Good news: Bosnia and Herzegovina for the first time among the "economically free" countries
For Bosnia and Herzegovina is of crucial importance to continue with reforms in the direction of increasing economic freedom, which can be achieved by reducing fiscal taxes, limiting government spending, but also by general political decentralization and, consequently, economic power in the country, especially in the Federation.
In recent days published the overall results of this year's Index of Economic Freedom, Fraser Institute in Canada. It is one of the two most relevant reports in this area within which measures the degree of political and institutional support economic freedoms of the individual, writes factor.
It is a so-called. negative freedoms which include the right of individuals to pursue their own interests through voluntary exchange of property rights, ie the right of individuals to freely work, produces, consumes and invests ie. perform basic economic activities. In this case the role of the state is reduced to ensure the rule of law and protection of individual freedom.
Impaired liquidity of the economy
Key factors for the assessment of economic freedom have the right to personal choice, freedom of exchange, freedom of entry and competition in the market, and the security of individuals and private property. In essence, seeks to assess the level of market forces, with respect for life, liberty and property of individuals. They use various indicators to measure, categorized into five areas: size of government - expenditures, taxes and (public) companies; structure of law and security of property rights, access to hard currency, freedom of international trade, and regulation of credit, labor and business. The state based on these indicators can get a score of in the range of 1 to 10, with a qualitative assessment that show whether a country is economically free or not.
Based on the results of this year's index, which tracks the year 2013, Bosnia and Herzegovina for the first time assessed as "economically free" countries. This is a secure 78th position on a given index, which is a significant improvement over the previous year (85th position). In particular, there has been progress in the following areas: the legal system and property rights: increased to 5.83 from 5.77, strength of currency: an increase in the 8.60 to 8.28, the freedom of international trade: an increase to 7.50 to 7 , 31, and regulation: increased to 7.66 from 7.49.
The only area where no progress is "size of government". In this area, our country gets the lowest rating - 5.28. This means that BiH is a country with strong state intervention in the economy, either through budgetary actions, fiscal burdens or simply actions of public companies, which is considered a negative factor for achieving economic growth and in this particular case the economic freedom of the individual.
If we analyze the previously presented assessment of the report, it is possible to conclude that there was an improvement of the legal system and property rights. However, progress has been negligible, especially taking into account the economic daily life where there are cases like Frutex from cells which bankruptcy proceedings last more than 13 years and, in turn, hundreds of million of debt on the basis of various obligations, in particular by state-owned companies, which seriously undermines the liquidity of the economy. The courts have an appointment, although we have spent millions of KM and decades for the purpose of their reform. We need new ideas, thinking and innovation as the world's current LEAP zone.
Monetary Stability
Currency strength indicator refers to the growth of money supply, the standard deviation of inflation, the level of inflation and the freedom to hold foreign currency accounts. Good results in this area support the notion that it is necessary to keep the existing model of the currency board, similar to what worked in Bulgaria, Estonia and Lithuania, and in order to preserve monetary stability of the country and therefore attempted to use other instruments of economic policy. This is especially important today when there are many demands to abolish the institution of the currency Board of which primarily come from politicians from the smaller BiH entity, namely Milorad Dodik.
There was an increase freedom of trading in the international market, as part of the expected taking into account the continuing process of EU integration, and this trend will continue in the future, especially in the context of the recently signed Stabilisation and Association Agreement. Bosnia and Herzegovina as a small economy needs to build its economic future in the framework of global trade flows and according to the principles of economic specialization.
The recent scandal involving export bans milk has shown us that any intervention and regulation in this area is always short-lived. What is surprising is the negligible decrease the level of state regulation of the economy which is one of the biggest problems of the local economy. The indicator relating to the regulation of credit markets, labor markets and business regulation in general. Improvement in this area can be partly explained by the reduction of business regulation in some parts of the country. Also, due to amendments to the Employment Act, it is expected that in the coming reports Fraser Institute get even better grade in this area.
Again, a lot of room for further reforms, especially if we know that in BiH there are about 500 para-fiscal levies, but also thousands of needless government bureaucrats and uncontrolled inspections that daily work to destroy private businesses, and entrepreneurial dreams of future businessmen of the country .
The importance of economic freedom
Bosnia and Herzegovina is now in a better position in the index compared to other countries of the former Yugoslavia, especially Slovenia, Croatian and Serbian. Only Macedonia and Montenegro have better grades. Hong Kong returned to the top of the table, followed by Singapore, New Zealand, Switzerland, United Arab Emirates, Jordan and Mauritius. Five lowest-ranked countries are Syria, Chad, Libya, Republic of Congo and Venezuela.
Economic freedoms are important for the economic development of certain countries, but also for a range of other social areas - data suggest that the citizens of economically freer countries on average have a higher life expectancy, that the poor in the respective countries almost twice richer than those in the non-free countries, and that political and civil liberties in a much bigger level. The importance of economic freedom is particularly underlined by the liberal economists like Milton Friedman, Friedrich Hayek, Ludwig von Mises, and others.
Because of all this for Bosnia and Herzegovina is of crucial importance to continue with reforms in the direction of increasing economic freedom. This primarily involves the processes of liberalization, deregulation, reducing fiscal taxes, limiting government spending, but also universal decentralization of political and therefore economic power in the country, especially in the Federation. We have a long way and we need to know in which direction we are going, whether the economic free Singapore, New Zealand and Switzerland, or to Libya, Congo and Venezuela (which socialism is economically devastated and reduced to the fact that a shortage of toilet paper).
- 16 Sep, 2015
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