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Armenia’s economy still ranked among world’s freest

Armenia freest in CIS and in neighborhood

Published: Saturday January 17, 2009

Tigran Sarkisian, now Armenia’s prime minister, led the Central Bank of Armenia from April 1998 to April 2008. Photolure

Yerevan - Armenia's economy is the 31st freest in the world and the 18th freest in Europe, according to the annual Index of Economic Freedom released on January 13. The index, prepared by the Washingtonbased Heritage Foundation and the Wall Street Journal, ranked 179 countries.

The index measures the extent of government involvement in each country's economy. The higher the score, the lower the level of government intervention.

Armenia's 2009 score is the same as last year, and Armenia continues to outperform several developed economies and leads its region in economic freedom.

In the neighborhood Georgia showed slight improvement and came in 32nd; Turkey is 75th, Azerbaijan is 99th, Russia is 146th, and Iran is 168st. The ratings are topped by Hong Kong, Singapore, and Australia, with the United States in 6th place.

The findings form part of the eligibility criteria for ongoing assistance through the U.S. government's Millennium Challenge Corporation (MCC). Implementation of a $235 million MCC program to fight rural poverty in Armenia began in December 2006.

Armenia's economy

Armenia rates significantly higher than the average country in eight of the 10 "freedoms" tracked by the report. The report found, "Commercial regulations are flexible and relatively simple. Low tax rates and moderate government spending contribute to an impressive degree of fiscal freedom."

The report also noted, "There are few restrictions on foreign investment, and banking is wholly private and well regulated."

However, the report, noted, "Widespread corruption and weak protection of property rights reduce Armenia's overall level of economic freedom." The report identified "burdensome bureaucratic procedures and discretionary decisions by individual officials" as factors encouraging petty corruption. It identified a fairly weak judiciary as a factor in the weak protection of property rights.

The report found that it's easy to open a business in Armenia. Once the business is open, the tax burden is low, with the top income tax rate and corporate tax rate at 20 percent. Customs tariffs are "relatively low," too, though the customs administration comes in for criticism.

The report notes that there are no restrictions or controls on the holding of foreign exchange accounts, invisible transactions, or current transfers, and there are no repatriation requirements for investments.

The report notes a rise in inflation and, consistent with the Heritage Foundation's philosophy, criticizes Armenia's government for subsidizing public transportation and regulating public utilities such as electricity and gas.

The report also notes, as a negative, the protection of workers' rights under the law.