39643 The Newsletter About Reforming Economies Beyond Transition October 2006 December 2006 · Volume 18, No. 4 http://www.worldbank.org/transitionnewsletter www.cefir.ru Theme of the Issue: Central Asia Insert: Slums of the Peri Urban Areas of Bishkek 16 Martha Brill Olcott: "The states have been pretty good at Evaluating Pension System Design in the Kyrgyz Republic keeping tensions from turning violent" 3 Roman Mogilevsky 17 Economic Performance of the Central Asian Economies Insert: Past Reforms and Future Challenges Richard Pomfret 4 in the Kyrgyz Republic 17 Regional Cooperation in Trade Kazakhstan Expenditure on Public Health Asian Development Bank 6 Meruert Makhmoutova 19 Impediments to Trade in Central Asia Insert: Human Development Index for Central Asian Countries 20 Clemens Grafe, Martin Raiser and Toshiaki Sakatsume 8 Promoting Innovation through Technoparks in Kazakhstan The Impact of Kazakhstan Accession to the World Trade Slavo Radosevic and Marat Myrzakhmet 21 Organization Jesper Jensen and David Tarr 9 New Findings Insert: Using WTO Commitments in the Telecom Sector Effectively 10 Corporate Philanthropy in Transition Katarina Svitkova 22 Uzbekistan -- in the Slow Lane of the New Silk Roads? Martin Raiser and Dennis De Tray 11 Enhancing South South Trade In Goods Przemyslaw Kowalski and Ben Shepherd 23 Insert: Kazakh and Kyrgyz Firms Have It Easier To Do Business 12 South South Trade In Services The Effect of Armed Conflict on Schooling in Tajikistan Nora Dihel, Felix Eschenbach, and Ben Shepherd, 24 Olga Shemyakina 13 Remittances in Tajikistan World Bank Agenda 25 Jariya Hoffman 14 New Books and Working Papers 27 Dimensions of Urban Poverty in Central Asia Ellen Hamilton, Christine Kessides, Deniz Baharoglu, Conference Diary 30 Bill Denning, Alexandre Kolev, and Maka Lomaia 15 Photo: Courtesy of the World Bank 2 · Central Asia From the Editor: Dear Reader, Being among the most land-locked countries in the world -- with distances to nearest ports exceeding 3000 km -- the Central Asian states heavily depend on cooperation with neighbors and each other for economic development. The lack of cooperation in international trade, water man- agement and other important issues, as well as poor institutional capacity were the major reasons for the meager, even devastating, performance of these countries during the first 15 years of inde- pendence (see articles by Pomfret and Asia Development Bank). Although the current situation could have been worse (Olcott, Grafe et al.), the issues of poverty and human development are really worrisome in all the countries, except for oil-rich Kazakhstan (Pomfret). Similar to other developing countries, in the past years women have suffered the most, both in terms of access to education (Shemyakina) and access to health services (Makhmoutova). Among other vulnerable groups are the inhabitants of secondary cities, who have suffered from poverty even more than the rural population (Hamilton et al.). In the poorest countries of the region migration has become the best sur- vival strategy. In Tajikistan remittances are estimated to be as high as 28% of GDP and have become the second most important source of revenues after aluminum exports (Hoffman). However, the institutional environment of the Central Asian countries does not facilitate the use of these remittances in the most effective ways for human development. This concerns both weak bank- ing systems, which charge high transfer fees, and pension systems design, which does not allow for contributions from migrants (Mogilevsky). Removing barriers to both regional and global trade seems to be the first step needed to boost development. Welfare effects of such policies can be substantial: according to Jensen's and Tarr's estimates, gains from Kazakhstan's accession to the World Trade Organization can amount to 6.7% of consumption in the medium term, and 17.5% in the long term. By opening borders, the most closed economy of the region -- Uzbekistan -- can increase its trade with South and East Asian countries by 10-15 times in the coming decade (Raiser and Tray). As recent growth in South-South trade shows, a more open policy will have a positive effect on trade and welfare not only in Uzbekistan, but also on most other countries in the region (Kowalski and Shepherd). Continuing reforms, decreasing barriers to new business development, and strengthening social support systems are some other important steps towards sustainable development in Central Asia. Experimenting with new industrial policies can also be help- ful if done carefully (Radosevic and Myrzakhmet). Overall, as this issue of BT suggests, for countries with a disadvantaged location, cooperation can be the key to development. However, this has to be backed up by good institutions and political will. Ksenia Yudaeva, Managing Editor Beyond Transition · October December 2006 Theme of the Issue: Central Asia · 3 Martha Brill Olcott: "The states have been pretty good at keeping tensions from turning violent" Martha Brill Olcott is a senior associate with the Russian & Eurasian Program at the Carnegie Endowment for International Peace in Washington, D.C. She has recently authored a book "Central Asia's Second Chance". Dr. Olcott has kindly shared her views with BT. Q.: What decisions taken in Central thus further impeding the cause of ernment factions on Afghan soil. Asia in the past 15 years ago -- since regional integration. Similarly, while everyone in the gaining independence -- will have par- And without this integration the size region recognizes that the regional water ticularly serious implications for the of the Central Asian/south Siberian mar- basin is a common one, each country region's future? ket has been sharply reduced, and pro- wants to use all the water available to it spects for creating a strong agro-industry to advance its own direct economic M. Olcott: There are several decisions and textile or clothing industry, which interests, and hold out hope that the taken in national capitals that have had could have provided a needed source of reluctance of any state in the region to an impact on the entire region. Probably jobs in the region has also diminished. use force against any other state will the most profound of these was the deci- keep the situation under control. sion by Uzbekistan, following bombings Q.: The landlocked countries of In fact, this has pretty much been the in Tashkent in early 1999, to effectively Central Asia surrounded by some of the case; the Uzbeks did mine their borders close its borders with the neighboring world's "hot spots" face a number of to keep Kyrgyz and Tajiks out, which led states. This action obviously caused common threats/risks, such as security to some loss of life before this policy was severe dislocations to those living in or issues, access to other markets, water reversed, and Tashkent sent planes over near the border regions, but most impor- and energy resources. Yet a lot of times Toktogul dam in Kyrgyzstan to make the tantly it effectively froze the development the countries find it difficult to cooperate point that if seasonal water patterns of intra-regional trade, especially since it on these issues. What, in your view, are were disturbed and they lost irrigation followed relatively shortly after the gov- the main stumbling blocks to closer they were capable of a military response. ernment in Tashkent decided to abandon cooperation? But to date, especially by comparison its financial stabilization program, and with the south Caucasus the states have chose instead to support a sharply under- M. Olcott: The Central Asian states been pretty good at keeping tensions valued [local currency] som. This deci- recognize that they face a series of shared from turning violent. And if anything, sion had a profoundly negative effect security threats, but they frequently the prospects of regional cooperation, at upon the economic development of define their individual national interest in least at the level of elite dialogue have Kyrgyzstan and Tajikistan in particular. ways that make regional cooperation improved over time. BT In general the decision to artificially more difficult. support the Uzbek som was a harmful This was cetain- one, for the prospects of Uzbek econom- ly the case with ic development as much as it was for the regard to the sit- economies of the neighboring states. uation in Afgha- Uzbekistan lost its starting advantage as nistan prior to a potential magnet for investment in September 2001, projects in the service sector and in light when Turkme- engineering. And over time the on-hand- nistan defacto capital of small and medium sized entre- recognized the preneurs in Uzbekistan, which was rela- rule of Taliban, tively significant until late 1993, has and Uzbekistan, almost completely evaporated. Kyrgyzstan and Similarly, the decision by Tajikistan all to Saparmurad Niyazov [late president of varying degree Turkmenistan] to predicate his foreign believed their policy on the doctrine of "positive neu- national security trality." This policy defies explanation in directly under- terms of what it facilitated, but was quite mined by it, clear as to what it impeded. Turk- because of the menistan refused to join any regional presence of organization (it remained in the CIS), armed anti-gov- The World Bank & CEFIR 4 · Central Asia Economic Performance of the Central Asian Economies Kazakhstan and Uzbekistan could become significant middle sized economies in their own right, while the other three countries will remain minor players in the global economy Richard Pomfret All Central Asian countries started hyperinflation and had been abandoned ence. The large declines in real GDP from fairly similar initial conditions. by the end of 1993. overstate the situation for two major rea- They were, apart from Kazakhstan, the By the early 21st century, all five sons: a shift in the reporting bias from poorest republics in the former Soviet countries had essentially completed the overreporting in the centrally planned Union and the suppliers of primary prod- transition from central planning. Within economy to underreporting in the mar- ucts -- mainly cotton, oil, natural gas the common bounds of resource-based ket economy, and the changing composi- and minerals. Human capital measures, economies and autocratic regimes, the tion of output. such as life expectancy or the almost uni- five countries gradually became more The brief economic profiles of the versal literacy, were, however, high for differentiated as their governments intro- five Central Asian countries a decade the income level (Table 1). duced national strategies for transition after their independence looked as fol- All the five republics were almost to a market-based economy. lows: totally unprepared for the rapid dissolu- tion of the Soviet Union in 1991. They Along Different Trajectories · The Kyrgyz Republic intro- had no experience of nationhood before By the usual measure of economic duced the best policies in the region, but they were incorporated into the Russian performance, real GDP, the five countries experienced disappointing outcomes. empire during the 18th and 19th cen- were to varying degrees worse off during The economic performance of the Kyrgyz Republic during the 1990s was All the five republics were almost totally unprepared for the rapid low, as living standards were eroded, both in terms of consumption levels and dissolution of the Soviet Union in 1991 the availability of social support, educa- tion and social services. Even though the turies. The indigenous capacity for eco- the decade after 1989, with the poorest Kyrgyz Republic has a relatively free nomic management was limited, because experiencing a decline of over 50%. market economy, matched only by that during the Soviet era development strate- These dramatic numbers do not, howev- of much richer Kazakhstan on the wave gies were determined in Moscow. All five er, fit readily with casual empiricism. of its oil boom, problems arose from fail- countries suffered from broken econom- Especially in the main cities of ure to establish the institutions necessary ic ties. Attempts to maintain economic Kazakhstan, the Kyrgyz Republic, and for a well-functioning market economy. links by retaining the ruble as a common Uzbekistan, the quality of life seemed currency exacerbated the problem of much improved a decade after independ- · Tajikistan's grim economic experience was largely shaped by the civil war which was waged on and off Table 1. Economic and Social Indicators, 1989 91 and 2002 for most of the 1990s. Tajikistan's rapid growth after 1999, ongoing reforms, and Population Gini coefficient Life expectan GDP per much-improved internal security are all (mln) cy (years) capita, PPP positive signs. On the other hand, Tajikistan remains the poorest country in mid 1990 1989 2002 1991 2002 2002 Central Asia. The economy relies heavily 2002 on earnings from aluminum and cotton Kazakhstan 16.8 15.5 0.289 0.35 69 66 5,870 exports (which accounted for 55% and (1996) 28% of total export earnings in 2003), and the only other serious potential for- Kyrgyz Republic 4.4 5.1 0.287 0.46 66 68 1,620 eign exchange earner is hydroelectricity. (1996) Institutional change has been slow, and Tajikistan 5.3 6.2 0.308 0.47 69 69 980 governance remains poor. The physical (1999) infrastructure, heavily damaged by civil Turkmenistan 3.7 4.8 0.307 0.41 66 67 4,300 war, is still in poor shape. Social collapse (1998) is highlighted by the drug problem and migration which both threaten the once- Uzbekistan 20.5 25.7 0.304 69 70 1,670 strong family structure. Beyond Transition · October December 2006 · 5 · Uzbekistan is characterized as a Asian countries but Kazakhstan, which holds whose heads failed to complete slow reformer. During the 1990s it had with its relatively high initial income has secondary school and this effect is still the best economic performance of all the least absolute poverty. larger in the Fergana oblast of Uzbe- Soviet successor states, which mainly Who have been the winners and los- kistan (43%). By contrast, narrower seemed to be due to good governance, at ers from the changes? Those in power technical education has left many with least by the low standards of the region. have become wealthy, converting the obsolete skills yielding no returns in the An important difference between privileges of the Soviet era into material market. Uzbekistan and Russia or Kazakhstan wealth, and in some cases a new class of was the degree to which resource rents rich businesspeople arose from the Prospects were privatized. The Uzbek government unequal privatization of state assets or The five countries have changed sub- used the revenue to maintain public from illegal activities. At the same time stantially, with the possible exception of spending on education and health care rural households, large families and peo- Turkmenistan, from the centrally better than in other CIS countries. The ple with lower educational attainment planned economies, and are likely to years 1996-2002 were characterized by have lost in most countries. continue moving along different trajecto- minimal economic reform and increasing Based on household survey data, we ries. Kazakhstan remains the most likely political repression. As the economy's find that three major factors determined to succeed. Both Kazakhstan and performance lagged in the early years of per capita household expenditure during Uzbekistan could become significant the 21st century Uzbekistan's economic the transition: middle-sized economies but in their own performance was less impressive and the · Location. In the Kyrgyz right rather than as part of Central Asia. government's popular support waned. Republic, rural households' per capita However, unless Uzbekistan addresses expenditure is on average 26% lower the interconnected issues of currency · In Kazakhstan, higher income levels, more abundant human capital and The greatest uncertainty, and potential catalyst for economic natural resources were enduring advan- change, in the five countries concerns the political regime tages.With new oil fields being developed and with new pipelines providing alter- native outlets for Kazakhstan's oil, the than that of urban households. In convertibility, farmgate prices, and gov- prospects for substantial oil revenues in Kazakhstan, living standards are highest ernment revenues, its economy could the medium term are promising. Despite in the north and lowest in the south. easily slip into the stagnation familiar anemic growth in the 1990s, it has since Environmental issues also matter, for from many import-substituting countries 2000 enjoyed an oil boom and is now by instance in areas like Dashoguz in of the 1950s and 1960s. far the richest country in the region. The Turkmenistan or the Karakalpakstan The three smaller countries will elite, although it derived its wealth and autonomous republic in Uzbekistan or remain minor players in the global econ- power from an unfair and distorted pri- South Kazakhstan widespread poverty is omy. Establishment of effective public vatization process, is now keen to estab- exacerbated by the negative effects of the administration and the rule of law in the lish the rule of law in order to protect its desiccation of the Aral Sea. Kyrgyz Republic and Tajikistan are nec- economic gains. · Household composition. The essary preconditions for progress. costs of large households are substantial. However, even with these conditions · At the other extreme, A recurring result is that additional chil- met, these countries' economic prospects Turkmenistan, despite its natural- dren lower per capita household expen- are not good, as both are poor land- resource wealth, faced the grimmest diture by a larger amount than addition- locked countries whose economic poten- immediate prospects with a regime that al elderly or middle-aged adults do. In tial depends upon good regional rela- pursued poor economic policies and was Kazakhstan, an additional child reduces tions to export. resistant to change. On the basis of its per capita household expenditure by In all the five countries the greatest small population and abundant natural 17%, an elderly adult by 12%, and a uncertainty, and potential catalyst for gas, the country after independence middle-aged adult by 6%. In Tajikistan, economic change, concerns the political claimed to be the "Kuwait of Central each additional child reduces per capita regime. Loosening of state control over Asia". The reality has been a highly per- household expenditure by 9%, each the economy may be inseparable from sonalized regime living off resource additional elderly adult by 5%, but addi- political reform, which allows more free- rents, with nothing like the level of com- tional middle-aged adults do not affect dom and pluralism. petent economic management of Kuwait. per capita expenditure. From the perspective of the economy, · Education brings greater mate- almost any change would have to be bet- rial reward in the market economy. In Richard Pomfret is Professor of ter than Turkmenbashi's policies. the shift from central planning, people Economics at the University of Adelaide, with high-level general education have Australia, and Agip Visiting Professor of Increased Inequality been best able to take advantage of new International Economics at the Johns Hopkins Univeristy Bologna Center. The arti- In all five countries the move to a opportunities. In Kazakhstan and in the cle is based on his book "The Central Asian market economy was accompanied by Kyrgyz Republic, per capita expenditure Economies Since Independence" published by increased inequality. This translated into is 27-29% higher in households with a Princeton University Press in 2006. The book high poverty rates in almost all Central college-educated head than in house- can be ordered at www.pup.priceton.edu. BT The World Bank & CEFIR 6 · Central Asia Regional Cooperation in Trade How can regional cooperation help the Central Asian countries increase gains from trade? Asian Development Bank The constituent members of the Recent Merchandise Trade Barriers to Trade are High Central Asia Regional Economic Performance has been Mixed The Central Asian countries had very Cooperation Program (CAREC) -- Following sharp fluctuations in the similar trade policy regimes at the time of Kazakhstan, the Kyrgyz Republic, late 1990s caused by swings in world their independence, but these have Tajikistan, and Uzbekistan -- are all rel- commodity prices and the 1998 Russian diverged significantly since then. Today, atively small economies. Therefore, they financial crisis, both merchandise trade policy regimes vary widely from the need to promote trade and closely inte- exports and imports expanded consider- very liberal in the Kyrgyz Republic to fair- grate into the international trading sys- ably in all four Central