The highly diverse nature of the ECA region signals a substantially differentiated scope of demand for PSD and PSD-related services across differing client groups. While eight client countries joined the EU in 2004– a strong indication of the progress made over the past decade of focused reform, other countries continue to experience significant challenges in efforts to reduce substantially high levels of poverty. Despite these differences, the need for a sustained focus on private sector-led growth is as critical as ever in light of the increased competitive challenges ECA clients now face.
In terms of private sector priorities and areas of focus, the region may informally be divided into six primary groups:
EU-8 Countries (Czech Republic, Estonia, Latvia, Lithuania, Poland, Hungary, Slovak Republic, Slovenia)
The European Union (EU-8) countries represent a highly unique group of Bank clients, given their recent integration within the European Union. The significant development challenge these countries face is convergence with the EU-15; a process which must be driven by private sector development. The World Bank continues to play role in assisting EU clients in analytical and advisory activities and lending projects aiming at addressing address EU-8 development challenges in business environment, technology, innovation, quality and skills, and supporting institutional capacity building and facilitating the process of market integration.
Turkey
Following Turkey's financial crisis, substantial progress has been witnessed in terms of overall economic growth. The EU's launch of accession talks with Turkey is indicative of significant PSD reforms which are likely to take place over medium term. This will include a focus on technology absorption at the firm level, increased use of quality standards among firms and labs, enhancement of potential for export and trade, facilitating SME and MSME access to credit by improving financial information and infrastructure and by providing medium and long term funding, streamlining administrative procedures with focus on reducing licenses and cost of entry and improving access to land, creating a level playing field by monitoring and reducing state aid and accelerating privatization of corporate and banking sectors, and improving flexibility of the labor market.
Central European Candidate Countries (Romania, Croatia and Bulgaria)
Romania, Bulgaria and Croatia represent the upcoming wave of accession countries to the EU, all three of which are working towards joining the EU in 2007. The need for continuing the reform agenda prior to the EU accession process remains a priority in all three of these countries. As such, alignment/harmonization with EU regulations, the development of sufficient capacity to support integration, adoption of lessons from first-wave accession countries and preparation of the private sector (especially SMEs) for the new competitive environment all represent priority areas these clients.
Western Balkans (Albania, Bosnia & Herzegovina, Kosovo, FYR Macedonia, and Serbia & Montenegro)
The World Bank has been actively involved in the Western Balkans in the post-conflict era, with private sector development a key engine for growth amongst member states within this region. The Bank has moved quickly to assist in the transition of these countries, and currently is leading the way with development policy lending and other PSD-interventions targeting legislative and regulatory reforms, and the overall business environment. Over the medium-term, the World Bank must continue to play a prominent role as Serbia and Montenegro, Bosnia-Herzegovina, FYR Macedonia and Albania tackle a number of key development challenges. These include the legal and institutional framework for business operations and access to finance, in addition to the prevailing problems of the role of the public sector in the economy, and the continued presence of a large number of firms in the grey economy.
Former Soviet Union (excluding Russia, Kazakhstan and Ukraine)
The former states of the Soviet Union represent a highly heterogeneous and emerging group of ECA clients. Although the pace of reforms within this client group has in some cases varied significantly between countries, a number of common developmental challenges remain. These are underpinned by the need to continue to support equitable economic growth, the enhancement of the environment for businesses, the opening up of borders to trade and foreign investment, improving living standards and the need to integrate with the sub-regional and world economies.
One of the priority reform areas lies in the need to continue the privatization agenda, particularly in relation to key strategic sectors. This activity must be accompanied by the establishment of a legislative and regulatory framework to increase transparency, as well as the need to address the current investment climate and business environment, particularly in terms of SME growth.
Kazakhstan, Russia, and Ukraine
Kazakhstan, Russia, and Ukraine represent four countries within the ECA region, each with unique developmental challenges. In Russia and Kazakhstan, there is a need to maintain growth and stability on the heels of the booming oil sector, and diversify the economy to lay the essential building blocks needed to support long-term growth. In Ukraine, substantial progress has been witnessed in terms of overall economic growth recently. The election of a new Government in Ukraine opens new opportunities for PSD dialogue and significant PSD reforms which are likely to take place over the medium-term. This will include a focus on technology absorption at the firm level, emphasize productivity and growth, enhance potential for export and trade and facilitate SME and MSME development. |
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