Development in Eastern Europe and the South Caucasus: Armenia, Azerbaijan, Georgia, Republic of Moldova and Ukraine

296 Pages·2011·2.66 MB·English

by  OECD

Development in Eastern Europe
and the South Caucasus
Development
ARMENIA, AZERBAIJAN, GEORGIA, REPUBLIC OF MOLDOVA
AND UKRAINE in Eastern Europe
The economic crisis, the second economic shock to hit the Eastern Europe and the South Caucasus and the South Caucasus
region after the collapse of the Soviet Union, has been a warning and a call to action. The region
has many advantages and much potential, but some of this was squandered during the boom years
of the 2000s. The studies contained in this volume demonstrate that the potential is still there and ARMENIA, AZERBAIJAN, GEORGIA,
that the measures that need to be taken to realise that potential are feasible and affordable. Some
REPUBLIC OF MOLDOVA AND UKRAINE
of them can have an almost immediate effect, such as easing access to fi nance for small and
medium-sized enterprises and opening up new markets for the region’s goods. Others are more
medium-term, such as redeveloping product lines in the steel industry or in agriculture. Some of
the most critical reforms, like raising the level of education and improving health care, will require
political and economic investment over the long term.
None of the recommendations in this book are, however, beyond the bounds of possibility.
Governments and the private sector have an interest in implementing reforms to diversify
the economy and improve the distribution of revenues. Given the enormous potential of the
Eastern European and South Caucasus countries, the region has every reason to be confi dent
about its future.
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Please cite this publication as: u
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OECD (2011), Development in Eastern Europe and the South Caucasus: Armenia, Azerbaijan, Georgia, C
Republic of Moldova and Ukraine, OECD Publishing. a
u
http://dx.doi.org/10.1787/9789264113039-en c
a
This work is published on the OECD iLibrary, which gathers all OECD books, periodicals and statistical su
databases. Visit www.oecd-ilibrary.org, and do not hesitate to contact us for more information. s
ISBN 978-92-64-11302-2 -:HSTCQE=VVXUWW:
41 2011 01 1 P

Development
in Eastern Europe
and the South Caucasus
ARMENIA, AZERBAIJAN, GEORGIA,
REPUBLIC OF MOLDOVA AND UKRAINE
The opinions expressed and arguments employed in this publication do not necessarily
reflect those of the OECD, its Development Centre or of the governments of their member
countries.
Please cite this publication as:
OECD (2011), Development in Eastern Europe and the South Caucasus: Armenia, Azerbaijan, Georgia,
Republic of Moldova and Ukraine, OECD Publishing.
http://dx.doi.org/10.1787/9789264113039-en
ISBN 978-92-64-11302-2 (print)
ISBN 978-92-64-11303-9 (PDF)
Photo credits: Cover © thieury - fotolia.com / © dave51 - fotolia.com/ © Stéphanie Char/ © Colm Foy.
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OECD 33
DEVELOPMENT CENTRE
The Development Centre of the Organisation for Economic Co-operation and Development was
established by decision of the OECD Council on 23 October 1962 and comprises 25 member countries
of the OECD: Austria, Belgium, Chile, the Czech Republic, Finland, France, Germany, Greece, Iceland,
Ireland, Israel, Italy, Korea, Luxembourg, Mexico, the Netherlands, Norway, Poland, Portugal, Slovak
Republic, Spain, Sweden, Switzerland, Turkey and the United Kingdom. In addition, the following
non-OECD countries are members of the Development Centre: Brazil (since March 1994); India
(February 2001); Romania (October 2004); Thailand (March 2005); South Africa (May 2006);
Egypt and Viet Nam (March 2008); Colombia (July 2008); Indonesia (February 2009); Costa Rica,
Mauritius, Morocco and Peru (March 2009); the Dominican Republic (November 2009); Senegal
(February 2011); and Argentina and Cape Verde (March 2011). The European Union also takes part
in the Centre’s Governing Board.
The Development Centre, whose membership is open to both OECD and non-OECD countries,
(cid:82)(cid:70)(cid:70)(cid:88)(cid:83)(cid:76)(cid:72)(cid:86)(cid:3)(cid:68)(cid:3)(cid:88)(cid:81)(cid:76)(cid:84)(cid:88)(cid:72)(cid:3)(cid:83)(cid:79)(cid:68)(cid:70)(cid:72)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:50)(cid:40)(cid:38)(cid:39)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:76)(cid:81)(cid:87)(cid:72)(cid:85)(cid:81)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:3)(cid:70)(cid:82)(cid:80)(cid:80)(cid:88)(cid:81)(cid:76)(cid:87)(cid:92)(cid:17)(cid:3)(cid:48)(cid:72)(cid:80)(cid:69)(cid:72)(cid:85)(cid:86)(cid:3)(cid:191)(cid:81)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)
Centre and serve on its Governing Board, which sets the biennial work programme and oversees
its implementation.
