Transition andMacro-AdjustmentDision * Pohcy Research Department * TheWorld Bank Russia's Health Reform: A Complicated Operation T he large, centrally planned demand, and involvement of foreign Symptoms of Sickness health sector of the.former firmsinthetransformationofthehealth Soviet Union provided cheap sector. Somepositiveresultshave been *Realwages,welfarebenefits, percapita medicines and free medical services to achieved. Thehealthpolicyprocesshas income, and consumptionhave dropped all. But the low-priority status of con- become more democratized, the man- since 1991, resulting in a larger share of sumption and health-related activities in agement more decentralized, patients the population living in poverty. Diets that shortage economy resulted in poor have been given greater rights to choose have worsened, and adults have contin- sanitation, severeenvironmentalpollu- doctors and medication, and various uedtodrinkandsmokeheavily. Cuts in tion,malfinctioningmedicalinstitutions, medical facilities have become more social investmenthave accelerated the and abackward pharmaceutical indus- efficient. Onthe whole, though, the Rus- physical deterioration of public facili- try. sian health sector have notimproved in ties, housing, neighborhoods, and water the transition period (see table). and sewage systems. In late 1991, with the fragmentation of the unified Soviethealth sector, Russia " * * inheritedadisproportionatelylargeshare Whats nside... of health resources. Initially it main- ofhealth,estate-uracedInationally hath mThe St. Petersburg Fix U.S. study places Russian agrarian re- tainedthestate-financednationalhealth Encouraging local health reform in Rus- form in historic perspective. (page 8) service and continued reforms ofinsti- sia: incentives started to take hold. tutions and procedures thatwerestarted (page 3) Research Update: Corporate Gover- during perestroika. For example, poly- nance in Central Europe (page 10). clinics and hospitals have offeredmore Why arePolish State Firms Restructur- services for fees to individual patients ing? The Czech Republic: A Triple B and economic organizations. Local ex- Brian Pinto, replying to Martin Schrenk, (page 11) periments were incorporating the analyzes the major findings of his study. conceptof"managedcompetition" inSt (page 4) Petersburg and Ekaterinbourg (see box CentralEuropeanAccesstoECMarkets: WorldBank/lMFAgenda (page 14) on page 3). An UnorthodoxView Are the ramparts of "fortress Europe" Milestones of Transition (page 16) Overtime amore radicalhealth reform more porous than believed? (page 6) programhas been developed. It calls for New Books and Working Papers emphasis on preventive medicine, re- QuotationoftheMonth: "AnyoneWho (page 19) emphasis on pntherolevofhen stativeinfinanc FarmedMorethan30Hectares,orHad ducion nthe role ofmthe state infranc- MorethanThree Cows,wasVilified as an Bibliography of Selected Articles ing and managing health care, intro- EnemyoftheState" (page24) duction of health insurance, opening public health institutions to the private The World Bank/PRDTM Health indicators in Russia, 1990-93; for speculative reasons. An increasing ',rFirt half ' he of medicines is sold outside the 1-. ,.- . 990 1991 1992 of 1993. , formal pharmacy system by vendors S 1bdetexT l,000); u - -, - 0 $ ' S 13.4 12.1 1'0.7 9.1 '- ' vwith no training. The informal private s oncuosis (cs per 100,000) .70.4 . . 74.2 8. 82.0 markets have unregulated prices and Pfiphleria (cases per 100,000), 0.8 1.3 3.1 4.6 quality standards. Many outdated for- Measles (cases. per 100,000)3. - 12.4 13.8 15.2 30.0 eignmedicines are dumped in Russia, per 100,000) 264.5 266.0 267.5 269.2 somepoorlyorganizedhumani- lTubClacers (fiist diagnosesx r100,000) 34.2. 34.0 37.7 45.3 Syphiis (first diagnoses per 100,000) 4.5 5.1 8.9 21.5 tananind. IXid beds (per 10,000) 0'' ' ' ' ' ' : <0'' '137.5 '134.7Y 127.7 121.3 'Medicalindustryenterpriseshaveex- tDoctors (pe 10,000) 46.9' 44.3 '42.0 40.0 periencedseveredisruptionsofsupplies, |P~t moity(per 10,000 ive births)17.4 17.8 18 . 18 while their existing capital stock is al- ~Maternal mortality (per 100,000 births)47.4 52.4 50.8 52.0 llIe moEtality 40-44 yeas (deals per 1,000 in age grnup) 7.6 .8.0 8.8 10.9 mostcompletelyobsolete. Thedemand judeath rat (deah peM 1,000) 11.2 11.4 12.0 14.4 for their products has been depressed ife expecncy (Years at birth) . .. : :69.2 69.0 68.6 67.2 bythedeclinesinbothrealincomesand f4urce.7The author medical establishment budgets. Medi- cal industry output has fallen and met 'Insufficientfundsha;vebeenallocated a doctor has hovered just -above the only 15 to 25 percent of pharmacy re- ito ecological programs, and therisk of poverty line) and relative to those of quirementsin 1992. 41pajor health catastrophes has grown other professional groups. In Septem- *Foreign trade in the health sector is due to poor maintenance in industhal +er 1993 medical and pharmacy work- now carried out on a hard currency erterprises andnuclearpowerstations. ers aymouncedplans foranationalstrike, basis. The value of Russian imports of Haniiy standalr:ds have fallen in the Only minor repairs have been made to medicines rose by 6 percent in 1992 to ftod industry and infood distnbutionvia medical facilities ormachinerythatwere US$1 .04 billion, but this was only half Onregulatedprivatemarkets. inmiserableshapebeforethetransition. the amount called for by a presidential tMostillnessrateshaveincreased. There Polyclinicsandhospitalshaveencoun- decree. In the first quarter of 1993, -is a high incidence among infants of ptereddifficultiesinobtainingailtypesof imports of medicines dropped by 85 ckets and infectious diseases, such as inputs. Medicinebudgetshavebeenheld percentto US$73 nillion (one-halftheir eases and whooping cough: Occur- down, drug.prices have risen sub-__ rnces ofsalmonellosish havensen, and stantially, domestic output has liy-the first half of 1993, the rate of fallen, and'i ports ofpharmaceue- 1dlphtheria-was.nore than three times ticas have been cut back. 0 -Nc higherthanithadbeenin 1991. Cholera *The quantities of services pro- ias appeared in some southern cities Of vided have fallen in many cases, tRussia. The incidence of tuberculosis becauseofshortages ofmedicines, is 34 percent higerithan in i991, of anesthetics, andinstruments. Qual- 'syphis four times as high. Cancer and ity of care has deteriorated, with . ascularilln,essesh,avecontinuedt,cimb. doctorsforcedtolimitdiagnostics, ' Alcohol poisoning, attempted suicides, reuse disposable equipment, and . , * traffic accidents, and criminalwound- forgoprescribingnecessarydrugs. . . ,i ' bghavealsosoared. Theinfantmortal- However, standards have been 'tyraterosetoanestimated 18.8 deaths maintained in the subsystem that . 'UV', per l,OOolivebirthsbymnid993 andthe serves the Russian elite and in the tnaternal mortality rate remained at a private,hard4currencyfacilitiesthat - .igh52 deaths per 100,000 births, de- treat foreigners. spite he decline in the birth rate. Life *State pharmacies have been par- . .\6 'expectancy in Russia hasAfallen from tially commercialized. However, ' :' 69.2years in 1990to an estimated 67.2 most are effectively bankrupt be- -__ yearsin1993. - causethestatehasimposedtighter #llocations to the medical system has cines than on their costs. The 11ieen reduced. These amounted to 6.2 privatization ofpharmacies began -; ' fercent ofthe total budgetand alow2 3 in 1993 butinadisorganizedman - I ¢percentofGP in 1 992.t Medical wages zner and accompanied by concerns From the Croat cartoonistSreckoPuntaric (Felix) jPave fallen in real terms (the wage for that acquisitions would be made September, 1993 i -. 1 E Transition valueinthefirstquarterofl991). Bythe The St. Petersburg Fix half-year mark, these purchases amounted to US$195r million. Only Among the regional experiences in health -Programs were launched to reorgani: US$30 million of these were financed care administration decentralization in outpatient hospital care and to, develop, Russia, St. Petersburgs is one of the most new type of healtht care professional--tIf by 1993 allocations of hard currency, promising. e general practitioner -- with the balance reflecting deliveries ; A networkofpublic:insurance eompanies according to 1992 contracts. Foreign St. Petersburg (population S million) has wassetup. (TheSt.1Petersburgmunicipar7 aidprogramshaveprovidedmedicalsup- 100 hospitals, with 57,000 beds, 400poly- ity established its ow public insurancQ plies, buttheirvolumehasbeeninsuffi- clinics (providing outpatient service and, company.) Citizens ofSt. Petersburg were cient to compensate for the collapse. of if necessary, referring patients to hospi- assigned to insurers according ,to, thei, domesticmedicalproductionandtrade. tals), as many as 29 research institutions, place of residence. A universal insuranceq and 4 training schools. The health care coverage system has.now.been introduced sector employs. a work force of 150, 000, Insurers, are;to be funded on a capitatio Challenges and Prospects including 30,000 doctors and 50,000 basis, adjusted to the clients'sex -and agje1, nurses. In 1991, for every 1 00 citizens, 18 Start-up money will be provided to instWY The difficulties of the Russian health hadhospitalstays. Patients'length-of-stay ers--based on S percent of the allocated sector are in part a product ofthe tran- in hospitals average seventeen days. The capitation budget-after agreement ha! sitionprocessitself,-whichhasboth of- occupancyrate.forSt.;PetersburgJihospi- been -reached with the providers on 1h4 fered reform opportwnties and created tal beds is.about 75 percent. ,serviwes they will reimburse. .-Insurance additional problems (see table above). Mco,mpanies will share.a common compute. Establishing anew national health sec- In launched a center. torsaajramiisraivunerakng health reform program that envisaged dtownsizing hospital capacity to 40,000 As for the arrangements between providi even inthe best ofcircumstances. Mos- ;bed, while making better use of the re- ers and insurance -com'panies; money thdi cow wants to completely and simulta- maining facilities. Excess hospitals were is allocated to insurance' comp&hies is ts neouslytransforrmseveral components, to be sold or rented, and the proceeds re- be separated out to refund either outpad introducing medical insurance, investedin the health sector By the end of tient care or hospital cqre. Each poly, privatization, andpromotionofmarket- 1992 five hospitals had been closed down clinic will manage a specific amount ingrelations. Butpresenteconomic and without major diffyculties. . ' monteyo cover its own expenses;, and .f il do nofavorsuch n prearatin for a maor reoi'm, St. r~fer:s patients to ho.ipitals,- it will, reimn- political preconditions donotfavorsuchbnrepthe hosalajor'opreete a drastic overhaul. Central control over Petersburg - Municipal Health Commit- , mined ruble quotas, based on treatmnt. the regions' health care finance, sani- tee launched the following initiatives:, cost. Probablkisavingsi'iil be'sharezd by tary conditions, and the quality stan- A detailed list has been -drawn up outlin- the polyclinic (80 percent) and the lnsurg dards of medical facilities and pharma- ing which health services remain free-and ance company (20 percent). cies has weakened. Conflicts within which servicespatients must payfor--least . Russia (for example, in Chechen- in part. Hospitals are to bepaidaccordingto med4 Ing.shetiya and in.neigho A. high-powered committee has surveyed cal discipline, .on aper patient basis., PayA Azersetly)and g bo aijan the condition of the citys hbspitili and ment using a patient classification syste* (Georgia, Armenia, Azerbaijan, polyclinics. The committee sfundings were ~-is envisageddowni-the-road. Hospitaldoc- Tajikistan)haveplacedfurtherpressure thattwenty-fourfacilitiesshould.shutdo-wn itors, in order to earn more refunds, will b4 on the national medical system. immediately. - 200 got the green light to motivatedto in&eise.Patienttuin&veranj carry on for one to three years;- and 170 to put a stop to chronic underutilization 0 Future developments in health will be were granted six months to improve their beds. -.Hospital departments will have t determinedbybothgeneralfactors, such standards to an "acceptable level"- or incentives .of salary increases and neX as economic success, and specific fac- eseeqimn,ppotnatoherpdu. tors,econom suchcasbetsers, andpecfi-fa -A cotmputerized health management in- tivity ' i torssimprovedsani- formation system was set up to register tation and environmental conditions, and hospital admissions and discharges'and Antonio F. Campo's reduced consumption of alcohol and to provide information for financial and Europe and Central Asia Country Depart, tobacco. The effectiveness of medical evaluation purposes. ment IV. The World Bank care needs to be enhanced, by abudget- '- financed contribution supplemented by vampthepharmaceutical productionof the survey, "Health Care Crisis ' a newinsurance-basedhealth caresys- technology Eastern Europe and the FSU; "' Rq`, tem. Medical research institutes, phar- Christopher M Davis dio Free Europe/Radio Liberty R-R maceutical factories, and pharmacies (The author is Lecturer in Russia d search Report, vol.: 2, no. 40, Octo need to be radically reformed. Foreign East European Political Economy at ber, 8 1993..) , . aid couldhelp byfinancing temporarily Oxford University. He contributed -to the import of medicines and help re- Voluine 4, Number 7 The World Bank/PRDTM Brian Pinto Explains Why Polish State Firms Are Restructuring Reply to Martin Schrenk n reviewing my work with Viewed from the perspective ofevents government must give consistent sig- Marek Belka and Stefan in 1990 and 1991, these findings are nals on the absence ofbailout and must Krajewski on Polish state enter- remarkable. In 1990 the surprise was eliminatesubsidies. Suchatoughstance prise behavior, Martin Schrenk (Transi- that state companies did not go bank- is not easy when most ofthe taxes come tion, vol. 4, no. 6, July-August 1993, p. rupt. On the contrary, hard currency from state-owned enterprises. 