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OECD Holds Conference on Eastern Transition Economies

By Natalia Tchourikova

Paris, June 4 (RFE/RL) -- Eastern and Central Europe should follow the Asian example and work more for less pay in order to ensure economic growth. So argued some OECD experts during a conference on economies in transition held last week in Paris.

But this easier said than done. Cultural differences between Eastern Europe and Asia make such experiences unlikely to succeed. And the geographical location of transitional countries in the middle of Europe tends to promote labor mobility across Europe. This makes it difficult to impose rigid work discipline.

Deputy Secretary-General and Development Director of the Center for Co-operation with the Economies in Transition, Salvatore Zecchini, told the conference that countries which applied "shock therapy" in introducing economic changes after the collapse of the communist system of command economy "achieved better results than those who opted for gradual changes." These countries included Poland and the Czech Republic.

Leszek Balcerowicz, former Polish finance minister and author of the "Big Bang" reform plan there said that the plan's initial "extraordinary success" was achieved largely owing to popular support.

Balcerowicz also noted that the new post-Soviet political elites which launched reform programs usually were defeated in subsequent elections. The reforms clearly have taken a toll on the populace.

But Balcerowicz was quick to emphasize that political reversals have not been followed by economic retrenchments. The successor governments, usually elected on populist platforms, have continued the reform policies. In some cases, these governments have taken even tougher decisions than their predecessors.

Several speakers have drawn attention to the importance of geopolitical factors that played a crucial role in the initial programs of economic changes.

The transition was not limited to a marketization of the economy. It marked also a shift of Central Europe from the communist centralized system to the free market Western one. What was initially taken to be an exogenous factor -- the breakdown of the Soviet-centered economic organization, the CMEA -- became in fact a major political decision to abandon the centralized system of command economy.

Mass privatization has emerged as the principle issue in transitional economies.

Several countries, such as the Czech Republic, Slovakia, Poland, Moldova, and the Russian Federation have opted for programs to privatize state property. In some cases, the results were impressive, but in many others the plans remained unfulfilled.

They have been hampered by such basic and persistent problems as the inability to reorganize management, the difficulty of setting up new economic institutions and, above all, the failure to ensure investment. Most existing enterprises remain undercapitalized. Many face little or no viable chance for capitalization.

Russia provides an example of how former state enterprises which have been privatized fail to conduct viable restructuring. Many of them simply continue to exploit what is left from available resources. This keeps potential investors away.

OECD�s experts recommended that such enterprises be open to outside investors, who could introduce the much needed changes in the management.

Hungary was presented by several speakers as providing an example of economic benefits derived from a high degree of outside control and quick restructuring. This was said to have resulted in modernization of enterprises and higher investments.