Asian countries ly liberal in Kazakhstan and Tajikistan, to tem to achieve sustainable economic in 2000-2004. By 2004, their overall quite restrictive in Uzbekistan. development. Regional cooperation level of trade (the ratio of merchandise Tariffs are fairly low and uniform in agreements can help the countries of exports plus imports to GDP) was high- the Kyrgyz Republic and Tajikistan. Central Asia liberalize trade policy at er than what one would expect given Kazakhstan has a rather complex tariff relatively low costs, reduce the risks of their small size, landlocked location, and schedule with a large number of tariff protectionist measures by trading part- per capita GDP (see Table 1). However, a bands and a high maximum tariff rate ners, create new trade, and improve handful of primary commodities, such as although its nonweighted average tariff social welfare. However, such agree- crude oil, metals, and cotton fiber, con- rate is not high. Uzbekistan has a com- ments, depending on their design, can tinued to dominate exports, and this plex tariff schedule and a relatively high also divert existing trade, worsen social makes the Central Asian countries vul- nonweighted average tariff rate. A serious welfare and hinder the countries' full nerable to abrupt swings in world com- problem with tariffs in Kazakhstan, integration into the international trading modity prices. Tajikistan, and Uzbekistan is that changes system. Regional cooperation in trans- At the same time, the participation of in tariff schedules are rather frequent and port and customs transit is unambigu- the Central Asian countries in global unpredictable. Also, tariffs rise with a ously beneficial, given the countries' production networks and related trade degree of processing in all the countries. landlocked status. in manufactured products remained very In addition to explicit tariffs, some Progress in any of these areas will limited. imports to Kazakhstan, and Uzbekistan have a limited positive impact on trade if Furthermore, Central Asian countries are subject to implicit tariffs in the form there is no progress in others. For exam- mainly traded with a small number of of taxes levied on imported goods but ple, liberalization of trade policy by one countries, with which they have close not on domestically produced goods or country and a nonadjacent trading part- historical and cultural links and/or to have higher rates for imported goods ner will not boost their bilateral trade which they are closely located, such as than for domestically produced goods. much if movements of transport and China, Russia and Turkey. An analysis Other significant barriers to trade are goods through connecting countries based on the gravity model suggests that high transport costs and long and unpre- remain difficult or impossible due to there is a significant unrealized potential dictable transit times for international deficiencies of transport infrastructure. for trade between Central Asia and most shipments to and from the region. This is Likewise, improvements in transport East and South Asian and Western not only due to the landlocked and infrastructure and transit systems in European countries. Concentration of remote location of Central Asia and its neighboring countries will do little to trade partners makes the Central Asian difficult topography but also to deficien- closely integrate a country into the inter- countries vulnerable to changes in cies of transport networks, and the high national trading system if its trade policy import demand in, and possible trade costs and low quality of transport and remains restrictive. sanctions by, their trade partners. logistics services in the region. For exam- Table 1. Actual and Predicted Ratios of Merchandise Exports plus Imports to GDP, 1999 and 2004 (in percent) At current prices At PPP based valuation 1999 1999 2004 2004 1999 1999 2004 2004 actual predicted actual predicted actual predicted actual predicted Kazakhstan 56.2 66.4 80.7 71.5 15.5 18.1 29.5 25.3 Kyrgyz Republic 84.8 69.4 76.6 72.0 14.8 11.9 16.8 13.9 Tajikistan 124.5 64.7 110.5 68.1 30.1 7.6 29.1 10.4 Uzbekistan 33.9 59 78.9 55.4 16.1 9.2 16.8 10.2 Beyond Transition · October December 2006 · 7 already a WTO Quantitative estimates based on a Tariffs (As of January 1, 2006) member. The CGE model of the Kyrgyz Republic other countries show that the Central Asian countries Number Maximum Non weighted are at different would reap considerable benefits from of tariff bands rate (%) average rate (%) stages of the regional cooperation in trade policy Kazakhstan 10 100 7.4 accession pro- within the multilateral framework and Kyrgyz Republic 5 15 5.1 cess. The poten- increased regional cooperation in trans- Tajikistan 4 15 7.5 tial benefits of port and customs transit. Uzbekistan 4 30 14.5 WTO member- A reduction in cotton subsidies in ship are many: developed countries and a resulting rise in world cotton prices and reductions in ple, the actual transport costs for ship- · Liberalization of trade policy at transport costs would substantially ments by road from Istanbul, Turkey to relatively low costs and a rapid expan- accelerate economic growth in the Central Asia are about 2-3 times as sion of trade due to improved access to Kyrgyz Republic. If world cotton prices expensive, while the actual transit time is markets of the WTO members; rose by 35% in 2006, the cumulative 1.5-2 times as long as those in a world · Diversification of trade flows growth of real GDP in 2006-2015 rela- with balanced transport flows, competi- towards countries with which Central tive to 2005 would be 33.4% higher tive markets for transport services, Asia currently "under-trades", including than in the baseline scenario. If the esti- smooth border crossing, low transit fees, most developed countries and emerging mated reductions in transport costs due and no visa problems. Transport costs of market economies in Asia; to increased regional cooperation in exports, as a percent of exports, vary · Reduced vulnerability to possi- transport and customs transit took place from 10% in Kazakhstan to 14% in ble protectionist measures by trading in 2006, the cumulative growth of real Tajikistan; while transport costs of partners and irreversibility of trade liber- GDP would be 112.3% higher than in imports vary from 8% to 10% in the alization; the baseline scenario. If both events same countries, respectively. · Strengthened bargaining power occurred in 2006, the cumulative growth in trade negotiations, especially with of real GDP would be 150.2% higher A Plethora of Ineffective countries seeking WTO membership; than in the baseline scenario. By com- Regional Trade Agreements · Strengthened capacity for poli- parison, a 50% unilateral, nondiscrimi- cy management and improving the qual- natory, and uniform reduction in tariffs Since 1991, the Central Asian coun- ity of institutions. would speed up the cumulative growth tries have joined several regional organi- WTO membership does not preclude in real GDP over the decade by a rela- zations that involve a multilateral regional cooperation in trade policy. In tively modest 27.6%. regional trade agreement. They have also fact, there are several options for such Unilateral nondiscriminatory trade entered into numerous bilateral trade cooperation. First, the Central Asian liberalization would have greater posi- agreements with other CIS countries. countries may want to liberalize trade tive effects on Kazakhstan, Tajikistan, Most regional trade agreements, howev- policy in a coordinated manner and on a and especially, Uzbekistan because their er, have a narrow coverage and complex nondiscriminatory basis. Second, those tariffs are, on the average, higher than rules of origin, and many have largely of them that are not yet WTO members those of the Kyrgyz Republic. Tajikistan, remained on paper only. may want to coordinate their negotiat- which suffers from especially high trans- An analysis based on a computable ing positions in the accession process port costs and long and unpredictable general equilibrium (CGE) model of with each other and with other coun- transit times, is likely to benefit even Kazakhstan suggests that implementing tries seeking WTO membership. Third, more than the Kyrgyz Republic from the Eurasian Economic Community cus- once they become WTO members, the increased cooperation in transport and toms union with a rise in Kazakhstan's Central Asian countries may want to customs transit. Tajikistan and external tariffs would substantially slow join issue specific coalitions within the Uzbekistan are likely to gain more than down its GDP growth. The cumulative WTO, such as the groups of developing the Kyrgyz Republic from a reduction in shortfall in real GDP over ten years countries pressuring for changes in cotton subsidies in developed countries would exceed 31% of GDP in the base WTO rules on agriculture and elimina- since cotton accounts for a larger share year. Implementing the EAEC customs tion of agricultural subsidies in devel- of their exports and GDP. union even with a reduction in oped countries. Kazakhstan's external tariffs would slow Acceding to the WTO is, however, down the growth of real GDP, but the not enough to realize the benefits of The piece is based on the 2006 Asian adverse effects on economic growth WTO membership. As the experience of Development Bank report titled "Central would be much smaller. the Kyrgyz Republic shows, good trans- Asia: Increasing Gains from Trade through Regional Cooperation in Trade Policy, Benefits of WTO Member port links with other WTO member Transport, and Customs Transit". The report countries and easy transit through neigh- ship also covers Azerbaijan, which is a member of boring countries are also necessary. In parallel with participation in vari- CAREC Program, and does not cover Turkmenistan, which is not a member. The ous regional agreements, the Central report was prepared by a team of experts led Asian countries have pursued member- Regional Cooperation in by Bahodir Ganiev. The full text of the report ship in the WTO. The Kyrgyz Republic is Transport and Transit is available at www.adb.org. BT The World Bank & CEFIR 8 · Central Asia Impediments to Trade in Central Asia The Central Asian countries are still quite closely integrated and have porous borders Clemens Grafe, Martin Raiser and Toshiaki Sakatsume With the collapse of the Soviet Union · Price dispersion is generally are among the cheapest locations in each the dynamics and structure of trade pat- greater between Uzbekistan and its country, whereas Tashkent is the most terns have changed quite substantially. neighbors than between Kazakhstan and expensive city in Uzbekistan, probably New and significant trade barriers the Kyrgyz Republic. However, almost due to remnants of price control leading emerged, including tariffs and differen- the entire estimated border effect is due to an implicit subsidization of less eco- tial excise taxes, difficulties crossing bor- to trend changes in the bilateral real nomically advanced regions; ders, corruption among customs officials exchange rates; · Distance is a significant deter- and the traffic police. Yet despite changes · The estimated border effect minant of relative prices for locally pro- in the direction of trade flows, former between any pair of countries is relative- duced goods such as agricultural prod- Soviet republics are still considered to be ly low compared to estimated effects cal- ucts, less so for branded products such as excessively integrated and "overtrading" culated for other developing countries, chocolate, instant coffee or mineral among themselves. although higher than that between water; In assessing the real size and impact Canada and the United States; · Distance-related costs are less of regional trade barriers in Kazakhstan, · Prices in northern Kazakhstan, important in the Kyrgyz Republic and the Kyrgyz Republic, Tajikistan and which is more integrated with Russia Uzbekistan than in Kazakhstan. Uzbekistan we focus on the most obvi- than with the rest of the country, diverge ous economic manifestation of barriers from other regions by more than average; Conclusion to trade -- the fact that prices for trad- · There is no evidence that being All this confirms that, contrary to able goods will differ significantly across located in the Ferghana Valley, where prior expectations, the Central Asian countries when arbitrage is not prof- distances are very short and national ter- countries are still reasonably closely inte- itable due to trade barriers. ritories highly contiguous, has a particu- grated, their borders are porous, and Well-integrated regions inside one lar impact on price dispersion and the constitute much less of a barrier to trade country should offer only limited arbi- border effect. than is often thought. Shuttle trade trage opportunities, i.e. the difference of The fact that borders seem to matter seems to be effective in taking advantage prices in two locations should only reflect less than is often thought in Central Asia of arbitrage opportunities in consumer different pricing of non-tradable goods is also confirmed by the second data set. goods markets. and transport costs. If the two regions are We looked at absolute differences The costs of crossing a national bor- located in different countries, a so-called between prices for specific products and der are small relative to the costs of border effect may be present, which is related these to geographical distance, the crossing the vast territory of Kazakhstan explained by tariff and non-tariff barriers border effect and specific product charac- or the mountains of Tajikistan. Indeed, to trade, non-integrated labor markets or teristics. The following results stand out: trade barriers beyond the border remain distribution networks that do not extend · Local factors are in many cases significant obstacles for market integra- across borders. Prices may also differ more important than national borders. tion both within countries and within because of changes in the nominal However, the border effect is significant Central Asia. Internal barriers to trade exchange rate that are not transmitted and positive for most locally produced such as numerous roadblocks and immediately to consumer prices. agricultural goods at the Kazakh and attempts by local governments to restrict Two data sets -- regional disaggregat- Kyrgyz border; access to local markets and bazaars are ed consumption price indices, and a price · The difference between the min- driving up price differences across survey of around 30 tradable consumer imum and maximum price is larger in regions to levels that are at least as high goods across all the countries -- allow us Kazakhstan and Tajikistan than in as differences across countries. to analyze price dispersion and directly Uzbekistan and the Kyrgyz Republic. In compare absolute price differences across other words, domestic markets are more various locations. We can thus estimate integrated in the latter than in the former Clemens Grafe is an economist for Union the degree of trade integration from the two countries; de Banques Suisse and lecturer at Birkbeck perspective of price levels as opposed to · Maximum price differences are College; Martin Raiser is Economic Advisor in the use of volume data, which suffers actually quite large: price margins tend to the World Bank's Country Office in Ukraine from significant under-reporting due to be in the range of 30-50% and sometimes and was the country manager for Uzbekistan shuttle trade in the Central Asian context. reach more than 100%. Moreover, the at the World Bank when this article was writ- maximum differences are found between ten; Toshiaki Sakatsume is an economist at the European Bank for Reconstruction and the cheapest and most expensive location Small Costs of Crossing a Development (EBRD). The views expressed in within Kazakhstan rather than between this paper are those of the authors only, and National Border two locations in different countries; not of their respective institutions. Full text of The results of our analysis based on · In Kazakhstan, the Kyrgyz the paper can be viewed at: www.ebrd.com/ the first dataset show that: Republic and Tajikistan, the capital cities pubs/econo/wp0095.htm BT Beyond Transition · October December 2006 · 9 The Impact of Kazakhstan Accession to the World Trade Organization Kazakhstan's gains from WTO accession could be as high as 17.5% of consumption in the long run Jesper Jensen and David Tarr Kazakhstan's accession process to the bers have questioned whether this is a imports. Numerically, this factor is WTO started in 1996, when the Working "local content" requirement in violation responsible for 0.4 percentage points of Party was established. Since 2004, the of the WTO agreement on Trade Related the gain in consumption. accession negotiations have acquired Investment Measures (TRIMs). · Improved access to the markets increased momentum. While Kazakh- Ironically, some multinational oil pro- of non-CIS countries, which accounts for stan's tariff structure is not highly dis- ducers have negotiated a waiver of the 0.5 percentage points of the welfare gain. torted, barriers to foreign direct investors 15% VAT on their imported inputs, a · The elimination of local content in several key business services sectors practice that has offsetting effects to the policies for multinational oil companies remain significant and are the most local content provisions on local input combined with VAT exemption on their important areas of negotiations between use by the multinationals. input purchases from domestic sources Kazakhstan and the WTO Working In our general WTO scenario we -- these result in a gain of welfare equal Party. assume that barriers against foreign to 0.9% of consumption. Our study accesses the consequences direct investment are reduced by 50%; · Liberalization of barriers to FDI of WTO accession for Kazakhstan, iden- basic metals and metal products, which in services sectors, which increases the tifies winners and losers, and key sources are subject to antidumping actions in number of service varieties available and of gains.We also examine where potential export markets receive slightly improved increases total factor productivity in sec- reforms can do the most to boost the market access; the tariff rates of all sec- tors that use business services. This competitiveness of the Kazakh economy. tors are reduced by 50%. In the oil sec- accounts for 4.9% of the value of con- For these purposes we develop a 56 sec- tor, we assume local content require- sumption, or over 70% of the total gains tor "small open economy" computable ments are eliminated, and we also from Kazakhstan's WTO accession. general equilibrium model of the country. assume neutral VAT treatment of local Thus, while improving its offer to The model not only numerically and imported inputs by extending the foreign services providers within the assesses the liberalization of barriers VAT waiver to local inputs purchased by context of the GATS may be a difficult against foreign direct investors in busi- the multinationals. aspect of Kazakhstan's negotiation for ness services but also examines the WTO accession, our estimates suggest impact of local content policies and spe- that liberalization of barriers against FDI cialized VAT treatment on multinational Annual Gains from WTO in services sectors will bring the highest oil producers. Currently, multinational Accession almost 10% of GDP welfare gains. oil producers that invest in Kazakhstan We estimate that the gains to Exporters the Biggest are encouraged to purchase Kazakh Kazakhstan from WTO accession inputs. This practice is controversial, amount to 6.7% of Kazakhstan con- Winners since some WTO Working Party mem- sumption (or 3.7% of GDP) in the medi- Based on our estimate results we find um term, and that: Impact of WTO Accession on Industry and Labor, could be as high as · The sectors that will expand the Selected Sectors (Percentage Change) 17.5% of most are those that export a large share Kazakhstan con- of their output, such as electrical equip- sumption (9.7% of ment, chemicals, crude oil and gas, basic WTO accession in WTO accession in GDP) in the long metals and communications equipment the medium term the long term run. The decompo- (see Table); Sector Output Labor Output Labor sition of the gains · The sectors that will contract Crude oil and gas 15 20 16 12 shows that they the most include the most protected sec- Chemicals 11 10 8 1 derive from four tors (e.g. medical equipment) and those Electrical equipment 46 42 64 50 key effects: that export less than 5% of their output, Publishing 17 18 16 21 ·Tariff reduc- such as wood products, vehicles, non- Vehicles 16 17 23 27 tion on goods, metallic products and publishing; Medical equipment 19 21 9 17 which improves · In business