13) describes the-"common wisdom" exports-mostlyfromthestate sector- *The role of banks is crucial in the allo- on state-owned enterprises. In trying to grew a huge 40 percent and companies cation ofresources. In a situationwhere explain why Polish state-owned enter- appeared to thrive. Any triumph was state-owned banks are used to doing prises defiedthesenegative stereotypes, short-lived, however. When Council for business with state-owned companies, Mr. Schrenk focuses on one aspect of Mutual Economic Assistance (CMEA) the supervision and control of banks is the puzzle: the motivations ofthe man- trading arrangements collapsed in 1991, perhaps more important instance than agers. While extremely important, this companies lost hidden subsidies on en- positive incentives. is only part of the story. ergy and raw materials as well as the *Managerscareabouttheirreputations advantage of a captive Soviet market. and workers care aboutjob security. It The Bottom Line Corporate profits and taxes fell, leaving is not that easy to decapitalize compa- abighole in the fiscal accounts. Poland nies: if managers run the company into If our study has a bottom line, it is that seemed setfor ahigh-inflation collapse. the ground, their own future is injeop- hardbudgets and competitioncanstimu- Both the response capacity of state- ardy; and there is not that much pur- late state-owned enterprises to restruc- owned enterprises and the sustainability chasing power around to engage in a ture even before privatization. And the ofthe reforms were in question. But by fire sale of assets. incentive effects of anticipated the end ofl 991 arevivalinmanufactur- *Arestructuringphase isallbutessen- privatization are very important. ing was underway. This coincided with tial prior to privatization. Genuine pri- the shift to a crawling peg in late 1991 vate investors will be reluctant to touch We found (Brian Pinto, Marek Belka, thatfollowedthefirstdevaluationofthe state companies burdened with excess and, Stefan Krajewski, "Transforming zloty almost seventeen months afterthe labor, social assets, and outmoded prod- State Enterprises in Poland: Evidence big bang in May 1991. ucts. And there is no reason to expect on Adjustment by Manufacturing that the government will be better able Firms,"Brookings Papers onEconomic Today, the private sectoris thriving and to enforce hard budgets once compa- Activity, 1993,pp. 213-70)thatfourfac- accounts for half of GDP. And there is nies are privatized (as some have ar- tors were crucial in explainingthe unan- concrete evidence of deep adjustmrent gued). ticipated positive response of state- among many state firms, with solid suc- owned enterprises: cess stories emerging. Whilethe private Mr. Schrenk raises aquestion aboutthe * The government's "no bailout" signal sector success is perhaps not surprising, nonrandom sample on which this study has been consistent and unambiguous the positive response of the state firms is based. Nonrandom does not mean right from the start, in spite of occa- has certainly surprised most people. At "irrelevant" forthe following reasons: sional political instability. a minimum, this finding contradicts the *Thefirms selected arewell-knowncom- *Rapid trade liberalization (by increas- expectation in 1990 that managers and panies with considerable geographical ing competition) and the elimination of workers would squander assets and then and product diversity, that is, incorporat- subsidies (by signaling hard budgets) ask the government for a fiscally ruin- ing a high degree of stratification. forced companies to focus on efficiency ous bailout, precipitatinghyperinflation. *The firms were selected based on their andprofits. 1989 sales and their fortunes have * Changed bank behavior as a result of Lessons from Poland evolved in random fashion since. This is improved supervision and governance the crucial point of the study. can we in late 1991 diminished soft loans and Thelessons arenumerous andsobering: take a set of firms with similar initial began directingresources to betterfinrs. Adjustmenttakes time. conditions in terms ofbehavior, bargain- Managers care abouttheir reputations Credibility ofhard budgets is acquired ing power, and size and see whether and expect to gain when privatization neither instantly nor permanently The their response to the econonic program occurs. 4 September, 1993 Transition andthe outcome are different? In short, stand against shock therapy ("Polish abletoinitiallyescapetheshocktherapy do we see evidence of adjustment? Lessons for Hopeful Russians," AIG byrecourseto bank loans fromtheir old 'It is true that the sample is representa- World Markets Advisory, September banker friends. The evidence from our tive only oflarge firms; butthese are the 1993). Our study suggests that some studyshowsthatittookagoodtwenty- crucial ones. If these firms respond, aspects ofshock are unavoidable. If the one months before bank loans to weak one can assume with some confidence goal is to make a clean break with the companies started shrinking. And even that smaller, more flexible firms have past, transparent signals and a drastic then our suspicion is that this was due also responded. approach arenecessary. This applies all more to introducing stricter supervision *There is much evidence that the state the more to Poland, where the 1990 and direct control of nine commercial sector as a whole has been responsive reforms were preceded byfifteenyears banks in late 1991 (including banning to thegovernment's economic program; of various failed reforms. If the goal is lendingto some 2,000 companies, public the conclusiors ofthis study are in line to change behavior, then the incentives and private) than to improved banking with general findings on the economy. must change. The only way to do this is expertise. (These banks spun off from (See lanHume and Brian Pinto, "Preju- to liberalize prices, eliminate subsidies, Poland's Central Bank.) After all, Po- dice and Fact in Poland's Industrial introducecompetition(whichinthefirst land did not really have a banking sys- Transformation," Finance andDevel- instance is easierto create in the form of tem until 1989. The dilemmaisthatthose opment, (June 1993) pp. 18-20. imports than from new domestic en- relatively new financial institutions are Finally, it is worth stressing-that while trants), and signal that there will be no relied onto figure out early inthe game the sample is representative of the be- bailout. This is what Mr. Balcerowicz whichcompaniesaremerelyrollingover havior oflarge companies, we deliber- was ableto achieve, and ourstudy shows loans and interest and which are bor- ately excluded thegiants such as URSUS that the resulting hard budgets and im- rowing for genuine expansion. andthebiggestshipyardsandsteelmills, port competition led to increased effi- which in our view represent special, ciencyand substantial adjustmentinspite There is also the vexing issue of output politically sensitive cases that are very ofthe delay in privatizing. loss. While itis true that the fall in indus- limited in number. trial output wildly exceeded all predic- Decent Proposals tionsatthestartofthe,reformsin 1990, Recently, the debate on shock therapy this- is no proof that a more gradual versus gradualism has resurfaced ButAlan Walters is quiterightin arguing approach would have led to a smaller with.Sir Alan Walters taking a strong that large state-owned enterprises were decline or lower welfare losses in present value terms. This is -a point on which l '~1 s Vt 'V r7 P there is no clear-cut answer; but the t 4 ot them 4r r lGiE0 bulkoftheevidencefromthe enterprise *Az ~~~i $2x, U5R ' , [ f study shows that consistency in apply- *~~~ ~ ~ ~ in~~g ahard budget standard helped es- WU IIr;- j iii ^; 1t .roiq tablish the credibility of Poland's re- .,fomis.This,intur, yielded improvement in manufacturing output, efficiency, and resource allocation. Ultimately, the debate overthe methods and speed ofprivatization-over shock therapyversus gradualism-is notgomg toberesolvedinWashingtonorLondon, or even Boston. It helps to take a stand <.4 jl - |tt ; -|on these complex issues now, when .-ti't l 4 bwf~ JUempirical evidence is accumulating, to visit state companies in various stages oftransformation and learn straightfrom themwhichpoliciesworkandwhichdo not. That is what we, have tried to do. Brian Pinto is Lead Economist in the International Finance Corporation s Reprtinted by permission of Trtibune Media Services Economics Department. Volume 4,Number 7 5 The World Bank/PRDTM Central EuoenAccess to EC Markets: :Hard or Easy? An Unorthodox-View O ver theD past year: the Euro- bringtheir economicregulatoryframe- countries,astheirmanufactured goods peanCommunity(EQC)hasbeen work in line with the EC. trade freely with the EC members. If under severe criticism for de- theprovisions oftheEuropeanAssocia- nying market access to exports from True, changes in access to EC markets tion Agreements, includingconcessions thetransitioneconomies ofCentral and can be assessed againsttheideal offree granted by the Copenhagen sumnnit Eastern Europe (the:CzechRepublic, tradeorfullECmemnbership.Ipreferto (June 1993), are fullyimplemented, the Slovalda,Hgary,Poland,Bulgaria,and look atitin the context ofEC preferen- Visegrad Group (Czech Republic, Romania). Some are accusingth-e EC tialtradinga eets.Thesecanbe Slovakia, Hungary, and Poland) will of erecting a new iron curtain around visualized as a pyramid, with the as- reachthetop ofthepyramid in 1997 and theformerSovietBlockcountries,pre- cending levels occupied by groups of BulgariaandRomaniawill do soayear ventinga timely recovery ofthe transi- cntriesenjoying the more privileged later. tioneconomies. - access to EC markets. Certainly, the pyramid only considers tariffi and says Duty-free Treat In my view, however,'the picture is not nothing aboutnontariffbamriers. so bleak. Tariff and nontarffmeasures Sincethe collapse ofcentralplanning in did notprevent the CEE countries from Secrets of the Pyramid 1990, the EC has'granted General Sys- expandingtheirpresenceinEC markets tem of Preferences (GSP) status to (with the exception of Romania, for do- Untilthelate 1980s, most-favored-nation HungaiyandPoland, and from 1991 did mestic reasons) between 19S8 and 1992. (MFN) tariff rates applied to the ex- the same for Bulgaria and the former Tshe CEE countries havebeen graned 'po.rts of the Comecon countries-the Czechoslovakia. (Romaniahad already significant preferential treatment over same tariffs;imposed on goods of non- beengranted limitedGSP statusin 1972.) most other countries. There is no evi- European OECD countries. The CEE Due to GSP preferences, average tariff dence of discrimnnation despitethe eco- countries,helpedbythetradeliberaliza- rates on imports from these countries nomic slump irithe EC. The potential tion commitments of Brussels, fast dropped to 1-2 percent from 6-7 per- threatoftheECresortingto"newpro- emerged from the bottom of the pyra- cent. As a result, the CEE countries tectionism"isreal,however. Thisthreat mid-whremosttrade restrictions ap- have gained better access to EC mar- will decline ifthe CEE countries' com- ply-and have already almost reached kets than have non-European OECD petitivepositionshifts&fomlow-sldllto the "free trader" top. At present, the countries, which are subject.to signifi- skilled labor-intensiveproducts and if peak position is occupied by the Euro- cantly higher MFN rates. The CEE Central European associate members pean Free Trade Association (EFTA) countries have better access than most E-Cimports of mdustrial products (in millions ofUSS) EC imports of agrieultiiral products (in millions ofTUSS) 8000 1400 7000 1200 Hun g ar 6000 5000 - , i; -i- ' 8: _ 000 5000~ Poland / 6800: Poland 3000 2000 F. Czec oaa 400 F. Czechoslovakia _ 1000 Hungary 20 - - ¶ I ari -: ' BIga-T An R.- Um- - - - 1988 1989 1990 1991 1992 1988 1989 1990 1991 1992 6 September, 1993 ; * S .>j iZ ~ a .>- - e - - - .~ w -Transition developing countries, including mem- this share (60 per'cent) will be ten per- Sensitive Barriers bers of the Lome Convention and that centage points smaller. Because of its of the states of the FSU. Moving away huge share oftextiles exports, Romania The trade-restructuring effect of the from GSP zero rates to duty-free ac- starts from a lower level of duty-free EuropeanConm,unity'snontariffbam- cess, however, does benefit the CEE exports and its duty-free share remains ers is never easy to estimate. The CEE exporters, includingpotential investors, around 20 percentage points lowerthan countries. will be--affected- differently, as GSP eligibility is subject to annual BuIgaria'sshareuntil 1998. aecording to their. export baskets and review. The concessions also i exportperformance Agricultural prod- include aucts are protected-bytheCommon Ag- gradual reduction. of tariff rate's fora For the Visegrad Group, the shareaof ncultus-al Policy (CAP), coal and stl duty-ree roduts i indstril ~ holearray of product as well -as an- duty-freeproductsinindustrialiports nual increases in tariff quotas or ceil producQtsareTregulated bythe European into the EC was around 60 percent dur- ianu Coal 'e '' y (ECK), and ing the first year of the Association uctswillbesubjectto quotasaslon as textile-and-cloth,ingproductsaresubject Agreements (9 92), and will rise to.70 - t rnent(MVA)is to -the MFA-. Imports. of capital-inten- perentin 995(inters other 192 theMulfi-FibreArrangeen(F)s epdut percent in 1995 (in terms .ofeir 1992 in force -duties on these i_tems willtbe sive.products (with the exception of export baskets) and to 100 percent in reducedsand abolished withi-nfiveyears steel), raw materials, and energy are 1997. ForBulgaria,theduty-freeshare 'osemeur v relatively free of any constraints. inthefirstyear(1993)is aboutthesame g-veexpo.rsom asfortheVisegraidGroupwhilein 1996 thetCEtousntiesa xta dg 1 990, nontariff barrer coverage ra- compet-tor. 