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The Integration of Western Balkan economies in Global Economic Flows

TitleThe Integration of Western Balkan economies in Global Economic Flows
Publication TypeConference Proceedings
Year of Publication2013
AuthorsGanić, M
Conference NameINTERNATIONAL SILKROAD CONGRESS and 10th ACTR CONFERENCE
Date PublishedOctober, 2013
PublisherIstanbul Sabahattin Zaim University
Place PublishedIstanbul, Turkey
ISSN Number978-605-62038-7-9
Abstract


Full Text

I.                   Introduction

In the last decade of the twentieth century, the process of internationalization of production and trade has been intensified. It is a process of opening of nacional markets in terms of free flow of goods, capital and labor. Moreover, it contributes to sustainable development by offering better conditions under which goods are produced and traded. The dominant economic entities are transnational corporations as the main driving forces of economic growth. In its business strategy, the global market is considered as a unique system. One of the trends that stimulate the process of globalization of the world economy is intensified institutional integration of the state, especially in the area of economic cooperation.

Trends in international financial flows enable private companies access to international financial markets in order to collect additional resources need to operate internationally. Growing freedom in trade in goods and services is closely linked to developments in the financial and capital markets. Such trends include one by one the countries that had a different form of economic organization. The transformation of the global economy is accompanied with fundamental changes in the nature of economic policy in most countries. This particularly applies to the Western Balkan countries.

In recent years the growing volume of financial transactions contributed to the ongoing changes in the structure of the financial system and greater integration of regional markets. As a result, inter-regional mobility of capital has become an important determinant that affects the economic activity (Buch, 2000).

Another opinion provided by Levine (2001) is that the international mobility of capital allows efficient global allocation of savings transfer of financial resources to their most productive use, thereby increasing economic growth and wealth of the world. In line with a greater degree of economic openness, many countries remove or relaxation of legal restrictions on capital flows in order to stimulate the flow of financing as weel as facilitate financing of their own deficits. This view can be supported by Buch (2000) suggesting that there are various indirect barriers that prevent greater financial integration. As such barriers may occur asymmetric information between domestic and foreign investors, preferences and fixed costs are entering the market and cultural differences There are also economists like Krugman and Rodrik who focus on considering the financial integration phenomenon suggest that, due to financial integration, the risk of damage it causes may exceed its benefits (Alfaro, Kalemli-Özcan, Volosovich, 2006). In recent decades, Western Balkan countries have begun the process of transition from one economic system to a market-oriented and are still in the midst of earlier stages of the model. However, the model of transition in those countries is different, with varying degrees of success and the many difficulties they face. These problems are the lack of adequate economic structure, technological backwardness, high indebtedness, unemployment, lack of own financial resources, etc. Opening up to trade is important issue in small countries with closed economy.

 

II.                The impact of capital account liberalization on the economy of WB countries

As the side effects of the process of globalization, liberalization of national financial systems, freedom of international capital flows and the internationalization of banks and companies have had to contribute to greater efficiency of the world economy and financial markets.

The topic of the capital account liberalization is considered often in connection with process of globalization. There are some basic facts that characterize the direction of economic trends in the WB and that they have a lot in common. Therefore, it is important to understand that from the moment of independence these countries have chosen to become democratic societies followed by other advanced transition countries. All countries of the WB have accepted the market economy as the basic orientation and long-term perspective of their social and economic development. This fact-constant of the new economic reality in the WB countries had certain significance to their further development. The second element that must be borne in mind are the objective conditions, internal and external-under which the emerging countries of former Yugoslavia in order to begin with its own political independent life and a breaking with socialism looking for new solutions in a market economy.

Impact of capital account liberalization on economic growth attracted the attention of many economists. First, because of the potential benefits in terms of improving the efficiency of developing countries and emerging markets, and secondly because of the mobility of capital.

Advantages of greater capital mobility for the growth and modernisation of the region are clear. These are more efficient allocation of resources, including access to new sources of financing projects in poor countries with a low level of savings, opportunities for diversification of risks, and promote financial development. International trade has had little involvement in the system of centralized planning as opposed to market-oriented economies and developing countries. Therefore, these countries have been isolated from the international financial system.