services, multina- Communications 10 6 15 6 tionals will have a greater presence, and Financial intermediation 6 4 18 7 domestic resource Land and pipeline transport 6 1 14 2 allocation and output, including multinational output, Air transport 13 16 9 17 increases the num- increases. In some business services sec- ber of varieties of tors, such as communications, financial Source: authors' calculations The World Bank & CEFIR 10 · Central Asia intermediation and land transport, the their prospects for joint venture partner- sion, the accession process represents a demand for labor also increases, due to ships with multinationals. unique historical opportunity to not only multinational firms' increase in their commit to liberalization of the foreign demand for Kazakh labor. At the same Barriers in the Services direct investment regime, but also to time, demand for labor will decline in Sector Still Large implement complementary reforms of the water and air transport services, where Kazakhstan has done more to lower domestic regulatory framework. multinational entrants will use the local its tariffs on goods than it has to liberal- labor less intensively than the existing ize its barriers to FDI in services sectors. Kazakh firms. The services sector provide crucial inputs Jesper Jensen is Director of Teca Training, The above suggests that domestic lob- to the manufacturing sector and are key Copenhagen, Denmark. David Tarr is bying interests within the service sector to the development of a Kazakh economy Consultant in the Development Research could be diverse regarding FDI liberaliza- capable of competing on the global mar- Group of the World Bank, Washington, DC. The full text of the paper can be accessed at: tion. We estimate that labor should find it ketplace. In this context, we have pre- http://econ.worldbank.org (World Bank in their interest to support FDI liberaliza- pared policy notes on the telecommuni- Policy Research Working Paper 4142). The tion even if capital owners in the sector cations (see box), financial services and views expressed are those of the authors and oppose it. But capital owners themselves transportation sectors. Given the external do not necessarily reflect those of the World may have diverse interests depending on pressure that accompanies WTO acces- Bank or its Executive Directors. BT Using WTO Commitments in the Telecom Sector Effectively The government of Kazakhstan is aware that an efficient · Tariffs: The existing distorted price regime redirects -- low-cost, high-quality -- telecommunications sector is one significant resources from non-telecommunications sectors of the critical determinants of export competitiveness. This is into the telecommunication sector. Under the approved plan especially true given that currently calls to the US from to increase the cost of domestic calls, and reduce the cost of Almaty cost two times the cost of calls from Moscow and 3.5 international calls, tariffs will not realistically eliminate the times on average the cost in the newly acceded EU 8 coun- existing major price distortions within the next 15 to 20 tries. Also the number of lines per 1000 inhabitants is 2.6 years. The progressive re-balancing of tariffs, including low- times larger in EU 8 countries than in Kazakhstan and almost ering interconnection charges is necessary for the market twice as high in Russia. players to make economic investment decisions. The WTO accession process can be used to address the · Universal Access: The state-owned companies argue key problems that are reducing the effectiveness of the sec- that they lose money on providing services in rural and tor. The most important areas of reform include: remote areas. The Universal Services Fund, set up by the gov- · Competition: Strong restriction on entry and for- ernment, collects contributions from fixed line operators and eign ownership to 49% ensures the monopoly provision of provides funds to the two operators to compensate for their key services. One way to effectively use the WTO accession losses. The current practice has the following shortcomings: process would be to allow majority foreign ownership in the The regulator determines not the particular level of GATS commitments. The existing level of cross ownership services, but the type of equipment to be used. Instead, uni- in the sector also limits competition. Shortening the period versal service programs need to be technologically neutral. of exclusive (monopoly) rights in the WTO offer could pro- The program funds recurrent costs rather than just vide a timely and strong signal to domestic players to pre- investments. Instead, subsidies may be justified to meet part pare for a liberalized market. Investors will receive assur- of the investment cost, but not to compensate for recurrent ances of greater security and predictability in the rules- service losses. Investments that are unlikely to become com- based environment that WTO membership represents. mercially sustainable on their own after limited initial sup- · Regulation: The WTO requires that the regulator port are rarely undertaken. be independent of the operators. Therefore the role of the The incumbent Kazakhtelecom does not provide infor- agency as "manager" of state assets in the sector must be mation on the cost of the services and receives a subsidy that transferred to another body prior to the membership. The lacks transparency. current institutional structure fragments policy making To have true participation from all operators, and to over three agencies and at the same time endows the key maximize the choice of technology, the universal service agency with significant functions outside its core mandate, program should complement and follow economic and tele- such as the administration of a large e-government pro- com sector reforms, particularly the liberalization of the gram. The regulator should focus on the core regulatory supply side of the telecom market. Only then does it make functions, such as regulation of competition, scarce sense to use subsidies to extend service beyond what com- resource and tariffs, as well as licensing and dispute resolu- panies are prepared to do on their own. tion. Due to different technologies, telecommunications reg- ulation must be sector-specific, to fixed line and mobile. But the competition regulation authority in telecommunications Source: "The impact of Kazakhstan accession to the World is vested in two different entities, neither of which is the Trade Organization : a quantitative assessment" by Jesper Jensen telecommunications regulator. and David Tarr. BT Beyond Transition · October December 2006 · 11 Uzbekistan -- in the Slow Lane of the New Silk Roads? Moving Uzbekistan to the fast lane in regional cooperation is a question of leadership and political will Martin Raiser and Dennis De Tray From the days of the famed Silk opening up of the region, when meas- ably further away than either China or Road, the area that is now Uzbekistan ured in total trade volumes. Uzbekistan Russia, and has a similarly dynamic, has traded or been an important transit was initially an exception to this trend, growing economy. The numbers for route for trade. With this illustrious trad- but the country has started to catch up in Pakistan are also disappointing. ing history why is Uzbekistan seen today terms of total export and import levels. A gravity model analysis confirms as the missing link, a major barrier in the Today, Uzbekistan's total trade stands at that Uzbekistan is under-trading with efforts to increase trade among the around 70% of GDP at market South and East Asia by a factor of per- Central Asian states? The reasons lie in exchange rates, a little below the CIS haps 10-15 times, with the notable excep- what changed and what did not change average, but well up on the trough of just tion of China, which has greatly increased following independence in 1991. 50% recorded in 2002. its economic presence all over Central The change came in the form of a Nonetheless, it appears that Asia in recent years, and South Korea, series of programs launched by President Uzbekistan is still not fully utilizing its which has historically played an impor- Karimov to dampen if not remove entire- potential to trade both regionally and tant role in Uzbekistan's economy. In ly Uzbekistan's dependence on others. Self with the global economy. Calculations monetary terms, and using the estimates sufficiency was the touchstone of Uzbek made by the IMF in 2005 suggest that of total trade of US$15 billion in 2015, economic policy and import substitution one of the main reasons for Uzbekistan's Uzbekistan's trade with its neighbors in its key instrument. As the experience of "undertrading" relative to potential may Central Asia, Russia, China, and South many other countries shows, inward lie in its own restrictive trade policies; if Asia may amount to over US$10 billion looking policies tend to produce eco- the trade policies were as liberal as those in that year.Trade with India may grow to nomies that are distorted and inefficient, in the rest of the CIS, the country could US$1.5 billion, trade with China could by making it ever more difficult for those increase its overall trade by at least US$2 that time exceed trade with Russia, and economies to open up.This is the position billion. Iran, Pakistan and Afghanistan could in which Uzbekistan finds itself today. Taking statistical under-reporting into together account for up to US$1billion. What did not change following inde- account, and with the recent significant · Greater Inter-continental Transit pendence were Uzbekistan's location and rise in exports and imports, it is perhaps Trade. The key to realizing the vision of a its population. Uzbekistan remains an a safe estimate to assume that new land bridge between Europe, China important bridge for transport from Uzbekistan's total level of openness still and India through the wider Central Asia south to north, from east to west. Stalin's falls around 10-20% short of its poten- is the construction of new transport links, infamous jigsaw borders in Central Asia tial. Over the period to 2015, for as investments in the preceding century exacerbate the problem and make getting instance, this implies potential increases have been almost exclusively directed around Uzbekistan more expensive. in Uzbekistan's exports and imports from towards integration with Russia. Uzbekistan is also the most populous of US$9 billion today to around US$15 bil- Presently still, almost all roads lead to the Central Asian states, and a potentially lion if GDP continues to grow at the Moscow. Most of the attention has been important internal market for the region. recent average (1998-2005) of 5%. concentrated on unlocking the roads As Uzbekistan's neighbors have · Geographic Reorientation of south from Central Asia, and providing begun to embrace the opportunities that Trade. Uzbekistan's dependency on access through the region to the new deep opening up to the world brings, and as Russia has remained very significant, water ports in Pakistan and Iran. the world's major trading powers have with around 22% of reported exports For Uzbekistan specifically, this pres- "discovered" Central Asia's potential for and 27% of reported imports going to ents both an opportunity and a chal- trade and transit, the opportunity costs and coming from Russia (according to lenge. The opportunity is that geograph- of maintaining Uzbekistan's position the IMF Direction of Trade Statistics). ically Uzbekistan sits right in the middle have visibly increased. And indeed, Both shares have increased in recent of Central Asia. With a less mountainous things may be slowly improving, which years and are now close to what they topography than that of the Kyrgyz creates opportunities for Uzbekistan and were in the mid 1990s. Republic or Tajikistan, it is a naturally for the region. By contrast, there seem to be huge preferable transit corridor for inter-con- unexploited trade opportunities with tinental north-south transit routes. South and East Asia. In 2004, The challenge is that to the extent Trade and Transit Uzbekistan's trade with India was that Uzbekistan becomes a major transit Opportunities for Uzbekistan around one tenth of its trade with China, route, its present restrictive trade regime · Greater Openness Overall. The and less than 5% of its trade with would come under increasing threat. The past 15 years have seen a significant Russia, although India is not consider- combination of tariffs and import excis- The World Bank & CEFIR 12 · Central Asia es raises the effective import tax level for · Creation of border zone mar- · Technical assistance to help some consumer goods in the Uzbek mar- kets, which are accessible to residents Uzbek suppliers compete in Afghan ket to three digit levels. Such levels of from these zones and within which duty rebuilding efforts. This is an area where taxation present extremely attractive free trade is possible. both Afghanistan and Uzbekistan could arbitrage gains for traders. Increasing · Rebuilding Uzbekistan as a benefit from working together and build transit trade would therefore increase wholesale trade center for Central Asia a basis for sustainable regional coopera- competition for these rents and under- starting from a pilot project that allows tion in the future. mine Uzbekistan's present economic competitive access of import wholesaling As the international environment policies. Although Uzbek consumers operations to one wholesale market in changes and the opportunity costs of would welcome such a change, the polit- Uzbekistan. As a side benefit, this could standing still become ever greater, more ical challenge it poses is significant and help reduce production costs of Uzbek ambitious measures may become feasible. may explain why Uzbekistan has so far firms because of easier and more reliable hesitated to embrace more fully the trade access to imports. and transit opportunities of integration · Concentrate donor support for Martin Raiser is Economic Advisor at the with the wider Central Asia region. trade and transit along a few selected World Bank Country Office for Ukraine, transit routes. This may reduce Uzbek Belarus and Moldova in Kiev and was for- Short term Policies security concerns about allowing greater merly Country Manager for Uzbekistan. For Uzbekistan to move from the movement of goods and people across Dennis De Tray is Deputy Director of the slow to the fast lane in regional coopera- the "friendship bridge" with Centre for Global Governance in Washington tion and integration is perhaps first and and was formerly World Bank Country Afghanistan. The support could further Director for Central Asia. The piece is foremost a question of leadership and extend to the roads and rail links along excerpted from the forthcoming book on political will. Still, a number of short- inter-continental corridors, so that trans- Central Asia edited by Frederick Starr, term measures may offer high returns port investments and trade facilitation Chairman of the Central Asia-Caucasus and harbor relatively few political risks measures, as well as border security ini- Institute, Johns Hopkins University, for the present leadership, including: tiatives are fully coordinated. Washington DC. BT Kazakh and Kyrgyz Firms Have It Easier To Do Business Kazakhstan -- the only Central Asian economy classi- decreased the cost to transfer title from 5.25% to 1.99% of fied as a lower middle income country -- has the highest the property value. The Kyrgyz Republic also permitted the rank in the region on the ease of doing business (63 out of enforcement of collateral agreements outside of court, 175 countries surveyed), and moreover, has improved its speeding lenders' ability to collect on bad debts. And it result from the previous year by jumping 19 places. Along reduced the mandatory notice period for dismissing a with Armenia and Georgia it is one of the three top-ranked redundant worker from two months to one month. countries in the region (and 33 places ahead of Russia). The Tajikistan (133) and Uzbekistan (147) rank lowest in the World Bank's "Doing Business" report particularly notes region, and Tajikistan went backward three places in Kazakhstan's reform in the area of getting credit. The coun- 2007compared to the previous year. Also Uzbekistan made try's first credit bureau began distributing credit reports on it more difficult to do business. It introduced a new tax on potential borrowers. The new bureau currently covers 5.5% business-a mandatory contribution to the School Education of Kazakh adults, using information from 29 commercial Development Fund-increasing the total tax burden from banks and collecting both negative data (on loan defaults, 106.3% to 122.3% of profits. It also downgraded secured for example) and positive data (such as on-time payments). creditors' rights in bankruptcy. The Kyrgyz Republic has also improved its performance The rankings track indicators of the time and cost to compared to 2006, in particular, in the areas of getting cred- meet government requirements in business start-up, opera- it and registering property. It introduced a flat notary fee for tion, trade, taxation, and closure. They do not track vari- land transfer agreements, replacing the percentage fee. This ables such as macroeconomic policy, quality of infrastruc- ture, currency volatility, investor per- Easiness of Doing Business in Central Asian Countries ceptions, or crime rates. Number of Time to pay Total tax Time to Time to The report finds that particular re- tax payments taxes (hours rate (% of import export maining obstacles in the region are per year per year) profit) (days) (days) slow and bureaucratic trade regimes and high and complex tax systems. Kazakhstan 34 156 45 87 93 For example, in Kazakhstan, export- Kyrgyz Republic 89 204 67.4 127 n/a Tajikistan 55 224 87 44 72 ing a good takes 93 days and requires Uzbekistan 130 152 122.3 139 44 14 documents. Average in Europe and Central Asia 50 423 56 37.1 29.2 Source: World Bank, "Doing Business in 2007: How to reform", www.doingbusi- Source: World Bank, "Doing Business in 2007: How to Reform", www.doingbusiness.org ness.org BT Beyond Transition · October December 2006 · 13 The Effect of Armed Conflict on Schooling in Tajikistan School enrollment in conflict affected areas was still lower several years after the end of the war Olga Shemyakina In Tajikistan, old grievances and new ing for children of ages 7 to 15. The gov- Not surprisingly, educational attain- challenges to the existing authorities led ernment is responsible for providing the ment by parents and household per capi- to a violent civil war that started in early general education in the state education- ta expenditure are positively associated 1992 and was followed by a prolonged al institutions free of charge. with child enrollment. A mother's widow armed conflict. In 1997, the UN facilitat- Despite the strong educational sys- status in households affected by conflict ed a peace accord between Tajikistan's tem and the popular support for educa- had a large negative impact on girls' government and the opposition. tion, enrollment rates in Tajikistan start- enrollment, possibly indicating lower However, the transition to peace was ed to decline soon after it's independence access to resources by widows in such often disrupted by violence. The conflict in 1991, according to UNICEF. The ini- households. ended in November 1998 when govern- tial decline in enrollments in the academ- Children who were of school age dur- ment troops forced the remnants of the ic years 1991-1992 and 1992-1993 coin- ing the war were significantly less likely opposition groups out of Tajikistan. cided with the first and most brutal years to complete their mandatory education The human cost of the conflict was of the Tajik civil war. The enrollment by age 17 than those who had an oppor- substantial for the 6.4 million inhabi- rates at all levels of education began to tunity to complete their education before tants of Tajikistan. The conflict displaced recover in 1997-1998, soon after the the start of the conflict. The probability at least 600,000 people internally, forced peace agreement was signed. of completing nine grades is 4% and 7% 500,000 to leave the country for good, lower for boys and girls respectively. claimed the lives of at least 50,000 men, Short Term Effects Biggest Further, the probability decreases by and orphaned 55,000 children, accord- for Girls another 5% for girls, born in 1978-1986, ing to estimates made by the Asian who also lived in regions affected by the The empirical results suggest that the Development Bank. conflict during their schooling years. damage to the household's dwelling dur- In theory, armed conflicts can affect Despite the rise of the enrollment rates ing the past civil unrest was strongly neg- education by reducing