Estonia ranks top in freedom, low in competitiveness

  • 2002-11-14

Estonia ranks as the world's sixth country in terms of economic freedom, sharing the peg with Denmark and the United States, according to results of a survey by The Heritage Foundation and The Wall Street Journal.

Government officials, however, voiced concern that the country will not rank high on the World Economic Forum's list of most competitive countries.

For the ninth year running, Hong Kong continues to have the biggest economic freedom among the 161 countries the survey covers, followed by Singapore, New Zealand and Luxembourg.

Australia and Great Britain come after Estonia in the 2003 economic freedom list, Lithuania is 29th, and Latvia is in 33rd place. Finland and Sweden are 11th and 12th, while Russia ranks low at 135.

The countries with the smallest economic freedom are North Korea, with the situation only slightly freer in Cuba, Zimbabwe and Laos.

The index, drawn up for the first time in 1995, is based on an analysis of 50 different indicators, including government interference in the economy, trade and fiscal policy, foreign investments, banking and finance, proprietory rights and the black market.

The higher each country's score, the more government interference and smaller economic freedom it shows. Estonia's score was level with that of 2002, 1.8 points, as against 2.05 points in 2001 and 2.2 points in 2000.

The score of Hong Kong climbed from last year's 1.35 points to 1.45 points. The score of Finland and Sweden was 1.9 points, of Lithuania 2.35 points, equal with Estonia's score in 1999, Latvia's 2.45 points and Russia's 3.70 points.

Of the 156 countries given a score in the survey, only 15, including Estonia, were found to be "free."

Fifty-six countries were categorized as "mostly free;" 74 countries "mostly unfree;" and 11 countries "repressed."

Authors of the survey gave Estonia the highest score, 1.0 in four out of the 10 main categories: foreign trade, foreign investments, banking and finance, and wages and prices.

While many economies are experiencing difficulties, Estonia proves that growth can be achieved by means of the right politics, the survey said.

At the same time the Estonian Chamber of Commerce and Industry said Estonia could not expect a good placing in the world competitiveness list this year, as its position is poor in the sub-ratings table released on Nov. 12.

"Estonia's ratings differ quite widely from sphere to sphere. If our technology rating is rather high, No. 14, thanks to the application of new technologies, then the rating of our public institutions (No. 28) is rather weak and the rating assessing the macroeconomic environment (No. 46) is very poor," the Chamber of Trade and Industry reported.

Last year, Estonia was No. 27 in the World Economic Forum competitiveness list.

"Separate consideration of the components of the macroeconomic environment rating shows a remarkable negative assessment of the fast growth of public spending, and also general macroeconomic stability in Estonia is not seen as very good," the chamber said.

The United States has taken the first place in the list released by the World Economic Forum. Compared last year, it has swapped places with Finland.

The U.S. owes a large proportion of its success to new-technology-based development and a favorable business environment. Also, the comparatively good macroeconomic outlook of the United States is of relatively big importance, although the growing unpopularity of saving and economy gives rise to certain alarm.

The whole report will be brought out in print by the World Economic Forum to take place in Davos on January 23-28.