Russia’s economy ranks 143rd in a list of the world’s freest economies, just one spot higher than countries with “repressed” economies like Vietnam, Ecuador, Belarus and Ukraine, according to a report released Wednesday.
The Heritage Foundation, a conservative U.S. think tank, gave Russia a freedom score of 50.3, 0.5 points down from last year, in its index of economic freedom in 183 countries.
The index uses a scale of zero to 100, with 100 being the most free, and is based on 10 indicators, including trade freedom, fiscal and monetary freedom, government spending, investment freedom and freedom from corruption.
“The Russian economy scores above the world average only in fiscal freedom, in part because of a reduced corporate tax rate that became effective in January 2009,” the report said.
Analysts concurred that it was more difficult to do business in Russia than in other European countries, but Russian politicians derided the report as unfair.
“The report is trying to say that it’s more difficult to do business in Russia than in Western Europe because there are more regulations in Russia and there may also be concerns about corruption,” said Nigel Rendell, an analyst at RBC Capital Markets in London.
The report said corruption remained rampant “in the size of bribes sought” and warned that government involvement hindered the economy.
“There’s always tension between state and market, and in the case of the Russian economy, unfortunately, the state seems to be winning,” said Anthony Kim, a researcher at Heritage Foundation who contributed to the report.
“That’s the reason why Russia’s economy is losing flexibility and competitiveness,” he said by telephone from Washington.
Kremlin spokesman Alexei Pavlov declined to comment on the report.
But Yevgeny Fyodorov, chairman of the State Duma’s Economic Policy and Entrepreneurship Committee, said the findings were far from reality. “This evaluation certainly has nothing to do with reality. It’s based on the notion that Russia’s economy is mostly supported by big companies that have a privileged status,” he told The Moscow Times.
He also said the post-Soviet, raw materials economy was fashioned on the advice of U.S. and European experts in the 1990s, and those experts were responsible for any lack of freedom.
“There was no authentic Russian base for this type of economy, so it was formed artificially,” he said. “The evaluation we have now is based on this artificial model.”
Bureaucratic obstacles for small businesses are among the other problems in Russia’s economy, the report said. Obtaining a business license in Russia takes much longer than the global average, it said.
Fyodorov conceded that small businesses faced enormous startup barriers. “There’s no place for small business in Russia’s aggressive economic climate,” he said.
The economic freedom list is topped for the third year in a row by Hong Kong, with a score of 89.7. Singapore and Australia hold second and third place, respectively.
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