One of the key aspect transition former Yugoslavia countries including Albania was to achieve macroeconomic stability in order to create environment that can support economic growth. Moreover, difficulties such as non convertible currency have imposed many limitations on local companies to deal with international transactions. After the collapse of the centralized planning system most transition economies has begun the process of removing restrictions on current account transactions. Furthemore, the majority of these countries have taken measures to liberalize financial flows as part of the development strategy. Over the transition period, a number of complex economic policy measures are conducted such as the liberalization of prices and trade, financial stabilization, establishment of currency convertibility, restructuring, and the development of an institutional and legal framework of a market economy. These moves were accompanied by the liberalization of capital account balance that has enabled countries of WB gradual integration into the international trade and financial flows. The main positive effects of liberalization have increased inflow of private (foreign) capital and foreign exchange reserves. By the same token, process of liberalization also had some negative consequences. The early years of transitions were characterized by public debt increases, trade deficit and increases of inflation rate. Table 1 gives a short overview of movement of selected economic indicators over the period 2002-2012 for the countries of WB. Data in the table 1 represent a weighted average of the selected countries. According to these data, it is observed that among the countries of WB Montenegro recorded in over a decade its highest-ever current account deficit in 2008 (49% of GDP) while Croatia recorded a lowest Current Account deficit of 0.14 percent of GDP. Fiscal consolidation is necessary in order to increase domestic saving and reduced the current account deficit. Also it is supposed that fiscal efforts should be oriented by develop a sustainable fiscal situation. All WB economies experienced increased govermnet debt in transition period that had relatively high ratios of debt to GDP. General government gross debt tradinionally had been high and remained in doble digits during transition period. 

On cumulative basis, most noteworthy the pickup in investment rate as well as average rates of gross national savings was recorded in Croatia and Albania.

Table 1 Selected economic indicators for WB countries

 

Bosnia and Herzegovina

Albania

Croatia

 Macedonia FYR

 Montenegro

Serbia

 

2007

2009

2011

2007

2009

2011

2007

2009

2011

2007

2009

2011

2007

2009

2011

2007

2009

2011

GDP Growth Rate

6.14

-3

1.6

5.9

3.3

2

5.1

-6

0

6.1

-0.9

3.03

10.7

-5.7

2.45

6.9

-3.1

1.78

CPI (period average)

1.5

-0.4

3.7

2.94

2.22

3.4

2.9

2.4

2.3

2.28

-0.8

3.9

4.2

3.4

3.08

6.5

8.11

11.2

Unemployment rate (as % of total labor force)

29

24.1

27.6

13.5

13.1

11.5

9.6

9.1

12.2

34.7

33

31.23

11.9

11.2

11.5

18.8

17.4

23.7

External Debt (as % of GDP)

42.5

46.6

25.67

14.4

23.4

38.5

77.7

99.1

102

52.5

58.8

66.7

75.8

96.9

99.9

64.9

65.5

77.5

Fiscal Balance (as % of GDP)

0.34

-5.82

-3.5

-3.6

-7.4

-3.7

-2.1

-4.2

-5.2

0.59

-2.6

-2.5

7.8

-4.4

-3.4

-1.92

-4.1

-4.6

Gross Reserves (as % of GDP)

28.7

19

23.1

19.7

19.1

11.1

21.5

22.7

24.9

26.3

22.2

22.58

18.8

14

8.66

35.3

35.5

33

Current Account Balance as % GDP

-12.6

-6.27

-8.34

-10

-14

-13

-7.3

-5.1

-1

-7.2

-6.8

-2.7

-39.5

-29.6

-19.5

-16.1

-7.12

-9.1

Source: International Financial Statistics (IFS), and Global Financial Stability Report (GFSR), The United States Agency for International Development (USAID) Partners for Financial Stability Program (PFS)

For most of the above countries proces of transition to a market economy was not easy. There are at least two key indicators that point to problems. Firstly, the accumulated fiscal problem inherited from the past "regime" and "pure" monetary problems prompted strong inflationary processes.

The economy’s development in selected countries was particularly successful in the period between 2003-2007 when there was dynamic growth in all basic sectors. The summary statistics on selected macroeconomic indicators in selected economies  suggest us that the inflation remained low in single digits despite current account imbalance and fiscal deficit increased (the exception was Serbia where inflation in 2011 accounted over 11 percent).