expected returns after the end of the war, the rates in the atively associated with girls' school on schooling thereby motivating deci- conflict affected areas were still below enrollment in 1999. In particular, girls sions to stop attending school; by those in areas not affected by the conflict. ages 12-15 were 13% less likely to be decreasing households' resources; by enrolled if their household's home was restricting access to schooling; and by damaged as compared to girls of the What Can be Done? destroying infrastructure, including roads same age from the households that did To increase school enrollment and and schools. Further, civilians are often not report such damage. keep children in school until graduation, targeted by warring parties for hatred or Remarkably, no such effect was the Tajik government should address the retribution.Thus, households may experi- observed for boys of school age. This distress that society may still be experi- ence a lack of physical security and keep may imply that households affected by encing after the conflict and the subse- their children away from public places. the conflict played "safe" and invested quent decline in livelihoods. To attract The individual and household level more in schooling boys. It is also possible children to schools, the government may data from the 1999 and 2003 Tajik that the expected return on investment in offer free hot meals to students. To keep Living Standards Measurement Surveys education of girls was lower in areas students in school, it is advisable to allow comparison of households which affected by conflict as many enterprises improve the quality of education and the were significantly exposed to conflict that traditionally employed women quality of physical facilities, sanitation with those that did not suffer as much, closed their facilities during the conflict. and safety. Furthermore, it may be advis- and to assess the effect of the armed con- Further, families may have viewed older able to create girls' only classes at the flict in Tajikistan. The past damage to a girls as more vulnerable to risks associat- higher levels of education, making school family's home, other dwellings in a com- ed with conflict activity (such as rape attendance by older girls more acceptable munity and residence in a high conflict and harassment), and therefore kept in some conservative communities. intensity area are used to proxy for a them at home. given household's exposure to economic Enrollment rates among younger and social hardships as a result of war. children aged 8-12 remained high, Olga Shemyakina is a doctoral student at implying that households attempted to the Department of Economics, University of Strong Educational System protect the education of younger chil- Southern California. The full text of the paper Like other FSU countries, Tajikistan dren by allowing them to complete at can be accessed at: http://wwwscf.usc.edu mandates nine required grades of school- least primary school. /~shemyaki/. BT The World Bank & CEFIR 14 · Central Asia Remittances in Tajikistan In 2004, remittances could amount to up to 28% of GDP, according to some estimates Jariya Hoffman Since gaining independence in 1991, for Tajikistan. In fact, the level of remit- macroeconomy and simplifying licensing Tajikistan has experienced high levels of tances ranks second after aluminum and and inspection regimes, and enhance the out migration. Early emigration was ahead of cotton if considered as an role of financial intermediaries for mobi- motivated by the civil war, while more export of labor services in 2004, and lizing savings and investment resulting recent migration has been provoked by towers over those of official develop- from remittances. Such policies include: economic factors, such as an increase in ment assistance and foreign direct invest- · Encourage entry of foreign the demand for labor in Russia, strong ment. Between 2000 and 2004, official banks into Tajikistan to foster modern- economic growth combined with slow estimated remittances increased from ization and to further increase public job growth and the low wage level in 0.1% to 12% of GDP. Alternative meth- trust in the banking system; Tajikistan. Economic growth averaged ods of estimating remittances produce · Cross-selling of financial prod- 9.6% in 2000-2004, yet Tajikistan numbers of up to 21-28% of GDP. ucts by commercial banks to migrants as remains the poorest economy in Central Remittances have become a source of incentives for keeping their savings in the Asia with a per capita GDP of US$310. income for many low income families to banking system; meet basic needs. The migration survey · Promote healthy competition of Who are Tajik Migrants? suggests that the financial situation of commercial banks to further reduce A migration survey conducted in migrants and their families improve after transfer fees; May 2005, shows that the average migration. Their income overseas is ten · Improve public information dis- migrant is a 34 year old married male times what they earned in Tajikistan semination related to financial services with five dependents. The majority of before migration (see table), of which by both the state and commercial banks; migrants have secondary education or about 48% is remitted to Tajikistan. · Integrate micro-financial insti- vocational training. Most are unem- Remittances are used for consumption, tutions into remittance services to mobi- ployed or grapple with a low wage level home repair, education and health, and lize un-banked remittance savings from that is insufficient to meet basic house- savings. Consequently, they have con- migrants in rural areas and channel them hold needs. They spend on average 14 tributed to short-term economic growth towards productive investment including months in Russia (and in other host and poverty alleviation through small business and agricultural projects. countries) and mostly work in construc- increased domestic demand. At present, · In the near-term, improve the tion, services, and manufacturing. Given their contribution to longer term growth quality and coverage of statistics on the dearth of migration statistics, the through investments in productive activ- migration and remittances, including true number of Tajiks living outside the ities is limited by the low level of estimating informal transfers of remit- country is unknown and a large number migrants' income and an unfavorable tances in the balance of payments and of them are undocumented migrants. business environment. However, their improving household budget surveys. One official estimate suggests the num- contribution to funding the education In terms of policies designed to ber was about 421,000 in 2004, while and health needs of families is arguably increase remittance inflows that are not other estimates indicate numbers of up an investment in human capital that can fully under the control of the Tajik to 1.2 million Tajiks living overseas. yield benefits both in the near and medi- authorities, the latter should more proac- What is all the more remarkable um-term. tively engage in bilateral diplomatic about Tajik migrants is that they are the negotiations with Russia to remove source of a large volume of funds that Policy Recommendations obstacles to migration with the aim to: are being sent back home in amounts so Yet, as international research shows, · Protect the rights of undocu- significant that they have now become large inflows of remittances can lead to a mented Tajik migrants in Russia; an important source of economic growth real appreciation of the exchange rate, · Simplify the registration process increase the vulnerability of recipient of resident permits for Tajik migrants; Financial Snapshot of a Tajik Migrant countries to host countries' migration · Lower the cost to Russian (Average monthly income, excluding policies and business cycles. To mitigate employers when hiring foreign workers. unemployed) the potential negative impacts and to enhance their longer term positive impact, the government of Tajikistan is This Policy Note is part of the 2006 Pre migration $30 Country Economic Memorandum for During migration $274 seeking appropriate policies on how to Tajikistan prepared by a team of experts from Post migration $91 further enhance the use of remittances ECSPE, the World Bank, Washington DC. Saving/Income 0.015 beyond increasing the standards of living Full text of the paper is available at: Remittances/Income 0.476 and welfare of household recipients. We http://www-wds.worldbank.org/external/ propose that the Tajik authorities default/WDSContentServer/WDSP/IB/2006/0 Source: Tajikistan's Sociological Research encourage a pro-business environment, 8/22/000160016_20060822094201/Rendere Center Zerkalo which requires maintaining a stable d/PDF/357710TJ.pdf BT The World Bank & CEFIR Beyond Transition · October December 2006 · 15 Dimensions of Urban Poverty in Central Asia The urban poor are overwhelmingly located in secondary cities Ellen Hamilton, Christine Kessides, Deniz Baharoglu, Bill Denning, Alexandre Kolev, Maka Lomaia Compared to other transition coun- urban poor are overwhelmingly located Reliability of Basic Servi tries, Central Asia is much less urban- in secondary cities in almost all transi- ces a Serious Challenge ized: the average share of the urban pop- tion countries reflects the relatively In our study we view both income ulation in the region is only 40%, which weak conditions of employment, limited and non-income dimensions of poverty, can be compared to the average of 63% economic diversification and fewer eco- the latter including access to housing, for all transition countries in Europe and nomic opportunities in secondary cities. infrastructure, and energy services. Central Asia (see Table 1). The concen- Also in Central Asian countries the Although formal access to infrastructure tration of the urban population in the incidence of poverty in secondary cities and energy remains higher in urban than largest city is, however, significantly is much higher than in the capital (see in rural areas, many households face higher than in transition countries (on Table 2). It is striking that in Tajikistan unreliable and deteriorated services. average, 15%), with the exception of poverty in secondary cities exceeds that Indeed, our findings show that despite Kazakhstan. in rural areas. high connection rates, the reliability of Our study explores the extent and Household heads in secondary cities basic services is a serious challenge in the nature of poverty in urban areas, provid- in Kazakhstan, Kyrgyz Republic and region. For example, only two out of five ing particular attention to how urban Turkmenistan are more likely to be households with water connection in the poverty varies across urban areas (the unemployed than those in the capital or capitals of Tajikistan and Turkmenistan capital and secondary cities). We also rural areas (this finding is also true for have 24-hour access to water. The gap focus on dimensions of poverty related the majority of transition countries), between connection and reliability is to provision of network infrastructure while in Tajikistan and Uzbekistan particularly pronounced in secondary and energy services in cities. We rely on unemployed heads predominate in rural cities. For instance, while almost all data from household surveys for 20 tran- areas. Across all transition countries, households have access to electricity 24 sition countries, including the five the relative poverty rates among the hours a day in the Kyrgyz capital, only Central Asian countries. unemployed household heads in the sec- 49% of households in the Kyrgyz sec- ondary cities is only slightly below that Households in Secondary ondary cities have such access. of rural areas, but half as large as that of Cities Worse Off Environmental and sanitary condi- the capital cities. This suggests that the tions are poor for many urban house- In Central Asian countries, second- unemployed in secondary cities stay holds. Across all transition countries, ary cities are home to the majority of all unemployed longer and cannot rely on more than 40% of urban households urban residents, as is true in other tran- financial safety nets to the same extent report burning, burying or dumping sition countries. We find that on average as in the capital cities. household waste. Households in second- the poverty risk for residents in second- Less educated household heads and ary cities are also much less likely to ary cities is two to four times greater large families are consistently associated have access to adequate sanitation (i.e., than for residents in the capital. That with poverty. The high rate of poverty an inside toilet) and much more likely to for the former re- use dirty fuels than are capital city resi- flects both a lack dents, both of which are indicators of Table 1. Urbanization Rates in Central Asia, 2001 of access to supple- poor living conditions. mental income Urban popula Population in the from farm produc- Highest Inequality Found tion (% of total) largest city (% of tion as well as less urban population) ability to compete in Secondary Cities Kazakhstan 56 13 for well-paying Although one might expect to find the urban employ- highest inequality within the capital city, Kyrgyz Republic 34 43 ment. In the case of which is typically the center of the great- Tajikistan 28 30 large families, the est wealth, in Kazakhstan and high rate of pover- Turkmenistan the secondary cities are the Turkmentistan 45 23 ty reflects the need most unequal (as measured by the Gini Uzbekistan 37 24 for urban families coefficient), albeit by a small margin. to have cash for In terms of infrastructure provision, Low income countries 31 17 essential goods and in capital cities households in the bottom Source: World Development Indicators 2003 services. quintile are less likely to be connected to The World Bank & CEFIR 16 · Central Asia · E m e r g i n g · Deteriorating services. Infra- Table 2. Poverty Incidence (Headcount) slums. Development structure services continue to erode. The by Settlement Area of real estate markets continued reliance on connection data, Capital city Other urban Rural in transition countries instead of reliability figures, serves to has provided a mech- conceal the degree of erosion in infra- Kazakhstan 4.41 16.31 26.18 anism for increasing structure provision. As service quality Kyrgyz Republic 7.03 19.71 23.23 the spatial concentra- deteriorates, the region faces a major Tajikistan 5.05 21.65 20.92 tion of different challenge since the poor quality of serv- Turkmenistan n/a 12.45 27.95 groups -- i.e. devel- ices provides few incentives for payment. opment of slums at At the same time, housing expenditures Uzbekistan 5.59 18.63 22.64 peri-urban areas as remain below 10% in many transition Note: the table portrays relative poverty, i.e. the share of each set well as in city housing countries. In Central Asia the share of tlement area's population falling below the lowest quintile of stocks. At the same housing expenditures is even lower at no national income. time, the erosion of more than 5% (except for Kazakhstan, public transportation where it reaches 12%). At the same time, district heating, running water and and other public services has meant that the average for OECD countries is 20%. phone lines than higher income house- marginal neighborhoods are less likely to Low tariffs, widespread exemptions and holds. The differences between connec- be well connected to the city fabric and non-payments explain the low rate of tion rates for low and high income public services and residents are more spending. Clearly, in this kind of envi- households are again greater in second- likely to face exclusion. Preventing the ronment, service providers are not able ary cities than in the capitals. A similar emergence of slums among the existing to invest in the rehabilitation of infra- picture emerges for per capita housing housing stock is a problem that is per- structure facilities, perpetuating the space. Although the transition countries haps unique to the region. Policies relat- vicious cycle of widening infrastructure are generally well provided with housing ing to provision of public services and poverty. This suggests the need to review space on a per-capita basis, lower income transport, urban development, social carefully existing tariffs, payment prac- households have substantially less space assistance programs and the housing sec- tices and subsidy systems with the objec- than do high income people. The dispar- tor will all influence slum development. tive of improving quality and access for ity in housing provision for rich and the · Mobility. The study finds that the poor. poor is greater in secondary cities than in poor households are much less likely to the capitals. have moved during the past five years than better off households, particularly in The article is based on the 2006 report Issues for Policy Makers capital cities (for example, in Kazakhstan "Dimensions of Urban Poverty in Europe and · Secondary cities. The urban poor where the difference reaches 10 percent- Central Asia Region" prepared by the are overwhelmingly located in secondary age points). If residential mobility is an Infrastructure Department, Europe and cities; however, little attention has been adjustment mechanism to enable house- Central Asia Region, World Bank, paid to these so far because most poverty holds to satisfy their housing needs and Washington, DC. The report covers 20 transi- tion countries in Europe and Central Asia. analyses fail to differentiate among urban find jobs, as is true in other countries, Full text of the report is available at: settlement types. As a result, the better off then low income people in cities are http://siteresources.worldbank.org/INTE- capital cities conceal the degree of pover- trapped due to both housing sector con- CAREGTOPURBMUNGOV/Resources/urb ty in the secondary cities. ditions and tight labor markets. anpoverty.pdf BT Slums in the Peri Urban Areas of Bishkek Large internal migration flows in the Kyrgyz Republic in area. Other settlements are located in the lower part of the the past ten years have seen the emergence of new slums in the city and are flooded after rains or melting snow, which reg- periphery of Bishkek. Today there are 23 precarious settle- ularly destroys the houses. ments in Bishkek, the largest has 4800 land parcels, while the There are important differences across the settlements in smallest has about 100. Many internal migrants often lack the terms of the demographic characteristics of the residents, funds for the construction of real houses and therefore live in which reflect the various regions from where people migrat- shoddy structures. Most of these settlements lack basic infra- ed. In the Salam-Alik settlement, children comprise only structure services and are often located in areas where there 10% of the total population. In the Kelechek settlement, for are adverse environmental health-related impacts. instance, the children make up 70% of the total population. One of the most populated slums, the Ak-Bosogo settle- Kelechek is mostly inhabited by migrants from the Batken ment, has very serious problems with water supply. Another region, which has the highest birth rate in the country. populated area, Bakai-Ata, is located close to the ash dump of the Bishkek power and heating station, which is the Source: Rakisheva, K. 2002. "Impact of the Internal Migration source of heavy pollution. Even a slight wind lifts ash into Upon the Poverty Problem." Mimeo.As cited in World Bank (2003). the air covering all houses and facilities in this residential Kyrgyz Republic: Enhancing Pro-poor Growth. BT Beyond Transition · October December 2006 · 17 Evaluating Pension System Design in the Kyrgyz Republic The attempt to "borrow" the pension system design from more developed countries and implant it in the transitional economy has not been successful Roman Mogilevsky Before 1991, the Kyrgyz Republic notional defined contribution system Yet pensions remain low, with an had the same pension system design as (NDC). In this system, pension contribu- average pension just slightly above other Soviet Republics: a low pension tions are "accumulated" on a worker's US$20 per month in 2005. The replace- age (60 for men and 55 for women), uni- virtual individual pension account but ment rate is half of what it was before versality, relatively high replacement are not saved (unlike in the system independence. The performance of the ratios (no less than 63%), and defined above); instead, they are used to pay NDC component is especially troubling. benefit and pay-as-you-go principles at pensions to current retirees. The NDC Nine years on, the informal sector the bottom. system allows for much less redistribu- employees and labor migrants in other In 