Most of the countries of Europe and Central Asia (ECA) Region emerged from the long period of communist rule with substantial and, in some cases, massive infrastructure. Additionally, they possess about 10% of the world's oil, almost 40% of gas, and 5% of coal reserves. This significant resource base enabled the region to develop considerable production capacity. Years of substantial public investment in utilities, roads and other infrastructure as well as the rapid construction of natural gas networks and power generation and transmission facilities during the 1970s and 1980s provided the capacity for large-scale supply of energy and infrastructure services to the economy.
Traditionally, the infrastructure and energy sector of countries in the region was structured as vertically integrated public monopolies. Central authority was perceived as a requirement to ensure expansion and operation of these facilities, and to protect consumers' interests. The traditional structure resulted in serious inefficiencies in investment decisions, plant operations, and product pricing. Prices were not related to costs and were not relied upon to allocate resources. Investment decisions were made without regard to their economic justification. In most cases, companies and service providers were not financially sustainable. They relied heavily on public funds while customer service was unsatisfactory and production facilities were not well maintained. These supply-side problems were exacerbated by low efficiency of consumption and unwillingness to pay hampering the competitiveness of the region's economies.
The collapse of the Council for Mutual Economic Assistance (CMEA) and the breakup of the former Soviet Union in 1991 led to massive changes in the region's political and economic structures. With a shift from centrally planned to market-based economic systems, the traditional structures of the infrastructure and energy sector became increasingly unsustainable. Hence, many countries in the region embarked on or are contemplating structural reforms. However, progress toward commercialization within an appropriate legal and regulatory environment is highly uneven. While there is considerable foreign and domestic private sector interest in participating in some energy and infrastructure subsectors in the region, the readiness of private operators to take the associated commercial and political risks is low and the willingness of governments to embrace the private sector varies significantly between countries.
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