This paper analyzes the costs of (partial) institutional harmonization with the EU acquis which countries of the former USSR are expected to conduct under their Partnership and Cooperation Agreements with the EU and European Neighborhood Policy Action Plans. The public sector will have to take an effort of the transposition and adaptation of EU norms, as well as ensuring that they are complied with. Yet, the major part of the adjustment costs will fall on the private sector, as enterprises will have to make substantial investments to comply with new product requirements and business practices.
In this study we used the method of extrapolation of average costs for CEE countries’ harmonization with acquis to estimate the potential harmonization costs for the neighboring countries based on internationally comparative macroeconomic indicators like sectoral and total value added. This involved estimating the EU pre-accession support for the CEE countries by main areas as a percentage of the total or sectoral value added, determining the expected degree of limited harmonization in the ENP countries and estimating “coefficients of limited harmonization”, which was subsequently used for adjustment of the estimated cost of full harmonization.
Authored by: Veliko Dmitrov
Institutional harmonization is an important part of European integration, and its effects are more far reaching than the effects of trade liberalization. In its policy towards neighbors (the European Neighborhood Policy, ENP), the EU puts a lot of stress on the desirability of institutional harmonization, at least in certain areas. In particular, the free trade agreements that the EU envisages concluding with its Eastern neighbors will involve substantial harmonization of product standards, competition policy and a range of other policies and processes. At the very least, the harmonization will have to focus on the areas that relate to improvement of market access, i.e. removing restrictions to trade, harmonizing product standards and the systems of quality control etc. But in order to implement the new standards and rules, the EU neighbors will have to reform many related areas, so that the harmonization will encompass the whole system of economic governance. Not only will such a revamp help attaining better access to the EU markets, but also (and probably more importantly) it will stimulate modernization of the neighbors' economies and bring much needed efficiency gains.
In measurement of benefits of harmonization we refer to two methods: one based on the computable general equilibrium (CGE) modeling of welfare effects of better market access, and the other employing a growth model to estimate the wider effects of European institutions on growth. The estimation of costs of harmonization bases on extrapolation of the analogous costs in other countries, in particular CEE. These costs include expenses by a public sector on introduction of harmonization measures, as well as private sector expenses and investments related to their implementation.
Authored by: Anna Kolesnichenko
Published in 2009
This paper claims that the European Neighbourhood Policy (ENP) of the EU, and in particular the elements related to justice and home affairs (JHA), is a complex, multilayered initiative that incorporates different logics and instruments. To unravel the various layers of the policy, the paper proceeds in three steps: firstly, it lays out some facts pertaining to the origins of the ENP, as its ‘origins’ arguably account for a number of the core tensions. It then presents the underlying logic and objectives attributed to JHA cooperation, which can be derived from the viewpoints voiced during policy formulation. The paper goes on to argue that despite the existence of different logics, there is a unifying objective, which is to ‘extra-territorialise’ the management of ‘threats’ to the neighbouring countries. The core of the paper presents the various policy measures that have been put in place to achieve external ‘threat management’. In this context it is argued that the ’conditionality-inspired policy instruments’, namely monitoring and benchmarking of progress, transfer of legal and institutional models to non-member states and inter-governmental negotiations, contain socialisation elements that rely on the common values approach. This mix of conditionality and socialisation instruments is illustrated in two case studies, one on the fight against terrorism and one on irregular migration. Finally, the paper recommends that the EU draft an Action-Oriented Paper (AOP) on JHA cooperation with the ENP countries that indicates how the EU intends to balance the conflicting objectives and instruments that are currently present in the JHA provisions of the ENP.
Authored by: Nicole Wichmann
Published in 2007
This paper studies costs and benefits of institutional harmonisation in the context of EU relations with its neighbors. The purpose of this paper is to outline the likely forms of institutional harmonisation between the EU and its Eastern neighbors and provide an
overview of the methodologies that can be used in measuring its effects (costs and benefits). This paper serves as a background for two measurement exercises – one on benefits and another on costs – that are to be undertaken during the second stage of research.
Authored by: Veliko Dimitrov, Vladimir Dubrovskiy, Anna Kolesnichenko, Irina Orlova
Published in 2007
The objective of the PICK-ME (Policy Incentives for Creation of Knowledge – Methods and Evidence) research project is to provide theoretical and empirical perspectives on innovation which give a greater role to the demand-side aspect of innovation. The main question is how can policy make enterprises more willing to innovate? This task is fulfilled by identifying what we consider the central or most salient aspect of a demand-side innovation- driven economy, which is the small and entrepreneurial yet fast growing and innovative firm. We use the term “Gazelle” to signify this type of firm throughout the paper. The main concern of policy-makers should therefore be how to support Gazelle type of firms through various policies. The effectiveness of different policy instruments are considered. For example, venture capitalism is in the paper identified as an important modern institution that renders exactly the type of coordination necessary to bring about an innovation system more orientated towards the demand side. This is because experienced entrepreneurs with superior skills in terms of judging the marketability of new innovations step in as financiers. Other factor market bottlenecks on the skills side must be targeted through education policies that fosters centers of excellence. R&D incentives are also considered as a separate instrument but more a question for future research since there is no evidence available on R&D incentives as a Gazelle type of policy. Spatial policies to foster more innovation have been popular in the past. But we conclude that whereas the literature often finds that new knowledge is developed in communities of physically proximate firms, there is no overshadowing evidence showing that spatial policies in particular had any impact on generating more of the Gazelle type of firms.
Authored by: Itzhak Goldberg, Camilla Jensen
Published in 2014
Does European economic integration create more inequality between domestic regions, or is the opposite true? We show that a general answer to this question does not exist, and that the outcome depends on the liberalisation scenario. In order to examine the impact of European and international integration on the regions, the paper develops a numerical simulation model with nine countries and 90 regions. Eastward extension of European integration is beneficial for old as well as new member countries, but within countries the impact varies across regions. Reduction in distance-related trade costs is particularly good for the European peripheries. Each liberalisation scenario has a distinct impact on the spatial income distribution, and there is no general rule telling that integration causes more or less agglomeration.
Authored by Arne Melchior
Published in 2009
This working document offers a conceptual framework for understanding the processes underpinning the external dimension of EU Justice and Home Affairs (ED-JHA). Practically, it defines how the export of JHA principles and norms inform the geopolitical ambitions of the EU, i.e. the use of space for political purposes, or the control and management of people, objects and movement. The author begins by investigating how the ENP reconfigures the ED-JHA, and then goes on to discuss various conceptual stances on governance, specifically institutionalism, constructivism, and policy instruments. To conclude he traces the evolution of this external dimension, emphasising, whenever possible, its continuities and bifurcations. Overall, the aim is to ascertain the extent to which conceptual designs clarify or advance our knowledge of the contents and rationales of the ED-JHA.
Authored by: Thierry Balzacq
Published in 2008
The paper discusses the current and potential role of the European Neighbourhood Policy (ENP) in anchoring economic reforms in the countries of the EU's Eastern Neighbourhood. It claims that it is too early to assess the success of the ENP in this sphere especially given that the actual progress of the ENP agenda has been limited. A review of the empirical evidence on external reform anchors confirms that the ENP shares some features with the EU accession process that has proven to be an effective mechanism supporting major economic, political and social changes in the countries concerned. The eventual ENP economic offer is meaningful and integration with the EU is getting stronger public support in several CIS countries and among their political elites. On the other hand several factors limit the reform anchoring potential of the ENP. This paper offers recommendations on policies that could strengthen this potential.
Authored by: Wojciech Paczynski
Published in 2009
Institutional harmonization is an important part of European integration, and its effects are more far reaching than the effects of trade liberalization. In its policy towards neighbors (the European Neighborhood Policy, ENP), the EU puts a lot of stress on the desirability of institutional harmonization, at least in certain areas. In particular, the free trade agreements that the EU envisages concluding with its Eastern neighbors will involve substantial harmonization of product standards, competition policy and a range of other policies and processes. At the very least, the harmonization will have to focus on the areas that relate to improvement of market access, i.e. removing restrictions to trade, harmonizing product standards and the systems of quality control etc. But in order to implement the new standards and rules, the EU neighbors will have to reform many related areas, so that the harmonization will encompass the whole system of economic governance. Not only will such a revamp help attaining better access to the EU markets, but also (and probably more importantly) it will stimulate modernization of the neighbors' economies and bring much needed efficiency gains.
In measurement of benefits of harmonization we refer to two methods: one based on the computable general equilibrium (CGE) modeling of welfare effects of better market access, and the other employing a growth model to estimate the wider effects of European institutions on growth. The estimation of costs of harmonization bases on extrapolation of the analogous costs in other countries, in particular CEE. These costs include expenses by a public sector on introduction of harmonization measures, as well as private sector expenses and investments related to their implementation.
Authored by: Anna Kolesnichenko
Published in 2009
This paper claims that the European Neighbourhood Policy (ENP) of the EU, and in particular the elements related to justice and home affairs (JHA), is a complex, multilayered initiative that incorporates different logics and instruments. To unravel the various layers of the policy, the paper proceeds in three steps: firstly, it lays out some facts pertaining to the origins of the ENP, as its ‘origins’ arguably account for a number of the core tensions. It then presents the underlying logic and objectives attributed to JHA cooperation, which can be derived from the viewpoints voiced during policy formulation. The paper goes on to argue that despite the existence of different logics, there is a unifying objective, which is to ‘extra-territorialise’ the management of ‘threats’ to the neighbouring countries. The core of the paper presents the various policy measures that have been put in place to achieve external ‘threat management’. In this context it is argued that the ’conditionality-inspired policy instruments’, namely monitoring and benchmarking of progress, transfer of legal and institutional models to non-member states and inter-governmental negotiations, contain socialisation elements that rely on the common values approach. This mix of conditionality and socialisation instruments is illustrated in two case studies, one on the fight against terrorism and one on irregular migration. Finally, the paper recommends that the EU draft an Action-Oriented Paper (AOP) on JHA cooperation with the ENP countries that indicates how the EU intends to balance the conflicting objectives and instruments that are currently present in the JHA provisions of the ENP.
Authored by: Nicole Wichmann
Published in 2007
This paper studies costs and benefits of institutional harmonisation in the context of EU relations with its neighbors. The purpose of this paper is to outline the likely forms of institutional harmonisation between the EU and its Eastern neighbors and provide an
overview of the methodologies that can be used in measuring its effects (costs and benefits). This paper serves as a background for two measurement exercises – one on benefits and another on costs – that are to be undertaken during the second stage of research.
Authored by: Veliko Dimitrov, Vladimir Dubrovskiy, Anna Kolesnichenko, Irina Orlova
Published in 2007
The objective of the PICK-ME (Policy Incentives for Creation of Knowledge – Methods and Evidence) research project is to provide theoretical and empirical perspectives on innovation which give a greater role to the demand-side aspect of innovation. The main question is how can policy make enterprises more willing to innovate? This task is fulfilled by identifying what we consider the central or most salient aspect of a demand-side innovation- driven economy, which is the small and entrepreneurial yet fast growing and innovative firm. We use the term “Gazelle” to signify this type of firm throughout the paper. The main concern of policy-makers should therefore be how to support Gazelle type of firms through various policies. The effectiveness of different policy instruments are considered. For example, venture capitalism is in the paper identified as an important modern institution that renders exactly the type of coordination necessary to bring about an innovation system more orientated towards the demand side. This is because experienced entrepreneurs with superior skills in terms of judging the marketability of new innovations step in as financiers. Other factor market bottlenecks on the skills side must be targeted through education policies that fosters centers of excellence. R&D incentives are also considered as a separate instrument but more a question for future research since there is no evidence available on R&D incentives as a Gazelle type of policy. Spatial policies to foster more innovation have been popular in the past. But we conclude that whereas the literature often finds that new knowledge is developed in communities of physically proximate firms, there is no overshadowing evidence showing that spatial policies in particular had any impact on generating more of the Gazelle type of firms.
Authored by: Itzhak Goldberg, Camilla Jensen
Published in 2014
Does European economic integration create more inequality between domestic regions, or is the opposite true? We show that a general answer to this question does not exist, and that the outcome depends on the liberalisation scenario. In order to examine the impact of European and international integration on the regions, the paper develops a numerical simulation model with nine countries and 90 regions. Eastward extension of European integration is beneficial for old as well as new member countries, but within countries the impact varies across regions. Reduction in distance-related trade costs is particularly good for the European peripheries. Each liberalisation scenario has a distinct impact on the spatial income distribution, and there is no general rule telling that integration causes more or less agglomeration.
