Milica Uvalic

Foreign Direct Investment into Transition Economies: Are the Balkans Different?

The paper explores the determination of foreign direct investment (FDI) into the Balkan transition economies – Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Macedonia, Montenegro, Romania and Serbia. Detailed FDI inflows to Southeast Europe (SEE) are analysed to determine the main differences in the volume, timing and sectoral structure of FDI within the region and in comparison to the Central East European countries. A gravity model to all transition economies during 1990-2011 is then estimated to assess whether the factors driving FDI to the Western Balkans are different. They are found to be so; even when size of their economy, distance, institutional quality and prospects of EU membership are taken into account, Western Balkans countries receive less FDI. These issues are of high policy relevance for the Balkan economies and ought to contribute to the current debate on the ‘new growth model’.

FDI into Transition Economies

The article explores the determination of foreign direct investment (FDI) into the Balkan transition economies – Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Macedonia, Montenegro, Romania and Serbia. Detailed FDI inflows to Southeast Europe are analysed to determine the main differences in the volume, timing and sectoral structure of FDI within the region and in comparison to the Central East European countries. A gravity model for all transition economies during 1990–2011 is then estimated to assess whether the factors driving FDI to the Western Balkans are different. They are found to be so; even when the size of their economies, distance from the source economies, institutional quality and prospects of EU membership are taken into account, Western Balkans countries receive less FDI than other transition countries. These issues are of policy relevance for the Balkan economies and ought to contribute to the current debate on the ‘new growth model’.

Regional Cooperation and the Enlargement of the European Union: Lessons Learned?

The article evaluates and attempts to draw some lessons from the recent initiatives aimed at stimulating regional cooperation among transition economies in Northern, Central, and South-Eastern Europe. Although these initiatives varied significantly in their scope, objectives, and domain of activity, the author highlights the common elements and discusses both their major achievements and greatest weaknesses. The author then relates these initiatives to the recent theoretical debate on regionalism, the main conclusions in the empirical literature, and the most important policy issues concerning current integration processes and eu enlargement. The role of subregional economic cooperation among transition economies is examined within the context of the problems posed by the variable speed integration policies of the European Union. The general conclusion is that the overall experience of regional cooperation among European transition economies has, on balance, been positive, though clear limitations and many unresolved questions remain. (For acronyms see page 323.)

Regional co‐operation in Southeast Europe

Regional co‐operation in Southeast Europe (SEE) is of even greater importance today, in the aftermath of the Kosovo conflict, than a few years ago. The various initiatives to stimulate regional co‐operation in SEE in the 1990s have not yet led to any significant results. On the contrary, the lack of regional cooperation has seriously undermined peace and stability in SEE, contributing to several armed conflicts in the region, including the most recent war in Kosovo between March and June 1999. Not surprisingly, the international communitys latest initiative, the Stability Pact for Southeast Europe, adopted 10 June 1999 in Cologne, again relies on regional co‐operation as one of the most important instruments for bringing lasting peace and stability to this part of Europe. This paper discusses some aspects, primarily economic, of regional co‐operation in SEE. For the purposes of this paper, SEE will include seven transition countries: Albania, Bosnia and Herzegovina, Bulgaria, Croatia, the Former Yugoslav Republic of Macedonia (FYROM), Romania and the Federal Republic of Yugoslavia (FRY), although Slovenia will also occasionally be considered. The paper first examines the question of economic integration in SEE by looking at past and present trade links among SEE countries. It then considers various initiatives aimed at stimulating regional co‐operation, including EU policies toward the SEE region. Finally, the paper discusses the main reasons why closer economic ties among SEE countries should actively be encouraged, followed by some concluding remarks.

Transition in Southeast Europe: Understanding economic development and institutional change

The paper analyses the 20-year experience with transition in the SEE countries in a comparative framework, illustrating how these countries encountered difficulties in its implementation, despite having some of the best starting conditions in 1989 to impl

Economic Transition in Southeast Europe

The article examines some of the main features of the transition to a market economy in Southeast Europe (SEE). Since the early 1990s, a number of politically determined processes have had very negative economic implications for the whole SEE region, since many important economic reforms have been substantially delayed. Although the overall prospects have improved over the past few years, the SEE economies are still facing a number of internal constraints on growth and development, which in some countries are aggravated by externally-imposed reform agendas, aid-dependency and inappropriate international assistance policies. The article analyses macroeconomic performance of individual SEE countries in the 1990s, progress with institutional reforms, their development prospects, the role of FDI and European Union policies. Today, a key challenge for these countries is to carry forward the transition to a market economy and create sound conditions for self-sustainable economic growth, while at the same time preparing for future EU membership.

