C O N T E N T Salternativi.unwe.bg/alternativi/br24/Body_br_01_2008_en.pdf · Studentski grad “Hristo Botev ... First vice-rector Assoc. Prof. Stati Statev, ... a en on to human

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Academic Recognition

Prof. Boyan Biolchev – Awarded with the Memorable Sign of UNWE 3

Gernot Erler – Doctor Honoris Causa of UNWE 5

Scientific Activities

International Scientific ConferenceEconomic Cooperation in South-Eastern Europe: Problems and Prospects 7

Articles

Determinants of Economic GrowthProf. George Petrakos, Paschalis Arvanitidis 11

Cooperation in South-Eastern Europe as a Means to Promote the European Prospects of the RegionAssoc. Prof. Dinko Dinkov, Ph.D. 31

Study on the Health Systems’ Efficiency in Five South-East European CountriesAssoc. Prof. Evgenia Delcheva, Ph.D. 36

The Retail InternationalizationAssoc. Prof. Septemvrina Kostova, Ph.D. 42

Interaction, Perceptions and Policies in the Boundaries of European Union: The Case of the Northern Greek Cross Border ZoneLefteris Topaloglou 60

Evolution of European Union’s Position on the Accession of the Western BalkansTzvetelina Iantcheva 82

Democratization and Growth in South East European Transition CountriesAssoc. Prof. Matilda Alexandrova, Ph.D. 90

The EU Energy Policy – Current State and Perspectives for DevelopmentSvetla Boneva, Ph.D. 101

International Railway Transport in South-Eastern Europe – Requirements and Perspectives Carriers FaceChief Assist. Prof. Christina Nikolova 115

Tutorial on Energy Efficiency to Managers of the Bulgarian IndustryChief Assist. Prof. Nikolay Shterev, Ph.D.Assist. Prof. Dimitar Blagoev 128

The Cultural Industries in the Countries of Southeast Europe and their Economic Impact in the Context of Social TransformationTsveta Andreeva 139

List of Publications 154

The University of National

and World Economy 157

Guide for Authors 159

C O N T E N T S :

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E c on om i c A l t e r n a t i v e s

Address of the editorial office:

Sofi a 1700Studentski grad “Hristo Botev”UNWE, offi ce 5004Tel.: (+3592) 81-95-435, 862-97-93e-mail: [email protected]

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Editor-in-chief:

Prof. Ivan Georgiev, D.Sc.

Editorial board: Prof. Ivan Georgiev, D.Sc. (UNWE) – Head

Prof. Blagoi Kolev, Ph.D. (UNWE)

Prof. Vassil Manov, D.Sc. (UNWE)

Associate Prof. Georgi Genov, Ph.D. (UNWE)

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(Ins tute of Economics at the Bulgarian Academy of Sciences)

Prof. Pano Lulanski, D.Sc.

Prof. Plamen Mishev, D.Sc.

Associate Prof. Plamen Oresharski, Ph.D. (UNWE)

Prof. Hris na Balabanova, Ph.D. (UNWE)

Prof. Hristo Hristov, Ph.D. (UNWE)

Economic Alterna ves, issue 1, 2008

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Prof. Boyan Biolchev – Awarded with the Memorable Sign of UNWE

Academic Recogni on

Prof. Borislav Borisov, Ph.D. – Rector of UNWE, and Prof. Boyan Biolchev, D.Sc.

4 Economic Alterna ves, issue 1, 2008

Academic Recogni on

Prof. Borislav Borisov, Ph.D. – Rector of UNWE,

Prof. Boyan Biolchev, D.Sc. and Vice Rector Assoc. Prof. Yordanka Vladimirova, Ph.D.

Prof. Blagoy Kolev, Ph.D. and Assoc. Prof. Stoyan Alexandrov, Ph.D.

5

Gernot Erler – Doctor Honoris Causa of UNWE

Academic Recogni on

First vice-rector Assoc. Prof. Stati Statev, Ph.D., Gernot Erler, Doctor Honoris Causa of UNWE

Speech of Gernot Erler,

Doctor Honoris Causa of UNWE


Academic Recogni on

Participants in the ceremony of awarding of Gernot Erler with the memorable sign of UNWE

Participants in the ceremony

7

International Scientific Conference

Economic Cooperation in South-Eastern Europe: Problems and Prospects

Scien fi c Ac vi es

The Vice-rector Prof. Plamen Mishev, D.Sc. is opening the conference


Scien fi c Ac vi es

Assoc. Prof. Evgenia Delcheva, Ph.D. Assoc. Prof. Stati Statev, Ph.D. – First vice-rector

Prof. Ivan Georgiev, D.Sc. – Editor-in-chief of Economic Alternatives Journal

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Scien fi c Ac vi es

Assoc. Prof. Dinko Dinkov, Ph.D.

Prof. George Petrakos


Scien fi c Ac vi es

Participants in the conference

Mrs Kapka Paleykova – Director of Scientific Activities

and the participant in the conference Kamelia Assenova

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Determinants of Economic Growth

* Department of Planning and Regional Development** Department of Economics

Prof. George Petrakos*and Paschalis Arvanitidis**University of Thessaly

Pedion Areos, Volos, 38334, Greece

Email: [email protected]

Summary: Over the last two to three decades a wide range of studies has inves gated the determinants of economic growth. Using diff ering conceptual and methodological approaches, these studies have placed emphasis on a number of explanatory parameters and off ered various insights to the process of economic growth. The current paper draws on a ques onnaire survey addressed to various experts (academics, policy makers and business people), to iden fy the factors that either support or inhibit growth poten al and to assess their degree of signifi cance. A number of points emerge. First, that alongside conven onal determinants, it is also the poli cal and ins tu onal aspects of an economy that play an important role in advancing growth dynamics. Second, determinants infl uence at a diff erent degree each economy depending on the level of development achieved. As such, there are clear indica ons that policy priori es should be diff erent between developed and developing countries. Third, despite the previous point, there are some basic elements which are deemed important for economic growth

independent of the level of development an area exhibits.

Key words: economic growth, economic dynamism, determinants, survey, experts’ views

Acknowledgements: This paper draws on a wider research project tled “Dynamic Regions in a Knowledge-Driven Global Economy: Lessons and Policy Implica ons for the European Union” (DYNREG) which is fi nanced by the EU 6-th Framework Program.

1. Introduction

Over the last two decades the determinants of economic growth have a racted increasing a en on in both

theore cal and applied research. Yet, the process underlying economic performance is inadequately conceptualised and poorly understood, something, which can be partly a ributed to the lack of a generalised or unifying theory, and the myopic way conven onal economics approach the issue (Artelaris et al, 2007).

Despite the lack of a unifying theory, there are several par al theories that discuss the role of various factors in determining economic growth. For instance, the neoclassical perspec ve, which is based on Solow’s growth model, has emphasised the importance of investment and, the more recent, theory of endogenous growth developed by Romer and Lucas has drawn

a en on to human capital and innova on capaci . Furthermore, important contribu ons on economic development have been provided by Myrdal’s cumula ve causa on theory, and by the New Economic Geography school. In addi on, other explana ons have highlighted the

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signifi cant role non-economic (in the conven onal sense) factors play on economic performance. These developments gave rise to a discussion that dis nguishes between ‘proximate’ and ‘fundamental’ (or ‘ul mate’) sources of growth. The former takes into account issues such as accumula on of capital, labour and technology while the la er places emphasis on ins tu onal structures, legal and poli cal systems, socio-cultural factors, and so on.

Theore cal developments have been accompanied by a growing number of empirical studies. Ini ally, research focused on the issue of economic convergence/divergence, since this could provide a test of validi between the main growth theories (i.e. the neoclassical and the endogenous growth theory). Eventually, focus shi ed to factors determining economic growth. Seminal studies in this fi eld include those conducted by Kormendi and Meguire (1985), Grier and Tullock (1989) and, especially, Barro (1991). This second ‘wave’ of empirical studies has been facilitated by the development of larger and richer databases (such as the Penn World Tables - PWT) and more advanced sta s cal and econometric techniques (mainly cross-sec onal and panel-data ones), which have enabled the iden fi ca on of determinants of economic growth with higher precision and confi dence. Finally, it is worth emphasising that due to the lack of a unifying theory on economic growth, a substan al volume of empirical research has mul -theore cal bases. This means that studies draw on several theore cal frameworks and examine factors highlighted by many paradigms. As a result fi ndings are o en contradictory and far from conclusive.

This paper draws on a ques onnaire survey addressed to various experts worldwide (academics, policy makers and business people), to explore their views on the factors underlying economic dynamism. Economic dynamics refers to the poten al an area has for genera ng and

maintaining high rates of economic performance. In par cular the research has set the following objec ves:

to iden fy dynamic regions in a global scale,1. to iden fy the key factors advancing 2.

economic dynamism,to iden fy the main factors that hinder the 3.

development process, and, overall, to assess the degree of infl uence of the 4.

various determinants that have been discussed in the literature.

The results of this research are expected to assist assessment of our current knowledgebase, to iden fy misconcep ons and knowledge gaps and to indicate direc on for further research on the issue of economic growth and development.

The structure of the paper is as follows. The next sec on briefl y presents the main economic growth theories and summarizes the most important determinants of economic growth that have been iden fi ed in the literature. Then, an overview of the employed research method is provided, following a short presenta on of the research project that the paper draws on. The fourth sec on discusses the results of the survey providing answers to the research ques ons set above, and the fi nal sec on concludes the paper summarising the key fi ndings.

2. Main theories and determinants of economic growth

2.1 Theoretical perspectives

The star ng point of conven onal economic growth theorisa on is the neoclassical

model of Solow (1956). The basic assump ons of the model are: constant returns to scale, diminishing marginal produc vi of capital, exogenously determined technical progress and subs tutabili between capital and labour. As

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a result the model highlights the savings or investment ra o as important determinant of short-run economic growth. Technological progress, though important in the long-run, is regarded as exogenous to the economic system and therefore it is not adequately explored by this model. Turning to the issue of convergence/divergence, the model predicts convergence in growth rates on the basis that poor economies will grow faster compared to rich ones.

The role of technological progress as a key driver of long–run economic growth has been put in scru ny by more recent studies, which accept constant and increasing returns to capital. These theories, known as endogenous growth theories, propose that the introduc on of new accumula on factors, such as knowledge, innova on, and the like, will induce self-maintained economic growth. Triggered by Romer’s (1986) and Lucas’s (1988) seminal studies1, work within this framework highlighted three signifi cant sources of growth: new knowledge (Romer, 1990, Grossman and Helpman, 1991), innova on (Aghion and Howi , 1992) and public infrastructure (Barro, 1990)2. As a result, and in contrast to the neoclassic counterpart, policies are deemed to play a substan al role in advancing growth on a long-run basis. Turning to the convergence/divergence debate, the endogenous growth models suggest that convergence would not occur at all - mainly due to the fact that there are increasing returns to scale.

Another strand of literature, perhaps less infl uen al, is the growth theory of cumula ve

causa on developed by Myrdal (1957) and Kaldor (1970). Essen al to this theory is the argument of ‘cumula ve causa on’ in which ini al condi ons

determine economic growth of places in a self-sustained and incremental way. As a result, the emergence of economic inequali es in space is the most possible outcome. Although there are centrifugal eff ects (posi ve spillovers) spreading growth from the more to the less advanced economies, they are incapable of bringing the system into a state of balance if market forces alone are le at work. In other words, economic policy has to come into play to correct those imbalances. In contrast to theories men oned above, theories of cumula ve causa on have a medium term view and o en described as “so ” development theories due to a lack of mathema cal rigour (Plummer and Taylor, 2001). However, certain similari es are evident between the cumula ve causa on approach and the theory of endogenous growth.

Similarly to the cumula ve causa on theory, the New Economic Geography (NEG) asserts that economic growth tends to be an unbalance process favouring the ini ally advantaged economies (Krugman, 1991; Fujita et al, 1999). However, in contrast to the former, this strand of literature develops a formalised system of explana ons which places explicit emphasis on the compound eff ects of increasing returns to scale, imperfect compe on and non-zero transporta on costs. Central to this theory is the view that economic ac vi tends to agglomerate in specifi c places and to choose loca ons with a large local demand resul ng in a self-reinforcing growth process. The spa al distribu on of economic ac vi can be explained by agglomera on (or centripetal) forces and dispersion (or centrifugal) forces. The former include backward and forward linkages of fi rms, externali es and scaled economies while the

1 Romer (1986) presented a formal model that yields posi ve, long-run growth rates on the basis of technological progress driven by the role of externali es, arising from learning by doing and knowledge spillover. Lucas (1988) introduced a model in which human capital plays a fundamental role in perpetua ng economic growth and preven ng diminishing returns to physical capital accumula on. 2 It is important to note that these factors have already been iden fi ed in the literature before, but it is the fi rst me that they are formalised and modelled.

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la er include nega ve externali es, transport costs and intensifi ca on of compe on. Consequently, NEG is mainly concerned with the loca on of economic ac vi , agglomera on and specializa on rather than with economic growth per se. However, regional growth outcomes can be inferred from its models.

From a more macro perspec ve, other theore cal approaches have emphasised the signifi cant role non-economic factors (at least in the conven onal sense) play on economic performance. Thus, ins tu onal economics has underlined the substan al role of ins tu ons (Ma hews, 1986; North, 1990; Ju ing, 2003), economic sociology has stressed the importance of socio-cultural factors (Granove er, 1985; Knack and Keefer, 1997), poli cal science has focused its explana on on poli cal determinants (Lipset, 1959; Brune i, 1997) and others have placed emphasis on role played by geography (Gallup et al, 1999) and demographic characteris cs (Brander and Dowrick, 1994; Kalemli-Ozcan, 2002).

2.2 Determinants of economic performance

A wide range of studies has inves gated the factors underlying economic growth. Using diff ering conceptual and methodological viewpoints, these studies have placed emphasis on a diff erent set of explanatory parameters and off ered various insights to the sources of economic growth.

Investment is the most fundamental determinant

of economic growth iden fi ed by both neoclassical and endogenous growth models. However, in the neoclassical model investment has impact on the transi onal period, while the endogenous growth models argue for more permanent eff ects. The importance a ached to investment by these theories has led to an enormous amount of empirical studies examining the rela onship between investment and economic growth (see

for instance, Kormendi and Meguire, 1985; De Long and Summers, 1991; Levine and Renelt, 1992; Mankiw, 1992; Auerbach et al, 1994; Barro and Sala-i-Mar n, 1995; Sala-i-Mar n, 1997; Easterly, 1997; Bond et al, 2001; Podrecca and Carmeci, 2001). Nevertheless, fi ndings are not conclusive.

Human capital is the main source of growth in several endogenous growth models as well as one of the key extensions of the neoclassical model. Since the term ‘human capital’ refers principally to workers’ acquisi on of skills and know-how through educa on and training, the majori of studies have measured the quali of human capital using proxies related to educa on (e.g. school-enrolment rates, tests of mathema cs and scien fi c skills, etc.). On these grounds, a large number of studies has found evidence that an educated labour force is a key determinant of economic growth (see Barro, 1991; Mankiw et al, 1992; Barro and Sala-i-Marin, 1995; Brune i et al, 1998, Hanushek and Kimko, 2000). However, there have been other scholars who have ques oned these fi ndings and, consequently, the importance of human capital as substan al determinant of economic growth (e.g. Levine and Renelt, 1992; Benhabib and Spiegel, 1994; Topel, 1999; Krueger and Lindahl, 2001; Pritche , 2001).

Innova on and R&D ac vi es can play a major role in economic progress increasing produc vi and growth. This is due to increasing use of technology that enables introduc on of new and superior processes and products. This role has been stressed by various endogenous growth models, and the strong rela on between innova on and/or R&D and economic growth has been empirically affi rmed by many studies (see Fagerberg, 1987; Lichtenberg, 1992; Ulku, 2004).

Economic policies and macroeconomic condi ons have, also, a racted much a en on in terms of

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its role to economic performance (see Kormendi and Meguire, 1985; Grierand and Tullock, 1989; Barro, 1991, 1997; Fischer, 1993; Easterly and Rebelo, 1993; Barro and Sala-i-Mar n, 1995) since they set the framework within which economic growth occurs. The literature has examined a number of economic policies that may aff ect economic performance, including investments in human capital and infrastructure, improvement of poli cal and legal ins tu ons and so on; however there is no consensus within the scien fi c communi with regard to which policies are more conduc ve to growth. In turn, sound macroeconomic condi ons are seen as necessary, though not suffi cient, condi ons for economic growth (Fischer, 1993). In par cular, a stable macroeconomic environment may favour growth through reduc on of uncertain , whereas macroeconomic instabili may have a nega ve impact on growth through its eff ects on produc vi and investment (i.e. higher risk). Several macroeconomic factors with impact on growth have been iden fi ed in the literature, but considerable a en on has been placed on infl a on, fi scal policy, budget defi cits and tax burdens.

Openness to trade is another important determinant of economic performance. There are sound theore cal reasons for arguing that there is a strong and posi ve link between openness and economic growth: openness facilitates the transfer of technology and the diff usion of knowledge, and, by increasing exposure to compe on, contributes to exploita on of compara ve advantage. In turn, there is a sizeable and growing empirical literature that has explored this rela onship in

prac ce3. Findings, however, are inconclusive. On the one hand, there are many researchers who have found that economies which are open to both trade and capital fl ows exhibit higher GDP per capita and they grow faster (Dollar, 1992, Sachs and Warner, 1995, Edwards, 1998, Dollar and Kraay, 2000). On the other hand, others have disputed these fi ndings raising concerns about the robustness of the developed models and highligh ng the methodological and measurement problems they encounter (see for example, Levine and Renelt, 1992; Rodriguez and Rodrik, 1999; Vamvakidis, 2002).

Foreign Direct Investment (FDI) has recently played a crucial role of interna onalising economic ac vi and it is a primary source of technology transfer and economic growth. This major role is stressed in several models of endogenous growth theory. The empirical literature that examined the impact of FDI on growth has provided more-or-less consistent fi ndings affi rming a signifi cant posi ve link between the two (e.g. Borensztein et al, 1998; Hermes and Lensink, 2000; Lensink and Morrissey, 2006).

Another important source of growth highlighted in the literature is the ins tu onal framework. Although the important role ins tu ons4 play in shaping economic performance has been acknowledged long me ago (Lewis, 1955, Ayres, 1962), it is not un l recently that such factors have been examined empirically in a more consistent way (see Knack and Keefer, 1995; Mauro, 1995; Hall and Jones, 1999; Rodrik, 1999; Acemoglu et al, 2002). Rodrik (2000) highlights

fi ve key ins tu onal structures (proper rights, regulatory ins tu ons, ins tu ons for

3 Openness is usually measured by the ra o of exports to GDP. However, another measure, maybe more appropriate, is proposed by Sachs and Warner (1995). According to this, an economy is considered to be quite open if it sa sfi es the fol-lowing fi ve criteria: (a) average quota and licensing coverage of imports are less than 40%, (b) average tariff rates are below 40%, (c) the black market premium is less than 20%, (d) no extreme controls are imposed on exports, and (e) the country is not under a socialist regime. 4 According to North (1990) the term ‘ins tu ons’ refers to the formal rules, informal constraints and their enforcement characteris cs that together shape human interac on.

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macroeconomic stabiliza on, ins tu ons for social insurance and ins tu ons of confl ict management), which, he argues, not only exert direct infl uence on economic growth, but also aff ect other determinants of growth such as the physical and human capital, the investment decisions and technological developments. It is on these grounds that Easterly (2001) argued that none of the tradi onal factors would have an impact on economic performance if there were no stable and trustworthy ins tu onal environment to sustain the economy. Measures of ins tu onal quali frequently used in the empirical literature include proper rights and contract securi , risk of expropria on, level of corrup on, legal certain and level of bureaucracy (Knack and Keefer, 1995).

The rela on between poli cal factors and economic growth has come to the fore by the work of Lipset (1959) who examined how economic development aff ects the poli cal regime. Since then, research on these issues has proliferated making clear that poli cal issues aff ect to a great extent the economy and its poten al for growth (Kormendi and Meguire, 1985; Scully, 1988; Grier and Tullock, 1989; Lensink et al, 1999; Lensink, 2001). For example, a highly unstable poli cal regime brings on uncertain , discouraging investment and, consequently, hindering economic poten al. But it is not only the stabili of the regime that infl uences growth dynamics; it is also its pe. For instance, the level of democracy is found to be associated with economic growth; though this rela on is much more complex. Democracy may both retard and enhance economic growth depending on the various channels that it passes through (Alesina et al, 1994). Over the years, there had been employed a number of variables in an eff ort to measure the quali of the poli cal environment. In turn, Brune i (1997) has put forward fi ve categories of relevant variables that comprehensively describe the poli cal environment: democracy, government stabili ,

poli cal violence, poli cal vola li and subjec ve percep on of poli cs.

Recently there has been a growing interest in how various social-cultural factors may aff ect growth (see Granato et al, 1996; Hun ngton, 1996; Temple and Johnson, 1998; Landes, 2000; Inglehart and Baker, 2000; Zak and Knack, 2001; Barro and McCleary, 2003). Trust is an important variable that belongs in this category. Trus ng economies are expected to have stronger incen ves to innovate, to accumulate physical capital and to exhibit richer human resources, all of which are conduc ve to economic growth (Knack and Keefer, 1997). Ethnic diversi , in turn, may have a nega ve impact on growth by reducing trust, increasing polariza on and promo ng the adop on of policies that have neutral or even nega ve eff ects in terms of growth (Easterly and Levine, 1997). Several other social-cultural factors have been examined in the literature, such as ethnic composi on and fragmenta on, diversi in language or in religion, beliefs, a itudes and the like, but their rela on to economic growth seems to be indirect and unclear. For instance cultural diversi may have either a nega ve impact on growth due to emergence of social uncertain or even to social confl icts, or a posi ve eff ect since it may give rise to a pluralis c environment where coopera on can fl ourish.

The important role of geography on economic growth has been long recognized. Though, over the last years there has been an increased interest on these factors since they have been properly

formalised and entered into models (Gallup et al, 1999). Researchers have used numerous variables as proxies for geography including absolute values of la tude, distances from the equator, propor on of land within certain distance from the coast, average temperatures and average rainfall, soil quali and disease ecology (Hall and Jones, 1999, Rodrik et al, 2002, Easterly and Levine, 2003). There have

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been a number of recent empirical studies (Sachs and Warner, 1997, Bloom and Sachs, 1998; Masters and McMillan, 2001; Armstrong and Read, 2004) affi rming that natural resources, climate, topography and ‘landlockedness’ have a direct impact on economic growth aff ec ng (agricultural) produc vi , economic structure, transport costs and compe veness. However, others (e.g. Rodrik et al, 2002; Easterly and Levine, 2003) found no eff ect of geography on growth a er controlling for ins tu ons.

The rela onship between demographic trends and economic growth has a racted a lot of interest par cularly over the last years, yet many demographic aspects remain today unexplored. Of those examined, popula on growth, popula on densi , migra on and age distribu on, seem to play the major role in economic growth (Kormendi and Meguire, 1985; Dowrick, 1994; Kelley and Schmidt, 1995; Barro, 1997; Bloom and Williamson, 1998; Kelley and Schimdt, 2000). High popula on growth, for example, could have a nega ve impact on economic growth infl uencing the dependency ra o, investment and saving behaviour and quali of human capital. The composi on of the popula on has also important implica ons for growth. Large working-age popula ons are deemed to be conduc ve to growth, in contrast to popula ons with many young and elderly dependents. Popula on densi , in turn, may be posi vely linked with economic growth as a result of increased specializa on, knowledge diff usion and so on. Despite these growing fi ndings, however, conclusions are not defi nite, since there have been studies repor ng no (strong) correla on between economic growth and demographic variables (e.g. Grierand and Tullock, 1989; Pritche , 2001).

3. Instrument design and surveycharacteristics

3.1 The DynReg project

The research from which this paper emanates is part of a wider research project funded

by the Sixth Framework Programme set up by the European Union. The project is known with the acronym DYNREG 5 and its aim is to iden fy economically dynamic regions in a worldscale and to specify the factors that determine growth poten al. The DYNREG project brings together ten academic ins tu ons from nine countries. These are: the Economic and Social Research Ins tute (Ireland), the Free Universi of Amsterdam (The Netherlands), the Free Universi of Brussels (Belgium), the London School of Economics (UK), the “Luigi Bocconi” Universi (Italy), the Universi of Bonn (Germany), the Universi of Cambridge (UK), the Universi of Economics and Business Administra on (Austria), the Universi of Ljubljana (Slovenia), and the Universi of Thessaly (Greece).

3.2 The survey structure

The current paper draws on a ques onnaire survey addressed to various experts worldwide (academics, policy makers and business people), to explore their views on the factors underlying economic dynamism. Economic dynamics refers to the poten al an area has for genera ng and maintaining high rates of economic performance.

Survey ques ons were pre-tested in a pilot study conducted in the Universi of Thessaly, Department of Planning and Regional Development, enabling fi ne-tuning of the instrument. The fi nal ques onnaire consists of fi ve parts. The fi rst part provides instruc ons

5 Its full tle is ‘Dynamic Regions in a Knowledge – Driven Global Economy: Lessons and Policy Implica ons for the E.U.

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and defi ni ons; while the second part asks respondents to iden fy fi ve wider regions in the world (from the twen specifi ed6) that are expected to exhibit economic dynamism in the next fi een years. The third part assesses which factors are regarded as important for economic dynamism u lising Likert pe ques ons. Of par cular importance is the last of four ques ons, which a empts to explore, which combina on of opposite characteris cs promotes economic dynamism. The fourth part evaluates the available theore cal backgrounds and research methods in terms of their abili to adequately explain economic dynamism at any spa al level, while the fi nal part of the ques onnaire gathers socioeconomic informa on of the respondents, such as age, gender, educa on and country of residence.

Surveys were held during the second half of 2006. Ques onnaires were distributed by each DYNREG project partner to 30 ‘knowledgeable’ individuals in their country, 10 academics, 10 highly ranked offi cials of the public sector, and 10 highly ranked business people. Due to their posi on, these individuals were able to have an ‘informed’ perspec ve or to represent diff erent viewpoints concerning regional economic dynamism. Moreoever, addi onal ques onnaires were collected from the par cipants of the 46-th Congress of the European Regional Science Associa on (ERSA) held in Volos between 30 August and 3 September 2006. All responses were validated and double-checked by both the DYNREG project partners and the authors. Then they were coded and analysed using mainly descrip ve sta s cs.

Table 1: Sample characteristics

Average Age 39

Gender

Male 226

Female 81

N/A 6

Educa on

Less than 12 years 1

High school 12

Universi /College 71

Postgraduate degree 109

Doctorate 115

N/A 5

Occupa on

Public sector 91

Private sector 104

Academia 104

N/A 14

6 These are: North America, Central America, South America, European core, European Union South, European Union New Member States, Eastern and South-Eastern Europe, Russia, North Africa, West Africa, Central Africa, East Africa, South Africa, Middle East, Central Asia, India, China, Japan, South-East Asia and Oceania.

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4. Analysis and findings

4.1 Response rate and composition of respondents

A total of more than 500 distributed ques onnaires yielded 313 properly

completed responses; a response rate of about 63%. The respondents were mainly males (72%), reaffi rming the low penetra on women have on highly ranked posi ons (see Table 1). The average age of the sample was about 39 years old. Most respondents (37%) have completed a doctorate, while 35% hold a postgraduate degree. The sample was about evenly divided between those working in the academia, (33%), in the private sector (33%) and in the public sector (30%).

4.2 Regions with potential for economic dynamism

The vast majori of the respondents (86%) opine that China is by far the place with the highest poten al for economic growth in the next fi een years, followed by India (71%). Third comes the EU New Member States voted by only 49% of the people surveyed. Interes ngly the European Core comes seventh in the rank whereas the South EU countries are ranked thirteenth just above Central America and below the Middle East area. As expected, African countries are at the bo om of the rank (Table 2).

Table 2: Areas expected to exhibit economic dynamism (next 15 year)

Rank Countries/ Regions %

1 China 86.26

2 India 71.25

3 European Union New Member States 48.56

4 South-East Asia 37.06

5 North America 36.42

6 Russia 35.14

7 European Core 31.63

8 Eastern and South-Eastern Europe 28.75

9 South America 22.04

10 Japan 15.65

11 Middle East 8.63

12 Central Asia 8.31

13 European Union South 7.03

14 Central America 6.71

15 South Africa 6.07

16 North Africa 5.11

17 Oceania 4.79

18 East Africa 2.24

19 West Africa 1.28

20 Central Africa 0.96

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4.3 Factors affecting economic dynamism

The two factors that people regarded as the most important in terms of their role to economic growth are high quali of human capital (54% of respondents) and high technology, innova on and R&D (50% of respondents). Following these two, the top ten places, out of the twen specifi ed factors in the ques onnaire, are taken up by the following: stable poli cal environment (41%), high degree of openness (39%), secure formal ins tu ons (legal system, proper rights, tax system, fi nance system) (37%), good infrastructure (33%), capaci for adjustment (32%), specializa on in knowledge and capital intensive sectors (30%), signifi cant FDI (23%), and free market economy (i.e. low state interven on) (22%). Interes ngly,

natural resources, geography, demography and urbanisa on are not qualifi ed in the top-ten factors (Table 3).

Similarly, the two main obstacles to economic dynamism, as voted by more than half of the people surveyed, are unstable poli cal environment (57%) and the low quali of human capital (51%) (Table 4). Following them, the rest of the top-ten factors viewed as obstacles are: insecure formal ins tu ons (i.e. legal system, proper rights, tax system, fi nance system) (48%), high levels of public bureaucracy (42%), low technology, innova on, R&D (38%), low degree of openness (36%), inadequate infrastructure (35%), poor macroeconomic management (31%), high degree of state interven on (24%), and low FDI (18%).

Table 3: Factors advancing economic dynamism

Rank Factors %

1 High quali of human capital 53.67

2 High technology, innova on, R&D 50.16

3 Stable poli cal environment 40.58

4 High degree of openness (networks, links) 38.98

5 Secure formal ins tu ons (legal system, proper rights, tax system, fi nance system) 36.74

6 Good infrastructure 32.91

7 Capaci for adjustment (fl exibili ) 31.63

8 Specializa on in knowledge and capital intensive sectors 29.71

9 Signifi cant Foreign Direct Investment 23.32

10 Free market economy (low state interven on) 22.36

11 Rich natural recourses 22.04

12 Robust macroeconomic management 21.73

13 Low levels of public bureaucracy 18.21

14 Favourable demographic condi ons (popula on size, synthesis and growth) 18.21

15 Favourable geography (loca on, climate) 13.10

16 Strong informal ins tu ons (culture, social rela ons, ethics, religion) 12.46

17 Signifi cant urban agglomera ons (popula on and economic ac vi es) 11.82

18 Capaci for collec ve ac on (poli cal pluralism and par cipa on, decentraliza on) 8.31

19 Random factors (unpredictable shocks) 4.79

20 Others 2.56

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Table 4: Factors hindering economic dynamism

Rank Factors %

1 Unstable poli cal environment 57.19

2 Low quali of human capital 51.12

3 Insecure formal ins tu ons (legal system, proper rights, tax system, fi nance system) 48.24

4 High levels of public bureaucracy 42.49

5 Low technology, innova on, R&D 37.70

6 Low degree of openness (fewer networks and links) 35.78

7 Inadequate infrastructure 34.82

8 Poor macroeconomic management 30.99

9 High degree of state interven on 23.96

10 Low Foreign Direct Investment 17.57

11 Rigid formal and informal ins tu ons 16.61

12 Unfavourable geography (loca on, climate) 14.70

13 Specializa on in labour intensive sectors 12.46

14 Lack of natural recourses 12.14

15 Weak informal ins tu ons (culture, social rela ons, ethics, religion) 11.50

16 Unfavourable demographic condi ons (popula on size, synthesis and growth) 10.22

17 Lack of urban agglomera ons (popula on and economic ac vi es) 9.90

18 Inabili for collec ve ac on (no poli cal pluralism, centraliza on) 9.27

19 Random factors (unpredictable shocks) 5.75

20 Others 0.64

Table 5: Factors advancing economic dynamism in China

Rank Factors %



3 Stable poli cal environment 41.39



Table 6: Factors hindering economic dynamism in China

Rank Factors %



3 Insecure formal ins tu ons (legal system, proper rights, tax system, fi nance system) 49.45



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Table 7: Factors advancing economic dynamism in the European Core

Rank Factors %





5 Specializa on in knowledge and capital intensive sectors 38.14

Table 8: Factors hindering economic dynamism in the European Core

Rank Factors %

1 Insecure formal ins tu ons (legal system. proper rights. tax system. fi nance system) 56.70





Table 9: The degree of influence of each specific factor on the economic dynamism

Developed countries

Developing countries

Factors Average Score

Favourable geography (loca on. climate) 4.00 6.07

Rich natural recourses 4.13 6.52

Robust macroeconomic management 6.22 6.06

High degree of openness (networks, links) 7.09 6.31

Specializa on in knowledge and capital intensive sectors 7.37 4.81

Free market economy (low state interven on) 6.38 5.42

Low levels of public bureaucracy 6.12 5.96

Stable poli cal environment 6.61 7.02

Capaci for collec ve ac on (poli cal pluralism, par cipa on, decentraliza on) 5.71 5.12

High quali of human capital 7.78 5.91

Good infrastructure 7.13 6.28

Signifi cant Foreign Direct Investment 5.28 6.90

Secure formal ins tu ons (legal system, proper rights, tax and fi nance systems) 6.97 6.71

Strong informal ins tu ons (culture, social rela ons, ethics, religion) 5.47 5.58

Capaci for adjustment (fl exibili ) 6.70 5.98

Signifi cant urban agglomera ons (popula on and economic ac vi es) 5.71 5.77

Favourable demographic condi ons (popula on size, synthesis and growth) 5.35 5.93

High technology, innova on, R&D 7.89 5.31

Random factors (unpredictable shocks) 3.80 4.75

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23

7 The numbers in the parentheses indicate their score out of ten maximum.

The respondents who selected China as the most dynamic region worldwide, deemed that the fi ve most important factors which would support its poten al are: high quali human capital, high technology, innova on and R&D, stable poli cal environment, secure formal ins tu ons, and high degree of openness (see Table 5). In turn those factors that could hinder its dynamism are regarded to be instabili in the poli cal environment, inadequate quali of human capital, insecure formal ins tu ons, high levels of public bureaucracy and low innova on capaci (see Table 6).

In turn, conduc ve factors for economic dynamism in the European Core region are regarded to be (see Table 7): high technology, innova on and R&D, high quali human capital, high degrees of openness, secure formal ins tu ons, and specializa on in knowledge and capital intensive sectors. Factors that may retard growth in this area are related to insecure (formal) ins tu ons, unstable poli cal environment, decreased quali of human capital, increased public bureaucracy and low levels of technology, innova on and R&D (Table 8).

4.4 The degree of influence of specific factors on the economic dynamism of regions

Respondents deemed that each factor infl uences at a diff erent degree the economic dynamism of places depending on whether they belong to the developed or the developing group of countries. The factors that are regarded as the most infl uen al for the developed countries are ranked as follows7 (see Table 9): high technology, innova on and R&D (7.9), high quali of human capital (7.8), specializa on in knowledge and capital intensive sectors (7,4), good infrastructure (7,1), high degree of openness (7.1), secure formal ins tu ons

(i.e. legal system, proper rights, tax system, fi nance system) (7.0), capaci for adjustment (6.7), stable poli cal environment (6.6), free market economy (i.e. low state interven on) (6.4), robust macroeconomic management (6.2), low levels of public bureaucracy (6.1), capaci for collec ve ac on (5.7), signifi cant urban agglomera ons (5.7), strong informal (i.e. socio-cultural) ins tu ons (5.5), favourable demographic condi ons (5.3), signifi cant FDI (5.3), rich natural recourses (4.1), favourable geography (4.0), and random factors such as unpredictable shocks (3.8).

In turn, the factors that are regarded as the most infl uen al for the developing countries are ranked as follows: stable poli cal environment (7.0), signifi cant FDI (6.9), secure formal ins tu ons (such as legal system, proper rights, etc.) (6.7), rich natural recourses (6.5), high degree of openness (6.3), good infrastructure (6.3), favourable geography (6.1), robust macroeconomic management (6.1), capaci for adjustment (6.0), low levels of public bureaucracy (6.0), favourable demographic condi ons (5.9), high quali of human capital (5.9), signifi cant urban agglomera ons (5.8), strong informal (socio-cultural) ins tu ons (5.6), free market economy (5.4), high technology, innova on and R&D (5.3), capaci for collec ve ac on (5.1), specialisa on in knowledge and capital intensive sectors (4.8), and random factors (i.e. unpredictable shocks) (4.8) (Table 9).

What becomes apparent from the above exposi on is that each factor aff ects economies to a diff erent degree depending on the level of economic development achieved. This becomes clear in Tables 10 and 11 below. In par cular the fourth column in Table 10 presents the diff erence in the degree of infl uence each factor exerts on economic dynamism (depending on whether the country is developed or developing).

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Table 10: Factors affecting economic dynamism and the state of economic development

Developed countries

Developing countries

Factors Average Score Diff erence

High technology. innova on. R&D 7.89 5.31 2.58

High quali of human capital 7.78 5.91 1.87

Specializa on in knowledge and capital intensive sectors 7.37 4.81 2.56

Good infrastructure 7.13 6.28 0.85

High degree of openness 7.09 6.31 0.78

Secure formal ins tu ons 6.97 6.71 0.26

Capaci for adjustment 6.70 5.98 0.72

Stable poli cal environment 6.61 7.02 -0.41

Free market economy 6.38 5.42 0.96

Robust macroeconomic management 6.22 6.06 0.16

Low levels of public bureaucracy 6.12 5.96 0.16

Signifi cant urban agglomera ons 5.71 5.77 -0.06

Capaci for collec ve ac on 5.71 5.12 0.59

Strong informal ins tu ons 5.47 5.58 -0.11

Favourable demographic condi ons 5.35 5.93 -0.58

Signifi cant Foreign Direct Investment 5.28 6.90 -1.62

Rich natural recourses 4.13 6.52 -2.39

Favourable geography 4.00 6.07 -2.07

Random factors 3.80 4.75 -0.95

Table 11: Top-ten factors advancing economic dynamism for each state of development

rank Developed Countries score Developing Countries score

1 High technology. innova on. R&D 7.89 Stable poli cal environment 7.02

2 High quali of human capital 7.78 Signifi cant Foreign Direct Investment 6.90

3Specializa on in knowledge and capital intensive

sectors7.37 Secure formal ins tu ons 6.71

4 Good infrastructure 7.13 Rich natural recourses 6.52

5 High degree of openness 7.09 High degree of openness 6.31

6 Secure formal ins tu ons 6.97 Good infrastructure 6.28

7 Capaci for adjustment 6.70 Favourable geography 6.07

8 Stable poli cal environment 6.61 Robust macroeconomic management 6.06

9 Free market economy 6.38 Capaci for adjustment 5.98

10 Robust macroeconomic management 6.22 Low levels of public bureaucracy 5.96

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25

A posi ve value indicates that the specifi c factor is more important for developed countries than for developing. In turn, nega ve values point at factors which are deemed to be more infl uen al in developing economies. Thus, it becomes evident that the factors which are deemed important for the economic dynamism of developed countries do not coincide with those of the developing countries. In par cular for the former group of countries most signifi cant elements are those related to high technology, innova on and R&D, to specializa on in knowledge and capital intensive sectors and to the quali of their human capital. In turn, important determinants of economic dynamism for the developing countries are those related to their natural resources and their geography.

A similar picture emerges in Table 11, which ranks the ten most important factors of economic dynamism for the two levels of development. Interes ngly, the three most important factors for the economic dynamism of developed countries do not appear in the list of the top-ten factors advancing economic dynamism in the developing countries. There are however, some elements which are deemed important independently of the development state of the country. These are marked in bold le ers and are the following: good infrastructure, high degree of openness, secure formal ins tu ons, stable poli cal environment, capaci for adjustment and robust macroeconomic management.

5. Conclusions

This paper draws on a ques onnaire survey to explore experts’ views on the factors

underlying economic growth. The results of the survey provide empirical support to a number of important research hypotheses, contribu ng in this way to exis ng literature. Three par cular points need to be emphasized.

First, the areas that experts expect to exhibit the greatest economic dynamism in the near future are China and India, followed by European Union new member states. The rest of the Europe, as well as some highly developed countries (such as Japan) or areas with rich natural resources (such as Middle East), receive a much lower score. As expected, the last posi ons in the rank are occupied by Africa, indica ng that these countries will probably con nue to experience low economic performance in the near future.

Second, the survey iden fi ed a number of important determinants of economic dynamism at the global scale. These determinants are consistent with the relevant mainstream literature (human capital, innova on, openness, FDI, infrastructure), but also with its most recent developments, highligh ng the increasing importance of poli cal and ins tu onal factors.

Third, it was found that the determinants 1. of economic dynamism do not have the same infl uence in the advanced and the less advanced countries (or regions). Therefore, there are clear indica ons that the priori es in terms of policies for economic dynamism should be quite diff erent between countries of diff erent state of development. For the former group, aspects related to innova on, knowledge, technology and human capital seems to be much more important, whereas for the less developed countries, aspects that are deemed paramount are related to the socio-poli cal framework, the ins tu onal environment and the amount of foreign direct investments. It is worth no cing that a high degree of openness, capaci for fl exible adjustment and the quali of provided infrastructure are some basic precondi ons for economic dynamism independent of the level of development an area exhibits.

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Cooperation in South-Eastern Europe as a Means to Promote the European Prospects of the Region

Assoc. Prof. Dinko Dinkov, Ph.D.

Summary: Under the tle above, I am sharing my thoughts with you on the opportuni es to ini ate new coopera on in South-Eastern Europe and understand its new meaning in light of the vast transforma ons that have taken place in the interna onal system and the Balkans a er the end of the Cold War. Special a en on is paid on the streamlined policy of the countries from this part of the con nent to achieve compa bili with the dominant trends of building a Common European Area. The ar cle covers the view that the local regional coopera on is no more a subs tute for the European integra on; rather, the la er is essen al for its eff ec ve progress. This idea is fundamental in the context of the a empts to break with the notorious image of the Balkans and promote their eventual europeaniza on.

Key words: regional coopera on, stabilisa on and associa on agreements, Western Balkans.

JEL: F01, F55.

Nonetheless, the region s ll has the poten al to balkanize Europe, in spite of all the op mis c trends throughout

it. It was here where the last military confl ict on the con nent took place. Moreover, many

other factors that make the region unstable are s ll in place: weak states with unfi nished poli cal and economic reforms; poli cal en es with unclear interna onal status; strong aspira on for power without demonstra on of good management skills. All this is pu ing the European prospects of the local people and states to the test.

The role of the European Union’s policy and strategy for the region will be of utmost importance for it. With the development of the policy of stabiliza on and associa on of the countries from the Western Balkans, Brussels made it clear it understands that without the integra on of South-Eastern Europe, the vast European unifi ca on project would be incomplete. Nevertheless, the indecision which process deserves a higher priori – stabiliza on or transforma on, has drawn much cri cism. Thus, the establishment of the Regional Council for Coopera on in South-Eastern Europe prompted the sugges on of a framework for the mechanisms promo ng regional coopera on. The general view that has been expressed is that these mechanisms will have to ensure the common voice of the countries from the region, which on its turn would bear their shared interests and would help fi nd ra onal solu ons to the problems in front of their European future.

A er the end of the cold war, against the background of radical transforma ons in the

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Coopera on in South-Eastern Europe

interna onal system, essen al changes are taking place in the most troublesome and confl ict-prone part of the European con nent – the Balkan peninsula, known as the bloody fi elds of Europe, Europe’s powder-keg, etc. The poli cal and economic reforms in the diff erent countries and the new trends in the development of the region as a whole, provide a basis for the conclusion that a there is a process under way of overcoming the bad reputa on of the region from the past and a stable development with the perspec ve of becoming an integral part of European structures, which have proved their vitali and sustainabili .

