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East: Globalization Combines With Localization, World Bank Says

The World Bank says that transition countries will be affected not only by economic globalization, but also by the decentralization of political power, known as localization. RFE/RL correspondent Tuck Wesolowsky spoke with the author of the World Bank's new report about the implications of the two trends for Central and Eastern Europe.

Prague, 25 October 1999 (RFE/RL) -- Two opposite processes -- globalization and localization -- could revolutionize development in the next century.

That is the main finding from the World Bank's "World Development Report 1999/2000," which was released last month (September 15) in Washington, D.C.

The chief author of the report, Shahid Yusuf, visited the Czech capital, Prague, on Friday (Oct. 22) to discuss the report's findings. He said powerful forces are reshaping the development landscape. Those forces include innovations in information technology, the aging of populations, the interconnectedness of global finances, and the rising demands for political and human rights.

But Yusuf said the surging phenomena of localization and globalization could potentially have the greatest impact on world development.

The term globalization is by now familiar to many. It denotes the growing integration of the world's economy, sparked mainly by technological innovations in communications and commerce. Combined with more liberalized markets, globalization has been credited with an upsurge in trade between the world's nations.

But there is a downside to globalization, explains Yusuf. Globalization has sparked fears of job insecurity, loss of state sovereignty, and disappearing national identity.

That's where localization comes in. The research carried out by Yusuf's World Bank team found that cities and provinces could become the new power centers in the next century, as political power shifts from the center to the local level.

Yusuf said by 2025, about two-thirds of the world's population will live in cities. He said the trend to a more decentralized power structure can even be seen in communist China, where the central government has allowed local elections in most villages. He said this call for more local power, and consequently more democratic government, can be seen in the proliferation of democracies. Today, 61 percent of the world's nations are democratic. In 1974, that figure was 27 percent.

Yusuf warns, however, that localization also carries its risks. Local political power can spawn extreme nationalism, which could spark civil wars. In the 1990s, he notes, 25 new nations have sprung up, the greatest decade of nation-building ever recorded.

Yusuf told our correspondent that the two phenomena have particular significance for the countries of Eastern and Central Europe.

"For economies in Central Europe, which are small, which are increasingly dependent on trade, which are increasingly dependent on foreign direct investment, globalization is very important. Globalization is really going to make an enormous amount of difference to their performance in the future. Localization adds a particular kind of wrinkle, or twist you might say, to the situation. What it means [is] that, as one is seeing, central governments in these countries now have a somewhat more complex relationship and a somewhat more difficult role to play in terms of the making of policy. So that our view is, that the localization process could increase efficiency at the local level if it is done properly."

Yusuf said with its highly educated work force, the countries of Eastern and Central Europe should be able to successfully face the new economic challenges. He said two-thirds of the world's foreign direct investment, or FDI, now targets the burgeoning service sector. Yusuf says the service sector -- particularly the computer industry -- will be Central and Eastern Europe's greatest growth sector in the future.

"And looking at the kinds of developments that are taking place in the area of software and computing, information technology, what would appear appropriate for economies in Central Europe with their very high levels of skill, and high levels of education, is that this is the direction that they need to move -- to utilize the FDI that is coming in for this purpose and to try to develop expertise in a variety of service sectors, both for purposes of domestic employment and for the purposes of generating increases of export volume."

Yusuf said those countries in Eastern and Central Europe likely to fare the best will have innovative governments. Those governments should devolve power to local authorities while still maintaining a central role in enforcing the rules of the economic game.

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    Tony Wesolowsky

    Tony Wesolowsky is a senior correspondent for RFE/RL in Prague, covering Belarus, Ukraine, Russia, and Central Europe, as well as energy issues. His work has also appeared in The Philadelphia Inquirer, the Christian Science Monitor, and the Bulletin Of The Atomic Scientists.