Authored by Arne Melchior
Published in 2009
This working document offers a conceptual framework for understanding the processes underpinning the external dimension of EU Justice and Home Affairs (ED-JHA). Practically, it defines how the export of JHA principles and norms inform the geopolitical ambitions of the EU, i.e. the use of space for political purposes, or the control and management of people, objects and movement. The author begins by investigating how the ENP reconfigures the ED-JHA, and then goes on to discuss various conceptual stances on governance, specifically institutionalism, constructivism, and policy instruments. To conclude he traces the evolution of this external dimension, emphasising, whenever possible, its continuities and bifurcations. Overall, the aim is to ascertain the extent to which conceptual designs clarify or advance our knowledge of the contents and rationales of the ED-JHA.
Authored by: Thierry Balzacq
Published in 2008
The paper discusses the current and potential role of the European Neighbourhood Policy (ENP) in anchoring economic reforms in the countries of the EU's Eastern Neighbourhood. It claims that it is too early to assess the success of the ENP in this sphere especially given that the actual progress of the ENP agenda has been limited. A review of the empirical evidence on external reform anchors confirms that the ENP shares some features with the EU accession process that has proven to be an effective mechanism supporting major economic, political and social changes in the countries concerned. The eventual ENP economic offer is meaningful and integration with the EU is getting stronger public support in several CIS countries and among their political elites. On the other hand several factors limit the reform anchoring potential of the ENP. This paper offers recommendations on policies that could strengthen this potential.
Authored by: Wojciech Paczynski
Published in 2009
In this paper the authors undertake an ex-post evaluation of whether the special economic zones (SEZs) introduced in Poland in 1994 have been successful in meeting regional development objectives. They evaluate the policy of as many of its objectives as possible: employment creation, business creation (which includes attracting foreign direct investment), income or wage effects, and environmental sustainability. They use different panel data methods to investigate this question at the powiat and gmina levels in Poland during the 1995-2011 period. It is also possible to include numerous controls to reduce the problem of the omitted variables bias such as education level, dependency rates, state ownership, general subsidies and whether the area is urban or rural. The results indicate that SEZs in Poland have been successful in a number of their objectives such as private business creation. The positive effect of the policy however mainly comes through foreign direct investment (FDI), whereas the effects on e.g. investment and employment are small or insignificant. In other areas, such as securing higher income levels and locking firms into the sustainability agenda through the adoption of green technologies and reduced air pollution, the authors find only a small positively moderating effect of the policy on what are traditionally economically disadvantaged areas in Poland that used to be dependent on the socialist production model. Hence, despite high levels of FDI, the zones policy has not managed to overcome the legacy of backwardness or lagging regions. The main policy implication of the paper is that SEZs may be successful in stimulating activity in the short run but the policy must be seen as one of necessary temporality and can therefore not stand alone. Before launching SEZs, policymakers must have plans in place for follow up measures to ensure the longer term competitiveness and sustainability implications of such an initiative. There is a need to understand the connection between the specific incentive schemes used (in this particular case tax incentives were used) and the kinds of firms and activities they attract, including the behavioral models that those incentives promote.
Authored by: Camilla Jensen
Published in 2014
The aim of the project is to analyze government support for innovation in a comparative perspective by first examining the main existing instruments of financial support for innovation in Turkey and Poland, and secondly to assess their effectiveness by applying recent econometric techniques to firm-level data for both countries obtained from the Community Innovation Survey (CIS).
Authored by: Wojciech Grabowski, M. Teoman Pamukcu, Krzysztof Szczygielski, Sinan Tandogan
Published in 2013
The paper discusses possible directions and magnitudes of the relationship between the social security driven tax wedge, employment and shadow employment in Russia and Ukraine. The first section presents a summary of the economic and institutional background for development of the current size and structure of the socially driven tax wedge in both countries. The second section presents some theoretical considerations on the relationship between the social protection system, tax wedge, non-employment and finally, shadow employment. The third section contains an attempt to econometrically estimate the magnitude of the possible relationship between the tax wedge and total employment rates in both countries. In the fourth section, the authors try to discover the mechanism of influence of the last reform of the Ukrainian payroll tax system on the structure and size of shadow employment in the country. The last analytical section closes the circle leading the reader back from shadow employment to wages and finally to the issue of access to social security institutions. The last section concludes.
Authored by: Marek Gora, Oleksandr Rohozynsky, Irina Sinitsina, Mateusz Walewski
Published in 2009
The EU has been one of the largest trade partners for so called Eastern Partnership (EaP) countries, namely Armenia, Azerbaijan, Belarus, Georgia, Moldova and Ukraine. Commodity turnover of these countries with the EU vary between 30% and 50% of total, but their access to the EU market is less preferential than for many other neighboring countries. They trade with the EU on the basis of MFN regime, and five EaP countries, with exemption of Belarus, use privileges provided by Generalized System of Preferences (GSP) or the GSP+ or autonomous trade preferences (Moldova). With the launch of EaP initiative in 2009, relations between the EU and the Eastern European countries (Armenia, Azerbaijan, Belarus, Georgia, Moldova and Ukraine) have received new impetus for development. The EaP offers upgrade of relations within three major dimensions, namely (a) the Association Agreement (AA), (b) Agreement on a Deep and Comprehensive Free Trade Area (DCFTA), and (c) Visa Facilitation and Readmission agreements. The AA talks have been launched with all EaP countries expect for Belarus, and four of them have been involved in the DCFTA talks. Ukraine has progressed the most, as after five years of negotiations the EU-Ukraine Association Agreement with embedded DCFTA has been initialed in 2012.The aim of this study is to assess gains and losses that could arise from the DCFTA with the EU for the EaP countries, using information about EU-Ukraine DCFTA as model case for EaP regional trade cooperation.The focus of the paper is on non-tariff (regulatory) component of the EU DCFTA and potential implications of regulatory approximation. Also, current level of harmonization of EaP countries’regulatory framework with the EU acquis in the areas related to the DCFTA is analyzed.
Authored by: Veronika Movchan, Volodymyr Shportyuk
Published in 2012
This study surveys the current state of affairs in Poland with regard to the development of knowledge-intensive entrepreneurship (KIE), or new firm creation in industries considered to be science-based or to use research and development (R&D) intensively. We place KIE in Poland in the larger institutional context, outlining the key features of the country’s National Innovation System, and then focus on KIE itself. Our findings are perhaps more optimistic than many previous studies of knowledge-based economy development in Poland. We observe significant progress due to Polish access to the European Union. The frequency with which universities are playing a significant role as partners for firms in the innovation process has increased significantly; moreover, we observe a significant degree of internationalization of innovation-related cooperation. Another optimistic development is that the level of activity of venture capitalists seems to be fairly high in Poland considering the relatively low degree of development of capital markets offering VC investors exit opportunities. Moreover, after almost two decades of decline in the share of R&D spending in GDP, there are signs that this is beginning to rise, and that businesses are beginning to spend more on R&D. While demand-side problems continue to be significant barriers for the development of KIE, due to the relatively low level of education and GDP per capita in the country, the trends here are optimistic, with high rates of economic growth and improvements in the level of education of younger generations. Significant improvement is still needed in the area of intellectual property protection.
Authored by: Richard Woodward, Elzbieta Wojnicka, Wojciech Pander
Published in 2012
This paper analyzes the direct and indirect income effects of international labor migration and remittances in selected CIS countries. The analysis is based on computable general equilibrium (CGE) models for Moldova, Ukraine, Georgia, Kyrgyzstan, and Russia. All net emigration countries would experience a sharp contraction of private consumption in the absence of remittances. In Russia, the main effect of immigration has been to hold down the real wage (as potential capital stock adjustments in response to immigration are not reflected in the authors comparative-static modeling framework). The paper concludes that because of the important contribution of migration and remittances to stabilizing and sustaining incomes in many CIS countries, enhanced opportunities for legal labor migration should figure prominently in any deepening of bilateral relations between CIS countries and the European Union under the European Neighborhood Policy.
Authored by: Aziz Atamanov, Toman Omar Mahmoud, Roman Mogilevsky, Kseniya Tereshchenko, Natalia Tourdyeva
Published in 2009
Ainura Uzagalieva
Vitaly Vavryschuk
The paper discusses the issue of labor force mobility in a broad sense, and analyses how changes in social security policy and the structure of the social safety net (SSN) affects different aspects of labor force mobility. The text is structured as follows: Introduction, then follows Chapter 2, which provides an overview of the labor market and social safety net developments in Russian and Ukraine over the last decade, as well as discusses common features of these countries. The Chapter 3 establishes theoretical models for different aspects of labor force mobility, discusses the availability of data on Russia and Ukraine to test these models, and provides a statistical analysis of the data. The Chapter 4 discusses results of the statistical analysis. The final chapter discusses policy conclusions that can be derived from comparison of the effect of the SSN on labor mobility in these two countries, and extends them to all countries in transition.
Authored by: Marek Gora, Oleksander Rohozynsky
Published in 2009
The importance of new firm creation in the post-Communist economies of East Central Europe (ECE) has been subject to extensive research. This paper focuses on an area of entrepreneurship which has received relatively little attention in the transition economy context but which is of particular importance for the modernization of the transition economies: knowledge-based entrepreneurship (KBE), or new firm creation in industries considered to be science-based or to use research and development (R&D) intensively. We begin by sketching the situation in Estonia‟s small and medium-sized business sector, then proceed to study the conditions for high-tech firm development in the country, with particular attention devoted to the development of Information and Communication Technologies (ICT), which have been of particular significance in the Estonian case, as well as the questions of finance and policy initiatives. We then turn to the analysis of a series of case studies of firms active in the areas of information technology, life sciences, and digital mapping and navigation technology. Among the issues treated are the resources and strategies involved in KBE in Estonia, the relationships (networks) of the firms in question and how they are used for knowledge acquisition, and barriers to innovation and development. In spite of a relative lack of government support, we find that overall Estonia appears to be one of the better locations for KBE in the ECE region, with rising R&D spending, a highly educated entrepreneurial class, and universities that have moved forward rapidly in the development of technology transfer support facilities. The firms studied here rely for much of their success on foreign markets; on the other hand, difficulties in internationalisation can be identified as one of the key bottlenecks for the development of Estonian KBE. In the area of business relationships and networks, academic partners dominate.
Authored by: Janita Andrijevskaja, Tonis Mets, Urmas Varblane
Published in 2010
In this paper the author presents a general assessment of the labour market situation of older workers in the Czech Republic, starting with a more general overview of the demographic situation and emphasizing the generational differences among the young-old and older cohorts, underlying a number of different problems as well as solutions. Further in the paper she addresses the impact of the recent economic situation on employment levels, showing that the recovery in terms of employment has not yet begun and that the impact on older workers is (at least) two-fold: firstly, for older workers it is very difficult to find a new job once unemployed; secondly, if employed, the pressure on workability and the increasing demands of workplaces may be harder to bear for the older the worker. She describes a National Action Plan Supporting Positive Ageing (2013-2017) and other examples of good and transferable praxes which address some of the active ageing issues in an innovative way.
The second part of this report examines the issues of employability, workability and age-management as perceived by some of the key actors. The report goes into greater detail on the topic of paid work after retirement, which is considered an important part of the Czech economy, despite the fact that the employment of sizable groups of older workers after retirement is undeclared. Self-entrepreneurship and independent work in later life are another realm of employment that is increasing in importance in the Czech economy; however, as consulted experts argue, it is not to be taken as an unproblematic solution to late-life careers. In the last chapter the author turns her attention to the lifelong learning of older workers and to their up-skilling/retraining. In the concluding remarks, she reemphasizes the need to address the heterogeneity of the older workforce, in the sense of age/generational affiliation, health, socio-economic and other characteristics.
Authored by: Lucie Vidovicova
Published in 2014
The aim of this work is to present an in depth understanding of the conceptual framework of active ageing policies, which have been created and implemented in Poland. The discussion of active ageing in employment in Poland started relatively late. The first discussions on the unfavourable situation of elderly employment emerged only in the second half of the 1990s, when the debate on the pension system reform started. While only a few ageing policies were developed at the national level during that time, several interesting initiatives were undertaken at a regional level and in the third sector. They were mostly focused on productive ageing and the problems associated with the economic activation of people over 50. The intensive implementation of the active ageing policies in Poland started in 2012, during the European Year of Active Ageing. At present, there is an intense discussion on policies addressed to the elderly, which concentrate not only on the activation of the labour market, but also on healthy, active and socially inclusive ageing, education andcivil engagement.
