Progress in transition and the business environment
View Full Text (PDF)
Fields marked with an asterisk * are mandatory.
In 2002 many countries of central and eastern Europe and the Commonwealth of Independent States have continued to make significant progress in structural and institutional reforms. The positive momentum over the past three years has been maintained, allowing some of the less advanced transition economies to close the gap with the frontrunners, which are now focusing on institutional reforms that inevitably take longer to achieve.
In central eastern Europe and the Baltic states (CEB), the EU accession process remains the main driving force for reform as eight countries in this sub-region– with the exception of Croatia– aim for EU accession by 2004. The Copenhagen summit at the end of 2002 is to announce the list of countries officially invited to join, signalling a landmark in these efforts. For these countries, negotiations on most accession issues related to adopting the acquis communautaire have been completed. In south-eastern Europe (SEE), political and regional stability has changed fundamentally the prospects of the countries in the region. As economic prospects have improved, the interest of investors has increased and this has helped to demonstrate the benefits of economic reform. As in 2001, the Federal Republic of Yugoslavia has made the most reform gains in SEE, albeit from a low starting point. In the Commonwealth of Independent States (CIS), Russia continues to lead reform efforts and its example is closely watched by reformers elsewhere in the sub-region. However, in parts of the CIS, the reform momentum has slowed down, particularly in Central Asia, where the commitment to economic and political openness is weaker.
The EBRD’s Office of the Chief Economist has assessed progress in structural and institutional reform across the region since 1994 based on its assessment of progress in key aspects of the transition process. However, these assessments do not fully address important aspects of economic governance, such as taxation, business regulation, corruption and the rule of law, and do not take account of the two-way relationship between enterprises and the state. To cover these crucial areas, the EBRD and the World Bank launched the Business Environment and Enterprise Performance Survey (BEEPS) in 1999. The BEEPS asks enterprises to evaluate economic governance and state institutions and to assess the extent to which the business environment creates obstacles to the operation and growth of their businesses. In 2002 the EBRD and the World Bank undertook a second stage of the BEEPS, surveying close to 6,000 firms across 26 countries of the region. The results indicate the progress that has been made in economic governance over the past three years, complementing the EBRD’s assessment of progress in transition.
The 2002 BEEPS shows that the business environment has improved significantly across most countries in the region since 1999 and that this is not due solely to the recovery in the business cycle since 1999. Moreover, some of the less advanced transition economies in SEE and the CIS have seen some of the strongest improvements in economic governance, closing the gap with the advanced reformers. This mirrors the findings of the EBRD transition indicators. The unevenness of the business environment for different types of firms– such as small, newly established private firms and large state-owned enterprises– has also diminished. These developments suggest that less advanced transition economies might be able to move beyond the partial or incomplete reforms, including insecure property rights, corruption and limited investment, that have held back their progress over the first decade of transition.
An analysis of reform patterns since 1989 suggests that three factors are critical for sustaining progress in reform. First, comprehensive economic liberalisation is necessary to create market competition and to generate the demand for market-supporting institutions. This demand arises from the fact that to prosper in competitive markets and to benefit from international trade, businesses must be supported by sound institutions and fair state practices. Second, market liberalisation is more effective when combined with political competition. The strongest and most sustained reform gains have been achieved in countries that elect their governments through a free public vote (see Chapter 1). Third, the process of transition is influenced by international integration (see Transition Report 2001, Chapter 2). This has been clearly demonstrated by the countries of CEB and SEE that are not EU accession candidates. In the countries of SEE and the CIS that are not candidate countries for EU accession, it will be important to promote other processes, such as accession to the World Trade Organization and possibly the voluntary adoption of at least some aspects of EU law. While free markets and private enterprise now seem to be relatively well-established across the region– with the exceptions of Belarus, Turkmenistan and to a lesser extent Uzbekistan– progress in democracy and the establishment of political competition remain much more uneven, as does the process of international integration.
This chapter begins with a review of reform progress as indicated by the EBRD’s transition assessments (see Sections 2.1 and 2.2). Section 2.3 introduces the findings of the BEEPS and explains how they complement the transition indicators. Section 2.4 examines the variation in the business environment as perceived by firms across 26 countries of the region. Section 2.5 looks at the number of business obstacles faced by enterprises to verify the qualitative assessments provided in the survey. Section 2.6 examines these business obstacles as experienced by different types of firm. The concluding section summarises why the business environment may have improved significantly between 1999 and 2002 and suggests areas where additional analysis is needed.
Email to a friend
Printer Friendly
Please Enter Your Comment: |
Rate the Article |
|---|---|
|
|
You need to login for rating the article.
|
Most Rated Articles |
Most Emailed Articles |
Most Viewed Articles |
|---|---|---|
| * Top 3 Articles | ||