The Centre links OECD members with developing and emerging economies and fosters debate and
discussion to seek creative policy solutions to emerging global issues and development challenges.
Participants in Centre events are invited in their personal capacity.
(cid:36)(cid:3)(cid:86)(cid:80)(cid:68)(cid:79)(cid:79)(cid:3)(cid:70)(cid:82)(cid:85)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:86)(cid:87)(cid:68)(cid:73)(cid:73)(cid:3)(cid:90)(cid:82)(cid:85)(cid:78)(cid:86)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:72)(cid:91)(cid:83)(cid:72)(cid:85)(cid:87)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:76)(cid:81)(cid:86)(cid:87)(cid:76)(cid:87)(cid:88)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:73)(cid:85)(cid:82)(cid:80)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:50)(cid:40)(cid:38)(cid:39)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:83)(cid:68)(cid:85)(cid:87)(cid:81)(cid:72)(cid:85)(cid:3)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:85)(cid:76)(cid:72)(cid:86)(cid:3)(cid:87)(cid:82)(cid:3)(cid:73)(cid:88)(cid:79)(cid:191)(cid:79)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)
Centre’s work programme. The results are discussed in informal expert and policy dialogue meetings,
and are published in a range of high-quality products for the research and policy communities. The
Centre’s Study Series presents in-depth analyses of major development issues. Policy Briefs and
Policy Insights summarise major conclusions for policy makers; Working Papers deal with the more
technical aspects of the Centre’s work.
For an overview of the Centre’s activities, please see www.oecd.org/dev.
OECD
EURASIA COMPETITIVENESS PROGRAMME
The OECD Eurasia Competitiveness Programme was launched in 2008 to support Eurasian economies
in developing more vibrant and competitive markets – both at the national and region level – in order
to generate sustainable growth. The OECD Eurasia Competitiveness Programme involves the OECD,
governments and the private sector in a comprehensive approach that involves regional dialogue,
(cid:83)(cid:72)(cid:72)(cid:85)(cid:3)(cid:85)(cid:72)(cid:89)(cid:76)(cid:72)(cid:90)(cid:15)(cid:3)(cid:71)(cid:72)(cid:191)(cid:81)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:85)(cid:72)(cid:73)(cid:82)(cid:85)(cid:80)(cid:3)(cid:83)(cid:85)(cid:76)(cid:82)(cid:85)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:68)(cid:86)(cid:86)(cid:76)(cid:86)(cid:87)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3)(cid:76)(cid:81)(cid:3)(cid:76)(cid:80)(cid:83)(cid:79)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:17)(cid:3)(cid:50)(cid:90)(cid:81)(cid:72)(cid:85)(cid:86)(cid:75)(cid:76)(cid:83)(cid:3)(cid:69)(cid:92)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:74)(cid:76)(cid:82)(cid:81)(cid:3)
is reinforced by an organisational structure in which economies from the two regions covered by the
Programme - Central Asia and Eastern Europe and the South Caucasus - chair the Advisory Council
(cid:68)(cid:81)(cid:71)(cid:3)(cid:72)(cid:91)(cid:83)(cid:72)(cid:85)(cid:87)(cid:3)(cid:90)(cid:82)(cid:85)(cid:78)(cid:76)(cid:81)(cid:74)(cid:3)(cid:74)(cid:85)(cid:82)(cid:88)(cid:83)(cid:86)(cid:17)(cid:3)(cid:55)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:74)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:3)(cid:68)(cid:83)(cid:83)(cid:85)(cid:82)(cid:68)(cid:70)(cid:75)(cid:3)(cid:68)(cid:79)(cid:79)(cid:82)(cid:90)(cid:86)(cid:3)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:85)(cid:76)(cid:72)(cid:86)(cid:3)(cid:87)(cid:82)(cid:3)(cid:71)(cid:72)(cid:191)(cid:81)(cid:72)(cid:3)(cid:83)(cid:85)(cid:76)(cid:82)(cid:85)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:79)(cid:72)(cid:68)(cid:85)(cid:81)(cid:3)
from their peers on how to design and implement successful policies and institutions. The OECD also
(cid:86)(cid:88)(cid:83)(cid:83)(cid:82)(cid:85)(cid:87)(cid:86)(cid:3)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:85)(cid:76)(cid:72)(cid:86)(cid:3)(cid:76)(cid:81)(cid:3)(cid:76)(cid:80)(cid:83)(cid:79)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:85)(cid:72)(cid:73)(cid:82)(cid:85)(cid:80)(cid:86)(cid:3)(cid:87)(cid:75)(cid:85)(cid:82)(cid:88)(cid:74)(cid:75)(cid:3)(cid:69)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86)(cid:3)(cid:70)(cid:79)(cid:76)(cid:80)(cid:68)(cid:87)(cid:72)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:86)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:16)(cid:86)(cid:83)(cid:72)(cid:70)(cid:76)(cid:191)(cid:70)(cid:3)(cid:86)(cid:87)(cid:85)(cid:68)(cid:87)(cid:72)(cid:74)(cid:76)(cid:72)(cid:86)(cid:3)
targeted to their priorities.