'tios forPoland and Romarda-that is, the The Other Side of the Fortress : share of their EC exports affected by nontariffbarriers-were 25 percent, for Despite its generous-sounding Interim tage of low-wage areas -that allow for an Bulgaria,and (the former) Czechoslo- Agreements, the European Community is efficient distribution of labor. Secon, in indulging in a veritable feast of order to compete effectively Western Eu- 3pere, d g 3 antidumping duties and "voluntary" ex- rope has to restructure those parts of ifts percent. These ratios were higher than port restraint agreements that give rise to industry that sufferfrom overcapacityand those. of the EFTA countries (5 to .12 serious doubts about the ECs commit- inefficiency -,a process'that is being prod- percent), around the same as of Japan ment to free trade. - ded- along by competitiowfrom Eastern (36 percent),andsignificantlylowerthan Europe. -,- c , , . -- of many Mediterranean countries A spate of studies by economists in recent -- (Turkey's ratio, forexample, has been months [asserts] that EC andEFTA coun- Countries can choose, to protect those sec- tries have far more to gain than lose from tors that are damaged by competitionn prntM. opening up their markets. Lastyear, both Central and Eastern Europe - in particu- the EC and EFTA had trade surpluses of lar agriculture, steel, textiles, and chemi- There are -reasons to believe -tha,t $.19 billion with the region.- Given the cals-atthecostoflosingrevenues:andjobs nontariffbarriers are both less restrain- still relatively low levels of trade, some in the competitive, export-oriented sec- ing and affect a -lower share. of CEE3 economists estimate that Western exports tors. Or they can give priority to exporters countiyexports-especiallythoseorigi- could increase by more than 10 percent by opening upmarketsandexposingweak natinginthe Vsegradcountries-than annually for well over a decade before domestic producers to potentially damag- originally thought. Between 1988 and stabilizing at a normal level. Apart from ing competition. Choosing the first strat- 1992Bul ' ' d it ha'iEC adding considerably to GDP growth, this egy goes directly against the kind of re- garimnrease its share E kind of export expansion will mean sig- structuring advice that the West has been imports of nontariff barrier-covered nificantjob creation in the West. But it will doling out liberally in Eastern Europe. products by 74 percent, (the former) only besustainable ifWestern Europe buys - Czechoslovakia by 81 percent, Hun- more from Eastern Europe. Otherwise, a At present, the [protection of] sensitive gary by 24 percent, and Poland by 56 combination of continued stagnation, sectors appears to be gaining ground. percent. Romania's share in such EC balance ofpayments difficulties, andpres- [WestEuropean producers] are complain- imports fell by 3 percent, as compared sure for counterprotectionism -- all three ing loudly that it's unfair to expect them to its a by ercent acompal very visible this year as the region s ex- compete with Eastern Europe, where low t p ports have faltered-willput an end to the labor, social security, and environmental imports. Such significant gais in the boom. costs, subsidized energy and transport share-ofECimportsofsensitiveprod- prices, and soft budget constraints make ucts suggest that the ramparts of "for- Less directly free trade with Central 'and for super-cheap exports. tress Europe" are porous. Eastern Europe is an important factor in Europe's bid to regain- global competi- From Delia Meth-Cohn's article"Fortress tivenessvis-a-visNAFTA andtheFarEast. Mentality," published in the monthly Busi- The aggregate Central European ex- This is so in two respects. First, both Of nessCo,ntralEurope,Vienna,Octoberl993. ports ofsensitive products fell backthis these global competitors have the advan- year, mainly as a result of the disap- Volume 4, Number 7 7 The World Bank/PRDTM pointing performance in agricultural products (including steel, cement, alu- onemayexpectthatexportcomposition exports. The contraction in agricultural minum, andthe like) due to cheap Soviet will keep movingtoward skilled, labor- output was a major factor-affecting the oil and the distortions of central plan- intensive engineering products subject Visegrad Group's total exports. Poland, rng. The CEE countries have com- tolowerlevelsofprotection. Moreover, atraditionalnetexporterofagricultural parative advantage in labor-intensive theAssociationAgreementsprovide an products to the EC, ran a deficit in its products (their textile and clothing ex- institutional environmentforthe devel- agricultural trade with the EC, while portsincreasedrecently)and insophis- opmentofintraindustrytrade,:whichis Hungarian agricultural exports to the ticated engineering goods (given the likely to become another engine of EC decreased by 30 percent in the first relativelyhigh quality and extent ofsci- growth for CEE country- exports being seven months of this year. [In fact, entific education). Machinery and trans- much less vulnerable to protectionist Hungary's western trade, overall, portequipment, electrotechnical prod- measures thantraditional exports. dropped by the same percentage during ucts, and durable consumer goods are thesameperiod.] also playing an increasing role in the Bartlomiej Kaminski VisegrAd Group's exports to the EC. International Economics Department Although the CEE countries are not The World Bank, and University of amply endowed with energyresources, Since wage differentials between the Maryland, College Park alargepartoftheirtraditional exports to CEE countries and the EC are particu- EC markets has been energy-intensive larly substantial for high-skilled labor, Quotation of the Month: "Anyone Who Farmed More than Thirty Hectares, or Had More than Three Cows, Was Vilified As an Enemy of the State" U.S. Study Places Russian Agrarian Reform in Historic Perspective The following contains excerpts from by the large landlords to those with too in the size of existing households. a recent study .by R L. Prosterman little land or to the many families who and others, 'Agrarian, Reform in earned aconsiderable part oftheirliving The Stolypin reforms soughtto replace Russia, " published at the Rural De- as short-term lessees or agricultural such communal forms of land owner- velopmentInstitute, Seattle (more de- wage laborers. Rather, the program at- ship and control with individual land tails on page 20). tempted to reform the obshchina (vil- ownership byenabling thepeasantryto lage communes), in which most peas- claim title to their scattered strips, con- overwheemingly agraria. MajRor pro- ants lived and obtained their primary solidate, them, and separate from the overwhelmingly agrariaii. Major pro- livelihood. Underthe obshchinasystem commune. Initially,to bewithdrawnland cesses of rural change began with the ultimate ownership of a village's agri- hadtobein aconsolidatedparcel,though emancipation of the serfs in 1861. emancipatensionofrhee serfstheirlong culturallandsresidedimthevillagecom- this requirement was later relayed, for Though ostensiblyfreedfromtheir long munityitself Theconmunitydetermined admninistrative and political reasons, to bondage to the squire, the former serfs-.- v bonagtothsr, te fthe agnrcultural calendar and made de- allow withdrawal ofthe separate strips found themselves burdened with heavr cisions about the crops to be grown. once peasant farmers had been given redemption payments for the land they s . redemptond pynsorse there land t hey Typically, each family had nrghts forthe full and permanent ownership nghts. By received and, worse ,were limited--n m use of a series of individual strips of 1915 abouthalfofall the householdsin favor of the large landowners --to about land, which were scattered to ensure Russia had become private owners of one-fifth of the land they had formerly '. .. access to land of various qualities. The former obshchinalands. Landtitles had cVultvated, peasant family was given the right to beengivento6millionto7millionhouse- farmthe strips of land without payment holds, but only 1.2 millionhad beenable RP,derrption payments were abolished* ' Redemption paymntsereand, in aminority of cases, to pass them to consolidate theirholdings into sepa- as a result of the peasant upheaval of downtotheirheirs; buttheydidnothave rate farms. The obshchinas fought this 1905. ShortlyafterwardPrimeMinister' .. 1905. Shtlyafinteroardd a imMinted re the right to sell, buy, or mortgage the process, oftenobstructingconsolidation. land. Moreover, in many if not most form program. This was not a classic obshchinas, parcels were periodically The Stolypin reforms were terminated "land reformn" inthe sense of redistrizb- reallocated in accordance with the for- when World War I broke out in 1914. uting the large quantity of land still held mation ofnew households and changes Althoughthe reforms had givengreater 8 September, 1993 Transition control ofthe land resources for.merly ofthe population, that is to say, ofthe Beakdm of Rusia!s totai agcid. taxi in 1993 inside the obshchinas to millions of peasants, to the revolution were the peasants,theholdingsofthelargeland- war and the land," and on those is- Sawte TheWaIISbeeJaena owners living outside the obshchinas, sues the two decrees submitted to the had not been touched by the reform Congress of Soviets on October 26, On the eve of the war, a third or more 1917 proved decisive. The first de- ofRussia's population still consisted of creewithdrewRussiafromWorldWar agricultural families who were sub- I. The second decree, the Land De- / Fh= stantiallydeperndenton cultivatinglands cree, nationalized all agricultural land 38 solely, orinadditiontotheirlands within without compensation to the former obshchinaboundaries--thatbelonged owners. What was to become of the to. lar ndholders. These families land thus appropriated was spelled worked such lands either as paid work- out in terms that are particularly poi- ers or, increasingly, as short-term ten- gnant in light of later events: ants paying high rents. "The lands shall be distributed among The war had serious consequences thosewho use them on the principle of PeFFan* Fan (163 rabiona) for the peasantry. It drained money equalization, that is, on the basis, as EmHdwldFm 03.6nam s) away from secondary uses, such as determined by local conditions, ofthe agricultural credit, and destroyed the normallabororfoodunits.Norestrictions ran asmall shop, orhired anylaborwas emergingmarketforcommercialcrops. shall be placed on the mode of land ten- vilified as a "kulak" and enemy ofthe Stocks of cereals accumulated with- ure, the separate village-communes de- state. out any prospect of being moved to termining whether it shall be household, market--as railroad rolling stock was individual, communal, or cooperativeten- In 1929 forced cobectivization began in preempted for the war effort, and it ure." was largely peasants who were con- reasons prompted collectivization, in- scripted. Inthis sweeping land-to-the-tillerreform, cludingthe desire for state control over there was no elaborate central-govern- the distribution and use ofagricultural After thefirst revolution and the over- ment apparatus. The peasants were, in productionandconcemforpolit{calcon- throw of Tsar Nicholas TI in February effect, urged to step in and administerthe trol ofthe peasantry. Production plum- 1917, the Social Democrats and decree themselves. Their rights to the meted, and Stalin briefly discontinued Kerensky temporized on the issue of seizedlands ofthelargelandowners, and thedecollectivizationpolicyin 1930, at what was to be done with the vast the legality of their actions, thereafter whichtime most ofthe farmers leftthe holdings oflarge landowners. Although dependedentirelyonaBolshevikvictory, newcollectives. Stalinhoweverreas- there were peasant disorders in many for which they provided the bulk of the serted the policy and completed the parts of Russia, with peasants seizing rank-and-file manpower in the 1917-21 collectivization process over the next landandlivestock, the,provisional gov- civil war, several years. A simultaneous drive to ernment recommended that the peas- Fr-m 1917 to 1929 the peasants contin- "liquidate the kulaks as a class" drove ants come to a "voluntary agreement tFrom 1f917 to 1929 thed peasarlts contin- millions of peasants from the landthey with the landlords," and threatened ued to farmtheir idividual parcels (ex- farmed. The disruption of production them with penalties for "taking the cept forthose on a small number of ex- was awesome. Farmers slaughtered law into their own hands." Although perimentalcoU1ectives),nowamplifiedby much of the country's livestock, pre- the Kerensky .governmnent exhorted the lands seized fromthe large landown- ferringto butcherthemfor meat rather the peasants to await whatever action ers. Duringtheearlyandmid-1920s, un- thangivethemtothe collectives. More on land reform the Constituention der Lenin's "New Economic Policy," than5millionpeoplediedintheresult- the peasants could even function in a semblymighttake, the Bolsheviks (at ing famine. The memory of the twin that point subsidiary actors) adopted a market, and were generally free of gov- processes of "dekulakization" and resolutioninApril 1917 approvingforc- ement crop seizures. The Soviet state, forced collectivization six decades ago iblelandseizuresfromthelandlordsby however, continuedto owntheland, asit is still alive among the Russian rural the peasants. had since the Land Decree. In the late population - 1 920s, Stalin began a campaign against After the October coup the Bolshe- the kulaks (richpeasants). Asolderpeas- Sovietcollectivizedfarmingprovedto viks moved quickly. As E. H. Carr put ants recalled from the time of their fa- be a black hole down which vast re- it; "hetwoburningissueswhichwould thers, anyonewhofarnedmorethanthirty