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By Ruben Meloyan
Armenia continues to boast the freest economy in the Commonwealth of Independent States, according to an annual report released Tuesday by the conservative U.S. Heritage Foundation and “The Wall Street Journal.”

Their 2009 Index of Economic Freedom around the world rates 179 countries on 10 economic factors like trade barriers, property rights, taxes and market regulations. Armenia is 31st in the rankings, ahead of all other CIS nations and even European Union countries such as France and the Czech Republic. Its overall performance is unchanged from the previous survey released a year ago.

“Armenia rates significantly higher than the average country in eight of the 10 freedoms,” reads the latest Heritage/WSJ survey. “Commercial regulations are flexible and relatively simple. Low tax rates and moderate government spending contribute to an impressive degree of fiscal freedom. There are few restrictions on foreign investment, and banking is wholly private and well regulated.”

Its authors noted at the same time that “widespread corruption” and weak protection of property rights continue to hamper economic activity in Armenia. “Although a number of reforms … have been introduced during the past four years, corruption remains a problem in such critical areas as the judiciary, tax and customs operations, health, education, and law enforcement,” they said.

Local analysts have long treated these largely positive assessments of economic freedom in Armenia with a degree of skepticism. They argue that the Heritage/WSJ surveys focus on the existence of business-related laws and regulations, rather than their enforcement by the government.

Government connections remain essential for engaging in large-scale economic activity in the country. Some lucrative sectors of its economy have been effectively monopolized by wealthy businesspeople close to the government. And Armenian courts still rarely make decisions going against the will of the executive branch.

“I think we should not pay too much attention to these ratings because there are much more important indicators that are not being talked about,” said Suren Poghosian, a senior professor at the Yerevan Economics University. “Take the indicator of the competitiveness of the Armenian economy, for example. We have a much more grim picture here.”

Gagik Aghajanian, the executive director of the Apaven cargo shipment company, pointed to “serious problems” with the enforcement of Armenian laws. “A lot of work needs to be done to ensure that engaging is business is easy and beneficial in this country,” he told RFE/RL. “For example, there is an outflow of capital from Armenia to Georgia, and everyone is aware of that.”

That Armenia’s investment climate leaves much to be desired is acknowledged by the government and Prime Minister Tigran Sarkisian in particular. Speaking at a cabinet meeting last week, Sarkisian pledged to take “radical” measures to improve it. Those, he said, will include a much tougher crackdown on tax evasion by large companies.
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