Transcript Title of presentation

Spotlight on SEE:
an overview of private sector
activity and investment
Peter Sanfey, Elisabetta Falcetti,
Anita Taci and Sladjana Tepic
16 April 2004
SEE: Opportunity and Potential

Growth exceeding CEB, driven by private
sector expansion

Private sector share of GDP > 60%

Improving investment climate

Increasing access to finance

FDI at record levels

Expanding intra- and inter-regional trade
Growing economies
7
6
Per cent
5
4.5
4
3
4.6
3.6
2.4
2.3
2
1
0
CEB
SEE
2001
2002
2003
4.3
Privatisation has advanced…
Large scale privatisation
Average EBRD Transition Indicator Score
4
3.5
3
2.5
2
1.5
1
0.5
0
1995
1996
1997
1998
1999
Central Europe & Baltics
Commonwealth of Independent States
2000
2001
2002
South-Eastern Europe
2003
…and the business climate improved
Finance
4.00
3.00
Corruption
Infrastructure
2.00
1.00
0.00
Rule of Law
Taxation
Judiciary
Source: BEEPS
1999
Regulation
2002
Credit to private sector growing
60
% of GDP
60
50
50
40
40
30
30
20
20
10
10
0
0
Albania
Bosnia &
Herz.
1999
Bulgaria
2002
Croatia
2003
FYR
Macedonia
Moldova
Romania
Real growth in 2003 (right axis)
Source: EBRD, IMF - International Financial Statistics, and central banks of countries in the region.
Serbia &
Mont.
Capital flows and FDI peaked in 2003
12
US$ billion
10
8
6
4
2
0
-2
1996
1997
1998
1999
FDI
Other Investment including bank loans
Sources: EBRD, IMF, World Economic Outlook, UNCTAD
2000
2001
2002
Portfolio Investment
Total capital flows, net
2003 (E)
Trade opportunities expanding

Trade liberalisation advanced: most tariff
barriers removed

Regional FTAs: 26 out of 28 signed, but
implementation is a key challenge

Access to EU markets improving
SEE: Challenges and Risks


Overall transition lags behind CEB
Doing formal business is difficult – informal
activities around 1/3 of GDP

Financial intermediation is limited

Limited “greenfield” investment so far

Non-tariff barriers to trade remain significant
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en
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Bu tia
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Al va
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rb os
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& a
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o
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rg
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rg sta
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Re
Uk p.
Az rain
er e
ba
Ta ijan
ji
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be an
kis
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Tu Be n
rk lar
m us
en
ist
an
Average transition score, 2003
Reforms in SEE lag behind CEB
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
CEB
SEE
CIS
Taxation, corruption and access to
finance remain key constraints
100
80
60
40
20
Finance
Infrastructure
Source : BEEPS
Taxes
Regulations
Judiciary
M
on
t.
&
Se
rb
ia
Ro
m
an
ia
ol
do
va
M
a
M
ac
ed
on
i
FY
R
Cr
oa
tia
Bu
lg
ar
ia
.
er
z
H
&
Bo
sn
ia
Al
ba
ni
a
0
Corruption
Crime
Internal funds are main source of
funds for SMEs
100
80
60
40
20
0
Albania
Bosnia &
Herz
Bulgaria
Croatia
Internal funds/retained earnings
Commercial banks
Money lenders or other informal sources
Government
Source : BEEP (2002)
FYR
Macedonia
Moldova
Equity
Family or friends
Leasing arrangement
Other
Romania
Serbia &
Mont
Most FDI linked to privatisation
Annual percentage change
200
150
100
50
0
-50
1995
1996
1997
Gross FDI
Source : UNCTAD, EBRD
1998
1999
2000
Privatisation revenues
2001
2002
Remittances play a crucial role
Remittances/GDP: Top 10 transition countries, 2001
18.69
16.85
15.12
13.26
Source : EBRD & IMF
2.71
1.99
1.84
FYR Mac.
Azerbaijan
3.59
Croatia
Armenia
Georgia
Serbia &
Mont.
Moldova
Albania
4.43
Latvia
9.2
Bosnia &
Herz.
20
18
16
14
12
10
8
6
4
2
0
Customs and trade regulations remain
significant obstacles to trade
Albania
3
Serbia &
Montenegro
Bosnia &
Herzegovina
2
1
Romania
Bulgaria
0
Moldova
Croatia
FYR Macedonia
Source : BEEPS (2002)
1999
2002
Policy implications

Encourage remittance flows through official channels

Strengthen banking competition and access to
alternative sources of domestic finance

Target meaningful investment climate measures
(including fair treatment for foreign investors)

Facilitate cross-border trade

Tackle the informal sector
EBRD Commitments to SEE:
>EUR 1 billion / yr – Private share up
Annual business volume
EUR million
1200
1000
71%
74%
800
600
Total
Private
51%
73%
400
85%
200
0
1999
2000
2001
2002
2003
Spotlight on SEE:
an overview of private sector
activity and investment
Peter Sanfey, Elisabetta Falcetti,
Anita Taci and Sladjana Tepic
16 April 2004