Here some estimates obtained from a survey of the possibilities for regional and cross-border cooperation within four Balkan countries are presented. Mainly small and medium enterprises (SME) from Bulgaria, Macedonia and Albania (53 to 63 questionnaires) and Greece (121 questionnaires) were surveyed.

Enterprises, which already have or have no business relations with neighbour countries, were examined. This is made in order to identity more accurately the barriers for regional cooperation, including those insurmountable for the enterprises cooperation.

Main results and conclusions from the study and the recommendations to the policy makers are presented

Dimitrov, Mitko

Munich RePEc Personal Archive

MPRAMunich Personal RePEc ArchiveCooperation of the Enterprises in EastEuropean Countries and EU: AdjustmentProblemsMitko Dimitrov2004Online at http://mpra.ub.uni-muenchen.de/57235/MPRA Paper No. 57235, posted 10. July 2014 20:11 UTC194 Dimitrov Mitko (Bulgaria) COOPERATION OF THE ENTERPRISES IN EAST EUROPEAN COUNTRIES AND EU: ADJUSTMENT PROBLEMS   The process of internationalization and integration of the East European transition countries is generating severe pressures on their economic and particularly industrial bases, taking the form of an in-tensive competition on international and domestic markets with more advanced Western European enterprises (CEC, 1993; Petrakos, 1997). This type of economic relations, however, generates a real danger for a new division in Europe where the East European coun-tries will form the new European periphery (Petrakos and Totev, 2000). The problem of the East European transition countries can be summarized in the following way. If in the foreseen fixture a stable process of convergence it is not feasible to start, the observed process of divergence between Western and Central European countries can-not be stopped or at least smoothened. The East European countries have to convince the positive forces in their own abilities to overcome negative trends. The first step could be the end of complaints and mutual efforts in problem resolution (Jackson, 2001). This attitude will help the region to re-verse the process of withdrawing the investors’ interests. The coun-tries should change the existing idea of a risky and uncertain atmos-phere that the foreign investors have about them. Here some estimates obtained from a survey of the possibilities for regional and cross-border cooperation within four Balkan coun-tries are presented. Mainly small and medium enterprises (SME) from Bulgaria, Macedonia and Albania (53 to 63 questionnaires) and Greece (121 questionnaires) were surveyed.1 Enterprises, which already have or have no business relations with neighbour countries, were examined. This is made in order to identity more accurately the barriers for regional cooperation, includ-ing those insurmountable for the enterprises cooperation.  1 The survey was realized under PHARE ACE Project coordinated by the Institute of Eco-nomics at the Bulgarian Academy of Sciences.                                                           195 Main results and conclusions:  First, political and economic stability in countries of the region is of considerable importance for successful business and cross-border economic relations’ development. Businessmen are very sensi-tive to this factor, its absence is taken as a barrier to mutually favour-able economic relations, which are expressed in the considerable valuation difference in different countries. Second, the need to improve trade and financial conditions is obvious, every positive result in this direction will stimulate regional relations. Financial conditions and especially access to financing need to be very seriously improved in the observed countries. These recommendations are to a great extent addressed to na-tional governments, but they have an entirely economic character. The improvement of trade conditions depends on the national gov-ernments’ efforts because, as usually considered, the unification of these conditions go along with WTO membership, agreements for EU association, EU membership. The unification of trade conditions can also be speeded up through bilateral and multilateral regional agree-ments. Third, businessmen prefer, first and foremost, to expect help from institutions of the three countries. National and regional busi-ness associations, local authorities, international organizations are not only evoked, but they should also be interested in helping to establish cross- border economic relations. This is the area where most efforts should be applied in order introduce changes and where barriers for regional cooperation could be relatively easily overcome. Considerably little is achieved by the EU institutions which have rich experience in assisting regional cooperation, including co-operation of border areas with other countries. This is a sphere that has been entirely neglected until now and where a lot can be done for regional and cross-border cooperation. Facilitating regional cooperation and cross-border relations has three dimensions – national, regional and international. The na-tional governments bear the highest responsibility for conditions which reign in their own countries. At the same time East European transition countries have common problems, which can be solved eas-ier if mutual efforts are applied. Finally, the support of international organizations will be essential for the successful promotion