sources disappeared, and from which determinethe attitudeofthegreatmass hectares, orhad more than three cows, or little lightemerged. Volume 4, Number 7 9 The World Bank/PRDTM Research Update: Coorate. Governance;:i in Central Europe- T he countries ofCentral and East Themain components ofthe projectwill The goal will be to determine the rela- emr Europe (CEE) are moving be:- i X tivedegree ofownership dispersion and rapidlyto privatize state enter- 'To identify and analyze laws and regu- the nature ofthe owners-two factors piises and remove centralized adminis- lationsthatinfluence patterns ofowner- that appear to have a strong influence trative controls over the economy. This ship and the process of corporate gov, on the type and efficacy of shareholder move to private ownership is based on emanceiniherelevant CEEecononies monitoring, the idea that the incentives created by including laws governing ownership of 'To shed light on how the legal frame- private ownership will:lead to a more equity by financial intermediaries (in- workforcorporategovernance(through efficient economy. For this to happen, cluding banks, insurance companies, both voice and exit) is functioning in however, ownership in a firm must be pension funds, and mutual funds), own- practice. This will involve two sets of coupled with some degree of share- ershipbyemployeesorcontractingpart- surveys: holder control over managerial ners,Publi hip, and shareholder -A survey of about 100 large private decisionmaking. Whilegood corporate rights, and oversightmechanisms. firms in eachofthethree countries (and governance is a key to the sound fur *To provide an overview of emerging a smaller number in Russia) to deter- tioningofanyprivatemarketeconomy, ownershippatterns oflarge private sec- mine how they are governed and how it can be argued that the need formas- tor firms. Data will be collected and suchmodes ofgovernanceaffectfirms' sive-enterpriserestructuringin reform- compared to analogous data from ad- ability to restructure and react flexibly ing econornies heightens theiimportance vancedmarketeconomies-particularly to changing external circumstances. of effective corporate governance (and in the United States, Germany, Japan, -Case studies of fifteen to thirty inter- may change the nature of governance and perhaps Great Britain and France. medianes who own shares in each of issues);mn those settings. f..: issues in those settings. Managers under Surveillance--of Whose? A new. World Banlk resear.cht pr.oject, Shareholder control over managerial de- and greater incentives and lower costs for "Corporate Govemance in Centrai cisions ("corporate governance ?) is just shareholder monitoring Historically, in- Europe," will focus on issues and-pat- one -of the constraints on managerial dustrial structures ofCEE economies have terns of corporate governance in large, behavior -in advanced market economies. tended to behighly concentrated. Preserv- privateornewlypriv,afizedfirms of the Others include economic constraints ing such concentration in some industries Czech Republic, Hungary, andPoland. (product, capital, and labor markets, the may bring some benefits, but privatization A separate component will analyze desire to avoid bankruptcy, and so on), policies should not leave the governance analogous issuesinRussia. Theresearch -legal constraints (government regulations issue out of the equTtion. analgousissus iRuss& Threselch alnd laws on fiduciary Ire sponsibility), and .financial intermediaries. The United will examine how the broad legal and cultural constraints (nornns of commercial States limits active participation of banks, regulatory regime-including the behavwir prevailing in a society)]Share- insurance' companies, pension funds, and privatization programs, the underlying holder monitoring is important in the tran- mutual funds in corporate governance. corporate and securities laws, -and spe- sition.economies, where markets for prod- Germany and Japan allow financial inter- cific regulations governing ownership ucts, capital, and managerial labor are mediaries a major voice in corporate gov- by financial intermediaries and certain still not strong enough to' exert competi- ernance. In Central and Eastern Europe, tive pressures on managers. The experi- due to high risk and the relative weakness oeps ofrinvestors-74sinfluenGLig encs'o6ermany Japan, and ihe United of legal and information system, large (or is likely to influence) the extent and statespfointto certain lessons andtr'deoffs institutional holdings might undermine effectiveness ofshareholder monitor- for consideration in Central and Eastern the safety andsoundness offinancialinter- ing in these countries.::: Europe.. There is probably a tradeoff be- mediaries. On the other hand, in the ab- tween the efficacy ofcorporate governance sence of active shareholder monitoring, In particular, the research will address and few constraints could discipline company thefollowing question.:do existinglegal distribution of wealth. lTghter owner- managers. and regulatoy frameworks in the CEE ship patterns lead to better corporate per- ormance. But mnore widely dispersed own- Drawn from Gray, Cheryl W., and Rebecca region.promote active, independen.t, anld v Y Q v s dfrmGa,CeyW.adRbca regio promte acive,indepndent and ership pattemns have other economic and J. Hanson, Corporate Governance irl Cen- effectiveshareholdermonitoring,includ- social benefits that to some extent moti- tral and Eastern Europe: Lessons from ing, if necessary, pressure for restruc- vate and affect the speed' of "mass Advanced MaIrketEconomies, the World turing? privatization" plans. Bank,WPS1182,1993,30p.Toorder:Ms. m industrial structure Smallerfirms mean MaxineBerg,theWorldBank,tel. (202)473- Vewer owners, greater stakes per owner, 1450. 10 : ; ; : September, 1993 Transition thethree countriesto determine (1)#ieir- d Bank s4tf, andeventually nAeormore mies, andwillhelp guide policymakers own regulatory and governance struc- books integrating the various pieces. and fegislators in the countries being ture and (2) their role in monitoringthe Seminars willbeheldintheBank and in-r studied and in otherpo-stsocialistecono- companies in which they own shares. theproject countries to discuss and dis- mies, includingthoseoftheforimerSo- Outputs ofthe research project will in- seminate findings. Other modes ofdis- vietUnion. elude a series of studies, phased over semination-iricludingperhaps alonger T p s s t b corn- the eighteen.months ofthe project, and in-depth conference or aseries ofsemi- ne peoeect ls scheduled to be cmgm- seminars. The studies will be writtenup nars in each of-the countries studied- plhted ifall. 1994Gr t is managed by and disseminated in various forms; in- will be considered as the project pro- For a ta l n ormo cludingindividualpublications(targeted ceeds. The outputwill complementhe contactrCheryltioGray,nfel.a(20 to policy anralysts and academic audi- extensiveacademicworkbeingdoneon 473-9188 oryland.ychelc te02 ences), reader-friendly summaries (tar- the topic in advanced market-econo- geted to policymakers, legislators, and -22) 478-0'768. The Czech Republic: A Triple B I n August,' Standard and Poors O'strava to less than 0.3 percent in percentinthe first quarter, signifying a gave the Czech Republic a BBB Prague. Unemployment-is unlikely to rise in real wages of 5.2 percent.- This rating. This puts the country into top 5 percent by the year's end, as would be a violation ofthe 1993 tripar- the "investment" category', on a par several hundred thousand pensioners tite-agreement, which pledged to keep with Chile, Israel, Turkey, and China, and women have' left the work1force. the average-real-wage increase below andtwopointsaboveHungary(whichis The numberoffull-timeself-employed 5 percent. The trade unions have dis- in the "speculative" category). Some surgidfrom 70,000 in- 1989to430,000 puted this data, and half-year figures ofthe trends international investors are today. Real wages-a mere Kcs 6,658 seem to show an average rise in real watching: (US$220) ayearin industry-are low, wages of only 1.4 percent. Neverthe- below wages in Poland or Hungary., less; from July!14 1993 the government Economic growth of 1 percent is pre- The balance of payments showed a announced new.penalties for excessive dicted for 1993 as awhole. Czech GDP surplus of Kcs 900 million for the first wage increases in all firms- with more started to grow inO'ctober 1992 forthe half-year. Foreign trade (excluding thantwenty-fouremployees-state and firsttime since 1989. However, the dis- Slovakia) rose 8.3 percent to Kcs 256 private. Wage increases that exceed solution ofCzechoslovakiainDecem- billion,'whiletradewithSlovakiafell24 firms' sale increases by more than 15 ber caused a 20 percent drop in trade percent, to Kcs 63 billion; exports in- percentin one quarterwill be subjectto with Slovakia, whichfedthrough into a creased 7.8 percent and imports 16.1 a 100 percent tax, and wage increases 2.4percentfallinCzechGDPinthefirst percent; aidimportsfromRussiafell22 30 percent higher than sales will ;be quarterof 1993. Inthefirsthalfof 1993 percent, whileimportsfrom-theEC rose taxed 200 percent. industrial 6utput fell 4.6 percent, con- 40 percent. InvestmentworthJUS$391 struction 5.2 percent, transport 20.1 millioneenteredtheCzechRepublicdur- SecondPrivatizationRound. percent, and agriculture 1.5 percent. ing the first half of 1993. However, a second-quarter recovery -Monthly inflation was 0.4 percent in OnOctober 1,thesecond round oflarge- meant that first-half GDP fell by only 1 June and 0 7 percentinJuly and August, -scale privatization began-in the Czech percent. so inflation is expected to fall to 1 7 Republic, with-the.publication'of the *Fiscal balance has been maintained, percent for 1993 as.a whole. Inflation new privatization strategies. As oflate- with the government running a surplus was a modest 11. I percent in 1992, but July 1993, privatization schemes of 548 of5.6billionkorona(Kcs) inthefirstsix surged8.5 percentinJanuaiyl993 alone, firms with assets of Kcs 79 billion had months, on expenditure ofKcs 145 bil- after the introduction ofthe new value- beehnapproved (schemes worth another lion. This was largely dueto spending on added tax system. For' the first half of KGS 60 billion:worth are in the works). unemployment benefits being much 1993, inflationraniatanannualizedrate Biddingforsharesisscheduledtobegin lowerthan anticipated. of 2 .7 percent. onJanuar 1, 1994, The procedure for 'Unemployment stands at a mere 2.8 the second wave is the same as for the percent (140,000), in contrast to 13.3 Thegovernmentremainsworriedabout first, except -that the Ministry of percent in Slovakia. It ranges from 4.6 a possible wage-price spiral. It has Privatization, which has become more percent in the coal-mining region of claimed that nominal wages rose 27.8 powerful,canrejectafirm'sprivatization Volume 4, Niunber 7 11 The World Bank/PRDTM projects-andimposespecificconditions of2O percenteach-andahost ofindi- The issuing-of shares in 987 former on resubmissions. vidual shareholders, with alargetranche state enterprises began on May25, and of shares still resting with the National tradingbeganonJune22. There aretwo Thefirstround ofvoucherprivatizations, Property Fund. Shareholders' meetings securities markets-the Prague Stock which ran from May 1992 to January beganinlateMa y.Newboardsofdirec- Exchange,whichopenedonApril6,and 1993, saw the distribution ofsome Kcs tors were appointed at the meetings. an over-the-counter system rimn by the 1,200 billionin assets in 1,500 firms, of RMS company. (RMS is a subsidiary of which Kcs 300 billion were sold for Despite problems with nonpayment of PVT, the firm that designed and oper- vouchers to the general public. The pri- debts (now amounting to Kcs 220 bil- ated the computer system for voucher vate sector now accounts for 36.2 per- lion), mostfirmsreportedoperatingprof- privatization. PVT is in turn owned by cent of industry, 11.4 percent of con- its to their shareholders. Most declinted subsidiaries of three PIFs-Harvard struction, and 66.1 percent ofretailing. to issue dividends, preferringto plough C&C,Zlatabrana, and Komercnibank.) Much of this shift in ownership came back profits into businesses. The new Prices in theRMS system have been 20 from the programs for restitution to bankruptcylaw, whichcameintoteffect to 50 percent lower than on the stock former owners and the auctioning of on April22, seems to have had minimal exchange, which has been forced to small businesses. The formertransferred impact. By the end of June, only forty widen the band of price changes it al- some Kcs 150-Kcs200billionworthof state-owned firms had filed for bank- lows in eachtradingroundfrom20 per- property. The latter saw 22,000 retail ruptcy, alongside one or two newly cent to 50 percent. units auctioned, raisingKcs 32 billion. privatized firms. The low number of bankruptcies can be explained by the Themain questionnowfacingthefunds Micro Changes at the Micro Level lengthy court proceedings and the is how to meet the promises made to govemment'swillingnesstoprotectvul- their investors. The 240 PIFs hold 72 There has been little immediate radical nerable firms it deems importantt. (Ac- percent ofthe shares, with the 13 larg- changeintheeconomic situatonoffirms cording to a recent report intheFinan- est funds controlling 35 percent. (The prnvatized in the first wave. Typically, cial imes, aboutathirdoftheprivatized Harvard Fund, with 814,000 sharehold- each firm is owned by two or three companies are believed to be techni- ers, has concentrated its shares into privatizationinvestmentfunds(PIFs)- callybankrupt.) fifty-one joint stock companies. They lirnitedbylawto amaximumownership own 18 percent of Komercni bank, 13 percent of Savings Bank, 6 percent of the giant Czech Energy Works, 5 per- cent of the Czech hnsurance Cornpany, CORRUPTION and the maximum 20 percent of Sklounion Glass Works, Slovnaft Oil