This paper concludes that despite intense work being done by public authorities, the concept still needs a deeper implementation - especially at the regional level. Furthermore, close observation and evaluation of the activation programmes is still missing and the identification and implementation of good practices which are already being developed in other European countries is under-used.
Authored by: Izabela Styczynska
The idea of a Deep and Comprehensive Free Trade Agreement goes beyond the traditional concept of trade liberalization and, apart from the elimination of tariffs in trade of goods, it also includes the reduction/ removal of non-tariff barriers, the liberalization of the investment regime, the liberalization of trade in services, and the far-reaching harmonization/ mutual recognition of various trade and investment-related regulations and institutions. The economic literature, CGE modeling exercises and the practical experience of “deep” trade integration suggest a substantial potential for the future EU-Ukraine DCFTA in promoting trade and investments, creating additional welfare and employment, regulatory and institutional harmonization with EU’s acquis, and modernizing Ukraine’s economy. While beneficial for both sides, the potential gains (but also potential adjustment costs) are greater for Ukraine as it is the smaller partner with higher initial trade barriers. However, the DCFTA does not include an automatic guarantee of success. Very much depends on the political will and administrative capacity to implement all of its provisions in a timely and accurate manner. This is a serious challenge for Ukraine, which has a mixed record in reforming its economy and state and which is still struggling to fulfill all of its commitments undertaken during the WTO accession process.
Authored by: Marek Dabrowski and Svitlana Taran
Published in 2012
This paper reviews the published literature on the definition and measurement of the administrative and compliance costs of taxation, with special reference to VAT (including evasion and fraud) in the European Union.
Written by Luca Barbone, Richard M. Bird, and Jaime Vasquez-Caro. Published in March, 2012.
See more on our website: http://www.case-research.eu/en/node/57573
This paper discusses the link between the deficit bias in public finance and institutional settings. The Polish experience is put in a wider context and provides an extensive discussion of possible institutional reforms that may be implemented to stabilise the path of fiscal policy and reduce the deficit bias. Although substantial improvements have been made in Poland with respect to fiscal transparency standards set by the IMF and EU there is still much scope for enhancement. The recommended change in fiscal policy would involve the implementation of medium-term budgetary framework that would ensure consistency between the budgetary process and medium-term fiscal goals. This should be accompanied by the introduction of binding constraints on fiscal policy. The expenditure rule could be reintroduced to strengthen fiscal discipline, as it could force policymakers to tighten fiscal policy. It seems to be indispensable to maintain fiscal rules at the local government level. The issue of still limited fiscal transparency and unsatisfactory performance of fiscal rules requires the undertaking of various appropriatemeasures to strengthen the policy framework in Poland. This can be done in our view by involving external institution entitled to examine fiscal transparency and the performance of fiscal rules in the budgetary process. We think that the institution that is fully capable to take the lead in this respect is the NIK, which was granted full independence in 1994 and has since proved to be successful in overseeing public finances. This should, however, be accompanied by simultaneous enhancement of the internal audit.
Authored by: Rafal Benecki, Jens Holscher, Mariusz Jarmuzek
Published in 2006
The empirical analysis of the determinants of institutional development in transition countries as well as the qualitative country studies summarized in this publication allow for some optimism concerning a potential impact of the EU on institution building and governance quality in CIS countries. Regression analysis reveals a positive impact of EU cooperation agreements below a membership perspective. Alternatively to the EU, entry into the NATO accession process also exerts incentives for better institutions which are often overlooked. In contrast, WTO membership is not found to have any impact on institution building in CIS countries. While there is room for some EU-related optimism given the results from the regression analysis it depends on the country-specific ENP action plans and programs whether or not ENP cooperation actually leads to Europeanization or institutional convergence towards EU standards in the CIS. The case studies on the effectiveness of Neighborhood Europeanization through ENP in Ukraine, Georgia, and Azerbaijan reveal that current EU policies towards these countries can be, at best, seen as a catalyst but not as a main driver of institutional convergence. A perspective for a stake in the internal market is on the long horizon for Ukraine only. ENP mechanisms for conflict resolution in Georgia and Azerbaijan have been rather weak before the recent clash in Abkhazia and South Ossetia. The top-down institutional convergence, i.e. an EU-first strategy, worked well for Enlargement Europeanization but implemented in the ENP it significantly reduces the leverage of the EU to create a ring of well-governed neighbour states.
Authored by: Thorsten Drautzburg, Andrea Gawrich, Inna Melnykovska, Rainer Schweickert
Published in 2008
This paper examines the motives behind foreign direct investment (FDI) in a group of four CIS countries (Ukraine, Moldova, Georgia and Kyrgyzstan) based on a survey of 120 enterprises. The results indicate that non-oil multi-national enterprises (MNEs) are predominantly oriented at serving local markets. Most MNEs in the CIS operate as 'isolated players', maintaining strong links to their parent companies, while minimally cooperating with local CIS firms. The surveyed firms secure the majority of supplies from international sources. For this reason, the possibility for spillovers arising from cooperation with foreign-owned firms in the CIS is rather low at this time. The lack of efficiency-seeking investment poses further concern regarding the nature of FDI in the region. The most significant problems identified in the daily operations of the surveyed foreign firms are: the volatility of the political and economic environment, the ambiguity of the legal system and the high levels of corruption.
Authored by: Malgorzata Jakubiak
Published in 2008
This paper is an overview of the achievements in the area of employee financial participation (EFP) during the last fifty years. It addresses the question of the extent to which EFP is relevant in today’s world. EFP is distinguished from participation in management (industrial democracy), and the various types of EP are discussed. The major arguments for EFP are presented and discussed critically. The evolution of major forms of EFP, the scale of their operation in several advanced economies, and the legal and tax incentives for EFP are described. The efforts of European Union bodies to popularise this idea in all member countries are illustrated. Showing that EFP has become a broadly recognised principle of modern management in thousands of enterprises, we consider opportunities for disseminating these solutions on a wider scale, in particular in Poland. Finally, a number of directions for further research on financial participation are considered.
Authored by: Barbara Blaszczyk
Published in 2014
This paper investigates the differences in innovation behaviour, i.e. differences in innovation sources and innovation effects, among manufacturing firms in three NMS: the Czech Republic, Hungary and Poland. It is based on a survey of firms operating in four manufacturing industries: food and beverages, automotive, pharmaceuticals and electronics. The paper takes into account: innovation inputs in enterprises, cooperation among firms in R&D activities, the benefits of cooperation with business partners and innovation effects (innovation outputs and international competitiveness of firms' products and technology) in the three countries. After employing cluster analysis, five types of innovation patterns were detected. The paper characterises and compares these innovation patterns, highlighting differences and similarities. The paper shows that external knowledge plays an important role in innovation activities in NMS firms. The ability to explore cooperation with business partners and the benefits of using external knowledge are determined by in-house innovation activities, notably R&D intensity.
Authored by: Ewa Balcerowicz, Marek Pęczkowski, Anna Wziatek-Kubiak
Published in 2009
The aim of this study is to estimate the impact of the removal of NTBs in trade between the EU and its selected CIS partners: Russia, Ukraine, Georgia, Armenia and Azerbaijan (CIS5). The report includes a discussion of methodologies of measurement of non-tariff barriers and the impact of their removal, including a review of previous studies focusing on CEE and CIS regions. Further, we employ a computable general equilibrium model encompassing the following three pillars of trade facilitation: legislative and regulatory approximation, reform of customs rules and procedures and liberalization of the access of foreign providers of services. We conclude that a reduction of NTBs and improved access to the EU market would bring significant benefits to the CIS5 countries in terms of welfare gains, GDP growth, increases in real wages and expansion of international trade. The possible welfare implications of deep integration with the EU range from 5.8% of GDP in Ukraine to sizeable expected gains in Armenia (3.1%), Russia (2.8%), Azerbaijan (1.8%) and Georgia (1.7%).
Authored by: Maryla Maliszewska, Irina Orlova, Svitlana Taran
Published in 2009
Foreign subsidiary performance and market efficiency effects are estimated and confronted in this paper using a rich firm-level panel for Polish manufacturing. Besides estimating total factor productivity, other performance measures are calculated and contrasted such as labor productivity, employment growth, markup levels and profitability. The findings show that foreign subsidiaries in Poland pay more (in wages and capital), earn less (in terms of profitability or ROA) and work harder (in terms of TFP and labor productivity) relative to their domestic counterparts. Foreign subsidiaries contribute with higher employment growth than other domestic and new firms. There is no evidence that foreign subsidiaries have significantly reduced market efficiency within the period of study and across the industries and entry modes investigated on average. Controlling for competition (which is found to have a negative effect on efficiency) the paper documents significant intra-industry spillovers. The effect is estimated to be twice as high within the foreign owned industrial communities as compared to the cross effect to domestic firms.
Authored by: Camilla Jensen
Published in 2009
This paper provides the quantitative estimate of the potential growth bonus for CIS countries, and in particular EU's Easter Neighbours, that can be a result of deeper institutional harmonisation with the EU. Econometric investigation involving instrumental variable, simultaneous equation and dynamic panel techniques documents the strong positive link between growth performance and reforms, as well as between reforms and European integration. The paper derives the range of possible values of growth bonus from the deepened neighbourhood cooperation between 1 and 3.8 with the median at 1.8 percentage points. The least growth bonus is expected through basic liberalization reforms, while countries with a considerable institutional gap are likely to gain the most.
Authored by: Artur Radziwill, Pawel Smietanka
Published in 2009
This paper focuses on knowledge-based entrepreneurship, or new firm creation in industries which are considered to be science-based or to use research and development intensively, in the East Central European (ECE) context. On the basis of case studies of thirteen knowledge-based firms in six ECE countries, we suggest that KBE firms in these countries may differ in some important ways from the conventional picture of new technology based firms. In general, we see the ECE knowledge-intensive firm as a knowledge-localiser or customiser, adapting global knowledge to local needs on the domestic market, rather than a knowledge-creator generating new solutions for global markets. The entrepreneurs who start and run these businesses are skilled at spotting trends early and bringing them to their countries. Based in countries that generally have poor reputations as sources of innovative, high-technology products, but having established strong brands for themselves in their home markets, they are struggling with the challenge of entering export markets with products and services that can achieve global, or at least regional, recognition. The studies of the companies discussed here suggest that ECE firms are still in the early stages of this strategic shift.
Authored by: Slavo Radosevic, Richard Woodward, Deniz Eylem Yoruk
Published in 2011
In this paper the authors undertake an ex-post evaluation of whether the special economic zones (SEZs) introduced in Poland in 1994 have been successful in meeting regional development objectives. They evaluate the policy of as many of its objectives as possible: employment creation, business creation (which includes attracting foreign direct investment), income or wage effects, and environmental sustainability. They use different panel data methods to investigate this question at the powiat and gmina levels in Poland during the 1995-2011 period. It is also possible to include numerous controls to reduce the problem of the omitted variables bias such as education level, dependency rates, state ownership, general subsidies and whether the area is urban or rural. The results indicate that SEZs in Poland have been successful in a number of their objectives such as private business creation. The positive effect of the policy however mainly comes through foreign direct investment (FDI), whereas the effects on e.g. investment and employment are small or insignificant. In other areas, such as securing higher income levels and locking firms into the sustainability agenda through the adoption of green technologies and reduced air pollution, the authors find only a small positively moderating effect of the policy on what are traditionally economically disadvantaged areas in Poland that used to be dependent on the socialist production model. Hence, despite high levels of FDI, the zones policy has not managed to overcome the legacy of backwardness or lagging regions. The main policy implication of the paper is that SEZs may be successful in stimulating activity in the short run but the policy must be seen as one of necessary temporality and can therefore not stand alone. Before launching SEZs, policymakers must have plans in place for follow up measures to ensure the longer term competitiveness and sustainability implications of such an initiative. There is a need to understand the connection between the specific incentive schemes used (in this particular case tax incentives were used) and the kinds of firms and activities they attract, including the behavioral models that those incentives promote.
Authored by: Camilla Jensen
Published in 2014
The aim of the project is to analyze government support for innovation in a comparative perspective by first examining the main existing instruments of financial support for innovation in Turkey and Poland, and secondly to assess their effectiveness by applying recent econometric techniques to firm-level data for both countries obtained from the Community Innovation Survey (CIS).
