DUSHANBE, September 29, 2008, Asia-Plus — Innovation, Inclusion, and Integration: From Transition to Convergence in Eastern Europe and the Former Soviet Union, will be presented at the WB Dushanbe on September 30.
The report will be presented by Pradeep Mitra, Chief Economist, Europe & Central Asia Region, World Bank and author of the report, through video conference.
According to the report, productivity growth – the only viable route to lasting prosperity – depends on there being a supportive business environment, specifically one that delivers competition, a deep financial sector, good governance, and superior skills and infrastructure.
It found that key aspects of the business environment, such as competition and finance, that shape the behavior of firms are maturing and converging towards or have caught up with those in the more developed market economies of Western Europe. This augurs well for their future prospects. This convergence is more pronounced in the new member states of the European Union. The Commonwealth of Independent States (CIS) are followers, though some distance behind.
The report found that productivity growth and public transfers fed by rising fiscal revenue have moved 50 million people – out of 400 million – out of absolute poverty (those with an income of less than $2.15 a day in purchasing power parities) between 1998-99 and 2005-06. While nearly one in five people – or 85 million – lived in poverty around 1998/99, only one in twelve – or 35 million – did so around 2005/06.
For its part, innovation is needed because boosting productivity requires firms either to innovate, developing knowledge new to the world, or to absorb knowledge generated elsewhere. Productivity growth is higher in firms when they face stronger pressure from domestic competitors to develop new products and markets, when they can access more developed financial sectors, and when rules and regulations are more predictable.
Lastly, the countries in the region need to redouble their efforts at integrating with the global economy. While trade now accounts for 60 percent of GDP in the countries that joined the European Union in 2004, it pales at only 20 percent in the CIS countries. This calls for developing better trade facilitation and logistics in port efficiency, and undertaking customs reforms. And by lowering costs through liberalized banking, telecommunications, and transport services, this can make countries’ exports more competitive.
Domestic and external factors worked in harmony as the new member states of the European Union used the anchor of prospective EU accession to lock in the reforms of policies and institutions necessary for rapid productivity growth and deeper integration into the world economy.