Federal Republic of Yugoslavia (FRY)

The Federal Republic of Yugoslavia (FRY) is today the country in Southeast Europe (SEE) that is undoubtedly in the worst overall situation. Throughout the 1990s, delays in fundamental economic and political reforms and numerous accompanying problems have positioned it among the countries that lagged behind most in the transition to a market economy and multiparty democracy. Moreover, the Kosovo conflict has had disastrous consequences for FRYs economy. In addition to the direct, immediate costs due to loss of human life and physical damage to industrial capacity and the transportation, energy and communications infrastructure, the conflict will have a number of indirect longer-term effects, including substantial loss of gross domestic product (GDP) over the next decade. Although FRY has been the country in the region most heavily affected by the NATO bombardments, for political reasons it has not been included, for over a year, in the Stability Pact for Southeast Europe, adopted 10 June 1999. It is only recently, after the elections held on 24 September 2000, which brought victory to the democratic opposition alliance DOS (Democratic Opposition of Serbia) and Vojislav Kostunica as the new president of FRY, that political circumstances in the country are radically changing, in this way also determining a turnaround in international strategies. At the meeting in Bucharest on 26 October 2000, FRY was officially admitted to the Stability Pact, while initiatives are in course that should allow the re-admission of FRY into major international organizations (e.g. the United Nations, the World Bank, the International Monetary Fund). This article discusses the main characteristics of the Yugoslav economy today, concentrating on Serbia as the largest part of the Yugoslav economy and not considering Kosovo since it has de facto been taken over by UNMIK (UN Interim Administration Mission in Kosovo). The paper examines the countrys initial conditions in 1989, external shocks during the 1990s, macro-economic performance over the past decade and progress made in economic reforms, followed by some concluding remarks.

International Advice and Institutional (Mis)configuration: The Case of Serbia1

International aid and assistance to the Western Balkans, which began more than two decades ago after the disintegration of sfr Yugoslavia, has been severely criticised on various grounds by academics, politicians, and domestic elites. One of the main points of criticism has been heavy foreign interference into domestic affairs, which deprives local policy-makers of ‘policy ownership.’ This paper uses four paradigmatic examples of reform in Serbia – in the areas of labor market, income taxation, pensions system, and privatization – to show that, despite the widely accepted view of the dominant role of international actors in the creation of the reform agenda, there was significant room for local policy-makers in Serbia to exercise full ownership over the ongoing reforms. What policy-makers really needed was expertise, a clear vision of the desired reforms, the determination to defend their agenda, and technical skills to implement it. The significantly different outcomes of the four areas of reform analyzed in this paper, despite involving virtually the same actors of international intervention, seem to illustrate well our hypothesis that the failure of some important sectoral reforms in Serbia during the post-2000 period was the result of the policy-makers’ own weaknesses, rather than the result of external conditionality.

Political Economy of Local Level Public Sector Employment: A Case Study of Serbia

This paper investigates the wider political economy implications of unpopular cuts in the number of public sector employees in local self–governments in Serbia, which took place in the first half of 2010. Since the onset of the global economic crisis, Serbia has faced serious fiscal pressure at all government levels, and reduction of public sector expenditure was identified as one of the most important adjustment mechanisms to the crisis, in accordance with the Stand–by Arrangement concluded with the International Monetary Fund. As this process was unfolding concurrently with efforts towards greater fiscal decentralization, the paper tries to contribute to an understanding of how local revenues are being allocated in times of crisis. The paper casts light on one of the most important issues of decentralization – transparency of local public expenditure – and the political economy of public sector employment in local self-governments in a country where employment is so scarce that the ability to employ gives local politicians considerable power over their electorate. We also present some findings from interviews with local authorities in six Serbian municipalities regarding cuts in public employment. The paper concludes that local public sector reform in Serbia (and probably elsewhere) needs to be more comprehensive and more carefully designed if it is to redirect resources away from current consumption towards sustainable local economic development.

Why Development Patterns Differ: The Czech and Serbian Cases Compared

This chapter compares the models of transition (systemic change) and development in two key countries over the 1989–2009 period, the Czech Republic (formerly part of Czechoslovakia), representing Central-East Europe (CEE), and Serbia (formerly part of socialist Yugoslavia), representing South-East Europe (SEE).1 A comparative analysis of the Czech and Serbian experiences is of interest considering their similar points of departure in 1989, but divergent patterns of systemic change, dissimilar policy dynamics, and very different outcomes. The CEE and SEE regions represent two ‘polar’ models, with the Czech Republic and Serbia being often viewed as the most ‘extreme’ cases within each. The Czech Republic is frequently cited as one of the most successful cases of transition economies and one of the fastest reformers, while Serbia has delayed many transition-related economic reforms and for years has been considered a laggard. Comparing the two countries hence brings out the distinct features of the policies and outcomes in the two regions.