Authored by: Wojciech Grabowski, M. Teoman Pamukcu, Krzysztof Szczygielski, Sinan Tandogan
Published in 2013
The paper discusses possible directions and magnitudes of the relationship between the social security driven tax wedge, employment and shadow employment in Russia and Ukraine. The first section presents a summary of the economic and institutional background for development of the current size and structure of the socially driven tax wedge in both countries. The second section presents some theoretical considerations on the relationship between the social protection system, tax wedge, non-employment and finally, shadow employment. The third section contains an attempt to econometrically estimate the magnitude of the possible relationship between the tax wedge and total employment rates in both countries. In the fourth section, the authors try to discover the mechanism of influence of the last reform of the Ukrainian payroll tax system on the structure and size of shadow employment in the country. The last analytical section closes the circle leading the reader back from shadow employment to wages and finally to the issue of access to social security institutions. The last section concludes.
Authored by: Marek Gora, Oleksandr Rohozynsky, Irina Sinitsina, Mateusz Walewski
Published in 2009
The EU has been one of the largest trade partners for so called Eastern Partnership (EaP) countries, namely Armenia, Azerbaijan, Belarus, Georgia, Moldova and Ukraine. Commodity turnover of these countries with the EU vary between 30% and 50% of total, but their access to the EU market is less preferential than for many other neighboring countries. They trade with the EU on the basis of MFN regime, and five EaP countries, with exemption of Belarus, use privileges provided by Generalized System of Preferences (GSP) or the GSP+ or autonomous trade preferences (Moldova). With the launch of EaP initiative in 2009, relations between the EU and the Eastern European countries (Armenia, Azerbaijan, Belarus, Georgia, Moldova and Ukraine) have received new impetus for development. The EaP offers upgrade of relations within three major dimensions, namely (a) the Association Agreement (AA), (b) Agreement on a Deep and Comprehensive Free Trade Area (DCFTA), and (c) Visa Facilitation and Readmission agreements. The AA talks have been launched with all EaP countries expect for Belarus, and four of them have been involved in the DCFTA talks. Ukraine has progressed the most, as after five years of negotiations the EU-Ukraine Association Agreement with embedded DCFTA has been initialed in 2012.The aim of this study is to assess gains and losses that could arise from the DCFTA with the EU for the EaP countries, using information about EU-Ukraine DCFTA as model case for EaP regional trade cooperation.The focus of the paper is on non-tariff (regulatory) component of the EU DCFTA and potential implications of regulatory approximation. Also, current level of harmonization of EaP countries’regulatory framework with the EU acquis in the areas related to the DCFTA is analyzed.
Authored by: Veronika Movchan, Volodymyr Shportyuk
Published in 2012
This study surveys the current state of affairs in Poland with regard to the development of knowledge-intensive entrepreneurship (KIE), or new firm creation in industries considered to be science-based or to use research and development (R&D) intensively. We place KIE in Poland in the larger institutional context, outlining the key features of the country’s National Innovation System, and then focus on KIE itself. Our findings are perhaps more optimistic than many previous studies of knowledge-based economy development in Poland. We observe significant progress due to Polish access to the European Union. The frequency with which universities are playing a significant role as partners for firms in the innovation process has increased significantly; moreover, we observe a significant degree of internationalization of innovation-related cooperation. Another optimistic development is that the level of activity of venture capitalists seems to be fairly high in Poland considering the relatively low degree of development of capital markets offering VC investors exit opportunities. Moreover, after almost two decades of decline in the share of R&D spending in GDP, there are signs that this is beginning to rise, and that businesses are beginning to spend more on R&D. While demand-side problems continue to be significant barriers for the development of KIE, due to the relatively low level of education and GDP per capita in the country, the trends here are optimistic, with high rates of economic growth and improvements in the level of education of younger generations. Significant improvement is still needed in the area of intellectual property protection.
Authored by: Richard Woodward, Elzbieta Wojnicka, Wojciech Pander
Published in 2012
This paper analyzes the direct and indirect income effects of international labor migration and remittances in selected CIS countries. The analysis is based on computable general equilibrium (CGE) models for Moldova, Ukraine, Georgia, Kyrgyzstan, and Russia. All net emigration countries would experience a sharp contraction of private consumption in the absence of remittances. In Russia, the main effect of immigration has been to hold down the real wage (as potential capital stock adjustments in response to immigration are not reflected in the authors comparative-static modeling framework). The paper concludes that because of the important contribution of migration and remittances to stabilizing and sustaining incomes in many CIS countries, enhanced opportunities for legal labor migration should figure prominently in any deepening of bilateral relations between CIS countries and the European Union under the European Neighborhood Policy.
Authored by: Aziz Atamanov, Toman Omar Mahmoud, Roman Mogilevsky, Kseniya Tereshchenko, Natalia Tourdyeva
Published in 2009
Ainura Uzagalieva
Vitaly Vavryschuk
The paper discusses the issue of labor force mobility in a broad sense, and analyses how changes in social security policy and the structure of the social safety net (SSN) affects different aspects of labor force mobility. The text is structured as follows: Introduction, then follows Chapter 2, which provides an overview of the labor market and social safety net developments in Russian and Ukraine over the last decade, as well as discusses common features of these countries. The Chapter 3 establishes theoretical models for different aspects of labor force mobility, discusses the availability of data on Russia and Ukraine to test these models, and provides a statistical analysis of the data. The Chapter 4 discusses results of the statistical analysis. The final chapter discusses policy conclusions that can be derived from comparison of the effect of the SSN on labor mobility in these two countries, and extends them to all countries in transition.
Authored by: Marek Gora, Oleksander Rohozynsky
Published in 2009
The importance of new firm creation in the post-Communist economies of East Central Europe (ECE) has been subject to extensive research. This paper focuses on an area of entrepreneurship which has received relatively little attention in the transition economy context but which is of particular importance for the modernization of the transition economies: knowledge-based entrepreneurship (KBE), or new firm creation in industries considered to be science-based or to use research and development (R&D) intensively. We begin by sketching the situation in Estonia‟s small and medium-sized business sector, then proceed to study the conditions for high-tech firm development in the country, with particular attention devoted to the development of Information and Communication Technologies (ICT), which have been of particular significance in the Estonian case, as well as the questions of finance and policy initiatives. We then turn to the analysis of a series of case studies of firms active in the areas of information technology, life sciences, and digital mapping and navigation technology. Among the issues treated are the resources and strategies involved in KBE in Estonia, the relationships (networks) of the firms in question and how they are used for knowledge acquisition, and barriers to innovation and development. In spite of a relative lack of government support, we find that overall Estonia appears to be one of the better locations for KBE in the ECE region, with rising R&D spending, a highly educated entrepreneurial class, and universities that have moved forward rapidly in the development of technology transfer support facilities. The firms studied here rely for much of their success on foreign markets; on the other hand, difficulties in internationalisation can be identified as one of the key bottlenecks for the development of Estonian KBE. In the area of business relationships and networks, academic partners dominate.
Authored by: Janita Andrijevskaja, Tonis Mets, Urmas Varblane
Published in 2010
In this paper the author presents a general assessment of the labour market situation of older workers in the Czech Republic, starting with a more general overview of the demographic situation and emphasizing the generational differences among the young-old and older cohorts, underlying a number of different problems as well as solutions. Further in the paper she addresses the impact of the recent economic situation on employment levels, showing that the recovery in terms of employment has not yet begun and that the impact on older workers is (at least) two-fold: firstly, for older workers it is very difficult to find a new job once unemployed; secondly, if employed, the pressure on workability and the increasing demands of workplaces may be harder to bear for the older the worker. She describes a National Action Plan Supporting Positive Ageing (2013-2017) and other examples of good and transferable praxes which address some of the active ageing issues in an innovative way.
The second part of this report examines the issues of employability, workability and age-management as perceived by some of the key actors. The report goes into greater detail on the topic of paid work after retirement, which is considered an important part of the Czech economy, despite the fact that the employment of sizable groups of older workers after retirement is undeclared. Self-entrepreneurship and independent work in later life are another realm of employment that is increasing in importance in the Czech economy; however, as consulted experts argue, it is not to be taken as an unproblematic solution to late-life careers. In the last chapter the author turns her attention to the lifelong learning of older workers and to their up-skilling/retraining. In the concluding remarks, she reemphasizes the need to address the heterogeneity of the older workforce, in the sense of age/generational affiliation, health, socio-economic and other characteristics.
Authored by: Lucie Vidovicova
Published in 2014
The aim of this work is to present an in depth understanding of the conceptual framework of active ageing policies, which have been created and implemented in Poland. The discussion of active ageing in employment in Poland started relatively late. The first discussions on the unfavourable situation of elderly employment emerged only in the second half of the 1990s, when the debate on the pension system reform started. While only a few ageing policies were developed at the national level during that time, several interesting initiatives were undertaken at a regional level and in the third sector. They were mostly focused on productive ageing and the problems associated with the economic activation of people over 50. The intensive implementation of the active ageing policies in Poland started in 2012, during the European Year of Active Ageing. At present, there is an intense discussion on policies addressed to the elderly, which concentrate not only on the activation of the labour market, but also on healthy, active and socially inclusive ageing, education andcivil engagement.
This paper concludes that despite intense work being done by public authorities, the concept still needs a deeper implementation - especially at the regional level. Furthermore, close observation and evaluation of the activation programmes is still missing and the identification and implementation of good practices which are already being developed in other European countries is under-used.
Authored by: Izabela Styczynska
The idea of a Deep and Comprehensive Free Trade Agreement goes beyond the traditional concept of trade liberalization and, apart from the elimination of tariffs in trade of goods, it also includes the reduction/ removal of non-tariff barriers, the liberalization of the investment regime, the liberalization of trade in services, and the far-reaching harmonization/ mutual recognition of various trade and investment-related regulations and institutions. The economic literature, CGE modeling exercises and the practical experience of “deep” trade integration suggest a substantial potential for the future EU-Ukraine DCFTA in promoting trade and investments, creating additional welfare and employment, regulatory and institutional harmonization with EU’s acquis, and modernizing Ukraine’s economy. While beneficial for both sides, the potential gains (but also potential adjustment costs) are greater for Ukraine as it is the smaller partner with higher initial trade barriers. However, the DCFTA does not include an automatic guarantee of success. Very much depends on the political will and administrative capacity to implement all of its provisions in a timely and accurate manner. This is a serious challenge for Ukraine, which has a mixed record in reforming its economy and state and which is still struggling to fulfill all of its commitments undertaken during the WTO accession process.
Authored by: Marek Dabrowski and Svitlana Taran
Published in 2012
This paper reviews the published literature on the definition and measurement of the administrative and compliance costs of taxation, with special reference to VAT (including evasion and fraud) in the European Union.
Written by Luca Barbone, Richard M. Bird, and Jaime Vasquez-Caro. Published in March, 2012.
See more on our website: http://www.case-research.eu/en/node/57573
This paper discusses the link between the deficit bias in public finance and institutional settings. The Polish experience is put in a wider context and provides an extensive discussion of possible institutional reforms that may be implemented to stabilise the path of fiscal policy and reduce the deficit bias. Although substantial improvements have been made in Poland with respect to fiscal transparency standards set by the IMF and EU there is still much scope for enhancement. The recommended change in fiscal policy would involve the implementation of medium-term budgetary framework that would ensure consistency between the budgetary process and medium-term fiscal goals. This should be accompanied by the introduction of binding constraints on fiscal policy. The expenditure rule could be reintroduced to strengthen fiscal discipline, as it could force policymakers to tighten fiscal policy. It seems to be indispensable to maintain fiscal rules at the local government level. The issue of still limited fiscal transparency and unsatisfactory performance of fiscal rules requires the undertaking of various appropriatemeasures to strengthen the policy framework in Poland. This can be done in our view by involving external institution entitled to examine fiscal transparency and the performance of fiscal rules in the budgetary process. We think that the institution that is fully capable to take the lead in this respect is the NIK, which was granted full independence in 1994 and has since proved to be successful in overseeing public finances. This should, however, be accompanied by simultaneous enhancement of the internal audit.