1991, social security expenditures tion and creates incentives for individu- countries are still not registered in the amounted to 6% of GDP, and the als to make contributions during work- system. Due to widespread tax evasion, Republic was receiving substantial ing life. a lot of workers, especially in the infor- transfers from the Soviet government. The 1997 law introduced many sig- mal sector, have accumulated little on Following the break-up of the Soviet nificant changes to the pension system: pension accounts, while the pension Union, the country's GDP fell sharply -- · A gradual increase in the retire- fund has struggled with perennial to 52% of the 1990 level, and the trans- ment age from 60 to 63 for men and deficits, which have been covered by fers from the center ceased. Agriculture from 55 to 58 for women; government budget transfers. The law and the informal trade and services sec- tors, which had the lowest effective pen- The average pension is now above the poverty line, and households sion fund contribution rates, increased with retirees bear 20% less risk of becoming poor as shares of GDP, while the shares of manufacturing, transportation, and communications, which contributed the · Abolishment of many privi- also failed to introduce an inflation most, shrank. As a result, despite a rela- leges, such as early retirement for some indexation mechanism for the second tively low share of retirees of about occupations and population groups; and third components, which under- 10% of the population, the pension sys- · A three-component pension mined the workers' incentives to con- tem became too heavy a burden for the system: a base pension guaranteed to tribute. country. everyone with a sufficiently long work- Due to the shortage of pension fund ing experience; a defined benefit pension Fiscal Sustainability Not resources, in 1994 the size of the average calculated as a percentage of the average Attained pension fell to only 70% of what it was wage before 1996; and individual retire- Thus, the fiscal sustainability of the in 1990. Pension arrears and payment of ment contributions accumulated on system -- one of the main objectives of pensions in-kind became widespread. individual accounts. the reform -- has not been attained. Inconsistent government policy has cer- Choosing a Model System Functioning Sub tainly played a role, as the government The pension reform had to restore optimally has insisted on preserving a big varia- the fiscal sustainability of the pension The above measures helped to tion in payroll tax rates for different system and protect the elderly from reduced pension liabilities. The pension groups: formal sector employees have to falling into poverty. fund expenditures decreased from 6.9% pay 27% tax (until recently 32%), while In choosing a model for pension of GDP in 1996 to 4.9% in 2005. The agriculture and trade workers -- two- reform the Kyrgyz government was average pension is now above the pover- thirds of the total employment -- only severely constrained by an underdevel- ty line, and pension arrears have been 1-2%. Many politicians still see a waiv- oped financial market and a lack of eliminated. The pension system has also er of pension fund contributions as an cash. This prevented it from introducing become much better at insuring the eld- easy way to provide support to their a fully-fledged contribution-funded sys- erly against falling into extreme poverty: constituencies. tem or developing voluntary pension currently, households with retirees bear Unfortunately, hopes of the Kyrgyz insurance through private pension 20% less risk of becoming poor in com- Republic's relatively quick transition to funds. parison to households without retirees. an industrialized economy appear to Following Italy and Latvia, the Of course, general economic recovery have been too optimistic. The current Kyrgyz Republic opted for the so-called has contributed much to these results. economic structure, characterized by The World Bank & CEFIR 18 · Central Asia semi-subsistence agriculture and a large aimed at reducing pension liabilities social protection could perhaps be a informal sector, mass labor emigration have been quite successful. more feasible solution for a country and consumption increasingly depend- The question of what pension system without the clear prospect of turning ent on remittances from abroad, impede design can be suitable for a country like into an industrialized economy. the smooth functioning of the NDC pen- the Kyrgyz Republic remains open. sion system. So, the attempt to borrow Perhaps one should explicitly account the system design from developed coun- for the deeply-rooted tradition of pro- Roman Mogilevsky is Executive Director tries and implant it in the transitional viding support to the elderly by younger of the Center for Social and Economic economy of the Kyrgyz Republic cannot family members. Such family insurance Research CASE-Kyrgyzstan. Full text of the be deemed a success. This is despite the mechanisms complemented by a simple article can be received by request from the fact that some reform components pension system, which provides minimal author, e-mail: rmogilevsky@hotmail.com. BT Past Reforms and Future Challenges in the Kyrgyz Republic In the past years the Kyrgyz Republic has put in place becoming increasingly active and is expected to partially the building blocks of a market economy and progressed on substitute public organizations. the way to achieving macroeconomic stabilization. In 2003- Despite an impressive reform record the Kyrgyz 2004, the average real GDP growth rate was about 7% per Republic faces some serious challenges. On the economic year, and growth took place in all sectors. Inflation has been side, the country urgently needs to diversify the sources of low at below 5% in recent years, the exchange rate has been economic growth away from agriculture and SMEs working stable, and the government budget deficit has been reduced in the shadow economy. This entails a significant increase in to below 5% of GDP. According to the EBRD Transition investments (both in physical and human capital) and Index, the Kyrgyz Republic's indicators are above the aver- exports. This should be coupled with massive public invest- age level in the CIS in all areas except for infrastructure ments in infrastructure. A large foreign debt of US$2 billion, reform. which has reached unsustainable levels, remains a signifi- Agriculture remains the largest sector producing rough- cant problem that needs to be urgently addressed. ly one-third of the country's GDP. Land reform has sub- In the social sector, the key challenge is how to restruc- stantially progressed; a new agrarian structure has ture extensive education and health care systems inherited emerged with universal access for farmers to land, the from Soviet times, without compromising access for the prevalence of small farms, and gradually growing farm poor and the quality of services. Governance issues, such as productivity. However, farmers' access to input and output inefficient public institutions, rent-seeking, unclear and markets is still limited, and disinvestment (fixed capital changing legislation, also need to be addressed urgently. depreciation exceeding new investments) poses a major To achieve sustainable economic growth and enhance threat in the long-term. Another important and dynamic export potential, the Kyrgyz Republic needs a large inflow sector of the economy is SMEs in light and food industries of investments. Recently domestic savings increased from and the services sector. These account for a vast share of almost zero in the end of 1990s to 12-13% of GDP in urban employment; however, since many of them operate 2002-2003; yet these resources are not enough to make up in the shadow economy, they face limited development for a huge disinvestment, which took place during the opportunities. 1990s. The potential sources of FDI are the developed Kyrgyzstan has been the largest recipient of foreign aid countries of Europe and North America, Japan, as well as in absolute and per capita terms in Central Asia. The per China, Russia, Turkey and the neighboring Kazakhstan. capita official development assistance amounts to almost US The active measures taken by the government to achieve $460 (the figure for second biggest aid-receiver, Tajikistan, macroeconomic stabilization and reduce poverty have born is US $185). The aid mainly helped to balance the budget some fruit, and the FDI inflow increased from US $90 mln and provide support to health care, education, agriculture, in 2001 to US $147 mln in 2003. Much more work remains financial sector, small and medium enterprise development, to be done, especially in reducing the regulatory burden institution building and infrastructure maintenance and and fighting corruption. development. Economic growth has helped to reduce the share of the poor from 55% in 1999 to 41% in 2003. Key social indica- Source: "Kyrgyz Republic and the Problems of Regional Cooperation in Central Asia" commissioned by the UNDP tors, such as infant mortality, life expectancy at birth, basic Regional Bureau for Europe and the CIS and prepared by the secondary education enrollment ratio, etc. have remained Center for Social and Economic Research CASE-Kyrgyzstan. The quite stable. However, insufficient public funding of the full text of the report has been published in the journal"Problems social sector has led to a steady decline in the quality of of Economic Transition", Vol. 48, No. 8 (2005) and is available at services. In health and education the private sector is www.case.elcat.kg. BT Beyond Transition · October December 2006 · 19 Kazakhstan Expenditure on Public Health Decreased public health indicators, limited funding and ineffective spending mar public health system Meruert Makhmoutova Government budget social spending years). On this count, Kazakhstan ranks nosed patients per 100,000 people, with determines the human capital develop- below not only developed countries the highest level again registered in the ment level, which in turn is a key condi- (77.6 years in the OECD countries), but Kyzylorda oblast. tion of a country's sustained develop- also developing countries (64.9 years). · As of January 1, 2006 ment. In terms of the UN Human · The overall mortality rate has Kazakhstan had 4,531 officially regis- Development Index (HDI), Kazakhstan increased by 20% since 1990. The main tered people living with HIV. In 2006 ranked 79th in the world in 2004. HDI causes of high mortality are cardio-vas- there was a flare-up of HIV in South is calculated on the basis of life cular diseases, cancer, poisoning and Kazakhstan oblast: 82 children and 11 expectancy, literacy level and per capita injuries. mothers were infected in the hospitals in GDP. All these indicators were declining · According to the WHO, infant the city of Shymkent during blood trans- during the 1990s, and by 1995 and maternal mortality in Kazakhstan is fusion. Kazakhstan had dropped to 93rd place among the highest among European and among 177 countries. Although in recent Central Asian countries. Undoubtedly, Limited Funding Remains a years it has registered an annual growth the poor health of women -- only 20- rate of nearly 10%, it was not until 2004 30% of them have a clean bill of health Serious Problem that Kazakhstan managed to go back to -- is an important factor. Mortality rates In spite of the unsatisfactory state of its 1990 level in terms of per capita GDP vary between regions, with the highest public health, the number of medical and the share of people between five and infant and mother mortality registered in facilities dropped from 1788 in 1990 to 24 in education. The only indicator on the Kyzylorda oblast in the south of 1063 in 2005, and government spending which the country still lags significantly Kazakhstan where these indicators are dropped from 3.6% of GDP in 1991 to behind the 1990 level is the average life above average by 1.6 and 2 times respec- 2.3% in 2006. While its GDP per capita expectancy. tively. The oblast is located in the Aral puts Kazakhstan in the group of medi- Sea area, where environmental problems um-income countries, in terms of public Health Indicators Low brought about a catastrophic decline in health spending it is among the poor The economic and political changes the health of the population. countries. In comparison, public health of the last 15 years have had a negative · The overall morbidity rate in spending in Belarus amounted to 4.9% impact on health indicators, which have 2005 had more than doubled since 1999 of GDP and in Russia to 3.3% in 2003- been steadily declining. to 100,163 instances per 100,000 people. 2004. The government plans to reach the · According to the World Health · Kazakhstan ranks first in 4% of GDP target, which is the mini- Organization (WHO), Kazakh citizens Europe in terms of tuberculosis inci- mum level recommended by the WHO, born in 2003 can expect to live an aver- dence. According to national statistics, in only by 2010. age 61 years (females 67 years, males 56 2005 there were 147.3 first-time diag- The reform of the health service in the 1990s resulted in mixed public-pri- Kazakhstan's HDI Slides in 2004 Compared to 1990 vate financing and the appearance of non-government medical facilities and private clinics. But the attempt to intro- duce mandatory medical insurance for citizens was later abandoned. Much of the public healthcare Russia Belarus Ukraine Kazakhstan Armenia Turkmenistan Azerbaijan Georgia Uzbekistan Kyrgystan Moldova Tajikistan 0 financing comes from local (oblast) budgets, which stand for 83% of the 20 total financing. Local budgets finance 40 the guaranteed minimum of free medical 37 38 45 60 47 care, and the list of free services is 49 62 54 66 62 approved by the government every year. 80 67 64 Although the share of public health 78 80 83 80 100 83 88 expenditure in GDP has fallen, its share 97 101 100 120 in local budgets grew from 16.8% in 111 109 115 122 1999 to 19.2% in 2005. Spending on 140 free medical care also grew in absolute 1990 2004 terms to US$56 per person in 2005, Source: UNDP World Human Development Report, 1990 and 2004 The World Bank & CEFIR 20 · Central Asia although regional variations were sub- protecting mother and child, including Tighter Spending Control stantial: from US$104 in the the Healthcare Reform Program, have Even the admittedly insufficient Mangistauskaya oblast near the Caspian not yielded the desired results. Shrinking amounts allocated to public health are Sea to US$51 in the Almaty oblast. public financing and the emergence of not fully or effectively used. In the 15 Accordingly, there remain significant poverty have resulted in unequal access months of 2005-2006 the Prosecutor regional differences in access to heath to medical care. There are still gaps in General's Office uncovered 18,000 vio- care, which are being eliminated thanks the cost of these services between lations of citizens' rights in all the to higher local budget revenues and tar- regions, which makes it unlikely that regions. These include failure to provide geted transfers from the national budget. Kazakhstan will achieve the Millennium the guaranteed range of free services, ille- While in 2001 the highest per capita Development Goals of reducing infant gal charging by public medical institu- healthcare expenditure was 4.7 times the and maternal mortality rates by 2015. tions for emergency medical assistance, lowest, by 2005 this gap had narrowed In our opinion, the government is incompetence of medical personnel as to 1.8 times the lowest. giving unwarranted priority to "pilot well as deaths through negligence of the Medical services outside the guaran- projects", such as the creation of a state- medical personnel and untimely delivery teed free minimum are paid for by the of-the-art "medical cluster" in Astana, in of medical assistance. Added to these are households, employers, the voluntary which leading foreign institutions are ineffective or unjustified use of regional medical insurance system. According to involved. This merely increases govern- budget funds, such as overstatements of the Asian Development Bank (ADB), ment spending on healthcare but makes the cost of work and construction mate- 91% of medical care was financed by the little difference to the heath of mothers rials in the building of new hospitals, state, 7% by households and 2% by and children nationwide. It is necessary inferior quality of construction and employers in 2002. Our calculations are to revise budget spending priorities to installation of dated medical equipment. close to those of ADB: in 2004-2005 make medical care more accessible to cit- The reasons for this are many: households paid for 8% and 6% of izens living in remote areas, for example, untimely adoption of regulatory acts on healthcare, respectively. in the Kyzylorda oblast which has the budget programs during the year, untime- The problem with assessing the size highest infant and maternal mortality ly state procurement, corruption, etc. All of the non-government sector of public rate in the country. this makes it imperative that the increase health is that in the process of creating To bring down infant, child and of state financing of public health to 4% paid-for health care, public hospitals and maternal mortality rates and make of GDP be accompanied by tougher con- clinics were transformed into municipal spending on public health more effective trol of how the money is spent. entities. On the one hand, they get state the following measures need to be taken: funding, but they also charge patients for 1. Provision of equal access to pri- their services. An average person coming mary medical care and guaranteed levels Meruert Makhmoutova is Director of the to a healthcare facility does not under- of free services. Public Policy Research Center. The article is stand which services are free and which 2. Development of medical and based on the author's 2007 study have to be paid for. economic standards for each group of "Kazakhstan National Budget Spending on diseases whose treatment can be Education, Health and Social Protection in Mother and Child Health the Interests of Family and Child" conducted financed by the state. Introduction of Protection Measures for UNICEF. The full text of the work will be diagnosis and treatment standards. published by UNICEF in spring 2007. It can be thus concluded that the 3. Separation between the public Questions may be addressed to the author: measures for combating diseases and and private health care systems. sipa@nursat.kz. BT Human Development Index for Central Asian Countries, 2004 HDI rank Country Human Life expectancy Adult literacy rate Combined gross GDP per capita Development at birth (% ages 15 and enrolment ratio (PPP US$) Index (HDI) (years) older) for primary, sec value ondary and terti ary schools (%) 79 Kazakhstan 0.774 63.4 99.5 91 7.440 105 Turkmenistan 0.724 62.5 98.8 ... 4.584 110 Kyrgyzstan 0.705 67.1 98.7 78 1.935 113 Uzbekistan 0.696 66.6 ... 