Tahir Mahmutefendic - Economic Performance in South-East European Transition Countries After the Fall of Communism

ECONOMIC PERFORMANCE IN SOUTH- EAST EUROPEAN TRANSITION COUNTRIES
AFTER THE FALL OF COMMUNISM

TAHIR MAHMUTEFENDIC

Copyright 2014 by Tahir Mahmutefendic.

Library of Congress Control Number: 2013923718

ISBN: Hardcover 978-1-4931-3965-1

Softcover 978-1-4931-3966-8

Ebook 978-1-4931-3967-5

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Rev. date: 01/08/2013

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CONTENTS

Dedicated

To Ekbal and Moenes

I owe a debt of gratitude to the following individuals:

Dr Eric Beckett Weaver, Editor in Chief of the South Slav Journal

Nemanja Marcetic, Honorary President of the South Slav Journal and former editor in Chief of The South Slav Journal

Pat Taylor, former Deputy Editor in Chief of The South Slav Journal

Edward Alexander, translator from Bosnian/Croatian/Serbian to English

Miro Ivanovic, ICT manager at CISCO

Finally, I owe my gratitude to those to whom this book is dedicated

Table 1Economic Growth in the Balkan Countries in 2004

Table 2Foreign Direct Investment in the Balkan Countries in 2004

Table 3Unemployment Rates in the Balkan Countries in 2004

Table 4Inflation Rate Measured by Consumer Price Index
in the Balkan Countries in 2004

Table 5Balance of Payments in the Balkan Countries in 2004

Table 6External Debt in the Balkan Countries in 2004

Table 7Share of Trade in GDP, 2002 (%)

Table 8Percentage of exports and imports to other
SEE countries, 2002

Table 9Share of the EU in SEE exports and imports (% 2002)

Table 10Growth of the world output in 2007

Table 11Selected economic indicators 2009/2010

Table 12Growth and composition of credit and currency
composition of loans, by country, March 2009

Table 13Percentage of the population in South-East European
transition countries living in absolute poverty using international poverty standards

Table 14The economic situation is better today than in 1989
(Per cent of respondents)

Table 15Relative Levels of GDP per Capita

ADAggregate Demand

AVNOJ The Antifascist Council of National Liberation

BiHBosnia and Herzegovina

CConsumption

CDOCollateral Debt Obligation

CEBSCentral European and Baltic States

CEFTACentral European Free Trade Area

COMECONThe Council for Mutual Economic Assistance

CPIConsumer Price Index

CPFCroatian Privatization Fund

ECThe European Commission

EBRDThe European Bank for Reconstruction and Development

ECBThe European Central Bank

EFTAThe European Free Trade Area

EIBThe European Investment Bank

EUThe European Union

ERMExchange Rate Mechanism

FBIHFederation of Bosnia and Herzegovina

FDIForeign Direct Investment

FIForeign Investment

FTAFree Trade Agreement

FRYThe Federal Republic of Yugoslavia

FYR MacedoniaThe Former Yugoslav Republic of Macedonia

GGovernment Expenditure

GDPGross Domestic Product

IInvestment

ICTInformation and Communication Technologies

ILOThe International Labour Organization

IMFThe International Monetary Fund

IPOInitial Public Offerings

KMultiplier

MImports

MbMonetary Base

MCIMonetary Conditions Index

MPCMarginal Propensity to Consume

MsMoney Supply

NAFTAThe North American Free Trade Area

NASDAQNorth American Stocks, Dividends and Quarterly

NATOThe North Atlantic Treaty Organization

OECDThe Organization for Economic Co-operation

OPECThe Organization of Petroleum Exporting Countries

OPTOptimal Purchasing Technique

PTAPreferential Trade Agreement

RMonetary Reserve Ratio

RPIRetail Price Index

RSRepublika Srpska

SEESouth East Europe

SEEREMSouth East European regional Electricity Market

SWFSovereign Wealth Fund

T-BillsTreasury Bills

UKUnited Kingdom

USUnited States

USAUnited States of America

VATValue Added Tax

WTOWorld Trade Organization

XExports

South East Europe is another name for the Balkans. The Balkans is a Turkish word meaning a mountain covered in forest. The region comprises the former Yugoslavia, Romania, Bulgaria, Greece, Albania and the European part of Turkey. The Balkans is one of the three peninsulas in Southern Europe. Unlike the other two, the Iberian and the Apennine, which are religiously and culturally homogeneous, the Balkans have always been a crossroads of civilisations and a mosaic of different religions, cultures, nations and ethnicities. This has been the cause of bloody conflicts throughout history. In addition the Balkans have always been the poorest region in Europe, with the possible exception of the 1960s, during which a successful economic development placed Greece and Yugoslavia near the bottom of the list of developed countries.

The Balkans were deeply divided in the aftermath of the Second World War. The regions heterogeneity was four-fold. The countries of the Balkan Peninsula had different internal political system, external political links and associations, different economic systems and different patterns of economic links with the rest of the world.

1.Greece and Turkey were mainly capitalist countries and parliamentary democracies and with multi-party political systems, which were on two occasions interrupted by military dictatorships. The other four countries, namely Albania, Bulgaria, Romania and Yugoslavia were communist countries with one-party system.

2.From the point of view of external politics the Balkans were even more divided. Greece and Turkey were members of NATO. Romania and Bulgaria were members of the Warsaw Pact. Yugoslavia was a non-aligned country, whilst Albania did not belong to any pact or association of countries. It had intensive links with the Soviet Union until 1961 and, after this point with China.

3.Greece and Turkey were market economies with their governments playing a large role in their economies, Bulgaria and Romania were centrally planned economies. Yugoslavia was a semi-market economy, containing elements of both the systems.

4.Greece and Turkey were the members of OECD and had the most intensive economic links with capitalist countries. Romania and Bulgaria were the members of COMECON and had the most intensive economic relationships with the other communist countries. Yugoslavia was the most open communist country with intensive economic links to both East European and West European countries, especially the Soviet Union, West Germany and Italy. Albania was a closed country with a negligible level of economic relations with the rest of the world.

Political and economic fragmentation is at the same time one of the causes and consequence of backwardness. The collapse of communism was viewed by some as a golden opportunity to integrate the region and turn it into a prosperous part of Europe. The introduction of parliamentary democracy, multi-party systems and free elections politically unified the region. Transition from centrally planned economy and in the case of Yugoslavia from a semi-market economy to a market economy had, amongst others the aim of removing the differences in economic systems which existed between the regions countries. Various initiatives such as the Stabilisation and Association Pact and bilateral trade agreements were supposed to beef up the weak relations which existed between the regions countries. The possibility of European Union and the NATO membership was supposed to act as a carrot, the aim of which was to integrate the Balkans into the wider European economic and political frameworks through dynamic economic expansion.