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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

External anchors and external support

According to several authors, the prospect of EU accession created incentives for reform in many transition countries – particularly after they had submitted membership applications, and most directly during the membership negotiation phase, when the EU pressed for specific reforms.1 Chart 3.11 shows that, in fact, reforms in the EU members that joined in 2004 and 2007 (the EU-10) peaked between one and three years prior to accession.

Chart 3.11

Source: World Bank.
Note: The chart shows the average change in the WGIs of the EU-10 countries in the seven years before and after EU accession. The EU-10 countries are: Bulgaria, Croatia, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, the Slovak Republic and Slovenia.

EU membership negotiations with Romania, the Slovak Republic and a number of other candidate countries started in early 2000. This was fortuitous for the Slovak reformers who had come to power in late 1998. Although both Romania and the Slovak Republic became EU candidates in the mid-1990s, the prospects of EU accession were clearer and stronger in late 1998 than they were in 1996, when Romania’s window of opportunity opened under the new centre-right coalition government. Following the broad change in policy direction by the Slovak reformers who had come to power in 1998, the republic re-opened negotiations to join the first wave of EU accession, while Romania, alongside Bulgaria, was kept in the second wave.2

Both Georgia and Ukraine lacked this EU anchor. However, the objective of joining NATO, which received unanimous support from Georgia’s parliament in 2006, may have provided an additional motive for Western-oriented economic reform, particularly prior to the country’s 2008 conflict with Russia. Similar calls for NATO membership in Ukraine might have provided some initial impetus for institutional reforms, but these ceased after a negative reaction from neighbouring Russia.

Western intellectual and financial support during and after the Rose Revolution may have also contributed to the success of some reforms in Georgia. According to World Bank data, net official development assistance and official aid received by Georgia from the United States and other partners fluctuated between 4.6 and 8.4 per cent of GDP per year between 2005 and 2009, compared with 0.3-0.6 per cent of GDP for Ukraine.

 

  1. See Roland (2000), Vachudova (2005) and Plümper et al. (2006). [back]
  2. See Berglöf and Roland (2000). [back]

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