The Policy Habits of Economically Successful Countries

Lessons for Moldova from Policies around the world Fraser Institute Program to measure 42 specific policies in 152 countries Objective to see what is the pattern of policies followed by the most successful countries Every policy examined is given a score out of ten Moldova’s policy score is then compared to the other 151 countries

Why Should Moldovans care about how their policies rank? Because Countries whose policies earn them a high policy rank also achieve better Economic and Social outcomes.

The World’s Top Ten Policy Makers Source: The Fraser Institute.

The impact of Policy on Prosperity and Development

Per Capita Income and Policy Score Quartile Sources: The Fraser Institute; The World Bank, World Development Indicators, 2013

Income of the Poorest 10% and Policy Score Sources: The Fraser Institute; The World Bank, World Development Indicators, 2013.

Policy Score and Political Rights Sources: The Fraser Institute; Freedom House, Freedom in the World Country Ratings, 2012, available at

Policy Score and Civil Rights Sources: The Fraser Institute; Freedom House, Freedom in the World Country Ratings, 2012, available at

Policy Score and Corruption Sources: The Fraser Institute; Transparency International, Corruption Perceptions Index, 2014 available at

Policy Score and Life Satisfaction Sources: The Fraser Institute; Happy Planet Index 2014

Literacy (% of population) Male Female Sources: The Fraser Institute; World Development Indicators 2013

Policy Score and Life Expectancy at Birth Sources: The Fraser Institute; The World Bank, World Development Indicators, 2013.

What is the connection between Policy and growth? What is measured as economic growth consists of : Real Cost Reduction – getting the same output for less real cost through innovation The extension of existing real cost technology to new members of the population or new regions The movement of workers within a country to sectors that have higher productivity – much of the growth in China for example

Real Cost Reduction In most cases, the real cost reduction that produces growth involves the reduction or elimination of some person’s income! The losers contrive to use the policies of government to protect their incomes. If they are successful the policies we observe will be anti-growth More importantly the policies will be anti- entrepreneurship because entrepreneurs bring the real cost reducing innovations

Policy Evaluation is a comparative process While we can conceive of “ideal” policies the real world is never ideal Practically speaking entrepreneurs and capital gravitate to the best available policy environment So the question is how does Moldova’s policy apparatus compare to everybody else’s?

Moldova's Ranking 86/152 Rank of 1 is best policy MoldovaTop TenMoldovaTop Ten Moldova’s Policies compared to 152 CountriesRankMedianRankMedian 1A Government Consumption74694Ai Revenue from trade taxes (% of trade sector)6410 1B Transfers and subsidies103894Aii Mean tariff rate1714 1C Government enterprises and investment114Aiii Standard deviation of tariff rates1824 1Di Top marginal income tax rate1414Bi Non-tariff trade barriers6124 1Dii Top marginal income and payroll tax rate82334Bii Compliance costs of importing and exporting A Judicial independence140164C Black market exchange rates11 2B Impartial courts137124Di Foreign ownership/investment restrictions C Protection of property rights127114Dii Capital controls D Military interference in rule of law and politics71314Diii Freedom of foreigners to visit8140 2E Integrity of the legal system39135Ai Ownership of banks11 2F Legal enforcement of contracts25275Aii Private sector credit8531 2G Regulatory restrictions on the sale of real property14425Aiii Interest rate controls/negative real interest rates11 2H Reliability of police11975Bi Hiring regulations and minimum wage9232 2I Business costs of crime53225Bii Hiring and firing regulations9060 3A Money growth119865Biii Centralized collective bargaining3218 3B Standard deviation of inflation85585Biv Hours Regulations1161 3C Inflation: Most recent year90635Bv Mandated cost of worker dismissal891 3D Freedom to own foreign currency bank accounts9015Bvi Conscription971 5Ci Administrative requirements Cii Bureaucracy costs Ciii Starting a business2913 5Civ Extra payments/bribes/favoritism Cv Licensing restrictions Cvi Tax compliance4817

Comparing Moldova to Average Score of the EU Score of 10 is best score MoldovaGeorgiaRussiaEU AverageEU Median 1A Government Consumption B Transfers and subsidies C Government enterprises and investment Di Top marginal income tax rate Dii Top marginal income and payroll tax rate A Judicial independence B Impartial courts C Protection of property rights D Military interference in rule of law and politics E Integrity of the legal system F Legal enforcement of contracts G Regulatory restrictions on the sale of real property H Reliability of police I Business costs of crime A Money growth B Standard deviation of inflation C Inflation: Most recent year D Freedom to own foreign currency bank accounts

Comparing Moldova to Average Score of the EUMoldovaGeorgiaRussiaEU Score of 10 is best policy AverageMedian 4Ai Revenue from trade taxes (% of trade sector) Aii Mean tariff rate Aiii Standard deviation of tariff rates Bi Non-tariff trade barriers Bii Compliance costs of importing and exporting C Black market exchange rates10 4Di Foreign ownership/investment restrictions Dii Capital controls Diii Freedom of foreigners to visit Ai Ownership of banks Aii Private sector credit Aiii Interest rate controls/negative real interest rtes Bi Hiring regulations and minimum wage Bii Hiring and firing regulations Biii Centralized collective bargaining Biv Hours Regulations Bv Mandated cost of worker dismissal Bvi Conscription Ci Administrative requirements Cii Bureaucracy costs Ciii Starting a business Civ Extra payments/bribes/favoritism Cv Licensing restrictions Cvi Tax compliance

Moldova’s Particular Challenges Population Decline and Remittances

Demographic Overview Moldova Demographic Indicators Population (in thousands)4,3553,9483,5473,177 Growth rate (percent) Births (in thousands) Deaths (in thousands) Migration Net migrants (in thousands)

Personal Remittances % of GDP 2012 Tajikistan47.50% Kyrgyz Republic30.75% Nepal24.96% Moldova24.52% Lesotho23.80% Haiti20.43% Armenia19.23% Guyana16.46% El Salvador16.42% Lebanon16.01% Honduras15.73% Gambia, The15.42% Jamaica14.50% Bangladesh12.17% Jordan11.25% Georgia11.17% Bosnia and Herzegovina10.94% Sri Lanka10.10%

Thank you for the opportunity to share our research with you