of re-196 gional cooperation and cross-border relations. In order to make use of advantages of regional economic inte-gration and cross border co-operation the East European transition countries need active relevant policies and initiatives. Obstacles re-lated with the lacking regional economic integration and cross border cooperation, insufficient or, to some extent, incompatible cross-border infrastructure networks, the "balkanisation" of regional trade relations, insufficient trade supporting services, different institutional and administrative frameworks, etc., should be overcome. The lack of information and failing provision with sufficient in-formation for running business can be outlined as the most important constraints to the development of successful business. It can also be stressed here that business associations show no real activity as they do in Western countries. The support from local and national authorities, from local and national business organizations, and from international organizations is definitely the weakest. In this respect the section of regional policy dealing with cross-border relations should include the provision of all necessary information needed by interested firms: information about suppliers, market niches, possible foreign partners, information for neighbour countries’ legislation as well as EU legislation, possibili-ties for obtaining bank credits and other forms of funding, incl. how to apply and participate in joint EU projects. The business organizations have to try to support crediting cross- border economic cooperation by means of guarantees, by train-ing to be able to elaborate business plans, training to be able to par-ticipate in joint regional projects with foreign financing, creating of centers of information services concerning the opportunities for fi-nancing not only for their members but also for businessmen from neighbour countries, and better use of financial opportunities from international, especially EU, programs. Quite important for interna-tional organizations is to be more active in supporting joint infra-structure projects in the region, even to make the first step in initiat-ing such kind of projects. However, it should be once again underlined that the main dis-advantages are related with the general economic conditions which imply also the existence of corruption and lack of security, and typi-cal for the region disloyal competition. Other economic conditions of general type are inflation, foreign exchange rates, income trends, etc. 197 Important obstacle for developing business in neighbour countries in transition is also the low purchasing capacity of the population result-ing from the low income level. Permanent amendments of regulations and the laws, poor economic culture and the state of the bank system are obstacles as well. All of them to a different extent are present in the different countries. The importance of general conditions can be underlined by the following fact: it is found out that the more unfavorable the general conditions in a given Southeast European country are, the more fa-vorable is its legislation and tax system aimed at compensating disad-vantages of the general conditions (Minassian, 2002). However, it has been also proved that these disadvantages can hardly be compensated by this policy.  More concretely, the general economic conditions refer to:  • political stability – the relative political instability in the region did not favor the development of business, above all attracting foreign direct investments; • changing rules – often changes in regulations and laws create for the firms an environment of uncertainty and limited possibilities for long-term planning of their activity; • corruption – corruption represents a huge problem for the countries, it affects both big companies as well as the SMB. Corruption is spread both at central and local adminis-trative level. It represent a serious obstacle for the cross-border business cooperation and is a strong anti-stimulus for investment in the region; • bureaucracy – this problem exists in all countries and almost every company has faced it. Bureaucracy in its differ-ent forms damages economic relations indirectly. The nega-tive effects are usually missing profits and opportunities. It should be emphasized that any time when companies refer to investment projects, they mention bureaucracy as a problem in trade relations (Totev, et. al., 2001); • disloyal competition is a major factor tightly related with corruption and bureaucracy. The existence of shadow economy also creates problems related with disloyal competi-tion; 198 •  lack of security typical for the region – high level of crime (stealing of cars, robbery and blackmailing) is still a problem for the region; •  security in income trends – the purchasing power of the population is low, the market in the three countries is nar-row with a small product differentiation; •  inflation and exchange rate – financial stability is a problem that affects economic relations and undermines the at-tempts to foresee and provide long-run policy;  Cross-border cooperation offers undoubted advantages to small and medium enterprises, this is very often the only way for the small firms to access foreign markets. That is why activities in supporting the development of small and medium enterprises in the border re-gions are essential. Partnership with a company on the other side of the borderline can be useful