In the context of the new trends in the development of world economy and interna onal rela ons, the idea of regional coopera on in Southeast Europe acquires a new sense and new content can be added to it. Coopera on can be possibly defi ned in short as joint ac ons to reach shared common goals. It presupposes pursuing common benefi t through accord, mutual assistance and solidari , fi nding compromises on the basis of equali . Rela ons between diff erent states depend on the extent to which each one of them has developed its produc ve powers, the division of labour, and its par cipa on in interna onal communica on. However, the specifi c characteris cs of economic and other forms of coopera on between the countries of Southeast Europe are determined by the objec ve situa on, created by the economic capaci of states in the region to par cipate in the interna onal division of labour, by the general state of their bilateral and mul lateral rela ons, on one hand, and the general condi ons in the world economy and the climate of interna onal rela ons, on the other.

A region in the interna onal system is not just a delimited territory, but a space where favourable geographic, poli cal, economic, and cultural condi ons for the realiza on of rela vely more intensive interac on have been formed.

For now, it is the European orienta on that dominates the policy of regional coopera on of all Southeast Europe states. A clear understanding is already present with respect to the fact that “to lower the risk poten al of the region”, it is necessary to “increase its compa bili with the unifi ed European space under construc on”1. Although diff ering in the degree of resolu on, the states consider their mutual coopera on as a way towards their full integra on in European processes. This became an underlying star ng point of regional coopera on in the Sofi a Declara on of Good-Neighbour Rela ons, Stabili , Securi and Coopera on in the Balkans, adopted at the mee ng of Ministers of external aff airs of Southeast Europe states, which took place at the ini a ve of Bulgaria in July 1996, Sofi a. On this mee ng, the ministers considered the future opportuni es of mul lateral coopera on in European perspec ve as following from the eff orts of each country to be integrated in Europe. In this context, they declared their desire to interact using other formats of regional coopera on. We are now witnessing the revival of ideas of the Sofi a declara on with a new strength and of the development of the coopera on process in Southeast Europe in modifi ed circumstances.

The European dominant of these ini a ves has ensured a magnifying eff ect of developing regional coopera on at a larger scale. In principle, the opportuni es of organising regional coopera on in Southeast Europe

1 Radeva, J. Regional coopera on – an impera ve in the process of europeisa on of the Balkans. In: “Preven ng military confl icts in Southeast Europe”, Ministry of Defence of the Republic of Bulgaria, Na onal Securi Scien fi c Centre, Sofi a, 1995, p. 144.

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should be considered not only at the regional, but also at the systemic level.

The new circumstances in the global system obviously represent a serious trial for the European orienta on of the coopera on in Southeast Europe. To avoid unfavourable consequences of the new confi gura on and trends in the rela ons between the global factors, the task of the small states in the region is s ll an adequate rethinking of further development of events and organising regional coopera on.

For the countries of Southeast Europe, overcoming their economic backwardness and making the region more stable is an important priori . Resolu on of these tasks is a precondi on of their integra on into European structures. Therefore, the eff orts of developing coopera on in the region have a deep sense in the context of its europeisa on.

The category of coopera on itself presupposes organised interac on, through which a coordina on of interests is achieved at the macro and micro level. The specifi c organisa on consists in a number of ac ons and interac ons from the part of governmental and intergovernmental, as well as public (non-governmental), na onal and interna onal structures and economic agents crea ng poli cal, contractual-legal, organisa onal-managerial and technical precondi ons for the development of economic connec ons between the countries in the region. The strength of the trend towards organisa on and management of interna onal economic links at a regional scale is determined by the a ained degree of interna onal division of labour and by the bounds that other countries may have with other interna onal coopera on mechanisms.

As long as ideas, rules, approaches, and specifi c prac ces are closely related to the organisa on of interna onal communica on processes, the following is necessary for organising coopera on in Southeast Europe:

a shared vision between interested countries 1. in the region;

shared values as a basis for interac on;2. using coordinated and commonly acceptable 3.

means;solidari in the pursuit of the common 4.

goal;a mechanism of decision-making.5.

The organisa on of the interac on between the countries of Southeast Europe can be only based on mutually dependent ac vi es, mo vated by common or unidirec onal interests, that can be inscribed into a common goal. It can be based on the rela vely specifi c communi of the countries in the region having in many cases iden cal or close interests with respect to their environment. Coordina ng the interests is a condi on for their subordina on to commonly acceptable and reasonable op ons. The behaviour of an organised communi is always purposeful2. Looking forward to the forma on of a favourable environment, such behaviour is also a way of adapta on to this environment.

The organisa on of regional coopera on presupposes a certain structure of rela ons. Such a structure should assign the roles of the diff erent players, i.e. it would ensure the effi cient division of labour between the diff erent

par cipants and the coordina on of their eff orts. Whether coopera on would be able to fulfi l its mission depends to a great extent on the way of its structuring. The stabili of the structure of coopera on in the region depends on the poli cal will of the par cipants, on the agreements between them, on the func oning

2 Yukl, G., K. Wexley, Organiza onal Behavior. Dow Jones-Irwin, Homewood, Illinois, 1997, p.141.

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Coopera on in South-Eastern Europe

of mechanisms, on the process of decision-making and the force of decisions. Regula ng factors as principles, norms, rules, agreements, determine the framework for the coopera on agents behaviour.

In the rela ons between Balkan countries, the organisa on of coopera on is most of all an issue of intergovernmental rela ons. However, in resolving this issue, public and business organisa ons, private companies, trade and industry chambers, etc. should be also involved together with governments This circle of shareholders in the region should become the generator of a kind of regional coopera on code. And this is not at all easy, taking into account the mul ple factors infl uencing the possibili es of coopera on and the wide range of economically and poli cally mo vated interests. It is diffi cult to unify them in a common platform, which would become a basis for the crea on of a regional coopera on mechanism.

Regional coopera on is not a subs tute or an alterna ve of European integra on and there are no more grounds for fears that regional coopera on could be an obstacle to European integra on of the countries in the region. Moreover, such integra on will not take place without regional coopera on. If the Stabili Pact of Southeast Europe engendered doubts that it could turn into a wai ng room for membership in the European Union, such doubts are cleared away a er the actual accession of the countries in the region.

There is no doubt that without making the Balkans a part of the European project, such project will stay unfi nished. Europeisa on of the Balkans is a fact. The changes in the countries of the region, the adop on of the so called European principles and norms by

including the countries in the Council of Europe, the enlargement of the European Union in

this direc on by the accession of Slovenia, Bulgaria and Romania, while Croa a, Turkey and Macedonia have the statute of countries applying for membership make the process of stabilising and associa on of the Western Balkan countries advance. The agreements with Macedonia, Albania and Montenegro have been signed, while nego a ons with Serbia and Bosna and Herzegovina are under way. All Western Balkan countries repeatedly declare their desire to join the European Union. Since the European Council in Thessaloniki in 2003, the European Union has also confi rmed its commitment to their eventual membership with the condi on that they sa sfy the membership criteria.

Despite the posi ve trends, despite of the fact that with the assistance of the USA the Balkans have been renamed to Southeast Europe, diff erent countries are at a diff erent stage in their way towards membership, statehood is weak, their economies are weak, and the effi ciency of absorbing economic assistance is low. There are many reasons for insecuri . S ll, a poten al of the region to balcanize Europe is present. The last war in Europe took place in the Balkans. There are unfi nished states and protectorates in the region. Let’s just men on Kosovo. The eff orts made so far to defi ne the statute of the former autonomous region of Serbia do not provide reasons for op mism. The interna onal communi is facing a diffi cult challenge because of diametrically opposed posi ons of Belgrade and Prish na.

The European Union is now directly involved in these issues, but will it manifest the capaci and will to become a major factor for the transforma on of the region into an integral part of the model of social development that dominates the Old Con nent? The policy of stabilising and associa on of the Western Balkan countries is not very convincing. The

circumstances and processes in the region result in hesita ons about which should be the main

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priori –stabilisa on or transforma on. The policy of s pula ng condi ons in its tradi onal parameters will hardly make the desired changes happen. For Southeast Europe, the European Union should explore special combina ons of its policies and tools. There is need for more carrots than s cks. Financial instruments should be adapted to reali es – weak states, non-reformed economies, crime, etc.

This makes it necessary for the European Union also to rely on the poten al of regional coopera on as an addi onal factor. The Stabili Pact has ceased to exist with the consent of Brussels. Great hopes are reposed on the already cons tuted Regional Coopera on Council with a Secretariat based in Saraevo. All this new construct aims essen ally at adap ng all exis ng ideas and ini a ves of regional coopera on in Southeast Europe to ensuring the European perspec ves of the region. Bulgaria has to play a special role, a er taking the presidency of the Process of coopera on in Southeast Europe in May 2007.

The ini a ve of Black See Synergy was started in April this year – obviously, in order to strengthen the posi ons of the European Union in the region, It was very carefully defi ned, taking

into account the specifi c characteris cs of the layout of power in this strategically important part of the world. The European Union already has a Black Sea outlet. The no on of synergy should be understood as joint ac ons and does not include any exaggera ons or unrealis c coopera on slogans. The ini a ve does not encompass any special fi nancial instruments, so it has been inappropriately interpreted by some as a realloca on of European Union resources for the development of regional coopera on. It is rather a poli cal construct in the context of EU interests in the fi eld of energy, which encourages interested countries to evaluate new opportuni es for interac on

At this stage, in my opinion, the issue of the balance between the roles of the diff erent factors becomes especially important. It is inadmissible to let the impression be formed that regional coopera on serves the interests of extraregional factors. Balkan na onalism is very sensi ve to these issues, It is important that the new mechanisms of organising regional coopera on express the common voice manifes ng common interests of countries in the region and helping to fi nd regional solu ons to problems and challenges related to their European perspec ves.

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Study on the Health Systems’ Efficiency in Five South-East European Countries

Assoc. Prof. Evgenia Delcheva, Ph.D.UNWE, Bulgaria

Summary: The goal of the research is compara ve study on the indicators for resources, health eff ec veness (health results) and effi ciency of the health care in fi ve South East European countries (Bulgaria, Greece, Macedonia, Rumania and Turkey), which are not only territorial neighbors, but have common tradi ons and historical origins. Addi onal limita on for the choice of these countries is available informa on from the Data Base of WHO “Health For All”. The studying period is 2000-2004/2005 years. Through using the formula of the Global compe veness index, is calculated the rate of the resources and health eff ec veness, as their propor on - the effi ciency coeffi cient.

The conclusions show, that the healthcare system in Greece works be er with higher effi ciency – 1,517 (2000) and 1,459 (2005),

followed by Macedonia – 1,329 (2000), 1,459 (2005) and Bulgaria – 1,119 (2000) and 1,201 (2005). Rumania is with effi ciency close to 1, but Turkey is on the last place with health care ineffi ciency. The study holds out opportuni es for future economic and scien fi c coopera on between South-East Europe countries in the

social and health area.

Key words: resources, health eff ec veness, ef-fi ciency, health care.

JEL : I10.

Preface

The health care system is a system of medical and non-medical, scien fi c and applica ve ac vi es, organized in the

socie for op mizing the quan ta ve and qualita ve aspects of the human reproduc on (2). Or this is the sphere that produces health services and results mainly in the shape improvements of the health, sa sfi es the fundamental needs of the people for their quan ta ve and qualita ve reproduc on and by that has infl uence over the other two spheres – of the material and the intellectual produc on, assuring the main produc ve agent – the human. Due to the heterogeneous structure of the factors condi oning the health and the uncertain for the posi ve result of the

interven on of the health professionals, not all results of the health services represent health improvements, but these are the preferred and domina ng pes of results. The economic criteria (for instance profi t, produc on of GDP or economic return) are in subordinate posi on towards the main objec ves of the system. The

non-economic factors for the development of the socie (like healthcare, culture and educa on)

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are considered as substan al for the civiliza on process (1, 3, 4). This is confi rmed also by the expansion of health and educa on indicators in the global indexes of human development and of na onal compe veness (5, 6, 7, 10).

It does not come from here that the healthcare is an alien element to the economy. The cor-rela on between them is bilateral. The health sector exerts infl uence on the economy pre-dominantly through the main results of its func- oning – the health improvements. The health sector in EC-15 produces 7 % of the GDP on the average, which is bigger than the part of the fi nancial sector. The employment level in the sector (together with the social ac vi es) a ains 8.8 % in EC-15 and 9.3 % in EC-25 at the end of 2003 (8). The health care and the ac vi es linked with it (as the health insurance) exert infl uence on the labor market – for ex-ample the mandatory health insurances of the employees increase the produc on cost and reduce the compe veness of the companies; the stable health insurance is a factor for com-pe on between the companies for a rac ng qualifi ed workers, as well as factor for mobili of the labor resources in the frames of a global market. Par cularly strong is the link between health expenditures and the common public ex-penditures (usually posi ve). For example for each unit of expenditures made in public health programs for the restric on of tobacco smoking are saved 2 units of prevented future expenses of the state (8), which could be invested in more produc ve way. In many developed coun-tries the defi cits in the healthcare worsen the macroeconomic stabili . The healthcare exer-cises substan al infl uence on the investments in high technologies and health related con-struc on. In countries like France, Germany and Netherlands the rates of investments in medi-cal equipment vary between 3 and 9 % yearly (5). Important eff ect of the healthcare is its ac on as an accelerator of bound sectors like pharmaceu cal industry, medical technologies,

health insurance etc. For example the pharma-ceu cal produc on is a structure defi ning high tech branch for Germany, France, USA, and Switzerland as well as one of the speedy de-veloping sectors in the countries of South-East and Central Europe.

The complicated interrela ons between health-care and economy increase the interest to the effi ciency of the branch. The thesis that we are to defend is that the more eff ec ve healthcare infl uences posi vely the na onal economy and the human development, as a result of which the examina on on its compara ve effi ciency is of primary importance to iden fy the place which occupies the health sector in Bulgaria by its effi ciency in the EC or among neighbor by their situa on and close by historic roots countries.

The objec ve of the study is to analyze in com-

para ve aspect main indicators for resources and health results and their correla on, ex-pressing the effi ciency of the health systems in three EC member-countries – Bulgaria, Greece and Rumania, and two candidates for member-ship – Turkey and Macedonia, which are close not only geographically but by their na onal tradi ons and historic roots. The fi ve countries are characterized by mixed systems of health sector fi nancing – combina on of health insur-ance funds and budget subsidies. In Greece is noted a long process of transi on from the Bismarck system to the Beverage system, that is crea on of Na onal Health Service with ap-proachable and free of payment healthcare,

based on budget proceeds. The health insur-ance funds however con nue to be important source of revenues especially for the outpa ent services. In Bulgaria, Rumania and Macedonia are organized na onal health insurance systems (Bismarck pe systems) with mandatory insur-ance and monopolis c organiza on, but in the three countries the budget fi nancing keeps cer-tain stake (biggest in Bulgaria). Turkey is also a

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Study on the Health Systems’ Effi ciency

country with mixed fi nancing system – budget fi nancing and health insurance funds.

Addi onal restric on of the choice of these countries of South-East Europe is the available informa on for the health resources and results in the European data base “Health for all” of the WHO (11). The period of the study is 2000-2004/2005 (the last year with available data), only for Turkey missing informa on for two health indicators relevant to results.

Resources’ and health results’ Indicators

In Table 1 are given 5 selected indicators of resources and 5 indicators for health results.

Their selec on is an expert private assessment based on their presence in most compara ve studies for the health sector development. Two of the resources related indicators are in natu-ral values (number of doctors and number of medical nurses per popula on of 100.000), the other three refl ec ng the fi nancial assurance of the sector with common and public resources (measured through the expenditures).

The centre of gravi in the combina on of indi-cators falls on the health results. Their selec on contains big responsibili due to the fact that a big part of the modifi ca ons in the health are determined by external, objec ve (from the point of view of the healthcare system) factors like heredi and biology, ethogenic changes (unsanitary conduct of the individuals), socio-

economic environment, ecological factors. The objec ve in our case was to select such indica-tors that indicate the abili of the health sys-tem the produce qualita ve and eff ec ve result. One indisputable indicator for health like “life expectancy” is present in all methodologies for assessment of the health status, the health

system, the human development and the com-pe veness of the na onal economy. In spite

that it is infl uenced by many external factors, we use it because of its synthe c informa ve-ness for one of the aspects of the human capi-tal development – the life expectancy. Other domina ng indicators are those the children’s and mother’s mortali as well as the DALE in-dicator (disabili adjusted life expectancy) and the number of years lost in result of premature exitus (before age of 65). Most of these indica-tors are included as objec ves in the European Health for All Strategy (9).

Efficiency

To measure the effi ciency of the health sys-tems in the fi ve countries and on the aver-

age for the EC and EC-10 we apply a methodic approach of general indexa on for the re-sources (a general average index for resources is received) and of the health results (average index for results). Through the use of the Jef-frey Sacks & al. formula (7) for compu ng the global na onal compe veness index are cal-culated indexes for the level of the resource provision and the health results on a resource unit. The ranging is eff ected on a scale from 1 to 7 where 1 is the lowest and 7 – the highest grade of assessment of the resource provision or the results, as well as of their correla on (results by resource unit) – the effi ciency.

Conclusions:

The approach applied for determining the ef-1. fi ciency of the health systems in the fi ve South-East European countries permits data integra- on for more than one pe of resources and health results that is dis nguishing it as more complex and informa ve for the assessment of the eff ec veness.

The coountries with growing effi ciency of 2. the health systems are: Greece with highest

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grow of 49% for the period 2000-2004, fol-lowed by Romania – with 11.7 %, Macedonia

- with 4 % and Bulgaria - with 3 %. Similar trend – with 18.7 % grow is noted as well in

Table 1. Types of indicators for assessment of the efficiency

Groups of indicators Indicators

Resources

– Human resources:

Availabili of doctors on 100.000 ci zens – the bigger availabili is a guarantee 1. for stronger health sector and healthier popula on (labor force respec vely)

Availabili of nurses on 100.000 ci zens – the nursing care is substan al 2. aspect of the healthcare; the bigger availabili presumes more economic and

qualita ve health care

– Financial resources:

Total health expenditures in % of GDP – the healthcare is one of the most 1. expensive systems, which op mally consumes not less than 8% of the GDP; the smaller share (less than 7%) means low quali and the high share (over 12-13%) signifi es huge expenditures of the socie (lost benefi ts)

Public health expenditures in % of the total expenditures – refl ect the 2. public sources of fi nancing (by the state and local budgets and the social health insurance), which guarantee the accessibili of the health services; it is necessary to dominate in the total structure of sources and to exceed 70%

Total health expenditures per capita of the popula on on PPP (Intern. Dollars) – 3. characterize the real purchasing power of the total health expenditures

Results

– Mortali :

Children’s mortali on 1.000 born alive – indicator accepted for assessment 1.

of the healthcare eff ec veness; the lower mortali is be er

Mother’s mortali on 100.000 born alive – characterizes the quali of the 2. healthcare in birth; the lower mortali is be er

– Life expectancy:

Life expectancy at birth (in years) – characterizes the quan ta ve aspect of 1.

the health as aggregated indicator of the health eff ec veness

Disabili adjusted life expectancy – in years (DALE) – characterizes the 2. quan ta ve and qualita ve aspects of the health

Reduc on of the life expectancy due to premature death (before 65) – 3. refl ects the losses of the socie and the economy by premature exitus in number of years of life

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Study on the Health Systems’ Effi ciency

the group of the 10 countries of the preceding joining of EC, which is explicable with a view to the more intensive processes of reform of their health systems and overtaking develop-ment to the level of the old European member-countries.

Turkey is dis nguishing not only with non-3. eff ec ve health system (with twice lower results per resource unit), but also with nega ve trend of decrease – with 33 % for the same period. It should be taken into account here that the data base fro Turkey was incomplete with two of the health indicators (the mother’s mortali and the reduc on of the life expectancy due to death before age of 65) and our conclusions are based only on three health indicators.

With lower results of the implemented re-4. sources (effi ciency coeffi cient below 1) are Tur-key and Romania, which imposes the necessi to reconsider the func oning of their health sys-tems and to look for reserves for increasing the eff ec veness.

Another nega ve trend of decrease of the 5. effi ciency (with 5 % but with eff ec veness coeffi cient between 1.31 and 1.25), is seen in the group of 25 EC member-countries. This is due to the growing health expenditures related

to the aging of the popula on, the implemen-ta on of new technologies and the increased requirements of the clients of the system. And probably this is an empirical proof of the decreasing marginal u li of the invested re-sources.

The effi ciency of the healthcare in Bulgaria 6. (1,6-1,65) is improving a er 2000, when were made the fi rst steps of the health reform, but the country is s ll moving very slowly ahead, to increasing the qualita ve and quan ta ve aspects of the health. The level of effi ciency of the health system in the country has a posi ve coeffi cient (the results exceed the resources in rela ve measures), the country been rated on the third place a er Greece – with coeffi cient 2.56 and Macedonia – with coeffi cient 1.79 at the end of the period.

In the most aspects of the summarised asses-7. sment of resources and health results in the new EC members – Bulgaria and Romania is noted a rather big lagging behind from EC-10 (par cu-larly for Romania) and even more from the EC which means that it is needed to launche urgent measures and to realise strategic vision provi-sioned with the necessary resources for dimini-shing the diff erences and improving the health results.

Table 2. Indexes of resources, results and coefficients of the health systems’ efficiency in the five South-

East European countries and the average for EC and EC-10

Years 2000 2004/2005 2000 2004/2005

CountriesResources

Index

Results

Index

Resources

Index

Results

Index

Effi ciency

Coeffi cientEffi ciency Coeffi cient

Greece 3.55 6.13 2.29 5.87 1.7267606 2.5633188

Romania 1.61 1.37 2.19 2.18 0.8509317 0.9954338

Macedonia 2.29 3.95 2.29 4.10 1.7248908 1.7903930

Turkey 1.46 1.00 1.94 1.00 0.6849315 0.5154639

Bulgaria 2.10 3.37 2.13 3.52 1.6047619 1.6525822

ЕС 4.22 5.57 4.10 5.13 1.3199052 1.2512195

ЕС-10 3.13 3.69 3.03 4.25 1.1789137 1.4026403

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Of the countries candidates for future EC 8. joining Macedonia is dis nguished with far be er indicators especially for health results as well as for the effi ciency of the system. Consequently in the sphere of healthcare the prompt integra on with EC is reachable. The same could not be said for Turkey which needs many investments in human and fi nancial resources in the health sector and policies of improving the health effi ciency.

The implemented study brings to our minds 9. possibili es for future economic coopera on and new scien fi c researches between the countries of South-East Europe in the sphere of the econ-omy and the policies in the health sector.

References

Лулански П., Социоվն лтурен процес, Сто-1. панство, С., 2000.

Попов М., Евг.Делчева, Технологии в здра-2. веопазването, Стопанство, С., 1996.

Филипов Д., Теория на социалния живот, 3. Стопанство, С., 2006.

Филипов Д., Социална икономия – ико-4. номическа теория на живота, книга първа: Икономически основи на живота, ВУ “Черно-ризец Храбър”, Варна, 2003.

European Compe veness Report 2004.5.

Inves ng in health , Development Report, 6. World bank, 2003.

Global Compe veness Report, 2006-2007.7.

Suhrcke M. et al, The Contribu on of health 8. to the economy in the European Union, EC, 2005.

Targets for health for all, WHO, 1986.9.

The Human Development Report 2006.10.

WHO, HFA Data Base, 2007. 11.

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The Retail Internationalization

Assoc. Prof. Septemvrina Kostova, Ph.D.

Summary: The retail interna onaliza on process is a long, risky, complex, expensive and non-linear one. Failure rates have been high for some of Europe’s major fi rms. Moreover, and despite the current trend of standar za on towards a single consumer, each country con nues to require a specifi c approach. In a number of emerging economies, distribu on maturi has accelerated, whether Rumania, Slovenia, Bulgaria, Chroa a with the emergence of strong local retailers who understand how to copy overseas retailers’ know-how, correct mistakes, and develop hybrid formulae that are be er adapted to the local se ing.

Extant literature on retail adapta on is fragmented, with contradictory evidence being provided by disparate studies set in diff erent socio-economic contexts. Psychic distance has been iden fi ed as an important antecedent to format adapta on. However, the exact nature of its interven on is disputed. There is evidence sugges ng that high psychic distance leads to standardiza on as well as adapta on

The interna onal strategy consists of core com-petencies, compe ve advantages in home country and in host country, strategic decisions: what, when, where, how, interna onal opera- ons: pre-entry – entry-growth, reposi oning, performance. Strong retail business formula in the home market is a combina on of material

and non-material elements owned by the retail fi rm and providing solu ons that are both global

and specifi c to the customer in terms of sale of goods and services.

Characteris cs of the expanding interna onal retailers are: innova ons, adapta on to the market, exploita on of economies of scale and scope, faster opera on of all process. Systemic retailers are defi ned as non-autonomous fi rms with a hierarchical/clan organiza onal culture and a centralized, formalized and specialized structure. Entrepreneurial retailers are defi ned as autonomous fi rms with an adhocracy/market centric organiza onal culture and a decentralized, non-formalized and non-specialized structure

The presented strategies are four: horizontal, perceptual, forced and migra onal. Systemic retailers are characterized by an innova on led approach to agenda se ing. Systemic retailers are characterized by an incremental approach to adapta on. Entrepreneurial retailers are characterized by a problem led approach to agenda se ing. Entrepreneurial retailers are characterized by an innova on approach to adapta on. Systemic retailers adopt a risk avoiding approach to adapta on. Entrepreneurial retailers adopt a risk neutral approach to adapta on.

Key words: Interna onal retailing, Psychic distance, Standar za on, Adapta on

JEL: F01, L81.

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Introduction

The retail interna onaliza on process is a long, risky, complex, expensive and non-linear one. Failure rates have been

high for some of Europe’s major fi rms, such as Marks & Spencer, Royal Ahold, Carrefour have ins gated a series of new interna onal launches and withdrawals. Could these groups have avoided failure? Did some of them neglect their home market? Analysing the cause of a failure is o en as important as analyzing a success. Moreover, and despite the current trend of standar za on towards a single consumer, each country con nues to require a specifi c approach. In a number of emerging economies, distribu on maturi has accelerated, whether Rumania, Slovenia, Bulgaria, Chroa a with the emergence of strong local retailers who understand how to copy overseas retailers’ know-how, correct mistakes, and develop hybrid formulae that are be er adapted to the local se ing.

Extant literature on retail adapta on is fragmented, with contradictory evidence being provided by disparate studies set in diff erent socio-economic contexts. Psychic distance has been iden fi ed as an important antecedent to format adapta on. However, the exact nature of its interven on is disputed. There is evidence sugges ng that high psychic distance leads to standardiza on as well as adapta on. Thus, modera on in this apparently contradictory rela onship is the gap that is iden fi ed in this study. Retailers have been classifi ed as entrepreneurial or systemic based on the degree of autonomy permi ed by the structure and culture of the organiza on. Diff usion of innova on literature is used to diff eren ate the process of adop on followed by systemic and entrepreneurial retailers. Adapta on literature is classifi ed into four generic strategies, highligh ng the diff ering paths that systemic and entrepreneurial fi rms undertake in their quest to adapt. Systemic retailers follow a perceptual route to migra on that is characterized by an

innova on led route to adapta on resul ng in incrementalism and low risk propensi . Entrepreneurial retailers adopt a forced route to migra on that is characterized by a problem-ini ated route to agenda se ing and a neutral risk propensi . Thus, autonomy, risk propensi and innova veness are the primary drivers towards the diff erent interna onalisa on paths followed by systemic and entrepreneurial retailers.

1. Circumstances for a successful Retail Internationalization

The decision to enter overseas markets is o en the decision of one person or a small group

of founding shareholders who take the ini a ve. Interviews with retail managers in France showed that the basic decisions to interna onalize were o en taken intui ve. Successful formats within the domes c market move to the other culture socie es and not always with success.

The basic of an interna onal retail strategy consists of four pes of key strategic decisions in answers of four strategic ques ons:

What store formats and formulae should be 1. interna onalized in priori ?

In what country or group of countries should 2. investment occur?

When should interna onal moves be made?3. How should interna onaliza on be 4.

achieved?

The interna onal strategy consists of core

competencies, compe ve advantages in home country and in host country, strategic decisions: what, when, where, how, interna onal opera ons: pre-entry – entry-growth, reposi oning, performance. Strong retail business formula in the home market is a combina on of material and non-material elements owned by the retail fi rmand providing solu ons that are both global and specifi c to the customer in terms of sale

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The Retail Interna onaliza on

of goods and services. This formulae revolves around three points:

Controlling the sales model (assortment, 1. discount strategy, innova on);

Establishing the economic model (revenues 2. and investments on a square metre basis);

Determining the fi nancial model (site 3. ownership or rental).

The key success factors are size of domes c market, control of the supply chain, exportabili of the retail formula and compe ve advantages, defi ning the “glocaliza on” level.

Managing the retail internationalization process.

Phases in the interna onaliza on process are: choosing a target country, taking several important strategic decisions, transfer of KSF and developing interna onal retail strategy.

A. Choosing a target country. When choosing a target country the following criteria can be considered:

Geographic distance. Taking a formula to a country that is geographically close helps limit investments, especially logis c costs in the entry phase.

Cultural proximi . This broad concept can be a key factor in choosing a country. Wal-Mart, for example, has not successfully transferred to

all its foreign markets, but the company has affi rmed its presence most in countries that share a cultural proximi , notably Canada, and the UK via ASDA acquisi on.

Maturi of the distribu on system. This can be measured by the market share of modern

retailing contribu ng to a country’ retail revenues. This has grown over the past decade,

especially in the large ci es of emerging countries like Bulgaria and Rumania. Generally speaking, the more mature a country the harder it is to enter. Maturi is based on economic factors as well as the distribu on system.

Economic and poli cal stabili . The legal and regulatory environment and acceptance of foreign investment is an important variable to considered. The aspect may be seen in the changed percep on of Rumania and Bulgaria as poten al markets of interest for interna onal retail ventures.

Three pes of markets can be iden fi ed:

Mature markets. The countries are characterized by high compe on and sophis cated consumer demand. These markets are diffi cult to enter without a strong network and / or a highly diff eren ated retail formula.

Poor countries include countries or group of countries that have not enough economic development and whose inhabitants’ standard of living and / or incomes are not high enough to forsee economic growth.

Emerging economies. This group off ers strong growth and progressive opening to foreign investment. These countries are a rac ve markets for retailers and include countries in Central and Eastern Europe.

B. It is necessary to take a few key strategic decisions: choosing entry mode; choosing the me of entry; seeking the loca on of the fi rst outlet; entry strategy, launch and early adapta on; reposi on and analyzing failure to the withdraw from a country.

C. Transfer of key success factors

In establishing the new role for retailing, the leading fi rms have developed a dis nc ve Eu-

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ropean model of management in retailing and distribu on. This European model is:

Interna onalist in outlook, not domes c, for ex-ample Metro and Tesco;

Structured around a consumer-driven integrat-ed demand chain, not a supplier-driven supply chain, for example IKEA and Lidl.

Built around a core of market innova on, not copying. The adop on of retail marke ng in the large fi rms has spread through the whole sec-tor to become a widespread feature of European retailing.

Using network structures to create the manage-ment controls.

Very adaptabile. The considerable varie of long-established na onal, regional and even local cultures in Europe has forced retailers to eschew standardized approaches and requires them to be locally adap ve in their opera ons.

Characteris cs of the expanding interna onal retailers are: innova ons, adapta on to the market, exploata on of economies of scale and scope, faster opera on of all process.

2. Standardization versus adaptation

One of the perennial discussions in interna onal marke ng literature is the

extent to which fi rms need to adapt their off ering to diff erent geographical markets (Levi , 1983; Kotler, 1986). Geographical markets could be countries, provinces within countries or urban versus rural areas. Geographic regions diff er from one another with respect to demographic, economic, cultural and linguis c bases. These diff erences have a profound impact on the way a product is perceived, understood and u lized. Thus, the

important decision that a fi rm needs to make when moving from one market to another is the extent to which it needs to adapt its off ering to suit the requirements of the market it is moving into (Solberg, 2000).

Retailers like any other fi rm need to make this decision when they move their formats, which is their off ering from one market environment to another. The environmental view of ins tu onal evolu on maintains that changes in the economic, demographic, social, cultural, legal and technological condi ons of the marketplace are refl ected in the structure of the retail system. Studies have been reported from Chile, Israel, Turkey, China, Saudi Araby and Brazil (Alexander, 2002). These studies have all reported on the failure of using standardized formats and the need to adapt to the socio-cultural environment of the country being entered.

However, having said that there is a strong school of thought that advises standardiza on across diff erent geographical markets. In a study of 130 papers published in this area between 1961 – 2002, Waheeduzzaman and Dube (2004) show that 23% of the papers published showed results favouring standardiza on. An a empt has been made in this paper to understand the role of the environment in adapta on of formats in compara ve retailing and also analysing situa ons where standardiza on is prevalent. The media ng role of the internal fi rm characteris cs (structure and culture) are u lized to classify retailers as systemic and entrepreneurial. The constructs are then defi ned to show that psychic distance leads to standardiza on or adapta on depending on this nature of the retailing fi rm. The diff erent routes to adapta on are then explored using the concept of diff usion of innova on in organiza ons. The study ends with proposi ons characterizing the alternate paths to migra on for diff erent categories of retailers. The

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conclusion briefl y dwells on the limita ons of the paper and areas for future research.

The Uppsala School of interna onalisa on postulates that fi rms select markets with low psychic distances when they interna onalise. The assump on is that markets with low psychic distances would be similar; hence, a fi rm would learn in an incremental manner avoiding the shock of entering a dras cally diff erent market. However, O’Grady (1996) reported empirical evidence that proved otherwise. The no on of psychic paradox postulated that fi rms underes mate the diff erences between perceivably similar markets and hence are not successful in their interna onalisa on eff orts.

Pederson and Peterson (2004) substan ate the concept further when they report that fi rms moving between these similar markets experience shock in the ini al stages when they adapt to the environment of such markets. The ini al period of shock con nues un l the eighth year, by when managers consider themselves to be truly knowledgeable of the market that they have moved into. The eff ects are reported only amongst fi rms that adapt and standardized off erings are completely devoid of any shock eff ects. Evans (2000), in an empirical study of interna onal retailers reports of standardiza on strategies amongst retailers entering high psychic

distance markets. Thus, there is confounding evidence in literature of psychic distance leading to both standardiza on and adapta on strategies. This apparent contradic on indicates the role of modera ng factors in the rela onship between psychic distance and format adapta on.

Sternquist (1997) a empts to resolve these contradic ons by dis nguishing between global and mul na onal retailers. Global retailers have a standardized format in diff erent countries while mul na onal retailers adapt their formats to the socio-economic context of the country they are moving into. This classifi ca on though useful in dis nguishing between diff erent categories of retailers, fails to address the factors that lead to such strategies. However, it indicates that structure of the retailer and it’s ideology impact the decision to standardize or adapt. Extending on this thought, an a empt is now made to address these process issues by considering the role of internal fi rm characteris cs. The basic model that has been inves gated in this paper is as illustrated in Fig. 1. Psychic distance infl uences the extent of retail format adapta on depending on the internal characteris cs of the fi rm.

PsychicDistance

Format decision(Standardizaon

versus adaptaon)

Firm Orientaon(Systemac versus Entrepreneurial)

Figure 1. Antecedents to format adaptation

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3. Construct Definitions

3.1. Psychic Distance

Vahlne and Weidersheim (1990) defi ned psychic distance as “factors preven ng or disturbing

the fl ow of informa on between poten al and actual suppliers and customers”. Lately Evans (2000) subsequently redefi ned psychic distance as “factors preven ng or disturbing fi rm’s learning and understanding of a foreign environment”. This refi nement was jus fi ed on the basis that learning and understanding, rather than the mere access to informa on are essen al in the development of appropriate opera ng strategies in foreign markets. Thus it is not the mere presence of external environmental factors but the mind’s processing, in terms of percep on and understanding of business and cultural diff erences, which forms the basis of psychic distance (Evans, 2000).

Psychic distance in literature has been opera onalized in terms of diff erences in language, business, economic development, legal and poli cal systems, infrastructure and culture. In addi on to these factors psychic distance in this paper also included geographic distance as a dimension in line with fi ndings that a combina on of psychic distance and geographic distance is a superior measure in market selec on than constrained models including only one of them. Thus, psychic distance can be defi ned as the distance between the home market and a foreign market, resul ng from the percep on of economic, social, cultural and geographic diff erences.

3.2. Systematic and entrepreneurial retailers

Firms can be classifi ed based on their organiza- onal culture as hierarchical, market centred, clan culture and an adhocracy. Hierarchical cultures emphasize procedures, rules and uniformi , market centred is compe on

oriented, clan culture emphasizes loyal to the organiza on while an adhocracy emphasizes entrepreneurial crea vi and fl exibili .

Centraliza on, formaliza on and specializa on are dimensions of structure, which infl uence entry strategies. Formaliza on is the degree to which ac vi es and rela onships are governed by rules and procedures specializa on is the degree to which tasks are divided into unique elements while centraliza on refers to the extent to which decisions are shared within the social system. Thus, based on these dimensions retailers can be divided into two categories: Systemic and Entrepreneurial.

Systemic retailers are defi ned as non-auto nomous fi rms with a hierarchical/clan organiza onal culture and a centralized, formalized and specialized structure.

Entrepreneurial retailers are defi ned as auto-nomous fi rms with an adhocracy/market centric organiza onal culture and a decentralized, non-formalized and non-specialized structure.

The essen al diff erence between systemic and entrepreneurial fi rms is the autonomy that the decision-making unit (individual or team) brings forth to an idea or vision and it’s subsequent implementa on. In an organiza onal context autonomy refers to ac on taken free of organiza onal constraints.

3.3. Retail format

The next category to defi ne is retail format. The retail format, the en being transferred, is discussed in the retailing literature as a combina on of the retail off ering and the retail culture. The retail off ering comprises of external elements such as atmosphere, price, assortment, service and loca on elements that deliver the func onal, social, psychological, aesthe c and entertainment benefi ts a rac ng consumers to

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stores. The second, the internal part consists of the retail culture, which determines the retailer’s opera onal strength and strategies. It consists of contracts; procedures and technology that enhance the retailer’s abili to evaluate situa ons iden fy trends and deal with problems.

The individual external and internal elements can be researched now. Pricing in retail outlets has been classifi ed in literature as EDLP (Everyday low prices) versus a HiLo (high mark-ups with frequent promo ons) strategy. Service levels are dis nguished on the basis of the range of services provided. They include dimensions such as household delivery, returns policy, credit facili es and in-store guidance. The atmosphere construct consists of stripped down warehouse buildings at one extreme to shopping as lifes le experiences at the other. Assortment has been dis nguished on the basis of the width and depth of the product lines carried. Loca on strategies vary between a central business dis-trict versus suburban focus.

As for the retail culture elements technology is defi ned in terms of the usage of IT systems in retailing opera ons while procedures refer to the presence of SOPs (Standard Opera ng Procedures). Contracts refer to the philosophy of measuring performance internally and with suppliers. The op ons are to reward outcomes versus rewarding behaviour. Outcome orientaon use formal explicit contracts while behav-iour-based contracts are based on trust.

4. Typology Of Adaptation Strategies: A Process View

The following sec on describes a pology of retail strategies based on the defi ni ons that

have been developed in the previous sec on.

The objec ve of the pology is to highlight the diff ering paths that entrepreneurial and systemic

retailers undertake in their quest to adapt. The pology is used to resolve the contradic ons that have been shown to appear in retailing literature regarding the role of psychic distance on format adapta on.

The presented strategies are four: horizontal, perceptual, forced and migra onal. The paths followed by systemic (Fig. 2) and entrepreneurial (Fig. 3) retailers are diff erent.

4.1. Horizontal strategies

Horizontal strategies are as is transfers in-volving no modifi ca ons in the retail format elements. It is most likely when a retailer is moving across similar suburbs in an urban market where psychic distances are low. It is also possible with global retailers catering to niche markets where consumers have rela vely homogenous demographic and psychographic profi les irrespec ve of their ethnici .

A third category of horizontal strategists would be category killers such as Toys R Us or IKEA that exist in a single category and are extremely compe ve on account of their scale irrespec ve of the market that they compete in. However, horizontal strategies are unlikely to work for mul -category mass retailers who need to take into account diff erences in the environments as they move from one market to another. Based on the above discussion the following proposi ons have been developed:

Niche retailers follow a standardiza on strategy

irrespec ve of the psychic distance of the geographical market being entered into.

Category killers follow a standardiza on strategy irrespec ve of the psychic distance of the geographical market being entered into.

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4.2. Perceptual strategies

Interna onalisa on process theorists conclude that fi rms when they are moving from one market to another try to do so in an incremental manner. Barkema, Bell and Pennings (1996) conclude that centrifugal expansion pa erns are more successful than random diversifi ed expansion routes. They iden fy a loca onal path of learning with respect to fi rms’ engagement in foreign opera ons. The fi rms that followed this path of learning not only benefi ted substan ally from their previous experience in the same country but also, though to a lesser extent benefi ted from previous expansion in culturally adjacent countries.

Hence, it is assumed that fi rms consciously choose markets that are perceived to be similar to exis ng markets that they are already present in to reduce the environmental uncertain es in decision-making. However, empirical studies (O’Grady, 1996; Evans, 2002; Alexander, 2002 and Pederson, 2004) show that fi rms moving between similar environments such as Canada-USA, Brazil-Portugal and Australia-New Zealand underes mate the nuances in cultural and business diff erences between these similar environments and hence fail in their adapta on strategies. It is in the retail culture elements that are internal to the fi rm such as management a itude, values and behaviour; and rela onships with suppliers and compe on, which defi ne the concepts, norms, prac ces and systems of the retailing fi rm that needs to be adapted.

4.3. Forced strategies

They happen when retailers move a standardized format from one market to another without any modifi ca ons. Typically, it is bound to occur when small retailers devoid of research resources move into new markets to encash opportuni es on account of market poten al (Goldman, 2001). Global retailers (Sternquist, 1997) also

pursue this route. They start by catering to a niche that has similar characteris cs across the globe. It is only when the poten al of the market jus fi es expenses on adapta on that they shi from the standardiza on strategy. The lack of any customisa on leads to contrast eff ects that are stark and would require suitable adapta on (Pederson and Peterson, 2004). Hence, the adapta on process would primarily evolve with the off ering elements as they would be subject to external scru ny and hence would demand ac on on a priori basis. Forced strategies are emergent rather than any planned intended strategies.

4.4. Migrational strategies

Migra onal strategies are when both retail off ering and retail culture elements are modifi ed to adapt to the new market. It is the most appropriate strategy, as the format would be customized to requirements of the new market. However, the decision needs to be traded off against fi rm resources available as well as the poten al and nature of market being entered into (Goldman, 2001).

As shown in Fig. 2 systemic corpora ons with “risk minimizing processes” would fi nd it diffi cult to voluntarily accept a migra onal strategy, as it would entail relaxa on in standard opera ng procedures, which is contrary to the centralized and formalized nature of the organiza on. In such circumstances, the fi rm would pically adopt the perceptual path before undertaking migra onal exercises.

Addi onally the perceptual path would be a “superior learning path” as the fi rm would have already experimented in a phased manner with modifi ca ons in the retail culture elements, which is the more diffi cult element to modify on account of it being internal and tacit to the company. Migra onal strategies would now entail only a superfi cial change in the external off ering

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Figure 2. Retail format adaptation process – systemic retailers

High Psychic Distance

Low Psychic distance

Standardizaon Adaptaon

Horizontal

Forced

Perceptual

Migraonal

Figure 3. Retail format adaptation process – entrepreneurial retailers

High Psychic Distance

Low Psychic distance

Standardizaon Adaptaon

Horizontal

Forced

Perceptual

Migraonal

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51

elements that can be mastered with suitable investments in consumer and market researches.

Systemic retailers undertake a perceptual route to migra on.

On the other hand as illustrated in Fig. 3, risk taking entrepreneurial fi rms with their limited resources are more likely to take the forced route to migra on. The overwhelming objec ve in this instance would be to take advantage of the opportuni of a high poten al market with “similar opera ng environments”. Typical examples would be the large number of small retailers from a varie of countries and their entry into China (Goldman, 2001) to primarily acquire fi rst mover advantages and encash on the enormous poten al of the market.