74 1.869 122 Tajikistan 0.652 63.7 99.5 71 1.202 Source: Human Development Report 2006, www.hdr.undp.org Beyond Transition · October December 2006 · 21 Promoting Innovation through Technoparks in Kazakhstan Technoparks have been operating as business incubators rather than high tech innovation centers Slavo Radosevic and Marat Myrzakhmet Kazakhstan -- a fast growing transi- The survey shows that Kazakh do not expect that location in a tion economy -- has been searching for technoparks are quite young and small, technopark will significantly improve ways to improve its competitiveness and housing between 16 and 46 enterprises. their access to finance, they expect better- diversify the economy away from heavy Technoparks tenants are much smaller quality business services and infrastruc- reliance on oil and minerals. The intro- than firms outside technoparks, with ture. Location in a technopark, however, duction of technology parks has been median employment per firm equal to 9 does not seem to fully realize their expec- seen as a way to promote innovation, and 32 people, respectively. Technoparks tations: infrastructure was considered a especially in hi-tech areas, and ensure tenants are also younger than other firms key barrier to growth for 38% of firms. growth based on local knowledge and (with median age of four vs. nine years Do technopark firms have stronger innovation. old, respectively). Service-providers linkages with other tenants and universi- Technoparks are believed to promote account for 45% of the firms inside ties? In fact, the answer is no on both economic growth and generate value by technoparks, while their peers outside of questions. The greatest intensity of link- enhancing the ability of its tenants -- technoparks mainly engage in manufac- ages is with outside firms. high technology firms -- to survive and turing. This partly explains the difference Thus, it is obvious that Kazakh grow in a very competitive environment. in the average size of the two types. technoparks do not really act as vehicles Nevertheless, there is conflicting evi- In contrast to other countries, where for the commercialization of new tech- dence regarding the actual effectiveness technoparks mainly house high-tech nologies. Instead of serving the centers of of technoparks, in part, due to their wide companies, many firms in Kazakh innovation promotion and economic variety, and also due to methodological technoparks work in traditional indus- diversification, they actually operate as difficulties in evaluating the contribution tries, such as furniture and souvenir pro- business incubators for small local firms of technoparks to the local economy. duction, trading, etc. In fact, the provi- operating in traditional sectors. Kazakhstan differs from developed sion of traditional products and services countries in that most of its R&D activi- dominate. Only four out of 110 firms Policy Conclusions ties are carried out by public organiza- claim they engage in IT services, and 11 Kazakhstan's transition from a pub- tions rather than businesses (see Table). engage in pharmaceuticals development. lic-driven R&D to firm-based innova- No noticeable shift towards firm-based Nor is there any traceable difference in tions cannot be successfully implemented R&D occurred during the 1990s. the proportion of innovative firms within the current policy framework. (developing a new product or process Such policy directs the bulk of funding to Technoparks Firms Smaller, which is either new to the firm or to the investments in infrastructure and build- Younger, More Cash Starved market) operating inside and outside ings, with little attention given to identi- Seven technoparks have been estab- technoparks. Another surprising result is fying innovative projects, and creating lished in Kazakhstan's biggest cities that technopark firms largely work in links between industries and research through the initiative of entrepreneurs in local markets, with about 90% of sales institutions/universities. Policy should public administrations, primarily at the having local destinations. instead prioritize support to innovative local level. We have surveyed 21 entre- research, as well as investments in human preneurs and administrators from five Why Relocate? capital and new skills. As the domestic major technoparks and collected data on Our survey shows that lower rents and demand for research is still small, innova- a reference group of 24 firms located the better image that operating in a tion policy should assist companies in outside the technoparks. technopark gives rank highest among rea- upgrading their technological capabilities sons to relocate to a to a level at which they can articulate R&D in Kazakhstan, the EU and North America technopark (relevant their demand for R&D. to 50% and 79% Proportion of gross Kazakhstan, North EU, firms, respectively). expenditure 2002 America, 1995 That these firms see Slavo Radosevic is Professor at the School on R&D performed by: 1995 lower rents as an of Slavonic and East European Studies, important benefit is University College London. Marat Myrzakhmet is Director of the Innovative Businesses 18.6 59.3 52.5 not surprising given Centre at Eurasian National University, Higher Education sector 22.2 15.6 20.8 the young age and Astana, Kazakhstan. Full text of the paper is Government sector 57.2 10.2 16.2 possible cash flow available at: http://www.ssees.ac.uk/publica- problems of the firms. tions/working_papers/wp66.pdf, Economics Sources: OECD, 2000, and Statistical Office of Kazakhstan Although most firms- Working Paper No. 66. BT The World Bank & CEFIR 22 · New Findings Corporate Philanthropy in Transition Slovakia lags behind the Czech Republic in giving Katarina Svitkova The study examines corporate chari- In general, the legislation governing and internationally-focused firms. table giving in the Czech Republic and corporate philanthropy was very similar Stakeholders in Slovakia seem to be less Slovakia, analyzing unique datasets col- in the Czech and Slovak Republics until powerful and unable to induce participa- lected through face-to-face interviews 2004 when several major changes were tion of firms at the local level. with 739 Czech and 152 Slovak firms, introduced in Slovakia. Among other If a firm is located in the capital city, conducted in 2004-2006 by market sur- things, Slovakia lowered the corporate it engages much less in philanthropy vey company Median. tax rate from 25% to 19% and intro- compared to regional firms.This could be There are several reasons why corpo- duced tax assignation, which allows cor- explained by the free riding effect and the rate charity in transition countries could porations and individuals to assign a anonymity of large cities, which makes it differ from that in developed economies: fraction of their taxes to a particular more difficult to establish partnerships. Transition economies continue to lag charitable purpose. However, while firms in Prague are not behind the developed countries in eco- frequently engaged in philanthropy, they nomic performance, an important deter- Scope, Location Important spend more on giving than firms in other minant of corporate charity. They also In both countries the size of the com- regions, perhaps because they are more lack a tradition of philanthropy and cor- pany, as measured by the number of profitable than other firms. porate social responsibility. The wide- employees and sales, increases engage- spread perception of nonprofit organiza- ment in both sponsoring and giving. The Impact of Taxes Small tions as inefficient and unprofessional, to number of employees increases giving One of the major questions of our some extent explained by their short his- more than sponsoring, while sales have a study was whether decreasing corporate tory, hinders cooperation between the similar effect on both. In terms of phil- tax rates affected corporate philanthro- py. Contrary to our expectations, the tax The corporate tax rate plays no role in the decision to give or the rate plays no role in the decision to give amount spent or sponsor or the amounts spent. We also observed that only approxi- mately half of Slovak firms participate in corporate sector and nonprofits. Such anthropic expenditures, small firms in assignation, a very low number if we cooperation is however being strength- the Czech Republic are more generous take into account that assignations ened by the EU accession and various givers than large firms, while the oppo- impose only administratively negligible European regional programs. In addition, site is true in Slovakia. This may imply costs on the company. This may be both the Czech and the Slovak Republics that philanthropic culture in Slovakia, caused by low (or negative) profits, experienced significant economic growth particularly among small firms, is not as and/or a lack of interest. during 2001-2005, which may conse- developed as in its neighbor. Thus, the results of our analysis quently intensify philanthropic activities. We expected the highest engagement reveal that despite the long common his- In the study we distinguish between in philanthropy from the service sector tory of the two countries there are sig- sponsoring and giving, which are subject firms. Yet this is only true for the Czech nificant differences in the philanthropic to two different tax treatments. This Republic (and only for sponsoring), while behavior of firms; the difference being would suggest that corporations use the most active sponsors and givers in significant only in giving, sponsoring these tools differently, to achieve differ- Slovakia are found in retail. In terms of behavior remains very similar. Firms in ent objectives. This hypothesis however the amounts spent, the service sector the Czech Republic give more often and has not been empirically tested yet. firms are the leaders in giving. Service in larger amounts than their Slovak Sponsoring is entered in the accounts firms have lower profitability compared peers. In addition, giving in Slovakia is as costs, and the contract requires the to firms in other sectors, which may more prevalent among large firms oper- receiving party to provide some services in explain their modest participation; but ating at the international level, while in return for funding. The corporate tax rate once they start to engage in philanthropy the Czech Republic smaller, regional is therefore the only legal factor that influ- they tend to give more because of their firms also participate. These differences ences the expenditures on sponsoring. close relationships with stakeholders. seem to be caused by the differences in The giving contract, on the other In Slovakia, firms operating on inter- profitability, further enforced by missing hand, requires nothing in return. national markets are much more active "leaders" among large firms in Slovakia. Outgoings on giving represent after-tax sponsors and givers, in contrast to the expenditures, tax deductible up to 5-10% Czech Republic, where local and region- of the tax base in the Czech Republic. al firms are more active givers. This Katarina Svitkova is a Junior Researcher Until 2004, donations were tax- again suggests that philanthropic culture at CERGE-EI, Prague and a Chair of School deductible up to 2% in Slovakia, since in Slovakia is lagging behind, with phi- of Business Administration at The New 2004 donations are not tax-deductible. lanthropy still being the domain of large Anglo-American College in Prague. BT Beyond Transition · October December 2006 · 23 Enhancing South South Trade in Goods 57% of the global gains from tariff removal accrue to countries in the South Przemyslaw Kowalski and Ben Shepherd Furthering trade integration between vegetable oils and fats, the share of Another interesting finding is that the low and middle-income countries (with South-South trade was already higher at recent growth in South-South trade has per capita GNI below US$9,075 in 2003) the beginning and continued increasing. not been brought about by the "death of can contribute substantially to these The lowest shares of South-South trade distance", as there hardly has been any counties' development and welfare. These were observed in machinery and trans- change in the impact of geographical dis- countries, referred to as the South, cur- port equipment and manufactured arti- tance on trade in the 1985-2002 period. rently face relatively high trade barriers. cles. In general, compared to other trade Additionally, South-South trade is con- South-South trade can be viewed as both flows, South-South trade seems to be rel- strained by distance-related trade costs an alternative and a complement to trade atively more concentrated in less- more than other types of trade: it is esti- with more technologically advanced processed products. mated that whereas a 10% increase in developed countries in the North. It Finally, South-South trade is general- distance tends to reduce North-North would entail smaller relative price ly subject to much higher barriers than trade by about 10%, the comparable fig- changes and thus less severe structural North-South or North-North trade. For ure for South-South trade is 17%. The adjustment, open up possibilities for example, the tariffs facing South-South negative effect of distance-related trade learning by doing, and allow Southern trade are almost three times higher than costs is especially strong for low-income countries to break into the North's mar- those facing North-North trade: 11.1% countries. kets for more technologically advanced and 4.3%, respectively (see Table). Given that geographical distances products. The relatively higher growth facing South-South trade are on average rates in developing countries add to the Tariff Reductions are comparable to those facing North-North potential of South-South trade. Important and North-South trade, the results sug- gest that there is considerable scope for Using the gravity model, which Impressive Growth During increasing South-South trade by reduc- explains bilateral trade by the size of the 1990s ing transport costs to the levels prevail- trading partners (GDPs), relative prices, ing for other trade flows. Since the early 1990s, South-South distance and cultural and historical links, trade has expanded at a more rapid rate we comprehensively analyze bilateral than either North-North or North-South trade flows of 180 countries in the peri- A Third of Global Welfare trade, though starting from a much od 1985-2002. Gains lower base. South-South trade grew on The analysis suggests that in the con- What welfare effects can multilateral average at 12.5% a year, compared with sidered period South-South trade has trade liberalization bring for developing 9.75% for North-South trade. In 1985 it been significantly impeded by tariffs. It countries? In the computable general made up around 3% of world trade has been estimated that a 10% decrease equilibrium analysis (CGE) that accom- while in 2002 this share has already been in South-South tariffs is associated with a panies the gravity methodology in our estimated at 6%. 1.6% increase in its trade. This translates paper the benchmark policy scenario is For some commodities, such as bev- to an additional US$5.7 billion in export the worldwide non-discriminatory erages, tobacco, and chemicals this share earnings per year. Interestingly, an equiva- removal of tariffs on merchandise prod- has increased from around 2% in 1985 lent reduction in North-North or North- ucts. Full removal of remaining tariffs is to around 6% in 1990, largely in line South tariffs does not result in an equally certainly an unrealistic scenario; however with total trade. In some sectors, such as significant impact on trade flows. Clearly, it helps us to compare the potential gains food and live animals and animal and South-South trade is substantially more from tariff liberalization that can be ulti- sensitive to tar- mately achieved through multilateral Simple Average Tariff Rates, 2001, by Exporter and iffs compared to negotiations with gains from less ambi- Importer Income groups trade involving tious scenarios. Our estimates reveal that the North. Thus, approximately 57% of the global gains Importer / High Upper Lower Low there is consid- from complete tariff removal accrue to Exporter Middle Middle erable scope for countries in the South of which as much High 4.38 8.39 9.72 11.73 trade policy to as half are obtained from liberalization Upper Middle 5.94 8.52 11.83 13.73 boost the trade by trading partners in the South, i.e. gains Lower Middle 5.57 9.49 11.06 14.28 and welfare of from South-South trade account for Low 3.63 8.72 10.01 13.38 countries in the approximately 28% of global gains. Note: Calculated from MAcMap data South. (Currently there is no consensus on the The World Bank & CEFIR 24 · New Findings share of gains form trade liberalization ufacturing tariffs is 40%. This underlines similar countries in other regions. This that accrue to developing countries; these the importance of South-South trade in suggests that multilateral negotiations depend on the modelling framework and agriculture. In manufacturing, North- remain an important vehicle of realising data used. Readers are therefore encour- South liberalization seems to be relatively the gains from South-South trade. aged to consult results of other existing more important than South-South liber- CGE simulations of tariff reductions). alization from the South point of view This means that for the countries in the but South-South liberalization still brings Przemyslaw Kowalski is an economist South, South-South tariff liberalization is about sizeable gains. with Trade and Agriculture Directorate, indeed as important as liberalization by Overall, the analysis of regional OECD, and Ben Shepherd is with the the high income countries. sources of gains from South-South trade Development Economics Research Group, the Sectoral tariff liberalization scenarios suggest that more than half of the gains World Bank and with the Groupe d'Econo- considered in the paper suggest that gains from South-South tariff liberalization are mie Mondiale, Sciences Po. Parts of the paper accruing to the South from reduction of captured by low and middle income coun- have been incorporated in Chapter 5 of manufacturing tariffs are comparable to tries in Asia, with China being the largest "Trading Up: Economic Perspectives on those from reduction of agricultural tar- beneficiary. Yet, only a part of the gains Development Issues in the Multilateral Trading System", OECD Trade Policy Studies, iffs. Yet, South-South trade accounts for from South-South trade could be realized 2006. Full paper is available as the OECD 58% of gains accruing to the South from through regional agreements, mainly in Trade Policy Working Paper No. 40 and can be the worldwide reduction of agricultural Asia. Many low and middle-income coun- accessed at http://appli1.oecd.org/olis/ tariffs while the respective share for man- tries benefit most from freer trade with 2006doc.nsf/linkto/td-tc(2006)8-final BT South South Trade in Services Services in many developing countries account for about technological knowledge that will determine comparative 50% of their aggregate GDP and employment opportuni- advantage, and enable the development of more advanced ties, and contribute close to 15% of their total exports. Yet services trade. there are virtually no systematic analyses of trends in the The elements that influence trade, including policy fac- structure of services trade among developing countries given tors, apply to South-South trade in much the same way that the numerous measurement difficulties. Our analysis repre- they do to other forms of trade. But the effect of distance on sents the first attempt to identify key features governing the South-South trade in services appears to be less strong than South-South dimension of services. It is estimated that for goods trade.This is consistent with the idea that the main South-South services exports (covering cross-border trade, cost involved in services trade is information, rather than the movement of consumers, and, to a limited extent, of transport which pushes up the cost of goods trade. But the suppliers) represented around 10% of world services analysis also points to the importance of policy barriers, and exports in 2002. There are however important sectoral dif- implies that countries could increase trade in services across ferences. For example, while South-South exchanges play an all sectors by relaxing restrictions on foreign establishment. important role in world tourism, certain other services such Services liberalization also has a positive and a signifi- as air transport are estimated to be still heavily dominated cant impact on merchandise exports through cheaper trans- by North-North and North-South flows. port, communication, and financial infrastructure. In addi- Significant geographical concentration of South-South tion, productivity gains in services which are direct inputs services exports is apparent: exports from Asian developing into producing merchandise can increase the competitive- countries represent around 8% of total world exports, and ness of firms. exports to other developing countries account for more than One significant fact to note is that the impact of lifting half of their total exports. Similarly, there is some evidence restrictions on performance may increase more than pro- that for certain Asian and Latin American developing coun- portionally with the scale of the liberalization measure. This tries, trade with other developing countries exceeds 50% of may mean that it is not enough to liberalize moderately in their total services trade. For the rest, exports to developed order to achieve an impact on performance if the initial countries appear to be more important. degree of restrictiveness is high. Preliminary results suggest The most important conclusion to emerge from our that if services sectors are closed to foreign competition, the work is that services trade between developing countries improvement of their performance requires a major rather takes place predominantly at the regional level for cross- than a small or moderate liberalization effort. border trade; movement of consumers; commercial presence and movement of suppliers. This may be due to the increas- The authors are Nora Dihel (OECD Trade Directorate), Felix ing tendency to include liberalization of services trade in Eschenbach (Groupe d'Economie Mondiale, Sciences Po) and Ben regional trade agreements. Shepherd (affiliated at the time of writing with the Groupe South-South services exports in general and services d'Economie Mondiale, Sciences Po). The article