for obtaining “first hand information” about the foreign market, it can be helpful in finding new partners, it can give additional information for production capacity or/and access to fresh funds. Using cooperative ties small and medium enterprises can profit from advantages of the economies of scale and, thus, be more competitive. Small and medium enterprises have specific strong characteris-tics which can be used in starting cross-border cooperation projects: their flexibility, promptness with which small and medium enter-prises can respond to the challengers of the foreign markets, direct contact between the managerial level and the market, horizontal structure of small and medium enterprises, which makes the decision-taking process easier and faster than in large companies. The process of regional integration and cross-border co-operation could be accelerated and enforced also through further par-ticular, specific policies and measures addressed to international or-ganizations, authorities at national and regional level, as well as to business organizations, etc. Recommendations to the business organizations: supporting the crediting of cross-border economic cooperation through training for making business plans, providing guarantees, etc.; training their members for participation in joint regional projects with foreign fi-nancing; creation of centers for information services concerning the opportunities for financing not only their members but also busi-199 nessmen from neighbour countries; better use of opportunities for financing from international, especially EU, programs. Recommendations to international organizations: supporting joint infrastructure projects in the region; supporting the building of new checkpoints and improving the check opportunities of the exist-ing ones; supporting the customs authorities for the projecting and building of a uniform system of database and its engaging in the EU one; supporting the training of passport and customs officers and the creation of efficient control of their work; supporting the financing of mutual cross-border business through business projects with interna-tional financing; better informing and activating the international or-ganizations in the region. it was proved that the development of economic relations within the East European countries is mutually beneficial and gener-ates conditions of an alternative paradigm formulation of intra-countries economic relations (Totev, 2002). From the strategic point of view, the long-term interests require stable relations between the countries, which will help their economies to recover, their industries to use the possibilities of intra-regional trade. Developing intra-regional economic relations will allow to search for trade possibili-ties. Inter-industry trade can be favourable, because the industrial structure in the countries is more complementary rather than concur-rent. The effect of merchandise trade development is expected to be long-term as a whole, but it will be the highest at the beginning of the process, because the potential for this kind of relations decreases with the increase of turnover. In East European transition countries facilitating the develop-ment of efficient enterprises that would benefit from internal and ex-ternal economies of scale, presupposes, on the one hand, open bor-ders and, on the other, intense trade relations within a larger region and, especially, with neighbouring countries. One can argue that regional and cross-border cooperation can be also considered as a tool for accelerating the process of synchro-nization and harmonization of countries' legislation and regulations. The regional and cross-border cooperation can be more signifi-cant for small countries compared with its role for Central European countries in transition; it is so because the possibilities of other forms of cooperation on this stage of economic development are not so fa-vourable for these countries. Providing regional cooperation is a 200 good indicator for the countries’ adaptability to cooperate and re-spond to the globalization processes.  References  CEC (1993) Trade and Foreign Investment in the Community’s Regions: The impact of Economic Reform in Central and Eastern Europe. Brussels: Re-gional Development Studies, No 7, Commission of the European Community. Minassian, G. (2002), The Economic Environment in Albania, Bulgaria, Macedonia FYR, and Greece. Journal Eastern European Economics, July-August, vol. 40, No. 4, pp. 45-82. Jackson, M. (2001) Politics and Transition Lags in Southeastern Europe: Will, Ability, or Possibility.Paper prepared for the final report of the Phare ACE Project P97-8196-R “Overcoming Isolation. Strategies of Development and Poli-cies of Cross-Border Co-operation in South Eastern Europe after “Agenda 2000”. Petrakos, G. (1997) Industrial Structure and Change in the European Un-ion: Comparative Analysis and Implications for Transition Economies. Eastern European Economics. March – April, vol. 35, N 2. Petrakos, G., S. Totev (2000) Economic Structure and Change in the Bal-kan Region: Implication for Integration, Transition and Economic Cooperation. International Journal of Urban and Regional Research, Vol. 24, N 1. Totev, S. (2002), Economic Performance and Structures of Southeastern European Countries – Albania, Bulgaria, FYR of Macedonia, and Greece Jour-nal. Eastern European Economics, Nov.- Dec., Vol. 40, No. 6, M.E., Sharpe Inc., NY., pp. 51-83.  