Authored by: Rafal Benecki, Jens Holscher, Mariusz Jarmuzek
Published in 2006
The empirical analysis of the determinants of institutional development in transition countries as well as the qualitative country studies summarized in this publication allow for some optimism concerning a potential impact of the EU on institution building and governance quality in CIS countries. Regression analysis reveals a positive impact of EU cooperation agreements below a membership perspective. Alternatively to the EU, entry into the NATO accession process also exerts incentives for better institutions which are often overlooked. In contrast, WTO membership is not found to have any impact on institution building in CIS countries. While there is room for some EU-related optimism given the results from the regression analysis it depends on the country-specific ENP action plans and programs whether or not ENP cooperation actually leads to Europeanization or institutional convergence towards EU standards in the CIS. The case studies on the effectiveness of Neighborhood Europeanization through ENP in Ukraine, Georgia, and Azerbaijan reveal that current EU policies towards these countries can be, at best, seen as a catalyst but not as a main driver of institutional convergence. A perspective for a stake in the internal market is on the long horizon for Ukraine only. ENP mechanisms for conflict resolution in Georgia and Azerbaijan have been rather weak before the recent clash in Abkhazia and South Ossetia. The top-down institutional convergence, i.e. an EU-first strategy, worked well for Enlargement Europeanization but implemented in the ENP it significantly reduces the leverage of the EU to create a ring of well-governed neighbour states.
Authored by: Thorsten Drautzburg, Andrea Gawrich, Inna Melnykovska, Rainer Schweickert
Published in 2008
This paper examines the motives behind foreign direct investment (FDI) in a group of four CIS countries (Ukraine, Moldova, Georgia and Kyrgyzstan) based on a survey of 120 enterprises. The results indicate that non-oil multi-national enterprises (MNEs) are predominantly oriented at serving local markets. Most MNEs in the CIS operate as 'isolated players', maintaining strong links to their parent companies, while minimally cooperating with local CIS firms. The surveyed firms secure the majority of supplies from international sources. For this reason, the possibility for spillovers arising from cooperation with foreign-owned firms in the CIS is rather low at this time. The lack of efficiency-seeking investment poses further concern regarding the nature of FDI in the region. The most significant problems identified in the daily operations of the surveyed foreign firms are: the volatility of the political and economic environment, the ambiguity of the legal system and the high levels of corruption.
Authored by: Malgorzata Jakubiak
Published in 2008
This paper is an overview of the achievements in the area of employee financial participation (EFP) during the last fifty years. It addresses the question of the extent to which EFP is relevant in today’s world. EFP is distinguished from participation in management (industrial democracy), and the various types of EP are discussed. The major arguments for EFP are presented and discussed critically. The evolution of major forms of EFP, the scale of their operation in several advanced economies, and the legal and tax incentives for EFP are described. The efforts of European Union bodies to popularise this idea in all member countries are illustrated. Showing that EFP has become a broadly recognised principle of modern management in thousands of enterprises, we consider opportunities for disseminating these solutions on a wider scale, in particular in Poland. Finally, a number of directions for further research on financial participation are considered.
Authored by: Barbara Blaszczyk
Published in 2014
This paper investigates the differences in innovation behaviour, i.e. differences in innovation sources and innovation effects, among manufacturing firms in three NMS: the Czech Republic, Hungary and Poland. It is based on a survey of firms operating in four manufacturing industries: food and beverages, automotive, pharmaceuticals and electronics. The paper takes into account: innovation inputs in enterprises, cooperation among firms in R&D activities, the benefits of cooperation with business partners and innovation effects (innovation outputs and international competitiveness of firms' products and technology) in the three countries. After employing cluster analysis, five types of innovation patterns were detected. The paper characterises and compares these innovation patterns, highlighting differences and similarities. The paper shows that external knowledge plays an important role in innovation activities in NMS firms. The ability to explore cooperation with business partners and the benefits of using external knowledge are determined by in-house innovation activities, notably R&D intensity.
Authored by: Ewa Balcerowicz, Marek Pęczkowski, Anna Wziatek-Kubiak
Published in 2009
The aim of this study is to estimate the impact of the removal of NTBs in trade between the EU and its selected CIS partners: Russia, Ukraine, Georgia, Armenia and Azerbaijan (CIS5). The report includes a discussion of methodologies of measurement of non-tariff barriers and the impact of their removal, including a review of previous studies focusing on CEE and CIS regions. Further, we employ a computable general equilibrium model encompassing the following three pillars of trade facilitation: legislative and regulatory approximation, reform of customs rules and procedures and liberalization of the access of foreign providers of services. We conclude that a reduction of NTBs and improved access to the EU market would bring significant benefits to the CIS5 countries in terms of welfare gains, GDP growth, increases in real wages and expansion of international trade. The possible welfare implications of deep integration with the EU range from 5.8% of GDP in Ukraine to sizeable expected gains in Armenia (3.1%), Russia (2.8%), Azerbaijan (1.8%) and Georgia (1.7%).
Authored by: Maryla Maliszewska, Irina Orlova, Svitlana Taran
Published in 2009
Foreign subsidiary performance and market efficiency effects are estimated and confronted in this paper using a rich firm-level panel for Polish manufacturing. Besides estimating total factor productivity, other performance measures are calculated and contrasted such as labor productivity, employment growth, markup levels and profitability. The findings show that foreign subsidiaries in Poland pay more (in wages and capital), earn less (in terms of profitability or ROA) and work harder (in terms of TFP and labor productivity) relative to their domestic counterparts. Foreign subsidiaries contribute with higher employment growth than other domestic and new firms. There is no evidence that foreign subsidiaries have significantly reduced market efficiency within the period of study and across the industries and entry modes investigated on average. Controlling for competition (which is found to have a negative effect on efficiency) the paper documents significant intra-industry spillovers. The effect is estimated to be twice as high within the foreign owned industrial communities as compared to the cross effect to domestic firms.
Authored by: Camilla Jensen
Published in 2009
This paper provides the quantitative estimate of the potential growth bonus for CIS countries, and in particular EU's Easter Neighbours, that can be a result of deeper institutional harmonisation with the EU. Econometric investigation involving instrumental variable, simultaneous equation and dynamic panel techniques documents the strong positive link between growth performance and reforms, as well as between reforms and European integration. The paper derives the range of possible values of growth bonus from the deepened neighbourhood cooperation between 1 and 3.8 with the median at 1.8 percentage points. The least growth bonus is expected through basic liberalization reforms, while countries with a considerable institutional gap are likely to gain the most.
Authored by: Artur Radziwill, Pawel Smietanka
Published in 2009
This paper focuses on knowledge-based entrepreneurship, or new firm creation in industries which are considered to be science-based or to use research and development intensively, in the East Central European (ECE) context. On the basis of case studies of thirteen knowledge-based firms in six ECE countries, we suggest that KBE firms in these countries may differ in some important ways from the conventional picture of new technology based firms. In general, we see the ECE knowledge-intensive firm as a knowledge-localiser or customiser, adapting global knowledge to local needs on the domestic market, rather than a knowledge-creator generating new solutions for global markets. The entrepreneurs who start and run these businesses are skilled at spotting trends early and bringing them to their countries. Based in countries that generally have poor reputations as sources of innovative, high-technology products, but having established strong brands for themselves in their home markets, they are struggling with the challenge of entering export markets with products and services that can achieve global, or at least regional, recognition. The studies of the companies discussed here suggest that ECE firms are still in the early stages of this strategic shift.
Authored by: Slavo Radosevic, Richard Woodward, Deniz Eylem Yoruk
Published in 2011
This paper evaluates the implications of Eastern EU enlargement with the use of a computable general equilibrium model. The focus is on accession to the Single Market, with explicit modelling of the removal of border costs and costs of producing to different national standards. The results indicate significant welfare gains for the CEECs (volume of GDP increases by 1.4-2.4%) and modest gains for the EU. The steady state scenarios, which allow for the capital stock adjustment in response to higher return to capital, more than double the static welfare gains.
Authored by: Maryla Maliszewska
Published in 2004
The paper discusses possible directions and magnitudes of the relationship between the social security driven tax wedge, employment and shadow employment in Russia and Ukraine. The first section presents a summary of the economic and institutional background for development of the current size and structure of the socially driven tax wedge in both countries. The second section presents some theoretical considerations on the relationship between the social protection system, tax wedge, non-employment and finally, shadow employment. The third section contains an attempt to econometrically estimate the magnitude of the possible relationship between the tax wedge and total employment rates in both countries. In the fourth section, the authors try to discover the mechanism of influence of the last reform of the Ukrainian payroll tax system on the structure and size of shadow employment in the country. The last analytical section closes the circle leading the reader back from shadow employment to wages and finally to the issue of access to social security institutions. The last section concludes.
Authored by: Marek Gora, Oleksandr Rohozynsky, Irina Sinitsina, Mateusz Walewski
Published in 2009
This paper describes the general framework of the EU’s emerging relationship with its new neighbours and investigates the potential economic impact of the European Neighbourhood Policy (ENP), both for the EU itself and for its neighbours. In particular, it seeks to develop an answer to the question of whether the ENP is sufficiently attractive so as to induce the governments in neighbourhood countries to adopt (or accelerate the adoption of) the types of economic and governance reforms that were implemented in the new member states during their accession processes. Although the specifics of the ENP are still being developed, the lack of incentives as regards to unclear accession to the EU is identified as the main weakness of the ENP.
Economically, the ENP seeks to ease trade restrictions through the implementation of legislative approximation and convergence with EU standards, before accessing the EU’s single market can become a reality. Positively though, is that the access to the single market could improve significantly under the ENP. As experienced by the Central European states, FDI is instrumental to transform the economies of the Western CIS and the Caucasus. The ENP can be a supportive framework for improving investor confidence. Likewise, the new European Neighbourhood Instrument can add more coherence in technical assistance, and provide more financial support for creating capacities for trade infrastructures and institutional and private sector development. Finally, measures to promote increased labour migration between the new neighbours and the enlarged EU may be worth to put on the agenda for the future development and impact of the ENP.
Authored by: Susanne Milcher, Ben Slay
Published in 2005
During the last two decades the CIS countries have received very significant amounts of technical assistance from international development organizations and bilateral donors. While this has played a positive and important role in the transformation of these societies, practically all stakeholders currently share the opinion that many problems have accumulated in the area of technical cooperation with CIS countries. This paper intends to outline these problems, analyze their underlying reasons - including the changing environment for technical cooperation in the CIS - and the interaction of the interests of beneficiaries, donors and providers in the process of implementing technical cooperation projects. The analysis suggests that a good understanding, recognition and coordination of the interests of all TC stakeholders and a reduction in the information gap between the various participants in the technical cooperation process are necessary for improving the effectiveness of technical cooperation.
Authored by: Aziz Atamanov, Roman Mogilevsky
Published in 2008
The The purpose of this paper is to analyze the various challenges facing European integration and the EU institutional architecture as result of the global financial crisis. The European integration process is not yet complete, both in terms of its content and geographical coverage. It can be viewed as a kind of intermediate hybrid between an international organization and a federation, subject to further evolution. This is also true of the Single European Market and the Economic and Monetary Union, which form the core of the EU economic architecture. Certain policy prerogatives (such as external trade, competition, and the Common Agriculture Policy) are delegated to the supranational level while others (such as financial supervision or fiscal policy) remain largely in the hands of national authorities.
Authored by: Marek Dąbrowski
Published in 2009
The CIS region is of vital importance for the EU countries considering that both are interconnected through cooperation or membership in supranational political and economic institutions (OSCE, WTO, OECD, NATO, etc.), through transport and energy corridors, through investment, trade and migration trends.
The interests of EU member states in the region are very diverse and are sometimes pursued in contradiction to one another. The overarching interest is of an economic nature, given the large reserves of natural resources (particularly gas and oil) and due to the size of the CIS market of 277 million consumers. Security and immigration issues also rank high on the list, whereas EU countries are less concerned with democratisation trends in the CIS. Russia is the most important CIS partner for a majority of EU countries. Energy plays a disproportionally high role in EU member states (MS) - Russia relations and is also a strong determinant of the overall heterogeneity of EU MS policies towards Russia. The type of bilateral relations which the EU MS maintain with one sub-region of the CIS (particularly the EENP, but increasingly also Central Asia) also affects their relations with Russia. Cultural closeness and a common history still play a large part in the development of bilateral relations. The accession to the EU of Central and Eastern European states has altered the existing relations between them and their eastern CIS neighbours, thereby also modifying their interests in the region. Regrettably, the EU's policies towards Russia and the EENP region have not yet been able to provide a playing field able to compensate for this alteration.
