle what is widely seen as the result of widespread tax evasion. President Robert Kocharian admitted the gravity of the problem at an extraordinary meeting with top government officials last week.


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