In addition, the external position of these countries remains weak due to the large foreign trade deficit. Reducing the value of exports and increasing imports of goods and services simultaneously has led to the fall in output and employment in the real economy, causing decline in disposable income and public revenues. On the other side of the equation, this has caused further decline in final consumption, particularly investments which resulted in a sharp fall in domestic demand. WB countries recorded decline and relatively small inflows of remittances. Also, in 2009 with the exception of the Albania all the rest countries of WB were facing with the recession and its adverse effects. Although many economies have demonstrated moderate positive economic recovery and out of the crisis in 2011, something like that cannot be said for the economies of WB. The weakening of economic activity is confirmed by foreign trade activities, reduction of foreign exchange reserves, rising unemployment and increasing fiscal deficit. In 2011, external debt in Croatia has risen since 2007 and exceeded 100 percent of GDP. Regarding employment rate, Croatia did better than most individual WB countries, increasing its employment rate.

Another problem is a drop in production and a rise in unemployment. Since the national savings rate was very low, foreign capital has been an indispensable complement national savings to increase investment and restructuring economies. In the early years of the transition inflow of capital was related to the ongoing processes of trade liberalization and the privatization.

The process of transition implied a decline in production and real economic activity. Economic collapse is mostly affected inefficient industrial sector inherited from the previous economic system.

The main objective of economic transition is the change the role of the government institutions that created the policy and directly managed by state-owned enterprises in the role that would allow the development of the economy based on private property of individuals. Also, it is expected that the transition process ensures that the economic role of the state and the individual should trade places. In pretransition period, a government has brought some important decisions such as the decision on the establishment of the company, new investment, economic development at the local level. However, with the start of the transition process tended to create the conditions for private companies take over the role of government in making decisions about economic activities to strengthen their competitiveness by including both domestic and foreign markets.

WB countries have been keen to increase policy action in light of the economic benefits of transition strategy in some areas of reform. Table 2 illustrates the overall transition indicator scores from 1989 to 2012, for all WB countries of the region and all core dimensions of reform (Large scale privatisation, Small scale privatization, Governance and enterprise restructuring, Price liberalization, Trade & Forex system, Competition Policy).[1] Over the last two decades countries of Western Balkan include Albania, Croatia and FYR Macedonia, Bosnia and Herzegovina, Serbia, Montenegro that have achieved progress in almost all core dimensions of reform transition reforms. As regards the transition reforms, further progress towards establishing a functioning market economy has been made in the reform of price liberalization, Trade & Forex system, and small scale privatisation. By country, in others areas of reform moving faster was not possible because most of WB countries have seen limited progress in governance reform and enterprise restructuring and competition policy. Except for the Croatian, the other WB countries still have a lot to do in above mentioned the area of reforms.

 

Table 2  The transition indicators - rate the progress of WB countries

 

 

1989

1997

2005

2012

  