Entrepreneurial fi rms undertake a forced route to migra on.

Risk Propensity And Firm Innovativeness

The internal characteris cs of a fi rm such as structure and culture have a role to play in

organiza onal innova veness. Centraliza on and formaliza on has been found to be nega vely associated with innova veness. However, implementa on of innova ons is encouraged with increases in centraliza on and formaliza on. As Cundiff (1965) points out compara ve retailing involves either an adapta on or adop on decision. Adop on (standardiza on) would

involve a direct transfer of an innova on in a retail format while adapta on involves changing the format innova on to the requirements of the social system that the fi rm is entering into. The innova on process in these two cases is diff erent.

In the case of adop on, the agenda se ing process is problem ini ated while in the case of

the la er it is innova on ini ated. In the la er case, the awareness of a new idea results in fi nding a new need for it by ini a ng the process of adap ng it to the organiza onal context. Incrementalism and risk avoidance is hence the defi ning characteris c of such systems and is the antecedent to the perceptual path followed by systemic retailers to migra on.

Systemic retailers are characterized by an innova on led approach to agenda se ing. Systemic retailers are characterized by an incremental approach to adapta on.

On the other hand, problem ini ated innova on processes lead to a radical reorienta on, frame-breaking change, radical innova on; and revolu on. The focus shi s to fi nding a solu on to the problem and hence restric ons favouring standardiza on are relaxed. The social risk taking abili of entrepreneurial fi rms allows them to incorporate changes that are a radical departure from past behaviour. Hence, retail culture elements are modifi ed resul ng in change that has been classifi ed varyingly in literature as radical innova on, frame braking change, revolu on etc. It is in such circumstances that the forced route to migra on of entrepreneurial fi rms comes into play.

Entrepreneurial retailers are characterized by a problem led approach to agenda se ing. Entrepreneurial retailers are characterized by an innova on approach to adapta on.

However, it is important to note that risk comprises of two dimensions – social and fi nancial. Social risk is characterized by behaviour that is contrary to the established norms and conven ons of the socie that the decision maker belongs to. The social risk propensi of entrepreneurial retailers is moderated by their limited abili to take fi nancial risks. Hence their approach can at best be described as a risk neutral approach in contrast to systemic

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retailers that are completely risk averse on account of their high degree of centraliza on and formaliza on.

Systemic retailers adopt a risk avoiding approach to adapta on.

Entrepreneurial retailers adopt a risk neutral approach to adapta on.

Thus, psychic distance between markets leads to either standardiza on or adapta on of retail formats depending on whether a retailer is systemic or entrepreneurial in its orienta on. A systemic orienta on reduces the retailer’s abili to take risks and adapta on is characterized by an incremental approach to innova on. An entrepreneurial orienta on is characterized by a standardiza on approach in ini al stages. However, externali es force innova on in such organiza ons and the resultant change is aff ected in a radical manner by not only changing the external retail off ering but also the more diffi cult to change retail culture elements that are internal to the organiza on.

Trade in services in SEE countries

Interna onal trade in services is infl uenced by a varie of economic factors, amongst which

the level of development seems to be the most important one. As the share of services in the na onal economy and in total employment rises with the level of development, the importance of trade in services for a country will also increase over me.

The constraints imposed by defi ciencies in collect-ing data on services trade, the lack of accurate data to measure trade fl ows in services accord-ing to the four modes of supply and the gap in data availabili allow only a limited interpreta- on of sta s cal informa on. Notwithstanding these limita ons, some insights into the present situa on concerning trade in services in the SEE countries could be obtained with a view to iden- fying their exis ng and poten al compara ve advantages and determining the factors that are relevant for the development of their services trade. The study is based mainly on BMP data (IMF and EU New Cronos databases), but addi- onal informa on from FDI- and migra on-relat-ed sta s cs as well as sectoral sta s cs compiled by competent interna onal organisa ons have been also drawn upon in the analysis.

Table 1. Trends in SEE goods and services trade

Millions of US dollars 1990 1993 1995 1998 2000 2001 Average Growth Rates 1990-2001

SEE Total trade 32096.7 38209.70 57778.8 69886.20 78589.6 87647.4 10.94

SEE Goods Trade 29202 30561.20 46524.3 54890.50 61738.2 68684.7 10.65

SEE Goods Exports 12205.1 13688.90 20073 22640.60 24681.6 26340.8 8.53

SEE Goods Imports 16996.9 16872.30 26451.3 32249.90 37056.6 42343.9 12.19

SEE Services Trade 2894.7 7648.50 11254.5 14995.70 16851.4 18962.7 12.02

SEE Services Exports 1478.5 4417.7 5806.2 8540.1 9822.6 11271 12.42

SEE Services Imports 1416.2 3230.8 5448.3 6455.6 7028.8 7691.7 11.45

Source: IMF: Balance of Payments Statistics Yearbook, 2002

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a) Overview of trends in goods and services trade in SEE

General trends

At the regional level, trade in services registered quite a considerable expansion in recent years. For a sector once considered to be untradable, there has been an important increase over the past decade in the propor on of total trade accounted for by services. This is par cularly true for post-communist countries where the service sector was rela vely small, given the policy op on of central planners to suppress the ac vi es of services, considered to be unproduc ve.

Table 1 presents the compara ve evolu on of total trade in goods and services for the SEE region.

As shown in table 1, during the period 1993 – 2001, the current value of SEE services trade increased at an average rate of 12 percent, faster than the average growth rate of goods trade of 10.9 percent. Similarly, with growth rates over 11 percent, services imports appear to be also

a dynamic component in SEE countries’ trade. However, services exports grew faster than services imports – as opposed to trade in goods where growth of imports surpassed the growth of exports. Throughout the period, trade in SEE countries recorded declines in dollar values in 1991 and 1998; however, the decline in services trade was less pronounced than that in goods trade. Furthermore, Table 6 presents the shares of goods and services exports and imports in the total trade of the SEE countries. Services exports recorded the highest growth rate, increasing their contribu on to total SEE exports (goods and services) from 24 percent in 1993 to almost 30 percent in 2001. With the export of services accoun ng for 21 percent of total exports, the SEE countries are reaching the shares registered by other transi on economies or even developed countries. Services imports account for more than 15 percent of total imports.

Exports and imports of total services in individual SEE countries

Although the SEE countries as a group accounted for only approximately 1 percent of total world

Table 2. Share of goods and services in total SEE trade

1990 1993 1995 1998 2000 2001

Total SEE Exports ( Millions of US dollars)

13683.60 18106.6 25879.20 31180.70 34504.20 37611.80

Goods Exports in total SEE Exports (%)

89.20 75.60 77.56 72.61 71.53 70.03

Services Exports in total SEE Exports (%)

10.80 24.40 22.44 27.39 28.47 29.97

Total SEE Imports (Millions of US dollars)

18413.10 20103.10 31899.60 38705.50 44085.40 50035.60

Goods imports in total SEE imports (%)

92.31 83.93 82.92 83.32 84.06 84.63

Services imports in total SEE imports (%)

7.69 16.07 17.08 16.68 15.94 15.37

Source: IMF: Balance of Payments statistics, 2002

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exports of commercial services in 2001, services as a share of total trade in individual countries were of undisputed importance. Analysing the evolu on of services exports and imports for

each country reveals the divergence among the individual SEE countries. Tables 3 and 4 show the exports and imports values with their average growth rates in all SEE countries as well as their

Table 3. Evolution of services exports in SEE countries

VALUE (MILLIONS OF US DOLLARS)AVERAGE GROWTH RATE

SHARE OF SERVICES EXPORTS IN TOTAL EXPORTS (%)

1990 1993 1995 1998 2000 20011990-2001

1990 1993 1995 1998 2000 2001

Albania 31.5 77.6 98.8 86.4 447.8 534.3 29.35 8.91 41.01 32.53 29.35 63.65 63.70

Bosnia and Herzegovina

229 304.8 261.3 288 3.33 60.10 31.86 18.50 19.80

Bulgaria 837 1171.3 1431.4 1787.9 2174.8 2419.2 10.13 12.04 23.91 21.12 29.89 31.07 32.14

Croa a 2285.8 2223.4 3949.1 4080.9 4872.7 9.92 36.93 32.98 46.30 47.19 50.63

Macedonia 84 185 131.3 303.1 233.4 13.63 7.37 13.31 9.84 18.71 16.83

Moldova 144.6 149.6 163.7 170.4 26.54 16.36 18.86 25.57 23.03

Romania 610 799 1494 1217 1767 1994 11.37 9.56 14.04 15.89 12.78 14.56 14.90

Serbia and Montenegro

688 914 624 759 1.98 24.23 26.59 28.51


Table 4. Evolution of services imports in SEE countries

VALUE (MILLIONS OF US DOLLARS)

AVERAGE GROWTH RATE

SHARE OF SERVICES EXPORTS IN TOTAL EXPORTS (%)

1990 1993 1995 1998 2000 2001 1990-2001 1990 1993 1995 1998 2000 2001

Albania 29.2 161.9 156.5 129.5 429.3 444.1 28.07 6.02 21.21 18.72 13.76 28.63 25.01


252 230.7 224.1 228.4 -1.39 18.89 5.71 5.55 5.51

Bulgaria 600 724.3 1277.9 1415.1 1668.8 1879.2 10.13 7.47 13.57 19.65 75.58 21.76 21.95

Croa a 1147.6 1361.1 1887.1 1828 1940.6 9.92 19.87 14.95 17.91 19.04 18.13

Macedonia 283 385.4 304.3 357.9 336.7 13.63 21.85 21.29 15.08 16.03 17.61

Moldova 196.4 196.9 206.7 218.7 26.54 19.53 16.03 21.20 19.86

Romania 787 914 1819 1871 2021 2203 11.37 7.95 13.18 16.09 14.62 14.36 13.31


421 293 441 9.75 7.99 7.32 8.36


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55

Table 5. Specialisation index for the SEE countries

1990 1993 1995 1998 2000 2001

Albania 0.04 -0.35 -0.23 -0.20 0.02 0.09

Bosnia and Herzegovina -0.05 0.14 0.08 0.12

Bulgaria 0.16 0.24 0.06 0.12 0.13 0.13

Croa a 0.33 0.24 0.35 0.38 0.43

Macedonia -0.54 -0.35 -0.40 -0.08 -0.18

Moldova -0.15 -0.14 -0.12 -0.12

Romania -0.13 -0.07 -0.10 -0.21 -0.07 -0.05

Serbia and Montenegro 1.00 0.37 0.36 0.27


Albania Bosnia and Herzegovina Bulgaria CroaaMacedonia, Republic of Moldova, Republic of RomaniaSerbia and Montenegro

20.00

15.00

10.00

5.00

0.00

-5.00

-10.00

-15.00

Figure 4. Balance of services as % of GDP


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contribu on to total exports and imports in these countries.

While Albania and Moldova exhibited the most dynamic evolu on of services exports and imports with average annual growth rates of over 25 percent, it should be highlighted that at the beginning of the period, the levels of services exports and imports for both countries were extremely low. Macedonia, Bulgaria and Romania record two digit growth rates, while the growth rate of the other SEE countries is in the range of 2 to 10 percent, with only Bosnia and Herzegovina registering nega ve growth rates for services imports.

The shares of services exports and imports in total exports and imports have increased in all SEE countries. Noteworthy are Albania’s and Croa a’s contribu ons of services exports in total exports of over 50 percent. In addi on, Table 5 shows the trade specialisa on index for all SEE countries.

The index is calculated as net trade in services divided by total trade in services, with a posi ve number implying a net exporter and a nega ve number a net importer. The table shows that the degrees of specialisa on did not change for most of the countries throughout the period 1990-2001. Bulgaria and Croa a were net exporters during the en re period (Serbia and Montenegro during 1998-2001), while Macedonia, Moldova and Romania were net importers of services. Only Albania and Bosnia and Herzegovina changed from net importers to net exporters. These trends are refl ected in Figure 4 that presents the evolu on of the SEE countries’ services trade balance as a percentage of GDP.

On the whole, services contributed substan ally to the reduc on in balance of payments defi cits, but their impact varied from one country to another as import fi gures also raised in some

countries. That is why, despite net posi ve transfers of capital, Macedonia reported a substan ally larger defi cit in its balance of trade, while in Croa a and Romania the larger imbalances of previous years were partly cleared. In Bosnia and Herzegovina, exports of goods and services con nued to stagnate at low levels, but the dras c reduc on in imports helped to reduce the balance of trade defi cit despite a fall in fi nancial transfers under the Dayton agreement.

b) Sectoral composi on of services trade

Concerning the sectoral composi on of trade in services, it is diffi cult to get a clear picture, as available data are not suffi ciently disaggregated by sector. Exis ng trade sta s cs in services cover three broad categories, namely transport, travel and other services, while the category “other services” contains a heterogeneous set of services including construc on, communica on, fi nance, insurance and other business services.

Bulgaria, Macedonia, Moldova and Romania enjoy a compara ve advantage in transport services. Among the individual transport components, all these countries have a compara ve advantage in both passenger and freight transport. While the RCA index for the other SEE countries is below 1 – sugges ng that these countries do not have at present compara ve advantage in this sector, a study

8

on transport services undertaken by the TINA Ins tute indicates that these countries do have a poten al/future compara ve advantage in this sector.

The study indicates that the poten al for growth in freight transport in all SEE countries is much more vigorous in interna onal transport than in domes c transport: it would seem that interna onal traffi c more than doubled (120 and 110 % for exports and imports) (Table 6).

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57

Both road and rail appear to be benefi ng from this growth, though to very diff erent extents: road traffi c can o en triple its volume, whereas the volume of rail traffi c only seems to increase by 50% on average. Because of this, there is a decline in the share of rail in the modal split in interna onal traffi c as well, and a certain decline in inland waterway traffi c, though this is less important since interna onal traffi c on inland waterways is doubled.

Balance of Payments Database (CHELEM-BOP) contains data on balance of payments, stretching back to 1996, and covering the whole

world. Figures are available for 1999 countries, as well as for the 61 elementary zones of the common classifi ca on, and for all interna onal organisa ons. The data is provided in current US dollars (millions) adop ng the 131 headings of the IMF, and is completed and corrected. It includes aggregate fi gures for 49 headings for invisible fl ows, capital movements and monetary transac ons.

The TINA (Transport Infrastructure Needs Assessment) Project is designated to ini ate the development of a mul modal transport system in the EU candidate countries.

Table 6. Index total transport trade: Projections 2015 (index 1996=1000)

Domes c transport Export Import

Country road rail inl. ww.

total rest road Rail inl. ww.

sea total rest road inl. ww.

sea total

Poland 193.2 85.6 200 172.8 263.4 290.8 113.6 268.7 191.5 208.8 151.9 395.6 248.2 219.7 244.6

Czech Republic

145.6 82.3 157.5 139.7 320.4 299.3 117.2 329.9 248.4 188.9 135.4 403.1 247.1 254.1 201.1

Slovak Republic

197.8 111 225 182.8 227.8 728.7 236.2 198.2 322.4 268.5 295.7 1008.4 241 320.2 212.3

Hungary 177.7 88.4 134.9 170.5 375.7 477.3 186.1 339.4 316.6 316.4 147.5 409.9 211 283 201.7

Romania 146.6 57.9 126.7 130.3 260.6 137 150 179.5 176.4 277 147.6 145.8 150.5

Bulgaria 147.9 87 153.4 137.6 163 225.4 94.2 166.2 194.6 189.6 497.5 253.3 140.9 128.6 168.6

Albania 240.3 229.5 240 421.7 392.6 450 436.5 456.3 330.8 284.9 298.7

Estonia 275.9 46.6 170 137.1 413.6 143.8 232.5 242.8 246.5 163.3 1469.3 263.9 239.2 214.7

Latvia 189.2 109 181.1 104.3 270.2 231.7 361.8 266.7 267 172.9 285.2 267.9 243.6 219.5

Lithua-

nia 191.3 56.1 175 309.9 335.3 84.4 738.9 211.9 196.3 175.7 574.7 336 263 250.6

Mac-edonia

204.5 185 201.4 314.7 355.9 312.5 203.7 348.2 330.4 233.6 212.9 208.6 253.4 213.8

Bosnia and Herze-

govina

220 251.2 162.2 194.9 207.1 219.9 3 266.7 209.8 242.7 348

Slovenia 185 108.8 179.4 427.2 318.4 216.9 386.1 300.3 102 324.9 176 222.4 256.2

TOTAL 171.1 81.1 128.3 157.7 258.4 323.8 282.8 207 220.7 187 420.9 147.3 192.4 176.3 210.9

Source: TINA (Transport Infrastructure Needs Assessment) Study

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CCNM/TD/SEE (2003)3/FINAL

For passenger transport, the study shows strong growth in interna onal mobili for all SEE countries, up by 85 % and doubling in many countries; road benefi ts ini ally, but also rail, which would appear to rise signifi cantly, though less quickly, from 50 to 60 percent (Table 6).

Conclusion

We can make followed conclusions:

Systemic retailers are characterized by an 1. innova on led approach to agenda se ing. Systemic retailers are characterized by an incremental approach to adapta on.

Entrepreneurial retailers are characterized by a problem led approach to agenda se ing. Entrepreneurial retailers are characterized by an innova on approach to adapta on. Systemic retailers adopt a risk avoiding approach to adapta on. Entrepreneurial retailers adopt a risk neutral approach to adapta on.

Retail ins tu ons are a func on of the socio-2. cultural environment of the socie they operate in. As the economy of a region develops, retailers from other parts of the map (countries or provinces) enter to take advantage of growth opportuni es that are present. The extent to which they modify their exis ng formats to suit the environment of the market they move into determines the extent of change that the retailer themselves are subjected to and the transforma on that they bring to retailing ins tu ons in the market that they are entering. Psychic distance is the construct that is used in summing up these environmental diff erences. Exis ng retailing literature is contradictory as psychic distance is shown to lead to both standardiza on and adapta on decisions. This paper resolves this anomaly by considering the

modera ng role of internal fi rm characteris cs. Psychic distance leads to standardiza on or adapta on strategies based on the internal characteris cs of a fi rm such as structure and culture. This study has classifi ed retailers as entrepreneurial or systemic based on the dimensions of autonomy, innova veness and risk propensi .

Entrepreneurial fi rms follow a forced route 3. to adapta on that is characterized by a problem led ini a on to agenda se ing leading to radical innova ons in retail formats. Systemic fi rms follow a perceptual route to migra on that is characterized by an innova on led ini a on to agenda se ing. Systemic fi rms enter markets with low psychic distances and suitably adapt themselves over an extended period of me to subtle diff erences in the environment. They are exposed to shock eff ects on account of psychic paradox during ini al entry, which they overcome by making changes to the retail culture elements governing their rela onships with suppliers and their use of new technologies.

Entrepreneurial retailers take advantage of 4. the environment by focusing on niches. Hence, irrespec ve of psychic distances they standardize their formats. They adapt only when the environment forces them to adapt on account of new opportuni es or a crisis situa on. Their route to innova on is problem ini ated and hence their innova on is a radical departure from the status quo. This is in direct contrast to the incrementalism prac sed by systemic retailers.

Finally, to conclude retailing systems in emerging countries diff er markedly from those in more developed systems on account of the large concentra on of small neighbourhood stores. Retailing literature in the past has concentrated on the large format organized retailers. The classifi catory schema provided in this study does not discriminate retailers on the basis of size. Hence, an opportuni has been provided for

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59

future research in developing countries where retailers can be studied irrespec ve of their size and level of organiza on.

Addi onally prior literature has been dominated by the choice of an adapta on or standardiza on strategy. The process through which diff erent retailers arrive at this decision has been ignored. This study has a empted to redress this gap by looking at how the organiza onal characteris cs of a retailer impact it’s innova on and risk taking abili es which ul mately determine the strategic choice of a retailer.

References

Alexander, Nicolas and Marcelo Lira e 1. Silva (2002), “Emerging markets and the Interna onaliza on of retailing: the Brazilian experience,” Interna onal Journal of Retail & Distribu on Management, 30 (6), 300-314.

Barkema, Harry, John Bell and Johannes 2. Pennings (1996), “Foreign Entry, Cultural Barriers and Learning,” Strategic Management Journal, 17 (2), 151-66.

Cundiff , Edward (1965), “Concepts in 3. Compara ve Retailing,” Journal of Marke ng, 29 (January), 59-63.

Evans, Jody and Felix Mavondo (2002), “Psychic 4. Distance and Organiza onal Performance: An Empirical Examina on of Interna onal Retailing Opera ons,” Journal of Interna onal Business Studies, 33 (3), 515-532.

Goldman, Arieh (2001), “The Transfer of 5. retail formats into developing countries: The example of China,” Journal of Retailing, 77, 221-242.

Kotler, Philip (1986), “Global standardiza on-6. cour ng danger,” Journal of Consumer Marke ng, 3(2), 13-15.

Levi , Theodore (1983), “The Globaliza on 7. of Markets,” Harvard Business Review, May-June, 92-102.

O’Grady, Shawna and Henry Lane (1996), 8. “The Psychic distance Paradox,” Journal of Interna onal Business Studies, 27 (2), 1-19.

Pedersen, Torben & Bent Petersen (2004), 9. ‘Learning About Foreign Markets: Are Entrant Firms Exposed to a Shock Eff ect?,” Journal of Interna onal Marke ng, 12 (1), 103-123.

Solberg, Carl. Arthur, (2000), “Educator 10. Insights: Standardiza on or Adapta on of the Interna onal Marke ng Mix: The Role of the Local Subsidiary/Representa ve.,” Journal of Interna onal Marke ng, 8 (1), 78-98.

Sternquist, Brenda (1997), “Interna onal 11. expansion of US retailers,” Interna onal Journal of Retail and Distribu on Management, 25(8), 262-268.

Waheeduzzaman, A & Leon Dube (2004), 12. “Trends and Developments in Standardiza on Adapta on Research,” Journal of Global Marke ng, 17(4), 23-51.

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1 EXLINEA (Lines of Exclusion as Arenas of Coopera on: Reconfi guring the External Boundaries of Europe — Policies, Prac ces, Percep ons) is funded by the European Commission under the 5th Framework Programme. This survey is part of a wider eff ort to study the evolu on, problems, policies, prac ces and percep ons prevailing in the old and new external borders of the European Union.

Interaction, Perceptions and Policies in the Boundaries of European Union: The Case of the Northern Greek Cross Border Zone

Lefteris TopaloglouUniversity of Thessaly

Department of Planning and Regional

Development

[email protected]

Summary: The accession of ten new States in the EU following 1st May 2004 and the accession of Romania and Bulgaria in 2007 have brought to the fore a new economic geography in Europe shi ing the EU’s external borders eastward. In the broader Balkan area in par cular a “new geography” starts to shape, which sets new factors, balances, threats and challenges. Within this context, the borders and border regions are found to be in the center of academic research and policy making as well. This ar cle a empts to study the pe and level of interac on, the percep ons and policies occurring across the Northern Greek cross border zone. The border zone between Greece on the one hand and Albania, FYROM and Bulgaria on the other, is one of the most fragmented economic, social and poli cal spaces in Europe. Consequently, the actual region was considered to be a low

opportuni area. It hosts small states having a low level of trade interac on and un l recently a mosaic of trade policies and restric ons to interac on towards each other. In addi on, all countries have ethnic minori es usually living in border regions that have triggered fric on or confl ict in the past and con nue in some cases to be a source of suspicion and tension. The empirical analysis is based on a survey in the Northern Greek border zone that was conducted within the framework of the European research project EXLINEA1.

Key words: boundaries, interac on, percep ons, policies, cross border coopera on.

Introduction

In terms of bibliography in recent years, in both the theore cal and empirical level of research, new and interes ng studies have

appeared dealing with borders. Borders have o en played the role of a boundary line among diff erent ideologies, cultures, religions and

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61

na onali es (Anderson and O’Dowl, 1999). It was o en the case when the borderline acted as a fi eld for extremely intense confl icts and discords some of which are s ll evident today (Kratke, 1999; Paasi, 1999). The transi on procedure into Central and Eastern Europe in par cular, had triggered the discussion for cross border coopera on policies as the border regions had been transformed from “dead ends” in areas of communica on and exchange, into contact zones with neighboring regions (Dimitrov et al., 2002; Resmini, 2002).

The accession of ten new states in the EU following 1st May 2004 and the accession of Romania and Bulgaria in 2007, has brought in the foreground a new economic geography in Europe shi ing the EU’s external borders. Within this framework, posi ve outlooks and percep ons had been developed for the forma on of a new “European iden ”. In the mean me, the new European structure is associated with new confl icts and new border lines that re-defi ne the percep ons of “us” and the “others”.

In the broader Balkan area a “new geography” is shaping, which sets new factors, balances, threats and challenges. The collapse of the communist regimes has brought forward signifi cant changes at a social, poli cal and economic level for which most Balkan countries had not been prepared for. The drama c changes occurring in the transi on countries was not a smooth course but a rather a distressing experience at mes.

This ar cle a empts to study the pe and level of interac on, the percep ons and policies occurring across the Northern Greek cross border zone. The border zone between Greece on the one hand and Albania, FYROM and Bulgaria on the other (in short: AFBG border region) is one of the most fragmented economic, social and poli cal spaces in Europe, where it was consid-ered to be a low opportuni area (Dimitrov et al 2003). It hosts small states having a low level

of trade interac on (Petrakos 2001) and un l recently a mosaic of trade policies and restric ons to interac on towards each other. In addi on, all countries have ethnic minori es usually living in border regions that have triggered fric on or confl ict in the past and con nue in some cases to be a source of suspicion and tension. Even their rela ons with the EU are diff erent. Greece is an EU-15 member since 1981, joined the EU in 2007, while the other two countries do not have yet a clear road map or a date determining when they become members of the EU.

The structure of the paper is as follows. In the next sec on a theore cal discussion concerning the borders and border phenomenon is provided. In sec on three, empirical evidence based on a survey conducted across the Northern Greek Borders is presented. The paper’s conclusions are presented in the last sec on.

Theoretical aspects concerning borders and border regions

The research dri on border issues has been triggered over the last fi een years. The re-

cent eastward European enlargement in par cu-lar, has drawn on a new ground for the discussion dealing with the role of boundaries. “Border-less”, “re-bordering”, “de-bordering”, are only some of the terms and no ons concerning bor-ders and border regions, indica ng that this dis-cussion has only just begun. Moreover, territorial lines that show dominance over the “other” di-viding line between ideologies, cultures and na- onali es, tension and confl ict, “wall”, “bridge”, “tunnel”, “opportuni ”, “threat” are only few of the diff erent interpreta ons that have been accredited for the role of borders. In the mean- me, border issues have accented not only the aspect of safe which was dominant up to then but also stressed the role of geography, history, religion, language and the “ini al condi ons” (Topaloglou et al, 2005; Petrakos and Topalo-

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Interac on, Percep ons and Policies

glou, 2007; Houtum and Struver, 2002; Paasi, 1999; Agnew, 2003).

It is broadly evident in the exis ng literature that borders discourage spa al interac on hindering factor mobili . However, some studies emerging during the two World Wars suggested that border obstacles are “good”. Seen from a military point of view the “best” borders would be mountains, lakes or deserts (Holdich, 1916; Fawce , 1918). Regardless of the two diff erent approaches, undoubtedly, the intensi of interac on drops where a border crosses a place. Barriers of movement may concern people, goods, capitals but also ideas, cultural standards, regula ons or intangible items. Barriers detected across a fron er line o en emerge due to diff erences in culture, language, religion, geographical characteris cs or ins tu onal diffi cul es inter alias.

The impact of borders in the process of integra- on in par cular, has become an issue of con-cern in the bibliography in recent years. Theo-re cally, the economic integra on between two countries implies the aboli on of barriers and obstacles at the borders. In other words, border line ceases to aff ect the cost of factors on the one hand and products and services mobili on the other. However, barriers may con nue to exist even long a er the removal of borders. As indicated by Hostfede (1980), o en there are such substan al cultural diff erences between countries that make cross border coopera on diffi cult. Almost all studies with regard the im-pact of borders in integrated regions come to the conclusion that the economic interac on between two countries would have been much more intense if there were no borders (McCal-lum, 1995; Helliwell, 1998; Bröcker, 1998). The above arguments suggest that placing a border and removing a border is not a symmetric ac- on due to the signifi cant role of ini al condi- ons (Petrakos and Topaloglou, 2007). But at the same me, there is no doubt that integra-

on procedures induce impacts upon space and economy. The process of integra on of course, although it possesses a non-spa al dimension, seems to bring forward both losers and winners with rela ve terms, though in absolute terms the posi ve result is inarguable (Petrakos, 2002).

What is the role of geography in the pe and level of cross border interac on? Are distance and transport cost associated with the level of border transac on? It is generally accepted in the literature, that distance is associated in a nega- ve way with trade intensi (Rauch, 1991; Ki-noshita and Campos, 2003) and with the level of regional labour wage (Hanson, 1998). Under this scope, the borders and the obstacles involved, can be considered as factors that increase dis-tance. Reversely, the reduc on of trade barriers at the borders will bring an increase of trade transac ons because of the reduc on of the rel-a ve distance. According to the new economic geography approach, the reduc on of transport cost under a crucial point could lead to a very serious discon nui in the spa al distribu on of economic ac vi (Krugman, 1991).

In the European space more specifi cally, following the recent E.U. enlargement, the proximi of border regions of the transi on countries with Western Europe seems to play an important role in the pe and level of cross border interac on. Petrakos (1996), states that areas with common borders with western European countries and border regions near to the European economic centre are expected to a ract ac vi es of a higher func onal order. The fact for example that the distance of the Greek border areas is beyond 1000 kilometres from the main European economic centres prejudges also a problema c incorpora on in the single European space (Petrakos 2000). Niebuhr and S ller (2002), add from their part the importance of spa al proximi of border regions to foreign markets as the basic geographical advantage that gives an explicit precedence to the central border regions.

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63

2 EXLINEA (Lines of Exclusion as Arenas of Coopera on: Reconfi guring the External Boundaries of Europe — Policies, Prac ces, Percep ons) is funded by the European Commission under the 5th Framework Programme. This survey is a part of a wider eff ort to study the evolu on, problems, policies, prac ces and percep ons prevailing in the old and new external borders of the European Union.

Proximi also favours the diff usion and the fl ow of “non-material goods” such as informa on, social and organisa onal models, cultural osmosis, etc. On the other hand perimetric regions with weak economic structures, poor infrastructure and inadequate local resources are expected to deteriorate.

An interes ng ques on in this discussion is whether or not the map of geographic borders is associated with the map of percep ons. It is generally acceptable that a border line dividing two countries in their geographical space aff ects signifi cantly the extent and pe of interac on that exists between them. However, the border line in terms of its intellectual and geographic dimension contributes signifi cantly in the forma on of the “us” vis-à-vis “others” iden . In fact, one could claim that the defi ni on of “us” in rela on to the boundaries presupposes the existence of the “others” in the opposite side of the borders. The manner that the people of these two countries perceive the concept of borders is not simply a ma er of lines drawn on a map or on the ground but something rather more complex and dynamic. The issue lends itself to further complexi when borders divide large geographic territories such as the EU-25 with neighbouring countries. In such cases, the grouping of characteris cs that form integrated

percep ons like religion, language, historical and cultural aff airs all lead to an intellectual hierarchy in space (Freundschuh, 1991). It is obvious that this “intellectual” special hierarchy is not always associated with the “geographic” spa al hierarchy.

Empirical Evidence

Methodology

What is a empted within the empirical sec on is to study the evolu on, problems, policies

and percep ons prevailing in the Northern Greek cross border zone. The empirical analysis is based on a research carried out in nine cross border areas at the EU’s external borders within the framework of the EXLINEA2 European Research Programme. Three of these nine cross border areas are found in the Northern Greek borders. The survey was conducted (among others) with the use of a standardized ques onnaire which included a total of 220 closed ques ons providing answers to sets of ques ons in a Likert scale ranging from 1 to 7. A total of 937 ques onnaires have been gathered within the EXLINEA from which 400 ques onnaires refer to the Greek case study. More specifi cally, nine eight (98) ques onnaires were collected from the

Table 1. The profile of respondents of the survey

(a) Public 186 (b) Private 214

Local Authori tes 86 Local Chambers 27

Public Agencies 27 Selected large fi rms 140

Development agencies 47 Consultants 23

Agencies promo ng cbc 11 Journalists 6

Universi es and Ins tu ons 15 NGOs 18

Source: Exlinea project, own elaboration

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Table 3. Cross border Investment

1 = no Investment at all Greece Greece Greece

7 = very sa sfactory level of Investment Albania FYROM Bulgaria

GR AL GR FY GR BU

Number of Observa ons 49 49 83 41 60 118

Cross-border exports to the nearest ci on the other side 2.37 1.45 2.77 2.71 3.35 1.93

Cross-border exports to the nearest larger ci on the other side 2.76 1.53 3.07 2.46 3.37 2.04

Cross-border exports to other nearby regional markets 2.82 1.47 3.06 2.76 3.50 2.15

Cross-border exports to more distant markets of the country 2.06 1.37 2.74 2.63 2.50 2.00

Cross-border exports to the capital of the country 2.55 1.45 3.01 2.90 2.90 2.14

Exports to other countries 2.98 1.35 3.15 2.85 2.75 2.66

Cross-border imports from the nearest ci on the other side 1.59 1.96 1.82 2.85 1.60 2.61

Cross-border imports from the nearest larger ci on the other side 1.61 4.43 2.00 2.68 1.80 2.92

Cross-border imports from other nearby regional markets 1.71 2.29 2.12 2.71 1.90 2.92

Cross-border imports from more distant markets of the country 1.47 2.86 2.07 2.37 2.05 2.66

Cross-border imports from the capital of the country 1.67 4.47 2.33 2.63 2.02 2.77

Imports from other countries 2.65 2.04 2.84 2.95 2.45 3.75

Source: Exlinea project. own elaboration

Table 2. Cross border Trade

1 = no exports/imports at all Greece Greece Greece

7 = very sa sfactory level of exports/imports Albania FYROM Bulgaria

GR AL GR FY GR BU


Cross-border exports to the nearest ci on the other side 2.94 1.80 2.84 2.71 2.58 2.59

Cross-border exports to the nearest larger ci on the other side 3.18 4.33 3.22 2.83 2.80 2.76

Cross-border exports to other nearby regional markets 2.92 2.31 3.18 2.71 2.95 2.99

Cross-border exports to more distant markets of the country 2.51 3.63 2.45 2.56 2.52 2.64

Cross-border exports to the capital of the country 2.76 3.49 3.21 2.76 2.93 2.84

Exports to other countries 3.51 1.63 3.70 3.20 3.60 4.00

Cross-border imports from the nearest ci on the other side 1.78 2.18 2.09 3.49 2.78 2.48

Cross-border imports from the nearest larger ci on the other side 1.94 5.18 2.12 3.46 2.60 2.81

Cross-border imports from other nearby regional markets 1.92 5.04 2.15 3.80 2.68 2.86

Cross-border imports from more distant markets of the country 1.57 4.08 2.06 3.34 2.55 2.59

Cross-border imports from the capital of the country 1.63 5.22 2.55 3.22 2.83 2.80

Imports from other countries 3.57 2.29 3.87 4.12 3.98 4.23


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65

border zones of Greece-Albania, a hundred and twen four (124) from the zones of Greece-FYROM and a hundred and seven eight (178) from the zones of Greece-Bulgaria. Table 1 illustrates the basic profi le of the sample which includes representa ves of the public and of the private sector, comprising a balanced sample. The following part of the paper deals with the analysis of ques onnaire results per

thema c fi eld.

The regional context

The region under study is a region where border confl icts and a decades-long legacy

of rigid border regimes have made cross-border interac on diffi cult. Another important

characteris c of the region is that of asymmetry. Not only do state borders defi ne a physical/legal separa on of communi es, they also reinforce the economic and poli cal-administra ve diff erences between EU member states and their neighbors. The pa ern is one of West-East and North-South dispari es, where standards of living, wages and general indicators of welfare appreciably decrease as one moves eastward. Poli cal asymmetries manifest themselves in diff ering degrees of poli cal decentraliza on, empowerment of local and regional governments and the resources available to local and regional governments. Under the infl uence of the EU and EU policies and as a result of the poli cal moderniza on process in the EU member states, mul level governance has begun to emerge as an important poli cal fact of life.

Table 4. De-localization of Activities

1 = no de-localiza on at all Greece Greece Greece

7 = very sa sfactory level of de-localiza on Albania FYROM Bulgaria

GR AL GR FY GR BU


Firms in this side of the borders have totally transferred their ac vi es to nearby regions in the other side of the border

1.90 1.53 2.96 2.07 3.32 1.64

Local fi rms in this side of the borders have par ally transferred their ac vi es to nearby regions in the other side of the border

2.35 1.45 3.24 2.44 3.58 1.74

Local fi rms in this side of the borders have totally transferred their ac vi es to the capital of country in the other side of the border

1.71 1.51 2.73 2.29 2.73 1.66

Local fi rms in this side of the borders have par ally transferred their ac vi es to the capital of country in the other side of the border

1.90 1.49 2.70 2.41 2.87 1.73

Local fi rms in this side of the borders have totally transferred their ac vi es to other regions in the other side of the border

1.69 1.45 2.74 2.02 3.13 1.73

Local fi rms in this side of the borders have par ally transferred their ac vi es to other regions in the other side of the border

2.12 1.55 2.94 2.17 3.05 1.92

Local fi rms in this side of the borders have totally transferred their ac vi es to other countries

2.06 1.49 3.02 2.15 3.10 1.86

Local fi rms in this side of the borders have par ally transferred their ac vi es to other countries

2.49 1.84 3.54 2.33 3.03 2.12


Ar cles



As is pical of many interna onal border regions, the EU’s external borders are also areas where cultural overlap and minori issues loom large. Greek communi es can be found straddling both sides of state borders, providing, on the one hand, a vehicle for improved communica ons across state borders but, on the other, in some cases conjuring up fears of challenged na onal iden es and revisionism. Perhaps one last major common characteris c of the case study regions is their lack of connec vi . Poor roads (except for major trans-European corridors), a limited number of border crossing points, an underdeveloped cross-border network of railway connec ons as well as other hindrances, new visa regula ons in par cular, make direct face-to-face contacts cumbersome.

Economic interaction

Trade and investment fl ows as well as dynamics of fi rm’s reloca on concern the

sets of ques ons examined in this thema c fi eld. Tables 2, 3 and 4 provide aggregate fi gures in mean values, referring to each border area and each cross border zone at the Northern Greek border region. The responses range from 1 to 7, with extreme values represen ng no trade/investment/reloca on at all (1) and very sa sfactory level of trade/investment/reloca on (7) respec vely.

The informa on provided in the above fi gures allow us to make a number of interes ng observa ons: a) The level of cross-border

interac on in trade and more specifi cally, in exports, is of a very low level, refl ec ng the weak border produc ve system and the regional character of specifi c border areas (i.e. small market areas). Also, exports in other countries are rather extensive, something that shows that the export orienta on of border regions has

not changed substan ally since 1989 (see Table 2). b) the region does not appear to cons tute

neither an important place of origin nor an important loca on for investments despite the fact that Greece cons tutes a vital foreign investor to the neighbouring countries. However, in the Bulgarian border zone the Greek border enterprises invest in nearby regions because of fabric manufacturing, which mainly requires low labour costs (see Table 3). c) Examining the degree that the size and the distance of ci es from the borders determine the form and the intensi of cross-border interac on, we iden fi ed a systema c correla on despite the fact that varia ons were not par cularly intense. In par cular, it was noted, that, under certain condi ons the larger ci close to the borders could absorb a lot of agglomera on dynamics released with the opening up of borders, a rac ng economic ac vi es. d) No evidence of signifi cant reloca on tendencies were found in the three cross-border areas as a whole. However, the exis ng reloca on of Greek fi rms mainly concerned the big ci es near the Bulgarian borders and with hardly any eff ect on those near the borders of FYROM (see Table 4).

Migration and social aspects of cooperation

What are examined in this sec on are im-migra on, cross-border mobili and social

interac on across the borders. Tables 5, 6 and 7 provide us with rela ve summary informa on.

With regard to migra on and social aspects of co-opera on we can conclude that migra on

fl ows of Albanians in the Greek border zone are of great importance, while there are also meaningful fl ows from Bulgaria. However, a specifi c concentra on of Albanian immigrants is not observed to the border area in rela on to the rest of Greece. It must also be noted that the migra on fl ows from FYROM to Greece

are very low. Immigrants work mainly in the sector of agriculture as unskilled workers and

Ar cles

67

Table 5. Immigration/Emigration

1 = no immigrants/emigrants at all Greece Greece Greece

7 = veri sa sfactory level of immigrants/emigrants Albania FYROM Bulgaria

GR AL GR FY GR BU


Locally se led cross-border immigra on from nearby regions 4,73 3,35 3,96 2,40 3,85 2,58

Locally se led cross-border immigra on from other regions 4,29 2,88 3,84 2,30 3,53 2,55

Locally se led immigra on from other countries 3,63 1,84 4,34 2,55 3,93 2,42

Locally se led cross-border immigra on working in the agriculture 4,80 1,84 4,05 2,18 4,05 2,25

Locally se led cross-border immigra on working in industry 3,33 1,53 3,13 2,30 3,07 2,33

Locally se led cross-border immigra on working in services 2,59 1,88 2,24 2,33 2,25 2,58

Locally originated cross-border emigra on to nearby regions 2,20 5,69 1,80 3,00 2,02 4,52

Locally originated cross-border emigra on to other regions 2,06 5,51 1,91 3,30 2,30 4,51

Locally originated emigra on to other countries 3,22 5,10 2,84 3,55 3,25 4,86


Table 6. Labor Commuting

1 = no commu ng at all Greece Greece Greece

7 = veri sa sfactory level of commu ng Albania FYROM Bulgaria

GR AL GR FY GR BU


Labor commu ng (people living in the other side of the borders

and working regulary in this side)3,59 2,31 3,05 2,83 2,80 2,45

Labor commu ng (people living in the other side of the borders and working sporadically in this side)

4,10 2,92 3,18 2,68 3,38 2,71

Reverse labor commu ng (people living in this side of the borders and working regulary in the other side)

2,04 3,73 2,58 2,98 2,07 3,70

Reverse labor commu ng (people living in this side of the borders and working sporadically in the other side)

2,24 4,12 2,61 2,90 2,55 4,01

One-day trade ac vi es (local merchants selling products in the other side in short trips)

3,08 2,80 3,37 3,08 2,75 3,63

One-day reciprocal trade ac vi es (merchants from the other side

selling products in the local market in short trips)2,57 2,37 3,18 3,35 3,45 3,08


Ar cles



a very small number of them work in industrial or service sectors. This fi nding also refl ects the produc on base pa ern in the cross-border zone area (see Table 5). There is no signifi cant level of labour mobili found on any side of the borders. The daily trade ac vi es are recorded in all cases, to below average, underlining the separa ng role of border in daily transac ons (see Table 6). With regards to the visits of the local residents to the other side of the borders, the nearby des na on trips explicitly surpass the long distance ones, stressing the important role that distance plays in social interac on. In the Greece-Albania border zone in par cular, the Albanian zone appears to be more ac ve especially for visits paid to rela ve immigrants

(see Table 7).

Identifying barriers to interaction and cross-border co-operation

The third thema c sec on examines the

degree to which condi ons of infrastructure, crossing the borders, trade, level of assistance,

and also economic geography operate as obstacles of interac on at the borders (see Tables 8, 9, 10, 11, 12 and 13 respec vely).

