Balkan Reforms Lag, Economic Freedoms Weak
Economy, Kosovo, Region Tuesday, January 13th, 2009| 13 January 2009 | By Srecko Latal in Sarajevo
Economic freedoms in the Balkans are suffering because of bloated governments, state monopolies, inconsistent regulations and widespread corruption, said the 2009 Index of Economic Freedom report, which stressed that further economic and fiscal reforms were crucial at a time of global recession.
The annual report, prepared and published by the Adriatic Institute for Public Policy, the Heritage Foundation and the Wall Street Journal, analyzes and grades the performance of countries on the basis of key criteria, including business, investment, trade, fiscal and monetary environment, as well as the size of their government, perceived corruption and respect of property and labor rights.
Out of all Balkan countries, Bulgaria was the front runner coming in at 56th place. There was respectable showings by Albania at 62nd place, Romania at 65th and Slovenia at 68th place, which however managed the biggest gains in economic freedom in Europe, improving its score by 2.7 points in 2008.
Macedonia and Montenegro placed in the middle tier, ranking 78th and 94th respectively. The biggest laggards of the region were Serbia at 109, Croatia at 116 and Bosnia-Herzegovina at 134, just ahead of Ethiopia.
“Business freedom, government size, monetary freedom, investment freedom, and freedom from corruption are weak,” the report said of Serbia, while on Croatia it noted that its “overall weakness stems from its outsized government”, while “in addition to high levels of government spending, the government’s presence in other key areas of the economy is considerable.”
Bosnia’s position at the bottom of the European pile, ahead only of Russia, Ukraine and Belarus, was due to the “inefficient and high government spending, weak property rights, and widespread corruption” that “hold down overall economic freedom…and discourage entrepreneurial activity.”
“As a result of sluggish privatization of state-owned enterprises, the private sector’s contribution to GDP has grown rather slowly,” the entry on Bosnia added. “Bureaucratic and non-transparent regulatory systems remain a problem for foreign investors and domestic entrepreneurs.”
The report said the low flat tax rates of 10 to 15 percent – among the lowest tax rates in the world – along with strong focus on privatization and internal structural reforms were a driving force for strong growth in Macedonia, Montenegro and Serbia in 2008.
These countries could still consider to further reduce and maybe even completely eliminate taxes, as Estonia did, said Joel Anand Samy from the Adriatic Institute for Public Policy. He noted that Croatia regressing on the the list of European countries did not bode well for its EU accession and said both Croatia and Bosnia should improve their privatization efforts and slash tax rates to boost economic vitality.
“Even (Barack) Obama’s team is including tax cuts as part of the remedy (for economic salvation of America),” Samy said. “Now is the time for Bosnia and Croatia to do the same.”
He quoted the late Milton Friedman, the 1976 Nobel prize winner in Economics: “Economic freedom is a pre-condition to political freedom.”
The Index shows Europe continued to be one of the best-performing regions, thanks to its “extensive and long-established” free-market institutions, good economic, investment environment, anti-corruption mechanisms and property rights.
“However, Europe’s overall economic freedom is still hampered by weak scores in labor freedom, fiscal freedom, and government size, reflecting the price tag of welfare states that consume a large percentage of GDP,” the report said.
Looking at the global picture, it said “many governments are maintaining a strong commitment to economic freedom, but others are regressing.”
“Regrettably, populist attacks on the free market, fueled by the economic slowdown and the political temptation of quick interventionist remedies, have gained momentum,” the report added.
Source: Balkaninsight
Short URL: http://www.albanianeconomy.com/news/?p=1609
Posted by 