Cooperation of the Enterprises in East European Countries and EU: Adjustment Problems

Munich Personal RePEc Archive

MPRA
Munich Personal RePEc Archive
Cooperation of the Enterprises in East
European Countries and EU: Adjustment
Problems
Mitko Dimitrov
2004
Online at http://mpra.ub.uni-muenchen.de/57235/
MPRA Paper No. 57235, posted 10. July 2014 20:11 UTC
194 
Dimitrov Mitko (Bulgaria) 
COOPERATION OF THE ENTERPRISES IN EAST EUROPEAN 
COUNTRIES AND EU: ADJUSTMENT PROBLEMS 
 
 
The process of internationalization and integration of the East 
European transition countries is generating severe pressures on their 
economic and particularly industrial bases, taking the form of an in-
tensive competition on international and domestic markets with more 
advanced Western European enterprises (CEC, 1993; Petrakos, 
1997). This type of economic relations, however, generates a real 
danger for a new division in Europe where the East European coun-
tries will form the new European periphery (Petrakos and Totev, 
2000). 
The problem of the East European transition countries can be 
summarized in the following way. If in the foreseen fixture a stable 
process of convergence it is not feasible to start, the observed process 
of divergence between Western and Central European countries can-
not be stopped or at least smoothened. 
The East European countries have to convince the positive 
forces in their own abilities to overcome negative trends. The first 
step could be the end of complaints and mutual efforts in problem 
resolution (Jackson, 2001). This attitude will help the region to re-
verse the process of withdrawing the investors’ interests. The coun-
tries should change the existing idea of a risky and uncertain atmos-
phere that the foreign investors have about them. 
Here some estimates obtained from a survey of the possibilities 
for regional and cross-border cooperation within four Balkan coun-
tries are presented. Mainly small and medium enterprises (SME) from 
Bulgaria, Macedonia and Albania (53 to 63 questionnaires) and 
Greece (121 questionnaires) were surveyed.1 
Enterprises, which already have or have no business relations 
with neighbour countries, were examined. This is made in order to 
identity more accurately the barriers for regional cooperation, includ-
ing those insurmountable for the enterprises cooperation. 
 
1 The survey was realized under PHARE ACE Project coordinated by the Institute of Eco-
nomics at the Bulgarian Academy of Sciences. 
                                                          
195 
Main results and conclusions: 
 
First, political and economic stability in countries of the region 
is of considerable importance for successful business and cross-
border economic relations’ development. Businessmen are very sensi-
tive to this factor, its absence is taken as a barrier to mutually favour-
able economic relations, which are expressed in the considerable 
valuation difference in different countries. 
Second, the need to improve trade and financial conditions is 
obvious, every positive result in this direction will stimulate regional 
relations. Financial conditions and especially access to financing need 
to be very seriously improved in the observed countries. 
These recommendations are to a great extent addressed to na-
tional governments, but they have an entirely economic character. 
The improvement of trade conditions depends on the national gov-
ernments’ efforts because, as usually considered, the unification of 
these conditions go along with WTO membership, agreements for EU 
association, EU membership. The unification of trade conditions can 
also be speeded up through bilateral and multilateral regional agree-
ments. 
Third, businessmen prefer, first and foremost, to expect help 
from institutions of the three countries. National and regional busi-
ness associations, local authorities, international organizations are not 
only evoked, but they should also be interested in helping to establish 
cross- border economic relations. This is the area where most efforts 
should be applied in order introduce changes and where barriers for 
regional cooperation could be relatively easily overcome. 
Considerably little is achieved by the EU institutions which 
have rich experience in assisting regional cooperation, including co-
operation of border areas with other countries. This is a sphere that 
has been entirely neglected until now and where a lot can be done for 
regional and cross-border cooperation. 
Facilitating regional cooperation and cross-border relations has 
three dimensions – national, regional and international. The na-
tional governments bear the highest responsibility for conditions 
which reign in their own countries. At the same time East European 
transition countries have common problems, which can be solved eas-
ier if mutual efforts are applied. Finally, the support of international 
organizations will be essential for the successful promotion of re-
196 
gional cooperation and cross-border relations. 
In order to make use of advantages of regional economic inte-
gration and cross border co-operation the East European transition 
countries need active relevant policies and initiatives. Obstacles re-
lated with the lacking regional economic integration and cross border 
cooperation, insufficient or, to some extent, incompatible cross-
border infrastructure networks, the "balkanisation" of regional trade 
relations, insufficient trade supporting services, different institutional 
and administrative frameworks, etc., should be overcome. 
The lack of information and failing provision with sufficient in-
formation for running business can be outlined as the most important 
constraints to the development of successful business. It can also be 
stressed here that business associations show no real activity as they 
do in Western countries. 
The support from local and national authorities, from local and 
national business organizations, and from international organizations 
is definitely the weakest. In this respect the section of regional policy 
dealing with cross-border relations should include the provision of all 
necessary information needed by interested firms: information about 
suppliers, market niches, possible foreign partners, information for 
neighbour countries’ legislation as well as EU legislation, possibili-
ties for obtaining bank credits and other forms of funding, incl. how 
to apply and participate in joint EU projects. 
The business organizations have to try to support crediting 
cross- border economic cooperation by means of guarantees, by train-
ing to be able to elaborate business plans, training to be able to par-
ticipate in joint regional projects with foreign financing, creating of 
centers of information services concerning the opportunities for fi-
nancing not only for their members but also for businessmen from 
neighbour countries, and better use of financial opportunities from 
international, especially EU, programs. Quite important for interna-
tional organizations is to be more active in supporting joint infra-
structure projects in the region, even to make the first step in initiat-
ing such kind of projects. 
However, it should be once again underlined that the main dis-
advantages are related with the general economic conditions which 
imply also the existence of corruption and lack of security, and typi-
cal for the region disloyal competition. Other economic conditions of 
general type are inflation, foreign exchange rates, income trends, etc. 
197 
Important obstacle for developing business in neighbour countries in 
transition is also the low purchasing capacity of the population result-
ing from the low income level. Permanent amendments of regulations 
and the laws, poor economic culture and the state of the bank system 
are obstacles as well. All of them to a different extent are present in 
the different countries. 
The importance of general conditions can be underlined by the 
following fact: it is found out that the more unfavorable the general 
conditions in a given Southeast European country are, the more fa-
vorable is its legislation and tax system aimed at compensating disad-
vantages of the general conditions (Minassian, 2002). However, it has 
been also proved that these disadvantages can hardly be compensated 
by this policy. 
 