Thus, the present report studies the various interests (political, security, economic, cultural) which underpin relations between the EU member states and the CIS countries and also discusses the latest developments in EU policies towards a specific CIS sub-region (Russia, the Eastern ENP and Central Asia), thereby providing a broad picture of the type of interests, how they are pursued by the EU member states and where these intersect or clash.
Authored by: George Dura
Published in 2008
The authors evaluate the effects of potential measures to liberalize trade between the EU and the CIS using a computable general equilibrium (CGE) model. They look at the CIS as an aggregate and we also present results for individual CIS countries. Their CGE model takes different underlying industry specific market structures and elasticities into account. Furthermore, the model incorporates estimated non-tariff trade barriers to trade in services. The results are compared to a baseline which incorporates recent developments in the trade policy environment, i.e. the phase out of ATC, enlargement of the EU and CIS accessions to the WTO. The analysis takes agricultural liberalization, liberalization in industrial tariffs, and liberalization in services trade as well as trade facilitation measures into account. While there is important heterogeneity in the impact of FTAs on individual countries, the results indicate that the CIS as a whole would experience a negative income effect if the FTA would be limited only to trade in goods. This implies that the CIS would most likely to benefit from an FTA with the EU if it would incorporate deeper form of integration not being limited to liberalization of tariffs in goods.
Authored by: Joseph Francois, Miriam Manchin
Published in 2009
The paper analyses the relationship between labour costs and employment development in manufacturing industry in Poland, Czech Republic and Hungary. It indicates the need for thorough labour cost analysis in Europe in the context low employment rates among New Member States. The steps taken within the framework of the EU's common employment policy emphasise the crucial role of labour costsin enhancing labour demand.
The question raised in this paper is whether the cost of hiring labour is a significant determinant of employment in Polish, Czech and Hungarian manufacturing and is considered in terms of both relative (unit labour costs) and absolute (labour costs per one employee) measures. The study examines the labour costemployment relationship aiming to find out whether it differs significantly between the three countries and between commodity groups in manufacturing industry within each country.
Authored by: Agnieszka Furmanska-Maruszak
Published in 2006
This paper contributes to the ongoing debate on fiscal consolidation and the questionable effectiveness of the Stability and Growth Pact by addressing the problem of economic governance in the EMU with a game-theoretic principal-agent approach. Following the theory of delegation, we develop a principal-multi agent model where the EMU authorities act as a collective principal that designs contracts for each of two agents that reflect Europe’s ”South” and ”North”. We investigate what happens when agents face hidden-information moral hazard problem and when they are able to coordinate their actions. Bearing in mind the applicability of incentive mechanisms, we discuss the optimal contracts for the principal and each of the agents. We prove that the most efficient solution consists of tailor-made contracts, according to which highly indebted countries must be offered strong incentive mechanisms in the form of substantial penalties but also rewards (e.g., preferential loans). We also stress the importance of taking into account positive spillover effects, which could be facilitated by economic integration and fiscal policy coordination between the EMU Members.
Authored by: Luca Barbone and Grzegorz Poniatowski
Published in 2013
The purpose of this paper is to examine the economic aspects of EU policy towards its Eastern neighbors in the former Soviet Union. For a long period of time, this region was considered as less important for the EU, as compared to Central and Eastern Europe, which was the subject of a far-reaching economic and political integration offer materialized in two rounds of EU Eastern Enlargements (2004, 2007). However, moving the EU's geographical frontier further to the East and Southeast increased the importance of the CIS region as a potential partner of the enlarged EU. In 2004, East European and Caucasus countries were invited to participate in the European Neighborhood Policy a new EU external policy framework also addressed to the Southern Mediterranean countries. Russia has been attempting to build a strategic political and economic partnership with the EU outside the ENP framework but the content of this relationship is, in fact, very similar to the ENP.
A general weakness of the ENP is that there is a lack of balance between farreaching expectations with respect to neighbors' policies and reforms, and limited and distant rewards that can potentially be offered. Thus, making this cooperation framework more effective requires a serious enhancement of the rewards using, to the extent possible, the positive experience of previous EU enlargements. The nature of contemporary economic relations in the globalized world calls for a more complex package-type approach to economic integration rather than just limiting cooperation to some narrow fields.
Authored by: Marek Dąbrowski
Published in 2007
The main purpose of this study is to determine what are the main factors which stand behind the diversity in performance of business services measured by their contribution to growth in the EU Member States. We show that in addition to typical growth factors which enhance labour productivity, also the extent of interconnectedness of business services with upstream industries is important to explain service-based economic growth.
The analysis yields two interesting results. Firstly, the authors show that patterns of industrial interconnectedness of business services are considerably diversified across the EU Member States indicating large differences in the integration of services as supplier with other sectors on a country level. Secondly they show that the diversified growth performance of business services across the EU25 countries can be explained by differences in labour productivity and differences in forward linkages.
The results indicate the fundamental role of business services as the main engine of growth in the European economy. This service-based growth is channelled mainly through increases in labour productivity and forward interconnectedness of services with downstream industries.
On the policy making level the results indicate that investment in human and intangible capital are crucial for the service-dominated economy as they not only enhance economic growth inside knowledge intensive services but also facilitate transmission of growth impulses to downstream industries by increasing diffusion and integration of services as suppliers of high value added inputs to the economy.
Authored by: Maciej Sobolewski, Grzegorz Poniatowski
Published in 2013
Synergies between ESIF funds, Horizon 2020 and other research programmesParma Couture
Improving linkages between various EU Funds is the best way to enhance the impact of research and innovation (R&I) investments. By coordinating different forms of support, these links help creating competitiveness, jobs and growth in the EU by combining, for example, European Structural and Investment Funds (ESIF), Horizon 2020 and other EU R&I instruments. Such a cross-cutting approach will be beneficial for gaining international quality of R&I projects, particularly in this area, where the EU is competing on the global stage.
To make these linkages a reality, national and regional authorities involved in the implementation of ESIF programmes focusing on research, innovation and competitiveness must seize the opportunity to ensure coordination and complementarities with instruments like Horizon 2020, COSME, Erasmus+, CreativeEurope and the Connecting Europe Facility. This means joint efforts at EU, national and regional levels in boosting the quality of programmes to achieve better results and higher impacts of the investments.
The European Commission has published guidance for policy-makers and implementing bodies on synergies between the different EU programmes investing into research, innovation and competitiveness, providing possible scenarios for their application in practice.
Implementation of the European internal market and East-West integration has been accompanied by dramatic change in the spatial distribution of economic activity, with higher growth west and east of a longitude degree through Germany and Italy. In the east, income growth has been accompanied by increasing regional disparities within countries. We examine theoretically and empirically whether European integration as such can explain these developments. Using a numerical simulation model with 9 countries and 90 regions, theoretical predictions are derived about how various patterns of integration may affect the income distribution. Comparing with reality, we find that a reduction in distance-related trade costs combined with east-west integration is best able to explain the actual changes in Europe's economic geography. This suggests that the implementation of the European internal market or the Euro has "made Europe smaller". In Central Europe, capital regions grow faster and there are few east-west growth differences inside countries. There is no convincing support for the hypothesis that European integration had adverse effects on non-members.
Authored by: Arne Melchior
Published in 2009
This report aims to identify, explain and detail the links and interactions in Southern and Eastern Mediterranean countries (SEMCs) between energy supply and demand and socio-economic development, as well as the potential role of energy supply and demand policies on both. Another related aim is to identify and analyse, in a quantitative and qualitative way, the changing role of energy (both demand and supply) in southern Mediterranean economies, focusing on its positive and negative impact on socio-economic development.
This report investigates in particular:
The most important channels through which resource wealth can contribute to or hamper economic and social development in the analysed region;
Mechanisms and channels of relations between energy supply and demand policies and economic and social development.
The burdens of energy subsidies and ‘oil syndrome’ are of particular relevance for the region. An integrated socio-economic development and energy policy scenario approach showing the potential benefits and synergies within countries and the region is developed in the final part of the report.
Written by Emmanuel Bergasse, Wojciech Paczynski, Marek Dabrowski and Luc De Wulf. Published in March 2013.
PDF available on our website at: http://www.case-research.eu/en/node/57975
This study is part of the project entitled “Costs and Benefits of Labour Mobility between the EU and the Eastern Partnership Countries” for the European Commission1. The study was written by Luca Barbone (CASE) Mikhail Bonch- Osmolovskiy (CASE) and Matthias Luecke (CASE, Kiel). It is based on the six country studies for the Eastern Partnership countries commissioned under this project and prepared by Mihran Galstyan and Gagik Makaryan (Armenia), Azer Allahveranov and Emin Huseynov (Azerbaijan), Aleksander Chubrik and Aliaksei Kazlou (Belarus), Lasha Labadze and Mirjan Tukhashvili (Georgia), Vasile Cantarji and Georgeta Mincu (Moldova), Tom Coupé and Hanna Vakhitova (Ukraine). The authors would like to thank for their comments and suggestions Kathryn Anderson, Martin Kahanec, Costanza Biavaschi, Lucia Kurekova, Monica Bucurenciu, Borbala Szegeli, Giovanni Cremonini and Ummuhan Bardak, as well as the dbaretailed review provided by IOM. The views in this study are those of the authors’ only, and should not be interpreted as representing the official position of the European Commission and its institutions.
Written by Luca Barbone, Mikhail Bonch-Osmolovsky and Matthias Luecke. Published in September 2013.
PDF available on our website at: http://www.case-research.eu/en/node/58264
Mapping varieties of industrial relations: Eurofound's conceptual framework a...Eurofound
Eurofound’s 2016 report Mapping key dimensions of industrial relations identified four key dimensions of industrial relations: industrial democracy, industrial competitiveness, social justice, and quality of work and employment. This report builds upon that earlier study, developing a dashboard of 45 indicators to assess how and to what extent the conceptual framework of these key dimensions can be applied at national level. The indicators were tested across the Member States by Eurofound’s Network of European Correspondents and show reasonable accuracy when used to map the predominant features and trends of the national industrial relations systems. The study confirms that a dashboard of indicators that can accurately measure and summarise the complex reality of industrial relations across the EU is a valuable tool for comparative research and a useful instrument for supporting policymakers, social partners and stakeholders. The report sets out a range of options for further developing this
This paper presents forecasts for the Financial Stress Index (FSI) and the Economic Sensitivity Index (ESI) for the period 2015-2015 for six countries in the region, namely the Czech Republic, Estonia, Hungary, Latvia, Lithuania and Poland. It is a continuation of the endeavor to construct synthetic indices measuring financial stress and economic sensitivity for twelve Central and East European countries using the Principal Component Analysis. In order to obtain forecasts of the FSI, we estimated Vector Autoregression (VAR) models on monthly data for the period 2001-2012 separately for all the countries. Using quarterly historical values of ESI and FSI, we estimated Dynamic Panel Data Model for the complete sample of countries. Parameters of the model were later used for forecasting the ESI. Obtained results suggest that the FSI will start to rise in 2014 in the Czech Republic, Lithuania, and Estonia. For Latvia and Hungary, we observed a conversion in the trend, i.e. at the beginning of 2015, when the index should start to fall. According to our forecasts, the ESI will be rising in the next two years, except for Hungary, where we predict a continuous decrease in economic sensitivity.
Authored by: Maciej Krzak and Grzegorz Poniatowski
Published in 2014
The impact of innovation on firm performance has been a matter of significant interest to economists and policy makers for decades. Although innovation is generally regarded as a means of improving the competitiveness of firms and their performance on domestic and foreign markets, this relationship has not been supported unambiguously by empirical work. Innovative activities of firms influence their performance not necessarily directly but through the production of useful innovations and increased productivity. Therefore, in recent years, the relationship between innovation and firm performance has been modelled by a multistageapproach. However, the findings from existing studies differ in many respects which suggests that there is the need for further research. In this paper we employ firm level data from the fourth Community Innovation Survey (CIS4), covering some 90,000 firms in 16 West and East European countries in order to assess the drivers of the innovation process in two different institutional settings, a number of mature market economies of WesternEurope and a number of advanced transition economies from Central and Eastern Europe. A four-equation model, originating in the work of Crepon et al., (1998), has been used to linkthe innovation decision of firms to their performance through the impact of innovation input on innovation output and the innovation output on productivity and better performance. Our findings confirm the positive relationship between innovation activities and productivity at the firm level and provide further evidence on the relationship between size and innovation activities.
