The so-called transition economies are commonly understood to refer to countries which have moved or are moving from a primarily state-planned to a market-based economic system, with private ownership of assets and market-supporting institutions. These countries include those of the former Soviet Union (FSU) and those of Eastern and Central Europe closely allied with the Soviet Union, as well as more recently countries in Asia and Africa undergoing market transformations of various degrees, such as China, Mongolia and Vietnam. These countries, ranging from middle to low-income countries, comprise the World Bank's Europe and Central Asia (ECA) region.
While the transition countries in the FSU differ from those in Asia and Africa and from one another in many respects, including culture, economic structure and extent of the informal sector, and pre-transition starting points, they nonetheless are affected by transition in much the same way.  The transition process has brought with it significant short-run costs to the economies that are by now well-documented. The dismantling of the state-owned enterprise systems have resulted in increases in poverty as wages dropped in the face of disruptions in trade and financial links (in ECA primarily), unemployment increased in some cases as newly private firms struggle to become competitive, and vulnerable groups generally were not able to rely on heavily state-subsidized support services. These changes were exacerbated by the collapse of historic trading relationships and fiscal shocks to state budgets. In many cases, poverty and increasing urbanization have further stressed and weakened family and community-based coping mechanisms, particularly in Asia. Transitions in Africa have been complicated by conflict and severe deteriorations in the terms-of-trade and are often constrained by very low income country settings.
The combined effects of these shocks have been dramatic. In 1990, an estimated 1.5 percent of the population in the ECA region lived on less than $1 a day.  By 1998, 5.1 percent of the population had fallen below this international poverty standard, with substantially higher rates and increased inequality in the lower-income and conflict-ridden countries. Many countries in the ECA region tried to hold together elements of the old social protection systems, including safety nets.  In 1999, for example, it is estimated that Russia spent 50 percent more on residential care institutions – important under the Soviet system – than on social assistance benefits and child allowances combined.
The key issue for safety nets provision in transition economies is been how to maintain an adequate mix of appropriate assistance for the poor and vulnerable while adhering to tighter budget constraints and changing government and institutional structures. The adjustments are ongoing. Recently, for example, several countries in the ECA region have improved the coverage and targeting of their programs, and by providing adequate financing, they have shown that it is possible to alleviate poverty at relatively low cost.
|
RSS