Structural Change and Catching Up: Experience of the Ten Candidate Countries

The paper analyzes the experience of the East and Central European candidate countries with respect to major macro-level changes in the structure of their economy relevant for their catching up. More precisely, the production and utilization sides of the GDP, as well as the structure of manufacturing industry are focused on. The most important development on the production side of the GDP has been the substantial reduction of previously over-developed industrial activities on the one hand, and the emancipation of service activities, on the other. In the past 11 years the candidate countries caught up with countries at the same per capita level of GDP in terms of service intensity. Expanding market services have played a crucial role filling the void after central planning was abandoned, since efficient market coordination, the working of the "invisible hand" could not have developed without them. Relevant input-output coefficients show some evidence that the impact of services is deepening, this sector is contributing to and determining the production of value added at more stages of the production process than before. Restructuring within manufacturing shows a wide variation across the candidate countries. Good performance in the phase of recovery of output was not necessarily associated with large structural shifts. The dominance of labor intensive products in manufacturing, however, indicate the productivity catching up will necessitate further massive shifts across the sub-sectors in most of the candidate countries. Even if the large share of "screw-driver operations" in the framework of multinational operations may blur the picture of manufacturing structures, we can identify that the countries that attracted the largest part of FDI managed either to achieve great structural shifts in their industry, or to develop sub-sectors with potentially high unit values, or both. On the utilization side of the GDP substantial fluctuations took place. The expectations, however, that following stabilization and recovery high domestic savings rates and relatively high domestic investment ratios would support the evolving real convergence process, have been realized only in a few country. Moreover, in some of these economies sizable proportion of the domestic saving was wasted. This mixed development emphasizes the importance of utilizing foreign savings, particularly in the form of direct investment. The programmed progress of the EU accession process is crucial both for increasing the potential volume of foreign savings and to achieve that the efficiency gains that were dominating the period of recovery in 1995-1999 continue to accompany the accumulation of physical capital

Accession to the EU: A Continuation of or a Departure from Transition Reforms?

Since the start of the political and economic transition in Central and Eastern Europe, much of the transformation was embedded in the process of leaving the Eastern alliance and joining the Western part of Europe. This co-evolution of transition and approaching the West showed certain patterns which, as the accession process accelerates, seem necessary to renounce. EU accession needs transformations different from the earlier ones in a way that they will be less autonomous, demand active government control and reliance on bureaucracies, will be centered more in Europe, face more resistance by particular Western countries or constituencies, and need cooperation among candidate countries that block the accession process. In order to ease these tensions, governments, legislative bodies, and the elites in general in the candidate countries must make themselves and the public understand the specific features of the accession process. In certain fields EU institutions can also smooth this development

Macroeconomic Developments in the Candidate Countries with Respect to the Accession Process

The aim of the study is to investigate likely macroeconomic developments in the ten East European candidate countries through 2010, based on two distinct scenarios: one that assumes accession for the relevant country to the EU in 2005, and another that assumes that it will not accede to the EU before 2010 (the status quo scenario). Of the ten candidate countries, five were selected for detailed analysis: Poland, the Czech Republic, Slovakia, Hungary and Slovenia, the countries that are adjacent to the core of the EU. The other five candidate countries (Romania, Bulgaria, Estonia, Latvia, and Lithuania) are also covered, but only briefly and much less profoundly

Catching Up and EU Accession - Conditions for Fast Real Convergence in the Candidate Countries

