Country-level transition indicators

Details

Structural reform

The EBRD's country-level transition indicators have existed since 1994 and cover the period since 1989. Although some were due for modification in 2013, given the theme of this report – "Stuck in Transition?" – the Bank has decided to maintain its methodology for one more year to ensure comparability with previous years.

In some categories, such as price liberalisation or trade and foreign exchange, many countries have reached the maximum score of 4+, so any further progress cannot be reflected in the scoring system. Other categories, such as governance and enterprise reform or competition policy, lag behind. Reforms in these areas may be complex and difficult to implement.¹

There are very few changes to record this year. For the first time downgrades (five in total – three in Hungary and two in the Slovak Republic) have outnumbered upgrades (one each in Croatia and Tajikistan) ‒ see Table S.4.

Tajikistan has been upgraded for trade and foreign exchange liberalisation in recognition of the country's accession to the World Trade Organization in March 2013.

Croatia has received an upgrade in the area of large-scale privatisation for restructuring and selling off a number of large shipyards. This was a significant achievement, as successive governments had grappled with this problem over many years. Progress in this area was one of the requirements of EU membership, which became effective on 1 July 2013.

In Hungary, the government has sought to solidify the country’s position as an export-oriented investment platform through an increasing number of investor-specific ‘strategic partnership agreements’. However, the use of firm-specific agreements weakens the role of the legislative and regulatory framework in creating a good business environment for all firms, and bears the risk that local or national authorities could discriminate in favour of firms that have signed an agreement. In that light, a downgrade in the transition indicator for trade and investment liberalisation is warranted. Heavy state intervention in the energy sector has also warranted a price liberalisation downgrade. The score for competition policy has been downgraded to reflect the government’s 2012 decision to suspend the application of provisions on restrictive practices in the agriculture sector under certain circumstances.

In the Slovak Republic the abrogation of a bilateral investment treaty after the loss of an arbitration case involving an international investor and the state has warranted a downgrade for trade and foreign exchange liberalisation, as these types of treaty exist to provide crucial protection for foreign investors. A downgrade for competition policy reflects increasing state interference across several sectors and the marked decline in enforcement activities by the Slovak competition authority since 2010.

1. See the EBRD blog entitled "Competition policy in the EBRD region: why is it lagging behind?" (February 2013). [back]

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