Authored by: Iraj Hashi, Nebojsa Stojcic
Published in 2010
Similar to CASE Network Studies and Analyses 388 - Cost of Institutional Harmonization in the ENP Countries (20)
The report examines the social and economic drivers and impact of circular migration between Belarus and Poland, Slovakia, and the Czech Republic. The core question the authors sought to address was how managing circular migration could, in the long term, help to optimise labour resources in both the country of origin and the destination countries. In the pages that follow, the authors of the report present the current and forecasted labour market and demographic situation in their respective countries as well as the dynamics and characteristics of short-term labour migration flows between Belarus and Poland, Slovakia, and the Czech Republic, concentrating on the period since 2010. They also outline and discuss related policy responses and evaluate prospects for cooperation on circular migration.
Podręcznik został opracowany w celu przekazania trenerom i nauczycielom podstawowej wiedzy, która może być przydatna w prowadzeniu szkoleń promujących pracę rejestrowaną. Prezentuje on z jednej strony korzyści z pracy rejestrowanej, z drugiej – potencjalne koszty związane z pracą nierejestrowaną. W pierwszej kolejności informacje te przedstawiono w odniesieniu do pracowników najemnych (rozdział 2), podkreślając w sposób szczególny to, że negatywne konsekwencje pracy nierejestrowanej są ponoszone przez całe życie. Ze względu na specyficzną sytuację cudzoziemców pracujących w Polsce konsekwencje ponoszone przez tę grupę opisano oddzielnie (rozdział 3). Ponadto zaprezentowano skutki dotyczące pracodawców z szarej strefy z wyodrębnieniem tych, którzy zatrudniają cudzoziemców (rozdział 4). Uzupełnieniem przedstawionych informacji jest opis działań podejmowanych przez państwo w celu ograniczenia zjawiska pracy nierejestrowanej w Polsce (rozdział 5) oraz prowadzonych w Wielkiej Brytanii, czyli w kraju będącym liderem w walce z szarą strefą (rozdział 6).
European countries face a challenge related to the economic and social consequences of their societies’ aging. Specifically, pension systems must adjust to the coming changes, maintaining both financial stability, connected with equalizing inflows from premiums and spending on pensions, and simultaneously the sufficiency of benefits, protecting retirees against poverty and smoothing consumption over their lives, i.e. ensuring the ability to pay for consumption needs at each stage of life, regardless of income from labor.
One of the key instruments applied toward these goals is the retirement age. Formally it is a legally established boundary: once people have crossed it – on average – they significantly lose their ability to perform work (the so-called old-age risk). But since the 1970s, in many developed countries the retirement age has become an instrument of social and labor-market policy. Specifically, in the 1970s and ‘80s, an early retirement age was perceived as a solution allowing a reduction in the supply of labor, particularly among people with relatively low competencies who were approaching retirement age, which is called the lump of labor fallacy. It was often believed that people taking early retirement freed up jobs for the young. But a range of economic evidence shows that the number of jobs is not fixed, and those who retire don’t in fact free up jobs. On the contrary, because of higher spending by pension systems, labor costs rise, which limits the supply of jobs. In general, a good situation on the labor market supports employment of both the youngest and the oldest labor force participants. Additionally, a lower retirement age for women was maintained, which resulted to a high degree from cultural conditions and norms that are typical for traditional societies.
Until now, the banking sector has been one of the strong points of Poland’s economy. In contrast to banks in the U.S. and leading Western European economies, lenders in Poland came through the 2008 global financial crisis without a scratch, without needing state financial support. But in recent years the industry’s problems have been growing, creating a threat to economic growth and gains in living standards.
For an economy’s productivity to increase, funds can’t go to all companies evenly, and definitely shouldn’t go to those that are most lacking in funds, but to those that will use them most efficiently. This is true of total external financing, and thus funding both from the banking sector and from parabanks, the capital market and funds from public institutions. In Poland, in light of the relatively modest scale of the capital market, banks play a clearly dominant role in external financing of companies. This is why the author of this text focuses on the bank credit allocation efficiency.
The author points out that in the very near future, conditions will emerge in Poland which – as the experience of other countries shows – create a risk of reduced efficiency of credit allocation to business. Additionally, in Poland today, bank lending to companies is to a high degree being replaced by funds from state aid, which reduces the efficiency of allocation of external funds to companies (both loans and subsidies), as allocation of government subsidies is not usually based on efficiency. This decline in external financing allocation efficiency may slow, halt or even reverse the process, that has been uninterrupted for 28 years, of Poland’s convergence, i.e. the narrowing of the gap in living standards between Poland and the West.
The economic characteristics of the COVID-19 crisis differ from those of previous crises. It is a combination of demand- and supply-side constraints which led to the formation of a monetary overhang that will be unfrozen once the pandemic ends. Monetary policy must take this effect into consideration, along with other pro-inflationary factors, in the post-pandemic era. It must also think in advance about how to avoid a policy trap coming from fiscal dominance.
This paper is organized as follows: Chapter 2 deals with the economic characteristics of the COVID-19 pandemic and its impact on the effectiveness of the monetary policy response measures undertaken. In Chapter 3, we analyse the monetary policy decisions of the ECB (and other major CBs for comparison) and their effectiveness in achieving the declared policy goals in the short term. Chapter 4 is devoted to an analysis of the policy challenges which may be faced by the ECB and other major CBs once the pandemic emergency comes to its end. Chapter 5 contains a summary and the conclusions of our analysis.
Purpose: This paper tries to identify the wage gap between informal and formal workers and tests for the two-tier structure of the informal labour market in Poland.
Design/methodology/approach: I employ the propensity score matching (PSM) technique and use data from the Polish Labour Force Survey (LFS) for the period 2009–2017 to estimate the wage gap between informal and formal workers, both at the means and along the wage distribution. I use two definitions of informal employment: a) employment without a written agreement and b) employment while officially registered as unemployed at a labour office. In order to reduce the bias resulting from the non-random selection of
individuals into informal employment, I use a rich set of control variables representing several individual characteristics.
Findings: After controlling for observed heterogeneity, I find that on average informal workers earn less than formal workers, both in terms of monthly earnings and hourly wage. This result is not sensitive to the definition of informal employment used and is
stable over the analysed time period (2009–2017). However, the wage penalty to informal employment is substantially higher for individuals at the bottom of the wage distribution, which supports the hypothesis of the two-tier structure of the informal labour market in Poland.
Originality/value: The main contribution of this study is that it identifies the two-tier structure of the informal labour market in Poland: informal workers in the first quartile of the wage distribution and those above the first quartile appear to be in two partially different segments of the labour market.
The rule of law, by securing civil and economic rights, directly contributes to social prosperity and is one of our societies’ greatest achievements. In the European Union (EU), the rule of law is enshrined in the Treaties of its founding and is recognised not just as a necessary condition of a liberal democratic society, but also as an important requirement for a stable, effective, and sustainable market economy. In fact, it was the stability and equality of opportunity provided by the rule of law that enabled the post-war Wirtschaftswunder in Germany and the post-Communist resuscitation of the economy in Poland.
But the rule of law is a living concept that is constantly evolving – both in its formal, de jure dimension, embodied in legislation, and its de facto dimension, or its reception by society. In Poland, in particular, according to the EU, the rule of law has been heavily challenged by government since 2015 and has evolved amid continued pressure exerted on the institutions which execute laws. More recently, the outbreak of the COVID-19 pandemic transformed the perception of the rule of law and its boundaries throughout the EU and beyond (Marzocchi, 2020).
This Study contains Value Added Tax (VAT) Gap estimates for 2018, fast estimates using a simplified methodology for 2019, the year immediately preceding the analysis, and includes revised estimates for 2014-2017. It also includes the updated and extended results of the econometric analysis of VAT Gap determinants initiated and initially reported in the 2018 Report (Poniatowski et al., 2018). As a novelty, the econometric analysis to forecast potential impacts of the coronavirus crisis and resulting recession on the evolution of the VAT Gap in 2020 is reported.
In 2018, most European Union (EU) Member States (MS) saw a slight decrease in the pace of gross domestic product (GDP) growth, but the economic conditions for increasing tax compliance remained favourable. We estimate that the VAT total tax liability (VTTL) in 2018 increased by 3.6 percent whereas VAT revenue increased by 4.2 percent, leading to a decline in the VAT Gap in both relative and nominal terms. In relative terms, the EU-wide Gap dropped to 11 percent and EUR 140 billion. Fast estimates show that the VAT Gap will likely continue to decline in 2019.
Of the EU-28, the smallest Gaps were observed in Sweden (0.7 percent), Croatia (3.5 percent), and Finland (3.6 percent), the largest – in Romania (33.8 percent), Greece (30.1 percent), and Lithuania (25.9 percent). Overall, half of the EU-28 MS recorded a Gap above 9.2 percent. In nominal terms, the largest Gaps were recorded in Italy (EUR 35.4 billion), the United Kingdom (EUR 23.5 billion), and Germany (EUR 22 billion).
The euro is the second most important global currency after the US dollar. However, its international role has not increased since its inception in 1999. The private sector prefers using the US dollar rather than the euro because the financial market for US dollar-denominated assets is larger and deeper; network externalities and inertia also play a role. Increasing the attractiveness of the euro outside the euro area requires, among others, a proactive role for the European Central Bank and completing the Banking Union and Capital Market Union.
Forecasting during a strong shock is burdened with exceptionally high uncertainty. This gives rise to the temptation to formulate alarmist forecasts. Experiences from earlier pandemics, particularly those from the 20th century, for which we have the most data, don’t provide a basis for this. The mildest of them weakened growth by less than 1 percentage point, and the worst, the Spanish Flu, by 6 percentage points. Still, even the Spanish Flu never caused losses on the order of 20% of GDP – not even where it turned out to be a humanitarian disaster, costing the lives of 3-5% of the population. History suggests that if pandemics lead to such deep losses at all, it’s only in particular quarters and not over a whole year, as economic activity rebounds. The strength of that rebound is largely determined by economic policy. The purpose of this work is to describe possible scenarios for a rebound in Polish economic growth after the epidemic.
A separate issue, no less important, is what world will emerge from the current crisis. In the face of the 2008 financial crisis, White House Chief of Staff Rahm Emanuel said: “You never want a serious crisis to go to waste. And what I mean by that is an opportunity to do things that you think you could not do before.” Such changes can make the economy and society function better than before the crisis. Unfortunately, the opportunities created by the global financial crisis were squandered. Today’s task is more difficult; the scale of various problems has expanded even more. Without deep structural and institutional changes, the world will be facing enduring social and economic problems, accompanied by long-term stagnation.
"Many brilliant prophecies have appeared for the future of the EU and our entire planet. I believe that Europe, in its own style, will draw pragmatic conclusions from the crisis, not revolutionary ones; conclusions that will allow us to continue enjoying a Europe without borders. Brussels will demonstrate its usefulness; it will react ably and flexibly. First of all, contrary to the deceitful statements of members of the Polish government, the EU warned of the threats already in 2021. Secondly, already in mid-March EU assistance programs were ready, i.e. earlier than the PiS government’s “shield” program. The conclusion from the crisis will be a strengthening of all the preventive mechanisms that allow us to recognize threats and react in time of need. Research programs will be more strongly directed toward diagnosing and treating infectious diseases. Europe will gain greater self-sufficiency in the area of medical equipment and drugs, and the EU – greater competencies in the area of the health service, thus far entrusted to the member states. The 2021-27 budget must be reconstructed, to supplement the priority of the Green Deal with economic stimulus programs. In this way structural funds, which have the greatest multiplier effect for investment and the labor market, may return to favor. So once again: an addition, as a conclusion from the crisis, and not a reinvention of the EU," writes Dr. Janusz Lewandowski the author of the 162nd mBank-CASE seminar Proceeding.