This is a report about the fifth workshop from the seminar series of IIASAs Economic Transition and Integration Project entitled "The Process of EU Accession: Preparation by Learning and Exchange". The workshop was held in Bratislava on 7-9 February 2002. The first two sections summarize the opening of the workshop and two introductory presentations dealing with economic policies of Slovakia on its way to the EU accession and the historical perspectives of growth, integration and recommended policies for catching-up in transition countries. The next section presents an outline of recent developments in the accession process in ten individual candidate countries. The fourth section concentrates on the analysis of factors determining savings and investments in accession countries and the role of banking intermediation, as illustrated on the case of Hungary. The fifth section is dedicated to questions of competitiveness - to the alternative ways of its measurement and policies that support exports and/or the ability of domestic producers to substitute imports, stressing that policies on the company and industry level are more important than national policies. The sixth section deals with the problems of macroeconomic financial convergence and the requirements on national performance for becoming a member of the European Monetary Union. Its first paper discusses alternative policies of central banks from Eastern and Central Europe for a smooth monetary integration of their countries with the euro-zone. Its second paper tests the empirical evidence on the speed of economic convergence in various transition countries. Its third paper analyses the aspects of the so-called nominal and real convergence and the potential scope of alternative monetary policies in accession countries in order to retain their external balance. The seventh section presents the summary of three presentations that dealt with international institutions. The first one is dealing with the policies and the support for catching up provided by the World Bank. The second paper describes the experiences of Ireland, Latvia and Estonia in preparing the national development plans and in the usage of structural and cohesion funds provided by the European Commission. The third paper concentrates on the problems of domestic agricultural policies and the EU Transfers, as based on the comparison of Slovakia with some other EU candidate countries and with the EU incumbents. The next two sections discuss the questions associated with the R&D, foreign direct investment, human capital and their spillovers. In the first of them the lessons from the Irish experience are summarized and compared with the present situation in accession countries. The paper, that follows next, analyses the data on education, compares the EU candidate countries with some less developed EU member countries and draws conclusion about policies for the human capital development and their association with growth. The last (tenth) section is based the on the comparative analysis of the empirical evidence from transition countries on the indicators of human development and the policies for a more comprehensive convergence of these countries to the levels of present EU member states

EU Structural Support: Its Macroeconomic and Distributional Effects and Social Environment

This is a report about the fourth workshop from the seminar series of IIASA's Economic Transition and Integration Project entitled "The Process of EU Accession: Preparation by Learning and Exchange". The workshop was held in Prague on 9-11 November, 2000. The first section summarizes recent developments in the accession process in the individual candidate countries. The second is devoted to the establishment of regional institutions for managing the structural support funds of the EU. The next section deals with the organization of planning, monitoring and evaluation of EU financed programs as experienced and perceived in the current member states and the candidate countries. The fourth section is devoted to the essence and realization of the principles of EU programs, while the fifth analyzes the macroeconomic effects of past and future such programs. Section 6 deals with the impact of EU funds on national and regional convergence, while section 7 with the issue of program selection. Finally, section 8 is devoted to the special problems of the two heavy weight sectors in EU programs: agriculture, as well as transport and infrastructure

The Time Pattern of Costs and Benefits of EU Accession

The paper summarizes the seminar meeting held at IIASA on December 5-7, 1998, on "The Time Pattern of Costs and Benefits of EU Accession." The underlying idea of the seminar was as follows. The CEECs aspiring to EU membership have already understood that opening their markets to the West and adjusting to the institutional framework, laws, and rules of the EU entails direct and indirect costs, generating considerable tension for the intitutions and individuals concerned. At the same time, these nations will certainly benefit from accession. East European experts and policy makers have not yet performed a systematic accounting of the costs and benefits to their countries before, during, after accession. Especially lacking is an appreciation for the "time pattern"of emergence of these costs and benefits. The lack of such an analysis is a drawback for the accession negotiations and for public policy. Understanding the temporal and regional patterns of costs and benefits is crucial to planning annual macroeconomic programs, as well as to projecting such indicators as private consumption, investment, and trade and current account balances. An appreciation of these patterns is also crucial to mobilize public support for the accession at the appropriate time. The costs of converging to the EU are not evenly spread across the societies in transition countries and emerge at various stages of the accession process. Moreover, many of the changes related to accession have diverse economic, social, administrative, and political effects. Most of the analyses of the costs and benefits of accession for the EU-member states and CEECs focus on a single aspect or on a particular time period and calculate the costs and benefits for the incumbents only. The discussion at the seminar encompassed the costs and benefits in terms that went beyond the strictly economic, and focused primarily on the CEEC side. The period in question under consideration is characterized by the following milestones: the start of the transition, the signing of the Europe Agreements, the start of accession negotiations, accession to the EU, and accession the European and Monetary Union (EMU). The mix of participants at the seminar was ideal for informed scientific and policy discussion: researchers and government experts gathered from nine candidate countries (all but Latvia, for which the invited expert withdrew at the last moment) plus Macedonia, as well as from European and U.S. universities and the European Commission. A relatively large number of Austrian experts also contributed to the success of the meeting. Of the six sessions at the workshop, the most heated debate was on the costs and benefits associated with agriculture, environment, EMU, and future of EU transfers. The report is structured as follows. The first section summarizes the most recent developments in the accession process in the individual candidate countries and Macedonia. The second is devoted to the experience of past enlargements and to general issues surrounding measuring the costs and benefits of the coming enlargements. The following section deals with EU's environmental requirements, especially the "hard" costs and "soft" benefits that various studies associate with them. The fourth section analyses expected developments in the monetary and exchange rate policies of the candidate countries, with the emphasis on the recent turbulence on the world financial markets and the issues raised by the necessity of fulfilling the conditions associated with EU membership. The next section deals with the expected size, role, and possible use of EU transfers in the periods preceding and following accession. The sixth section is devoted to agriculture, one of the most complicated issues that arises in the accession process. The final section summarizes the results of the synthetic approaches that employ computable general equilibrium (CGE) models to estimate the costs and benefits of enlargements