The data indicated in the above Tables allow us to make the following observa ons:

a) Despite the general belief that the infrastructure cons tutes a decisive obstacle in interac on, the research results do not confi rm this statement. However, the standard of railways appears to be an obstacle between the borders of Greece with Albania and FYROM (see Table 8). b) The closeness and the inadequate number of check points do not cons tute a serious problem for crossing the borders. The Visa’s procedures cons tute the basic obstacle of crossing the borders for FYROM and Albania as well as at a lesser degree the passport and custom offi cers’ treatment and a itude. (see Table 9). c) The obstacles that concern condi ons of trade are not important in the cross-border Greece-Bulgaria area due to Bulgaria’s accession

in EU. However meaningful obstacles in trade transac ons to exist as a result of du es,

Table 7. Social Interaction

1 = no interac on at all Greece Greece Greece

7 = very sa sfactory level of interac on Albania FYROM Bulgaria

GR AL GR FY GR BU


Cross-border visits of local residents to the largest ci of the other side near the border for personal reasons

3.71 4.86 4.14 3.88 4.65 4.36

Cross-border visits of local residents to the nearby regions of the other side for personal reasons

3.76 4.84 3.87 4.10 4.45 4.38

Cross-border visits of local residents to other more distant regions of the other side for personal reasons

3.33 4.76 3.58 4.20 3.73 4.01

Cross-border visits of local residents to the capital of the other side for personal reasons

3.31 4.78 3.77 3.78 4.45 3.93

Cross-border visits of residents of the nearby regions of the other side to local des na ons in this side for personal reasons

3.98 4.43 3.57 3.75 3.65 4.06


Ar cles

69

Table 9. Barrier in Crossing the Bordes

1 = barrier that cannot be overcome Greece Greece Greece

7 = no barrier at all Albania FYROM Bulgaria

GR AL GR FY GR BU


Closeness of check points 4.59 4.59 4.87 4.03 4.13 4.08

Inadequate number of check points 4.35 3.94 4.54 4.25 4.22 3.78

Visa procedures (is any) 3.63 3.24 4.19 2.60 4.37 4.56

Passport offi cers treatment and a itude 3.92 3.47 4.47 3.60 4.57 3.93

Customs offi cers treatment and a itude 4.12 3.69 4.08 3.41 4.60 4.04


Table 10. Trade Conditions as a Barrier



GR AL GR FY GR BU


Tariff s or du es imposed by the other side on exports 3.69 3.90 3.58 3.03 4.35 3.99

Quotas (limited quan es) imposed on exports 3.92 3.90 3.63 2.79 4.45 3.94

Bureaucra c procedures in exports 3.35 3.67 3.54 2.97 4.10 3.67

Bureaucra c procedures in imports 3.27 3.84 3.54 2.85 4.18 3.69

Technical requirements concerning exports 3.90 3.86 3.90 2.87 4.48 3.75

Technical requirements concerning imports 3.80 4.10 3.93 3.38 4.17 3.97


Table 8. Infrastructure Conditions As A Barrier



GR AL GR FY GR BU


Railways 2.86 3.37 4.29 2.83 3.83 3.44

Roads 3.88 5.51 4.84 4.65 3.85 3.90

Telecommunica ons 4.00 5.67 4.76 4.95 4.75 5.08

Public transport 3.84 5.06 3.96 3.58 3.52 4.15


Ar cles



Table 11. Level of Assistance as a Barrier



GR AL GR FY GR BU


Insuffi cient local government assistance 3.47 4.18 3.93 2.95 4.03 4.36

Insuffi cient regional government assistance 3.43 4.29 3.75 3.18 3.97 4.23

Insuffi cient na onal government assistance 3.12 3.61 3.71 3.18 3.70 3.87

Insuffi cient local business associa ons assistance 3.69 4.45 4.04 3.03 4.20 4.42

Insuffi cient regional business associa ons assistance 3.73 4.33 3.82 3.10 4.08 4.26

Insuffi cient na onal business associa ons assistance 3.47 3.90 4.00 3.13 3.85 4.19

Insuffi cient local agencies assistance 3.88 4.65 4.10 3.08 3.73 4.44

Insuffi cient regional agencies assistance 3.76 4.22 3.80 3.18 3.98 4.30

Insuffi cient na onal agencies assistance 3.43 3.92 3.80 3.23 4.17 4.20

Insuffi cient European (interna onal) organiza ons assistance 3.18 3.35 3.76 3.36 3.92 4.23


Table 12. General Conditions as a Barrier



GR AL GR FY GR BU


Poli cal industry 3.22 3.65 3.25 3.36 4.05 4.42

Historical evants 3.61 4.71 3.28 3.23 4.38 4.48

Corrup on 3.04 3.22 3.08 3.00 3.70 3.54

Securi problems 2.98 3.59 2.88 3.33 3.55 4.05

Frequent changing of the rules in business 3.27 4.22 3.25 3.10 3.92 3.92

Exchange rate instabili 3.61 4.53 3.58 3.79 4.02 4.91

Quali of banking system 3.47 4.47 3.46 3.77 3.80 4.88

Infl a on 3.82 4.84 3.83 4.41 3.86 4.74

Diff erent culture 4.22 5.82 4.64 4.46 4.76 5.32

Diff erent religion 4.33 5.51 4.67 4.64 4.97 5.11

Diff erent language 4.31 5.22 4.11 3.92 4.59 4.44


Ar cles

71

quotas, bureaucra c procedures and technical requirements concerning the exports and imports at the border zones of Greece with Albania and FYROM (see Table 10). d) The level of assistance of cross border co-opera on in general is not perceived as an insuperable obstacle. However, the na onal level of support in all cases is recorded to contribute the least in the cross-border collabora on in rela on to local and regional levels. Also, the Bulgarian and Albanian side believe that they have a higher level of assistance in rela on to the Greek side, while opposite percep ons are held from the side of FYROM (see Table 11). e) Obstacles concerning general condi ons, corrup on is fl agged up as a serious obstacle that penetrates all regions. On the contrary, diff erences in terms of religion, culture, and, language, does not represent obstacles. All three border zone regions consider that obstacles are

represented by the general economic condi ons that have to do with the banking system, exchange rate, infl a on, and the stabili of business rules. The concerning issues of poli cal instabili , securi , and, historical events, are presented as obstacles at the border zones of Greece with Albania and FYROM (see Table 12). f) With regards to economic geography condi ons, the purchasing power and the insuffi cient size

of the nearby markets in the other side of the borders is seen as a problem by the total Greek border zone. On the contrary, the distance of the large ci es as well as the diffi cult geographic morphology, are not perceived as obstacles. The low quali and produc vi as well as the limited product diff eren a on of local economy seem to cons tute a problem which is mainly presented in the border zone of Greece-Albania (see Table 13).

Perceptions and attitudes towards the border and the neighbours

The “ini al condi ons”, the images of the “others” and the percep ons concerning

the impacts of greater cross border interac on are the issues examined in this thema c sec on. Tables 14, 15 and 16 report the rela ve empirical results.

On the basis of the above empirical results the following comments are derived:

a) All sides face “ini al condi ons” in general as an advantage, with Albania presen ng the highest scores. When comparing percep ons among border zones, they are systema cally

Table 13. Economic Geography as a Barrier



GR AL GR FY GR BU


Insuffi cient in size nearby markets in the other side 3.35 4.98 3.64 4.49 3.80 4.55

Low purchasing power of the nearby markets in the other side 3.16 5.31 3.47 4.21 3.66 4.51

Diffi cult geographical condi ons in border regions 3.90 5.31 4.31 4.90 4.31 4.41

Large ci es on the other side too far away 4.12 4.84 4.05 4.46 4.19 4.38

Low quali and produc vi of local fi rms 3.49 3.49 3.81 4.10 4.03 3.99

Limited product diff erenta on of local economy 3.43 3.96 3.95 4.18 4.25 4.02


Ar cles



Table 15. Images of the Other

1 = not at all Greece Greece Greece

7 = yes to the maximum degree Albania FYROM Bulgaria

GR AL GR FY GR BU


Hard working (people on the average) 4.22 5.59 3.73 4.37 3.88 4.35

Produc ve 3.82 5.37 3.80 4.63 3.92 4.42

Honest 3.55 4.84 3.90 3.92 3.95 4.39

Friendly 3.65 5.27 3.77 4.16 4.15 4.81

Peaceful 3.65 5.49 3.69 4.39 4.20 5.07

Wealthy 2.88 5.45 3.07 4.87 3.12 4.74

Open minded 3.57 5.35 3.46 4.16 3.90 4.63

Disciplined 3.57 5.39 3.87 4.11 4.03 4.51

Similar to us 3.24 4.57 3.76 4.08 3.92 4.64

They have good feelings towards us 3.51 3.96 3.91 4.11 4.14 4.61

They have a “European” culture 3.06 4.73 3.84 4.37 3.78 4.61


Table 14. Initial Condition

1 = serios problem Greece Greece Greece

7 = important asset Albania FYROM Bulgaria

GR AL GR FY GR BU


Historical events amond the two countries 3.55 5.76 3.78 3.61 4.07 4.75

Cultural diff erences 3.65 5.86 3.82 4.32 4.53 4.93

Religious diff erences 3.82 5.63 4.00 4.68 4.42 5.00

The existence of an ethnic minori in the other side 4.00 5.53 4.19 3.55 4.47 4.67

The existence of an ethnic minori in this side 4.02 5.45 4.01 4.53 4.36 4.71

Linguis c diff erences 4.00 5.61 3.78 3.74 4.20 4.33

Current rela ons among governments 4.41 5.84 4.14 3.89 4.49 5.20

Current rela ons among local / regional authori es 4.53 5.76 4.30 4.39 4.51 5.22

Poli cal diff erences among regional and local administra ve frameworks in both

3.96 5.65 3.92 4.16 3.71 4.92


Ar cles

73

presented by the highest scores for the Al-banian and Bulgarian zones in respect to the Greek zone. Moreover, percep ons held by the Greek zone as against to the Bulgarian one are systema cally more posi ve than for the other two border zones of Greece-Albania and Greece-FYROM. It is also important that the rela onships among local, regional authori es and the governments are considered as an advantage, underlining the vital role of policy making in the cross-border collabora on. Reli-gious diff erences and the existence of na onal minori es at the borders are also considered as an asset, although there are diff used opinions

for the opposite (see Table 14).b) The “map of images” for the “other” as it came out of from the fi ndings of the research is as follows: Albanians for Greeks: very hard working, produc ve, honest, friendly, peaceful, open-minded, moderate similar to us. Greeks for Albanians: Enough hard-working, moderate produc ve, honest, friendly, peaceful, open-minded, similar to us. FYROM for Greeks:

Enough hard-working, produc ve, friendly, peaceful, open-minded, disciplined, similar to us, moderate honest. Greeks for FYROM: moderate hard working, produc ve, friendly, peaceful, open-minded, disciplined, similar to us, honest. Bulgarians for Greeks: very peaceful, enough hard-working, produc ve, friendly, open-minded, disciplined, similar to us, honest. Greeks for Bulgarians: enough peaceful, friendly, disciplined, moderate hard-working, produc ve, open-minded, similar to us (see Table 15). c) The expecta ons from the poten al greater interac on are very posi ve in general. However, in rela ve terms Greeks are more retained towards

Albania and Bulgaria, whereas less favourable are the people from FYROM towards Greece. Nevertheless, the cross-border collabora on in trade, investment, social interac on, and, ins tu onal co-opera on is perceived as a process that will prove advantageous to all par es (see Table 16).

Table 16. Perceptions About the Impact of Greater Interaction

1 = totaly nega ve impact Greece Greece Greece

7 = higly posi ve impact Albania FYROM Bulgaria

GR AL GR FY GR BU


Totally open borders within a wider Europe 4.57 5.98 4.72 4.63 4.97 5.82

Investment by local fi rms in the other side of the borders 4.92 5.69 4.83 4.61 4.88 5.69

Investment by fi rms origina ng in the other side of the border in the local economy

4.24 6.02 4.53 4.11 5.07 5.53

Immigrants from the other side working in the local economy 4.39 5.92 4.46 3.92 4.86 4.64

Emigrants from this side working in the other side of the borders 4.45 6.20 4.51 4.03 4.83 5.36

Local exports to the other side of the borders 5.10 6.22 4.74 4.32 5.14 5.62

Local import from the other side of the borders 4.55 5.88 4.25 4.00 4.59 5.08

Mixed marriages with immigrants 4.08 5.80 4.49 4.24 4.76 5.08

Cultural interac ons 4.59 6.04 4.90 4.26 4.97 5.87

Collabora on among universi es, research ins tutes, etc. 4.94 5.54 4.67 4.08 5.19 5.80


Ar cles



Institutional initiatives of cross-border co-operation

In this fi h thema c sec on what was inves gated was the frequency and eff ec veness

of policies of cross-border collabora on and the degree of ac va on of local actors (Tables 17, 18 and 19 respec vely).

The fi gures presented in the above Tables allow us to make the following comments:

a) The frequency of implementa on of cross-border policies is of moderate level, while, systema cally, the frequency of implementa on of European policies are higher rela ve to the corresponding na onal, regional and local policies. In terms of subject-ma ers, policies

seem to focus across all border zones in the collabora on of local authori es and cultural exchanges. In the Albanian and Bulgarian border zones more frequently implemented policies seem to exist in rela on to the Greek regions located across. From the Greek side, the frequency of policies concerning the environment and natural disasters exhibit below average in all cases. On the other hand, there is low frequency of policies from the Greek side that deal with organised crime, immigra on, educa on/research and trust building policies (see Table 17). b) The eff ec veness of the cross border co-opera on policies could be characterised as moderate appearing values at a lower level in rela on to the frequency of policies. The European level also, in this unit, obtains in all cases the highest values when compared to the

Table 17. Implementation of Policies of Cross-Border Cooperation

1 = no policies at all Greece Greece Greece

7 = very frequently poli es Albania FYROM Bulgaria

GR AL GR FY GR BU


Local policies of c-b coopera on 3.61 4.46 4.01 4.37 4.29 4.92

Regional policies of c-b coopera on 3.71 4.35 4.26 4.11 4.17 5.06

Na onal policies of c-b coopera on 3.73 4.06 4.25 4.13 4.21 4.83

European Union policies of c-b coopera on (funding) 4.14 4.21 4.44 4.16 4.41 5.00

Infrastructure (roads, crossings, railways, etc.) 3.80 4.46 4.28 3.95 3.98 4.43

Coopera on among local authori es 3.98 4.96 4.31 4.16 4.43 4.61

Coopera on among local fi rms 3.80 4.58 4.12 3.97 3.97 4.16

Policies of coopera on in environmental problems 3.16 4.38 3.69 3.68 3.78 4.55

Policies of coopera on in the case of natural disasters 3.51 4.35 3.74 3.87 3.95 4.75

Policies of coopera on towards organized crime 3.65 4.79 3.73 4.16 3.98 4.81

Policies of coopera on in migra on issues 3.57 4.96 3.81 4.11 4.07 4.59

Policies of cultural coopera on 3.82 5.29 4.17 4.29 4.28 4.92

Policies of coopera on in educa on / research 3.51 5.25 3.62 4.29 4.31 4.53

Trust building policies 3.80 4.91 3.90 4.21 4.05 4.56


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75

Table 19. Local Actors Active in Cross-Border Interaction or Cooperation

1 = no ac ve at all Greece Greece Greece

7 = very ac ve Albania FYROM Bulgaria

GR AL GR FY GR BU


Local administra on 3.79 4.74 4.01 3.26 4.34 4.76

Regional administra on 3.94 4.98 4.10 3.87 4.16 4.71

NGOs 3.69 5.57 3.93 3.82 4.16 4.49

Local or regional Chambers 4.10 5.19 3.80 4.03 4.22 4.50

Labor Union 3.71 4.60 3.78 3.37 3.95 3.54

Universi es and Research Centers 3.77 5.23 4.34 3.82 4.16 4.23

Development Agencies 4.15 5.43 4.19 4.32 4.16 4.15

Private fi rms 4.04 5.09 4.39 4.03 3.98 4.39

Poli cal par es 3.64 4.87 3.76 3.53 4.02 3.85

Private ci zen 4.09 5.11 4.20 4.24 4.19 4.30

Networks of ci zen 3.62 5.02 3.81 3.97 3.98 4.30

Cultural Associa ons 4.11 5.28 3.95 4.00 4.47 4.42

Minori es 3.70 5.66 4.21 4.26 4.10 4.03

Other 4.30 6.04 4.54 4.61 4.40 4.79


Table 18. Effectiveness of Policies of Cross-Border Cooperation

1 = no eff ec ve at all Greece Greece Greece

7 = maximum eff ec veness Albania FYROM Bulgaria

GR AL GR FY GR BU





European Union policies of c-b coopera on (funding) 3.94 4.60 4.17 4.00 4.47 4.53










Trust building policies 3.60 4.64 3.86 3.76 4.33 4.71


Ar cles



na onal, regional, and, local level. The most eff ec ve policies for the Greece-Albania border zone seem to be the co-opera on among the local authori es and cultural exchanges. The most eff ec ve policies for the border zone Greece-FYROM are infrastructure ma ers and the co-opera on among local authori es. Regarding the Greece-Bulgaria border zone the most eff ec ve policies deal with the cultural exchanges and the trust building aspects. (see Table 18). c) The degree of ac va on of local actors is pre-sented generally moderate, with some diff eren- a ons. In the border zone of Greece-Albania development agencies are the most ac ve. In the Greece-FYROM border zone mostly ac ve

are the individual fi rms , that in rela on to the most of the cross border ini a ves are noted from local authori es (see Table 19). Our fi nd-ings suggest that there is “room for policy mak-ing” from the local actors as long as they obtain the respec ve decentralized competencies.

Expected effects of greater cross border interaction and co-operation

The benefi ts of greater interac on between two countries and the compara ve

assessment of the gains are examined in the sixth thema c sec on (See Tables 20 and 21 respec vely).

Table 20. The benefits of greater interaction between the two countries

1 = no benefi ts at all Greece Greece Greece

7 = maximum benefi ts Albania FYROM Bulgaria

GR AL GR FY GR BU


Our country 5.04 6.40 5.05 4.68 4.81 5.61

The other country 4.87 5.81 4.84 4.54 4.82 5.39

The capital ci of our country 4.78 5.98 4.83 4.38 4.54 5.35

The capital ci of the other country 5.20 6.30 5.04 4.32 4.95 5.52

Our border region 5.33 6.21 5.14 4.73 4.91 5.82

The border region in the other side 5.36 6.00 5.21 4.46 4.93 5.73

The large ci es near the border in our side 5.36 5.91 4.96 4.36 4.88 5.63

The large ci es near the border in the other side 5.02 6.17 4.60 4.28 4.86 5.52

The rural areas near the border in our side 4.82 5.85 4.51 3.92 4.50 5.50

The rural areas near the border in the other side 4.69 5.17 4.63 3.42 4.75 5.01

The organized crime in both countries 4.78 6.15 4.92 3.86 4.93 4.97

The rich and weal in this country 4.69 6.20 4.90 4.19 4.65 5.24

The rich and weal in the other country 4.44 6.11 4.64 4.03 4.09 4.97

The poor in this country 4.71 5.76 4.35 3.47 4.06 4.57

The poor in the other country 4.55 6.02 4.53 3.97 4.23 4.87

The poli cal par es in power 4.31 5.70 4.23 3.78 4.40 4.80

The poli cal par es in the opposi on 4.50 5.72 4.71 4.11 4.32 5.03


Ar cles

77

On the basis of the informa on provided in Tables 20 and 21 we can make the following interes ng observa on:

a) It is found that there are high enough expecta ons for benefi ts from all par es and in the most intense degree from the Albanian side. Among the border zones Albanians and Bulgarians expect greater benefi ts than Greeks do, and, on contrary to Greeks opposite to FYROM who envisage great benefi ts from their neighbours. It must be noted that all par es

believe that their own country as a whole will benefi t more, their capital, however, will gain less than the capital of the neighbouring country. Another important fi nding is that it is expected from the border regions to be equally benefi ted as a result of the cross-border interac on. Results for benefi ts between the rich and the poor show that all border zones expect from the rich of their own country and the poor of the

neighbouring country to gain rela vely more. Finally, it is an cipated that opposi on poli cal par es are expected to benefi t more than the par es in power. (see Table 20). b) Through the compara ve assessment of benefi ts it is found that posi ve expecta ons are focused mainly in the Albanian and Bulgarian border zones. It also follows that all border zones will come out with benefi ts from the cross-border interac on. Comparing the expected gains at a country level as well as at a border region level, it is found that both levels gain

more or less the same. There is also the opinion that greater interac on results in winners and losers in border regions that keep some sort of balance (see Table 21).

Table 21. Comparative assessment of the gains of greater interaction between the two countries

1 = not at all true Greece Greece Greece

7 = absolutely true Albania FYROM Bulgaria

GR AL GR FY GR BU


Both countries gain from greater interac on 4.74 4.87 4.41 3.94 4.47 5.37

The other country gains more 4.21 5.35 4.61 4.17 4.47 4.15

Our country gains more 4.57 5.30 4.42 4.20 3.98 4.75

Both border zones gain from greater interac on 4.50 4.76 4.43 4.14 4.08 5.21

The other border zone gains more 4.17 4.91 4.51 4.06 4.09 4.21

Our border zone gains more 4.26 4.63 4.09 4.29 4.51 4.30

Our country gains more than one region 4.36 5.39 4.37 3.94 3.87 4.72

Our region gains more than our country 4.10 5.15 4.35 3.97 4.02 4.97

Our region and our country gain about the same 4.24 5.37 4.04 3.91 4.30 4.89

Greater interac on causes in our region both winners and losers 4.26 4.93 4.17 3.71 3.94 5.20

Gains are greater than losses in our region 3.80 4.54 4.26 3.85 3.72 4.55

Losses are greater than gains in our region 3.83 4.91 4.03 3.74 4.27 4.16

Gains and losses are about the same in our region 4.30 5.29 4.53 4.88 4.22 4.68


Ar cles



Expected effects of EU enlargementon the region

In this seventh and fi nal thema c sec on the issues examined have to do with the

compara ve assessment of the eff ects from the EU enlargement and the an cipated consequences in the cross border co-opera on policies (See Tables 22 and 23).

From the analysis of the results the following observa on can be made:

a) Generally posi ve expecta ons prevail for the an cipated benefi ts that will result from the EU enlargement. It is claimed that the EU itself will come out benefi ted from the process of enlargement. Another observa on derived is that not only neighbouring countries but all border regions will gain benefi ts. Moreover, it

is shown that for each side the same level of benefi ts are expected for the country as well as for the border regions. The EU enlargement is also claimed that will bring upon winners and losers at the border regions, which nevertheless will be of an equal size and level (see Table 22). b) The an cipated impacts of the enlargement regarding the cross-border policies are believed to be essen al. Equally posi ve are expected to be the consequences in the na onal, the regional and the local level. However, it is found that there are diff erences in the Albanian and Bulgarian side that expect more posi ve impacts from the enlargement compared to the Greek zone. On the contrary, the Greek zone opposite of FYROM is the one that holds the most posi ve expecta ons from the enlargement compared to its neighbouring border region. It is also remarkable the fact that the most op mis c expecta ons of the Greek zone with Albania

Table 22. Comparative assessment of the impacts of EU Enlargement

1 = not at all true Greece Greece Greece

7 = absolutely true Albania FYROM Bulgaria

GR AL GR FY GR BU


EU gains 4.70 4.78 4.60 4.53 4.10 5.42

All countries gain 4.13 5.31 4.66 4.09 4.22 4.95

The other country (countries) stand to gain more 4.78 5.33 4.57 4.06 4.42 4.30

Our country gains more 4.63 4.62 4.49 4.27 4.24 4.71

Both border zones gain 3.98 4.87 4.68 4.00 4.24 4.73

The other border zone gains more 4.50 4.60 4.18 4.13 4.43 3.78

Our border zone gains more 4.10 4.95 4.23 4.19 4.20 4.18

Our country gains more than our region 4.40 5.02 4.67 4.09 4.08 4.65

Our region gains more than our country 4.31 5.25 4.51 4.09 4.53 4.71

Our region and our country gain about the same 4.51 5.23 4.46 4.09 4.60 5.00

EU enlargement causes in our region both winners and losers 4.29 4.41 4.37 4.94 4.13 5.28

Gains are greater than losses in our region 4.29 5.07 4.48 4.44 4.63 4.71

Losses are greater than gains in our region 5.05 6.35 5.07 5.09 5.02 4.65


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79

and Bulgaria focus in the trust building policies, whereas the same issue is the one of the least op mis c expecta ons of the Greek zone with FYROM (see Table 23).

Conclusion

This paper has provided evidence concerning interac on, percep ons, policies and

prac ces on the Northern Greek cross border zone. The main conclusions derived from the precedent analysis which deserve considera on are the following:

Borders cons tute regions of rela vely low at-trac veness. The low level of economic interac- on and weak compe veness and the outward looking approach accordingly, confi rm the exist-ence of a weak produc ve and export base of the border zone regions, which do not appear

to cons tute either the key sender or the key recipient of serious investments. The fact, how-ever, that the problem of unemployment is sov-ereign in the cross-border zones is relevant to the statements men oned above.

Inves ga ng the extent to which size and distance of the ci es from the border areas defi nes the pe and the level of cross border interac on, we have no ced a systema c correla on. The size of a ci , as in all cases, plays a signifi cant role. In almost all cases, the largest ci near the borders exhibits a signifi cantly larger mean value compared to that of the nearest ci . The signifi cance of the results is augmented as we gradually move from smaller ci es to the capital. These results lead us to the conclusion that there is a special role for the large urban centre close to the borders as this could operate under certain condi ons as a hub for all sorts of economic ac vi es.

Table 23. Impact of EU Enlargement on Cross-Border Cooperation / Interaction

1 = nega ve Greece Greece Greece

7 = posi ve Albania FYROM Bulgaria

GR AL GR FY GR BU














Trust building in the cross-border region 6.50 6.50 4.75 2.83 5.20 6.02


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Diffi cult terrain and physical geography do not cons tute a major intervening factor in infl uencing cross border interac on pa erns. However, the peripheral loca on in the wider European economic space infl uences to a large extent both the prospects for development and pa ern of specializa ons in these border regions. It can also be noted that geographical proximi s mulates mutual contacts and social interac on and also enhances the networking between the two sides of borders.

Analysis of the impacts that are likely to arise from the greater CBC, allows us to conclude that the expecta ons for posi ve repercussions prevail. However, countries that have a low level of growth and ins tu onal comple on with the EU-15 focus their posi ve percep ons in a ract-ing investments, cultural and ins tu onal collab-ora on, and, social interac on. On the contrary, the most developed countries posi vely conceive the increase of CBC through investments, trade, and, profi t from cheap labour.

In terms of regional “images”, it is worth no ng that there are divergent percep ons with respect to the geographical loca ons of Greece and its northern neighbors. More specifi cally, in the northern borders of Greece a sense of isola on prevails while, on the other side of the border, residents fi nd themselves to be located in a favorable place. In other words, for the Greeks the borders separate something “diff erent” while for their northern neighbours they separate something that is “the same”. Within this context, the role of EU is decisive regarding the confi gura on of percep ons of “us” and “the other”.

If anything has become clear in studying the area of our focus, it is that cross-border regionaliza on is inherently a process of socio-poli cal construc on and, in many, ways highly

ar fi cial. Cross-border regions do not create “monolithic” communi es of interest, where

ci zens, poli cal actors and the private sector par cipate equally in promo ng coopera on. Instead, regionaliza on in this case is a project of linking together actor groups and ins tu ons with a stake in improved co-opera on. The simultanei of inclusion and exclusion, of “opening” and “closure” and/or “na onalizing” and “Europeanizing” discourses at the border characterizes all our case study areas. These contradic ons are the point of departure for any serious contempla on of cross-border region-building. Given the simultanei of inclusion and exclusion in borderlands contexts, the quali of coopera on will to a great extent depend on the role poli cal elites assume in promo ng a regional idea and bridging cultural diff erence. The quali of the poli cal message, however, is not only a local issue; it is subject to prac ces and discourses that operate at several diff erent spa al levels and societal realms.

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Ar cles


1 Бузек, Ерхард, В. Миվն лич, Европейският съюз по пътя на изток, ПИК, 2005.2 Ферхойген, Г., Европа в криза. За преосмисляне на европейската идея, Български бестселър, С., 2006.

Evolution of Еuropean Union’s Position on the Accession of the Western Balkans

Tzvetelina IantchevaPh.D. student at the Department of

International Economic Relations and

Business, UNWE

E-mail: [email protected]

Summary: The enlargement policy is one of the main instruments EU has in implemen ng its external policy. Encouraging stabili , safe and prosperi in the Western Balkans is a major priori for the EU. Membership prospects are a powerful incen ve for poli cal and economic reforms in the region.

The EU’s opinion regarding the Western Balkans in united Europe

EU’s posi on on the place of the Western Balkans in united Europe evolves from close coopera on to associa on and membership. However, the ul mate goal – full membership – depends on several condi ons. Main factors for

this evolu on are considered: the crisis in the EU and the situa on in the Western Balkans.

The object of the ar cle is the EU’s posi on on the accession of the Western Balkans. The aim is to study how this posi on evolves, and the

tasks are to clarify the factors which infl uence this evolu on, the Bulgarian posi on and the degree to which the accession criteria are fulfi lled by the Western Balkan countries.

Key words: EU, Western Balkans, stabiliza on and associa on process, Stabiliza on and associa on agreements, Thessaloniki Agenda.

JEL: F15.

Evolution of European Union’s position on the accession of the Western Balkans

The enlargement policy is one of the main instruments EU has in implemen ng its external policy. It has been the ruling

idea since the beginning of the 1990s that off ering the possibili of membership is the most effi cient as well as the cheapest way of stabilizing reforms in Central and Eastern

Europe1. The European Union’s (EU) own safe depends on safe and stabili in its neighbouring countries; moreover, a high degree of poli cal and economic stabili means more safe and more economic opportuni es for EU itself2. The EU cannot prosper if its neighbours

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3 Ленард, М., Защо Европа ще управлява ХХ� век, Обсидиан, 2005. 4 Albania, Bosnia and Herzegovina, Croa a, Macedonia, Montenegro and Serbia with Kosovo. 5 These are the so called Copenhagen criteria: stabili of ins tu ons guaranteeing democracy, the rule of law, human rights and respect for and protec on of minori es; existence of a func oning market economy and the capaci to cope with compe ve pressure and market forces within the Union; abili to take on the obliga ons of membership, including adherence to the aims of poli cal, economic and monetary union; existence of administra ve capaci for the adop on and implementa on of the Union’s acquis and policies. The Western Balkan countries must meet one more requirement: full coopera on with the Interna onal Criminal Tribunal for the former Yugoslavia as well as developing coopera on with the countries in the region.

provoke wars and ethnic violence3. That’s why encouraging stabili , safe and prosperi in the Western Balkans4 is a major priori for the EU. Membership prospects are a powerful incen ve for poli cal and economic reforms in the region. A further mo va ng factor is the successful comple on of accession nego a ons and the accession of the ten countries from Central and Eastern Europe in 2004 and 2007.

The poli cal framework of the coopera on between EU and the Western Balkans a er 1999 is the stabilisa on and associa on process (SAP). It is an ambi ous extens on of the regional approach for the Western Balkans and is further enriched with elements of the enlargement process at the Thessaloniki summit in June 2003.

The SAP aims: stabili and a smooth transi on to market economy, support for regional coopera on and the prospect for accession. The elements of the EU partnership are:

trade concessions (autonomous trade • measures);

economic and fi nancial support (CARDS • programme);

contractual rela ons (Stabiliza on and • Associa ng Agreements – SAA).

Within the framework of the stabilisa on and associa on process with the countries of the Western Balkans, the European Union has set up European partnerships with the countries of the Western Balkans. These partnerships set up a framework of priori ac on and a fi nancial

structure to improve the stabili and prosperi of the region, with a view to greater integra on with the EU. The European Union (EU) applies the same methodology to the countries of the Western Balkans as that followed for the new Member States and acceding countries.. As a candidate country for which membership nego a ons have already begun, Croa a benefi ts from its own accession partnership.

EU’s position on the accession of the Western Balkans after 1999

Ar cle 49 of the Trea of the European Union says: any European state which respects the principles of liber , democracy, respect for human rights and fundamental freedoms, and the rule of law may apply to become a Member of the Union. The EU has set poli cal and economic membership criteria, as well as criteria concerning the obliga ons of membership and the administra ve capaci for adop ng and implemen ng the acquis communautaire and the policies of the Union5.

At the Helsinki European Council in December 1999 the EU explicitly declares its determina on to have a leading role in promo ng stabili , securi and economic development in South-Eastern Europe in close partnership with the countries of the region. It is underlined that the Stabilisa on and Associa on Agreements (SAA) should allow the development of closer rela ons between the states in the region in all areas. It is stressed on the major importance of removing

trade barriers and barriers to the movement

Ar cles


Evolu on of Еuropean Union’s Posi on

6 The Thessaloniki Agenda for the Western Balkans, Presidency conlusions, European council, Thessaloniki, 19-20 June 2003.

of people between the countries concerned. Special a en on is paid to the Union’s wish to support democra za on of the Federal Republic of Yugoslavia and to rehabilita on and reconstruc on of Kosovo.

The European council in Feira in June 2000 reaffi rmed the priori for the Union of the enlargement process. The objec ve of the EU is confi rmed: the fullest possible poli cal and economic integra on of the Western Balkans through the SAP, poli cal dialogue, liberaliza on of trade and coopera on in Jus ce and Home Aff airs. All the countries in the region were declared poten al candidates for EU membership. The European Council encourages the Western Balkans states to increase their regional coopera on including through regional trade arrangements. The EU is ready to intensify its coopera on with them, including in economic and fi nancial assistance, poli cal dialogue, free trade, approxima on of EU legisla on and coopera on in other policy areas.

The Nice European Council in December 2000 uses the formula: “a clear prospect of accession, indissolubly linked to progress in regional coopera on”. It is underlined that each country will receive individual treatment.

The Brussels European Council in March 2003 reaffi rms that the future of the Western Balkans is within the EU, which pledges full support for the process of consolida ng democracy and stabili as well as for the economic development.

The Western Balkans are the main topic of the Thessaloniki European Council in 2003. It is realized that it is necessary to go beyond rehabilita on and reconstruc on of these countries, to make the shi to approxima on of the legisla on, to increase the support of the EU. The so called Thessaloniki Agenda for the Western Balkans was

accepted. It confi rms once again that the Western Balkans and the support for their prepara on for future integra on in the European structures and a membership in the Union are a high priori for the EU. “The Balkans will be an integral part of a unifi ed Europe”6. The policy of Stabilisa on and Associa on is enriched with elements from the enlargement process. It is stressed that the future of each country lies in its own hands: it depends on the implementa on of reforms, of fulfi llment of the criteria laid down in Copenhagen in 1993 and on the performance of the country in the SAP. The main principles are those of own merits, catch-up and regional approach.

The EU acknowledges the necessi of con nued US involvement in the Balkans, as well as the presence of the Balkans on the agenda of the EU dialogue with Russia.

The EU’s commitments and assistance must be matched with the commitment of the govern-ments of the Western Balkans to make the nec-essary reforms, to establish adequate administra- ve capaci and to cooperate among themselves. The Thessaloniki summit is the start of a mul lat-eral poli cal forum EU – Western Balkans.

The Thessaloniki Agenda includes the following elements:

enhanced support for ins tu on building;• fi gh ng organised crime, coopera on in •

jus ce and home aff airs ma ers;promo ng economic development;• reconciling for the future and enhancing •

regional coopera on.

The Brussels European Council in December 2003 points out that the pace of the reform process remains slow. The countries of the region are called to intensify their reform eff orts especially in areas like public administra on, fi gh ng

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85

7 The Salzburg Declara on, Salzburg EU/Western Balkans Joint Press Statement.8 It is now confessed that the ten Central and Eastern European countries were not ready for full membership at the me of accession.9 Croa a is in the middle of accession nego a ons, Macedonia has applied and has a candidate status, Albania, and Bosnia and Herzegovina and Montenegro have signed Stabilisa on and Associa on Agreements, Serbia has no such agreement yet.10 2005 Enlargement Strategy Paper, Communica on from the Commission.

organised crime and corrup on. It is necessary that all countries in the region cooperate fully with the Interna onal Criminal Tribunal for the former Yugoslavia (ICTY). The Council reiterates its determina on to support fully the European perspec ve of the Western Balkans.

The European Council in December 2004 approves the framework for nego a ons with the candidate countries. Each individual framework takes account of the experience of the fi h enlargement process and of the evolving of the acquis, as well as the country’s own merits, specifi c situa on and characteris cs. The frameworks contain long transi onal periods, deroga ons, permanent safeguard clauses as well as the areas in which they will be applied: freedom of movement of persons, structural policies, agriculture.

Regarding the fi nancial aspects of accession it is said that the nego a ons with a country whose accession could have substan al fi nancial consequences can only be concluded a er the establishment of the Financial Framework for the period from 2014 together with possible consequen al reforms.

The shared objec ve of the nego a ons is accession. However, these nego a ons are an open-ended process and the outcome cannot be guaranteed beforehand. Moreover, if during nego a ons a candidate country seriously and persistently breaches the principles of liber , respect for human rights and fundamental freedoms and the rule of law on which the Union is founded this could lead to suspension of nego a ons as the condi ons for eventual resump on will be set beforehand.

The enthusiasm and uncondi onali of the Thessaloniki summit are now replaced by pragma sm and cau on, by a debate on further enlargement7. Offi cially EU supports the Thessaloniki Agenda, but if ll now 2014 was given as a possible deadline for accession no specifi c dates are men oned now. It is also clear that the Copenhagen criteria will be strictly observed, while during the fi h enlargement fulfi llment of economic criteria was assessed in the average run8.

The next enlargement will not encompass a large group of countries. Nego a ons with Turkey are a long term process, the Western Balkans comprise of small countries which are on diff erent stages on their road to the EU9. Future enlargements will be done at a pace depending on the performance of each country so that smooth accession is guaranteed10.

2006 is a year of a thorough debate on future enlargement. The conclusions are as follows: the renewed consensus on enlargement is based on a strategy which includes consolida on, communica ons and condi onali taking into account the absorp on capaci of the Union. It is necessary that two condi ons are fulfi lled simultaneously so that a candidate country can become a full member: it should be ready to assume the obliga ons of membership and the EU should be able to func on effi ciently and to develop. Both condi ons are necessary in order to provide sustainable public support which will be promoted through greater transparency and be er communica ons. It is accepted that more

diffi cult issues such as administra ve and judicial reforms will be discussed at earlier stages of the nego a ons. It is stressed on the importance of

Ar cles



11 Commission of the European communi es, “Working together for growth and jobs. A new start for the Lisbon Strategy” communica on to the Spring European Council, Brussels 2005. 12 “Accession of Republic of Bulgaria to the EU as a factor determining a new place of the country in the world”, “Economy Universi Publishing House”, Sofi a 2007.

deepening integra on in the EU. It is necessary that the ins tu ons func on effi ciently and that the Union’s policies are further developed and fi nanced.

Factors which influence the EU’s position on the accession of the Western Balkans

What brought to such a change in the EU’s opinion on the accession of the Western

Balkans?

First of all, it is the situa on in the EU itself. The fi h enlargement was a fact on 1 May 2004. There are 8 CEE countries among the new member states. At the same me it is said that the EU is in a deep crisis, that protec onism and disintegra on are greater. In October 2004 the European Parliament declined the fi rst Commission Mr Baroso proposed. The 2007-2013 Financial Framework nego a ons were very diffi cult; it was only in the fi rst half of 2006 when an agreement was reached. The last enlargement took place before the ins tu onal reform. In many areas decisions are taken unanimously which in the case of 25 (27 to be) member states is a prerequisite for decision blocking and slowing down the integra on process. In the spring of 2005 Holland and France rejected the Cons tu onal Trea – the next ins tu onal reform. The Lisbon strategy turns to be a failure; the results from the fi rst fi ve years are disappoin ng: the planned economy growth, produc vi and employment fi gures

were never achieved. Crea on of new jobs slows down, investment in science is not enough, the gap between growth rates in Europe and North America and Japan widens11.

A major external factor is the situa on in the Western Balkans. The diffi cul es for the Western Balkan countries result from the fact that besides the severe social and economic problems they have to meet the challenge of approaching European standards. These countries lie to the highest extent away from the European standards and good prac ces compared to all candidate countries in the EU enlargement history. Some of the major problems are weak governments, high poli cal risk, lack of stable ins tu ons, corrup on and organized crime. Despite the eff orts there is li le progress in this respect. There is no success in building mul ethnic socie es in the countries of former Yugoslavia. There are even more ethnic confl icts: in Kosovo in March 2004 there was mass violence which resulted in burning down many Serbian homes and places of religious worship, there are vic ms from both sides. Other major problems are refugee returns and discrimina on of minori es. This has a nega ve impact not only on the region (contributes to the high degree of suspicion among the countries of the region) but on EU too as it allows import of organized crime in the Union12.

It is necessary to fulfi ll certain criteria in order to achieve full EU membership. The fi rst group is the one of poli cal criteria: stabili of ins tu ons guaranteeing democracy, the rule of law, human rights and respect for and protec on of minori es. On 20 April 2004 the European Commission declared that Croa a (the only state from the Western Balkans so far) was a func oning democracy. Despite this further

eff orts are needed regarding minori rights, reform in the judicial system, fi gh ng organised crime, regional coopera on. Full coopera on with ITCY is crucial. It is the insuffi cient coopera on with the interna onal tribunal why

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13 Ферхойген, Гюнтер, Европа в криза. За преосмисляне на европейската идея, Български бестселър, София, 2006 г. 14 Маринов, В., М.Савов, М.Петров, М.Славова, Д.Хаджиниколов, С.Кръстев, Европейска икономическа интеграция, УИ “Стопанство”, София, 2004г., стр.479.

the beginning of the nego a ons with Croa a was postponed from the spring of 2005 to the autumn of the same year. This postponement has a clear message: elucida ng war crimes in former Yugoslavia as well as coopera ng in the punishment of the guil ones is a major criterion for EU membership13. Neither of the remaining countries in the region receives a posi ve assessment on poli cal criteria. On 16 December 2005 the former Yugoslav republic of Macedonia was declared a candidate country, however it is a poli cal recogni on; it is said in the opinion of the Commission in November of the same year that the country is well on its way to sa sfy the poli cal criteria for EU membership.

The second Copenhagen criterion is the existence of a func oning market economy. So far it is fulfi lled only by Croa a (as per the last opinion of the Commission). The major indicators on which the Commission gives its opinion are: macroeconomic stabili , broad consensus on poli cal stabili , price and trade liberaliza on, a strong economic poten al (the existence of enough human and physical capital), the abili to a ract foreign investment, restructuring of ownership and enterprises (high share of private capital), distribu on of resources as per the market principles and closing down of enterprises sustaining loss; no major obstacles for entering and leaving the market, equal opportuni es for all economic agents, regula ng proper rights and the possibili for implemen ng of laws and contracts; confi dence both between na onal and interna onal business agents; well developed ac ve fi nancial sector; well developed intermediary sector14.

The Commission’s assessment on the compe veness of Western Balkans’ economies

is not posi ve either. Compe veness depends most of all on the produc on and innova on poten al of the country and its adjustment to the European market. A small share of R&D expenditure in the economy is pical for all countries of the region. Among the main compe ve advantages are the low wages and the not so strict environment legisla on. In order to reach long-term compe veness it is necessary to move up on the value added chain and to manufacture capital-consuming goods. To this end it is necessary to bring up-to-date the produc on and technologies. Another factor for increasing compe veness is the existence of adequate infrastructure (energy, telecommunica ons, transport).

It is necessary a higher rate of economic de-velopment to be achieved in order to benefi t from mutual integra on both between West-ern Balkan countries and between them and the EU. Moderate economic growth is due to primary produc on factors so far. In produc- on and export structure goods with low added value (foodstuff s, tex le, chemicals, agricultural products, machines, metals, tobacco) dominate which are usually designed for less solvent con-sumers. These economies face the task to in-crease foreign investments which contribute to the technological renova on. In the long term it is necessary an innova on oriented growth to be achieved.

The Energy Communi in South East Europe is an a empt to strengthen the poli cal and economic stabili in the region. The Trea was signed in 2005 and entered in force in 2006 a er being ra fi ed by all par es. It sets a single regula ve zone in the region as the countries in South Eastern Europe align their energy, en-vironment standards and compe on legisla-

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on with that of the EU. Only natural gas and electrici fall in the reach of the communi ; however it is possible that it could be broaden and to include other energy sources and in-frastructure. South Eastern Europe is situated strategically as long as it concerns the control, running and transporta on of energy, especially gas and oil15.

