Armenian Economy Rated ‘Moderately Free’

Armenia has the 39th freest economy in the world thanks to a liberal regulatory environment and “competitive” tax rates, according to an annual survey released by two conservative U.S. institutions on Thursday.

“The Wall Street Journal” and the Heritage Foundation rated 179 countries on four criteria of economic freedom, including the rule of law, the size of government and market openness.

With a cumulative score of 68.8, Armenia was placed into a category of nations with “moderately free” economies. It was ranked 19th freest among 43 countries in Europe, ahead of France and Norway. Of all other former Soviet republics, only neighboring Georgia as well as Lithuania and Estonia occupy higher spots in the 2012 Index of Economic Freedom.

“The overall regulatory framework remains efficient, facilitated by streamlined business procedures and competitive tax rates,” said the WSJ/Heritage survey. “Policies that support open markets are firmly in place, making the country’s investment and trade regimes competitive.”

Still, Armenia’s overall score decreased by 0.9 point from last year because of what authors of the survey see as negative trends in corruption, government spending and monetary freedom.

“That should be a subject of serious analysis because in the absence of other competitive advantages economic freedom is our main trump card,” said Gagik Minasian, the pro-government chairman of the Armenian parliament’s committee on finance and budgetary affairs.

“We should not be satisfied with the fact that other CIS countries are below 100th place,” Minasian told RFE/RL’s Armenian service (Azatutyun.am).

Armenian analysts and opposition politicians have treated the largely positive WSJ/Heritage findings with a degree of skepticism. They argue that the global surveys focus on the content of business-related laws and regulations, rather than their enforcement by the government.

“Based on the indicators used in the survey, Armenia’s position should have been worse,” said Vahagn Khachatrian, an economist and senior member of the opposition Armenian National Congress (HAK). Khachatrian pointed to the existence of de facto economic monopolies and the importance of government connections for doing business in the country.

The U.S. survey did acknowledge problems with the Armenian business environment. “Although the country performs relatively well in many of the four pillars of economic freedom, the foundations of economic freedom are not strongly sustained by a strong and independent judiciary,” it said. “Lingering corruption further undermines opportunities for more vibrant and lasting economic development.”

In a recent interview with RFE/RL’s Armenian service, Prime Minister Tigran Sarkisian said his government will step up its efforts to improve the investment climate in 2012. He said reforms carried out by the government have already produced “encouraging” results.

“There was no change in the business environment in 2011,” insisted Khachatrian. He downplayed a recent World Bank report which concluded that doing business in Armenia has become somewhat easier over the past year.