Company, SpolanaPhannaceuticals, and the KutnaHoraTobacco firn, which is majonrty-owned by Philip Morris. The Savings Bankfimd,with1oninves- tors, holds shares in 500 companies, but morethan half oftheir stock isconen- trated in 48 companies, in which they hold 10 to 20 percent of shares.) Most of the funds promised cash pay- r iments ofKcs 1 0,000-Kcs 15,000 within one year to citizens investing their privatizationvoucherswiththem. These promises are now falling due. If the funds start dumpingshares on thefag- ile stock markets, the latter could col- lapse completely, leavingthefunds short of cash to meettheir obligations. Based on Reports of OxfordAnalytica : : \ : ;: ; \ : ; ~~~~~~~~~~Ltd., Oxford From the Hungarian Weekly, Ludas AMatyi L Oxfor 12 -September, 1993 Transition Conference Diary For the Record An international conference sponsored 1992, the project aims to identify com- by IIASA (International Institute for monlabormarketandwelfareresponses Bottom-up Transformation in East- Applied Systems Analysis), Laxenburg; to economic transformation and provide ern Europe: The Role of Small and theLudwigBoltzmannInstituteforEco- lessonsforpolicymnakersthroughoutthe New Firms in Postsocialist Coun- nomic Analysis; the Austrian Chamber region. The three sessions on the sub- tries ofCommerce; theUniversityofVienna; jectwill examinelabormarketdevelop- September 9-11, 1993, Freiberg, Ger- and the Commission of the European ments in transforming economies; so- many Community, Brussels. cial policy effects of labor market changes; and international comparative The Second Freiberg Symposium on Topics for discussion: Measurement perspectives on labor markets and so- Economicswasorganizedundertheaus- of Output Decline (An artifact of the cialpolicies. pices of the European Association for NMP/SNA measurement problems? Information: Institutefor Human Sci- Cotmparative Economic Studies Measurementoftheinformaleconomy; ences (IVM), Vienna, Spittlauer (EACES) at the technical university, the structure of output decline and em- Lande 3, A-1090 Vienna, tel. (431) Bergakademnie, Freiberg, Germany. The ployment trends; Country experiences 313-580, fax (431) 313-5830. meeting focused on the evolution of ofPoland, Hungary, the Czech Repub- entrepreneurship in Eastern Europe. lic, and Slovakia; Common causes or Fourth Trento Workshop Topics included: Entrepreneurship in structural adjustment?); Causes ofOut- Centralization and Decentralization EasternEurope:NeitherMagicnorMi- put Decline (Consequence of the de- of Economic Institutions: The Role rage; Developing. New Technology- mise of the CMEA-and U.S.S.R; Ag- in the Transformation of Economic based Firms in Russian Science Parks; gregate supply shock versus aggregate Systems Big Problems of Small Businesses in demand shock; The impact ofperverse February 28 - March 1, 1994, Trento, Estonia; New Firms in Bulgaria: The incentive structures; The labor market Italy Impact of Structural and lnstitutional structureandwagesetiing;Theconse- Information: Bruno Dallago, De- Changes; Small Firm Policy in South- quence of financial market problems; partment of Economics, University of eastEurope;MassPrivatizationversus Comparing intemationalexperiences); Trento, Via Inarna 1, 38100 Trento, Private Sector Development; How To and Policy Issues and Measures for Italy, teL (39-461) 882-211, fax (39- Become an Entrepreneur in East Ger- Recovery (opening Western markets, 461) 882-222. many. monetary and fiscal policy implications Information: Mr Uwe Steinborn, tel. of enterprise bad debt, fostering prop- Annual Bank Conference on De- (49-3731) 513-159 or Ms. Claudia ertyrightsandspeedingupprivatization, velopment Economics Werker, tel. (49-3731) 513-238, fax individual country programs or April28-29,1994,Washington,D.C. (49-3731) 512-733. regionwide restructuring?). Inform ation: IIA SA, A -23 61 OrganizedbytheWorldBank, withkey- Forthcominim Laxenburg, Austria, tel. (432236) 71- noteaddressbyVicePresidentMichael 521, ext. 556, fax (432236) 73-147. BrunoonAspectsofAdjustment,Tran- Conversion of Russian Military sition, andReform. Topics include: Tran- Enterprises Labor Market Changes in Central sition in Socialist Economies: November 12-14, Berlin, Germany Europe: Lessons for Social Policy Macropolicy-Theory and Practice January 21-23,1994, Vienna, Austria (StanleyFischer, LeszekBalcerowicz), lnternationalWorkshop,sponsored Property Rights in Transition (Andrei by the Volkswagen Foundation. Third Central European Forum, spon- Shleifer), The Economy of the FSU: Information: Dr Petra Opitz or Prof sored by Institute for Human Sciences RetrospectandProspect(JeffreySachs, W Pfaffenberger, Berlin, University (Institut fur die Wissenschaften vom Anders Aslund), Chinese Reform Ex- of Oldenburg, fax (4930) 441-0221. Menschen[IWM]). This CentralEuro- perience with State and Nonstate En- pean forum will address the mostpress- terprises (Thomas Rawski, Gary H. Output Decline in Eastern Europe: ing social issues ofthe postcommunist Jefferson, Nicholas Stemn, ShahidBurki). Prospects for Recovery transition. The topics correspond to Information: Boris Pleskovic, the November 18-20, Laxenburg, Austria IWM's comparative research project World Bank, RAD, tel. (202) 473- on Social Costs ofEconomic Transfor- 1062, fax (202) 477-0955. mation in Central Europe. Initiated in Volume 4, Number 7 13 The World Bank/PRDTM World Bank/IMF Agenda Two IDA Credits for Albania people in outlying villages have access. IBRD President Lewis Preston an- The waiting time for a phone in the nounced the World Bank's first loan to OnSeptember l4theInternationalDe- Czech Republic averages- 5.3 years. VietNamsincel978, a$70millionedu- velopmentAssociation(IDA)approved When the system is used heavily, only cation credit. Another IBRD loan of $5.4 millionto help Albaniadevelop an 30 to 40 percent of long-distance calls $158.5 millionforupgradingroadshave active labor market and improve the are connected. Thatnumberdrops to 20 been approved by the World Bank in operation of its local labor offices. The percent, and even as low as 5 percent, October. IDA creditwill also supportafund aimed when congestion continues and the net- at training unemployed workers and workjams. Camdessus's Field Visit creatingsmallenterprises. Some 10,000 people couldtakepart,withupto 7,000 Good Morning VietNam IMF Managing Director Michel expected to gain permanent jobs from Camdessus began avisitto VietNam on theplan. (Albania'sjoblessrategrewto Viet Nam officially cleared its $140 October10. The four-day visitto Hanoi 27 percent by the end of 1992 from 9 million arrears with the IMF in late- andHoChiMinhCityfollowsthesettle- percent earlier that year.) The second September,pavingthewayforrenewed ment of Viet Nam's arrears with the IDA credit, also for $5.4 million, will IMF and World Bank support. In turn, Fund Camdessus said VietNam faces a assist Albania in reforming its social the IMF disbursed its first loan to Viet formidablelistofchallenges, butthathe safety net. New systems will be put in Nam since 1981 in the amount of$223 is convincedthe countrywill soon catch place to fightrecipientfraud and abuse, million. Ofthe total, $85 million will be up with the performance of the "radi- andacomputersystemfordetermining used to pay offthe syndicated bridging ant" Southeast Asian econonies. He benefiteligibihtywillbedeveloped.Train- loanthatHlanoi obtained in September noted the country's success in cutting ing and research at institutions that (from a fifteen-nation group ofdonors, inflation, increasing exports, and reduc- manage .cash benefits will also be cochairedbyFranceandJapan),to setfle ing the current account deficit in the strengthenedtoimproveandmodemize its longstanding IMF debt. Some $17 past few years, despite shocks caused service delivery. mnillion represents the first oftwo STF by the collapse of Communist aid and tranches, while the rest is a stand-by trade withthe former SovietUnion and First World Bank Loan to Czech available overthenexttwelve months to Eastern Europe. He also told his hosts Republic supportthegoveniment's economic and that the IMF would help Viet Nam re- financialreformnprogram. TheFundsaid schedule its $4.5 billion debt innegotia- On September 9 the World Bank ap- VietNabnhasmademajorprogresssince tions next month with the Paris Club. proved an$80 millionloanin support of moving toward a market-oriented sys- the CzechRepublic'sthree-year,$891.5 tem, and cited as positive factors the TransitionEconomiesandtheWorld million telecommunications program. movetowardfamily-basedfarming,lib- Bank The Bank loan is the first to the Czech eralization ofagricultural prices, reform- Republicsinceitjoinedtheinstitutionon ing the tax system, and establishing a The magnitude and pace ofpolitical and January 1 as a successor state to the two-tier banking system. The IMF said economic changes in Central and East- CzechoslovakFederation, and itfollows that under its 1993-94 program, Viet em Europe, the Baltic states, and the a $55 million loan made in July to the Namplannedtolimititsbudgetdeficitto former Soviet Union have posed an SlovakRepublicforimprovementofits 5.5 percent of GDP in 1993 and 4.5 unprecedented challenge for the entire telecommunications. TheEuropeanIn- percentin 1994 by containmentofgrowth intemationalcommurnity,statestheWorld vestmentBank andtheEuropeanBank in currentexpenditurestocutinflationto Bank Annual Report 1993. The for Reconstruction and Development 7 percent by end- 1994 from a 38 per- Bank's total commitments to the Eu- arecofinancingtheCzechplanwith$80 cent annual rate; and to maintain eco- ropeandCentralAsiaregion;(including million each. The project will transform nomic growth of 7 to 8 percent. The those made by the IDA) in fiscal 1993 theCzechtelephonesystemtoonebased program calls for further foreign ex- amountedto $3.84 billion, about 16 per- on digital technology using new fiber change andtrade liberalization, includ- cent of all commnitrnents made by the optic cables. Currently, only 16 ofevery ing removal of nontariff barriers and Bank and IDA inthat fiscal year. Major 100 Czechs have access to atelephone, reform,ofthe import licensing system. structural changes undertaken by the a much lower number than in nearby Bankruptcy and laborlaws already are postcommunistcountries includeprice Western European countries. Also, al- being drawn up. Land use rights will be and trade liberalization, privatization, though 30 percent of Prague residents clarified, andthegovemnmentwill speed creation oflegal and institutional frame- have phones, only 2 to 6 percent of up a restructuring of state enterprises. works to help the development of pri- 14 September, 1993 Transition vate enterprise, financial sector reform, Facility, designed to help once centrally ...and Supports Kyrgyzstan and setting up mechanisms to protect planned countries make the leap to a the most vulnerable social groups during market economy. Earlier, Cambodiahad The IMF authorized Kyrgyzstan to draw thetransitionperiod.Justaspoliticaland cleared $52 million in arrears with the $23 million as a second tranche of the economic heritages of these countries Fund. Cambodiahas also completed ne- Fund's Systemic Transformation Facil- are diverse, so, too, dotheydifferfrom gotiationsona$62.7millionemergency ity, and a further $3 million under a oneanotherintheirabilitytopushthrough loan from the World Bank to finance stand-bycredit, approvedin May1993. reforms. Eleven of the Soviet Union's essential imports. International donor Althoughtheeconomyis experiencinga successor states joined the World Bank countries pledged $119 million in new steeper decline than expected, stabiliza- infiscal 1993, as didLatviaandLithuania financial aidto Cambodiato help Phnom tion is beginning to take hold (partly due TheRussianFederationandEstoniahad Penhrebuilditseconomy. Theaidpack- to the successful introduction of the alreadyjoined in June 1992. The Czech age was announced at the end ofa two- som), inflation has been contained, and and Slovak Republics became separate day meeting of the Intemational Com- extemal reserves have been built up, members on January 1, 1993. The mittee for the Reconstruction of asserts the IMF statement. Bank's executive directors terminated Cambodia, which includes thirty-one themembership ofYugoslaviainFebru- donorcountries andelevenintemational World Bank Loan to Kazakhstan ary 1993, permitting the five successor organizations. The donations, which are republics to become members. Croatia to be disbursed in early 1994, include In mid-September the World Bank an- and Sloveniajoinedin February 1993. $20 million from Japan and 62 million nounced a $180 million loan to By the end ofthe fiscal year, application francs from France. A total of $714 Kazakhstan, a country of 17 million procedures were pending on member- million ofthe$880millionpromisedlast people where industrial output fell by ship for Bosnia-Herzegovina, the Re- year has been disbursed and another one-quarter between 1990 and 1992 and public of Macedonia, and the Federal $135 million is expected to be commit- is expected to drop another 8 percent in Republic ofYugoslavia. ted by early 1994, officials said. Cambo- 1993. Kazakhstan has launched radical dian Finance Minister Sam Rainsy told economic reforms to turn the tide. The Stand-byto Hungary donors thathisgovemmentneeded $10 Bank loan is broken into two parts. Some million-$ 13 million in extemal assistance $94millionwillhelpexpandKazakhstan's In mid-September the IMF approved a per month to keep the govemment run- ailing foreign exchange auction market, $478 million stand-by credit to Hungary ning and provide basic public services. which airs to makehard currencyavail- in support of the country's economic able to importers. The new foreign ex- program through end- 1994. Hungary's IMF Approves STF Credit to change will help meet the rising demand goal is to attain an annual economic Moldova... from new businesses that need cash to growth rate of 