Monitoring Progress in Transition to a Market Economy Samuel Fankhauser EBRD Workshop on Global Monitoring 19 June 2003

EBRD Comparative Advantage Private sector focus “Foster the transition towards open market oriented economies and to promote private and entrepreneurial initiative...” Monitoring tools Transition indicators (progress in transition) Business environment and enterprise performance survey (BEEPS)

Transition Indicators Aim: monitor progress in transition Value judgement by “experts” By EBRD Office of the Chief Economist Based on strict classification system Relatively cheap to produce Some consultation with other IFIs

Transition Indicators Ordinal ranking 10 step scale from 1 (worst) to 4+ (best) Broad data set 12 years (1991-2002), updated annually 27 countries 8 main dimensions of transition

Main Dimensions of Transition Enterprises Small scale privatisation Large scale privatisation Enterprise restructuring Markets and trade Price liberalisation Trade and foreign exchange system Competition policy Financial institutions Banking reform, interest rate liberalisation Securities markets & non-bank financial institutions

Application: Development Over Time 3

Application: Cross Country Comparison 3

Energy efficiency and enterprise restructuring Application: Analysis Energy efficiency and enterprise restructuring Tonnes of oil equivalent per US$ 1,000 of value added in industry EBRD transition indicator for governance and restructuring 1

The BEEPS Aim: in depth assessment… …of quality of governance, business performance and nature of firm-state interactions Survey among regional entrepreneurs By professional survey firm Representative sample, sound methodology Substantial cost Jointly with the World Bank

The BEEPS Business perceptions as well as objective indicators e.g., on bribe tax, frequency of corruption Wealth of data 26 countries (excluding Turkmenistan) 6,700 enterprises active in the region 100 questions 2 rounds (1999, 2002)

Application: Development Over Time Obstacles to business All countries 3

Application: Cross Country Comparison Quality of legal system

Application: Analysis Heavy-handed regulation and corruption 3

Conclusion Monitoring the investment climate is a key part of global monitoring efforts Role of the private sector in promoting growth Transition indicators are a cheap way of monitoring based on value judgement BEEPS is a more sophisticated but expensive tool Both have a wide range of applications