A new World Bank study on eastern Europe and former Soviet Union countries has found that the most prosperous countries of the region are those that have found ways to leverage greater integration internationally into faster development at home. |
But the report points out the countries have achieved this not only by liberalising trade policies, but also by implementing domestic reforms fostering international trade ""what it calls "behind the border" reforms. |
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The report, titled "From Disintegration to Integration""Eastern Europe and the Former Soviet Union in International Trade", analyses the evolution of trade by 27 transition countries since the fall of communism. It says since the disintegration of the Soviet trade bloc, the region as a whole has experienced rapid trade flows""in line with comparable regions in the world. |
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The study's key observation is that there is evidence of two new intra-regional trading blocs emerging""the prosperous countries that have begun to trade more with western Europe and the global economy, and poorer ones focusing still on the commodity-oriented trade pulling back into a Russia-centric sphere. |
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The countries that have integrated with the European Union such as Poland and Ukraine are getting richer; the Russia-centric countries that mostly include the central Asian Republics remain poor. And there are south-east European countries, ranging from relatively prosperous Croatia to very poor Albania, in transition at various levels. |
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The study gives the countries scores for their regulations, Customs services and the efficiency of ports and says gains from "trade facilitation" are huge. |
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Raising these scores to merely half the EU levels will bring $178 billion in extra trade, a gain of around 50 per cent, says the report. The study is also rather dismissive of the benefits of other bilateral regional trading arrangements that some of the poorer Russia-centric countries have entered into. |
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The study notes poorer governance and institutional mechanisms, corruption and bureaucratic hassles as the main reasons for poorer growth of the Russia-centric countries. |
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In essence, the study stresses that reforms in trade policies are necessary to ensure sustainable growth, but not sufficient by themselves. "Behind the border" reforms are the cause for increased trade flows on favourable terms and not the other way round, implies the report. |
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On domestic reforms, the study cites measures to promote competition between domestic enterprises; improved governance, less corruption; lesser regulation of services sectors; and encouragement to foreign direct investment""linking domestic firms into global production networks. |
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The report has many observations and recommendations that our policymakers and exporters can take note of. India also witnesses a bipolarity with the western and southern regions and parts of northern region leveraging opportunities that globalisation offers a lot more than the eastern and central regions and parts of northern region that depend more on the commodity exports. Also, the more prosperous regions show better governance than the less prosperous ones. |
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Our commerce ministry can take note of the observations that merely pushing exports through subsidies will not help. Foreign trade is highly beneficial""but ultimately it is a symptom of success, not a cause. It is reforms "behind the border" that count. |
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Exporters need to push for reforms of domestic policies and not merely plead disabilities and seek subsidies. They can also look to exploit the opportunities that relatively prosperous countries in east Europe offer. tncr@sify.com |
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