Estonia tops think-tank's economic freedom index for CEE

By bne IntelliNews January 18, 2007

Nicholas Watson in Prague -

Estonia was the highest ranking Central and Eastern European country on the Heritage Foundation's -- a (very) conservative US think-tank – economic freedom index for 2007, coming in at No. 5 on the European list and No. 12 on the global list. Estonia was followed by another Baltic state Lithuania (14/22) and the Czech Republic (18/31).

The index – which ranks 157 countries on 10 types of economic freedom, among them tax rates and property rights – showed mixed progress for the countries that recently joined the EU.

The economic freedom score for Poland (35/87) dropped 2.8 from the year before, Bulgaria (29/62) fell 2.1 and Hungary (25/44) was 0.9 lower. However, Romania (31/67) bucked the trend and rose 2.3.

"Romania enjoys high levels of fiscal freedom, trade freedom, and financial freedom. The financial system in Bucharest is consistent with international standards and has been enhanced by a recent reform and privatization program," the report says.

However, "There is significant corruption in most areas of the bureaucracy, particularly in the judiciary, which enforces commercial contracts only selectively," it says.

Slovenia, which the report says "enjoys high levels of business freedom, investment freedom, trade freedom, and freedom from corruption," was again the top-ranked Southeast European country.

Outside the EU, Eastern European countries generally scored low on the index, though there were some surprising results.

Georgia (20/35) was the biggest mover in the year, its score rising 3.9 from the year before. "Impressively for a post-communist state, Georgia leads in labour freedom and fiscal freedom because of a combination of low taxes and a highly flexible labour market," the report says.

Meanwhile, "Armenia (19/32) and Macedonia (32/71) – leaders in freedom from government and monetary freedom, respectively – are other former communist nations that are rebuilding their economies," it said.

Russia (39/120), Ukraine (40/125) and Bealrus (41/145) came bottom of the European rankings.

Daniella Markheim, a senior analyst with the Heritage Foundation, told RFE/RL that Russia had done pretty well in terms of lowering income-tax rates, as well as starting to reduce some of the price controls and things like that that were affecting their monetary freedom.

"Unfortunately, because [Russia has] some fairly negative force in property rights, in financial freedom, in investment freedom [and] in corruption, those tended to overbalance some of the successes they've had in trying to deregulate, in trying to reduce taxes, and other policies," she said.

"Russia's had a bit of a tough time. It will be interesting to see how they move forward in terms of trying to strengthen their judicial system, their ability to deal with corruption, strengthen property rights, protect intellectual-property rights, and then move forward in trying to continue to remove government from the financial system, from the investment system and let foreign companies in, and open that part of the economy up to true competition," she said.

To read more on the economic freedom index and other items such as "The Enemy at Home: The Cultural Left and Its Responsibility for 9/11", click here.

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