The report finds excessive corruption and weakness in rule of law that slows progress in the region.
By Svetla Dimitrova for Southeast European Times in Sofia -- 10/01/13
The report noted gains in the management of public spending in Turkey. [AFP]
The economies of Turkey and seven Southeast European countries are classified as "moderately free" in an annual survey released Thursday (January 10th), but the average level of economic freedom in the world improved only slightly last year.
The Index of Economic Freedom survey, conducted by The Heritage Foundation and the Wall Street Journal, named Hong Kong as the freest economy in the world, followed by Singapore, Australia, New Zealand and Switzerland.
Eight Southeast European countries -- Albania, Bulgaria, Croatia, Cyprus, Macedonia, Montenegro, Romania and Turkey -- were classified as "moderately free."
Turkey is ranked 69th, up from 73rd last year. The higher mark reflects "gains in the management of public spending, business freedom, and labour freedom that outweigh declines in investment freedom and freedom from corruption," said the report.
Cyprus ranked 41st, the best ranking in Southeast Europe, followed by Macedonia at 43. Romania and Bulgaria ranked 59th and 60th -- up from 62nd and 61st last year – and were noted as "recording their highest economic freedom scores ever in 2012."
However, Bulgaria should make further reform efforts "to solidify the foundations of economic freedom and ensure vibrant economic development in the future," the report said.
The 19th annual edition of the Index of Economic Freedom covers 185 countries, evaluating their performance in four broad areas of economic freedom -- rule of law, regulatory efficiency, limited government and open markets.
It ranks 177 of the surveyed economies on the basis of 10 indicators, including property rights, freedom from corruption, fiscal freedom and government spending.
Based on their aggregate grades, countries are classified into five groups: free, mostly free, moderately free, mostly unfree or repressed.
Scoring less than 60 points, BiH, Greece, Moldova and Serbia were placed among the "mostly unfree" economies.
Greece's score reflects the "substantial declines in property rights and financial freedom that largely offset improvements in six of the 10 economic freedoms," according to the report. The country, which has been trying to avoid defaulting on its huge sovereign debt, is now ranked 117th.
Natasha Srdoc, co-founder of the Adriatic Institute for Public Policy and International Leaders Summit, partner of the Index of Economic Freedom, cited corruption and slow reforms as some of the problems facing the region.
"The major weakness in ... Southeast Europe is weak rule of law measured by high levels of political corruption and a very poor protection of property rights which have been in the repressed category of the Index of Economic Freedom since the start of the study," she told SETimes.
"In order to attract capital and opportunities for local economies, an emphasis on strengthening the rule of law and protection of property rights must become a high priority. Investors from strong rule of law nations are less inclined to enter markets which are adversely affected by politically influenced judicial systems," Srdoc said.
A number of regional nations should also show the political will needed for carrying bold institutional reforms, she said.
"Government spending has remained very high in countries, including Bosnia and Herzegovina, Croatia, Greece and Serbia," Srdoc added. "As noted in the annual study, deeper institutional reforms are urgently needed to tackle bureaucracy, reduce rampant corruption, and strengthen a judicial system that is vulnerable to political interference."
However, she also noted the successful implementation of the flat tax reform initiative in a number of countries as a positive development in the region.
"The flat tax does have an anti-corruption component and is a transparent and non-distortive tax system. The flat tax removes arbitrary tax related decisions by individual politicians and political groups," said Srdoc, urging citizens in the Balkans to "press for principled reforms" like those successfully implemented in the Baltics.
The 2013 index can be found at http://www.heritage.org/index/