Though they were a part of the same state some 10-15 years ago (except for Albania) the Western Balkan countries have to walk the long way to their mutual integra on. The countries in the region have oriented their rela ons to the EU rather than to their neighbours. One of the reasons is the low degree of economic development and the resul ng limited opportuni es for mutually benefi cial trade rela ons. Membership in the Central European Free Trade Agreement is an a empt to overcome this nega ve trend. Now it is possible only to try to foresee the posi ve eff ect of this membership: elimina on of du es in trade between countries, diagonal cummula on of origin, valuable experience in integra on and prepara on for future EU membership.

Bulgaria’s position

Bulgarian policy in the region is based on the formula “safe and stabili through

coopera on and integra on”. Development of regional coopera on is considered a part of the European coopera on. The main principles of the policy are balanced rela ons with all neighbouring states and development of the

rela ons with each of them so that it does not impede the rela ons with others. Before signing the trea es with NATO and the EU the strategic goals were full membership in these two organisa ons. It was considered

that any measures and plans for integra on and stabilisa on in the region should not stray the country from its goals; therefore, support for such measures should be given only a er careful considera on. There were fears that the regional approach may prolong Bulgaria’s accession to the EU, that the Stabili Pact in South Eastern Europe may turn to be a subs tute for EU’s enlargement16.

A er 2001 (and especially a er the country’s accession to NATO and the EU) Bulgaria’s opinion evolved from suspicion to construc veness and will to play a leading role in the process of regional coopera on. The country’s foreign policy is in line with NATO and EU’s concerted approach for the Western Balkans17. It is of Bulgaria’s interest that its neighbours in the Western Balkans become full members of the EU: thus the uni of interests and poli cal stabili in the region will be guaranteed. The offi cial Bulgarian posi on is in line with the EU’s posi on: Bulgaria supports the European perspec ve of the Western Balkan countries which would allow the crea on of a zone of stabili and prosperi and which would grant these countries and their peoples a clear orienta on and would mo vate them for implemen ng the necessary reforms. Bulgaria does not commit itself with concrete deadlines either, however, it states that the accession will depend on the progress of the countries in implemen ng the criteria.

Bulgaria’s basic goals for the period 2005-2009 are: adop ng the European policy and EU’s priori es; consistent work on becoming a reliable

partner with a contribu on for strengthening and developing EU; development of regional coopera on in the area of culture; assistance to neighbouring countries for full integra on in Euro-Atlan c structures.

15 Динков, Д., “Регионалното сътрудничество в Югоизточна Европа”, С. 2002, УИ “Стопанство”, с. 22. 16 Динков, Д., “Регионалното сътрудничество в Югоизточна Европа”, УИ “Стопанство”, София 2002 г. 17 Петрова, Ст., “Стабилизиращата роля на България в Югоизточна Европа”, сп. “Международни отношения”, бр. 1/2005 г.

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Bulgaria’s role in the Western Balkan’s accession could be searched for in the following direc ons: coopera on in the framework of regional ini a ves (such as the Regional Coopera on Council) and bilateral coopera on. The countries from the region could profi t from Bulgaria’s experience gained on its way to full membership. On the other hand as the European integra on of its neighbours is of its interest Bulgaria could lobby for their accession. Bulgaria pursuits a leading role in the process of Euro-Atlan c integra on of the countries in the region through an ac ve policy for economic and cultural coopera on. Bulgaria has signed free trade agreements with all the countries in the region. In May 2007 – May 2008 Bulgaria chairs the Process of coopera on in South Eastern Europe. During this period at an informal mee ng of the Foreign Aff airs Ministers in Plovdiv an agreement was signed for the crea on of the Secretariat of the Regional Coopera on Council in Sarajevo.

Bibliography

Бузек, Ерхард, Вернер Миվն лич, “Европей-1. ският съюз по пътя на изток”, ПИК, 2005 г.

Динков, Динко, “Регионалното сътрудни-2. чество в Югоизточна Европа”, УИ “Стопан-ство”, София, 2002 г.

Ленард, Марк, “Защо Европа ще управля-3. ва ХХ� век”, Обсидиан, 2005 г.

Маринов, В., М.Савов, М.Петров, 4.

М.Славова, Д.Хаджиниколов, С.Кръстев, “Европейска икономическа интеграция”, УИ “Стопанство”, София, 2004 г.

Петрова, Стоянка, “Стабилизиращата 5. роля на България в Югоизточна Европа”, сп. “Международни отношения”, бр. 1/2005 г.

”Присъединяването на Република Бъл-6. гария м Европейския съюз като фактор, детерминиращ ново място на страната в света”, под общата редакция на Динко Динков и Георги Генов, УИ “Стопанство”, София, 2007 г.

Заключения на председателството на 7. Европейския съвет в Хелзинки (декември 1999 г.), Фейра (юни 2000 г.), Ница (декем-ври 2000 г.), Брюксел (март 2003 г.), Солун (юни 2003 г.), Брюксел (декември 2004 г.).

Приоритетно изпълнение на поетите 8. ангажименти от правителството на Репу-блика България в процеса на присъединяване на страната м Европейския съюз във всич-ки сектори, 2006 година.

Програма на правителството на Репу-9. блика България в областта на европейската интеграция, икономическия растеж и соци-алната отговорност, 2005-2009 година,

Ферхойген, Гюнтер, “Европа в криза. За 10. преосмисляне на европейската едея”, Бъл-гарски бестселър, 2006 година.

2005 Enlargement Strategy Paper, Commu-11. nica on from the Commission.

Commission of the European Communi es, 12. “Working together for growth and jobs. A new start for the Lisbon strategy” communi-ca on to the Spring European Council, Brus-sels, 2005.

The Salzburg Declara on, Salzburg EU/13. Western Balkans Joint Press Statement.

Thessaloniki Agenda for the Western Bal-14. kans.

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Democratization and Growth in South-East European Transition Countries

Assoc.Prof. Matilda Alexandrova, PhDDepartment of Management, UNWE – Sofia

Studentsky Grad, Sofia 1700, Bulgaria

Tel.: +359-8195-457, Mobile: +359-899-604-811

E-mail: [email protected]

Abstract: Two specifi c phenomena were ob-served at the outset of the economic reforms in the former socialist countries: fi rst, poli cal lib-eraliza on ini ated along with market reforms, and second, deep and prolonged economic recession in most of the countries. Some ana-lysts of the socio-economic changes in Eastern Europe postulate the existence of a signifi cant rela on between the degree of development of democra c ins tu ons and the success of the conducted economic reforms. It is an cipated that the veloci of democra za on processes refl ected not only the will of transi on countries ci zens to live in civil and economic freedom, but also the poli cal pressure of Western gov-ernments and interna onal organiza ons. The European Union iden fi ed the democra za on as a precondi on explicitly imposed for ini at-ing accession nego a ons, which itself was per-ceived in transi on countries as a main route to rapid economic reconstruc on and development

in a medium run. The proposed paper consid-ers some features of the interrela on between the socio-economic reforms, democra za on, and economic development in South-Eastern European transi on countries. For this purpose, various indicators for democra za on and liber-aliza on formulated by Freedom House are u -

lized in order to characterize the impact of these processes on economic growth.

Key words: democra za on, economic develop-ment, South-East Europe.

JEL: Р21, Р27, P36.

Introduction

The ini al stage of the economic reforms in the former socialist countries was characterized by two socio-economic

phenomena: fi rst, poli cal liberaliza on along with the ini ated economic reforms, and second, deep and prolonged transi onal recession in most of these countries. Various analysts of the economic transforma ons in Eastern Europe postulate the existence of an interrela on between the extent of development of democra c ins tu ons and the success of economic reforms. It was asserted that the dynamics of democra za on processes refl ected not only the will of transi on countries ci zens do live in condi ons of civic and economic freedom but also the encouraging signals and even pressure of Western European governments and interna onal ins tu ons. European Union iden fi ed democra za on as an explicit precondi on for launching a nego a on

procedure for accession which was related to great expecta ons in transi on countries for accelerated economic revival and development in a medium run.

Two main processes can be outlined during the last decade of the XXth century in Europe: the

process of poli cal and economic integra on within the European Union, and the economic

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and poli cal transforma on in Central and Eastern European countries [12]. These two processes of transforma on and integra on were accompanied by expecta ons for socio-economic development and improvement of living standards, however, it is currently a fact that there is s ll a signifi cant regional dispari in the results achieved. In this aspect there are opinions sta ng that peripheral European regions have lower chances for successful performance in the integra on processes because of the lower level of development of their economic systems, infrastructure, and the capabili es to keep the valuable human resources for their economies.

The aim of this paper is to review some features of the interrela on between the levels of democra za on and economic development in South East European transi on countries. The main thesis of the study emphasizes on the asser on that the processes of economic transforma on and growth in diff erent countries in the region are far not iden cal where in the same me slow but sustainable democra za on is observed in spite of the turbulent economic and poli cal condi ons and even violent confl icts accompanying this process. Poli cal and economic reforms in South East European countries are conducted in parallel where in most cases the former are taking the lead. This process is contras ng with the experience of countries like Chile, Taiwan, and South Korea where the democra za on have been ini ated a er a successful economic liberaliza on. An extreme example in this line is China where poli cal liberaliza on was dampened down along with radical economic reforms and considerable rates of growth in the last 15 years [5].

The tradi onal understanding of economic growth is related to the increase of the aggregate volume of goods and services produced by economic agents in a country. Growth is quan ta vely measured by the rela ve change in the Gross domes c product (GDP) in

respect of some base level (usually the previous year) while as a summarized measure of the level of economic wellbeing in a country the Gross na onal product (GNP) per capita is tradi onally employed.

Within this study, under “democra za on” we recognize a process of poli cal and social changes oriented to the establishment of democra c principles in the socio-poli cal system of a country. In other words, this process is pically related to the transi on from an authoritarian to a democra c poli cal system. In the same me, democra za on as a process is characterized by “waves” refl ec ng the transi on of a group of countries from non-democra c to democra c regimes during a par cular period of me when which pro-democra c changes prevail in contrast to any an -democra c direc ons of development in par cular countries [8].

Main literature review

Historical evidence for the interrela on between economic development and

poli cal processes shows that transi on to a democra c system was observed more o en in countries with moderate (or around the mean) level of development. From the other side, the intensifi ed economic progress a er the World War II up to the 1970s allowed many countries to transfer to the average-income group, which indirectly created favorable economic condi ons for a transi on to democracy through a poten al expansion of its social base. Historical experience

however indicates that there is not any unidirec onal causal rela on between the level of economic development and democra za on where the impact of economic change on the poli cal processes is o en achieved by a media on of the induced social changes.

According to Samuel Hun ngton economic development generates addi onal sources of

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Democra za on and Growth

wealth and power outside the state along with the func onal need of delega ng rights for decision-making [8]. There is also a reverse direc on of this rela on when higher level of welfare acts as a poten al factor of changes in the social structure and value system of the socie , which appear as important precondi ons for democra za on. Par cularly, ci zens’ wellbeing level causes new quali of the shared social values, develops their feeling of sa sfac on, civic responsibili and solidari , which provides favorable founda on for establishment of democra c ins tu ons. Important role here plays also the increase of educa onal and cultural level of the popula on that induces an enhancement of individual needs for civic freedom and provokes a more cri cal a itude to social and poli cal systems and their opera on mechanisms. Last but not least, the availabili of more resources for redistribu on, along with the enlargement of the share of middle class, facilitates the achievement of compromises and the search of mechanisms for non-violent resolu on of social confl icts.

A range of publica ons support the statement that democra c changes in the early transi on, characterized by high degree of dynamism, were related to unfavorable results in South East European countries. Democra za on process and par cularly the threat of radical electoral confronta on invoked important poli cal limita ons for the governments to conduct substan al economic reforms and to make eff ec ve economic policy [14]. North (1990) emphasizes on the role of democra za on and the protec on of private proper as necessary condi ons for sustainable growth in a long run referring to the economic history according to which poli cal liberaliza on provides more favorable condi ons for economic development than authoritarian regimes [10].

Olson (2000) develops a theory of democra-

za on based on the “premise of interlinked interests” that fi nds a government based on a

wider societal representa on more successful in matching the interests during the economic development in comparison with a govern-ment represen ng the interests of a narrow elite or, even more, an authoritarian regime [11]. On this ground a conclusion is derived that democra za on achieves systema c pro-vision of policy facilita ng sustainable growth and prosperi at lower tax burden levels and in the same me supplying adequate amount of public goods. On the other side, Rodrik (2000) provides an argumenta on for the rela on be-tween democra za on and sustainable growth rates through the provision of lower degree of economic uncertain , be er ins tu onal envi-ronment and more adequate reac on to unfa-vorable external shocks [13].

The econometric study of Falce i, Lysenko and Sanfey (2005) focuses on the determinants of economic growth in transi on countries as well as on the eff ects of economic reforms on the growth rates. [4]. They use three key determinants of economic growth – export of energy/fuels, external demand of domes c products, and the process of “catch-up” captured by the speed of resurrec on from early transi onal recession. The model of economic growth includes a measure of macroeconomic stabiliza on achieved, lagged variables for market reforms, and overall score for the ini al condi ons of market transi on.

In another study the transi on to democracy along with a stagna on of the income level, weak ins tu ons and ethnical heterogenei is o en linked to prolifera on of crime, violence,

corrup on, and anarchy [9]. The eminent expert in growth theory R.Barro concludes that the aggregate eff ect of democra za on on economic growth is o en found as nega ve [2, 3]. According to this author the most favorable (in terms of economic growth) is an “average level” of democracy followed by the lower level

and fi nally the highest level. Along with this, equally unlikely are the theses for (i) a necessi

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93

of democra za on for accelera ng economic growth, and (ii) a necessi of dictatorship in a poor country to overcome the pover problem. For the countries with weak ins tu ons and ineff ec ve law enforcement the democra za on process is of lower importance compared with the processes of strengthening the rule of law and provision of independence and eff ec veness of judiciary system [3]. From this point of view it should not be assumed that democra za on is a key prerequisite for economic growth, according to R.Barro, it is rather necessary for the establishment of a legi mate legal framework and order.

Interrelation between democratization and economic development in South East European countries

There is a consensus in research literature on the statement that democra za on process

facilitates the formula on and execu on of reasonable economic policy s mula ng economic growth through eff ec ve selec on of competent public servants in state administra on, control on bureaucracy and ineff ec vely opera ng ins tu ons, and provision of transparency of the decision-making process in central and local governments. Addi onally, it is believed that democra za on is especially necessary for enforcement of judiciary system, fi gh ng the corrup on, and improvement of the quali of ins tu ons.

In the same me the level of wellbeing, the development of educa onal system and the establishment of civil socie appear to be necessary prerequisites for an eff ec ve democra za on process. Other condi ons however exist that obstruct the democra za on through crea on of opportuni es for abuse and rent-seeking behavior on the basis of non-transparent opera on of the ins tu ons of

public power which transforms democracy in a situa on of chaos. Worldwide sta s cal data for the last 30 years show that democra za on is related to steady growth rates only in those countries where reliable law enforcement is established and the judiciary system operates eff ec vely. In countries with ineff ec ve law enforcement ins tu ons the democra za on process has usually been related to a limita on of public expenditures and the scope of opera on of public ins tu ons, enlargement of the share of grey economy sector, increased budgetary defi cits, infl a on, and as a result, low levels of the wellbeing and the average life expectancy.

The interrela on between the degree of democra za on and economic development in transi on countries has been a subject of research in various studies focused most o en on Russia, CIS countries, China, but also on Central and Eastern Europe [1, 5]. Empirical analyses are performed to study the degree of impact of socio-economic transforma ons on economic growth on the basis of offi cial data from interna onal organiza ons. Various indicators are u lized for democracy, economic reform, and civil socie development evaluated annually by Freedom House. Since 1972 and through sequen al inclusion of sets of countries this mul -country survey program covers currently over 180 countries. The constructed interna onal database allows longitudinal modeling of rela ons and assessment of the eff ects of democra za on on the changes in socio-economic status in a wide range of countries. Accumulated results

however show that, if separate assessment is performed for rich and poor countries, these eff ects are contradictory diff erent dependent on the availabili of eff ec ve law enforcement – for example, in the developing countries in 1975-1999 with pically ineff ec ve rule of law, high infl a on levels are observed along with insignifi cant growth rates notwithstanding the accelerated processes of democra za on.

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For the purposes of the current study aggregated indicators developed and es mated by Freedom House are employed, namely the indices for:

(1) democra za on, (2) legal framework and independence of judiciary system, and (3) corrup on. Data for the period 2001-2006 are

Table 1. Indices of democratization, legal framework, and corruption

Countries2001 2002 2003 2004 2005 2006

Democra za on Index

Albania 4.42 4.25 4.17 4.13 4.04 3.79


5.17 4.83 4.54 4.29 4.18 4.07

Bulgaria 3.42 3.33 3.38 3.25 3.18 2.93

Croa a 3.54 3.54 3.79 3.83 3.75 3.64

Macedonia 4.04 4.46 4.29 4.00 3.89 3.82

Romania 3.67 3.71 3.63 3.58 3.39 3.39

Slovenia 1.88 1.83 1.79 1.75 1.68 1.75


– – – 3.83 3.75 3.71

Index of Legal Framework and Independence

Albania 4.50 4.50 4.25 4.25 4.50 4.25


5.50 5.25 5.00 4.50 4.25 4.00

Bulgaria 3.50 3.50 3.50 3.25 3.25 3.00

Croa a 3.75 3.75 4.25 4.50 4.50 4.25

Macedonia 4.25 4.75 4.50 4.00 3.75 3.75

Romania 4.25 4.25 4.25 4.25 4.00 4.00

Slovenia 1.50 1.75 1.75 1.75 1.50 1.50

Serbia and

Montenegro– – – 4.25 4.25 4.25

Corrup on Index

Albania 5.50 5.25 5.00 5.25 5.25 5.25

Bosnia and

Herzegovina5.75 5.50 5.00 4.75 4.50 4.25

Bulgaria 4.75 4.50 4.25 4.25 4.00 3.75

Croa a 4.50 4.50 4.75 4.75 4.75 4.75

Macedonia 5.00 5.50 5.50 5.00 5.00 4.75

Romania 4.50 4.75 4.50 4.50 4.25 4.25

Slovenia 2.00 2.00 2.00 2.00 2.00 2.25


– – – 5.00 5.00 4.75

Source: Freedom House (2007).

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used for the following South East European transi on countries: Albania, Bosnia and Herzegovina, Bulgaria, Croa a, Macedonia, Romania, Serbia and Montenegro, and Slovenia. As tradi onal measures of economic development and wellbeing, the annual rate of growth of real GDP and the level of GNP per capita are employed using the data provided in The World Bank databases [5].

The methodology of Freedom House provides an opportuni to quan ta vely evaluate the effi ciency of the work of governmental and non-governmental ins tu ons on the basis of objec ve facts as well as expert opinion on the status of various aspects of socio-economic reforms and democra za on process. Seven-grade scale is used for evalua on of each component, for

example, the ranks for the Democra za on Index vary from 1 “consolidated democracy” to 7 “authoritarian regime”. The Democra za on Index is calculated as a mean value of the indices for electoral process; civil socie ; independent media; central democra c governance; local democra c governance; legal framework and independence of judiciary system; and corrup on (table 1).

The interrela on between Democra za on Index and the growth of GDP (fi g. 1) confi rms the thesis that high growth rates do not necessarily assume an effi ciently opera ng democra c system in South East European countries. For example, in 2005 for Slovenia is es mated the best level for Democra za on Index along with an annual GDP real growth of about 4 %, which

Figure 1. Democratization Index and annual rate of real GDP growth in South East European countries, 2005.

Source: Freedom House (2007), World Bank Country Statistics.

0

1

2

3

4

5

6

7

AL BiH BG CR MK RO SL SMN

GDP growth (%) Democrazaon Index

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is observed also in countries with much more unsa sfactory levels of the Democra za on Index (e.g. Croa a, Macedonia and Romania).

Contradictory results are obtained also for countries like Albania, Bosnia and Herzegovina, and Serbia, where a rela vely higher rate of growth is es mated (5-6 %) along with lower development of democra c system and ins tu ons. Only Bulgaria makes some exclusion because of the rela vely higher GDP growth rate (6 %) and the second result for the Democra za on Index (3.18) for year 2005.

In most of South East European countries the weakness of democra c ins tu ons and ineff ec veness of judiciary systems are o en related to a signifi cant share of hidden economy,

stagna on at a lower wellbeing level as well as incapaci of the state to execute its du es on providing public goods and regula ng economic ac vi mechanisms. Frequently met experiences are also demone za on, dollariza on/euroiza on of the economy, lack of effi cient procedures on bankruptcy, ineff ec ve protec on of commercial contracts and private proper , increasing criminal ac vi es, etc. The data for South East European countries for the level of GNP per capita show some posi ve associa on between the levels of wellbeing and democra za on (fi g. 2). It provides basis for an asser on that with lowering of Democra za on Index (from 5.25 to 1.75; an evidence for a more developed electoral process, civil socie , independent media, central and local governance, etc.) an increase in income level is observed in these countries for the period

Figure 2. Scatter-plot of the Democratization Indices and GNP per capita, 2001-2006, Albania, Bosnia

and Herzegovina, Bulgaria, Croatia, Macedonia, Romania, Serbia and Montenegro, Slovenia.


0

4

8

12

16

20

1,5 2,0 2,5 3,0 3,5 4,0 4,5 5,0 5,5

Democrazaon Index, 2001-2006

GN

P p

er c

apita

(thousa

nd U

SD)

CR

BG

SL

BiHAL

MKRO

SMN

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2001-2006. Only Croa a is an exclusion where a rela vely higher wellbeing level is related to a status of democra za on processes comparable with those evaluated for the other transi on countries in the region (except Slovenia).

The infl a on rate is one of the indicators for ins tu onal eff ec veness used in a varie of studies on the topic covering the countries in economic transi on. It is however found that high infl a on is not always a consequence of wrong or inadequate economic policy but rather as a result of administra ve incapaci and/or incompetence of the central government revealed in its rela on with business circles, fi nancial groups, sectoral lobbies, etc. It usually refl ects the incapaci of the government, from

one side, to collect the taxes for fi nancing its opera on, and from the other side, to resist the pressure of lobby groups and/or syndicates for government expenditures expansion. As a result, the enlarged budgetary defi cit can be fi nanced only through governmental borrowing from the central bank leading to increased monetary base and thus boos ng infl a on. Some analysts even treat infl a on as a mean for avoiding civil wars (if infl a onary fi nancing is technically impossible, this could lead to radical pressure and confronta on between various socio-economic groups regarding the redistribu on of public resources). As a result it could be expected that existence of infl a on is a rela vely appropriate indicator for administra ve weakness of governments and immaturi of civil socie es.

Figure 3. Democratization Index and GDP deflator in South East European countries, 2005.


0

2

4

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8

10

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AL BiH BG CR MK RO SL SMN

GDP deflator (%) Democrazaon Index

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In countries of South East Europe during the last few years rela vely low infl a on is observed, except in Romania and Serbia and Montenegro (fi g.3). The offi cial data show very low infl a on rates in countries like Bosnia and Herzegovina, Albania, Macedonia and Croa a characterized by compara vely unfavorable Democra za on Index; in the same me low infl a on is measured in Slovenia where eff ec ve market ins tu ons and more developed democra c system is established.

Another important aspect of the process of stable democra za on is the degree of the spread of corrup on prac ces. It is commonly agreed that such prac ces are widely spread in almost all countries performing a transi on from command to market economy, maybe with some exclusion of Slovenia. Various authors relate corrup on to

the specifi cs and nature of the transi on process in post-totalitairan states. For example, an analysis conducted by researchers of The World Bank [7] uses indicators for corrup on in over 100 countries for the period a er 1980. It fi nds that the eff ect of the corrup on environment on investment and economic growth is considerable reaching to a conclusion that, if a country’s corrup on indicator improves even in small extent, the ra o of investment in GDP also increases and in the same me an increase in GDP per capita can be expected albeit in a lesser extent.

The data for 2005 show a slightly revealed interrela on between the Corrup on Index evaluated by Freedom House and GNP per capita evaluated by The World Bank using the Atlas method (fi g.4). Except Slovenia and Croa a,

Figure 4. Scatter-plot of Corruption Indices and GNP per capita, 2005.


AL

MK

SMNRO

BG BiH

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1,5 2,5 3,5 4,5 5,5

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er c

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(thousa

nd U

SD)

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having rela vely higher per capita income level in the region (17.4 and 8.4 thousand USD respec vely), the increase in the degree of spread of corrup on prac ces (Corrup on Index from 4 to 5.25) is associated with rela vely lower wellbeing level (from 3.8 to 2.5 thousand USD of the GNP per capita) in the rest of the South East European countries.

It is agreed that a range of social and mentali specifi cs are pical for the countries in the region which determines the pa erns of their socio-economic development and integra on both in the European and the globalized world economy. There are also concerns that because of its economic and technological backwardness as well as due to decelerated and ineff ec ve democra c reforms these countries will stay, in one or other extent, in an “isolated periphery”. Nevertheless, the transi on countries of South East Europe can suffi ciently succeed in the introduc on of the prac ces and standards of the common European market. Even if the countries in the region fail to infl uence the European “center of strategic decision-making”, there certainly are enough possibili es to successfully par cipate in the ongoing integra on processes.

Main conclusions

In spite of the conducted structural reforms and the rela ve success in various areas and

in par cular transi on countries in the region, the level of economic development s ll stays rela vely low. It is assumed that the slow down of the democra c and economic reforms can postpone the expected favorable eff ects of these reforms. Such transforma on should be oriented to adequate and effi cient usage of human capital and increase of labor produc vi through appropriate mechanisms as: increase of labor market fl exibili , improvement of educa onal system, technological renewal, encouragement of innova ons, etc.

On the basis of the current study we can conclude that the results for the interrela on between democra za on and economic development in South East European countries are not iden cal with those obtained for transi on countries in other regions of the world. The specifi cs of the region lead to a lack of explicit associa on between the successful development of a democra c system and the accelera on of economic growth. In spite of this, there is some evidence that low level of corrup on, well func oning judiciary system, and the overall steady democra za on process as a whole are associated with higher level of wellbeing, and vise versa, in par cular countries in the region. Hence, countries with stronger democra c ins tu ons and eff ec ve law enforcement provide favorable business climate facilita ng the a rac on of foreign investment and technology transfer which in turn s mulates economic growth.

As main channels of the nega ve impact of the slow democra c changes on the socio-economic development are iden fi ed the spread of corrup on prac ces, enlargement of grey economy sector, ineff ec ve judiciary system, inadequate macroeconomic policy and infl a onary fi nancing of budgetary defi cits. In the same me, similarly to other transi on countries (e.g. in East Europe or Asia) the rapid democra c reforms in countries with well-grounded authoritarian regimes in the near past, the actual lack of legal order, and the “shock therapy” economic reforms, is accompanied by a varie of nega ve economic and social consequences. Finally democra za on conducted under a transi on from totalitarian to a democra c pe of regime and economic rules could have success if following a stepwise schedule, along with the enforcement of legal order and judiciary system, and development of civil socie as a real counterac on of any wrong governance policy.

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References

Полтерович, В., В. Попов., “Стадии раз-1. вития и экономический рост”, В: Вопросы экономики, No.7-8, 2006.

Barro, R., “Democracy and growth”, In: 2. Journal of Economic Growth, vol.1, pp.3-27, 1996.

Barro, R., 3. Rule of Law, Democracy, and Economic Performance. The Heritage Founda on, 2000.

Falce i, E., T. Lysenko, and P. Sanfey, 4. “Reforms and growth in transi on: Re-examining the evidence”, EBRD Working Papers, No.90, March 2005.

Fidrmuc, J., “Economic reform, democracy 5. and growth during post-communist transi on”, In: European Journal of Poli cal Economy, vol.19, pp.583-604, 2003.

Freedom House, 6. Na ons in Transit 2006: Democra za on from Central Europe to Eurasia. New York, Washington DC, and Budapest, 2007.

Hellman, J., G. Jones, and D. Kaufmann, 7. “Seize the state, seize the day: State capture, corrup on and infl uence in transi on”, World Bank Policy Research Working Papers, No.2444, 2000.

Hun ngton, S., The Third Wave: 8. Democra za on in the Late Twen eth Century. Norman Publ., 1991.

Kaplan, R.D., 9. The Coming Anarchy: Sha ering the Dreams of the Post Cold War. New York: Random House, 2000.

North, D., 10. Ins tu on, Ins tu onal Change, and Economic Performance. Cambridge, UK: Cambridge Universi Press, 1990.

Olson, M., 11. Power and Prosperi : Outgrowing Communist and Capitalist Dictatorships. New York: Basic Books, 2000.

Petrakos, G., “The Balkans in the new 12. European economic space”, In: Eastern European Economics, vol.40, no.4, pp.6-30, 2002.

Rodrick, D., “Ins tu ons for high-quali 13. growth: What they are, and how to acquire them?”, CEPR Discussion Paper Series, No.2370, London: Center for Economic Policy Research, 2000.

Roland, G., 14. Transi on and Economics: Poli cs, Markets and Firms. Cambridge, MA: MIT Press, 2000.

Radulescu, R., and D. Barlow, “The 15. rela onship between policies and growth in transi on countries”, In: Economics of Transi on, vol.10, no.3, pp.719-745, 2002.

Rodrik, D., and R. Wacziarg, “Do democra c 16. transi ons produce bad economic outcomes?”, In: American Economic Associa on Papers and Proceedings, vol.95, no.2, May 2005.

Tavares, J., and R. Wacziarg, “How democracy 17. aff ects growth?”, In: European Economic Review, vol.45, pp.1341-1378, 2001.

World Bank, 18. World Development Indicators. Washington, D.C., 2005.

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The EU Energy Policy – Current State and Perspectives for Development

Svetla Boneva, Ph.D.chef assistant professor, UNWE – Sofia,

“International Economic Relations

and business” Department

e-mail: [email protected]

tel: 0888 506 856

Summary: The paper is focused on the ques on how to secure compe ve and clear energy for Europe in the condi ons of climate change, con-stantly growing global energy demand and obscu-ri regarding future supply. The paper points out the contemporary problems with regard to the constant growth of the energy price and the striv-ing for keeping the planet environmentally clear as well as some sugges ons for their decision like the usage of renewable sources of energy.

The instruments for the implementa on of the future EU policy in the fi eld of energy have been described. These instruments include the development of technologies ensuring energy from renewable energy sources, programs for energy effi ciency, guarantees for the energy supply by diversifi ca on of the energy mix,

mutually advantageously collabora on with the energy suppliers, securing of good fi nancing for the separate programs and projects, provision of informa on for the socie and transparency of the policy and all ac ons in the fi eld of energy.

Key words: renewable sources of energy, the EU energy policy.

JEL: F15, Q43.

The world today is facing energy and environmental challenges – the exhaus on of tradi onal energy sources (coal, oil,

natural gas, uranium ore) and the signifi cant industrial growth lead to increase in the tradi onal energy produc on causing both serious environmental damages and threatening people’s health. This challenge is acute for Europe, and shared by all Member States. How to secure compe ve and clean energy for Europe and avoid the climate change in the condi ons of global energy demand and future supply uncertain es? In an era of high technologies and technical revolu on one of the most important tasks is the inven on and implementa on of renewable energy sources and boos ng investment in energy effi ciency projects.

The days of cheap energy for Europe are over. The challenges of climate change, increasing import dependence and higher energy prices are faced by all EU member states. Moreover the interdependence of the EU Member States

in the energy fi eld, as in many other areas, is increasing – a power failure in one country will have immediate eff ects in the others. “Europe needs to act now, united, to deliver sustainable, secure and compe ve energy.” In doing so the EU has to return to its roots. In 1952 with the Coal and Steel Trea and in 1957 with the Euratom Trea , the founding Member States have seen the need for a common approach to energy.

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The EU Energy Policy

Energy markets and geopoli cal considera ons have changed signifi cantly since then, but the need for European ac on in this sphere is stronger than ever. Without it the EU’s objec ves in other areas, including the Lisbon Strategy and jobs and the Millennium Development Goals, will be more diffi cult to achieve. A new European Energy Policy needs to be ambi ous, compe ve and long-term – and to the benefi t of all Europeans.

Energy policy must be addressed by many diff erent policy areas. For example, the social dimension of Europe’s energy policy needs to be taken into account throughout all stages of designing and implemen ng the individual measures.

The star ng point of the debate for the EU energy policy is determined by three main factors:

1. Geopoli cal. Europe is becoming increasingly dependent on hydrocarbons import. With the tradi onal industries the EU’s energy import de-pendence will jump from 50 % of total EU energy consump on today to 65 % in 2030. Reliance on gas imports is expected to increase from 57 % to 84 % by 2030, of oil from 82 % to 93 %. This carries poli cal and economic risks. Major priori to be pursued by an eff ec ve external EU Energy Policy during the next three years is to enhance rela ons with external energy suppliers, further developing comprehensive partnerships based on mutual inter-est, transparency, predictabili and reciproci .

2. Comba ng climate change. The EU strengthens its eff orts to promote the fi ght against climate change, to coordinate energy policies and to strengthen the coopera on on clean technologies. The EU’s inten on is to invest in research and innova ve programmes for energy produc on and environmentally friendly transporta on. Burning of fossil fuels (oil, gas, coal and others) could cause a varie of ecological disasters; there are great risks with their

transporta on as well – for example accidents with petrol tankers pollu ng large regions.

3.Geological. The compe on for energy resources is intense on a global scale and a number of scien fi c analysis state that in 50 years there will be no oil and natural gas resources le , moreover their supply will become more and more expensive and irra onal.

The EU is becoming increasingly exposed to price vola li and price rises at the interna onal energy markets and the consequences of the progressive concentra on of hydrocarbons reserves in few hands. In order to limit its growing exposure to oil and gas prices vola li and to bring about a more compe ve EU energy market, the new Energy policy should switch to “low- carbon economy”, using less fossil fuels (in the industry and transport sectors as well as in individual households) and s mula ng innova on technologies in the renewable energy sources (for electrici genera on, hea ng and cooling of buildings and in transporta on). That could be achieved by the usage of wind energy (especially at the seaside regions), bio – fuels available for the mass consumer and building hydro and solar power plants.

Next step will be adap ng to “hydrogen” economy and the European Technology Platform for Hydrogen and Fuel Cells has paved the way to this change.

Exis ng measures in areas such as produc on of electrici from renewable energy sources, biofuels, energy effi ciency and the Internal Energy Market have achieved important results but lack the coherence necessary to bring sustainabili , securi of supply and compe veness. No one element of the policy provides a fi nal decision to the EU’s problems in the energy fi eld – they must be taken together as a whole.

According to the new Nuclear Programme, the EU should develop further advanced framework for nuclear energy for those Member States

that choose nuclear power, mee ng the highest standards of safe and non-prolifera on as

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103

required by the Euratom Trea . Many ac ve power plants have already reached their eff ec ve poten al and new investment projects should be developed to balance the “supply – demand” equilibrium.

Nuclear power also raises important issues regarding waste radioac ve materials and decommissioning, so nuclear waste management should be also included in future Communi work. Eff orts to meet the Kyoto Protocol targets should con nue, while current tendencies show they are hard to reach.

Energy produc on accounts for 80 % of all greenhouse gas (GHG) emission in the EU which is the basic factor for climate change and most air pollu on. The EU is commi ed to reduce the EU and worldwide greenhouse gas emissions at a global level to a level that would limit the global temperature increase to 2°C compared to pre-industrial levels. Current energy and transport policies would secure an increase in the EU CO

2

emissions with 5 % by 2030 and global emissions rise by 55 %. The present energy policies within the EU are not sustainable. Although there are possible CO

2 emission quan es defi ned,

companies exceeding these limits are allowed to buy carbon allowances from other smaller producers. This s mulates the more eff ec ve energy use and helps to decrease the air pollu on with CO

2. With the help of the la er mechanism

the EU abides its Kyoto protocol obliga ons for comba ng climate change.

1. Traditional Energy Sources in the European Union energy mix

An eff ec vely func oning and compe ve Internal Energy Market should provide securi

of supply and high standards of public service. The eff ec ve separa on of the transport networks from the electrici and gas produc on businesses results in real incen ves for companies to invest in new infrastructure, inter-connec on capaci and new energy genera ng capaci , thereby avoiding unnecessary price surges. A true single market promotes diversi .

Oil and gas resources are not evenly distributed. The demand for them though is constantly growing not only in the developed countries, but in the intensively developing ones like China and India as well. The most signifi cant oil and gas fi elds are located in poli cally or economically unstable regions like the Near East and Russia. Arguments between neighboring countries in these regions (for example between Russia and Ukraine in January 2006 or Russia and Byelorussia in January 2007) could lead to signifi cant decrease in the pipelines supply for the Member States. The geopoli cal aspects of the Energy policy for Europe are an integral part of the Foreign Policy of every Member State.

Approximately 50 % of the energy sources used in the European economy are fossil fuels – oil, nature gas or coal. The breakdown of energy

Figure 1. Energy consumption in the EU by type of energy source

Source: European Energy Outlook, http://www.euractiv.com/en/energy

Energy mix

41%

21%

18%

14%6%

oil

Nature gas

coal

nuclears

renewables

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consump on by pes of energy sources is presented on Figure 1.

Energy produc on based on European “domes c resources” provides the following shares: 29 % of the nuclear energy; 22 % of fossil fuels; 21 % of the nature gas; 16 % of the oil and 12 % of the renewable energy sources.

Even with the targets on energy effi ciency and renewables, oil and gas will con nue to cover half of the EU's energy needs, with import dependence high in both sectors (over 80 % for oil and some 45 %, expected to reach another peak of up to 93 % in 2030). 2/3 of the imported raw petrol in the EU is from the OPEC countries. Russia is domina ng the nature gas import market. Coal is more widely distributed in many European countries, but its high genera on expenditures make it impossible for this source to compete with the cheap imported gas. Nuclear energy genera on and renewable sources energy produc on is suffi cient for the European market needs.

High energy prices are par cularly damaging for developing countries. Whilst a few developing countries might benefi t as producers, the others meet the increased costs of energy imports outstripping their development aid receipts. Africa and other developing regions have a vital interest to boost diversifi ca on and energy effi ciency – this can make a major contribu on to the Millennium Development Goals. The EU is commi ed to support developing countries in promo ng sustainable and secure energy supply and use. Oil import and prices are heavily dependent on the geopoli cal situa on in the Gulf region that may bring insecuri in the European Energy System. It is also threatened by the unstable poli cal situa on in Iran – the major disrupter of the supplies from both the Gulf and the Caspian basin. Iran is holding control of the Hormus straight – the transit point of over 40 % of the daily world traded petrol. The blocking

the straight would be the worst scenario in an eventual poli cal or military confl ict in the region.

Presently the EU is addressing Iran’s instabili as poli cal problem only, but it should also consider the poten al economical consequences.

The Interna onal Energy Agency (IEA) expects global demand for oil to grow by 41 % by 2030. It is not clear however how supply will keep up with this demand: the IEA in its 2006 World Energy Outlook has stated that "the abili and willingness of major oil and gas producers to step up investment in order to meet rising global demand are par cularly uncertain". The risk of supply failure is growing.

Moreover the mechanisms to ensure solidari between the Member States in case of an energy crisis are not yet in place and most of the Member States are largely or completely dependent on one single gas supplier.

The EU has strategic reserves of diff erent pes of fuels in order to decrease its vulnerabili to possible crisis in the world energy markets. Long – term securi of energy supply requires coopera on with a bigger number of smaller energy suppliers.

A deepening dialogue and rela ons with the key energy producers and transit countries is necessary, through the OPEC and the Gulf Coopera on Council, by implemen ng the Memoranda of Understanding with Azerbaijan and Kazakhstan and by establishing new es with other Central Asian producers like Turkmenistan and Uzbekistan.

It is important to facilitate the transport of the Caspian energy resources to the EU. The European Commission has presented a Communica on on the Coopera on with the Black Sea Council in Spring 2007 in this respect.

Enhancing the rela ons with Russia through the ne-go a on of a new, comprehensive framework agree-

ment, including a fully-fl edged energy partnership benefi ng both sides and crea ng the condi ons

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for new investments is necessary. This agreement should emphasize the mutual long-term benefi ts to both Russia and the EU and be based on market principles and those of the Energy Charter Trea .

For the past few years geopoli cal considera ons dominate over economic measures in the energy policy fi eld. As the margins for maneuvers for the EU energy supply are weak, the strategy should try to maximize the geographical diversifi ca on of the energy supplies to areas like La n America and the Caribbean.

The European Commission gave its condi onal approval to invest in 3 major oil pipelines and 2 gas – pipelines located in South East Europe:

The fi rst Oil pipeline project is designed • to connect the Bulgarian port of Burgas with Alexandrupolis in Greece. The pipeline will transport oil from the Russian terminal of Novorossiysk, bypassing the congested Bosporus straits. It will have an ini al annual capaci of 35 million tones that could be expanded to 50 million tones. The Russian companies Rosne , Transne and Gaspromne will acquire 51 %, the Greek corpora ons will get 24.5 %, and the Bulgarian ones will hold the other 24.5 % of its value.

The oil pipeline will be 280 km long and 135 kilometers of the pipeline will be on Greek territory. The project will have a total budget of 750-800 mill. Euros (in 2007 prices) and a transport capaci of 35 mill. tones per year.

The storage facili es that will be built at the port of Alexandropoulos will have a total capaci of 650,000 tones; they will have special loading and unloading infrastructure and will be able to serve tankers of up to 300,000 tones. The construc on of the pipeline is expected to be completed by the beginning of 2009.

The Burgas – Alexandroupolis oil pipeline project is important not only for Bulgaria, Greece and

Russia but for the en re EU. The oil pipeline will shorten the transporta on route of Russian oil from the Caspian region to European energy market. Burgas-Alexandroupolis will transport Russian oil through the Bulgarian port of Bourgas to the Greek port of Alexandroupolis bypassing Bosporus Strait in Turkey. The Bosporus Strait is too busy due to its specifi c geographical loca on and capaci . The pipeline project will guarantee the direct access to various oil resources as well as oil transporta on from Russian Novorossiysk.

Bulgaria’s loca on and poli cal and economic stabili will guarantee the safe of natural gas and oil transporta on through its territory. Major foreign investors, among which some energy giants, have showed interest to par cipate in the project.

A US-registered company, • the Albanian-Macedonian-Bulgarian Oil Corpora on (AMBO) plans to build a second regional oil pipeline that will compete directly with Burgas-Alexandropoulis. The project received the backing of the US government and was fi rst conceived by the Halliburton Energy Corpora on which conducted the feasibili study.

The AMBO pipeline will be 912 km long, trans-por ng 35 million tones of oil annually. It will con-nect the Black Sea with the Adria c sea and, to a wider extent, Central Asia with the Italian penin-sula. The project is expected to be completed by 2012. It will, according to its advocates, help the balance of the oil prices in the world market.

Top representa ves of Macedonia, Bulgaria and Al-bania have met in Sofi a to ink a memorandum of understanding with Ted Ferguson, the president of the AMBO (Albania-Macedonia-Bulgaria Oil) pipeline project. The American-based corpora on has been struggling since 1994 to get the a en on of key poli cal and industrial backers, in order to begin the construc on. The fi rst obstacle was the preoccupa- on of relevant par es in the Clinton Administra on with the Baku-Tbilisi-Ceyhan pipeline in Anatolia.

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Later came the wars in Kosovo and Macedonia in 1999 and 2001 that le investors ji ery. Now the situa on seems stable and the future looks bright for AMBO. The construc on of the oil pipeline is of strategic interest for Macedonia as well.

But is the signing merely symbolic? The rival pipeline Burgas – Alexandrupolis that looked good enough to start un l recently appears to have stalled due to internal disagreements between Russia, Bulgaria and Greece. The AMBO president Ted Ferguson claims that his project has received $900 million of investor funds from the Overseas Private Investment Corpora on (OPIC) – a US development agency, the Eximbank, Credit Suisse First Boston, and others.” A big mystery un l now had been whether the AMBO project actually had any solid backers. While the cash now appears to be there, an announcement has yet to be made regarding backing par es of the oil industry.