is based on "South- South Services Trade", OECD Trade Policy Working Paper No. 39 trade in particular have the potential to increase. Initially, (http://appli1.oecd.org/olis/2006doc.nsf/linkto/td-tc(2006)7-final). services trade between more advanced and less advanced Parts of the paper have been incorporated to Chapter 5 of "Trading countries will be based on the differences in short-term Up: Economic Perspectives on Development Issues in the Multilat- comparative advantage. In the medium to long term, it is eral Trading System", OECD Trade Policy Studies, OECD, 2006 BT Beyond Transition · October December 2006 Agenda · 25 President Wolfowitz Hails Economic in consultation with authorities and stakeholders in the coun- Reforms, Bank Partnership, in Turkey try. In addition to financing and research offered to the Montenegrin government by IDA and IBRD, the Bank Group, World Bank Group President Paul Wolfowitz traveled to through IFC and MIGA, will also continue to offer support to Turkey from January 27 to 29. During the two day trip, he met encourage private sector investments in Montenegro. New sup- with a low-income family benefiting from a Bank supported port will build on support that the World Bank Group has pro- conditional cash transfer program, and with youth groups and vided to Montenegro since a separate program was established civil society organizations; toured modern International in 2001. Active World Bank lending projects that are currently Finance Corporation-supported glassmaking and paper pack- being implemented by the government of Montenegro total aging factories; and visited men in a homeless shelter in down- slightly over US$30 million, while the IFC currently has a total town Istanbul. Mr. Wolfowitz had what he called "extremely portfolio of private sector investments in Montenegro valued good meetings" with Prime Minister Tayyip Erdogan and State at over US$18 million. For more information, visit: Minister for the Economy Ali Babacan, focusing on a range of http://www.worldbank.org/montenegro topics, including Turkey's economic reforms, the challenge of the country's unemployment, and Turkey's prospects for mem- bership in the European Union. Mr. Wolfowitz noted that the New Migration Report Analyzes Potential very reforms that will benefit Turkey's development in the long Benefits of Migration run are also the reforms on the path toward EU accession. For Migration can benefit both sending and receiving countries more information, visit: http://www.worldbank.org/president and reduce poverty among migrants if it is better coordinated between countries, according to the new World Bank report, Report Looks at 2007 Economic Prospects Migration and Remittances: Eastern Europe and the Former for Newest EU Members Soviet Union, launched on January 16 in Brussels. Migration within and from the transition economies of Europe and Output growth gained further pace across the region in Central Asia has been large and will likely continue to increase 2006 but is likely to moderate slightly in 2007, according to the as declining birthrates across much of the region will lead to an World Bank's latest EU8+2 Regular Economic Report, increased demand for a young labor force. To ensure that launched on January 25. The report indicates that real GDP migration benefits both sending and receiving countries and growth strengthened in the region, not least in Poland, Slovakia, the migrants themselves, countries could more closely coordi- and Romania, as dynamics improved further in the second half nate their policies so that the supply of migrant labor can meet of the year, but the Baltic States, Slovenia, and Bulgaria also demand through legal channels that respect the rights of grew at an even stronger rate than the year before. This migrants and are politically and socially acceptable to migrant- occurred in spite of currency appreciation against the euro, and receiving countries. There are no readymade solutions for especially the dollar, in several countries, as well as some mod- effective migration policy, yet one possible route might be to eration in growth in the euro area. Meanwhile, oil prices combine short-term migration with incentives for return or cir- declined significantly from September and further in early cular migration. Circular migration could allow migrants to 2007. The report predicts that growth is likely to ease in most spend short periods of time abroad without creating new of the new member states in 2007 as growth slows in the euro amounts of permanent migration. For more information, visit: area and output moves closer to potential. The previous EU8 http://www.worldbank.org/eca/migration Quarterly Economic Report series has been extended to include new EU member states Bulgaria and Romania in addition to the eight Central European and Baltic countries that joined the EU New Bank Strategy for Russia Adapts in 2004. The new EU 8+2 Regular Economic Report will con- Partnership to Russia's Realities tinue to monitor the macroeconomic and reform developments The World Bank's Board of Executive Directors endorsed in the EU 8+2 countries and provide both an up-to-date sum- on December 14, 2006 a new three-year Country Partnership mary of economic developments in the region and in-depth Strategy for Russia that marks a shift towards new ways of analyses of key current economic policy issues. For more infor- cooperation focused on knowledge sharing, increased techni- mation, visit: http://www.worldbank.org/eca/eu10rer cal advice and financing to the country's regions, and new fee- for-service arrangements for investment and policy advice, combined with continued strong levels of financing for the Newly Independent Montenegro Joins private sector and limited financing for assistance in manag- World Bank Group ing priority public investments. The Strategy builds on The Republic of Montenegro became the newest member Russia's recent accomplishments yet recognizes that impor- of the World Bank Group on January 18 when Finance tant development challenges remain. Russia has experienced Minister Igor Luksic signed the Articles of Agreement of the five years of strong economic growth and poverty reduction. International Bank for Reconstruction and Development Furthermore, sharp increases in the prices of Russia's main (IBRD). Montenegro is the 185th member of the IBRD. In export commodities, particularly oil and gas, have filled the addition to becoming a member of IBRD, Montenegro joined coffers of the federal government, and provided for the accu- the International Development Association (IDA), the mulation of over US$300 billion in monetary and fiscal International Finance Corporation (IFC), and the Multilateral reserves. Russia's global role as a G8 member, emerging Investment Guarantee Agency (MIGA). The World Bank donor, and provider of world energy has expanded notably. Group is developing a new four-year strategy for Montenegro, Accordingly, recent years have witnessed the beginning of a The World Bank & CEFIR 26 · Agenda major transition in the nature of cooperation between the all Bank operations in the country lending, analytical work World Bank Group and the Russian government. For more and technical assistance. The new partnership strategy covers information, visit: http://www.worldbank.org/ru a four-year period from 2007 to 2010, and envisages a lend- ing program of US$1.26 billion, both in IDA and IBRD Georgia Investment Climate Forum financing, as well as an active IFC program. Knowledge shar- Features Successful Reforms ing, analytical and advisory activities and development part- nerships will reinforce these investments. The strategy sup- Georgian Prime Minister Mr. Zurab Nogaideli highlighted ports the main objective of the government's long-term pro- Georgia's reforms since the Rose Revolution, including in the gram to reduce poverty and achieve the Millennium business environment, education, and energy, at a symposium Development Goals by fostering economic diversification and on December 13, 2006, hosted by the World Bank Group and growth, particularly in non-oil sectors, while maintaining the U.S. Department of Commerce's BISNIS unit. Georgia has macroeconomic stability; improving health, education and made great strides in several sectors, including its investment infrastructure services; strengthening social protection; and climate, as evidenced by the World Bank/International Finance addressing important environmental issues and implementa- Corporation's annual Doing Business survey, as well as the tion of the climate change agenda. For more information, visit: 2005 joint World Bank/EBRD's Business Environment and http://www.worldbank.org/az Enterprise Performance Survey. In addition to the investment climate, the Prime Minister touched upon energy and infra- structure improvements, education reforms including objective Roma Decade Event Moves Forward with testing methods in university entrance exams, targeted poverty Plans for Monitoring benefits for the poorest, new liberal labor regulations enacted A new initiative by Roma organizations to monitor imple- in May 2006, and reduced tariff rates-with the bulk of imports mentation of National Decade Action Plans, as well as a com- now carrying no duties. The symposium concluded with the mitment to provide cross-country support using an interna- signing of a Credit Agreement for the First East-West Highway tional trust fund, were endorsed at the Decade of Roma Improvement Project for US$19 million in the presence of the Inclusion's November 16-17, 2006 meeting of its International Prime Minister and Vice-President Shigeo Katsu. For more Steering Committee in Sofia, Bulgaria. "DecadeWatch," a information, visit http://www.worldbank.org/ge means to monitor the Decade countries' execution of their National Decade Action Plans, is being prepared in the nine Moldova's Donors Meeting Evaluates Decade countries by Roma researchers, supported by the Open Funding Priorities Society Institute and the World Bank. Cross-country support through sharing of best practices will be enabled by the Decade The government of Moldova and its international partners Trust Fund, to which Decade countries and international convened on December 12, 2006, in Brussels for a Consultative organizations such as the OSI have committed funds. The Group Meeting. The objectives were twofold: (a) to assess Decade of Roma Inclusion is the first international effort progress and to confirm commitment in the implementation of designed to improve the lives of Roma and include them in the the country's reform program and development agenda, as set societies in which they live. The Decade is an initiative of nine out in the EU-Moldova European Neighborhood Policy Action countries in collaboration with donors, including the OSI and Plan and the Moldova Economic Growth and Poverty the World Bank. It sets forth national targets in four priority Reduction Strategy Program, and (b) to provide indications of areas: education, housing, employment, and health. For more additional external financing in response to recent external information, visit: http://www.romadecade.org shocks that have opened a short-term financing gap, putting Moldova's poverty reduction and growth objectives in ques- tion. The meeting was jointly hosted by the European Kosovo Lignite Power Commission and the World Bank. The Government delegation Kosovo moved one step closer to developing the potential of was led by Prime Minister Vasile Tarlev. All key development its large energy reserves after the World Bank's Board of partners were represented. Partners and government agreed Executive Directors approved on October 12, 2006, an US$8.5 that the further economic and social development of Moldova million grant aimed at supporting development in Kosovo, as well as the close relationship between the country and the which suffers from high unemployment and chronic electricity international community hinges on a continued strong will in cuts. The Lignite Power Technical Assistance Project grant from Moldova to implement political, social and economic reforms. the World Bank's International Development Association comes For more information, visit: http://www.worldbank.org/md in response to a request by the Kosovo Provisional Institutions of Self-Government, which asked the World Bank, the European Commission, and several bilateral donors to support Kosovo's Bank Strategy for Azerbaijan Supports development agenda by facilitating investments in key sectors of Continued Reforms the economy with high growth potential.The grant will help the The World Bank's Board of Executive Directors discussed PISG to put in place the right regulations and laws to allow pri- a new Country Partnership Strategy for Azerbaijan on vate investors to start bidding in 2007, begin construction in December 7, 2006. The Country Partnership Strategy is a cen- 2008, and complete the power plant in 2012. For more infor- tral document defining the World Bank Group's support to mation, visit: http://www.worldbank.org/kosovo Azerbaijan to meet the country's key development challenges, including reducing poverty, modernizing infrastructure, and This section has been provided courtesy of Merrell Tuck and improving governance and social services. The strategy guides Christina Lakatos, Europe and Central Asia External Affairs. BT Beyond Transition · October December 2006 New Books and Working Papers · 27 World Bank Publications The authors present a new database of minimum distance road routes connecting 138 cities in 27 countries across Information and orders: the World Bank, P.O. Box 960, Europe and Central Asia. The data show that improved road Herndon, VA 20172, U.S.; tel.: +1-703-661-1580, fax.: 703- network quality is robustly associated with higher intraregion- 661-1501, email: books@worldbank.org, www.worldbank.org al trade flows. Gravity model simulations suggest that an /publications, or visit the World Bank InfoShop at 701 18th ambitious but feasible road upgrade could increase trade by Street, N.W., Washington, D.C., tel.: +1-202-458-5454. 50% over baseline, exceeding the expected gains from tariff reductions or trade facilitation programs of comparable scope. Alan Winters, Shahid Yusuf, eds. Cross-country spillovers due to overland transit are important: Dancing with Giants: China, India, and the Global total intraregional trade could be increased by 30% by upgrad- Economy ing roads in just three countries -- Albania, Hungary, and Published January 2007 by Institute of Policy Studies Romania. (Singapore) ISBN: 0-8213-6749-8 ISBN-13: 978-0-8213-6749-0 Assar Lindbeck SKU: 16749 An Essay on Economic Reforms and Social Change in China WPS4057, November 2006 China is now the world's fourth largest economy and grow- ing very fast. India's economic salience is also on the rise. The author applies a systems-oriented "holistic" approach Together these two countries will profoundly influence the to China's radical economic reforms during the past quarter of pace and nature of global economic change. Drawing upon the a century. When looking at the economic consequences of latest research, this volume analyzes the influences on the rapid China's change of economic system, he deals with both the future development of these two countries and examines how impressive growth performance and its economic costs. The their growth is likely to impinge upon other countries. It con- author also studies the consequences of the economic reforms siders international trade, industrialization, foreign investment on the previous social arrangements in the country, which were and capital flows, and the implications of their broadening tied to individual work units-agriculture communes, collective environmental footprints. It also discusses how the two coun- firms, and state-owned enterprises. He continues with the tries have tackled poverty, inequality and governance issues social development during the reform period, reflecting a com- and whether progress in these areas will be a key to rapid and plex mix of social advances, mainly in terms of poverty reduc- stable growth. tion, and regresses for large population groups in terms of income security and human services, such as education and, in Global Economic Prospects 2007: Managing the Next particular, healthcare. Next, the author discusses China's Wave of Globalization future policy options in the social field, whereby he draws Published December 2006 heavily on relevant experiences in industrial countries over the ISBN: 0-8213-6727-7; ISBN-13: 978-0-8213-6727-8 years. SKU: 16727 Shubham Chaudhuri, Martin Ravallion Over the next 25 years developing countries will move to Partially Awakened Giants: Uneven Growth in China and center stage in the global economy. Global Economic Prospects India 2007 analyzes the opportunities -- and stresses -- this will cre- WPS4069, November 2006 ate. While rich and poor countries alike stand to benefit, the integration process will make more acute stresses already Drawing on analyses based on existing household survey apparent today -- in the areas of income inequality, labor mar- data and aggregate data from official sources, the authors kets, and the environment. Rapid technological progress, trade show that growth in China and India has been uneven at the in goods and services, and integration of financial markets cre- geographical, sectoral, and household level, and that this has ate the opportunity for faster long-term growth. However, meant uneven progress against poverty, less poverty reduction, some regions, notably Africa, are at risk of being left behind. and an increase in income inequality. The discussion is struc- The coming globalization will also see intensified stresses on tured around the idea that there are both "good" and "bad" the "global commons". Addressing global warming, preserving inequalities in terms of what they imply for both equity and marine fisheries, and containing infectious diseases will require long-term growth and development. The development paths of effective multilateral collaboration to ensure that economic both China and India have been influenced by, and have gen- growth and poverty reduction proceed without causing erated, both types of inequalities. The authors argue that poli- irreparable harm to future generations. cies are needed that preserve the good inequalities, such as con- tinued incentives for innovation and investment, but reduce the scope for bad ones, notably through investments in human World Bank Working Papers capital and rural infrastructure that help the poor connect to http://econ.worldbank.org markets. Ben Shepherd, John S. Wilson Thomas Rutherford, David Tarr Road Infrastructure in Europe and Central Asia: Does Regional Impacts of Russia's Accession to the World Trade Network Quality Affect Trade? Organization WPS4104, December 2006 WPS4015, September 2006 The World Bank & CEFIR 28 · New Books and Working Papers The authors develop a computable general equilibrium large variation in institutional development, ranging from full model of the regions of Russia to assess the impact of accession enforcement of property rights in the Northwest to communist to the WTO on the regions of Russia. They estimate that the regimes in the Southeast. They find an unambiguous relation- average gain in welfare as a percentage of consumption for the ship between strong and sustained institutional development, whole country will stand at 7.8% (or 4.3% of consumption); represented by investment risk rating, and technological they estimate that three regions will gain considerably more: change. Southwest (11.2%), St. Petersburg (10.6%) and the Far East (9.7%). The principal explanation for the differences across Ruta Aidis and Yuko Adachi regions is the ability of the regions to benefit from a reduction Russia: Firm Entry and Survival in barriers against foreign direct investment. The three regions WP 67, September 2006 with the largest welfare gains are clearly the regions with the estimated largest shares of multinational investment. Thus, Why are there so few new firms in Russia? This paper pro- regions may gain more from WTO accession if they can suc- vides further insights into the specific Russian business land- ceed in creating a good investment climate. scape and how it impacts the low level of new firm entry. As this paper indicates, internationally comparative data does not Lire Ersado provide many clues since in terms of purely formal constraints, Rural Vulnerability in Serbia Russia fairs comparatively well. However, a deeper analysis WPS4010, September 2006 uncovers the informal impediments associated with the lack of rule of law, inconsistent enforcement of regulations, regional The author analyzes the nature, extent, and causes of rural autonomy and pervasive corruption. These informal con- vulnerability in Serbia using panel national household data straints