The US's Heritage Foundation and Wall Street Journal published its 12th report on Index of Economic Freedom this January. Hong Kong is traditionally ranks first with Index of Economic Freedom (IEF) at 1.28, with one being maximum freedom and five - no freedom at all. The top five of most economically free countries consists of Singapore, Ireland, Luxembourg and Iceland. Belarus moved from 143rd down to 151st. Its IEF became worse from 4.04 to 4.11. It ranks seventh among the ten most economically unfree countries.
Belarus is also among ten countries that have been consistently curtailing economic freedom over the past 12 years, from 1995 to 2006. The country's IEF worsened by 0.41 points. The trend is worse only in Venezuela (minus 0.94), Nigeria (-0.63), Malaysia (-0.48), United Arab Emirates (-0.48) and Thailand and Argentina (-0.45 each).
GDP per capita in terms of purchasing power parity amounted to $30,997 in most economically free countries in 2004, while the respective figure for repressed economies, including Belarus, was only $4,239. Among mostly free countries, e.g. many countries in Europe, GDP per capita in terms of purchasing power parity was $13,531. Belarus could be in that group, if it chose a different development strategy 12 years ago.
Although Belarus' GDP per capita in terms of purchasing power parity is higher than that of other repressed economies (it has about $6,900), the difference with other European countries is still significant. Belarus' capitalization could have been much larger today. The cost of a wrong development strategy is hundreds of billions of dollars. The country could have received them in investment. This amount includes the capital "deadened" by the government, frozen resources in unsuccessful investment projects, money of domestic businesses evicted from the country and value added that could have been generated by free entrepreneurs.
The Heritage report confirms that conclusion and says that Belarus remains the least economically free country in the region. It has worsened its indicators as to fiscal burden and informal market, which sent it back to the group of repressed economies. Belarus has not actually made any progress in conducting economic reform and market liberalization. A Soviet-style anti-market policy prevented the country's economy from effective operation.
Countries as rated by Index of Economic Freedom in 2003-2006
Country |
2006 |
2005 |
2004 |
2003 |
Estonia |
7 |
4 |
6 |
|
Lithuania |
23 |
23 |
22 |
29 |
Latvia |
39 |
28 |
29 |
33 |
Czech Republic |
21 |
33 |
32 |
35 |
Moldova |
83 |
77 |
79 |
92 |
Poland |
41 |
41 |
43 |
44 |
Russia |
122 |
124 |
114 |
135 |
Ukraine |
99 |
88 |
117 |
131 |
Kazakhstan |
113 |
130 |
131 |
119 |
Belarus |
151 |
143 |
145 |
151 |
Source: Index of Economic Freedom 2003-2006 Heritage Foundation
Trends of Index of Economic Freedom in 1995-2006
Country |
1995 |
1997 |
1999 |
2001 |
2003 |
2004 |
2005 |
2006 |
Trend 1995-2006 |
Estonia |
2.45 |
2.46 |
2.29 |
1.89 |
1.68 |
1.76 |
1.65 |
1.75 |
0.7 |
Lithuania |
3.45 |
3.1 |
2.9 |
2.53 |
2.21 |
2.19 |
2.18 |
2.14 |
1.31 |
Latvia |
3.19 |
2.86 |
2.74 |
2.49 |
2.35 |
2.41 |
2.31 |
2.43 |
0.76 |
Czech Republic |
2.33 |
2.24 |
2.19 |
2.1 |
2.35 |
2.39 |
2.31 |
2.1 |
0.23 |
Moldova |
4.1 |
3.6 |
3.44 |
3.7 |
3.13 |
3.09 |
3.11 |
3.1 |
1 |
Poland |
3.51 |
3.14 |
2.83 |
2.69 |
2.83 |
2.81 |
2.59 |
2.49 |
1.02 |
Russia |
3.6 |
3.83 |
3.65 |
3.84 |
3.54 |
3.51 |
3.61 |
3.5 |
0.1 |
Ukraine |
4 |
3.78 |
3.95 |
3.88 |
3.59 |
3.49 |
3.16 |
3.24 |
0.76 |
Kazakhstan |
4.23 |
4.23 |
4.14 |
3.8 |
3.5 |
3.65 |
3.61 |
3.35 |
0.88 |
Belarus |
3.7 |
3.95 |
4.19 |
4.1 |
4.19 |
4.04 |
4.04 |
4.11 |
-0.41 |
Source: Index of Economic Freedom 2003- 2006 Heritage Foundation
But everything started very good for Belarus about a decade ago. Its IEF was much better than that of Kazakhstan, Russia, Ukraine and Moldova in 1995. And it was almost at the same level with Poland and Lithuania. Belarus was freer than China at that time. But now the latter is much ahead of the former. China's IEF rating is 3.34 (111th in the world). Belarus is the only country in the region that diminished its economic freedom over the past 12 years.
This year Heritage ranked 157 countries with the use of 50 variables grouped in ten categories: 1) trade policy, 2) fiscal burden, 3) government intervention, 4) monetary policy, 5) foreign investment, 6) banking and finance, 7) wages and prices, 8) property rights, 9) regulation and 10) informal market. As many as 99 countries became freer economically, 51 countries worsened their index and five countries remained at last year's level. Of 157 countries, just 20 are ranked as economically free, 52 are "mostly free," 73 countries - "mostly unfree," and 12 - "repressed." Belarus is in the last group.