1989

1997

2005

2012

ALBANIA

Large scale privatisation

1.0

2.3

3.0

3.7

FYRM

Large scale privatisation

1.0

3.0

3.3

3.3

Small scale privatisation

1.0

4.0

4.0

4.0

Small scale privatisation

3.0

4.0

4.0

4.0

Governance and enterprise restructuring

1.0

2.0

2.0

2.3

Governance and enterprise restructuring

1.0

2.0

2.3

2.7

Price liberalisation

1.0

3.7

4.3

4.3

Price liberalisation

2.7

4.0

4.3

4.3

Trade & Forex system

1.0

4.0

4.3

4.3

Trade & Forex system

2.0

4.0

4.3

4.3

Competition Policy

1.0

1.7

2.0

2.3

Competition Policy

1.0

1.0

2.0

2.7

B&H

Large scale privatisation

1.0

1.0

2.7

3.0

MONTENEGRO

Large scale privatisation

1.0

1.0

3.3

3.3

Small scale privatisation

3.0

2.0

3.0

3.0

Small scale privatisation

3.0

3.0

3.7

3.7

Governance and enterprise restructuring

1.0

1.0

2.0

2.0

Governance and enterprise restructuring

1.0

1.0

2.0

2.3

Price liberalisation

2.7

3.0

4.0

4.0

Price liberalisation

2.7

2.7

4.0

4.0

Trade & Forex system

2.0

3.0

3.7

4.0

Trade & Forex system

2.0

1.0

3.7

4.3

Competition Policy

1.0

1.0

1.0

2.3

Competition Policy

1.0

1.0

1.0

2.0

CROATIA

Large scale privatisation

1.0

3.0

3.3

3.3

SERBIA

Large scale privatisation

1.0

1.0

2.7

2.7

Small scale privatisation

3.0

4.3

4.3

4.3

Small scale privatisation

3.0

3.0

3.3

3.7

Governance and enterprise restructuring

1.0

2.7

3.0

3.3

Governance and enterprise restructuring

1.0

1.0

2.3

2.3

Price liberalisation

2.7

4.0

4.0

4.0

Price liberalisation

2.7

2.7

4.0

4.0

Trade & Forex system

2.0

4.0

4.3

4.3

Trade & Forex system

2.0

1.0

3.3

4.0

Competition Policy

1.0

2.3

2.3

3.0

Competition Policy

1.0

1.0

1.0

2.3

             

Source: EBRD

III.             Trade Reorientation

One has to assume that nowadays in order to ensure the growth of the national economy, also state  has to be relied on international trade and intensifying relationships with other countries.

After the fall of socialism, the former socialist countries have undertaken a series of reforms towards establishing a functioning market economy. One of the most important reforms is the one that was related to trade liberalization. The primary objective of this reform has been motivatied by the needs to harmonize the level of domestic prices to the level of world prices, and also improve cooperation in the field of international trade with its natural trading partners.

In 1999, the EU has extended autonomous trade preferences for the five WB countries focusing on Stabilization and Association Process. Stabilization and Association Process has taken important step in developing wider cooperative and approaching the countries of the region after the war events in the early 1990's. This cooperation has been established through a network of bilateral free trade agreements (G. Wittich, 2005, p. 2). The conclusion of these agreements was preceded by the signing of a Memorandum of Understanding (MoU) with the intention to liberalize trade between Albania, Bosnia and Herzegovina, Bulgaria, Croatia, FYR Macedonia, Romania and Serbia and Montenegro (C. Grupe and S. Kušić, 2005, p.10). MoU regulates the issues of tariff rates for the abolition of at least 90% of all tariff lines and tariff liberalization in order to cover at least 90% of bilateral trade by value. (The European Institute Foundation, 2004, p.23). During the 1990s, significantly reduced the level of trade protection. There was a reduction of customs duties and leaving the policy of high tariff prottection.  The aim of these activities is to be to support gradually entering of domestic enterprises in international markets and to take measures to strengthen their competitiveness, providing access važnirn inputs. (Drabek and Bacchetta, 2004). Foreign currency transactions are liberalized, monopolies of state enterprises eliminated, and operational decisions are made through the decentralized market. Domestic competition is strengthened through the process of privatization of state owned enterprises, while the arrival of foreign investors supported by liberalization of their establishment in the host countries. Market access to developed countries is vital for countries in transition. The process of liberalization of the South East European region began in 2001 with the signing of the Memorandum of understanding, liberalization and facilitating trade conditions and giving incentives to trade under the auspices of the Stability Pact for for Southeast Europe.

This has opened the negotiations that led to creation of a network of 32 bilateral agreements on mutual liberalization of trade in industrial and agricultural products, which has been signed between eight the countries of Southeastern Europe (Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Serbia and Montenegro, Macedonia, Moldavia and Romania).

Among other things, many of those countries enjoy preferential status in the market under the bilateral arrangements such as those signed with the EU. Successfully enter a new market was enabled by signing an agreement with the EU, but also whitin GATT programm at the beginning of the transition. The passage of time the network of bilateral trade agreements is growing and spreading. The entry of Romania and Bulgaria into the European Union on 1 January 2007th, the CEFTA was included the following countries: Albania, Bosnia and Herzegovina, Croatia, Macedonia, Moldova, Serbia and Montenegro. The agreement provides for the expansion of markets for all products, but also trade under the same conditions for all manufacturers.

It also expands and modernizes the domain of free trade, open up more markets for trade and investment. The signing of these agreements have created powerful incentives for closer trade ties with the EU.

The decade of 2000-2008 is undoubtedly one of the most important period of trade expansion in the WB region. Greater integration with the EU internal market implies also the need of countries of WB that its policy of economic development harmonizes with the EU strategy of economic development.