form impediments not only for new firm creation but from the 2002 and Serbia Living Standard Surveys from 2003. also for firm survival and firm exit. Since not all industries are He measures rural vulnerability as a function of determinants affected in the same way, this paper includes a comparison of poverty and the exposure to risk. While low levels of con- between a new and traditional industrial sector: software sumption (poverty) explain about 70% of vulnerability, the development and the textile industry. author finds that risk and uncertainty account for the remain- ing 30%. Households and regions with a greater share of their livelihood depending on agricultural activities are more at risk of vulnerability than those with a significantly higher share of Other Publications income coming from nonagricultural sources. Rural vulnera- bility to poverty and risk is also strongly associated with asset Transition Report 2006: Finance in Transition ownership and access to markets. EBRD Report, ISBN: 1 898802 28 9, ISSN: 1356-3424, www.ebrd.org UCL School of Slavonic and East The special theme of the report is devoted to an analysis of the financial sector in transition countries. Making use of sev- European Studies (SSEES) eral unique data sources, the report looks at how financial sys- http://www.ssees.ac.uk/economic.htm tems have been restructured over the past 15 years, their impact on the economy and private sector development and the Kate Bishop introduction of new financial services. The main conclusions of Knowledge Based Entrepreneurship in the Czech Republic the report include: and Hungary: Results from Four Case Studies · Progress in reform has been maintained WP 71, December 2006 · Strong growth continued throughout the region in 2006 This paper describes the growth and development process · Financial markets have grown in size, complexity and of four firms in the two countries: an environmental services stability firm, an IT services firm, a data recovery firm, and a biophar- · Public and private equity markets have emerged but maceutical firm. The objectives of the case studies are to illus- bank-based systems dominate trate experiences of knowledge based entrepreneurship within · Continuing scope for improving the quality of institu- a transition environment in terms of their different growth and tions and the operating environments development paths using the ecological conceptual framework. · Potentially large growth dividend from further finan- cial deepening Brigitte Granville and Carol S. Leonard Do Institutions Matter for Technological Change in Transi- Janos Kollo tion Economies? The Case of Russia's 89 Regions and Republics Workplace Literacy Requirements and Unskilled WP 70, December 2006 Employment in East-Central and Western Europe Institute of Economics Hungarian Academy of Sciences, The authors explore the impact of institutions on techno- BWP -- 2006/7, December 2006, http://www.econ.core.hu logical change in a transition economy. They use regional panel data for Russia's 89 regions and republics during the period of Primary degree holders have extraordinarily low employ- recovery and growth from 1998 to 2004 to show the impact of ment rates in Central and East European (CEE) countries. The Beyond Transition · October December 2006 · 29 paper looks at the possible role for skills mismatch in explain- book discusses these questions in the context of new empirical ing this failure. The analysis is based on data from the IALS, an evidence, including a critical examination of the main themes international skills survey conducted in 1994-98. The results in the economics of transition literature. suggest that selection to skill-intensive jobs was more severely biased against the less-educated in the CEEs (Czech Republic, Hungary, Poland and Slovenia) than in the rest of Europe Tomasz Mickiewicz (Ed.) including countries hit by high unskilled unemployment at the Corporate Governance and Finance in Poland and Russia time of the survey (UK, Ireland, Finland). The paper concludes First published in 2006 by Palgrave Macmillan, Houndmills, that the skill deficiencies of workers with primary and appren- Basingstoke, Hampshire RG21 6XS; ISBN 0-230-00795-3 tice-based vocational qualifications largely contribute to the unskilled unemployment problem in the CEEs more than they This book is a compendium of articles written by do in mature European market economies. researchers from different countries who are working exten- sively in the field of corporate governance and finance. The Zuzana Fungacova and Jan Hanousek book provides a comparative analysis of the emerging corpo- A Castle Built on Sand: The Effects of Mass Privatization rate control structures in the transition economies and details on Stock Market Creation in Transition Economies characteristics of corporate governance and finance in the two BOFIT Discussion Papers No 14 / 2006, http://www.bof.fi largest transition economies: Russia and Poland. It explores what kind of ownership structures are emerging in these two This paper deals with the relationship between mass priva- countries and to what degree they are path-dependent and con- tization and stock market development in transition ditional on the initial choice of privatization methods -- fast economies. The link is investigated empirically using a panel of ownership transfer through the mass privatization program data that includes most transition countries. Our results con- and loans-for-equity scheme in Russia, or a more "organic" firm the hypothesis that mass privatization exerted a negative growth of the new private sector in Poland. It examines the influence on stock market functioning over the short and directions of the subsequent, post-privatization, secondary medium term. Further, it appears that stock markets in coun- ownership flows in both countries and the impact of the gov- tries with mass privatization were initially perceived as mere ernment on corporations, implied both by the residual share- byproducts of the privatization process. Such stock markets holding and by its regulatory and administrative actions. What typically not only failed in their core mission of providing cap- makes the comparison between Russia and Poland most inter- ital for the corporate sector, but generated negative investor esting is the fact that while the economic systems in the two sentiment and did little to catalyze economic growth. countries were very similar to start with, their corporate struc- tures evolved in different directions. This book aims to enhance understanding why. Book Reviews David Lane and Martin Myant (Eds.) Tomasz Mickiewicz Varieties of Capitalism in Post-Communist Countries Economic Transition in Central Europe and the First published in 2007 by Palgrave Macmillan, Houndmills, Commonwealth of Independent States Basingstoke, Hampshire RG21 6XS, ISBN 1-4039-9641-5 First published 2005 by Palgrave Macmillan, Houndmills, Basingstoke, Hampshire RG21 6XS; ISBN 1-4039-4162-9 Former communist countries in Eastern and Central Europe, the CIS and Asia have, over recent years, transformed Fifteen years ago, 27 countries in Europe and Central Asia or reformed their economies. This book addresses the question embarked on their economic transition path. For some, the of how far they have changed into capitalist systems and, if so, outcome was a considerable success. Several others are still what kind of capitalism they have developed, or are develop- struggling to shed the inheritance of the past and to correct ing. This collection of papers has been the subject of two con- more recent policy mistakes. The author starts his book by dis- ferences of participants -- held at the University of Cambridge cussing the old regime and the reasons for the slowdown and in 2004 and at the University of Paisley in 2005. This book sets ultimate demise of the command economy system. Then he the experience of transition countries against the "varieties of introduces the main components of the reform program and capitalism" paradigm, as developed by authors using an discusses the interdependence between stabilization, liberaliza- approach based on institutional economics. By avoiding the tion and the "hardening" of the budget constraint. The author assumption that all transformations must lead to one kind of then turns to the process of privatization, which was the key market economy, it provides a framework for comparing the aspect of institutional change and concludes the first part of courses and current outcomes of very different transformation the book with a discussion of unemployment and why labor processes. However, it becomes clear that the rather different market outcomes were so different in the various transition heritages of the communist and even pre-communist pasts economies. In the second part the author asks possibly the mean there is no close fit with the ideal types used for analyz- most fundamental questions: why some countries went ing and comparing mature market economies. The work there- through a ten-year long recession, while others emerged from fore has implications for the more general discussion of differ- the post-communist recessions after a mere two years? Why ences between kinds of capitalism, pointing to the need to was fiscal performance so different? Was democracy a factor place more emphasis on change and development and hence on that facilitated reforms or, rather, slowed them down? The political and social interests. BT The World Bank & CEFIR 30 · Conference Diary CEPR/Swedish Development Economics Network other policy makers. To request an invitation visit: Conference on Development Economics http://www.ebrd.org/new/am/index.htm. March 9, 2007, Stockholm, Sweden General inquiries: Office of the Secretary General, Tel.: +44 (0) 20 7338 6625, Fax: +44 (0) 20 73387320, E-mail: aminvi- CEPR Development Economics Program and Swedish tations@ebrd.com. Development Economics Network are organizing a joint con- ference on development economics. The conference is funded CEU Summer University 2007 by the Swedish International Development Agency. The goal of July 4-27, 2007, Budapest, Hungary the conference is to provide a forum for work in development economics and to bring together economists in the field from In 2007 CEU Summer University will offer 15 courses. The across Europe and researchers from outside the region. The program encourages applications from advanced Ph.D. stu- participants will present both theoretical and empirical papers dents, postdoctoral fellows, junior faculty, researchers and pro- in any area of development economics broadly defined. fessionals. The CEU Summer University program welcomes More information: http://www.cepr.org/Meets/diary/list- course proposals both from CEU and non-CEU faculty from all year.asp?year=2007 over the world. The next submission deadline for new courses in 2008 is May 17, 2007. Fifth International CASE Conference "Winds of Inquiries should be directed to Eva Gedeon, Executive Change: The Impact of Globalization on Europe and Asia" Director of SUN. E-mail: gedeone@ceu.hu, Tel: +36-1 327- March 23-24, 2007, Kiev, Ukraine 3069, http://www.sun.ceu.hu/2General/proposal.php With high growth rates in China, South East Asia, India and Annual Conference of the European Association of Central Asia the economic center of gravity of Eurasia is quick- Labor Economists ly shifting to the East. The same is true as regards to popula- September 20-22, 2007, Oslo, Norway tion. At the same time most of Europe faces serious growth barriers in the long term. The conference will look at the caus- The aim of the conference is to facilitate the exchange of es and consequences of this major shift in economic power and research ideas and results across a range of fields in Labor political potential and consider options faced by policymakers Economics. The conference will be organized by the in various parts of Europe and Asia. Discussion will include Department of Economics, University of Oslo, Institute for themes such as differences in growth performance, the nature Social Research, and the Frisch Centre. The electronic submis- of global imbalances, changing directions of goods, capital and sion form for paper contributions will close after the deadline aid flows, the challenges of migration and emerging regional of March 1, 2007. The registration site will be open from May integration models. The conference will contain six thematic 1, 2007. Papers accepted for presentation can be submitted sessions and three keynote addresses. It will gather 200-250 again for publication in the annual conference volume of the participants from more than 30 countries. journal "Labor Economics". To register, go to: http://aries.case.com.pl/register/. To read More information: http://www.eale.nl/Conference2007/ conference papers, go to: http://www.case.com.pl/strona--ID- Callforpapers.htm winds_papers,nlang-710.html Business and Marketing Strategies for Central and 2007 Spring Meeting of the World Bank Group and the Eastern Europe International Monetary Fund November 29-December 1, 2007, Vienna, Austria April 14-15, 2007, Washington, D.C. 15th Annual conference is organized by DePaul University Around these meetings, the IMF and World Bank organize Chicago and Vienna University of Economics and Business a number of forums to facilitate the interaction of governments Administration. and IMF-Bank staff with NGOs, journalists, and the private Empirical research, case studies or discussion sessions are sector. Every effort is made to ensure that the annual meetings sought which address such topics as comparative analysis of provide an effective forum for explaining to the public-directly conditions of market entry in CEE countries, market entry and through the media-the tasks, objectives, and outcomes of through exports versus market entry via capital investment, the work of the IMF and the World Bank. At least 10,000 peo- acquisitions as opposed to joint ventures in CEE, marketing ple attend, including about 3,500 members of delegations from strategies to reach CEE consumers, marketing-mix-decisions for the member countries of the IMF and the World Bank, rough- markets in CEE, financial strategies for opening CEE markets, ly 1,000 representatives of the media, and more than 5,000 vis- case studies of CEE experiences by western firms. Abstracts of itors and special guests drawn primarily from private business, the papers, should be received by September 15, 2007. The final the banking community and NGOs. papers must be ready by November 1, 2007. More information: http://web.worldbank.org/ More information: Prof. Dr. Reiner Springer, Vienna University of Economics and Business Administration, Phone: EBRD 2007 Annual Meeting and Business Forum +43-1-313 36/4377, FAX: +43-1-313 36/751, E-mail: May 20-21, 2007, Kazan, Russia Reiner.Springer@wu-wien.ac.at or Prof. Dr. Petr Chadraba, Department of Marketing, College of Commerce, DePaul This annual event brings together investors and corporate University, USA, Phone: (312) 362-6889, FAX: (312) 362- executives, regional entrepreneurs, government officials and 5647, E-mail: pchadrab@depaul.edu BT Beyond Transition · October December 2006 Bibliography · 31 "Uzbekistan -- on the slow lane of the new Silk Roads?" by "Evaluating Pension System Design in the Kyrgyz Republic" by Martin Raiser and Dennis De Tray Roman Mogilevsky Asian Development Bank. 2005. "Report on the Economic The World Bank. 2003. "Kyrgyz Republic. Enhancing Pro- Impact of Central-South Asian Road Corridors", prepared for the poor Growth." Report No. 24638-KG. Transport Committee of CAREC. The World Bank. 2004. "Kyrgyz Republic. Public Expenditure Broadman, Harry (ed.). 2005. "From Disintegration to Review. Volumes I and II." Report No. 28123-KG. Reintegration. Eastern Europe and the Former Soviet Union in Williamson, J.B., Williams, M. 2003. "The notional defined International Trade". The World Bank, Washington DC. contribution model: an assessment of the strengths and limitations Byrd, William and Martin Raiser (with Alex Kitain and Anton of a new approach to the provision of old age security". Center for Dobronogov). 2006. "Prospects for Economic Development and Retirement Research at Boston College. Cooperation in the Wider Central Asia Region", World Bank Working Papers No. 75, April 2006, forthcoming. "Promoting Innovation through Technoparks in Kazakhstan" Grafe, Clemens, Martin Raiser, and Toshiaki Sakatsume. 2006. by Slavo Radosevic and Marat Myrzakhmet "Beyond the Border: Reconsidering Regional Trade in Central Asia". EBRD Working Paper No. 95. Arnold E.M., Bell M., Bessant J., Brimble P. 2000. "Enhancing Ojala, Lauri. 2005. "Review of Inter-Regional Trade and Policy and Institutional Support for Industrial Technology Transport Facilitation in Europe and Central Asia Region, South Development of Thailand". The Overall Policy Framework and Asia Region and East Asia and Pacific Region". Mimeographed. the Development of the Industrial Innovation System, December, Raballand, Gael, Antoine Kunth, and Richard Auty. 2005. Technopolis, Brighton "Central Asia's Transport Cost Burden and Its Impact on Trade". Storey DJ and Tether BS. 1998. "Public Policy measures to sup- Economic Systems 29(1): 6-31. port new technology based firms in the EU", Research Policy 26, World Bank. 2004. "Central Asia: Regional Electricity Export 1037-57 Potential Study." Washington, DC: World Bank. Sarfraz M.A. 1996. "Assessing value -added contributions of university technology business incubators to tenant firms", "The Impact of Kazakhstan Accession to the World Trade Research Policy 25: 325-35. Organization" by Jesper Jensen and David Tarr Dyker A D. 2005. "Technological Change, Network Building and Dynamic Competitiveness in the Engineering Industry in Jensen, Jesper, Thomas Rutherford and David Tarr (forthcom- Kazakhstan", Post-Communist Economies, 17(4): 485-501. ing). "The Impact of Liberalizing Barriers to Foreign Direct US Department of Commerce 2003. "A National Investment in Services: The Case of Russian Accession to the Benchmarking Analysis of Technology Business Incubator World Trade Organization." Review of Development Economics. Performance and Practices", Washington, DC: US Department of Working paper version available at: http://econ.worldbank.org/ Commerce. external/default/main?pagePK=64165259&theSitePK=46 9372&piPK=64165421&menuPK=64166093&entityID=000012 "Enhancing south-south trade in goods" by Przemyslaw 009_20040909153130 Kowalski and Ben Shepherd Rutherford, Thomas F. and David Tarr. 2006. "Poverty Effects of Russia's WTO Accession: modeling "real households" and Agariello, O. 2004. "Why pay attention to South-South endogenous productivity effects. Available as World Bank Working trade?" Background Paper, International Trade Centre, ITC, Paper No. 3473 at www.worldbank.org/trade/russia-wto. Montreux, September. Cernat, L. 2003. "Assessing South-South Regional "The Effect of Armed Conflict on Schooling in Tajikistan" by Integration: Same Issues, Many Metrics", "Policy Issues in Olga Shemyakina International Trade and Commodities Study" Series No. 21, UNCTAD, Geneva. Falkingham, Jane. 2000. "Women and gender relations in Coulibaly, S. and L. Fontagne. 2003. "South-South Trade: Tajikistan". [Manila]: Asian Development Bank Programs Dept. Geography Matters", Centre d'Etudes Prospectives et East and Office of Environment and Social Development. d'Informations Internationales (CEPII), Paris, August. Law of the Republic of Tajikistan. "About Education." Edition Department of Foreign Affairs and Trade (DFAT). 2004. 12/28/2005. N 143, Ministry of Justice of Republic of Tajikistan "South-South Trade: Winning from Liberalisation", Economic UNICEF Innocenti Research Center. 2005. "TransMonee Analytical Unit, Australian Government, June. 2005: Statistical Tables". UNICEF Regional Office for Central OECD. 2006. "Trading Up: Economic Perspectives on and Eastern Europe and the Commonwealth of Independent Development Issues in the Multilateral Trading System", Douglas States, http://www.crin.org/docs/TransMonee%20%20Statistical Lippoldt (ed.), Paris. %20Tables.pdf UNCTAD. 2004. "New Geography of International Trade: Uppsala Universitet. Department of Peace and Conflict South-South Cooperation in an Increasingly Interdependent Research, 2006. Conflict Database: Tajikistan, World", TD/404, United Nations Conference on Trade and http://www.pcr.uu.se/database/conflictSummary.php?bcID=205 Development, Geneva, June. The World Bank & CEFIR 32 · Order Form Beyond Transition The Beyond Transition Newsletter is FREE of charge. Please fill in the order form below if you would like to receive a complementary subscrip- tion to the English version. Please indicate if you would like to receive an Managing Editor: Ksenia Yudaeva electronic version (a .pdf file) or a printed copy. 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