2 percent, reduce the buy essential imports. The other $86 rate ofinflationto 17.3 percentin 1994, The IMF approved a$32 million credit million of the loan will pay for vital im- and stabilize the current balance of pay- to Moldova from the Fund's Systemic ports in agriculture, energy, transport, ment deficit. The budget deficit is to be Transformation Facility to help steady and health. cut from almost 7.3 percent of GDP in the country's shaky economy and rein in 1992 to 5.3 percent in 1994, keeping it rocketing inflation. The country wants IFC Follows Suit under 250 billion forint. Hungarian resi- to bring monthly inflation down to single dents will be encouraged to participate digits by the end of 1993 from an aver- The IFC announced the approval of its intheprivatizationprocedure. Otherre- age ofmore than 25 percent in the first first investment in Kazakhstan. The forms include recapitalizing the banks, quarter of the year. Moldova has expe- Intemational Finance Corporation will improving the bankruptcy process, and rienced persistent difficulties in obtain- take an equity holding of 20 percent in strengthening the governance of firms ing key raw materials from other coun- ABN-Amro Bank Kazakhstan. ABN- remaining under state control. tries of the former Soviet Union, the Amro Bank Group, the leading Dutch Fund said in announcing the loan. The bank, will be the technical partner and Cambodia Full IMF Member deputy chairman of the central bank, will have 51 percent ofthe bank's capi- Dumitru Ursu, said Moldovaplans mea- tal. Kramds Bank, the largest local pri- The IMF has authorized Cambodia to sures to control inflation. The bank will vate group in Kazakhstan, will hold 29 draw anew on its financial resources issue 10 billion rubles ofnew cash, and percent. The newly established bank and has approved its first financial as- thetemporary five-lei banknotes will be will focus on supporting foreign trade sistance to the country in nearly twenty withdrawn from circulation. and will offer financial advisory ser- years. The Fund approved a $9 million vices. loan under its Systemic Transformation Volume 4, Number 7 15 The World Bank/PRDTM Milestones of Transition Russian President Boris Yeltsin has dispose ofitfreely, Commonwealthtele- transport agreement signed between extended the validity of privatization vision announced in earlyOctober. The Presidents Boris Yeltsin and Lech vouchers to July 1,1994 (they were due decree appears to supersede aprevious WalesainAugust. Asthenewlinewould to expire at year-end). First Deputy restrictiverulingbytheformersupreme divert a substantial portion of the gas Prime Minister Yegor Gaidar has been legislature, the Congress of People's currentlypipedthroughUkraine, thedeal drawing up plans for deregulating com- Deputies, whichPresidentBoris Yeltsin is being criticized by Ukrainian officials moditymarkets, openingupforeigntrade, dissolved in September after accusingit as "anti-Ukrainian.") and furthering privatization. Finance of blocking reform. The Congress al- Minister Fedorov has drawn up a pro- lowed private ownership of land but The energy crisis has forced the Ukrai- gram of measures aimed at achieving banned the sale and purchase of land nian government to place strict limits macroeconomic discipline, including a for ten years, effectively preventing a onelectricityuseinthe fourthquaterof ban on the use offoreign currency (see free market. 1993. HalfoftheindustriesinKievhave next entry); an increase in the value- already been shut down because of in- added tax of 7 percentage points; an Russia'stotalforeigndebtstoodat$72.5 adequate gas, fuel, and coal supplies, increase in the marginal rate of income billion by the end of the first quarter of eventhough Ukraine is self-sufficient in tax ontop salariesto 50 percent; higher 1993, including $4.7 billionin overdue coal. In Septemberthegovemmenttook import duties on cars and other goods; interest payments, according to a cen- measures to reduce energy consump- further restriction on creditto most sec- tral bank report published in early Sep- tion by fining factories that used too tors of industry; a review of capital in- tember. The total debt figure compares much fuel and electricity and by cutting vestment; postponement until 1997 of to$74.6billiononJanuary 1, when over- offsupplies to customers who failed to interest payments on government debt due interestpayments were $2.8 billion. pay their energy bills. The crisis has to the Russian central bank; and 30 Debt on tied medium-term credits to- been prompted by Russia's moves to percent cuts on imports of raw materi- taled$32.7 billion, downfrom$36.3 bil- increase the price of its gas and oil to als. Boris Fedorov expressedhopethat lion on January 1. And nontied credits world prices. Ukraine's secondsupplier, the Russian state would be able to keep were $20.4 billion, comparedwith $21 Turkmenistan, also wants to be paid deficitspendingwithintheR 4.7 trillion billion. Thedebtoncomnmercial credits world prices for its gas even though it borrowed from the Russian central bank was $7.2 billion as of April 1, 1993, up has an agreement with Ukraine allow- forthelastquarter of 1993, linewitha from $6.6 billion. The bank said the ingita40percentdiscount. proposed 1993 shortfall ofR 16 trillion. former SovietUnion's debtto the Paris Club ofofficial creditors was $35 billion, Ukraine Economics Minister Roman The Russian central bank is to ban all and debt to commercial bank creditors Shpek said Kiev needs to take a gradual transactions in foreign cash, effective $16billion-$22billion. approach in shaking off the legacy of January 1,1994. Enterprises aretohand seven decades of communism. Acting in all foreign banknotes to banks by Belarus is in a deep economic crisis; PrimeMinisterYefimZvyagilsky'sgov- Decemnber31. Transactions using hard productionhasfallenby 15 percentfrom ernrnent is working on a new anticrisis currency credit and charge cards and 1992, and the country's finances are program that will place renewed em- otherinternationally accepted forms of completely dependent on the price of phasisonstabilizingtheeconomythrough financial dealing will still be permitted. Russian energy, asserted' Stanislau central control, slowly weaving in mar- Permission to trade in foreign cash will Shushkevich, chairman ofthe Supreme ket reforms. In the latest round of sub- be withheld, effectiveNovember 1. Fi- Soviet, at the September 15 session of sidies to agriculture and social security, nance Minister Boris Fedorov said that Parliament. Belarus officials are hope- the government and central bank agreed Russian banks held $11 billionin depos- fulthataproposedpipelinerunningfrom to raise the ceiling on state credits inthe its from private citizens and enterprises. Yamal in northern Russia to Central third quarterby one-third, to $1.1 billion. Fedorov claimed that government re- Europe via Belarus will ease the eco- serves have doubled and that 75 to 80 nomic blow of paying world prices for President Nursultan Nazarbaev told percent ofrubles in circulation are now its energy supplies. Belarus officials see Kazakhstan's Supreme Soviet at its backed by hard currency. it as an opportunity to buy Russian gas current session that total production in more cheaply. The pipelinewouldtrans- 1992-93 is down25 percent in compari- The Russian govemmenthas prepared port80billioncubicmetersofgasthrough son with 1991, the lastyear before inde- a draft decree on agrarian reform that Belarus annually, four times the current pendence. Industrial output is down 22 gives.people the right to own land and amount. (The pipelinewas part ofagas percent, capital investment 70 percent, 16 September, 1993 Transition and retail trade turnover 41 percent. could grow by as much as 4.5 percent sector affiliate, the IFC, should in some Nazarbaev attributed Kazakhstan's dis- in 1993. Industrial production was 7.8 instances-particularlyintransactionsthat mal showing to the trade barriers within percent higher than in the same eight- can be largely carried out by the private the former U.S.S.R. monthperiodofl992;laborproductiv- sector - play a supportive rather than a ity was up by 11 percent; the financial lead role. Theinternational financial in- The leaders ofnineformer Sovietrepub- health of enterprises continued to im- stitutions should discuss the "gray ar- lics signed a treaty in Moscow on Sep- prove; and the situationin agriculture eas" of loans with the private banking tember 24 creating an economnic union. was less gloomy than expected, de- sector,lettingbankersknowwherecom- The treaty was signed by Azerbaijan, spite the effects of the 1992 drought. mercial risk ends and political risk be- Armenia, Belarus, Kazakhstan, Kropiwnicki's major worry was gins. The development banks should Kyrgyzstan, Moldova, Russia, Poland'snegativetradebalance, which reconsider whether it is appropriate to Tajikistan, and Uzbekistan. Ukraine grew to more than $1.4 billion in Au- insistonborrowing-governmentguar- signed as an associate member; Georgia gust. Poland's gross domestic product antees for all lending, suggested Dallara. signed some of the provisions, as an ob- grew by 1.5 percent last year, revised server; and Turkmenistan said it might figures from the Central Statistical Hungary's industrial production was joinlaterifamendments were madeinthe Office show. GDP in 1992 reached up 2.5 percentinthefirst seven months provisions on taxes, company law, and $84 billion, or $2,200 per capita. The of 1993 compared with thesameperiod finance. Thetreaty envisages the gradual private sector's share ofthe economy lastyear. (Industrial outputhas declined reduction and eventual abolition of all grew to 49.7 percent as its output ex- by some 40 percent over the past four customs tariffs and other internal trade panded by 11.3 percent, against a 6.6 years.) Production of manufacturing barriers; equal legal status for companies percent fall in the output ofthe public industries was up 20 percent during the in all member states to encourage the sector. first seven months, while machine in- creation ofjointly owned enterprises; and dustryproductionrose 12.9percent, with apayments union, ormulticurrencyclear- Polish government officials an- domestic sales up 16.8 percent. The ing system, thatwouldberunthroughan nouncedihatincomefromprivafization food, drink, and tobacco industries re- interstate bank and could eventually be- for 1993 is running ahead ofschedule port an 8.3 percent loss in domestic come a currency union. for the first time since the program sales and a 31.7 percent drop in export began, and that the annual revenue sales inthesameperiod. Real GDP will Moldova launched a sell-off of state goal of 4 trillion zloty ($211 million) drop another 2-3 percent by the end of property with an auction of seven food planned inthe budgetwas metin Sep- theyear, the balance ofpayment deficit shops and two cafes to citizens holding tember. Since August 1992, will exceed $2 billion, andthe consumer privatization vouchers. Vouchers forvari- privatizationcontractshavewonguar- price index will rise to 22-23 percent able amounts have been issued to 3.5 antees of new investments worth 13 compared with 1992, according to re- m-llionMoldovansandcanbeusedtobuy trillion zloty ($684 million) over the ports inmid-SeptemberfromtheHun- a stake in any of the 1,595 state-run en- next five years and have secured garian News Agency, which quoted terprises-one-third of Moldova's state 110,000jobs. So farthis year, thirty- governmentforecasts. property-that the country aims to sell by seven major state firms have found the end of 1994. new private owners through "capital In the first four months of 1993, privatization," officials said. The min- Huingary's gross foreign debt increased Poland's servicing of both its internal istry plans to sell another thirty firms by$2.2billion,to$23.6billion, reported and external debt is expected to increase by the end of October. the Budapest economic daily, Napi expenditures to 115 trillion zloty ($5.8 -Vilaggazdasag, on September 15. To billion) in 1993. Poland will be unable to The Institute for International Fi- help meet Hungary's credit needs, the containitsspiralingpublicdebtwithouta nance, which represents many of the Hungariannationalbank,throughCredit substantial write-offonits $12billion debt world's largecommercialbanks, called Lyonnais and four other French banks, to foreign commercial banks, disclosed fornewapproachesbytheWorldBank in Paris on October 12 issued bonds Osiatynski, the former finance minister, and other multilateral institutions to with a six-year maturity worth one bil- in an early September interview. The improve their effectiveness in using lion French francs. The day before, Oc- creditor banks have offered 30 percent, privatefundsfordevelopingcountries. tober 11, the national bank, with the but Poland is hoping for a 50 percent IlFManagingDirectorCharlesDalara assistance of a consortium of Swiss, write-off in a letter to the Chairman of the In- German, American, and Japanese terim Committee, Belgian Finance banks, had also issued in Switzerland CentralplanningchiefJerzyKropiwnicki MinisterPhilippeMaystadt, points out six-year bondsworth200millionSwiss saidinmid-SeptemberthatPoland'sGDP that the World Bank and its private- francswitha6.75 percentannual yield. Volume 4,Number 7 17 The World Bank/PRDTM Foreign investors committed morethan of the economic system0 has proved ness newspaper, ridian. The uminis- $42 billion tomorethan 1,700projects in greater than that at the political system try has issued 420,000 property deeds thetwenty-eightcountriesoftheformer and that it cannot endure brusque and since the land reform law was adopted Comecon countries in the eighteen radical changes. He went onto say that inMarchl1991,butAntochisaidthat"a monffis leading up to end-March 1993, privatization is not an easy process, es- further 5 million Romanian citizens are according to figures compiled by the pecially when it comes to privatizing waitingtogettheirlandownershipcer- East European magazine, Investment. 