As could be expected, the Greek government supports the Burgas-Alexandropolis alterna ve

for its rela ve cost-eff ec veness and me-saving quali es. However, as supporters of AMBO have long pointed out, the Burgas-Alexandropolis project does not really take care of environmental concerns, because avoiding the congested Bosporus strait it merely transfers the problem to the island-congested Aegean sea. An oil spill in the Aegean would be devasta ng for Greece’s tourism industry. The AMBO project avoids the sea en rely, crossing the Balkan Peninsula overland and termina ng at the Adria c port of Vlore.

The European Commission has also expressed • interest in a third regional oil pipeline project, connec ng the Romanian Black Sea port of Con-stanta to Trieste, an Italian port on the Adria c Sea. The pipeline will pass through Serbia, and probably the nego a ons on the Kosovo’s status will aff ect the project.

Five Southeast European countries – Croa a, Italy, Romania, Serbia and Slovenia have interest in the 1,856 km long pipeline that will carry 40 million

Figure 2. Nabucco pipeline project route

Source: the European Commission

Exisng gas network

Priori project (pipeline)

Major pipeline withlinks to a priori project

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107

tones of oil annually in its fi rst phase and has the capaci to transport 90 million tones at a later stage. The EU Energy Commissioner Andris Piebalgs has signed the project. This provoked discontent in the Kremlin, since Russia has been excluded from the project, even though the EU currently gets half of its crude oil and natural gas from Russia.

The Nabucco project• is a new gas pipeline connec ng the Caspian region, Middle East and Egypt via Turkey, Bulgaria, Romania, Hungary with Austria and further on with the Central and Western European gas markets

The pipeline’s length is approximately 3,300 km (2,050 miles). It will start from Erzurum in Turkey to Baumgarten an der March, a major natural gas hub in Austria. Most of the gas volumes, reaching Baumgarten will be further transported from Austria to the Central and Western European Countries. Some analysts consider the pipeline as a diversifi ca on from the current prac ce of impor ng gas solely from Russia.

Nabucco could bring gas supplies from Iran, Azerbaijan, Kazakhstan, Turkmenistan, Egypt and Syria. Near Erzurum it will be connected with the Tabriz-Erzurum and with the South Caucasus Pipelines that will connec ng the Nabucco Pipeline with the planned Trans-Caspian Gas Pipeline.

In the fi rst years a er comple on the deliveries are expected to be between 4.5 and 13 billion cubic meters (bcm) per year and hardly 2 to 8 bcm of them will reach Baumgarten. Later half of its increased capaci will be delivered to Baumgarten and half of the natural gas transported will be diverted for the markets on the route. In the year 2020 the transmission volume is expected to reach 25.5 – 31 bcm per year, of which 16 bcm will go to Baumgarten. The pipeline has been designed to transport a maximum amount of 31 bcm per year.

The cconstruc on of the pipeline is expected to begin in 2009 and to end in 2012. Es mated

investment costs for this completely new pipeline system amount to 5 billion euro. The company leading the project is OMV from Austria. The shareholders of the project company are OMV (Austria), MOL (Hungary), Transgaz (Romania), Bulgargaz (Bulgaria), BOTAS (Turkey). All current shareholders have 20 % of the shares. The french company Gaz de France, and German company RWE have also expressed their interest to par cipate in the project. The consor um could also include the State Oil Company of Azerbaijan and Kazakhstan companies that are interested to join the project. The Nabucco project is included in the EU Trans-European Energy Network program and a feasibili study for the Nabucco pipeline has been performed under an EU project grant.

The Russian company Gazprom has recently • proposed an alterna ve project compe ng Nabucco. It off ered the construc on of a second sec on of the Blue Stream gas pipeline (a ma-jor trans-Black Sea gas pipeline that runs beneath the Black Sea from Russia to Turkey), extending it through Bulgaria, Serbia and Croa a to western Hungary.

Blue Stream pipeline was constructed by the Blue Stream Pipeline B.V. – a Netherlands based joint venture of the Russian company Gazprom and the Italian company ENI. The pipeline had been built with the intent of diversifying Russian gas delivery routes to Turkey and avoiding third countries.

By 2010, Blue Stream is expected to operate at full capaci , delivering 16 billion cubic meters of gas per year. The length of the pipeline is 1213 km. The Russia’s land sec on is 373-km-long from and includes the Stavropolskaya and Krasnodarskaya compressor sta ons. The off shore sec on is 396 km long laying from the Beregovaya compressor sta on in Arkhipo-Osipovka to the Durusu terminal located 60 kilometers from Samsun (Turkey). Turkey’s land sec on is 444 km long up to Ankara.

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The Blue Stream pipeline was the founda on for a “strategic partnership” between Russia and Turkey in oil, energy, and transport sectors. The poli cal decision to sell Russian gas to Turkey was taken in December 1997, when the two countries signed an inter-governmental agreement according to which Russia will supply 364.5 billion cubic meters of gas to Turkey between the years 2000 and 2025.

The exis ng gas transit route goes through Ukraine, Moldova, Romania, and Bulgaria. This land route makes the gas substan ally more expensive, and there are reports of gas being illicitly siphoned off while transported through Ukraine and Moldova. Russia solved these problems by building a pipeline across the Black Sea fl oor.

In the meanwhile, some Russian economic analysts objected that building a pipeline to Ankara means ing Russia to a monopolist consumer, and Turkey is not a reliable partner. Before the Blue Stream’s opening ceremony, the USA publicly cri cized the pipeline, calling on Europe to avoid becoming any more dependent on Russia for energy.

One of the poli cal goals of the Blue Stream project has been to block the path of rival countries aiming to use the territory of Turkey to bring gas from the Middle East and the Caspian area to Europe. In November 1999, the presidents of Turkmenistan, Turkey, Azerbaijan, and Georgia signed a four-par inter-governmental agreement on building a rival Trans-Caspian gas pipeline. Within a few months, three major oil companies – General Electric, Bechtel, Royal Dutch Shell – had established a joint venture to work on the competing project.

In the spring the year 2000, however, an argument has aroused among the Trans-Caspian gas pipeline par cipant na ons over alloca on of the quotas for Azerbaijan’s use of the pipeline and all construc on work was halted. Thus, Blue Stream won the ba le for the Caspian gas. In the end of 2006 however, the fi rst sec on of the Trans-Caspian pipeline – connec ng the South Caucasus Pipeline from Baku to Erzurum – has been opened.

The South Stream pipeline• – on 23rd June 2007 the Italian company “Eni” and the

Figure 3. South Stream pipeline project route

Source: Ministry of Economy and Energy, Bulgaria

Blue Stream ProjectSouth Stream Project

1. СЛОВЕНИЯ

2. ХЪРВАТИЯ

3. ЧЕРНА ГОРА

4. АЛБАНИЯ

5. МАКЕДОНИЯ

6. АРМЕНИЯ

БългарияВарна ЧЕРНО МОРЕ

КАСПИЙСКОМОРЕ

SOUTH STREAMPROJECT

Nabuco ProjectPossible Route

I

I

II

II

II

II

III

III

III

IV

IV

IV

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Russian “Gazprom” signed a Memorandum of Understanding1 for the realiza on of South Stream, a new gas pipeline system which will link Russia to the European Union across the Black Sea. The South Stream project is the third pillar of the strategic agreement reached between “Eni” and “Gazprom” and signed in November 2006. The Memorandum is for the implementa on of a technical and economic feasibili study of the project and for the necessary poli cal and regulatory evalua ons for its implementa on. The transport capaci of South Stream will be defi ned by the feasibili studies and on the basis of market analyses that will be carried out in the countries involved in the project and in the end markets in order to op mize the costs.The project is par cularly relevant in the context of the signifi cant gas shortage which will be experienced by the EU for the period 2007-2015 as demand increases while internal produc on decreases signifi cantly.

In its 900-km long off shore sec on, the South Stream will cross the Black Sea from the Russian coast of Beregovaya – the star ng point of the Blue Stream pipeline as well – to the Bulgarian coast, reaching a maximum water depth of over 2,000 metres. “Eni” and “Gazprom” will carry out the construc on work using the most advanced tech-nologies and respec ng the strictest environmen-tal criteria. For the onshore sec on two diff erent routes in Bulgaria have been under study: one to-wards northwest and one towards southwest. Ac-cording to preliminary studies2 costs are comparable with the development of the LNG chain (liquefac- on plants, ships and re-gasifi ca on plants).

This project is an example of a situa on where the objec ves of a business project overlap with the interests of the governments and popula ons of several European countries. The Governments of the countries involved in and interested in the

South Stream project have planned to sign a clus-ter of agreements suppor ng the ini a ve of the Italian and Russian companies.

There are many diff erent opinions on the infl u-ence of these investment projects on South – East Europe’s economy. Some regional ana-lysts forecast an era of stabili and hospitable investment environment. Not only the energy sector, but many other industries, like tourism, transport, proper and construc on businesses, could benefi t from it. In case these projects bring the necessary capital to the local economies the Balkans could a ract the a en on of the whole world. Other analysts think that energy interests could lead to poli cal confl icts in the region.

The prognosis of increasing demand for natural gas in the EU over the next 30 years is based on the low carbon content of the natural gas and its inherent environmental advantages. The necessi of diversifi ca on of its sources and economic us-age can no longer be neglected. The deepening energy import dependence of the EU is obvious – import sa sfi es 41 % of its oil and 21 % of its gas consump on. 76 % of the oil is imported from OPEC, Russia and the countries from the former Russian Federa on (OND) and North Africa.

The EU Internal Energy Market increases the in-terdependence of Member States in energy supply for both electrici and gas. Despite the targets on energy effi ciency and renewable energy, oil and gas con nue to secure over half the EU’s energy consump on, with import dependence high in both sectors. The prognosis of the Eu (over 90 % for oil and some 80 % for gas in 2030). Electrici genera on will be heavily dependent on gas.

The growing demand for natural gas in the EU (mainly because of the use of natural gas for

1 The Memorandum signed in the presence of the Minister of Industry and Energy of Russia, Viktor Khristenko, and the Italian Minister for Economic Development, Pierluigi Bersani. 2 Carried out by Saipem.

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power genera on in combined cycle gas turbines due to decarbonisa on) poses the EU the problem of providing stabili of gas imports at a reasonable price.

Ensuring external supplies requires nego a ons with producer countries. It implies strategic partnerships with gas producing countries like Russia and the development of oil and gas transport and supply networks. The EU could also promote new import routes and expand strategic reserves.

A possible “trap” in respect of natural gas is the danger for the EU to grow increasingly dependent on rela vely unpredictable supplies in the long-term. Currently gas imports come mainly from Algeria and Russia. EU’s external supply of gas depends on 41 % of imports from Russia and almost on 30 % from Algeria, that’s why geographical diversifi ca on of our supplies is obvious. By comparison, Europe’s oil and coal supply is more diversifi ed. In this situa on the development of long-term energy partnerships with the key suppliers like Russia is essen al.

Electrici genera on is and will be heavily dependent on gas. Without a signifi cant technology breakthrough, oil will con nue to dominate transport. Therefore, securi of supply of these fuels will con nue to be paramount to the EU economy.

Gas is compe ng with oil for being the dominant energy source. In electrici genera on gas plays as important a role as oil in transporta on. Energy disrup ons have considerable infl uence on the na onal accounts far beyond the direct cost of market par cipants.

The present gas supply to the EU depends on too few suppliers and routes. The EU needs a clear and ac ve policy on the “securi of gas supply” issue with a strong mul lateral direc on. The measures developed for the oil industry over the last 30 years could be a star ng point for a debate. When discussing securi of gas supply it is useful to defi ne the various risks for the EU. Free riders relying on alterna ve fuels without par cipa ng in the EU securi systems are not permissible.

Import dependency of Europe is expected to grow from 36 % in 2000 as high as 69 % by 2030. Addi onal supplies are situated in remote areas and they will also follow complex and poten ally risky transporta on routes as some 70 % of global gas reserves are located in the Caucasus the Middle East. The EU Energy Policy should work towards:

ensuring adequate levels of gas storage or • alterna ve back-up fuels;

diversifying supplies whilst ensuring a • reasonable balance between diff erent supply sources,

Figure 4. Major oil suppliers for Europe

Source: European Energy Outlook, http://www.euractiv.com/en/energy

45%

23%

20%

12%Persian Gulf

Russia & CIS

Nord Africa

Others

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111

providing incen ves for new gas supplies, • the risk of system failure or disrup on •

of the largest natural gas supply source and related costs of such a disrup on,

considering possibili es for cross-border • co-opera on as well as the importance of long-term contracts and their fl exibili .

In October 2000, the EU and Russia agreed to start an Energy Dialogue dealing with issues like securi of supply, energy effi ciency, infrastructure (e.g. construc on of pipelines), investments and trade. Launched at the EU-Russia Summit in Paris in October 2000, this bilateral Energy Dialogue aims at securing Europe’s access to Russia’s huge oil and gas reserves (the country holds one third of the world’s known gas reserves). The dialogue is based on the assump on that interdependence between the two regions will grow – from the EU for reasons of securi of supply; on the part of Russia, to secure foreign investment and facilitate its own access to EU and world markets (the EU is responsible for over half of Russia’s trade turnover).

Import dependence for oil and natural gas from outside the EU will increase in the forthcoming years and accession countries are not going to change the situa on with Norway, Russia and Algeria remaining the main suppliers for the EU but new gas expor ng countries (Egypt, Qatar, Trinidad and Tobago) are expected to enter the picture.

2. Renewable energy sources in the European Union energy mix

The development of renewable energy – the energy coming from from wind, water, solar

power and biomass – is one of the basic objec ves of the European energy policy. The main pes of renewable sources (RES) include:

solar energy and wind energy• , as well as the energy of the atmospheric processes such as cyclones, storms, tornados and hurricanes.;

geo- genesis energy• (geo thermal energy; the energy of sea and ocean waves, des, etc);

energy from some chemical • reac ons –release of hydrogen, ammonia, carbon oxide and others.

energy of bio –• chemical processes – the energy received when hydrogen is released from some plants and seaweeds.

There are several reasons proving the importance of further development and research in this fi eld:

Renewable energy contributes for reducing • the Carbon Dioxide (CO

2) emissions in the air – a

major Communi objec ve. The increasing share of renewable energy in the •

energy balance of the EU enhances sustainabili .RES also improve the securi of energy supply •

by reducing the EU’s growing dependence on imported energy sources.

Renewable energy sources are expected to be economically compe ve with conven onal energy sources in the medium to long term.

In 1997, the EU started to work for a target of a 12 % share of renewable energy in its overall energy mix by 2010 that would mean a doubling of 1997 levels. Since then, renewable energy produc- on has increased by 55 %. Nevertheless the EU will not reach its target. The share of renewable energy is unlikely to exceed 10 % by 2010. The main reasons for the failure to reach the target are the higher costs of renewable energy sources today compared to “tradi onal” energy sources and the lack of a coherent and eff ec ve EU policy

framework and a stable long-term vision. As a re-sult, only a limited number of Member States have made serious progress in this area and renewables produc on is s ll a niche but not the mainstream.

The EU has to provide a long term vision of the future of renewable energy in the EU, built on the exis ng instruments like the renewable Electric-i Direc ve. This will help to trigger further in-

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vestment, innova on and jobs. The challenge for renewables policy is to fi nd the balance between installing large scale renewable energy capaci to-day, and wai ng un l research lowers their cost tomorrow. Finding the right balance means taking the following factors into account:

Using renewable energy today is more • expensive than using hydrocarbons, but the gap is narrowing – par cularly when the costs of climate change are factored in;

Economy of scale can reduce the cost • of renewable energy but this requires major investment today;

Renewable energy helps to improve the EU’s • securi of energy supply by increasing the share of domes cally produced energy, diversifying the fuel mix and the sources of energy imports and increasing the propor on of energy from poli cally stable regions as well as crea ng new jobs in Europe;

Renewable energies emit few or no greenhouse • gases, and most of them bring signifi cant air quali benefi ts.

A er an impact assessment study, the European Commission has proposed in its Renewable Energy Roadmap a target of increasing the level of renewable energy in the EU’s energy mix from less than 7 % today to 20 % by 2020. Targets beyond 2020 would be assessed in the light of technological progress.

Mee ng the 20 % target requires a growth in all three renewable energy sectors: electrici , biofuels and heat-ing and cooling. The policy frameworks in some Mem-ber States have achieved results which show how this is possible. Renewables have the poten al to provide around a third of the EU electrici by 2020.

Today wind power provides approximately 20 % of the electrici produced in Denmark, 8 % in Spain and 6 % in Germany. Costs in other new technologies – photovoltaic, solar thermal power, and wave & de, are projected to decrease from currently high levels.

In the hea ng and cooling sector, progress is a result of a number of new technologies. Sweden, for example, has over 185 000 installed geothermal heat pumps. Germany and Austria are leaders in the solar hea ng. If other Member States reach their levels, the share of renewable energy in hea ng and cooling would jump by 50 %.

As for biofuels, Sweden has already achieved a mar-ket share of 4 % of the petrol market for bioetha-nol, and Germany is the world leader for bio-diesel, with 6 % of the diesel market. Biofuels could pro-vide up to 14 % of transport fuels by 2020.

Major concern of the EU is the fact that acqui-si on of the European structural and cohesion funds will increase the CO

2 emissions and will

therefore hinder the Union’s combat with cli-mate changes. The Member States have to draw up na onal ac on plans to achieve 1 % yearly energy savings in the retail, supply and distri-bu on of electrici , natural gas, urban hea ng, and other energy products including transport fuels. Spain, Portugal Greece and Ireland have considerably increased their CO

2 emissions a er

their accession to the EU. Poland is expected to receive 20 % of the Structural funds for the period 2007 – 2013 and to increase its CO

2

emissions by 31 % un l 2013. The new Member States plan to invest mainly in road transport infrastructure and insignifi cantly sponsor railway and marine transport. The number of vehicles has increased drama cally in the new mem-ber states and for example the Czech Republic and Lithuania have more cars per capita than wealthier countries like Denmark.

The 20 % target is truly ambi ous and requires major eff orts by all Member States. The contribu on of each Member State will have to take into account diff erent na onal circumstances and star ng points, including the nature of their energy mix. Member States should have the

fl exibili to promote the renewable energies most suited to their specifi c poten al and priori es.

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113

The way in which Member States will meet their targets should be set out in Na onal Ac on Plans to be no fi ed to the Commission. The Plans should contain sector targets and measures consistent with achieving the agreed overall na onal targets. Implemen ng their Plans Member States will set their own objec ves for electrici , biofuels, hea ng and cooling, which would be verifi ed by the Commission to ensure that the overall target is being met. The Commission plans to prepare a new renewables legisla ve package in 2007.

A par cular feature of this legisla ve framework is the minimum development of biofuels throughout the EU. Today and in the near future biofuels will be more expensive than other forms of renewable energy, but over the next 15 years they are the only way to signifi cantly reduce the oil dependence in the transport sector. In its Renewable Energy Roadmap and Biofuels Progress Report, the Commission proposes a minimum target for biofuels of 10 % of vehicle fuel by 2020.

The EU currently meets 5 % of its energy needs from biomass. In case of full use of its poten al, the EU would more than double the biomass use by 2015. The increase in biomass use could bring the following benefi ts:

diversifi ca on of Europe’s energy supply, • increasing the share of renewable energy by 5 % and reducing the energy import from 48 to 42 %

a reduc on in greenhouse gas emissions of • 209 million tonnes CO

2 eq per year;

direct employment for up to 250-300 000 • people, mostly in rural areas.

poten al decrease in the oil price as a result • of the lower demand for oil.

extending the EU’s technological leadership in • the sector of renewable energy.

Biomass should be produced in compliance with good agricultural prac ce, safeguarding sustainable produc on of biomass and without signifi cantly aff ec ng domes c food produc on. Bulgaria

and Romania’s accession improves availabili of biomass because Bulgaria and Romania each have 0.7 hectares of agricultural land per capita, compared to 0.4 in the EU-25.

Biofuels are a credible alterna ve to oil. In most Member States the diesel that motorists buy already includes biodiesel in low blends. Major oil companies undertake biofuel investment programs for millions of euros and vehicle manufacturers have begun mar-ke ng cars running on high bioethanol blends.

There comes however another pe of problem with the usage of bifuels. If we take corn for in-stance – the quan necessary for the produc- on of a 25 gallon tank of the bioethanol biofuel, is enough for the nutri on of one person for one year. European Governments do not control bio-fuels produc on and there is high investment in the sector because of the rising tradi onal fuel prices on one hand and the high profi ts of bio-fuels produc on on the other. If that trend con- nues, we might reach to a phase when there won’t be agricultural products available for farm animals breeding (the only source of meat, milk and eggs). Highest level of compe on for the same biomass is observed in the case of the maize corn, sugar beet, sunfl ower and all pes of corn.

Governments should introduce relevant measures to take control of the situa on and give licences for the biofuel produc on. Otherwise the increase of corn prices could bring the poorer countries into economy crises and instabili . The solu on of this problem could be diversifying the energy sources and wider introduc on and implementa on of the

renewable energy sources.

3. Opportunities and threats for the energy policy of the EU

Europe’s major problem is to fi nd a way to de-crease its energy sources import dependence.

If the EU to succeeds in mee ng the objec ves re-

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3 COM (2000) 769, Towards a European Strategy for the Securi of Energy, Green Paper.

garding energy effi ciency and renewables, this will put it on track to meet the 2020 greenhouse gas reduc on of 20 %, and provide a springboard to achieve drama c reduc ons according to the 2050 objec ves. Determined ac on requires mely invest-ment, new jobs and a technological lead for Europe in low carbon technologies. The EU could set the pace for a new global industrial revolu on.

The Green Paper “Towards a European Strategy for the Securi of Energy”3 adopted in November 2000 by the European Commission focuses on the grow-ing dependence of the EU on external supplies of energy. It draws a en on to structural weaknesses as well as geopoli cal, social and environmental shortcoming of the EU’s energy supply, notably with regards to EU commitments in the Kyoto Protocol. Furthermore, it iden fi es two main priori es:i) controlling the growth of demand and ii) managing supply dependence in Europe.

The submissions received during the Green Paper consulta on period, have shown that this situa on cannot con nue. A coherent series of measures now need to be taken with the objec ve of creat-ing a European Gas and Electrici Grid and truly compe ve European-wide energy market. A par- cular feature of this framework is the need for a minimum and coordinated development of biofuels throughout the EU.

The EU should engage third countries and their producers to achieve these goals. The 2007 re-newables legisla ve package includes measures to facilitate the market penetra on of both biofuels and hea ng and cooling from renewables. The

Commission also plans to intensify the use of re-newable energy through other policies.

And, of course, there is an important ques on – how much will it cost to implement this global strategy? To achieve a 20 % share for renewables will cost annually approximately € 18 billion –

around 6 % of the EU's total expected energy import bill in 2020. But this assumes oil prices of $ 48/barrel by 2020. If prices rise to $ 78/barrel, this average annual cost will fall to € 10.6 billion. If a carbon price of more than € 20 is factored in, the 20 % objec ve will cost prac cally no more than relying on “tradi onal” energy sources, but create many jobs in Europe and develop new, technology driven European companies.

The EU has two objec ves for energy technologies: to lower the costs of clean energy and to put EU industry at the forefront of the rapidly growing low carbon technology sector. To meet these objec ves, the European Strategic Energy Technology Plan outlines a long term vision of moving towards a low carbon energy system in a compe ve manner.

The EU cannot achieve its energy and climate change objec ves on its own. The EU in the future will account for only 15 % of the world’s CO

2 emis-

sions. By 2030, with the new objec ves, the EU will consume less than 10 % of the world's energy. The challenges of securi of energy supply and climate change cannot be overcome by the EU Member States ac ng individually. The EU has to work with both developed and developing countries, energy consumers and producers, to ensure compe ve, sustainable and secure energy.

The EU must pursue these goals forming eff ec ve partnerships and translate them into a meaningful external policy. Energy policy must become a cen-tral part of all external EU rela ons – it is crucial to geopoli cal securi , economic stabili , social de-velopment and interna onal eff orts to combat cli-mate change. The EU must develop eff ec ve energy rela ons with its interna onal partners, based on mutual trust, coopera on and interdependence – rela ons should be broadened in geographical scope, and deepened on the basis of agreements with substan al energy provisions.

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International Railway Transport in South-Eastern Europe – requirements and perspectives carriers face

Chief Assist. Prof. Christina NikolovaDepartment of Economics of Transport, UNWE

Students Town Christo Botev, 1700 Sofia

tel: 02 8195 284 / 292

e-mail: [email protected]

Summary: The processes of globaliza on and European integra on call for amendments in the European transport model as well as in the Bulgarian one. These amendments cover prolonged period and they aim at the adjustment of the transport systems to the new logis c necessi es of the European economy. The fact that fi ve of the Trans-European transport corridors pass through Bulgaria is an addi onal incen ve for discussing and solving the problems related with the perspec ve in front of Bulgarian operators licensed for performing interna onal freight and passenger carriages. The emphasis is mainly on the opportuni es for collabora on in the fi eld of transport among South-Eastern European countries.

The necessi of consistent development in transport sector imposes the harmoniza on of the transport legisla on of the candidate-states for the European Union with the Acquis Communautaire. It is a prolonged process that guarantees the applica on of the common transport policy in the EU. The main goals of this policy could be set out in three spheres:

Improving the quali of transport services • through establishing the integrated transport system based on the modern technologies and, thus, protec ng environment and raising securi of the services;

Ge ing the func oning of the united • transport market be er, that is aiming at the effi ciency soaring and expanding the customer choice opportuni es. It is supposed to lead to a higher level of services quali while keeping pace with the social standards;

Further development of the posi ve • externali es through improving the quali of transport rela on between EU and the third countries which gives the opportuni for penetra ng in foreign markets.

The above men oned purposes correspond with the requirements for giving open access, for secure and stable transport system and they suppose development of the reliable concepts for improving the compe veness of the transport companies as well as the infrastructure capaci . Collabora ng and discussing the current problems of the transport are, of

course, necessary prerequisites for achieving the aims. It is apt to coordinate the measures for applying common approaches for be er use of transport infrastructure and securing the ra onal development of European Transport System for interna onal carriages. With regard to this the opportuni es for the achieving the aims by improving the rela ons between the countries in South-Eastern Europe and by collabora on in

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Interna onal Railway Transport

transport sector should be subject to clarifi ca on. These opportuni es are supposed to be specifi ed in the light on the development and elabora on of the transport technologies and organiza on of carriages.

The characteris cs of the diff erent modes of transport outline diff erent opportuni es for coopera on in solving the transport problems as well as taking measures for improving the compe veness of the transport companies on the European market.

The possibili es for collabora on and for development of the railway transport in South-Eastern Europe are being duly laid out in the paper. The conclusions are based on the analysis of the current condi ons and the problems in front of the management of the diff erent railways in the region.

Key words: railway transport, strategic barriers, adaptabili , compe veness, collabora on.

JEL: F51.

I. Introduction

The processes of globaliza on and European integra on call for amendments in the European transport model as well

as in the Bulgarian one. These amendments cover prolonged period and they aim at the adjustment of the transport systems to the new logis c necessi es of the European economy. The fact that fi ve of the Trans-European transport corridors pass through Bulgaria [2] is an addi onal incen ve for discussing and solving the problems related with the perspec ve in front of Bulgarian operators licensed for performing interna onal freight and passenger carriages. The emphasis is mainly on the opportuni es for collabora on

in the fi eld of transport among South-Eastern European countries (SEEC).

The process of joining of Bulgaria to the EU imposes the harmoniza on of the transport legisla on requirements and procedures with the Acquis Communautaire. It is a prolonged process that con nue a er the admission of the country in the Communi and includes three main stages [1] as follows:

Introducing the Acquis Communitaire in the • sphere of transport in country’s legisla on by using the due na onal procedures and measures (laws, regula ons, decrees etc);

Applying the new transport legisla on • through se ing up ins tu ons and raising funds required for execu ng the laws and regula ons;

Control over the observa on of legisla on • by inven ng the due measures necessary for guaranteeing law appliance thoroughly.

And while the fi rst two levels are limited in me and their accomplishment is prerequisite for carrying out the engagements taken owing to joining the EU, conduc ng the third stage of the process is a permanent one and ensures appliance of the European transport policy. The main goals of this policy could be set out in three spheres:

Improving the quali of transport services • through establishing the integrated transport system based on the modern technologies and, thus, protec ng environment and raising securi of the services;

Ge ing the func oning of the united • transport market be er, that is aiming at the effi ciency soaring and expanding the customer choices. It is supposed to lead to a higher level of services quali while keeping pace with the social standards;

Further development of the posi ve • externali es through improving the quali of transport links between the EU and the third

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117

countries which gives the opportuni for penetra ng in foreign markets.

The above men oned purposes correspond with the requirements for giving open access, for secure and stable transport system and they suppose development of the reliable concepts for improving the compe veness of the transport companies as well as the infrastructure capaci . Collabora ng and discussing the current problems of transport are, of course, necessary prerequisites for achieving the aims. It is apt to coordinate the measures for applying common approaches for be er use of transport infrastructure and securing the ra onal development of European Transport System for interna onal carriages. With regard to this the opportuni es for achieving the aims by improving the rela ons between the countries in South-Eastern Europe and by collabora on in transport sector should be subject to clarifi ca on. These opportuni es are supposed to be specifi ed in the light on the development and elabora on of the transport technologies and organiza on of carriages.

The characteris cs of the diff erent modes of transport outline diff erent opportuni es for coopera on in solving the transport problems as well as taking measures for improving the compe veness of the transport companies on the European market.

II. Development and state of the Railways in South-Eastern Europe

The Railways in SEEC are facing a crisis. The tendencies in the whole region are

toward rail market contrac on, increase in opera onal costs and need for greater governmental expenditures for subsidiza on of rail services (especially passenger ones). The fi nancial implica ons of these tendencies

are par cularly severe. Despite the na onal economies gradually strengthen, opera onal costs are doubled in the railway transport. There is a loss of market share comparing to the other modes of transport. The market studies within Phare Mul -country Transport Program revealed a consistent misunderstanding of the changing needs of both passenger and freight customers in the railway transport fi eld [5]. However, most of the railways in the region do not carry out market studies for determining clients’ needs. Common complaints from the railways passengers concerned the low level of personal securi , limited outlet for ckets sales which necessita ng lengthy queues and long delay at interna onal borders. The customers of the freight services are complaining about the lengthy and complex contract procedures, about the lack of tracking and monitoring systems and the lack of freight specialized wagons. In general, railways in South-Eastern European countries are failing to meet the challenges of the developing market economies. The customers have increased requirements and choice which are in favor of the other modes of transport. The situa on being as it is, the urgent measures for improving the condi ons and the quali of rail services are necessary.

The main barriers to compe veness of the railways in SEEC are said to be internal for these organiza on, without underes mate the external threats. Some of the rail enterprises in the region are s ll opera ng as centralized systems which delegate minimal responsibili es for their management and impose li le commercial accountabili . In 2001 the study of the Halcrow consultancy established an index of rail adaptabili [3], defi ned below:

A=P * C

where:А is the Index of Adaptabili ;Р – Power index – refl ects the extent to which

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each railway is empowered to defi ne its own organisa onal structure, appoint senior staff , set its own budget, raise fi nance and dictate the metable and fares.С – Index of the Accountabili – concerns the extent to which a railway is held responsible for its commercial performance (defi ned as the percentage of turnover subject to fi nancial targets).

A railway with an Adaptabili of 1.0 would have a fully empowered management that is commercially accountable for all aspects of its business. SEEC railways had an average Index of Adaptabili of 0.32, barely half that of EU railways (0.62)1. Interes ngly, the average accountabili es of SEEC and EU railways are similar, sugges ng that a empts are being made to introduce some commercial focus. However, low power indices amongst SEEC railways indicate li le progress in implemen ng a more empowered, commercial approach to management. Accountabili and

power has not been devolved within railway organisa ons.

The Adaptabili analysis was accompanied by a comprehensive benchmarking exercise. A varie of benchmarking methods were used, ranging from simple par al produc vi measures to total factor produc vi and cost fron er analysis (which measures the overall effi ciency of the organisa ons).

In the table above are presented the values of the key factors for railways benchmarking in SEEC. The results reveal following main trends:

Only Slovenian railways which are advanced in • restructuring have high compara ve effi ciency;

All other rail enterprises in the region • have nega ve indexes of produc vi and they confi rm the theory that rising wages suppress the effi ciency when the level of organiza onal reform is low;

1 Source: Profi tabili of Rail Transport and Adaptabili of Rail (PRORATA) prepared for DGVII of the European Commission, Halcrow Fox, February 1999.

Table 1. Key factors for railways benchmarking

Country Railway

Total Staff (railway

and non-railway staff )/

Gross tonne km

Wagons/ freight

Tonne km

Passenger

coaches/

Passenger km

Total Factor

Produc vi

Cost

Fron er

Analysis

Bulgaria BDZ 10 10 1 5 3

Macedonia CFARYM 11 11 11 6 7

Romania CFR 8 9 2 9 10

Albania HSh 12 12 10 n/a 9

Hungary MAV 9 7 3 11 8

Slovenia SZ 5 6 8 10 11

Legend:

Low efficiency 12 11 10 9 8 7 6 5 4 3 2 1 High efficiency

Source: European Conference of Ministers of Transport, What Role for the Railways in Eastern Europe?,

OECD, 2001.

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119

If all of the railways in the South-Eastern • Europe achieve the level of most effi cient one (the Slovenian Railway), then the prerequisites for saving opera onal costs and long-term savings will exist;

The perspec ves for salaries rising in the • SEEC could lead to the growth in the opera onal costs of the railways.

Consequently, the main threat the railways in the SEEC face is related to the usage of the out-dated, product-led organiza onal structure, set within ins tu onal framework which prevent management from the powers they need to conduct an eff ec ve commercial ac vi . In addi on to the nega ve tendencies are a varie of opera onal and technical barriers as follows:

Lack of management and analy cal • informa on about the expenditures and lack of business-planning system in the most of railways in the region;

Low level of asset u liza on as a result of • the lack of management informa on systems;

Excess of employees hired in all ac vi es; • Poor infrastructure and vehicle maintaining •

especially of those performing interna onal carriages as well as terminals and tracking systems;

Poor coordina on in interna onal carriages • planning and management.

The study of the railways compe veness has a signifi cant meaning in the disclosure of the opportuni es for improving their state. The main threats and barriers to compe veness are not discrete issues. These are complex of external, ins tu onal and technical problems. For example: a lack of commercial freedom, an absence of consistent business-planning and lack of management informa on systems.

The obstacles to compe veness of the railways in SEEC could be classifi ed in accordance with their infl uence as follows: market, produc on and

strategic. The responsibili for each barrier and hence the responsibili for its overcoming could be specifi ed towards the owners/ regulators, train operators and infrastructure owners (Table 2). It should be noted that the same or similar barriers appear in more than one category. This once again emphasizes the close interrela ons and especially the way the strategic obstacles drive the market and produc on ones. Although on the produc on and market level the changes could be done, these changes are restricted in scope and in effi ciency, if the strategic obstacles are not changed. If there exist rela vely limited opportuni es for modeling the interrela ons between the railways and the governments, then it should be noted that they have fundamental infl uence on the possibili es for changes on the other levels. This is extremely important when es ma ng the barriers to compe veness of interna onal transport services.

The main conclusions that could be drawn from the analysis of the railways compe veness in the SEEC are:

The railways need an explicit concept of the • role and the objec ves they follow. They should have freedom in the business management and to achieve their goals. Accountabili and power should be delegated throughout the railways enterprises as part of matrix of responsibili es, targets and objec ves;

There is a lack of commercial focus. • Few, if any of the railways in the region are communica ng and listen to their clients to fi nd out what services they want. To a large extend this is due to the ins tu onal framework within which the enterprises exist and to a contract with governments. In other words, the railways are not interested in studying their clients’ needs;

Lack of management informa on systems • and thorough business-analyses and the evalua on processes. This is related also with the rela ons with government (See Table 2) and

Ar cles



exis ng organiza onal structures in which the main responsibili es are delegated to the top-management and on the lower levels the necessary controlling informa on is not consigned. The managers do not have at their disposal suffi cient data for adequate decisions and recourses’ conduc ng even when they are empowered for this. The full poten al of management informa on systems could be revealed only provided that the organiza onal structures of the railways are such that could give enough power to managers to use these systems;

It is diffi cult to conduct any form of • business planning and to choose eligible market strategies in view of the fact that the investors, respec vely the government does not confi de to the management of the enterprises;

Rolling stock produc vi is lower than that • in Central and Western European Countries. This leads to higher costs and is related to a lack of adequate management informa on, business-es ma on and monitoring systems;

The hired staff is more than really needed, • which imposes lower labor produc vi than this in Western and Central European Countries. The reason is the absence of eligible management informa on systems but also it has a close link to the rela ons with government and the delegated powers of management;

The growing labor costs impose serious • problems which to a large extend reduce the eff ect of staff reduc on and rapidly drawing up the opera onal costs. At the same me the railways fail to achieve posi ve results from the restructuring;

Collabora on among railways in the region, • and between railways and their customers is on a low level. This leads to lengthy delays on borders, unreliable interna onal services and a general lack of customer confi dence. There is a lack of standard opera ng procedures and technical standards and a unitary body responsible for marke ng and interna onal services between countries and along Trans-European Corridors;

The investments in trac on and rolling stocks • are very low, that is why it is necessary to ensure that the investments are properly evaluated by railways to have maximum benefi t. Failing to address most of the problems men oned above will see lower level of funds and con nued decline of the services off ered;

Customer expecta on and requirements • rising and the popula ons want to achieve the standard of live in Western and Central European Countries. The railways failed to keep pace with these changing requirements. When providing interna onal freight services it couldn’t proceed from the literate space moving of goods between two points. Transport services should be considered as an integral element in the en re logis c chain. The product off ered should rather be a service which enhances the goods fl ows than vehicles that perform carriages of goods. Freight services will become increasingly important but the railway transport systems of the SEEC fail to meet these requirements.

It should be recognized that in the railways in some of the countries in the region are established and developed good prac ces and ins tu onal models. Bulgarian and Romanian railways are restructured and the freight traffi c is stabilized and does not go down anymore.

The comparisons among the railways effi ciency in SEEC show that it is possible to achieve signifi cant cost savings if all of the countries in the region reach level of the most eff ec ve railways – Slovenian railways.

The table below presents the barriers to compe veness of the railways classifi ed by countries. Of course, there are always some excep ons but the goal is to focus on the common problems.

In spite of the reforms undertaken the major part of the railways in the SEEC are s ll in decline, including those in ascendant (Table 3). Special

Ar cles

121

Table 2

. Barr

iers

to c

om

pet

itiven

ess

Resp

osi

bili

P

rod

uc

on

Mark

et

Str

ate

gic

Ow

ner

/

regula

tor

(gove

rnm

ent)

◊ L

ack

of

clar

i

and t

ransp

aren

cy in t

he

rela

onsh

ip b

etw

een g

ove

rnm

ent

and

railw

ays

◊ L

ack

of

obje

c v

i

and c

lari

within

pla

ns

for

rest

ruct

uring, co

mm

erci

alisa

on,

priva

sa

on a

nd a

cces

s ch

arges

, et

c.

◊ Insu

ffi c

ient

fundin

g f

or

infr

astr

uct

ure

an

d r

olli

ng s

tock

reh

abili

ta on

◊ Insu

ffi c

ient

subsidie

s fo

r lo

ss-m

akin

g

serv

ices

◊ S

trong t

rade

unio

ns

inhib

i ng r

eform

and r

estr

uct

uring

◊ R

egula

on/co

ntr

ol of

fare

s by

gove

rnm

ent,

bel

ow

mar

ket

leve

ls

◊ T

her

e is a

lac

k of

fl ex

ibili

in f

reig

ht

tariff s

◊ H

igh lev

els

of

conce

ssio

nar

y tr

avel

◊ G

ove

rnm

ent

contr

ol of

m

etab

le

◊ Inad

equat

e co

mpen

sa on f

or

soci

al

oblig

a o

ns

to o

per

ate

loss

mak

ing s

ervi

ces

◊ L

ack

of

inte

gra

on w

ith o

ther

modes

◊ S

trong s

tate

invo

lvem

ent

in

man

agem

ent

and p

olic

y

◊ R

ailw

ay m

anag

emen

t has

lim

ited

pow

ers

and a

ccounta

bili

◊ L

ack

of

clar

i

in c

ontr

act

with

gove

rnm

ent

for

soci

al r

ole

of

railw

ay

◊ S

low

rat

e of

legal

ref

orm

s an

d

intr

oduc

on o

f pro

gre

ssiv

e le

gisla

on

◊ P

oorly

exec

ute

d a

nd ineff

ec

ve

priva

sa

on

◊ L

imited

priva

sa

on p

olic

es

◊ L

imited

im

ple

men

ta on o

f EV

direc

ve

s

Ar cles


Interna onal Railway TransportR

esp

osi

bili

P

rod

uc

on

Mark

et

Str

ate

gic

Trai

n

oper

ators

◊ Inap

pro

priat

e org

anisa

onal

str

uct

ure

s

and a

ccounta

bili

es

◊ A

bse

nce

of

free

dom

to m

anag

e

◊ A

bse

nce

of

busines

s m

anag

emen

t

stru

cture

, te

chniq

ues

, to

ols a

nd s

kills

◊ A

bse

nce

of

suitab

le m

anag

emen

t

info

rma

on s

yste

ms

linke

d t

o a

nal

ysis a

nd

eval

ua

on p

roce

sses

.

◊ A

bse

nce

of

mar

ket

orien

ted s

trat

egie

s

◊ A

bse

nce

of

per

sonnel

tra

inin

g a

nd

dev

elopm

ent

stra

tegie

s

◊ B

ure

aucr

a c

pro

cess

es a

nd r

esista

nce

to

cultura

l ch

ange

◊ P

oor

condi

on o

f lo

com

o ve

s an

d

rolli

ng s

tock

◊ L

ack

of

equip

men

t an

d s

par

e par

ts f

or

repai

rs a

nd r

ehab

ilita

on

◊ P

oor

pro

duc

vi

of

reso

urc

es

◊ P

oor

qual

i

pro

duct

s an

d d

eliv

ery

◊ Incr

easing o

per

a o

nal

cost

s fo

r la

bour,

m

ater

ials a

nd s

ervi

ces.

◊ P

oor

leve

l of

cost

rec

ove

ry a

nd

signifi

cant

loss

mak

ing a

c v

i es

◊ Inad

equat

e re

venue

colle

c o

n a

nd

pro

tec

on s

yste

ms

◊ L

ack

of

com

mon t

echnic

al s

tandar

ds

and o

per

a n

g p

roce

dure

s fo

r in

tern

a o

nal

se

rvic

es

◊ P

oor

ck

e n

g a

nd r

etai

ling m

ethods

◊ P

oor

pas

senger

info

rma

on

◊ L

ack

of

cust

om

er f

ocu

s

◊ P

oor

mar

ke ng o

f se

rvic

es

◊ L

ack

of

mar

ket

rese

arch

and

com

munic

a o

n w

ith c

ust

om

ers

◊ P

oor

qual

i

sta

on e

nvi

ronm

ent

and

faci

li e

s

◊ P

oor

qual

i

rolli

ng s

tock

and f

acili

es

◊ P

asse

nger

sec

uri

◊ L

ack

of

inte

gra

on w

ith o

ther

modes

,

incl

udin

g c

ar p

arki

ng a

t st

a o

ns

◊ P

oor

m

etab

ling a

nd low

fre

quen

cy

serv

ices

◊ O

verc

row

din

g

◊ Infl ex

ible

and len

gth

y co

ntr

act

neg

o a

ons

for

frei

ght

tran

sport

◊ F

reig

ht

tariff s

are

com

ple

x an

d d

iffi c

ult

to u

nder

stan

d

◊ L

ack

of

spec

ialis

t fr

eight

wag

ons

◊ S

pee

d a

nd t

ransit

m

es a

re c

onsider

ed

to b

e poor

and u

nre

liable

◊ T

rack

ing o

f co

nsignm

ents

◊ D

elay

s at

bord

er c

ross

ings

◊ P

oor

secu

ri

of

goods

◊ Inap

pro

priat

e org

anisa

onal

str

uct

ure

◊ L

ack

of/

ineff

ec

ve

man

agem

ent

info

rma

on s

yste

ms

◊ L

ack

of

busines

s an

alys

is e

thos/

tech

niq

ues

.