More concretely, the general economic conditions refer to: 
 
• political stability – the relative political instability in 
the region did not favor the development of business, above 
all attracting foreign direct investments; 
• changing rules – often changes in regulations and laws 
create for the firms an environment of uncertainty and limited 
possibilities for long-term planning of their activity; 
• corruption – corruption represents a huge problem for 
the countries, it affects both big companies as well as the 
SMB. Corruption is spread both at central and local adminis-
trative level. It represent a serious obstacle for the cross-
border business cooperation and is a strong anti-stimulus for 
investment in the region; 
• bureaucracy – this problem exists in all countries and 
almost every company has faced it. Bureaucracy in its differ-
ent forms damages economic relations indirectly. The nega-
tive effects are usually missing profits and opportunities. It 
should be emphasized that any time when companies refer to 
investment projects, they mention bureaucracy as a problem 
in trade relations (Totev, et. al., 2001); 
• disloyal competition is a major factor tightly related 
with corruption and bureaucracy. The existence of shadow 
economy also creates problems related with disloyal competi-
tion; 
198 
•  lack of security typical for the region – high level of 
crime (stealing of cars, robbery and blackmailing) is still a 
problem for the region; 
•  security in income trends – the purchasing power of 
the population is low, the market in the three countries is nar-
row with a small product differentiation; 
•  inflation and exchange rate – financial stability is a 
problem that affects economic relations and undermines the at-
tempts to foresee and provide long-run policy; 
 