6,000 large state-owned enterprises. Re- tificates." He said the issuing of docu- organization provokes disorganization. ments has been hindered by an acute President Ion Iliescu of Romania says The most complicated task , Iliescu shortage ofministry staff, adding, "We quick privatization and shock therapy added, is to change the mentality of have now the necessary data to issue are not the way to modernize the people. another 153,000 deeds." country's sluggish economy Speaking in Bucharest in early October, at the Romania has failed to complete China's economy is in for a hard land- official launching of a mass education postcommunistlanddistribution undera ing in 1994, with a rapid recovery in campaignbythegovernment's National law adopted two-and-a-halfyears ago, 1995, followingcounterinflationarypoll- PrivatizationAgency, he said the inertia Gheorghe Antochi, secretary ofstate at cies imposed to curb the overheated theMinistryofAgriculture,toldthebusi- economy. These are the findings of a study by the Amsterdam-based Mees . . .. Pierson Securities (Asia) Ltd., which .... ..X- ...... ........................t . . old t W or ....... thIMFAnntMeCeingsthralChNawtld .~........sedu.rfrs.twlitodcvle | | pri111l!| | u ses, andadoptanewbudgetmecha- | | 1 1 _ I 111 Illii | il Tlil _ ~The Banco de Angola devalued the kwanza by 38.5 percent to 6,500 per -| . . .... .... i g U.S. d rto narrowthe gap between percrates. Angolan Finance Minister .......... l | 11 | to explan arralr ton the country's $ ............. l ll _ l= - _ _ billion external debt and to seek hi e . ... . ... .. E unblockingofcreditlines.Arrearsgrew dths year as the government directed preseso to its renew ed w ar against th t wile rebel UNITA movement. The Iirstpivate secor dcmmeral bat ................theopeneicialzandback eminarke y txhrnee deades. ofgotate baningnc monopolyei ; explain a the country. : u(Wle appreciate the contributions from the r s h Ri Research Instntuted) |~~~~~~~~~~~~~~~~~~h rbl UNT moeet ~~~~~~~~~~~~~~~~~~~~~~~~~~. . ....... From the Russian Business Weekly, Commersant o s b - i 18 September,1993. 0~~~~~~~~~~~~~~~~~~~~~~~..... .. ........ .........er,.... ...... ...... . .... .. ... ... .... ...... ... . Transition New Books and Working Papers - The PRDTM unit of the World Bank regrets. that it is unable to supply the publications listed World Bank Publications Simon Commander and Richard AlanGelb,GaryJefferson,andlndeijit Jackman, Providing Social Benefits Singh, Can Communist Economies Branko Mitanovic, Social Costs ofthe in Russia: Redefining the Roles of TransformIncrementally?-China's Transition to Capitalism: Poland, Firms and Government, WPS 1184, Experience, WPS 1189, 1993,39 p. 1990-91, WPS 1165, 1993, 29 p. 1993,30p. To order: Ms. Vesna Petrovic, the To order: Ms. Rebecca Martin, the To order: Ms. Olga del Cid, the World World Bank, PRDTM, Rm. N 11-065, World Bank, PRDTM, Rm. N 11-043, Bank, EDIEM,Rm.M3-047, tel. (202) teL (202) 473-8966. tel. (202) 473-9026. 473-5195. SimonCommander,LeonidLiberman, Morns E. Morkre and David G.Tarr, CeciliaUgaz, and RusianYemtsov, The ReformingHungarian Agricultural IMF Working Papers Behavior of Russian Firms in 1992: TradePolicy: AQuantitativeEvalu- Evidence from a Survey, WPS 1166, ation, Policy Research Working Pa- ParhasarathiShomeandJulioEscolano, 1993, 30p. pers Series (WPS), 1185, 1993, 30 p. The Sta'te of Tax Policy in the Cen- To order: Ms. Olga del Cid, the World tralAsian and Transcaucasian Newly Bank, EDIEM, Rm. M3-047, teL (202) Hungarian agricultural production has Independent States (NIS), IMF WP 473-5195. remained protected through import li- 93/8, Washington, D.C., 1993,21 p. censing, and agricultural export subsi- SimonCommander,LenoidLiberman, dies have become a large share oftotal Central Asian and Transcaucasian and Rusian Yemtsov, Unemployment government subsidies. Harmonization Newly Independent States' tax policy and Labor Market Dynamics in of Hungarian agncultural sector poli- strategies conformtoneitheran optimal Russia, WPS 1167, 1993,30 p. cies to those ofthe EC could mean the nondistortional tax structure as a one- To order: Ms. Olga del Cid, the World introductionofaCommonAgricultural shot action nor to an interim tax struc- Bank, EDIEM, Rm. M3-047, tel. (202) Policy (CAP)-type system, and the con- ture withidentifiable and clearly under- 473-5195. tinuation of export subsidies. Authors stood distortional elements focused on developed a computable general equi- closing the fiscal deficit. NIS policies Bartlomiej Karninski and Alexander librium model, calibrated for the year instead are rapidly acquiring complex Yeats, OECD Trade Barriers Faced 1990, to evaluate the consequences of features comprising multiple rates, ex- by the Successor States of the So- possibleHungarianpolicyactions. The emptions, and other properties, which yiet Union, WPS 1175, 1993, 30 p. results showthatimportprotection, ex- are difficultto administer. Steady-and To order: Ms. Jean Jacobson, the portsubsidies,orimpositionofaCAP- perhaps prolonged-effortneeds to be World Bank, IECIT, Rm. S 7-035, tel. typesystemwouldbecostly,inefficient made ifsimple, broadly based, and rev- (202) 473-3710. policies. The tariffequivalent oftheim- enue-productive tax structures areto be -prtlicensesisestimatedthroughade- achieved. : Branko Milanovic, Cash Social Trans- tailed price comparisons study, the first fers, Direct Taxes, and Income Dis&- ofits kind forHungary. The removal of Gerd Schwartz, Toward an Economic tribution in Late Socialism, WPS import licenses in the presence of ex- 'TheoryofMultilateralDevelopment 1176, 1993,33p. portsubsidieswouldgeneratebyproduct Banking,IMF WP 93/40, Washington, To order: Ms. Rebecca Martin, the distortionsintheexportrmarketandlittle D.C., 1993, 22 p. World Bank, PR)TM, Rm. N 11-043, gain in welfare may ensue. Piecemeal tel. (202) 473-9065. removal ofexportsubsidies, ontheother Xavier Maret and Gerd Schwartz, Po- hand, will not generate byproduct dis- land: The Social Safety Net during Bartlomiej Kaminski, How the Mar- tortions, but the gains would be to the the Transition, IMF WP 93/42, Wash- ket Transition Affected Export Per- detriment ofadjustment cost.- ington, D.C., 1993,40 p. formance in the Central European To order: Ms. Nellie Artis, the World Economies, WPS 1179,1993,38 p. Bank, PRDTP,-IRm. N 10-013, tel. GabrielleLipworthandErichSpitaller, To order: Ms. Pauline Kokila, the (202) 473-8010. VietNam: Reformand Stabilization, World Bank, IECITI Rm. S 7-040, tel. 1986-92, IMFWP 93/46, Washington, (202) 473-3716. D.C., 1993, 24 p. Volume 4, Number 7 19 The World Bank/PRDTM To order: IMF Publication Services, Otherrecentpapers by SimonJohnson 700-19th Street, N., Suite C-100, (and ohers)ppublishedbyTheNational Washington, D.C. 20431, tel. (202) Council for Soviet and East European 623-7430, fax (202) 623-7201. Research: The Role of New Banks in a Par- tially Reformed Economy: Evidence SimonJohnson and OlegUstenko, The from Ukraine, 1993,48 p. Road to Hyperinflation: Economic Independence in Ukraine, 1991-93, Corporate Control of Enterprises The National Council for Soviet and before Privatization: The Effects of EastEuropeanResearch, Washington, Spontaneous Privatization, 1993, D.C., August 1993,37 p. 58p. Theeconomicperformanceofindepen- To order: National Councilfor Soviet dentUkraine has been disappointing. It and East European Research, 1755 has been less exposed to the disruption Massachusetts Avenue, N. W Wash- of trade and higher energy prices fol- ington D.C 20036, tel. (202) 387- lowingthebreakup oftheSovietUnion 0168, fax (202) 387-1608. than most other ex-republics but it has From the Chinese (Zhengzhou) one of the worst inflation rates in the Magazine, Cartoon Monthly region (a monthly 50 percent). Credit provided at negative real interest rates Roy L. Prosterman, Timothy Hanstad, Thenumber of private farms could pos- andagrowinggovernmentbudgetdefi- and Leonard J. Rolfes, Jr., Agrarian siblyincreaseto around 800,000 bythe cit have meant high and rising rates of ReforminRussia,RuralDevelopment mid- 1990s. Russiaappears likelyto un- monetary emission. De facto price con- Institute (RDI), incollaborationwiththe dergo a much more gradual process of trols continue to distort markets and Agrariannstitute, MoscowMonographs decollectivizationthan China. Even the most trade in food products remains in on Foreign Aid and Development, no. most accelerated scenario would prob- the state sector. The privatization pro- 11, 1993,50p. ably result in no more than 1.5 to 2 cess has moved ahead only slowly. [The millionindividual farms by the end ofthe ceiling on state credits inthe:third quar- Thenumberofindividualpeasantfarms decade, while perhaps halfthefarmland ter has been raised by one-third, to 16 inRussiahasgrownfromlessthan 1,000 would remain in a reformed collective trillion karbovanets (US$1.1 billion). in the fall of 1990 to 258,000 by July and state farm sector and be farmed Large subsidies have been directed to 1993,accountingforabout5 percentof jointly- agriculture, which has suffered from theagriculturalpopulationandmorethan recent increases in fuel costs due to 4 percent of Russia's cropland. Most The direct purchase and sale ofagricul- higher Russian prices. Over the sum- state and collective farms have reorga- tural land between broad categories of mer, the government granted subsidies nized into some form ofjoint stock en- individuals should be sanctioned. Pur- to collective farms exceeding 7 trillion terprise, in which each workerhas both chaseandsalerights would enablefarm- karbovanets (US$530million). TheMin- land andnonland (property) asset stocks ers and banks to use the existing rightto istryofAgriculturehas requested addi- that can be turned into actual land and mortgage. Thus, a true credit and land tional subsidies of 10.6 trillion otherassets,to start anindividual peas- marketcouldbecreated. Farmsshould karbovanets.] ant farm. The holders ofthe 41 million operate according to market economic small plots account for another 4 per- principles, rather than relying on subsi- The failure to control inflation has made cent of cultivated land (including the dized credit and inputs. it more difficult to establish a strong household plots held by workers on system ofpublic finance, start meaning- present or former state and collective Marketing and processing of agricul- fil private sector development, andre- farms, garden lots, orchard plots; and tural products need to be further devel- structure the banking system. Ukrai- dacha plots held by urban residents). oped. The experience of industrialized nian experience demonstrates what They have full ownership over these democracies should be drawn onforthe happens when partial and gradual anti- plots, with the right to buy and sell their agrarianreform inRussia,includingtech- inflation measures fail. property. nical assistance to design alternative fanningmodels. Private investors should be encouraged to build tractors and 20 September, 1993 Transition equipmentsuitableforindividual-farm Jiri Krovak, Friedrich Levcik, and oth- London W1X ILB, tel. (4471) 734 use. (The average cost of starting a ers, The Czech and Slovak Econo- 9110, fax (4471) 734-8760. peasantfarmntodaywouldbeequivalent mies after the Split, The Vienna Insti- toabout$4,000.)For$400rmilhioninaid, tuteforComparativeEconomicStudies, perhaps 100,000 families could startin- WIIW no. 199, June 1993,48 p. dividualfarming. OECD Publications [Pub- Sandor Richter, East-West Trade un- lished in Paris] Roy L. Prosterman and Leonard J. der Growing Western Protection- Rolfes, Jr., Russian Agrarian Re- ism,TheViennaInstituteforCompara- Mikhail A. Korolev and Salvatore form: A FieldWork-Based Assess- tiveEconomnicStudies,WIIWno. 198, Zecchini(editors),NationalAccounts ment, Rural Development Institute June1993,17p. for the Former Soviet Union: (RDI), in collaboration with the Agrar- Sources, Methods, and Estimates, ian Institute, Moscow. Monographs on To order: WIIW, The JVienna Institute 1993,152 p. Foreign Aid and Development, no. 83, for Comparative Economic Studies, 1993,20 p. PO. Box 87, A-1103 Vienna. Industry in Poland: Structural Ad- justment Issues and Policy Options, Roy L. Prosterman and Tim Hanstad, CCEET-OECD, 1992,185 p. LandReforminChina:AFieldwork- CEPR Discussion Papers based Appraisal, Rural Development OECD Economic Surveys: Poland, Institute(RDI),incoliaborationwiththe Laszl6 Halpem, Factors and Effects 1992,198 p. Agrarian Institute, Moscow, Mono- of Trade Reorientation in Hungary, * graphs on Foreign Aid and Develop- CEPR DPS no. 772, London, March Bulgaria: An Economic Assess- ment, no. 12, 1993,61 p. 1936~.ment, 1992, 101 p. To order: Rural Development Insti- Agricultural Statistics-Central and tute (RDI), 1100 NE Campus Park- SDinn,PivatizateoungRinskdtansWeandr Eastern Europe: A Compilation of way, Seattle, Washington 98105, teL the CommunistaFin, RCEPRDPS nod Food Balancesannd Selected Indica- (206) 528-5880, fax (206) 528-5881. the ConommnistFimbrm 1EP2D3S no. tors, 1992,370 p. Jo***hn Benett and Huw David Dix, Reforming the Economies of Cen- WIIW Publications Macroeconomic Equilibrium and tralandEasternEurope; 1992,l2Op. Reform in a Transitional Economy, St Raimund Dietz, Transformation in CEPR DPS no. 758, London, January Chort-Term Economic StaEpst1cs: Mittel- und Osteuropa: Eine Syn- 1993,34p. 400p1 opsis, The Vienna Institute for Com- parative Economic Studies, WIIW no. Michael C. Burda, The Determinants 147,July1993,pp.61-75. of East-West German Migration: Policies-Hungary, 1993,159p. Some First Results, CEPR DPS no. Hubert Gabrisch, IM Zeichen 764,London,Januaryl993,12p. m E A westilcher Rezession: Die me n 1993 122 Wirtschaffslage der post- Peter Bofinger, The Output Decline 1 p socialistischen Lander im ersten in Central and Eastern Europe: A To rd the US.: OECDPubl Quartal 1993 und Ausblick 1993/ Classical Explanation, CEPR DPS o an f on Cente, 20]- 94, The Vienna Institute for Compara- no.784, London, May 1993,33p. Stons and nformation Cen7eas 2001 L tiveEconomic Studies,WIIWno. 