◊ G

row

ing fi n

anci

al d

efi c

its.

Ar cles

123

Resp

osi

bili

P

rod

uc

on

Mark

et

Str

ate

gic

Infr

astr

uct

ure

ow

ner

◊ P

oor

condi

on o

f in

fras

truct

ure

and

signifi

cant

bac

klog in m

ainte

nan

ce a

nd

renew

als.

◊ L

ack

of

equip

men

t an

d s

par

e par

ts f

or

repai

rs a

nd r

ehab

ilita

on

◊ P

oor

reso

urc

e pro

duc

vi

◊ Incr

easing o

per

a o

nal

cost

s fo

r la

bour,

mat

eria

ls a

nd s

ervi

ces

◊ R

oute

cap

aci

const

rain

ts –

sin

gle

lines

, le

vel cr

oss

ings,

per

man

ent

spee

d

rest

ric

ons,

etc

.

◊ E

xces

sive

net

work

s in

nee

d o

f ra

onal

isa

on

◊ P

oor

inte

rchan

ge

faci

li e

s.

◊ P

oor

qual

i

sta

on f

acili

es

.

◊ L

ow

lin

e sp

eeds.

◊ Ineffi

ci

ent

frei

ght

term

inal

s an

d p

oor

frei

ght

han

dlin

g f

acili

es

.

◊ C

ost

s of

oper

a o

ns

and infr

astr

uct

ure

ar

e

not

mad

e ex

plic

it a

nd p

ote

n al

bar

rier

s to

new

entr

ants

rem

ain.

◊ E

xces

sive

net

work

s.

◊ lac

k of

inve

stm

ent

and p

oor

condi

on

ofn

infr

astr

uct

ure

.

Oth

er/

com

mon

◊ R

isin

g c

ust

om

er e

xpec

ta ons.

◊ L

iber

alisa

on o

f ro

ad f

reig

ht.

◊ R

isin

g lev

els

of

car

ow

ner

ship

.

◊ L

ow

purc

has

ing p

ow

er o

f th

e popula

on

in s

om

e co

untr

ies,

par

cu

larly

the

Bal

kans.

◊ L

ow

mo va

on t

o r

estr

uct

uring a

nd

refo

rm w

ithin

the

rail

indust

ry.

◊ R

isin

g lab

our

cost

s

◊ G

row

th in c

ar o

wner

ship

.

◊ G

row

th o

f co

mpe

ng m

odes

– c

ar, ro

ad

frei

ght

and in s

om

e co

untr

ies

effi ci

ent

stat

e ai

rlin

es.

◊ R

egio

nal

confl ic

t in

the

Bal

kans.

◊ P

oor

econom

ic p

erfo

rman

ce a

nd low

purc

has

ing p

ow

er.

Sourc

e: E

uro

pea

n C

onfere

nce

of M

iniste

rs o

f Tra

nsp

ort, W

hat Role for

the

Railways

in E

aster

n E

uro

pe?

, OECD, 2001.

Ar cles



a en on should be paid to the perspec ve of raising salaries in the region in connec on with the economy growth. This will bring to a paradoxical rise of the risk for the railroads in mes of ge ing economy condi ons be er. Classifying railroads of SEEC into three groups is based on their similar characteris cs. Group one includes Hungary, Slovenia and Greece, which have stable economy but have low cost effi ciency. The second group consists of Bulgaria and Romania that fi nd themselves in period of soaring economy, but have not yet accomplished thoroughly their reforma on in railways. It needs to be emphasized that the main problems in the SEEC railways are not caused by lack of

investments. In most cases problems derive from the fact that due procedures of correct es ma on of the investments’ needs and for direc ng the funds for moderniza on and rehabilita on of the rolling stock and infrastructure have not been duly carried out. Something more, it is even possible raising investments to have li le impact on the state of railways companies. This is pical for the third group of countries including Albania, Bosnia and Herzegovina, Croa a and FYR Macedonia. The reason here stems for the low level of the conducted ins tu onal reforms. Besides, railways in all SEEC are not supposed to expect the market growth in all the segments to solve their fi nancial diffi cul es if not restructured.

Table 3. Common barriers to competitiveness

Country Produc on Market Strategic

Hungary, Slovenia and Greece

◊ Labour costs rising

◊ Limited management powers

◊ Large networks of branch lines

◊ Poor rolling stock u lisa on

◊ Low labour produc vi

◊ Train service not market led

◊ Growing customer expecta ons

◊ Poor retailing/ cke ng

-

Bulgaria and Romania

◊ Maintenance backlog

◊ Poor rolling stock

u lisa on

◊ Low labour produc vi

◊ Low speeds

◊ Basic marke ng

◊ Poor informa on

◊ Poor logis cal management

systems

◊ Growing defi cits

◊ Compe on from other

modes

◊ Contract with government

Albania,

Bosnia and Herzegovina, Croa a

and FYR Macedonia

◊ Maintenance backlog

◊ Single line working

◊ Low resource and labour produc vi

◊ Low speeds

◊ Poor condi on of coaches and

wagons

◊ Lack of investment

◊ Balkan crisis

All ◊ Passenger securi

◊ The of freight

◊ Condi on of rolling stock

◊ Bureaucracy at borders

◊ No market research

◊ Poor integra on

◊ Lack of management informa on systems

◊ Lack of business evalua on and analysis systems and

processes

Ar cles

125

At that the a itude and the approach to the customers should, by all means, be changed in order to preserve at least the exis ng market shares.

The complexi of the men oned problems clearly shows why the situa on in railways con nues to get worse and the necessi of instant measures are required. Therefore, the priori es for the railways in the region should be implementa on and conduc ng programs that will help to the restructuring and will focus on rising opera onal effi ciency. If more commercial orienta on is being imposed, then it will enable inven on and carrying out more ambi ous marke ng programmes.

III. Measures for improving the state and efficiency of the railways in South Eastern Europe and opportunities for partnership

Mul tude of researches and recommenda ons for the railways development [4] defi ne

diff erent opportuni es for improving their status, effi ciency and compe veness. Some of the opportuni es are linked to suppor ng ins -tu onal reforms and commercial liberaliza on. This, in turn, requires change in the regulatory and ins tu onal frame as a precondi on for achieving the expected results. Such kind of changes will bring to a further progress from heavily regulated and controlled structures toward a business orientated companies and even private ones.

Other measures are being implemented in order to get the effi ciency be er without carrying our implicitly structural reform. These may include changes in exploita on ac vi es, asset management and marke ng. Nevertheless, the

compe veness will go up as the ins tu onal and organiza onal structure change, too. It should be taken into account that the index of adaptabili of badly-run but liberalized railways in any case is higher than those of well-run, but with tradi onally set structure. When the regulatory frame is made up in such a way as to allow changes in the company adaptabili , it is possible to boost the effi ciency in their ac vi es, but it will not be evident at once. Most eff ec vely working railways in Europe – those of Sweden, Germany and UK are s ll rela vely less effi cient and adaptable. However, at present, the aforesaid countries represent the most successful models in the development and could be singled out as a sample to any other railway. The railways of these three countries have achieved be er effi ciency through implemen ng a sequence of successful measures along with the development of their adaptabili and as a result they have improved their status as a whole. On the other hand, the measures are strongly related to improving the power index.

Bearing in mind the example with the railways of Sweden, Germany and UK, we can make out an ac on plan with priori measures. The poten al fi nancial benefi ts from their implementa on could run up to around EUR 4-5 billion a year2. Major part of the measures aim at improving compe veness; e.g.: developing organiza onal structures and accountancy systems, drawing out business plans and implemen ng new products could easily be applied by the very railways. What ma ers in this case is that the companies can take decisions by themselves. The external factor infl uence should not be underes mated as a means to rule the changes and yet this should be handled through partnership between the government and the railways. There should be undertaken regional measures that will incent the railways to ac on in increasing the market share. This cannot be reached only by

2 Source: European Conference of Ministers of Transport, What Role for the Railways in Eastern Europe? OECD, 2001.

Ar cles



off ering lower prices or increasing frequency of the transport services. At fi rst there should be undertaken a reform in the sector, more power of a orney to be delegated and the costs for control to be es mated. Interna onal partnerships, respec vely in South East Europe are of strategic importance for implemen ng new prac ces and technologies, e.g., through leasing and franchising. The interna onal freights in the region off er the opportuni for including in the private sector as in the exploita on, so in ensuring specialized freight wagons. The following measures could be summarized by countries:

Albania, Bosnia and Herzegovina and • Macedonia: there exists necessi of rehabilita on of the network and rolling stocks, in order to have the normal func oning ensured. The outside, including the poli cal barriers, however, deter the progress. Yet the applying decent models is possible for se ing up ins tu ons, work organiza on and procedures from the other countries in the region that are ahead of the reforms in the sector. These measures are basic in achieving profi t from the investments in the infrastructure. Bulgaria and Romania have both some good results in restructuring and ins tu onal reforms in the railways. Measures, that the railways of these countries should take in these sectors for increasing the effi ciency are supposed to be directed to the business-management and exploita on issues. The approaches to improving fi nancing and supplying are of major importance, too.

Of the railways in Hungary, Slovenia and • Greece the accent of the perspec ves ac ons and measures for ge ing be er the effi ciency, could be put on the government (ins tu onal ques ons and measures for increasing the responsibili es). In these countries the reforms are on their way for a long me and the fi rst posi ve results are evident.

The interna onal freight and passenger • transporta on in the region are expected to

peak considerably un l 2015. Nevertheless, the forecast for the railways are rather to generate further market share losses to those of the road and air transport. Although some specifi c barriers exist on the way of the interna onal transport in South Eastern Europe (e.g., delays in crossing borders, diff erent technical standards and equipment, poor quali of the rolling stock), they can posi vely be overcome. What ma ers is that as the domes c so the interna onal transport services in the region as a whole are product-oriented and do not respond to the expecta ons of the clients. The measures to bring change and redirec ng the railways from exploita on to commercial control will add for improving the quali of the interna onal railway freights. There exists an opportuni for penetra ng of private companies and developing of innova ve services in the fi eld of the freights.

The EU has a clear role in fostering the implementa on of the direc ves linked to ensuring an open access to the railway infrastructure and collec ng the charges for its use. By doing this, further ins tu onal reforms base frame is being ensured. If the access to the railways is open for sure and innova ve interna onal transport services are to be developed, then the next step is developing system for monitoring. Crea ng a European Railway Organiza ons System could become a model that will constantly be expanding and to include all the SEEC.

IV. Conclusion

The crisis in the railways in SEEC could not be prevailed only by investments in new

vehicles and infrastructure. Finding solu ons to the problems are in the competence of the railways by themselves and their owners – the governments of the countries. In order to rid of the reasons of the low compe veness and effi ciency, organiza onal and ins tu onal reforms

Ar cles

127

are required. Management should become more independent to posses more rights and responsibili es. It is necessary that the present model of product-oriented management to be replaced with more commercial organiza on. Along with it, standard business processes could be implemented. This would inevitably lead to considerable savings of exploita on expenses. Reinvestment of funds made by the savings in commercially focused structures will bring to increase in the compe veness of the railways which will be able to respond to the higher level of demand in the market.

The transport market in the region has every opportuni to grow, yet it is required that the accelera ng of the processes on realiza on of infrastructure projects in the fi eld of transport and carrying out a common infrastructure policy is ensured and based on following principles:

European orienta on, stemming from the • integra on of the most of the countries in the European economical and poli cal processes;

Developing the infrastructural policy • within the frame of mul lateral forums and organiza ons;

Combining infrastructural projects on the • side of the Black Sea and Danube partnership with common European orienta on;

Taking into account the rela on and • opportuni es for development of the transport and telecommunica ons in direc on to the Middle and Far East, Asia and North Africa.

References

Министерство на транспорта, Наръч-1. ник м съвվն пното право на Общността в областта на транспорта (Transport Acquis), он-лайн, h p://www.mt.government.bg/documents, 1999г.

Мутафчиев, Л., Първанов, Хр., Бакалова, 2. В., Кирова, А., Транспорт и застраховане, УИ “Стопанство”, София, 2007г.

Brown, M., 3. The Future of Railways in Central and Eastern Europe. In: What Role for the Railways in Eastern Europe? European Conference of Ministers of Transport, OECD, 2001.

Commission of European Communi es (CEC), 4. White Paper: European transport policy for 2010: me to decide, 2001.

Thompson, L., 5. Railways in Eastern Europe. In: What Role for the Railways in Eastern Europe? European Conference of Ministers of Transport, OECD, 2001.

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Tutorial on Energy Efficiency to Managers of the Bulgarian Industry

Chief Assist. Prof. Nikolay Shterev, Ph.D.Assist. Prof. Dimitar Blagoev

Summary: Bulgaria is one of the important energy center not either on the Balkans but on the CEE in the last few years. Besides the sector development we can expect a shrinking of this energy infl uence in the next 5 – 10 years. The fast and adequate measures on the macro, mezzo and micro level are needed.

The exis ng Bulgarian Energy Strategy gives some important decisions of those problems at the macro and mezzo level. The energy decisions of each enterprise are very important for energy effi ciency on the micro level

The following paper discussed some important energy problems on enterprise level for Bulgaria and EU. The main points are connected to development of energy effi ciency educa on, respec vely acquiring knowledge and skills about energy effi ciency, in the Bulgarian enterprises of all economy sectors.

Key words: Bulgarian enterprise, energy effi ciency, training, EU, CEE.

JEL: L94, M53, O13.

Treatment

The last necessi es determine the must from op mizing a range of ac vi es in the broadcast area of the organiza on

and the opera on that will be directed to confi rming proof development not only to the occupa on, but to the socie as well as before the industrial companies.

Achieving fi xture in the development, as well naturally its economic and social consequence, is one of the main reasons among the precessions to the European Union that such direc ons hit the deck as human’s resources development, ecology, energy effi ciency etc.

The priori es are played in using the energy resources for produc on of energy eff ec ve socie in a range of European and na onal documents. Among the main European communi documents the decision-the 1639/2006-the EU of the European parliament, the diff erent commissions reports to ЕP (the European catfi sh (2007) in 1, the European catfi sh (2006) in 848, the Silurus glanis (2006) in 357, the Silurus glanis (2006) in 1173) etc. are got. They join in

among the main na onal documents: the law for the energy effi ciency, the energy scheme to Bulgaria, the report on the energy effi ciency in the area etc. among the ground direc ons for an indemni to energy effi ciency crucial point fi lls boos ng the investments with the new members in newer, more kind technologies in

areas in the energy effi ciency, renewable energy resources and energy diversifi ca on, by zooming

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the barriers between the success displays to advanced technologies and their eff ec ve market presenta on in meaning to inves ng implements to the public and private sector, the genera on to the strategic technologies, reducing the spending, zooms to market-a empt The distribu on At the fi scal risk and star ng gates, the inves ng had reached the likes.

In the pointed direc on achieving the energy effi ciency can be achieved by diversifi ca on to the energy resources, used by the industry, as follows:

Cu ing using energy in industrial sector; • Promo ng tradi onal and renewable energy •

sources for electric power, hea ng and cooling in industrial sector off ;

Desegrega ng using things and renewable • sources in local energy system at industrial yard.

With the presented paper their writers put the following main goals and tasks:

The goal:• The actual direc ons on origina ng the good competence of the Bulgarian administrators on effi caciously using the energy sources.

Tasks :• a) The state of the Bulgarian energy sector is analyzed, as the cardinal fi x domains, calling the more kind management of the energy resources, are limited as well;b) The cardinal, needed knowledge and the skills that the decisions for the use of the energy resources need have got get are led;c) Fuel gauges (standards and indicators) are outpu ed for consequence judgment from improved competence in the area in the energy effi ciency;d) The goal groups for which one similar educa on is needed as well admirably are iden fi ed;e) Predict What The results can be achieved in a short - term and long - term period.

The object to inves ga on in the ar cle is the learning in energy effi ciency, as its par culari es, the goal audiences and the results are declared.

1. The status of the power grid, the energy powers, the production and the consumption to the electricity in Bulgaria.

Bulgaria is a s ff pre-range of severe challenges in the energy sector, crea ve from objec ve

reasons and circumstances, of result in the new courses in the world economy from delaying the reforms as well in the sector in the years of passage. The must from making the habits for effi caciously using the energy resources of the par determines on this, as from the individual users, largely from the industrial users as well, they use largest share up as en es so from the manufactured energy of country.

Bulgaria is very strong energy dependency, for it brings more from 70 of hundred of its primary energy resources.

The most important local energy resource is the lignite coals with high content to sulfur are a local energy resource. It is deciphered largely to import Russia fuel-petroleum, natural gas, qualita ve coals and nuclear fuel. This framework of the energy balance wakes the alert from the viewpoint to the securi of the power grid. The European union, whose addic on is less from a import, Around 40 in hundred but with tendency for waxing to 70 in hundred a er 20

years it commits serious a empts in two main direc ons :

Rela ve energy consump on decrease • of unit-gross intrinsic merchandise (GDP) to economy and be ering energy effi ciency.

It uses on - scene energy sources in т. The • number separates the greatest a en on to the so called energy renewable sources.

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Tutorial on Energy Effi ciency

Despite the short local energy poten al, the Bulgarian economy excels in the other countries (as From Advanced, So from the countries in walk of central and eastern Europe as well) with the energy extravagance. Due to this the main strategic economy goal as well as of the industry is to use of the energy resources of the produced energy as well must be ra onal. The lack to the market mechanisms for the impact does not allow to this stage the sensible solu ons to be not achieved despite her no - nonsense science technical poten al, admi ed in her performance.

1.1. Electricity consumption in Bulgaria

The electrici consump on in the side is in direct connec on with the economic development. From 1990 to 2003 it declines reasonably by nearly 20-25 percent, as the func on is shi ing for the period and they are watched as the periods of the drop, caused by hyper-infl a on, and the stagna on to the economy, the periods to the low eleva on so as well.

The produc on sector, receives and processes industry in that number, is an underlying consumer of energy with rela ve share of 45 of up to 56 percent as well largely on the Restructuring owes whi ling the consump on It is blue for the period – 1990-1997 that the sector clearing of industry reduces its rela ve par on in the industrial consump on of energy as well. This does not apply to/for the big establishments in this sector that are with tradi ons in the machines produc on, the metallic structures etc. They as

well s ll func on, but with reduced powers. The course with these is establishments for retaining the level to consump on to electrici in the last 6-7 years. The solid fuels, predominate in the general consump on of electric energy in Bulgaria as can be scored, that altogether.

The energy is nearly 50 percent from the general consump on of primary energy, as the diff erence

consists largely in outages in transduc on (81 percent), consump on from energy producing powers (12 percent) and loss in the rent and the alloca on (7 percent). That data show that the par excels as losing with ineff ec ve electrici and a distribu onal net, so with a industry, that is wasteful in energy a itude, as well genera ng energies, that are big.

1.2. Bulgarian energy produce

The industry of electrici is in volume that permits the smooth sa sfac on to the needs of the side (of the industry and the popula on), and eff ec ng the expor ng as well as well for neighboring stand back in Bulgaria. In the context to the presented percent allotment to powers of produc on of electrici and cap ve of 3rd and 4th block in Nuclear-electrici power sta on Kozloduy (but the unclear future of nuclear-electrici power fl akes off ). It is told that the prognosis’s know the share to the mass – produced energy is increased from the remaining two pes of powerhouses, namely from thermo-electric power sta on and water-electric power sta on as well and from the last energy renewable source, as is the course in en re Europe most already. Observing despite the good candidates of the a itude the ecological norms at the produc on to the energy for water electric power sta on as well compounds they the construc on in Bulgaria in the last 2-3 years is s ll you with small produc on powers and fulfi lls largely local need.

Increasing the number of electrici , produced by the renewable energy sources, is good course, because this pe of fabrica on features short produc on cost and ecological features, but it meets together despite this, That The contribu on to the mass - produced electrici from these two kinds of the powers is s ll low

It cannot be deciphered on it as well in a full grade for covering need in the energy balance.

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The water energy really so called renewable used part-energy head (Renewable Energy Resources) is mainly. In comparison with the direct use of the sunny, aeolian or geo-thermal energy as the sea disorders water electric power sta on used the centralized hydro-poten al with be er profi ciencies-economic indicators.

Produced by water-electric power sta ons despite all favorable facets to the energy it can be pointed, reads the nature condi ons (the fl ow to the rivers on which the precipita ons that have fallen are framed up as well in the year) are heavily con ngent. Despite this the views are good for their growth and the share of the produced by them of electrici will con nue growing. In the EU-15 countries the greater a en on is spun off always to building alterna ve electrici sources. This is ordered as from aligning with a range with ecological factors (for instance: The statement From Kyoto they start restric ng and reduce to the emissions of greenhouse gases), so from the more short produc on cost to the mass - produced electrici in comparison as well thereupon, Mass – produce by coals and petroleum. They decline to the alterna ve electrici sources: geo-thermal, solar, the biomass, the use of the personnel of the winds to the fl ood des as well and the ebbs. The known candidates for the construc on of solar energy produc on exist for Bulgaria the powers work in such as well with a staple-biomass, because for using remainder the alternate origins do not exist in the country good nature as well clima c the provision. Therefore, a er the cap ve in 3rd – and well 4th block of Nuclear-electrici power sta on the major increase to their contribu on of the general fabrica on to the electrici need to be expected with general European tendencies in connec on as well. At the present moment Bulgaria used the following renewable heads of energy, as the specifi ci and the volumes are as follows manufactured energy:

Water energy – In a na ve state the nature • rarely indicates waterfalls pressure as well For they them to be achieved the construc on is put ar fi cially on cisterns etc. This qualifi es the power to the hydroelectric centrals to 10 МW. Despite this in the country the several waters centrals with the capaci of 120-160 MW are built.

The hydro- and geo-thermal energy – using • hydro- and geo-thermal technologies the preoccupa on to the hydro and geo-thermal poten al can reach un l 47-75 MW, but the Bulgarian nature condi ons do not provide such opportuni .

Solar energy – The MW heat power from the • sunlit thermal facili es has installed 20 to the moment in Bulgaria and there aren’t installed photo-voltage facili es.

Aeolian energy – Using the Aeolian energy is • in dependence from the force in the wind and the number of year blowsy days. The poten als for using this generator are limited, as the output is limited to energy un l 100-200 W /м 2 at maximum in 4-7 MW. The following subtrac ons in the rela on can be done in conclusion The output, the consump on and using the diff erent sorts poten al (renewable and tradi onal) energy resources as follows:

The rela ve advantages and the defects at 1. using the diff erent standards of the assessment have got diff erent energy resources. Renewable energy resources have rela ve advantages upon treatment of prices to the inves ng, ecological eff ect and the energy dispatch of the consump on.

The country must excite building things 2. Power, reasoned, On Tradi onal The renewable sources as well, for the balance to be eff ected on the market of energy products

They are with inspec on to resource fi niteness 3. to the tradi onal resources expediently building new powers, established as renewable energy resources.

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The analysis and the so defi ned discounts suggest the individualizing to the following (more crucial) problema c fi elds, on resolu on of which the educa on will be built:

Analysis to the state of the Bulgarian industry 1. of rela on level of the energy effi ciency of the companies;

Researching and no ng in prac ce in the 2. European countries, related to the energy effi ciency, the diversifi ca on to the energy sources and foreclosing on alterna ve as well renewable origins;

Determining poten al and prospects for 3. effi caciously using renewable energy informants and their point of energy balance of area (1) and their part for reducing costs of energy of industrial enterprises (SME and large-scale);

Execu ng connec ons between scien fi c-4. exploratory and development components (technical and economic) and the contractors, the owners and the directors of the industrial enterprises of Bulgaria and Europe.

2. Education for getting skills for building energy club

It is from CEE in the areas among the base direc ons on effi caciously using the energy

sources for the construc on to be boosted on energy the eff ec ve way of the organiza on and the rule of the occupa on by the diversifi ca on to the energy resources in the things and the renewable sources, established as the modern socie , to the knowledge.

The reaching of that general goal can be executed an instrumentali developing the concrete plans for the universe and the circulariza on to the knowledge and the road senses for effi caciously using the energy in the areas of the so called “east block“ as well as in Bulgaria. One similar

educa on to leaders from industrial sector must be established as of the good the prac ces in

tutorial naturally, EU-15 deduces by the countries, as the peculiari as well pleasantly to na onal energy organiza ons and the opportuni es for their more kind use.

2.1. Guidance to the education

Some main commissions in which the produc on is necessary and promo ng of extra knowledge and skills can be led in Bulgaria to using the energy resources in the condi on at analysis, and they namely:

1. Exploring in theory as well prac ce in countries with advanced market economy for poten al approaches, methodology, methods, tools and another, for be ering energy eff ec veness of industrial clientele by use on miscellaneous tradi onal and new, including renewable, energy sources.

The performance of this commission corresponds with the European policy of energy effi ciency, with the home strategy and numbers for energy policy and as well as with the status of the par in that area of the colla on with the skills in the economics technical sciences.

First of all she is directed to showing the skills in theory as well the prac ce the skills can be authen cated as good prac ce. At the performance of the task it is expected that the several results are achieved:

The part of the things and renewable is • showed energy sources for energies the balance of Bulgaria in the context of the fact that the country is the cardinal energy center in Eastern Europe of the Balkans as well.

The list is done, with goal subsequent • propor oned, to the advanced ideas for reducing the energy costs in the produc on or for using various energy sources of con nuing

the produc on process.

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Second, it corresponds with the European poli cs for energy effi ciency. The execu on of that undertaking is pointed at achieving be er prepara on on those who take decision-directors in the area to the energy effi ciency as well as by a itude to the opportuni es for diversifying of the used in the produc on energy resources. We in that way think that some main requirements fulfi ll themselves in the complete Lisboan Strategy of making proof development by socie es to knowledge as well as some more concrete condi ons to the direc ves to resounding for straining using to renewable energy sources the energy system of the EU countries.

2. Researching at prac cal opportuni es for desegrega ng kind prac ces in business of enterprises of new EU members (Bulgaria etc.).

The performance is steered away from unveiling specifi cs to using at renewable energy resources at diversifi ca on to the used energy sources in the produc on on this task. By that it correspond as with the direc ves of the European the poli cian.

By performance of the put concrete • undertaking the la tude between the EU policies in the area to increasing the level to using the things and the renewable energy sources was made. Due to the recent full membership of the country in EU Bulgaria could capitalize only on the pre-accession pools to resounding for the moment. It is important for the Bulgarian business due to that reason for harboring countries with advanced market economy to regale the a empt (for instance: Germany, France etc.). Collate these results with the past drive on the na ons are joined earlier (for instance: Poland, Czech Republic, Hungary etc.).

It is other solu on that can be expected for • the possible consequence judgment from using the na onal measures for the energy effi ciency to be led. By colla on with the analyses, it is prac cably the par es reference EU (par cularly

EU-15) members for the hoped consequence judgment from using the measures and the creatures of the na onal poli cs in the discipline of the energy eff ec veness by the rela on to the parcel to the increase in the consump on of the energy for the things or renewable of the sources to be led as well. To a second point, naming the knowledge and the skills in that direc on corresponds with the condi ons of the side for using various energy sources. It is necessary in that direc on for modeling behavior of diff erent industrial players to be held. The underlying hypothesis, knows the behavior of the companies in the face in addic on from the sector of the economy as from scale as well the structure in the yard is possible to be monitored had diff eren ated to their directors of esteem to taking the diversifi ca on in things and renewable sources for the process to produc on. That can be had at holding cluster-analysis by the method of analogue programming and by Delphi-method as well. The results are showed here:

Educing ground pes of behaviors of those • who make decisions of industrial enterprises;

S pula ng poten al drives to growth •

at diversifi ca on of consump on of energy, par cularly at up ck the share of energy, received by renewable sources.

3. Promo ng and the trainings the administrators of the real economy to the feasibili es and the candidates from the diversifi ca on to use in the prac ce energy sources.

Ini a ng enough knowledge and skills of those who make the decisions in the Bulgarian

industrial occupa on gives on reaching as of short – term points, and long – term so aim. In closer plan raising the level to the knowing is achieved from those who make decisions to the alterna ve energy sources and of esteem to the methods of judgment the potency of them from its diversifi ca on as well (the diversifi ca on) respec vely. This is par cularly valid on the heads of modest and average enterprises in the country.

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The cardinal consequence that can be watched in this more short- me period is the number of the successfully trained administrators. Making by the execu on of this task the pro forma and informal chains can contribute development to the coopera on in the area for communica on, as on na onal, so to a European level as well. By carrying the various acts in communica on in the number and the educa on for the Bulgarian directors brought about they to be er a poten al real own much knowledge and road senses at using things and renewable energy sources. In the same me of European degree, the aces and the EU-countries directors, par cipa ng in the educa on, will have the poten al to develop knowledge, road senses and experience in construc on of systems for energy effi ciency they in the industrial enterprises in the same me as well to will have the opportuni to use the good prac ces s ll to dra stages, in own the work for the homegrown members to the industry achieving those solu ons.

2.2. Expected results of holding training

The indices, measuring the grade in which the put tasks are aff ected of the educa ons, more energy force Fuel gauges for consequence of educa on and fuel gauges for impact of educa on.

1. Fuel gauges for the consequence of the educa on they appreciate contac ng the put more general problems of the tutorial, and ini a ng knowledge and skills among those who make decisions in following direc ons:

Building the knowledge at effi caciously using • the energy sources says in the systema za on of the a ainments in theory and the prac ce in the area, including As well that can be shopped as real pursuance in nearest future. In that direc on the database is built with the following direc ons:

A database with the abstract • a ainments in the area of the energy

effi ciency, notably by rela on of the approaches, the methodology, the methods and the instruments for achieving effi ciency at using the energy resources.

The database with the prac cal • a ainments in the shopped area, consorted with the so called good prac ces. They can be got here as the corollaries and the old applied inves ga ons results, so as well the results for the effi ciency from using the various things and the renewable energy-the resources of the industrial prac ce (largely in the countries with an market, that is advanced, the economics).

The database with the new • developments (largely to the idea dra phase to the development) that can they are priced as energy resources, that are long - term notably at a itude of using the things and renewable.Building concrete road senses for using •

concrete procedures and methods for effi caciously using energy resources. In that direc on those procedures have to match fl at as to the European the direc ves for the eff ec ve energy, so to the opportuni es and the state of the industrial companies (notably for the new members Romania and Bulgaria) as well. Those procedures can be viewed in two direc ons:

A procedure for specifying the necessi • and the direc ons to diversifi ca on to foreclosing the energy resources as the economy aspects of the proof sustainable business development;

A procedure of specifying the necessi • of renewable energy resources for produc on tasks foreclosing organiza onal and technical (including ecological) aspects of sustainable development policy.

2. The indicators for the impact of the adult educa on they price the degree in which the consequences of the adult educa on determine

on achieving long – term eff ect. They can be got for them.

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The serviceabili of the European and • na onal measures of the energy effi ciency. It can be told in that direc on. The policies of the energy effi ciency had gambled in the frameworks of its home for achieving the consequence on the snowball in trained directors, prepared to use the perspec ves of turn.

The green energy in the consequence of the held training and the prac cal usage the developed before the procedure of the training procedures – had addi onally produced.

The number of the extra investments of the • things and the renewable energy sources.

3. Goal groups and cardinal participants in the education

Making the knowledge as well needs means overtakes road senses for effi caciously using

the energy next to a large body of interested faces, notably to directors at including to thing number best prac ce (in meaning on is showed) specialists in the area on: the economy, the organiza on and the rule to the industrial enterprises and to their energy resources. Concrete the following discrimina on can be done:

Directors of small, medium and large-scale industrial enterprises is scheduled the spokespersons to get this aim group ac ve engagement in each one degree of adult educa on. Booking their a en on is an cipated to happen by their involvement in the various

forms of communica on and sale promo on of the developed procedures for diversifying of energy resources in produc on. During stage seminars the directors will have opportuni not to meet only together with the alternate opportuni es for using things and renewable energy resources, but they will be able to ar culate stands by the discussions, to establish contacts for building new raw energy powers by

her games as well. The resolved educa on can be held as well with the engagement in seminars.

The resolved training of interested during the seminars administrators can be held as well upon seminars for the engagement okay. The adult educa on is reasoned on the must from establishing concrete knowledge and skills that are needed for the crea on, the forming, the rule and the control to building new energy powers, established as renewable energy resources. In the course of the adult educa on the administrators can obtain adept help, that to direct them to using the an cipated in the European commission direc ve – European and na onal measures for energy effi ciency.

Directors of small, middle and large-scale • enterprises develop and / the energy resources grow energy powers, had rested on the things and renewable. The engagement of the spokespersons from this aim team must be really ac ve during various ac vi es of educa on. The commitments of these administrators can be codifi ed in two direc ons.

First of all, engagement in developing the modern molding on energy the eff ec ve powers, established as the renewable resources. The skills are in essen al sense in the managed by them companies here. In the degree of goal (idea phase, an original or produc on of merchandise) their adept advisory help for the opportuni es for be ering using the energy source is important for the developed procedures for diversifi ca on independently.

The second, ac ve engagement to this goal – directed group in the seminars and the educa on of the administrators from the old aim team is in the ground of two of goals execu on-introduc on with the advantages and the opportuni es from use of renewable energy resources and produc on to spouse’s interrela ons of new developments in this area.

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The heads of the state public agencies. They • interact to this group the all public execu ves that can by their decisions in the area of the legisla on and the government in the area and the region to infl uence on the degree to use or to diff usion of the technologies for produc on of energy of the things and renewable energy sources. The altera on, the adapta on, of the exis ng measures for encouraging the inves ng in the things and renewable of the energy resources can be achieved in a ereff ect of the interac on with this aim group. Their engagements will be executed at holding seminars and the other communica onal acts by represen ng the opportuni es for diversifying to energy resources in the produc on sector.

4. Results of prosecuting education

The expected results of one similar educa on the issues and the issues can be discovered in

unsolved. Concrete can silhoue e the following more important moments:

First of all, be ers to the communica on and the exchange of the informa on about things and renewable energy resources. Due to the par culari es of her economic, poli cal social status in the na ons of eastern block (valid for Bulgaria in part for the other countries as well from CEE) large part from the modern ideas including as well as these about the things and the renewable energy sources and the systems, s ll stay largely put to idea dra phase. By the sciences of it there will be able to be ini ated

by the educa on the discipline of the applied energy – saving or green energy engineering. In one country the exchange can menstruate in the eastern countries to the western world (of new advanced technologies to idea dra phase), from another from the developed country as well the informa on on the applicable already

in prac ce such technologies is accumulated. Informa on of all concerned country will bring

not only to more one similar exchange, but they can create advantage in the same me for the implementa on of new such technologies that will increase the level at long – term plan to green energy of European level

Second, the important posi ve kick can be heard in the opportuni for the a empt to be analyzed in each and every one from the sides from CEE by the work at the European and na onal funds on energy effi ciency. The outpu ed models of opera on of diff erent of characteris c-companies can serve for an important fuel gauge of the European commission, par cularly for those who are numbers in that area. In addendum, as the prominence of the energy effi ciency is minded as well on the proof development, the held seminars and adult educa ons can tell her that the numerous other measures, relate the advanced development, the ecological sets as well another consequences of the proof growth.

5. The model work plan for holding the education in Bulgaria

The work plan gives impression for the main ac vi es and their succession at the

educa on performance-project. The three phases to the educa on can be individualized:

First phase, making knowledge for the opportuni es of the effi caciously plying of the energy resources in the produc on and the

concrete European and na onal measures for promo ng using alterna ve things and renewable of energy sources. To this phase synthesis to the limit of the known the colla on is made between where that is now and where do we must ground. It is here special that the troubles comes the models of her regions na onal needs

and those, produced from direc ves to European commission, are viewed.

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Second phase, crea ng knowledge and skills of report, analysis and leading model of behavior of industrial en es by a itude to diversifi ca on of their energy heads-methods, systems, investments, ground energy from green resources etc. in this phase the solu on from the old is used to be made what are the possible-the reac ons of the diff erent in characteris c-industrial en es (by cluster-analysis). At this phase the poten al commissions, set as well to the proof development by innova ons in the ecological energy with the things and renewable energy resources are made as well. Second, the important posi ve kick can be heard in the opportuni for the a empt to be analyzed in each and every one from the sides from CEE by her work at the European and na onal funds on energy effi ciency. The outpu ed models of opera on of diff erent of characteris c-companies can serve for an important fuel gauge of the European commission, par cularly for those who are numbers in that area. In addendum, as the prominence of the energy effi ciency is minded as well on the proof development, the held seminars and adult educa ons can tell her that the numerous other measures, relate the advanced development, the ecological sets as well another consequences of the proof growth.

The third phase, tried distribu on of the knowledge. They happen at this phase the stage of the events that are meant executed the exchange to the ideas, know-how, investments and others in the domain of the effi cient exploita on to new energy sources in the industry sphere.

Decision

Engendering the new knowledge and the skills of those who make decisions are a key

for more kind as well effi cient opera on of the industrial companies of the used resources in as well surely.

Breve ng the competence at a itude to the used energy resources can be heard as important stage in adapta on to the Bulgarian enterprises (In the director face) to the requirements of the EU (In using good prac ces).

The consequences of the training can be proved in energy effi ciency in the Bulgarian directors as on region (na onal), so to an European level as well. That speculates upon one similar training to happen by coopera on with European representa ves to each one level. For instance:

The European enterprises: produce • prerequisites for transfer of know-how by treatment of the effi cient use of energy resources;

European educa on agencies: the • accumulated experience makes a possibili and the knowledge, educed In good prac ces are used in the adult educa on to administrators by the Bulgarian industry;

European science ins tu ons: collabora ve • work in direc on to using developed procedures for forming and prosecu ng plans of educa on by energy effi ciency and holding subsequent control for degree of their eff ec veness;

The European ins tu ons: the engagement • in the plans of the structural funds of the EU for be ering the effi ciency to the na onal industries and le ing using energy renewable sources out.

References

Shterev N. and D.Blagoev, The challenges and 1. opportuni es for building new produc on energy electric powers, Journal Economy Alterna ves 5/2005, Sofi a, 2005, pp.65-83;

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Shterev N., Challenges and hypothesizes on 2. involvement of projects of the European union, Journal Mining and forma on science 1/2007, 2007.

The plan of the development of the energy 3. sector-the plank – bed. Bulgaria with minimal costs for the period 2004-2020, NEC, Sofi a.

White book, sector power grid 4. h p://www.doe.bg/download/bqlakniga.doc

The energy strategy-the plank - bed. Bulgaria, 5. MEER, www.doe.bg/cgi-bin/i.pl?l=1&P=288

Result from the investment policy in 6. the power grid – 2001-2004 H p://econ.bg/analyse.html

Consequences of dena onaliza ons on 7. energies associa on h p://econ.bg/analyse.html

Energy-effi ciency 8. H p://www.seea.government.bg/inner.jsp?load=info&PAGE=EE

Renewable energy sources h p://www.seea.9. government.bg/inner.jsp?page=vei

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The Cultural Industries in the Countries of Southeast Europe and their Economic Impact in the Context of Social Ttransformation

Tsveta AndreevaPhD Student, Social and Cultural

Management Department

University of National and World Economy –

Sofia

Summary: In the recent years the cultural industries became very popular all over the world. In the countries of Southeast Europe they are s ll not suffi ciently explored and assessed in the economic studies and research.

The no on of cultural industries was ini ally raised by Adorno and Horkheimer and thus it is defi ned by the penetra on of the industrial methods of organiza on of cultural produc on and their mass reproduc on with the technology means. Infl uenced by economic and poli cal contexts, this no on bears content transforma ons into crea ve or copyright industries, crea ve economy etc.

The present ar cle a empts to analyze the overall situa on and the posi on of cultural industries in the countries of Southeast Europe assuming the infl uence of two factors: the transi on to market economy and the stages towards EU integra on in the region. On that very founda on the opportuni es for regional coopera on are studied, available through the diff erent EU policies and their fi nancial instruments.

Being a part of na onal economies in the European Union, the cultural industries develop in the condi ons of the Economic and Monetary Union and they are eligible for the EU fi nancial instruments. The pre-accession processes of Croa a, Turkey and FYROM should also be taken into considera on, along with the nego a ons on Stabiliza on and associa on agreements with other countries from the region.

Main thesis of the present paper is that the impetus of the development in the region, as a result of the transi on, determines the accelerated development of cultural industries in SEE and the raised interest in their economic contribu on. The interna onal organiza ons, coopera on in their frameworks and programs, and the EU integra on are catalysts in this process.

Main tasks: 1) to clarify the term cultural industries and the approaches for their studying according to the na onal and regional context;

2) to study the correla ons between the economic and poli cal transforma ons in the countries in ques on, and the development of cultural industries; 3) to present those fi nancial instruments of the intergovernmental organiza ons and the EU, the priori es of which are or may be applied for the development of the cultural industries in Southeast Europe.

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The Cultural Industries

The no on “countries of Southeast Europe” is understood as Albania, Bosnia and Herzegovina, Bulgaria, Greece, Kosovo, FYROM, Romania, Serbia, Croa a, Montenegro and (partly) Turkey (for the insuffi cient data not all of them will be examined to the same extent).

Key words: cultural industries, economic impact, European integra on.

JEL: Z1.

Introduction

The varie of ac vi es embraced by the term “cultural industries” assigns them to diff erent economic sectors and

belongs to the scope of the diff erent policy instruments (of economic, cultural, social, educa onal policies). In the recent years the cultural industries became very popular in Europe, Asia, USA, and La n America not only among the cultural sector, but also among economists and policy-makers. The number of studies of their economic impact increased signifi cantly but yet in Bulgaria and in the region of Southeast Europe, they are insuffi ciently assessed in the economic literature. There are no specifi ed policies for their development as a sector. This could be a ributed to their interdisciplinary nature, therefore o en perceived as an oxymoron. Raised ini ally by the Frankfurt school (Adorno and Horkheimer), it is defi ned by the penetra on of the industrial methods of organiza on of cultural produc on and their

mass reproduc on with the technology means. Infl uenced by economic and poli cal contexts, the no on bears content transforma ons into crea ve or copyright industries etc. to the end of emphasizing its economic ma er.

The reasons for raised interest in the fi eld might

be assumed in poli cal, economic and socio-cultural terms. Faster growth of these industries

in the West and their signifi cant contribu on to the GDP are among thise reasons, along with the a empts of cultural sector to prove being not only a consumer, but also a producer of economic welfare.

Essen al role for the intensive studies in the fi eld is played by the intergovernmental organiza ons (Council of Europe, UNESCO, WIPO, OECD) and other interna onal organiza ons and non-governmental networks. By the means of their programs the new forms of coopera on among the countries in SEE have arisen, many projects and networks have been developed, some of which dedicated specifi cally to feasibili studies of the cultural industries in Bulgaria, Serbia, FYROM, Montenegro, Romania.

The European Union enlargement process has lead to substan al reforms in the na onal economies in the newly acceded countries – Bulgaria and Romania, but also has infl uenced signifi cantly the candidate countries (Croa a, FYROM and Turkey) as well as the other countries in the region.

The present paper a empts to analyze the overall situa on and the place of cultural industries in the countries of Southeast Europe assuming the infl uence of two factors: 1) the transi on to market economy and 2) the stages of EU integra on in the region. On that founda on are studied the opportuni es for regional coopera on, available through the diff erent EU policies (such as: pre-accession programs, structural funds, Communi programs).

The subject of the study is cultural industries and the main topic – the opportuni es for enhancing their economic impact in the SEE region. (This paper is a part of a research in the framework of PhD candidate thesis on the economic impact of the cultural industries in Bulgaria).

The no on “countries of South East Europe” is understood as Albania, Bosnia and Herzegovina,

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Bulgaria, Greece, Kosovo, FYROM, Romania, Serbia, Croa a, Montenegro and (partly) Turkey. Because of the insuffi cient data not all of them are equally analysed.

Main thesis of the study is that the impetus of the development of the countries in the region, as a result of the transi on, determines the accelerated development of cultural industries in SEE and the raised interest in their economic contribu on. Interna onal coopera on and EU integra on are catalysts in this process.

