Office of the Chief Economist Promoting Work and Well Being: Policy Challenges in the Global Environment Toshiaki Sakatsume Office of the Chief Economist EBRD It is my pleasure to be here and make a presentation to you. I am economist at the EBRD. Bucharest, June 23rd 2008

We currently have 29 countries of operations We currently have 29 countries of operations. Annually we commit Euro 5 billion new investment, and roughly 86% of the investment is made for the private sector. Three sub-regions…slightly different from those of OECD, and other organizations. the key objective of the EBRD is the creation of market economies based on private investment. Thus we expect new business opportunities create new jobs. the transition process and its impact on employment is not straight forward. On one hand, privatization and restructuring contribute to job destruction. But creation of the good business environment will contribute to job creation and emergence of entrepreneurs.

EBRD surveys BEEPS: In partnership with the World Bank, the EBRD is implementing the Business Environment and Enterprise Performance Survey (BEEPS). Three rounds of the survey have so far been implemented (1999, 2002, and 2005). 20,000 firms in 27 countries have been interviewed. Life in Transition Survey: Jointly with the World Bank , EBRD implemented the survey is to assess the impact of transition on people 29,000 individuals were interviewed in 28 transition countries plus Turkey. My presentation today is roughly based on the two surveys One is so called BEEPS, periodically every 3-4 years focusing on firms and business environment the second is one off survey conducted in 2006, focusing on people. Are you happier, still supporting democracy and market economies?

The speed of labour reallocation varies substantially by region The chart shows a predictable decline in the state sector for all regions, but different pace of growth of the private sector. The cross over point between state and private employment comes much earlier in Central Europe than in South east Europe. The crossing point has not yet been reached in CIS+M. Comparatively high levels of self-employment in CIS+M, particularly in the earlier years, may not have been voluntary. Source: EBRD-World Bank, Life in Transition Survey, 2006.

Private sector share in GDP At the beginning of transition, economic resources were concentrated in the state hands. The state owned roughly 90% of the economy Generally great progress between 1990-1995, and currently the private sector accounts for 67% of GDP. Caucuses catch up was quick and significant (with an exception of Azerbaijan) CA is still lagging behind Turkmenistan no progress but recently opened the door

Transition Indicators: Measurement 4+ 4 3 2 1 Standards of an industrialised market economy Little or no change from a centrally planed economy We consider there are at least two reasons; First: progress of privatisation Second: development of new private businesses or emergence of entrepreneurs. The constraint behind is unfavourable business environment and difficulties to access to finance

Progress in small-scale privatisation There was significant progress made in early years. In many transition economies (including Krz, kaz, Taj, Georgia and Armenia), small-scale privatisation is almost complete however, in some central Asian economies, including Uzbekistan and Turkmenistan, significant number of small-scale enterprises remain state owned.

Progress in large-scale privatisation large scale privatisation is even slower everywhere. The countries in the Caucuses is on average of all transition economies (but significant difference between Armenia and Azerbaijan) progress in CA quite slow

Governance and enterprise restructuring Restructuring is lagging behind. So the understanding of job losses associated with corporate restructuring may not be very right. economic efficiency needs to be improved further but it might come with pain

Business Environment and Enterprise Performance Survey (2002, 2005) Georgia Tajikistan We assess various aspects of the business environment Among them, the main obstacles are Access and cost of financing Tax rate and tax administration Macro economic stability Major improvements have been made in some countries (although it varies across countries) Among those we observed significant improvement in corruption (although CPI has not echoed with us)

Business Environment and Enterprise Performance Survey (2002, 2005) Azerbaijan Kazakhstan However, unfortunately in some countries perceptions worsened (note; it does not necessarily mean the business environment itself deteriorated

Younger people more upbeat than older generation Older generation has borne the brunt of painful economic and political reforms Younger generation poised to reap the benefits It is not surprising that the older generations are less satisfied than younger people on balance. Older people had spent years under communism generating network ties, business contacts, career histories, much of which was undone with the collapse. Older people had to start afresh, often lacking the skills or will to adapt to a new system. Younger people were not freighted with a commitment to nor nostalgia for a bygone era. They adapted more quickly and have generally fared better than older generations. 3

People in Transition Past, present, future Overall, people in the region do not consider the life today is better than that of 1989. But people are more or less satisfied with the quality of life today (particularly with freedom and democracy). Most importantly, people see the quality of life for their children will be better than that of today. 13

For further information visit www.ebrd.com/economics Last of all. If some of you are interested in the survey results, all data are available on our web site. Thanks for listening.