197, -D.C. 20036, tel. (202) 785-6323, fax Junel993,32p. Dennis J. Snower, Revenue-shaxing (202) 785-0350, or OECD Publica- Subsidies as Employment Policy: tions, 2 rue Andre-Pascal, 75775 Hubert Gabrisch and others, Die Reducing the Cost of Stimulating Paris CEDEX 16, France. Rezession schwacht sich ab: Die East German Employment, CEPR Wirtschaftslage in den post- DPSno. 783,London,April 1993,24p. sozialistischen Landern Europas CERGE Working Papers 1992/93, TheViennalnstituteforCom- To order: Centre for Economic Policy parative Economic Studies, WIIW no. Research, 25-28 Old Burlington St., Stephiniak Andrzej,The European 146, May 1993. Agreement: EC-Poland and Liber- Volume 4, Number 7 21 The World Bank/PRDTM alization of-Transfer of Capital and increasemin one,country's FDI can only Lisz1oJ (layeditor), SmallBusiness Financial Services, WPS 32, 1993, be at the expense of another. Development throughPrivatization, 29p. Foundation for Market Economy, Ifreform proves successful, aprogres- Budapest, 1992,122 p. JanexPrasnikar, Jan Svejnar, Dubravko sive reduction in the industrial concen- Mihaljek, andVesnaPrasnikar,Behav- tration of CEE exports to the EC is To order: Foundation for Market ior of Participatory Firms in Yugo- expected. Economnic structures in the Economy, Dombovari ut; 17-19, H- slavia: Lessons for Transforming CEEcountriesshouldbecomeincreas- 1117 Budapest, Hungary, tel. Economies, WPS 35, 1993, 30 p. ingly similar to those of comparable (361)161-0460, fax (361) 161-1845. OECD economnies. Potential growth of Jan Svejnar andMiroslav Singer, Using EC manufacturing exports to Eastern Kalman Mizsei, Bankruptcy and the Vouchers to.Privatize an Economy: Europe and the FSU is expected. The Post-Communist Economies of East The Czech and Slovak Case, WPS CEE and FSU countries have to face CentralEurope,InstituteforEastWest 36, 1993,51 p. large projected trade deficits in manu- Studies, New York/Prague/Budapest, factures withtheEC. Thereis scopefor 1993,54p. To order: CERGE, Charles Univer- considerable growthinintraindustry.as sity, Faculty of Social Sciences, well as interindustry trade. Regional Development Studies: Taboritska 23, CS-130 87 Prague 3, To order: NERA, 15 Stratford Place, Trade and Foreign Investment in Czech Republic. London WIN 9AF; tel. (4471) 629- the Community's Regions-The Im- 6787, fax (4471) 493-5937, or EC pactofEconomicReform in Central Office for Official Publications, 2 and Eastern Europe, NERA, Brus- rueMercier, L-2985Luxembourg, tel. sels, Luxembourg, 1993,157 p. Other Publications (352) 499-281, fax (352) 488-573. To order: NERA, 15 Stratford Place, London WIN 9AF; tel. (071) 629- Central and Eastern Europe Zofia Szpringer, Assessment of Price 6787, fax (071) 493-5937. Liberalization Effects in Selected Trade and Foreign Investment in Postsocialist Economies, Institute of Recession Prolonged for One More the Community's Regions: The Finance (Warsaw), WPno. 34,1993, Year? The Economic Situation in impact ofEconomic Reform in Cen- 28 p. Hungary in Early 1993 and the Out- tral and Eastern Europe, Commis- look for the Rest of the Year, Public sionoftheEuropeanCommunities and Grzegorz W-Kolodko, From Output PolicyInstitute, Budapest, 1993,21 p. National Economic Research Associ- Collapse to Sustainable Growth in To order: Public Policy Institute, ates (NERA), Regional Development Transition Economies: The Fiscal Budapest V, Szechenyi rkp. 19, H- Studies, no.7, Brussels, Luxembourg, hIplications,InstituteofFinance(War- 1358, tel./fax (361) 26-90-523. 1993,157p. saw), WP no. 35, 1993, 78 p. To order: Institute of Finance, Infor- Martin Myant, Transforming Social- Thesurveyconfirtmstheviewthatthere mation andPublication Section, War- ist Economies:The Case of Poland is unlikely to be a large immediate ex- saw, Swietokrzyska 12, Poland. and Czechoslovakia, Studies of Com- pansion in foreign direct investment munismin Transition, Brookfield, Ver- (FDI) to the transition economies of Economic Survey of Europe, UN mont, 1993,297 p. Central and Eastem Europe (including Economic Commission for Europe, states oftheFSU). The lagging regions Geneva, 1993,291 p. Tomasz Zylicz, Implementing Envi- ofthe Community do nothave much to To order: UN/ECE Information Of- ronmental Policies in Central and worryabout. Givenmarketpotential:and fice CH 1211, Geneva 10, tel. (4122) Eastern Europe, PPRG Discussion political and economic stability, inves- 917-2893, fax (4122) 917-0036. Paperno. 19,WarsawUniversity,March tors are not making location choices 1993,32p. basedoncapitalcostsandtheavailabil- East Europe and the Republics, ity of cheap labor, and have not, as yet, PoliticalRiskServices,NewYork, 1993. Patrick Artisien, Matija Rojec, and seen the need to compare CEE coun- Information: Political Risk Services, Marjan Svethcic (editors), Foreign tries and the lagging regions ofthe EC. 222 Teall Ave., Suite 200, PO. Box Investment in Central and Eastern Ifthe potential is there, they will invest 6482, Syracuse, NY 13217-6482, tel. Europe, St. Martin's Press,NewYork, inboth. Itis wrongtothinkofa"fixed" (315) 472-1224, fax (315) 472-1235. 1993,206 p. quantity of investment, where an 22 September, 1993 Transition Stephen G. Deets (editor), Romania's Comprehensive Handbook on Y Y Kueh and Robert F. Ash, Eco- Energy Sector: Findings and Rec- Privatization in Russia (2 volumes), nomic Trends in' Chinese Agricul- ommendationsofanAmerican-Ro- EuromoneyBooks,London, 1993. ture: The Impact of Post-Mao Re- manian Workshop, November 8-18, forms, Clarendon Press, Oxford, 1992, NationalAcademyPress, Wash- To order: Euromoney Books, England, 1993,405 p. ington,D.C;,,1993,59p. PlymbridgeDistributorsLtd., Estover, For copies: Office for Central Eu- Plymouth, Devon PL6 7PZ, United Qingzhao, Hua, From Yalta to rope and Eurasia, National Research Kingdom,- te. (44752) 695-745, fax Panmunjom: Truman's Diplomacy Council, 2101 Constitution Avenue, (44752)695-5668. and the Four Powers, 1945-1953, N W, Washington, D.C. 20418. Cornell East Asia Series, Cornell Uni- Richard Poe, How to Profit from the versityEast AsiaProgram, no. 64,1993. A Guide to'Doing Business in Rus- Coming Russian Boom: The sia, Center for International Private Insider's Guide to Business Oppor- Holz, Carsten, The Role of Central Enterprise (CIPE), Washington, D.C., tunities and Survival on the Fron- Banking in China's Economic Re- 1993. tiers of Capitalism,McGraw-Hill,New forms, CornellEastAsia Series, Cornell To order: Economic Reform Today, York, 1993,305 p. University East Asia Program, no. 59, Center for International Private En- To order: McGraw-Hill, New York, 1- 1993,236p. terprise, 1615 H Street, N. W, Wash- 800-2-MCGRAEW ington, D.C. 20062, tel. (202) 463- Richard D. Fisher and Jason E. 5901, fax (202) 887-3447. Russian Government Today: Direc- Bruzdzinski, U.S. and Asia Statistical tory ofRussian Officials, Russian In- Handbook-1993 Edition, The Heri- Former USS: Price Reform Driving formation Services, Inc., Vermont, June tage Foundation Asian Studies Center, AgriculturalRestructuring,Interna- 1993. Washington, D.C., 1993,83 p. tional Agriculture and Trade Reports, To order: The Heritage Foundation, U.S. DepartmentofAgriculture, Wash- To order: Russian Information Ser- 214 Massachusetts Avenue, N.E., ington,D.C., 1993,95p. vices, 89Main Street, #2, Montpelier, Washington, D.C. 20002, tel. (202) To order: tel. 1-800-999-6779 or Vermont, 05602, tel. 1-800-639-4301. 546-4400. (703) 834-0125, fax (703) 834-0110. The Fundamentals of a Business John P: Hardt and Richard Kaufmnan Plan, Russian Far East Update, Wash- (editors), The Former Soviet Union ington, D.C., 1993,24p. Newsletters/Bulletins in Transition (2 volumes), Congres- To order: Russian Far East Update, sional Research Service, Washington, Box 22126 Seattle, Washington SEEISurvey of East European D.C., February/May 1993,42 p. 98122, tel. (206) 447-2668, fax (206) Law, newsletter of the Columbia Uni- To order, call: (202) 788-3288. 628-0979. versity, Parker School. [Some topics from the May 1993 issue: Joseph C. Kun,In Search ofGuaran- Carmelo Mesa-Lago (editor), Cuba The New Russian Legal Framework tees: Hungary's Quest for Security, AftertheColdWar,UniversityofPitts- forthe nsurancelndustry; Analysis and ThePotomacPapers,Virginia, Septem- burghPress, Pennsylvania, 1993,383 p. Update of the Russian Free Economic ber 1993, 3 Op. Zones; Arbitration in Russian-Ameri- To order: The Potomac Foundation, Than, Mya, and Joseph L. H. Tan, can Trade.] .1311 Dolley Madison Boulevard, MVetnam's Dilemmas and Options: Information: Transnational Juris Suite 2-A, McLean, Virginia, tel. (703) The Challenge of Economic Transi- Publications, Inc., One Bridge Street, 506-1790, fax (703) 506-8085. tion in the 1990s, ASEAN Economic Irvington-on-Hudson, NY 10533, tel. - -Research Unit, Institute of Southeast 904-591-4288, fax 914-591-2688. Mark Tourevski and Eileen Morgan, Asian Studies, Singapore, 1993,306 p. Cutting the Red Tape: How West- To order: Institute of SoutheastAsian The ESMAP Connection, newsletter ern Companies Can Profit in the Studies, Heng Mui Keng Terrace, ofthe JointUNDP/WorldBankEnergy New Russia, New York Free Press, Pasir Panjang, Singapore 0511, Sector Management Assistance Pro- NewYork, 1993,310p. Singapore, tel. (65) 778-0955, fax gramn. Richard Lloyd and Peter Mut*, The (65) 778-1735. To order: The ESA!4P Connection, Russian Privatization Manual: The the World Bank, 1818 H Street, N. W, Russian Privatization'Manual: The Washington, D.C. 20433. Volume 4, Number 7 23 The World Bank/PRDTM Bibliography of Selected Articles Postsocialist Economies Poland: Warsaw Checks its Assets. The WhoisWhoinEasternEuropeanBanking. Banker(U.K) 143(812):41-49, October 1993. Euromoney(U.K.) 118-140, September 1993. Klaus, Vaclav. The Ten Commandments [for a systemic reform] Revisited. The Interna- Rege, S. SquanderingMay Kill Hungary. CIS andtheBaltics tionalEconomy (TU. S.) 7(5):36-3 9, Septem- Hungarian Economic Review (Hungary) ber/October 1993. August 1993 (pp.6-7). Baltic States: Kroons, Lats, Litas. Econo- mist(U.K.)July3-9,1993 (p.50). Rana,Pradumna B., and J. MalcoimDowling Rice, E.M. Public Administration inPost- Jr. Big Bang Bust [gradualism works], The Socialist Eastern Europe. PublicAdminis- Fairlamb, D. Brilliant, BeUigerent Boris International Economy (U.S.) 7(5):40-43, trationReview52(2):116-124,March/April Fedorov. Institutionallnvestor,intemational September/October 1993. 1992. edition(U.S.) 18 (9):94-101, September 1993. Centraland Eastern Europe Schmidt, K. M., and M. Schnitzer. Estonia Looks to the West. Euromoney Privatization and Managementlncentives (U.K.) June 1993 (pp.159-71 }1). Djelic,B. , and N. Tsukanova. VoucherAuc- intheTransitionPeriodinEasternEurope. tions:cACrucialSteptowardPrivatization JournalofComparativeEconomics (U.S.) DeficitBudgetforl993FinallyConfirmed. Russia's Emerging Market. RFE/RL Re- 17:264-87, June1993. The CurrentDigest 65(24):15-1 7,July 1 993. searchReport(J. S./Germany)2(30): 11-18, July23,1993. Slovenian Telecom: Full Steam Ahead. Ignon,L.TaiBreaklssueSplitsCabinet[in Eastern European-(former) Soviet Telecom Hungary]. BudapestSun (Hungary) 1(29): 1 - Jones, C. Bulgaria: Slowv Shake Down [of Report(U. S.)4(10): 10-1 1,October I, 1993. 3,September 16-22,1993. the banking system]. The Banker (U.K.) To order: in Hungary, teL (361) 268-1101, 143(812):36-40,Octoberl 993. Swinnen, J. Development of Agricultural fax (361) 268-1103; in U.S., tel. (800) 775- Policies in CentralandEasternEurope: An 0578. Marsh, V Privatization in Romania. Cen- Endogenous Policy Theory Perspective. tral European (U.K.) 25:37-41, September FoodPolicy (U.K.) 18:187-91, June 1993. Jakobson,M. Whattodo aboutRussia. World 1993. Monitor: The Christian Science Monitor Torok,A. Trends andMotives ofOrganiza- Monthly (U. S.) 6:44-49, May 1993. Marples,D. UJkraine,Belarus,andtheEn- tional Change in Hungarian Industry: A ergy Dilemma. RFE/RL Research Report ;Synchronic View. Journal ofComparative Kaffenberger, W. Privatization in Russia. (U.S.Germany) 2(27):39-44, July2,1993. Economics (U.S.) 17:366-84, June 1993. InternationalEconomicInsights (U.S.)4:44- 48,May-June .1993. Pataki, J. A New Era in Hungary's Social U.S.TradeandDevelopmentProjects.East- SecurityAdnsinistration.RFERLResearch ern EuropeFinance (U.S.) 4(10):2-1 1, May Korchemkin, M. Wasting Russia's Re- Report(U.S./Germany)2(27):57-60,July2, 1993 sources. EnergyEconomist(U.K.) 140:2-5, 1993. June 1993. Pleskovic, B. Regional Development and Ukraine: Galloping Towards the Brink. Transition in the FSU: A Comment. nter- Economist (U.K.)July 3-9,1993 (pp. 49-50). LendRussiaMoney and aToughAccoun- national Regional Science Review (Ue.S.) tant. New York Times (U.S.) July 7, 1993 p. : o15(3):297-305. Veljanovski, C. Privatization in Eastern A14. Europe. EconomicAffairs (U.K.) 13:16-17, June 1993. TRANSITION is a regular publication of the World Bank's Transition and Macro-Adjustnent Division, Policy Research Departnent. The findings, views, and interpretations published in the articles are those of the authors and should not be attributed to the World Bank or its affiliated organizations. Nor do any of the interpretations or conclusions necessarily represent official policy of the World Bank or of its Executive Directors or the countries they represent Richard Hirschler is the editor and production manager. Jennifer Walker is the research assistant and Desktop Publisher. If you wish to receive Transition, send name and address to Jennifer Walker, Room N-11023X, The World Bank, 1818 H Street NW, Washington, D.C. 20433, or call (202) 473-7466, or fax (202) 676-0439. hnformation on upcoming conferences on transforming economies, indication, of subjects of special interest to our readers, letters to the editor, and any other reader contributions are appreciated. 24 September, 1993