The Eastern Europe and South Caucasus Competitiveness Initiative, launched in April 2009, is part of
the OECD Eurasia Competitiveness Programme and covers the six countries of Eastern Partnership:
Armenia, Azerbaijan, Belarus, Georgia, the Republic of Moldova and Ukraine. The Initiative aims to
help create a sound business climate for investment, enhance productivity, support entrepreneurship,
develop the private sector, and build knowledge-based economies to render the region more competitive
and attractive to foreign investment.
For more information on the programme, please see www.oecd.org/daf/psd/eurasia.
DEVELOPMENT IN EASTERN EUROPE AND THE SOUTH CAUCASUS © OECD 2011

FORE 5
Foreword
WORD
The OECD is celebrating its 50th anniversary this year. Throughout its history, the OECD has assisted
countries in reforming and improving their policies to promote economic growth and development. It
has fostered more open societies and the rule of law and has helped build the institutions necessary
for the good functioning of market-based economies. This experience has been particularly valuable
to countries undergoing political and economic transitions.
This publication, Development in Eastern Europe and the South Caucasus, provides detailed country
reviews of Armenia, Azerbaijan, Georgia, the Republic of Moldova and Ukraine. It explores current
economic performance and the challenges of economic development and competitiveness. Despite
differences in economic structures and policy reforms, all these countries face similar challenges
arising from the transition from a centralised to a market economy in a climate of rapid political and
societal change.
(cid:55)(cid:75)(cid:72)(cid:3)(cid:87)(cid:85)(cid:68)(cid:81)(cid:86)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:83)(cid:85)(cid:82)(cid:70)(cid:72)(cid:86)(cid:86)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:191)(cid:89)(cid:72)(cid:3)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:85)(cid:76)(cid:72)(cid:86)(cid:3)(cid:90)(cid:75)(cid:76)(cid:70)(cid:75)(cid:3)(cid:90)(cid:72)(cid:85)(cid:72)(cid:3)(cid:86)(cid:88)(cid:69)(cid:77)(cid:72)(cid:70)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3)(cid:68)(cid:3)(cid:71)(cid:72)(cid:87)(cid:68)(cid:76)(cid:79)(cid:72)(cid:71)(cid:3)(cid:85)(cid:72)(cid:89)(cid:76)(cid:72)(cid:90)(cid:3)(cid:75)(cid:68)(cid:86)(cid:3)(cid:83)(cid:85)(cid:82)(cid:89)(cid:72)(cid:81)(cid:3)(cid:87)(cid:82)(cid:3)
(cid:69)(cid:72)(cid:3)(cid:71)(cid:76)(cid:73)(cid:191)(cid:70)(cid:88)(cid:79)(cid:87)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:86)(cid:72)(cid:89)(cid:72)(cid:85)(cid:68)(cid:79)(cid:3)(cid:85)(cid:72)(cid:68)(cid:86)(cid:82)(cid:81)(cid:86)(cid:29)(cid:3)(cid:80)(cid:68)(cid:81)(cid:68)(cid:74)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:83)(cid:82)(cid:79)(cid:76)(cid:87)(cid:76)(cid:70)(cid:68)(cid:79)(cid:3)(cid:70)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72)(cid:15)(cid:3)(cid:82)(cid:89)(cid:72)(cid:85)(cid:70)(cid:82)(cid:80)(cid:76)(cid:81)(cid:74)(cid:3)(cid:72)(cid:91)(cid:76)(cid:86)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:70)(cid:82)(cid:81)(cid:192)(cid:76)(cid:70)(cid:87)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)
(cid:82)(cid:89)(cid:72)(cid:85)(cid:70)(cid:82)(cid:80)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:79)(cid:82)(cid:86)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:72)(cid:87)(cid:76)(cid:87)(cid:76)(cid:89)(cid:72)(cid:81)(cid:72)(cid:86)(cid:86)(cid:17)(cid:3)(cid:44)(cid:81)(cid:3)(cid:82)(cid:85)(cid:71)(cid:72)(cid:85)(cid:3)(cid:87)(cid:82)(cid:3)(cid:80)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:87)(cid:85)(cid:68)(cid:81)(cid:86)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:83)(cid:85)(cid:82)(cid:70)(cid:72)(cid:86)(cid:86)(cid:3)(cid:72)(cid:73)(cid:191)(cid:70)(cid:76)(cid:72)(cid:81)(cid:87)(cid:79)(cid:92)(cid:15)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)
study puts forward four key recommendations:
(cid:320) promoting “green energy” and higher quality food as part of product and market differentiation;
(cid:320) rehabilitating infrastructure and better connecting national and regional markets;
(cid:320) addressing the skill gap and promoting regional mobility;
(cid:320) (cid:83)(cid:85)(cid:82)(cid:80)(cid:82)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:42)(cid:85)(cid:72)(cid:72)(cid:81)(cid:191)(cid:72)(cid:79)(cid:71)(cid:3)(cid:76)(cid:81)(cid:89)(cid:72)(cid:86)(cid:87)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:73)(cid:68)(cid:70)(cid:76)(cid:79)(cid:76)(cid:87)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:68)(cid:70)(cid:70)(cid:72)(cid:86)(cid:86)(cid:3)(cid:87)(cid:82)(cid:3)(cid:191)(cid:81)(cid:68)(cid:81)(cid:70)(cid:72)(cid:17)(cid:3)
We hope that this study provides a useful contribution to the policy debate and delivers practical
guidance for private sector development in Armenia, Azerbaijan, Georgia, the Republic of Moldova
and Ukraine. The OECD stands ready to accompany these countries as they consolidate the important
progress made in the last few years.