Cross-border cooperation offers undoubted advantages to small 
and medium enterprises, this is very often the only way for the small 
firms to access foreign markets. That is why activities in supporting 
the development of small and medium enterprises in the border re-
gions are essential. Partnership with a company on the other side of 
the borderline can be useful for obtaining “first hand information” 
about the foreign market, it can be helpful in finding new partners, it 
can give additional information for production capacity or/and access 
to fresh funds. Using cooperative ties small and medium enterprises 
can profit from advantages of the economies of scale and, thus, be 
more competitive. 
Small and medium enterprises have specific strong characteris-
tics which can be used in starting cross-border cooperation projects: 
their flexibility, promptness with which small and medium enter-
prises can respond to the challengers of the foreign markets, direct 
contact between the managerial level and the market, horizontal 
structure of small and medium enterprises, which makes the decision-
taking process easier and faster than in large companies. 
The process of regional integration and cross-border co-
operation could be accelerated and enforced also through further par-
ticular, specific policies and measures addressed to international or-
ganizations, authorities at national and regional level, as well as to 
business organizations, etc. 
Recommendations to the business organizations: supporting 
the crediting of cross-border economic cooperation through training 
for making business plans, providing guarantees, etc.; training their 
members for participation in joint regional projects with foreign fi-
nancing; creation of centers for information services concerning the 
opportunities for financing not only their members but also busi-
199 
nessmen from neighbour countries; better use of opportunities for 
financing from international, especially EU, programs. 
Recommendations to international organizations: supporting 
joint infrastructure projects in the region; supporting the building of 
new checkpoints and improving the check opportunities of the exist-
ing ones; supporting the customs authorities for the projecting and 
building of a uniform system of database and its engaging in the EU 
one; supporting the training of passport and customs officers and the 
creation of efficient control of their work; supporting the financing of 
mutual cross-border business through business projects with interna-
tional financing; better informing and activating the international or-
ganizations in the region. 
it was proved that the development of economic relations 
within the East European countries is mutually beneficial and gener-
ates conditions of an alternative paradigm formulation of intra-
countries economic relations (Totev, 2002). From the strategic point 
of view, the long-term interests require stable relations between the 
countries, which will help their economies to recover, their industries 
to use the possibilities of intra-regional trade. Developing intra-
regional economic relations will allow to search for trade possibili-
ties. Inter-industry trade can be favourable, because the industrial 
structure in the countries is more complementary rather than concur-
rent. The effect of merchandise trade development is expected to be 
long-term as a whole, but it will be the highest at the beginning of 
the process, because the potential for this kind of relations decreases 
with the increase of turnover. 
In East European transition countries facilitating the develop-
ment of efficient enterprises that would benefit from internal and ex-
ternal economies of scale, presupposes, on the one hand, open bor-
ders and, on the other, intense trade relations within a larger region 
and, especially, with neighbouring countries. 
One can argue that regional and cross-border cooperation can 
be also considered as a tool for accelerating the process of synchro-
nization and harmonization of countries' legislation and regulations. 
The regional and cross-border cooperation can be more signifi-
cant for small countries compared with its role for Central European 
countries in transition; it is so because the possibilities of other forms 
of cooperation on this stage of economic development are not so fa-
vourable for these countries. Providing regional cooperation is a 
200 
good indicator for the countries’ adaptability to cooperate and re-
spond to the globalization processes. 
 
References 
 
CEC (1993) Trade and Foreign Investment in the Community’s Regions: 
The impact of Economic Reform in Central and Eastern Europe. Brussels: Re-
gional Development Studies, No 7, Commission of the European Community. 
Minassian, G. (2002), The Economic Environment in Albania, Bulgaria, 
Macedonia FYR, and Greece. Journal Eastern European Economics, July-
August, vol. 40, No. 4, pp. 45-82. 
Jackson, M. (2001) Politics and Transition Lags in Southeastern Europe: 
Will, Ability, or Possibility.Paper prepared for the final report of the Phare ACE 
Project P97-8196-R “Overcoming Isolation. Strategies of Development and Poli-
cies of Cross-Border Co-operation in South Eastern Europe after “Agenda 
2000”. 
Petrakos, G. (1997) Industrial Structure and Change in the European Un-
ion: Comparative Analysis and Implications for Transition Economies. Eastern 
European Economics. March – April, vol. 35, N 2. 
Petrakos, G., S. Totev (2000) Economic Structure and Change in the Bal-
kan Region: Implication for Integration, Transition and Economic Cooperation. 
International Journal of Urban and Regional Research, Vol. 24, N 1. 
Totev, S. (2002), Economic Performance and Structures of Southeastern 
European Countries – Albania, Bulgaria, FYR of Macedonia, and Greece Jour-
nal. Eastern European Economics, Nov.- Dec., Vol. 40, No. 6, M.E., Sharpe Inc., 
NY., pp. 51-83. 
 


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Cooperation of the Enterprises in East European Countries and EU: Adjustment Problems

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