End in sight for regional transition


Experts say the transition period in the region will end when the private sector share of the economy approaches EU levels.

By Linda Karadaku for Southeast European time in Pristina -- 24/09/12


The end of Yugoslavia in 1991 sparked a transition period for the countries in the region. [Reuters]

Countries in Southeastern Europe are well on their way to overcoming the long transition towards democracy and a market-oriented economy after the 1991 split of Yugoslavia.

Will Bartlett, senior research fellow in the Political Economy of Southeast Europe, said that transition will end when the private sector share of each country's economy approaches EU levels.

"This has happened in most countries -- apart perhaps from Serbia where there is still some way to go to complete the privatisation process, although the most important enterprises have been privatised there," he said.

But the transformation was not speedy.

Following the break with the Soviet Union in 1948, Yugoslavia gradually abandoned central planning, and by 1965 had created a market economy.

State owned enterprises were transformed into socially owned enterprises under the workers self-management system. Managers of firms had autonomy in decision making, and were accountable to the workforce.

Transition is still ongoing, says Dragan Popovic, head of the Belgrade-based NGO Policy Centre.

"Even now, in 2012, Serbia has more than 100,000 people working in non-privatised companies," Popovic told SETimes.

Serbia's transition has been complicated "due to the fact that its start was during the Milosevic regime, and the new model was adopted after 2000. We are now in situation that there is no clear answer on how long transition will last," Popovic said.

However, private companies are now the most effective part of the Serbian economy, and create most of the domestic GDP.

"The majority of the remaining non-privatised companies are in a difficult position [because there is no interest in them]. The solution should be bankruptcy, which means 100,000 new unemployed people," Popovic said.

The transition was not the same for all the former communist countries in the region.

Bartlett distinguishes what he calls "early reformers" such as Albania, Croatia and Macedonia which carried out privatisation in the 1990s.

"The privatisation in Croatia and Macedonia was associated with the development of 'crony capitalism,' which means that most enterprises were effectively handed over to managers with close connections to the ruling political parties. These were then systematically asset stripped with a consequent massive increase in unemployment and slow economic growth," Bartlett told SETimes.

The late reformers, Bosnia and Herzegovina (BiH), Serbia and Montenegro began the privatisation process later on. In BiH after the end of the civil war, the socially owned firms were privatised on the basis of a distribution of vouchers to the population and the workers. In Serbia and Montenegro, starting in the early 2000s, the enterprises were sold outright to new private owners through public tender and auctions.

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Kosovo, under the UN administration, began privatisation in the mid-2000s. For each enterprise, a new enterprise was created to which all good assets were transferred, leaving the debts in the hands of the old enterprises.

"The hyper-presence of corruption, political influences and devaluation of the socially and publicly owned property degraded the process," Lumir Abdixhiku, executive director of Riinvest Institute in Kosovo, told SETimes, adding that the transfer of property was not done fast and properly.

The remaining issues now relate to the process of EU accession, organized crime and its role in holding back the economy and the ways to deal with the serious impact of the global economic crisis and the eurozone crisis in the region.

"The message of those two decades is simple: revolutions may trigger fundamental change but the latter can be accomplished only through scrupulous and painful evolutionary growth on firm and solid foundations. It takes time and can't be done fast," Andrey Ivanov, a senior policy advisor for the UNDP in Europe said.

This content was commissioned for SETimes.com.
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