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3 The 10-Step Road Map To Prosperity 1.Trade Policy 2.Fiscal Burden 3.Government Intervention 4.Monetary Policy 5.Capital Flows and Foreign Investment 6.Banking and Finance 7.Wages and Prices 8.Property Rights 9.Regulations 10.Informal Market

4 Economic Freedom and Per Capita Income 2004 GDP per Capita (in Purchasing Power Parities) Source: World Bank, World Development Indicators Online, available by subscription at wwww.worldbank.org/data; Central Intelligence Agency, The World Factbook 2005,available at Marc A. Miles, Kim R. Holmes, and Mary Anastasia O’Grady, 2006 Index of Economic Freedom (Washington, D.C.: The Heritage Foundation and Dow Jones & Company, Inc., 2006), at Index of Economic Freedom

5 Improvement in Economic Freedom and Economic Growth Compound per Capita Growth ( ) Change in Economic Freedom (1997 Index to 2006 Index) Biggest ImprovementBiggest Decline Source: World Bank, World Development Indicators Online, available by subscription at wwww.worldbank.org/data; Central Intelligence Agency, The World Factbook 2005, available at Marc A. Miles, Kim R. Holmes, and Mary Anastasia O’Grady, 2006 Index of Economic Freedom (Washington, D.C.: The Heritage Foundation and Dow Jones & Company, Inc., 2006), at

6 CountryScore Change over Index History Slovenia1.38 (1996 to 2006) Lithuania1.31 (1996 to 2006) Malta1.28 (1995 to 2006) Poland1.02 (1995 to 2006) New EU Members0.83 (1996 to 2006) Cyprus0.79 (1996 to 2006) Latvia0.76 (1996 to 2006) Estonia0.70 (1995 to 2006) Bulgaria0.68 (1995 to 2006) Hungary0.49 (1995 to 2006) Slovak Republic0.48 (1995 to 2006) Old EU Members0.39 (1995 to 2006) Czech Republic0.23 (1995 to 2006) Improving Economic Freedom: Performance over Index History

7 Bulgaria’s Monetary Stability Takes a Step Backwards Monetary Policy Score High Low Source: Marc A. Miles, Kim R. Holmes, and Mary Anastasia O’Grady, 2006 Index of Economic Freedom (Washington, D.C.: The Heritage Foundation and Dow Jones & Company, Inc., 2006), available at Index of Economic Freedom 1 5

8 Bulgaria’s Trade Policy – Slipping Trade Policy Score High Low Source: Marc A. Miles, Kim R. Holmes, and Mary Anastasia O’Grady, 2006 Index of Economic Freedom (Washington, D.C.: The Heritage Foundation and Dow Jones & Company, Inc., 2006), available at Index of Economic Freedom

9 Bulgaria Welcomes Foreign Investment Capital Flows and Foreign Investment Score High Low Source: Marc A. Miles, Kim R. Holmes, and Mary Anastasia O’Grady, 2006 Index of Economic Freedom (Washington, D.C.: The Heritage Foundation and Dow Jones & Company, Inc., 2006), available at Index of Economic Freedom

10 *Income Tax Rate as of June 30, 2005CountryTop Income Tax RateGrowth Rate ( )Average Growth Rate Countries with Tax Rates below 35 percent Slovak Republic Bulgaria244.9 Estonia247.2 Latvia257.5 Cyprus303.4 Czech Republic323.0 Lithuania336.7 Finland Countries with Tax Rates from 35 to 45 percent Malta United States352.6 Hungary383.9 Luxembourg Greece404.3 Poland403.1 Portugal401.1 United Kingdom402.8 Ireland426.1 Italy431.3 Germany Spain453.6 Countries with Tax Rates above 45 percent France Austria501.8 Belgium501.9 Slovenia503.4 Netherlands521.3 Denmark591.5 Sweden602.5

11 *Corporate Tax Rate as of June 30, 2005CountryTop Corporate Tax RateGrowth Rate ( )Average Growth Rate Countries with Tax Rates below 20 percent Estonia Cyprus103.4 Ireland Bulgaria154.9 Latvia157.5 Lithuania156.7 Hungary163.9 Poland193.1 Slovak Republic194.1 Countries with Tax Rates from 20 to 30 percent Luxemburg Slovenia253.4 Portugal251.1 Austria251.8 Czech Republic263.0 Finland262.8 Germany Sweden282.5 Denmark281.5 Countries with Tax Rates above 30 percent United Kingdom Netherlands Greece324.3 Italy331.3 France Belgium341.9 Malta351.8 Spain353.6 United States352.6

12 Bulgaria’s Property Rights – Must Improve Property Rights Score High Low Source: Marc A. Miles, Kim R. Holmes, and Mary Anastasia O’Grady, 2006 Index of Economic Freedom (Washington, D.C.: The Heritage Foundation and Dow Jones & Company, Inc., 2006), available at Index of Economic Freedom 1 5

13 Bulgaria’s Regulatory Burden – Repressive Regulations Score High Low Source: Marc A. Miles, Kim R. Holmes, and Mary Anastasia O’Grady, 2006 Index of Economic Freedom (Washington, D.C.: The Heritage Foundation and Dow Jones & Company, Inc., 2006), available at Index of Economic Freedom 1 5