By Emil Danielyan
Armenia’s struggling economy, which kept up its robust growth last year, remains the most liberal and open in the Commonwealth of Independent States, according to an annual global survey conducted by two conservative U.S. institutions. The 2004 Index of Economic Freedom released by the Heritage Foundation and “The Wall Street Journal” on Friday again rates Armenia as the only member of the Russian-dominated grouping of ex-Soviet states with a “mostly free” business environment.
The latest study ranks 155 countries of the world on ten different factors, including trade policy, government intervention in the economy and fiscal burden on businesses. Armenia maintains its 44th in the rankings, sharing it with France, the world’s fourth largest economy.
The former Soviet republic of Moldova moved up to 79th place, but is still a distant second in the survey’s CIS standings. Neighboring Georgia and Azerbaijan were ranked 91st and 106th respectively -- slightly higher than Russia which shares 114th place with the African state of Malawi. All four countries remain in the Index’s category of “mostly unfree” economies.
Armenia maintained its position despite a slight drop in its overall score measured by the WSJ and Heritage on a five-point negative scale. It was assigned 2.63 points this time, 0.04 point more than last year.
The survey, largely based on annual reports issued by the U.S. State Department, the World Bank and other international institutions, concludes that the 1994 ceasefire in Nagorno-Karabakh “has significantly helped to strengthen Armenia.” “Due to the introduction of a liberal trade regime and the mid-1990s successful macroeconomic stabilization, the economy has experienced low inflation and a stable exchange rate,” it reads.
The 2004 Index cautions at the same time that the nine successive years of economic growth, which the Armenian government says hit a record-high rate of 15 percent in 2003, has not resulted in a massive job creation and decline in widespread poverty.
Its authors, who champion free-market economics around the world, downgraded the country’s trade policy score, citing “new evidence of customs corruption.” They also note that “neither legal enforcement nor the judicial system provides adequate protection” of private property and point to the rampant government corruption as a major hindrance to free enterprise.
“A corrupt bureaucracy often applies regulations haphazardly, and political strife hampers the progress of any reforms,” the survey says.
On the positive side, the survey sees a major improvement in state regulation of Armenia’s banking and finance sector. It also praises its government for not imposing any currency exchange controls or profit repatriation restrictions on foreign investors. “Armenia offers equal official treatment to foreign investors, who have the same right to establish businesses as native Armenians in most sectors of the economy,” it says.
The administration of President Robert Kocharian has welcomed previous WSJ/Heritage studies as a vindication of their economic policies and is bound to seize upon the latest one as well to promote greater foreign direct investment in the Armenian economy which stood at a modest $115 million in the first nine months of 2003.
His political opponents, however, will likely dismiss its findings as largely irrelevant to the plight of ordinary Armenians. At least half of them continue to live below the official poverty line, according to government data.