Angel Gurría
OECD Secretary-General
May 2011
DEVELOPMENT IN EASTERN EUROPE AND THE SOUTH CAUCASUS © OECD 2011

ACKNOW 7
Acknowledgements
LEDGEMENTS
Development in Eastern Europe and the South Caucasus was prepared as a joint effort between the
Development Centre’s Black Sea and Central Asia Initiative and the OECD Eurasia Competitiveness
Programme (DAF/PSD), supported by regional correspondents located in each of the countries.
The macroeconomic overview of each country was prepared under the supervision of Colm Foy,
Co-ordinator of the Development Centre’s Black Sea and Central Asia Initiative. Stéphanie Char,
Policy Analyst at the Development Centre, co-authored all the individual country studies which were
drafted by Armen Hovhannisyan (Armenia), Elkhan Kasimov (Azerbaijan), Dimitri Japaridze (Georgia),
Tatiana Lariushin (Republic of Moldova), and Olga Kupets and Tatiana Melnyk (Ukraine). Anna Tchoub,
(cid:51)(cid:88)(cid:69)(cid:79)(cid:76)(cid:70)(cid:3)(cid:36)(cid:73)(cid:73)(cid:68)(cid:76)(cid:85)(cid:86)(cid:3)(cid:82)(cid:73)(cid:191)(cid:70)(cid:72)(cid:85)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)Black Sea and Central Asia Initiative, provided communications and
logistical support.
The Private Sector Development sections of each country study and the regional overview are the
outcome of work conducted by the OECD Eurasia Competitiveness Programme under the authority of
the Eastern Europe and South Caucasus Initiative Steering Committee (referred to in this publication
as the “OECD” when policy recommendations are formulated). They were prepared under the
supervision of Fadi Farra, Head of the OECD Eurasia Competitiveness Programme, DAF/PSD, with
input from the OECD Centre for Entrepreneurship.
The Private Sector Development sections of each country study were co-authored by Marina Cernov
and Daniel Quadbeck, Policy Analysts, OECD Eurasia Competitiveness Programme (DAF/PSD).
A very large number of individuals and institutions contributed to the success of this project. Among
them, the project managers wish to acknowledge the assistance accorded to its in-country teams
by the authorities of the countries concerned, as well as to small and medium-sized enterprises
(SMEs) and individual entrepreneurs who were kind enough to participate in the surveys, private
institutions and foundations that were willing to compare their views and conclusions with those of
the teams. Special thanks go to the Union of Black Sea and Caspian Confederation of Enterprises
(UBCCE), as well as to their member organisations as well as chambers of commerce that greatly
improved the teams’ insights. Local support was provided by the embassies of the European Union,
Poland, Sweden and Romania, and the teams received valuable comments from local representatives
of the European Bank for Reconstruction and Development (EBRD), the European Commission, the
International Monetary Fund (IMF) and the World Bank.
Particular gratitude goes to Kiichiro Fukasaku, Head of Regional Desks at the Development Centre,
and Anthony O’Sullivan, Head of the Private Sector Development Division (DAF), who fully supported
this project from its inception, and to OECD colleagues Magali Geney, Orla Halliday, Elisabetta da Prati,
Vanda Legrandgérard, Elizabeth Nash, Antonio Somma and Adelina Vestemean, whose assistance
was instrumental to the success of the project.
Without support from the authorities of the Czech Republic, Greece, Poland, Romania and Sweden,
as well as from the European Union, this work would not have been possible and their contributions
are gratefully acknowledged.
DEVELOPMENT IN EASTERN EUROPE AND THE SOUTH CAUCASUS © OECD 2011