U.S. STUDY AGAIN LAUDS ECONOMIC FREEDOM IN ARMENIA
By Emil Danielyan

Radio Liberty, Czech Rep.
Jan 16 2007

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 U.S. 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
average-an 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.