From 2000s, onwards Europe's Preferential Trade Agreements provides countries of the WB preferential access to the EU market through reduced tariffs creating a strong stimulus to the rapid growth of trade. Among these countries exports from Croatia and Macedonia in the period between 2000 - 2010 were more than doubled, Bosnia and Herzegovina's export is quadrupled. It is indicative that average intraregional import share in total imports amounted only 15.2% for all countries of the WB (included Bulgaria and Romania) indicating a high degree of similarity of productive structure of countries in the region, rather than complementarities (S. Kathuria, 2008, p. 37). In international trade region of the WB has achieved a step forward in terms of increasing exports has achieved important progress in terms of the increasing volume of their exports. Strengthening export oriented economy is based on the use of the advantages of preferential exports to the EU market.

Figure 1 Percentage Import Growth Rates for   Figure 2 Percentage Export Growth Rates for selected selected economy, 1997-2010                                                                             economy, 1997-2010 

    

Source: International Trade Statistics 2011, Authors calculation.

Comparative data on export and import show that there are significant differences between countries of the region. As illustrated in Fig. 2, during the period between 1997- 2010 exports grew by an average annual rate of 18.05% in Albania, Serbia (11.10%) and Bosnia and Herzegovina (9.65%). On the other hand, as illustrated in Fig. 1 over the same period, the highest recorded average annual growth rate of imports was in Albania (16.30%) and Bosnia and Herzegovina (11.15%).

The share of exports in GDP is modest. There were large differences in these ratios across countries. The lowest growth rates of exports during this period were recorded in Montenegro (29.1%) and highest growth rates of exports in FYR Macedonia 58.9 % (table 3). On the other hand, over the same period, the lowest share of imports in GDP was in Montenegro 35.7%, and highest in FYR Macedonia 94.8% (Table 3). It is shown over the reference period that growth rate of exports has been greater than imports with the exception of Macedonia and Montenegro. The share of imports in GDP in all selected countries exceeded the share of exports due to which merchandise trade balance of WB was in a deficit. In recent years it has been shown that the FYR Macedonia, Serbia and Bosnia and Herzegovina have the most trade openness in the region (column 2 and column 4). In contrast, Montenegro is most closed in terms of imports or exports in total GDP.

Table 3: Review of the indicators of international trade development over the period 1997-2010

 

Exports

Imports

Trade-to-GDP ratio

Exports-to-GDP ratio

average growth rate 1997-2010 (%)

Imports-to-GDP ratio

average growth rate 2000-2010 (%)

Albania

36.5

20.38

48.5

16.3

48.5

Bosnia

42

17.74

62.2

11.15

62.2

Croatia

32.7

8.72

51.6

6.27

51.6

Serbia

42.8

11.10

64.1

6.17

64.1

Macedonia

58.9

6.69

94.8

9.00

94.8

Montenegro

29.1

-12.76

35.7

4.15

35.7

Source: Derived from the EUROSTAT database, National statistics, Authors calculation (column 2 and column 4).

 

IV Role of Foreign Direct Investment

The significant growth of FDI is a manifestation of the accompanying completing the process of privatization as well as transformation of transition economies toward market-oriented economy.

Within international financial transactions dominant role since the mid-1990s onwards have foreign direct investment (FDI). By 1980s, economies of these countries had identical characteristics which were fully manifested in zero or negative economic growth rates. Entrepreneurship and private initiative are negated as initiators of a continuous process of innovation, technological change and improve the organization and management of economic activity. Given that the country WB could not find the way out from this situation, they were indispensable help of developed countries This has created the need for a complete reform of the socio-economic system of WB countries. In the hope that it will lead them to the path of economic growth, they have encouraged the flow of foreign capital, especially FDI.

As time went on, it became evident that liberalization and deregulation of markets within the WB region has resulted in a significant increase Private capital flows (net foreign direct investment and portfolio investment). The importance of private capital inflows flows to countries in the region illustrated their share in the GDP. Although, among WB countries Croatia and Serbia received the most private capital inflows flows in absolute terms over past decade Montenegro was first largest receipent private capital inflows flows as percent of GDP.