The European Union and the Rest of the World: Complements or Substitutes for Central and Eastern Europe?

This paper is a summary report on the seminar held in Budapest, Hungary on December 4-6, 1997 on the "The European Union and the Rest of the World: Complements or Substitutes for Central and Eastern Europe?" This report is structured as follows. The first section summarizes the most recent developments in the accession process in the individual candidate countries. The second is devoted to the tasks required by the adjustment to the EU's common external tariff and the process of common policy formation within the EU. The following section analyzes what will happen to the existing close bilateral relations after accession: both recent Austrian experiences and the expectations of candidate countries, such as Estonia and Bulgaria, are presented. The prospects for capital flows originating from outside EU are investigated in Section 4, from both the recipients' and external investors' points of view. The following section reports on the already existing and broadening opportunities for technological cooperation across EU borders, based on the example of the EUREKA program. One of the most sensitive issues of EU enlargement is agriculture. The Polish and Hungarian presentations on the subject discuss the challenges that these major agricultural producers face as they enter accession negotiations. Section 7 analyzes the core subject matter of the seminar in the broadest perspective: how does the coming accession fit into the overall process of regionalization and globalization in historical and economic perspective? The report ends with the summary statements at close of the workshop

Russian Applied Research and Development: Its Problems and its Promise

This Research Report discusses the changing nature of research and development (R&D) in Russia. In the decades following World War II, the USSR was one of the two great powers in R&D; the other was the USA. After the breakup of the Soviet Union, the R&D sector went into a precipitous decline that continued until at least 1995. The collection of papers in this report addresses what went wrong. A number of broad issues are covered, such as whether the decline of the R&D sector from 1991 to 1995 was too steep or too modest for the welfare of the Russian economy; how the structure and organization of Russian-applied R&D should be developed over the long term; and what role government policy should play in Russian-applied R&D. Chapters in the report were written by Russian senior officials and by scholars of R&D policy from outside Russia

Small Scale Privatization in Eastern Europe and Russia from a Historical and Comparative Perspective

This Working Paper is a summary of a workshop which was held at IIASA, Laxenburg, Austria on 26-28 June 1992. Small scale privatization (SSP) of shops, restaurants and other consumer services has been accomplished in the first stage of the complex process of privatization in Eastern Europe. It was also an experiment for measuring the demand for previously state owned property and for verifying different techniques of privatization. The Russian Federation is now undertaking the first steps in SSP and may learn much from recent experiences of the other East European economies. In order to facilitate such an exchange, a workshop was organized at IIASA to analyze the pattern of SSP in the Czech and Slovak Federal Republic, the former East Germany, Hungary, Poland, and Russia. The characteristics at each stage of the privatization processes were thoroughly discussed and compared across the nations, beginning with the emergence of the idea of SSP, through legislation and the rise of unexpected tensions during the implementation phase, to the characteristic features of newly privatized retail and service businesses