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Transition Report 2013 Stuck in transition?

CH3 180sq

Facts at a glance

ALMOST
25
years after the start of the transition process, economic institutions in the transition region are, on average, still weaker than in other countries with comparable levels of income.

0.5 The correlation between measures of democracy and regulatory quality in a global sample of countries.

Cover 180sqV2

 

THE
3
-year period prior to accession saw a peak in terms of institutional improvements in EU accession countries.

OVER
33%
of Kyrgyz SMEs say that unofficial payments are required in everyday business.


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Economic institutions

Political polarisation

Political polarisation is defined in the transition context as the strength, in terms of the number of parliamentary seats, of the largest post-communist faction when an anti-communist faction is in power and vice versa (see previous section). Between 1990 and 2004 Romania and Ukraine were among the three or four countries in the transition region with the highest degree of political polarisation (the others being Bulgaria and, depending on the methodology, either Albania or the Kyrgyz Republic).1

Political polarisation makes it more difficult for reformist groups to initiate and sustain change for two reasons. It is obviously harder to pass and implement reforms in the face of strong parliamentary opposition. More subtly, polarisation increases the likelihood of changes of government and changes to policies, so reformers can count on less support from the presumed beneficiaries of change – for example, new businesses – and their chances of defeating incumbent interest groups are lower.

It may therefore be costlier and riskier – not just for reformist politicians, but also for public officials and civil servants – to take on vested interests in a polarised political environment. This may explain why reforms in Romania between 1996 and 2000 were hesitant and undermined by dissent within the governing party and why the Yushchenko administration in Ukraine was reluctant to reform the energy sector to the detriment of established industrial interests.

 

  1. See Frye (2010). [back]

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