Main objec ves: 1) to clarify the term cultural industries according to the na onal and regional context; 2) to present the main methods for studying of the economic impact of cultural industries, used in the region in the recent years; 3) to study the correla ons between the economic and poli cal transforma ons in the countries in ques on, and the development of cultural industries; 4) to analyze those fi nancial instruments of the intergovernmental organiza ons and the EU, the priori es of which are or may be applied for the development of the cultural industries in SEE.

Definitions and approaches for studying the cultural industries1

The Studies in Economy and culture rela ons have existed for more than 40 years now

and the cultural industries discourse started in the for es of the 20th Century. Adorno and Horkheimer, who introduced this no on in the scien fi c area, believed that the technical progress was the basis for development of commercial, in terms of their purpose, and cultural, in terms of content, ac vi es and products. Penetra on of the industrial methods of organiza on of cultural

produc on, boosted by the technologies, leads to their mass produc on and distribu on, with the respec ve posi ve and nega ve consequences (Filipov 2005, p. 130).

The Economy of Culture discipline studies the correla on of cultural and economic values and their eff ects on the cultural industries. As in Bulgaria these ma ers have not yet become so popular, we rely on exis ng concepts and methods of studying, in order to fi nd the most appropriate ones according to the na onal and regional context. For the interdisciplinary pe of those industries, they are subjects of interest of various pes of researchers: economists, sociologists, experts in cultural studies and intellectual proper . Each of the methodologies used is based on specifi c approaches and prac ces, and brings about various defi ni ons, but also no ons, related to cultural industries. Such no ons for instance are “crea ve industries”, “copyright based industries”, “crea ve economy”.

For the sake of the present study there is a need of clarifi ca on of those defi ni ons and of their adequate posi oning in the Southeast European regional context.

Cultural industry and Cultural industries

As a singular term it was used fi rst in the 1940s (XX-th Century) bearing nega ve connota ons and strong accent on the commercializa on of the arts products, as depriving them of their intrinsic ar s c value. In plural, the term appears in the 70s this me with a more posi ve connota on, in the fi rst research on the economy of culture (and in par cular with the research work of Myerscough (11, 1988). According to authors as Hesmondhalgh (9, 2002, p. 12) the plurali

1 There are also other defi ni ons, related to diff erent methods of studying the cultural industries, e.g. by the OECD. UNESCO developed in 1986 “Framework of Cultural Sta s cs” for being able to collect cultural sta s cs, which infl uenced the cultural industries research. These and other related defi ni ons such as “knowledge economy”, “crea ve economy” and other are not subjects of the present study [ref. author, T. А.].

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2 Study of the Economy of Culture in Europe, (EC 2006, pp. 46-52) (8) h p://ec.europa.eu/culture/eac/sources_info/studies/economy_en.html / accessed 12/10/2007.3 Ibid, 8, p. 47.4 The Crea ve industries no on has appeared ini ally in Australia brgining of 90s, XXth century. Most popular defi ni on is the one made by the Crea ve Industries Task Force of the UK Department for Culture, Media and Sports (DCMS) in 1997 and published in the First Crea ve Industries Mapping document in UK, DCMS, 1998.

expresses more adequately the diverse features of these economic ac vi es, as they comply with diff erent market laws.

Since 2004 the European Union gave new impetus to the implementa on of the Lisbon strategy goals with the idea to mobilize all the resources available, including culture. For that ma er the European Commission commi ed the Study of the Economy of Culture in Europe, published by the end of 2006 (8). It was there where for the fi rst me in the European prac ce there was a par cular a en on paid to the economic contribu on of the so called “Cultural and Crea ve Sector”2 and the role of the crea ve ac vi es for improving the compe veness of the European economy. According to the Study authors, “cultural industries” are: “A set of economic ac vi es that ally concep on, crea on, and produc on func ons to more industrial func ons of manufacturing and commercialising at large scale, through the use of material supports or communica on technologies”3. Considered as such, the scope of cultural industries is: book publishing, press, magazines, sound recording, and wholesale and retail of these products, audiovisual ac vi es (produc on of fi lms for television, produc on of ins tu onal and adver sing fi lms, video publishing and distribu on, exhibi on, radio, produc on of TV programmes); PR ac vi es, mul media and adver sing. This tradi onal percep on of cultural industries should be considered as a departure point for their studying in SEE countries.

Crea ve industries

One of the largest no ons used both in and outside Europe, the populari of which is in

constant increase also in the new EU member states, and the candidate countries. It is o en used in a rela vely incorrect way – as a subs tute of the cultural industries – notwithstanding its larger scope and bedrock. The economy approach is in its origin, along with the intellectual proper right as a core element of these industries. Key criterion for genera ng the term is the crea vi as a main contribu on to the produc on process and as a resource for increasing wealth. Except the above men oned tradi onal cultural industries, within its scope we see also architecture, arts and an ques markets, ar s c cra s, design, fashion design, interac ve entertainment so ware, performing arts, so ware and computer services.

This very substance of the crea ve industries is a reason for their enormous populari all over the world, and namely among the policy-makers, as thus it gave impetus of the more profound measurements of the growth and the employment rates in the sectors in ques on. Important role in this process played the Bri sh neo-liberal economic policy of the end of 90s (Tony Blair’s government). Main contribu ons of this policy line may be summarized in:

Pushing to the fore the economic contribu on • of the cultural industries and of the copyright based ac vi es and new technologies in the Bri sh policy for culture and media;

Promo on of the new extended no on of • the crea ve industries4 through the instruments of the Bri sh foreign policy: “Those industries which have their origin in individual crea vi , skill and talent and which have a poten al for wealth and job crea on

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5 Crea ve Industries Mapping Document 1998, Department of Culture, Media and Sports, UK 1998 (5).6 h p://machaut.uchicago.edu/cgi-bin/WEBSTER.page.sh?page=894 / accessed 15/10/2007.

through the genera on and exploita on of intellectual proper ”5;

Using the mapping (5) of these industries as • a fundamental method for their studying, for the purposes of their appropriate introduc on into the poli cal discourse.

Some economists as Garnham (17, 2005, pp. 16-29) assume the crea ve industries concept as being dominated by poli cal causes and the prac ce. It s ll needs scien fi c jus fi ca on, in order to gain recogni on as a part of the economic theory.

Another topical issue for the purpose of the present study, raised by the same author, is approaching the cultural and the crea ve industries through the prism of the state policies on culture and media. Hence more light is put on one of the main cultural sector’s delusions – that “crea vi ” in those industries is assumed only as ar s c crea vi , and as such belongs only to the cultural sector. The experience of most contemporary researchers dealing with the phenomenon of regula ng these industries through cultural and media policies’, directs their focus towards the means of produc on, distribu on and consump on, but from the point of view of the economy of innova on and the informa on socie . The general trends in the EU policies for achieving a more compe ve European economy, based on technologies, innova on and knowledge (Lisbon Strategy) require new approaches and methods for mobilizing to maximum all resources of the member states. Cultural industries shall not be excluded from this process but since in many states they are subject of na onal cultural or media policies, the need of changes in the approaches to their analysis is ge ing urgent. This is obvious in the context of specifi c studies of the economic impact of the cultural or of the crea ve industries.

The crea ve industries concept has gained numerous adherents in SEE countries. The Mapping of crea ve or of cultural industries has become one of the very explicit methods of accoun ng the posi on of thise industries in the na onal economies in the region. The very fi rst essays for raising awareness of the countries and their governments has started with the Pilot project of the Council of Europe “Cultural Policy and Cultural Diversi ”(15) (2000-2003), centered in Bulgaria, as well as with the MOSAIC Project for cultural policies and management in SEE. The Bri sh Council in 2005 started in all countries in the region (Greece and Turkey excl.) out of which a network of Crea ve ci es and project teams has been developed in SEE. Thanks to this ini a ve in several ci es in the region the fi rst mapping exercises have been conducted – Plovdiv (Bulgaria), Split (Croa a), Belgrade (Serbia). Other ci es like Tuzla (Bosniq and Herzegovina), Iasi (Romania) and Skopje (FYROM) have decided to start up a new project for general shi s of the ins tu onal and urban environments towards more prosperous development.

Mapping in its tradi onal sense, according to the 1913 Webster’s Dic onary, is “to represent or indicate systema cally and clearly; to sketch; to plan; as, to map, or map out, a journey; to map out business”6, which in the context of the cultural or crea ve industries “considers the process of successive iden fi ca on (incl. in geographical terms) of the crea ve industries, delinea on of their economic profi le, scale, specifi ci , poten als” (2, p. 11). Borrowed by the experience of the Department of Culture, Media and Sports of the United Kingdom (5, 1998) this methodology allows more freedom in the interpreta on of data and empirical sociologic material and enables to be er iden fy the poten als for the development

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7 Defi ni on of the so called Core copyright industries: “The core copyright industries are industries that are wholly engaged in crea on, produc on and manufacturing, performance, broadcast, communica on and exhibi on, or distribu on and sales of works and other [copyright] protected subject ma er”. WIPO Guide, 2003, с. 29.8 Report Building market ins tu ons in South East Europe, World Bank, 2004.

of the crea ve industries at a given territory and socio-economic condi ons. Similar studies in Great Britain and Columbia, for instance, off ered the governments and local authori es a clear “overview” of the situa on in certain sub-sectors such as design, handicra s, so ware etc., and enabled them to discern the obstacles and opportuni es for development; to iden fy the number of employed in the sectors and the possibili es for job crea on in the regions, as well as to set up adequate s mula on instruments for their development.

Copyright-based industries7

The methodology of the World Intellectual Proper Organisa on (WIPO), published in 2003 (8, 2003, p. 29), aims at emphasizing the economic contribu on of the copyrights, through their various applica ons at the diff erent levels of produc on and to create a basis for interna onal comparison at global scale. This methodology was applied in Bulgaria in 2006-2007 (1), and in parallel two other countries from the region started the same pe of studies – Romania and Croa a.

The Role of the context of social transformation

The hard transi on to market economy in the Southeast European countries lead to dras c

changes in state funding in all sectors where culture and science turned out to be among the most deprived. Seeking for alterna ve op ons for fi nancing and organisa on of cultural and crea ve sector was urgently needed.

The diff erence between the economic situa ons between Great Britain and the SEE countries de-

termines the main trends in the development of the discourse for cultural and/or crea ve indus-tries. According to the Croa an sociologists Pet-ric and Tomic-Koludrovic (13, 2005, pp. 7-23), for instance, the crea ve industries concept is related to the “advanced economies”, so there is no possibili for its direct applica on in the transi on countries.

We could therefore express the hypothesis that the impetus in crea ve industries (and cultural industries in par cular) in South-East Europe is a result of the market economy development in these countries. Main prerequisites for this assump on are:

The democra c processes in the countries in • the region together with the intensive presence of the interna onal organiza ons and the civil socie development;

Introduc on of the market principles in the • main economy sectors, including of the main cultural industries such as publishing, electronic and print media, fi lm produc on sound recording etc.

Increasing the level of the foreign direct • investment;

Penetra on of the new technologies (which • have essen al impact to mass produc on and distribu on of these industries);

The processes of European integra on in the • region that boost reforms in all public spheres and mostly in the economic sector.

A er the 1990s recession by 2003 the real growth of the GDP in South East Europe has

risen by 3,5 % comparing to the previous me period, which is faster than the 2,6 % growth of the world economy8. According to the data quoted by the Guide for investors in SEE developed by the South-East European Economic

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Forum (2006) in 2005 the average growth in SEE was 5,4 % comparing the previous year. This growth is namely due to the private sector development. Crucial role of the sustainabili of the trend is the improved investment environment. At global scale it is usual that only powerful and large scale economies as USA, UK, India, Japan etc. are “doomed” to success as net exporters of cultural industries’ produc on. In the fi lm produc on sphere, for example, these are the largest producers (over 200 fi lms per year): India (839), China and Hong Kong (469), Philippines (456), USA (385) and Japan (238)9. All SEE countries, event the richest ones, men oned above, belong to the group of “small producers” – that produce between 1 and 19 full length movies per year. Main issue in this industry is that, due to the high “fi rst copy” costs, it relies very much on the state subsidies and in most SEE countries, despite the introduc on of market principles, the appropriate legal basis was established for guaranteeing at least a minimum of na onal fi lm produc on. The number of the full-length feature fi lms at European level is increasing, realised as co-produc ons with the support by the EURIMAGES fund10. The number is increasing signifi cantly a er the par cipa on of the independent countries of former Yugoslavia a er year 2001. Till then, since the fund’s establishment in 1988, only Greece, Bulgaria, Turkey and Romania had been members. In 2003-2007, for instance, an average of 11 co-produc ons per year has been supported with the par cipa on of SEE countries. The number of regional co-produc ons is also raising, the fi lm distribu on and exhibi on is also s mulated by

the Fund, through support of cinema theatres in 5 countries in Southeast Europe. Since 2001 there is also a regional associa on – South East European Film Network – aimed at se ing up a fund for support regional fi lm projects.

The EU member countries in the region (Bulgaria, Romania, Greece and Slovenia) par cipate in the MEDIA Communi program, aimed at improving the compe veness of the European audiovisual industry by suppor ve measures for training, development, distribu on, promo on and fes vals. The program is open for accession of Third countries with priori a itude to candidate countries and those, which concluded stabiliza on and associa on agreement (SAA). Up to the present moment, none of the rest of SEE countries have signed memorandum for acceding the MEDIA program, which could be considered as an obstacle before the crea ve ini a ves of professionals from non-EU member states in the region.

The dras c decrease of the number of cinema theatres in ci es and towns all over the region is a pical feature of transi on period (counterbalanced to a certain extent by the new mul plex cinemas in big ci es), as shown in the Table 1 below. The European Audiovisual Observatory (LUMIERE Data) provides data that over 60 % of the acquisi ons in Europe are US movies. According to the EAO calcula ons between 1996-2003 in Europe the acquisi ons of SEE fi lms are as follows: 1 FYROMn, 1 Bosnian, 1 Croa an, 5 Albanian, 10 Bulgarian, 9 Serbian, 12 Romanian.

As regards the number of yearly acquisi ons per person, the data presented by the EAO for 2005 – in Croa a average acquisi on per person is 0,9, in Bulgaria (0,3), in Romania (0,1). For comparison – the average acquisi ons per person in EU are almost 3, in USA – 4,7. The main reasons for this diff erences might be considered the narrowed distribu on network, the large off er of DVD, the increased cket prices, but also the piracy.

9 “Cinema and Audiovisual Media: A Survey on Na onal Cinematography” UNESCO, 2000, h p://www.unesco.org/culture/industries/cinema/html_eng/survey.shtml accessed, 13/10/2007. 10 Only Albania from the SEE countries is not a member of the Eurimages fund.

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In the TV and radio broadcas ng the average growth is above 50 % of the hours of transmissions and almost the same growth of number of TV transmissions. Serbian market marks highest rates of growth – almost 100 % for radio- and above 100 % of TV transmissions. A proof for liberaliza on of the TV market in SEE and the compe on is the number of commercial operators. (for instance in Bulgaria

169 TV programs are transmi ed by private and only 17 by public operators).

The fast introduc on of new technologies in all spheres has also infl uenced the increased interest and growth of cultural industries – a fact recognized by most researchers of cultural industries in the region. Increasing the internet use is also an important precondi on for

Table 1. Production in some cultural industries in SEE countries (1996-2003)

Coun-try

Popula on est. (2004)

Books, Number of tles per year

Films, number produced

Radio transmissions (hours)

TV transmission (hours)

Cinema theatres

1996 2002 1996 2002 1996 2003 1996 2003 1990 2000

1 Albania 3.074.600 N/A N/A N/A N/A13,870 (2002)

N/A11,315 (2002)

65 25

2

Bos-nia & Herze-govina

4.359.800 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A

3Bul-garia

7.888.600 4,8406,018

(2002)7

(1997)6

(2002)314,773

(1997)525,511

(2003)261,816

(1997498,091

(2003)300

(1993)149

4 Croa a 4.376.800 3,8794,298

(2002)7

16 (2003)

480,514870,795

(2003)30,701

75,657 (2003)

273 143

5Mace-donia

2.133.100 N/A -2

(1997)2

(2002)N/A

622,382 (2003)

N/A338,166

(2003)40

(1996)23

(2003)

6Roma-

nia21.480.200 7,199 10,159 11

6 (2000)

80,06596,033 (2000)

13,09515,296

(2000)4,637 279

7

Ser-

bia & Mon-tene-

gro

10.519.400 5,381 4,643 416

(2001)544,000

1,004,000 (2000)

77,615291,324

(2001)398 167

8Slove-

nia1.954.500 3,441 3,917 4

9 (2000)

319,530471,167

(2000)64,420

89,111 (2000)

140 78

Source: National statistical institutes of the countries and European Audiovisual Yearbook 2003

and Focus 200611

11 This data was quoted and interpreted by Jaka Primorac in the publica on Cultural Transi ons in Southeastern Europe, ed.by N. S

〉vob-Dokic (2004), Zagreb: Ins tute for Interna onal Rela ons, pp. 59-78, and complemented by the author on

the basis of the Compendium of ERICarts (www.culturalpolicies.net ).

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faster penetra on of the technologies and the industries, and their larger outreach12. The data presented below shows that during 2000-2007 in countries like Albania and Bosnia and Herzegovina the dissemina on of internet amongst the popula ons increased over 70 mes13! Slovenia has largest scale of internet penetra on, comparing to the number of popula on – over 50 %, which places it among the fi rst in EU14. Bulgaria is at 4th posi on in the region with 28,7 %, preceded by Greece and Croa a. The average growth for the region during the 7 years period in ques on is about 2310.75 %, as obviously in countries with highest growth rate it was close to zero in the beginning of 1990s.

Introduc on and effi cient enforcement of be er legisla on for intellectual proper protec on is not only an issue of the authors themselves. It has already been recognized in the countries as a factor for improvement of the economic climate; as a guarantee for securi and compe veness of local and foreign companies in the NT and

so ware business. The recently published Study of the copyright-based industries in Bulgaria has shown contribu on of these industries to GDP for 2005 of 2.81 %, which posi ons them at 11th place among the main economic sectors of Bulgarian economy (3.42 % is their contribu on to the Gross Value Added) (see Charts 1 and 2). The growth in the sector for the studied period is of almost 50 %, the gross produc on – with 33 % and the number of employed – with 13 %. In certain sectors of the so called Core copyright industries, as “Produc on and distribu on of fi lms and video” the growth is 166 % for 2 years only! Within the scope of this group only the fi lm and vide produc on has grown with 225 %! Another very dynamic sector is “So ware and databases” with 93 % growth for 2003-2005, whereas here the most important ac vi for development of original so ware (the crea ve element) for sa sfying the needs of the clients, and the web design, have grown with 108 %. The third fastest sector in Bulgaria is “Architecture”. Calculated in line with the WIPO methodology, the copyright

Chart 1. Growth of the Copyright industries’ share in the main economic indicators in Bulgaria for 2003-2005

4,002

4,510

2,434

3,419

2,081

2,814

3,9344,305

% o

f N

aonal

Eco

nom

y

GrossOutput

GVA GDP Employment

2003

2005

12 Primorac, Jaka “Mapping the Posi on of Cultural Industries in Southeastern Europe”, in Cultural Transi ons in Southeastern Europe. 13 www.internetworldstat.com and other sources. 14 As Slovenia is less and less perceived as SEE country, the data are quoted only to illustrate the diff erences with the developed EU countries [ref. author, T.A].

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based industries (which to a great extent overlap with crea ve industries) bypass the GDP share of sectors like “Hotel and Restaurants” and “Extrac on industry”15.

In many peoples’ minds in the cultural sector, is s ll diffi cult to overcome the border dividing the subsidized culture (expressed by the means of cultural policy) and the private entrepreneurship in sound recording, fi lm produc on, adver sing etc. As it was previously explained, the need of “legi mizing” the non-profi table (subsidized) cultural sector for more and effi cient state funding, made the Anglo-Saxon modes of the crea ve industries so a rac ve. On the other hand, the studies of this model elsewhere in the world have shown that the highest economic contribu on of this model is not due to the arts sector (subsidized by states, municipali es, regions, funds), but from the economic ac vi es – the pure industries, combining the various forms of cultural expression and means for their mass reproduc on. (for instance, the Gross Value Added, created by the Core copyright industries in Bulgaria was 2.12 % for 2005 (1, p. 9). for the same year the public expenditures for culture were 0.72 % of GDP. The subsidies for the most growing sector of these industries – the “Book publishing and Print” in the framework of this annual budget subsidy is only 0.12 %)16. The WIPO

methodology is based mainly on NACE sta s c classifi ca ons of the countries (introduced in Bulgaria in 2003) and in the case of this study do not take into considera on the ac vi generate incomes of the biggest theatres, operas and philharmonic orchestras etc. Nevertheless the economic sta s cs take into considera on these sales incomes of state and municipal cultural organiza on but under general codes where they are mixed together with a great varie of ac vi es and their dis nc on for the sake of proper studying is prac cally impossible. It should be noted that the WIPO Guide s ll off ers one of the most elaborate methods for research in this area. Notwithstanding the central focus on the copyrights, it could be used for gathering and analysis of comparable data from the SEE countries. The issue of the further implementa on of that experience and of the conclusions and recommenda ons made.

Serbia is among the countries in the region which put eff orts in overcoming the unclear status of the cultural industries in their culture and media policy. Besides the experience in mapping the crea ve industries in Belgrade ci in 2005, a mapping exercise of the economic poten al of these industries at na onal scale has been performed in 2005 (11) using similar methodology.

15 Study of the Economic Contribu on of the Copyright Based Industries in Bulgaria (2003-2005), Universi Ed. “Stopanstvo”, 2007.16 Ibid.

Chart 2. Economic contribution of copyright industries in Bulgaria for 2005

Source: Study of the Economic Contribution of the Copyright Based Industries in Bulgaria (2003-2005), p. 10.

Share of GVAShare of GDP Share of Gross Output

2,81% 3,42% 4,51%

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According to this study in 2004, about 1 316 enterprises were ac ve in the cultural industries and the number of employees were 21 397. (The propor on in total number of Serbian employees is about 1.36 %). The economic performance (net profi t ra o, income, net income ra o etc.) of enterprises in the cultural industries is be er than the average for the whole economy. The most profi table industries in Serbia for the studied period were publishing journals and similar periodicals (net profi t ra o 22.26 %), publishing books (net profi t ra o 10.66 %) and fi lm and video produc on (net profi t ra o 10.4 %). For comparison, the same year net profi t ra o for the whole economy was 3.57 %.17 These sectors are the largest – both in terms of number of companies, but also as number of people employed in them. Over 58 % of all companies studied are in the book publishing and print sector, around 24 % in radio and TV ac vi es.

The state through its instruments and relevant policies shall create condi ons for sustainable growth of these sectors. Their fast growth, rela vely easy market access, highly educated workforce are an advantage for every ci and region.

Prac ces in many western countries and mainly European regions have demonstrated interes ng examples how through the fi nancial instruments of the EU (Structural funds, Cohesion fund, Communi programs) the groundwork of successful development of these industries have been laid down. The bright examples of

Merseyside (Liverpool), the Guggenheim Museum (Bilbao), the crea ve clusters in Berlin, are s ll at a distance from the South East European realm, but not impossible, while speaking about integra on processes in the EU.

Impact of the international institutions and the European integration processes in the region on the development of cultural industries

1) Since 1990s there are results of the pro-ac ve role of the intergovernmental organiza ons as UNESCO, Council of Europe, Stabili Pact for SEE, as well as of the network non-governmental structures (Open Socie Ins tute, Pro Helve a and other) for s mula ng the administra ons and the civil socie es and to facilitate democra za on processes. The foreign cultural ins tutes were among the fi rst promoters of various instruments and models. They gave impetus to the fi rst transversal studies in cultural sector and cultural industries, trained hundreds of professionals in public and private sphere, introduced and created in situ know-how and networks of interna onal and local experts.

2) Along the way, paved by the common European policy in some spheres, this mixed model of par al protec onism and subsidies (through the various EU funds and programs), the governments of member states would not completely withdraw from this sphere. However, the same fi nancial instruments of the EU – for support regional development, enhancing compe veness, raising GDP per capita at na onal and regional level, aim at s mula ng entrepreneurship in businesses, including in the cultural industries.

Opera ve programs for regional development, • for enhancing compe veness and for human resources development off er opportuni es for SMEs (as cultural industries are very o en SMEs), for training and pre-qualifi ca on of ar sts running their own “crea ve” businesses. In order to be eligible and comparable to other sectors,

17 Compendium: Cultural policies and trends in Europe www.culturalpolicies.net /accessed 15/10.2007.

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these industries need such economic studies of their core ac vi es and economic poten al in the countries and regions;

for those countries, which are on the way • to EU accession it is very important to use the exis ng experiences from the pre-accession process (that for SEE case followed inseparably the transi on to market economy). Not only by legisla on reforms and harmoniza on with the acquis , but also by real examples from the intellectual proper sphere, media policy, specifi c projects and programs could have an impact to their development – at fi rst – as awareness raising tools among the policy-makers;

the pre-accession programs ac ng in the • region (the fi nal PHARE – CBC) and the joint work under new INTERREG (2007-2013) are a good opportuni for inclusion of cultural industries in programming (where possible); unfortunately only single projects were related to the cultural industries issues under the previous PHARE – cross-border coopera on schemes; Western Balkans benefi t also from fi nancial assistance from the EU, in par cular under the CARDS programme, the purpose of which is to support the necessary poli cal and economic reforms with a view to future accession to the EU. Between 2000 and 2006, subsidies totalled EUR 5.4 billion for the region. The European Investment Bank (EIB) granted EUR 2 billion in loans;

in the fi elds of educa on and research, • the countries of the non-EU member states from SEE – called Western Balkans – take part in a number of Communi programmes such as TEMPUS, Erasmus Mundus, and Youth, in framework programmes for research (the 7th Framework Programme starts in 2007) and in the ac vi es of the Joint Research Centre (JRC) and the European Training Founda on (ETF). They also can us Technical Assistance Informa on Exchange Offi ce (TAIEX).18

Having adopted once the principles for widening and deepening of the integra on and following the examples of many EU countries, the South East European countries have to show eff ort and to prove that those sectors, considered as non-profi table (as culture and educa on) may have contribu on to achieving economic goals and to enhancement of regional development. Last but not least, integrated approach of the diff erent policies and instruments is necessary, because of the interdisciplinary nature of the cultural industries (and of their larger form – the crea ve industries). Even though o en being unable to achieve poli cal consensus in the SEE region – the exis ng experts’ networks and the experiences acquired in research will be of help to the direct benefi ciaries of the exis ng programmes – the entrepreneurs themselves in the fi eld of culture and cultural industries.

Conclusions

The a empt for analysis of cultural industries in the context of social transforma on in the

countries of Southeast Europe has brought about several conclusions on the main objec ves:

1) In respect of the definitions and approaches.

The prospec ve model of crea ve industries is gaining recogni on at global scale. It is s ll not easy to fi nd a suitable form for applying this concept in the SEE region, since it has been born by the liberal western economy. It did not come out of transi on to market economy and in predominant subsidized cultural sector.

Both approaches presented here – the “mapping” and the WIPO method for studying the economic impact of copyright industries, are base on data

18 h p://europa.eu/scadplus/leg/en/lvb/r12650.htm /acessed 15/10/2007.

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151

provided by the na onal sta s cs. They have already been tested at local and at na onal level in Bulgaria, Serbia, Romania and other countries. On the basis of the studies performed and the a empts for comparison of their economic impact, s ll the cultural industries off er more consistent and comparable empirical informa on, than the crea ve industries. This is due to the na onal specifi ci es that the researchers had to comply with while iden fying the scope of the “crea ve” industries. Light is put on in this respect by the systema zed WIPO approach, namely regarding the copyright element which is fundamental for the crea ve industries. Therefore it is most closely related to the subject of the study in the “Core” copyright industries division and partly with the “Interdependent” industries. (1, 2007, p. 8).

2) In respect of the correlation between social transformation and the development of cultural industries in the region.

The studies done in the region have shown that the “core” cultural industries such as book publishing, prin ng, fi lm produc on and distribu on, sound recording, mass media, wholesale and retail with their products etc. are almost en rely priva zed. That is a reason for their economic growth and increased contribu on to the na onal economies in Southeast Europe. The raised interest leads to the fi rst studies in of the economic impact of cultural industries in some of the countries.

The main contradic on between desires and possibili es for development of the cultural industries in SEE as regional development factor comes from the lack of suffi cient research of that kind, which to be able to convince the ins tu ons in the posi ve perspec ves for development of cultural industries as drivers of innova on and entrepreneurship in regions and ci es.

3) In respect of the role of the international cooperation and the European integration – a stimulated economic impact of cultural industries in Southeast Europe.

Serious reforms towards democra za on and integra on in the European Union bring about addi onal restructuring and adapta on of these economies to the exis ng opportuni es for interna onal support. The membership of the SEE countries in intergovernmental organiza ons and many programs for technical and fi nancial assistance has proven their posi ve impact through the increased number of co-produc ons, the development of regional and trans-regional partnership networks for distribu on etc.

Being a part of the na onal economy cultural industries, together with all economic ac vi es in Slovenia, Bulgaria, Greece and Romania, are now working in the condi ons of the Economic and Monetary Union. Through precise studies and harmonized sta s cs, these ac vi es could be possibly set apart as a specifi c sector, which could be eligible for the EU fi nancial instruments. Strategic ac ons in this direc on are needed and there is a consensus at the European Union level on this very important issue, regarding the more precised measurement of the cultural sector’s contribu on, as well as of the crea ve industries, to the growth and compe veness of the European economy.

The European Union has also enlarged to a great extent the access of the SEE countries to the Single market. Beforehand, the liberaliza on of trade within the region was accelerated through signing Memorandum of understanding for liberaliza on of trade in SEE (2001). Economic and commercial integra on depends in par cular on the nego a on of Stabiliza on and associa on agreements (SAA) which provide for the establishment of a free-trade zone between the EU and the countries involved; the nego a ons for the conclusion of SAA are under

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way with Albania, Bosnia-Herzegovina, Serbia and Montenegro. Some World Bank experts assume that ins tu onal reforms could facilitate more foreign direct investments in the region (5).

Proving their serious poten als and fast growth pace, compared to some tradi onal sector of the economy the cultural (or crea ve) industries may become also subject of interest for foreign direct investments but also of specifi c credi ng systems, thus s mula ng growth, pover eradica on and the sustainable development of the regions.

Bibliography

Икономически принос на авторскоправни-1. те индустрии в България, авторски колектив с ръководител доц. Д-р И. Чалъков, УИ “Стопан-ство” София, 2007 [Economic Impact of Copyright Based Industries in Bulgaria, Tchalakov, Ivan et all, Universi Ed. “Stopanstvo”, Sofi a, 2007].

Творческите индустрии в гр. Пловдив – 2. икономически поглед, изследване на колектив с ръководител доц. Д-р И. Чалъков, Британ-ски съвет – България, 2006 [Crea ve Industries in the ci of Plovdiv – an economic perspec ve, Tchalakov et all, Bri sh Council – Bulgaria, 2006].

Филипов, Д., Културата и икономическа-3. та теория, УИ “Стопанство”, София, 1996 [Filipov. D. Culture and the economic theory, Universi Ed. “Stopanstvo”, Sofi a, 1996].

Филипов, Д., Културата и развитието, 4. УИ “Стопанство”, София, 2005 [Filipov. D. Culture and the development, Universi Ed. “Stopanstvo”, Sofi a, 2005].

Building Market Ins tu ons in South Eastern 5.

Europe: Compara ve Prospects for Investment and Private Sector Development by Harry G.

Broadman, James Anderson, Constan jn A. Claessens , Randi Ryterman , Ste a Slavova , Maria Vagliasindi, Gallina Vincele e, World Bank, 2004 – цитиран в h p://www.econ.bg/analysis86024/ar cle103812.html (accessed 10/10/2007).

Crea ve Industries Mapping Document 6. 1998, Department of Culture, Media and Sports (DCMS), UK, 1998.

Culture and Internal Market, report by 7. Budapest Observatory h p://www.budobs.org/bo-documents/bo-documents/culture-and-the-eu-internal-market.html, accessed 10/10/2007.

Economy of Culture in Europe, European 8. Commission 2006, h p://ec.europa.eu/culture/eac/sources_info/studies/economy_en.html/ accessed 12/10/2007.

Guide on Surveying the Economic 9. Contribu on of the Copyright-Based Industries, WIPO Publica on, Geneva, 2003, 29 p.

Hesmondhalgh, D., The Cultural Industries, 10. SAGE Publica ons London, UK, 2002.

Jovicic, S. and Mikic, H. Crea ve industries 11. in Serbia – basic facts and recommenda ons, Bri sh Council, Belgrade, 2006.

Myerscough, J. The Economic importance 12. of the Arts in Britain. London: Policy Studies Ins tute, 1988.

Primorac, J. “Mapping the Posi on of 13. Cultural Industries in Southeastern Europe”, in Cultural Transi ons in Southeastern Europe, N. Svob-Dokic, ed. (2004), Zagreb: Ins tute for Interna onal Rela ons, p. 59-78.

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Southeastern Europe Collec on of papers from the course on “Managing Cultural Transi ons:

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Southeastern Europe – the Impact of Crea ve Industries”, Inter-universi centre, Dubrovnik (8-15 May 2005), Ed. By Nada Svob-Dokic, Ins tute for Interna onal Rela ons, Zagreb, 2005.

Council of Europe, Cultural Policy and 15. Cultural Diversi Project h p://www.coe.int/t/e/cultural_co%2Doperation/culture/completed_projects/transversal/_Summary.asp#TopOfPage/ accessed 10/10/2007.

Compendium. Cultural policies and trends 16. in Europe www.culturalpolicies.net/ accessed 15/10.2007.

Garnham, N., in Interna onal Journal of 17. Cultural Policy, 2005 VOL. 1, с. 16-29. World Film Market Trends Focus 2006, European Audiovisual Observatory 2006 (p. 34-35) http://www.obs.coe.int/online_publication/reports/focus2006.pdf

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Economic Alternatives, Issues 1-2/2008 (in Bulgarian)List of Publications:

ISSUE 1/2008

Table of Contents

International Scientific ConferenceEconomic Cooperation in South-Eastern Europe: Problems and Prospects

Articles

Risk Management of the Portfolio of Securities Using the Optimal HedgingAcad. Ivan Popchev, Nadya Velinova

Application of the Means-End Chain Approach and the Laddering Methodology for Eliciting and Assessment of Positioning Ideas (Part 1)Assoc. Prof. Simeon Jelev, Ph.D.

Determinants of Economic GrowthGeorge Petrakos Paschalis Arvanitidis

Cooperation in South-Eastern Europe as a Means to Promote the European Prospects of the RegionAssoc. Prof. Dinko Dinkov, Ph.D.

Study on the Health Systems’ Efficiency in Five South-East European CountriesAssoc. Prof. Evgenia Delcheva, Ph.D.

The Retail InternationalizationAssoc. Prof. Septemvrina Kostova, Ph.D.

Interaction, Perceptions and Policies in the Boundaries of European Union: The Case of the Northern Greek Cross Border Zone.Lefteris Topaloglou

Evolution of European Union’s Position on the Accession of the Western BalkansTzvetelina Yantcheva

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155

Discussion

On the Necessity of Studying Political Economy in Higher EducationProf. Penyu Mihailov, Ph.D.

Publications in “Economic Alternatives” Journal, Issues 1-6/2007

Contents and Article Summaries

Guide for Authors

ISSUE 2/2008

Scientific Recognize

Prof. Boyan Biolchev – Awarded with the Memorable Sign of UNWEGernot Erler – Doctor Honoris Causa of UNWE

Articles

Assoc. Prof. Velina Baleva

Application of the Means-End Chain Approach and the Laddering Methodology for Eliciting and Assessment of Positioning Ideas (Part 2)Assoc. Prof. Simeon Jelev, Ph.D.

Democratization and Ggrowth in South East European Transition CountriesAssoc. Prof. Matilda Alexandrova, Ph.D.

A model for IT-support of the multilateral cooperation in southeastern EuropeAssoc. Prof. Dimiter G. Velev, Ph.D.

The EU Energy Policy – Current State and Perspectives for the DevelopmentChef Assist. Prof. Svetla Boneva, Ph.D.

Economic Efficiency or Technical Feasibility Choosing of Variant of Investment in Small Hydropower Plants “Run-of-the-River”?Chief Assist. Prof. Georgi Kiranchev

International Railway Transport in South-Eastern Europe – Requirements and Perspectives Carriers FaceChief Assist. Prof. Hristina Nikolova

Tutorial on Energy Efficiency to Managers of the Bulgarian IndustryChief Assist. Prof. Nikolay Shterev, Ph.D., Assist. Prof. Dimitar Blagoev

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Implementation of “Convergence” and “Triple Play” as Strategies for the Growth of the Telecommunications SectorPeter Stritzl

The Cultural Industries in the Countries of Southeast Europe and Their Economic Impact in the Context of Social TransformationTsveta Andreeva

Discussion

Past and Present in the Interpretation of the Term “Political Economy”Assoc. Prof. Zoya Mladenova, Ph.D.

Contents and Article Summaries

Guide for Authors

157

The Universi of Na onal and World Economy is the biggest high school in Bulgaria and Southeast Europe. It was

founded in 1920 by 11 dis nguished professors, businessmen and prominent public fi gures, historicians, sociologists and lawyers as the Free Universi of Poli cal and Economic Sciences (FUPCS). Its fi rst rector was (for twen years) professor Stefan Bobchev – Minister of public educa on in 1911, Plenipoten ary Minister in Sanct Peterburg, a corresponding member of the Yougoslavian Academy of Science and Art, of the Czech Academy of Science and Art, of the Polish Scien fi c Socie , doctor honoris causa of law of the Universi of Bra slava and corresponding member of the Slavic Seminar in the Royal College of London Univeri .

In 1940, FUPCS was transformed by law into State High School of Financial and Administra ve Sciences (SHSFAS), and in 1947 it became a Facul of Economic and Social Sciences at the Sofi a Universi . In 1952 the high school became independent again under the name High Economic Ins tute “Karl Marx”, which was renamed in 1990 as Universi of Na onal and World Economy (UNWE).

The mission of UNWE is to cul vate highly educated personali es – leaders, who would build a be er and more humane world, meet with the challenges of modern mes with honour and digni , effi ciently combining the high requirements of global world with the tradi onal academic spirit, who always care about the quali of educa on and scien fi c research in the fi rst place.

The ambi on of the academic management of UNWE is to be a leader in Bulgarian high educa on, and off er compe ve educa onal services, to be an integral part of the European educa onal space and a preferred space for young Bulgarians, who wish to have modern educa on.

The Universi has received a Cer fi cat of conformi to the system of quali management in educa on under the interena onal standard ISO 9001:2000 with the cer fi ca on mark of Moody Interna onal (United Kingdom).

UNWE has 7 facul es: General Economics of industries, Finance and Accoun ng, Infrastructure Economics, Interna onal Economics and Policy, Management and Informa cs, and Law; 34 departments, and the following sec ons: the “Master Degree” sec on; the Ins tute of Post Graduate Qualifi ca on and Faculta ve Educa on; the Distant Learning Centre with two branches – Haskovo and Vratza (South and North Bulgaria); the Ins tute of Economic Policy; the Ins tute of Development of Entrepreneurship; the Centre of Intellectual Proper ; the Inter-Universi Centre of Career Development; the English Language Department etc.

About 30 thousand students are enrolled in UNWE. Upon fi nishing their studies, they receive the educa onal and qualifi ca on degrees of Bachelor and Master in 31 special es, grouped in 6 professional fi elds (economics; administar on and management; sociology; public communica ons and informa on sciences; law; poli cal sciences), as well as the educa onal and qualifi ca on degree of Doctor (PhD).

UNWE

The University of National and World Economy


UNWE

UNWE has a highly compe ve posi on with respect to other similar na onal schools. Despite the demographic problems, the number of applicants, compe ng for one student posi on is growing. Tradi onally, UNWE has the highest number of applicants and a record high number of excellent students compared to other high schools in the country. For the last four years only, 20 thousand young Bulgarians have graduated from the UNWE. At present, over 400 Bulgarian and foreign PhD students study at the Universi .

The Universi has 600 lecturers, 285 of them professors and associate professors. UNWE has taken part in 46 Bulgarian and interna onal projects and in 13 interna onal scien fi c forums. Yearly, every third member of the scien fi c and teaching staff of UNWE takes part in large scope interna onal projects or in projects, assigned by government ins tu ons, and every third member – in public administra on or business bodies.

UNWE is a coordina ng universi for Bulgaria within the Central European Ini a ve of Inter-Universi Rela ons. The Universi cooperates with more than 100 West European and American universi es. The long-term goal is to work jointly on Master Programs, scien fi c and research projects, distance learning, student and lecturers exchange. The loan system, introduced by UNWE, allows students from all over the world to use loans, and also students of UNWE to graduate with other foreign universi diplomas.

Prominent scien sts, government fi gures, Prime Ministers, managers of state, municipal, and business organiza ons and of central and local authori es ins tu ons, bankers, businessmen etc. are among alumnus of UNWE. During the

last 15 years only, four of the former students have been Prime Ministers of Bulgaria. UNWE is not just a pres gious high school; it is also an integral part of the new na onal legi macy of Bulgaria on the way of its integra on in unifi ed Europe.

UNWE publishes an almanac, a year-book and “Scien fi c works” of UNWE, the scien fi c jorunal “Economic Alterna ves” and the newspaper “Economist” (edited by journalism students)

In the last years, the honorable tle of Doctor Honoris Causa of UNWE has been given to respected scien sts in Europe and USA, such as prof. Joseph S glitz, a Nobel Prize winner, D-r Kamil Idris, general director of the World Intellectual Proper Organiza on, Franc Fishler, former EU agriculture commissioner, prof Vaclav Klaus, President of the Czech Republic, etc.

The overall built area of the UNWE occupies 41 square meters with 120 auditoriums (the distance learning centers in Haskovo and Vratza and the Ins tute of Post-Graduate Qualifi ca on are not included), computer rooms, a student computer informa on system, specialized laboratories, a modern library with a computer room, the Informa on Technologies Sec on, the Universi Publishing House “Economy”, prin ng facili es, a bookshop, a bank branch, cafeterias, a restaurant – canteen, etc. The sport center “Economist” is also included in the structure of the Universi , with sport and rehabilita on halls, tennis courts, playgrounds. The universi has hostels for 5004 students. The Universi Park is located on 45 thousand square meters of green areas with recrea onal and parking spaces. In 2002, a totally renovated Universi Study and Health Center was opened at the Black Sea cost (in Ravda, Bourgas region).

159

The journal “Economic Alterna ves” off ers to the public part of the best theore cal, methodological and

applied research and academic staff and Ph.D. students of the Universi for Na onal and World Economy, as well as other Bulgarian and foreign universi es and scien fi c ins tu ons. On the pages of this journal you can fi nd ar cles, which elucidate important problems of economic and management prac ce and propose solu ons for them on the basis of contemporary scien fi c accomplishments; ar cles developing the discussions on the most recent economic theories, approaches and methods, and sugges ng alterna ve solu ons; trea ng problems of the integra on of the Bulgarian economy into the European economic space; considering interdisciplinary problems in fi elds between economics and management, law and economics, sociology and economics, technology and economics etc., suppor ng the regula on of educa on of undergraduate and graduate students.

1.Manuscripts for publica ons should be sent in 2 printed copies and as a fi le on a fl oppy

or compact disc to the following address: Sofi a

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The electronic address of the journal is: [email protected].

The web address of the journal “Economic Alterna ves” is: h p://alterna vi.unwe.acad.bg

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accepts ar cles, which summarize

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The ar cles should be presented using World 6.0 or higher version for Windows ’98 (or

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Guide for Authors

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the Editorial Offi ce. The tle, surname and family name of the author, the summary and the keywords in English should be presented separately, on a separate sheet of paper and in electronic form. The author is responsible for the accuracy of the transla on.

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The journal “Economic Alterna ves” can be purchased from the bookstore of UNWE.

Guide for Authors


Documents

C O N T E N T Salternativi.unwe.bg/alternativi/br24/Body_br_01_2008_en.pdf · Studentski grad “Hristo Botev ... First vice-rector Assoc. Prof. Stati Statev, ... a en on to human