Figure 3  Private capital flows, total (% of GDP)

Source:

The countries of WB have benefited from recent private capital inflows. Private capital flows as % of GDP to some countries exceeded 10 percent of GDP. Strong growth in private capital inflows into the country of WB from 2002 onwards is supported by the privatization of public enterprises, large-scale projects which are based on low-cost production. The upward trend in private capital flows has continued over the period from 2005 to 2007 when it reached a record level in some countries (Bosnia and Herzegovina, Macedonia, Montenegro). Meanwhile, firstly the global and EU debt crisis as well as a fact that process of privatization is coming to its end influence that since 2008 onwards recorded a drop in private capital flows. When talking about the major investors in the region, then it must be said that these transnational companies from the European Union.According to the data from Table V it can be seen that Montenegro has attracted the most private capital flows, as% of GDP, followed the Serbia and Albania recently. It is interesting also to notice that Bosnia Herzegovina and Macedonia received a similar amount of private capital flows.

Since the beginning of the 1990s, the main focus of the most of these countries was directed to the higher degree of integration and convergence with the intention to one day become EU members. From an economic point of view, the past decade has shown that all the WB countries largely depend on their cooperation with the EU, either through foreign direct investment, loans or grants. The following table presents the inflows and outflows of FDI over the period 2005-2011 for the WB. Among the countries in Table V, in the period between 2005-2011 FDI outflows increased only in Serbia Bosnia and Herzegovina.The first growth interval of FDI in WB economies is represented by the period of 2005-2007 when FDI gradually grew from 4876 mil.$  in 2005 to 5725 mil.$  in 2007 and second one when FDI recorded decline from 5475 mil $ in 2008 to 857 mil. $ in 2011.

  Figure 4 FDI inflows economy, 2005-2011                                    Figure 5 FDI outflows economy, 2005-2011

            (Milllions of $)                                                                   (Milllions of $)

Source: Derived from the UNCTAD, FDI/TNC database

The presence of foreign investors and the growth of inflow FDI in WB was motivated by many factors including:

a) geographical proximity to EU market that allowed favorable conditions for attracting foreign investors who relocated part of its production to countries with cheaper labor and less stringent work regulation. In previous years it has been shown that the effect of geographic proximity is an important factor that influenced on high level trade exchanges with the EU gave companies from EU a major competitive advantage in initiating the international expansion of their activities in neighboring countries.

b) opportunity to expand their market share to the organization of production in WB (and thereby reducing transportation costs) or to use in the production of these countries as a platform for expansion into larger markets in other regions.

Thanks to the reforms and the promising economic outlook region of WB become a place where investors with regional ambitions had the greatest potential for cross border expansion. This is especially important in the context of the region's aspiration to join the EU.

 

CONCLUSION

In recent years, it has shown that the financial needs of WB countries can not be met through private financial markets. To overcome these problems significant financial support to countries in transition provided by the IMF and the World Bank. Assistance provided by the multilateral financial institutions was aimed at helping countries in transition to adjust capacity to external shocks experienced in transition period. All such measures were taken to make the transition countries create conditions for attracting private financial flows from abroad.

Creating an attractive investment environment is an essential prerequisite to increase motivation of foreign investors to invest in the region of WB. However, it must be borne in mind that due to the impact of economic and financial crisis quite possible that in the coming years there is a slowdown in FDI inflow. This may have resulted in increased borrowing from abroad. In much of the region, transition process has also been accompanied by high current account deficit and fiscal imbalances.

The process of trade and capital-account liberalization enabled countries to gradually integrate into international trade and financial flows at the end of the 1990s. The effects of such processes have been demonstrated in increased inflow of foreign direct investments, increasing international trade and increasing foreign exchange reserves. Over the last decade of transition, two dominant tendencies of macroeconomic trends emerged that marked this period between 2001-2011:

a) The relatively high average annual rate of real GDP growth of 3.75% did result in significant economic policies in transition economies taking initial conditions and policies as well as the cyclical movement of the world economy. Economic growth was mainly driven by domestic demand, where the personal and public consumption generate GDP growth, while the inflow of investment and export growth was insufficient to faster rate of economic growth and increased employment.

b) rapid growth in domestic final demand throughout the transition period was offset by higher volumes, and the growth of merchandise trade deficit which has caused the deficit in current transactions. A significant portion of the merchandise trade deficit was financed through inflows of remittances, foreign direct investment and the income from privatization.

 

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[1] EBRD indicators are ranked in the range of 1 to 4 +. Indicator value of 4 + indicates that the structural characteristics of a country comparable to those that make up the average in developed economies. Indicator 1 shows the position countries in pretransitional period.