Dla wielu rodaków europejskość Polski jest oczywista, trudno jest im nawet wyobrazić sobie, jak kształtowałyby się losy naszego kraju bez uczestnictwa w integracji europejskiej. Szczególnie młode pokolenie traktuje osiągnięty przez nas dzięki uczestnictwie w Unii ogromny postęp cywilizacyjny jako coś danego i naturalnego. Jednak świadomość tego, jaki był nasz punkt wyjścia, jaką przeszliśmy drogę i jak przyczyniły się do tego unijne działania oraz jakie wynikały z tego korzyści powinna nam stale towarzyszyć. Bez tej świadomości, starannego weryfikowania faktów i docenienia naszych osiągnięć grozi nam uleganie niesprawdzonym argumentom przeciwników integracji europejskiej i popełnienie nieodwracalnych błędów. Dla tych, którzy chcą poznać te fakty, przygotowany został raport "Nasza Europa. 15 lat Polski w Unii Europejskiej". Podjęto w nim ocenę 15 lat członkostwa Polski z perspektywy doświadczeń procesu integracji, z jego barierami i sukcesami, a także wyzwaniami przyszłości.
Raport jest wynikiem pracy zbiorowej licznych ekspertów z różnych dziedzin, od wielu lat analizujących wielowymiarowe efekty działania instytucji UE oraz współpracy z krajami członkowskimi na podstawie europejskich wartości i mechanizmów. Autorzy podsumowują korzyści członkostwa Polski w Unii Europejskiej na podstawie faktów, nie stroniąc jednakże od własnych ocen i refleksji.
This report is the result of the joint work of a number of experts from various fields who have been - for many years – analysing the multidimensional effects of EU institutions and cooperation with Member States pursuant to European values and mechanisms. The authors summarise the benefits of Poland’s membership in the EU based on facts; however, they do not hide their own views and reflections. They also demonstrate the barriers and challenges to further European integration.
This report was prepared by CASE, one of the oldest independent think tanks in Central and Eastern Europe, utilising its nearly 30 years of experience in providing objective analyses and recommendations with respect to socioeconomic topics. It is both an expression of concern about Poland’s future in the EU, as well as the authors’ contribution to the debate on further European integration.
Poland’s new Employee Capital Plans (PPK) scheme, which is mandatory for employers, started to be implemented in July 2019. The article looks at the systemic solutions applied in the programme from the perspective of the concept of the simultaneous reconstruction of the retirement pension system. The aim is to present arguments for and against the project from the point of view of various actors, and to assess the chances of success for the new system. The article offers a detailed study of legal solutions, an analysis of the literature on the subject, and reports of institutions that supervise pension funds. The results of this analysis point to the lack of cohesion between certain solutions of the 1999 pension reform and expose a lack of consistency in how the reform was carried out, which led to the eventual removal of the capital part of the pension system. The study shows that additional saving for old age is advisable in the country’s current demographic situation and necessary for both economic and social reasons. However, the systemic solutions offered by the government appear to be chiefly designated to serve short-term state interests and do not create sufficient incentives for pension plan participants to join the programme.
Belarus was among the few post-communist countries to resign from comprehensive market reforms and attempt to improve the efficiency of the economy through administrative means, leaving market mechanisms only an auxiliary role. Since its inception, the ‘Belarusian economic model’ has undergone several revisions of a de-statisation and de-regulation kind, but still the Belarusian economy remains dominated by the state. This paper analyses the characteristic features of the Belarusian economic system – especially those related to the public sector – as well as its evolution over time during the period following its independence. The paper concludes that during the post-Soviet period, the Belarusian economy evolved from a quasi-Soviet system based on state property, state planning, support to inefficient enterprises and the massive redistribution of funds to a more flexible hybrid model where the public sector still remains the core of the economy. The case of Belarus shows that presently there is no appropriate theoretical perspective which, in an unmodified form, could be applied to study this type of economic system. Therefore, a new perspective based on an already existing but updated approach or a multidisciplinary approach that incorporates the duality of the Belarusian economy is required.
Belarusian economy has been stagnating in 2011-2015 after 15 years of a high annual average growth rate. In 2015, after four years of stagnation, the Belarusian economy slid into a recession, its first since 1996, and experienced both cyclical and structural recessions. Since 2015, the Belarusian government and the National Bank of Belarus have been giving economic reforms a good chance thanks to gradual but consistent actions aimed at maintaining macroeconomic stability and economic liberalization. It seems that the economic authorities have sustained more transformation efforts during 2015-2018 than in the previous 24 years since 1991.
As the relative welfare level in Belarus is currently 64% compared to the Central and Eastern Europe (CEE) countries average, Belarus needs to build stronger fundaments of sustainable growth by continuing and accelerating the implementation of institutional transformation, primarily by fostering elimination of existing administrative mechanisms of inefficient resource allocation. Based on the experience of the CEE countries’ economic transformation, we highlight five lessons for the purpose of the economic reforms that Belarus still faces today: keeping macroeconomic stability, restructuring and improving the governance of state-owned enterprises, developing the financial market, increasing taxation efficiency, and deepening fiscal decentralization.
Inflation in advanced economies is low by historical standards but there is no threat of deflation. Slower economic growth is caused by supply-side constraints rather than low inflation. Below-the-target inflation does not damage the reputation of central banks. Thus, central banks should not try to bring inflation back to the targeted level of 2%. Rather, they should revise the inflation target downwards and publicly explain the rationale for such a move. Risks to the independence of central banks come from their additional mandates (beyond price stability) and populist politics.
Estonia has Europe’s most transparent tax system (while Poland is second-to-last, in 35th place), and is also known for its pioneering approach to taxation of legal persons’ income. Since 2000, payers of Estonian corporate tax don’t pay tax on their profits as long as they don’t realize them. In principle, this approach should make access to capital easier, spark investment by companies and contribute to faster economic growth. Are these and other positive effects really noticeable in Estonia? Have other countries followed in this country’s footsteps? Would deferment of income tax be possible and beneficial for Poland? How would this affect revenue from tax on corporate profits? Would investors come to see Poland as a tax haven? Does the Estonian system limit tax avoidance and evasion, or actually the opposite? Is such a system fair? Are intermediate solutions possible, which would combine the strengths or limit the weaknesses of the classical and Estonian models of profit tax? These questions are discussed in the mBank-CASE seminar Proceeding no. 163, written by Dmitri Jegorov, deputy general secretary of the Estonian Finance Ministry, who directs the country’s tax and customs policy, Dr. Anna Leszczyłowska of the Poznań University of Economics and Business and Aleksander Łożykowski of the Warsaw School of Economics.
The trade war between the U.S. and China began in March 2018. The American side raised import duties on aluminum and steel from China, which were later extended to other countries, including Canada, Mexico and the EU member states. This drew a negative reaction from those countries and bilateral negotiations with the U.S. In June 2018 America, referring to Section 301 of its 1974 Trade Act, raised tariffs to 25% on 818 groups of products imported from China, arguing that the tariff increase was a response to years of theft of American intellectual property and dishonest trade practices, which has caused the U.S. trade deficit.
Will this trade war mean the collapse of the multilateral trading system and a transition to bilateral relationships? What are the possibilities for increasing tariffs in light of World Trade Organization rules? Can the conflict be resolved using the WTO dispute-resolution mechanism? What are the consequences of the trade war for American consumers and producers, and for suppliers from other countries? How high will tariffs climb as a result of a global trade war? How far can trade volumes and GDP fall if the worst-case scenario comes to pass? Professor Jan J. Michałek and Dr. Przemysław Woźniak give answers to these questions in the mBank-CASE Seminar Proceeding No. 161.
This Report has been prepared for the European Commission, DG TAXUD under contract TAXUD/2017/DE/329, “Study and Reports on the VAT Gap in the EU-28 Member States” and serves as a follow-up to the six reports published between 2013 and 2018.
This Study contains new estimates of the Value Added Tax (VAT) Gap for 2017, as well as updated estimates for 2013-2016. As a novelty in this series of reports, so called “fast VAT Gap estimates” are also presented the year immediately preceding the analysis, namely for 2018. In addition, the study reports the results of the econometric analysis of VAT Gap determinants initiated and initially reported in the 2018 Report (Poniatowski et al., 2018). It also scrutinises the Policy Gap in 2017 as well as the contribution that reduced rates and exemptions made to the theoretical VAT revenue losses.
More from CASE Center for Social and Economic Research (20)
Turin Startup Ecosystem 2024 - Ricerca sulle Startup e il Sistema dell'Innov...Quotidiano Piemontese
Turin Startup Ecosystem 2024
Una ricerca de il Club degli Investitori, in collaborazione con ToTeM Torino Tech Map e con il supporto della ESCP Business School e di Growth Capital
Currently pi network is not tradable on binance or any other exchange because we are still in the enclosed mainnet.
Right now the only way to sell pi coins is by trading with a verified merchant.
What is a pi merchant?
A pi merchant is someone verified by pi network team and allowed to barter pi coins for goods and services.
Since pi network is not doing any pre-sale The only way exchanges like binance/huobi or crypto whales can get pi is by buying from miners. And a merchant stands in between the exchanges and the miners.
I will leave the telegram contact of my personal pi merchant. I and my friends has traded more than 6000pi coins successfully
Tele-gram
@Pi_vendor_247
Even tho Pi network is not listed on any exchange yet.
Buying/Selling or investing in pi network coins is highly possible through the help of vendors. You can buy from vendors[ buy directly from the pi network miners and resell it]. I will leave the telegram contact of my personal vendor.
@Pi_vendor_247
What website can I sell pi coins securely.DOT TECH
Currently there are no website or exchange that allow buying or selling of pi coins..
But you can still easily sell pi coins, by reselling it to exchanges/crypto whales interested in holding thousands of pi coins before the mainnet launch.
Who is a pi merchant?
A pi merchant is someone who buys pi coins from miners and resell to these crypto whales and holders of pi..
This is because pi network is not doing any pre-sale. The only way exchanges can get pi is by buying from miners and pi merchants stands in between the miners and the exchanges.
How can I sell my pi coins?
Selling pi coins is really easy, but first you need to migrate to mainnet wallet before you can do that. I will leave the telegram contact of my personal pi merchant to trade with.
Tele-gram.
@Pi_vendor_247
when will pi network coin be available on crypto exchange.DOT TECH
There is no set date for when Pi coins will enter the market.
However, the developers are working hard to get them released as soon as possible.
Once they are available, users will be able to exchange other cryptocurrencies for Pi coins on designated exchanges.
But for now the only way to sell your pi coins is through verified pi vendor.
Here is the telegram contact of my personal pi vendor
@Pi_vendor_247
how to sell pi coins in South Korea profitably.DOT TECH
Yes. You can sell your pi network coins in South Korea or any other country, by finding a verified pi merchant
What is a verified pi merchant?
Since pi network is not launched yet on any exchange, the only way you can sell pi coins is by selling to a verified pi merchant, and this is because pi network is not launched yet on any exchange and no pre-sale or ico offerings Is done on pi.
Since there is no pre-sale, the only way exchanges can get pi is by buying from miners. So a pi merchant facilitates these transactions by acting as a bridge for both transactions.
How can i find a pi vendor/merchant?
Well for those who haven't traded with a pi merchant or who don't already have one. I will leave the telegram id of my personal pi merchant who i trade pi with.
Tele gram: @Pi_vendor_247
#pi #sell #nigeria #pinetwork #picoins #sellpi #Nigerian #tradepi #pinetworkcoins #sellmypi
how to sell pi coins at high rate quickly.DOT TECH
Where can I sell my pi coins at a high rate.
Pi is not launched yet on any exchange. But one can easily sell his or her pi coins to investors who want to hold pi till mainnet launch.
This means crypto whales want to hold pi. And you can get a good rate for selling pi to them. I will leave the telegram contact of my personal pi vendor below.
A vendor is someone who buys from a miner and resell it to a holder or crypto whale.
Here is the telegram contact of my vendor:
@Pi_vendor_247
The European Unemployment Puzzle: implications from population agingGRAPE
We study the link between the evolving age structure of the working population and unemployment. We build a large new Keynesian OLG model with a realistic age structure, labor market frictions, sticky prices, and aggregate shocks. Once calibrated to the European economy, we quantify the extent to which demographic changes over the last three decades have contributed to the decline of the unemployment rate. Our findings yield important implications for the future evolution of unemployment given the anticipated further aging of the working population in Europe. We also quantify the implications for optimal monetary policy: lowering inflation volatility becomes less costly in terms of GDP and unemployment volatility, which hints that optimal monetary policy may be more hawkish in an aging society. Finally, our results also propose a partial reversal of the European-US unemployment puzzle due to the fact that the share of young workers is expected to remain robust in the US.
how can i use my minded pi coins I need some funds.DOT TECH
If you are interested in selling your pi coins, i have a verified pi merchant, who buys pi coins and resell them to exchanges looking forward to hold till mainnet launch.
Because the core team has announced that pi network will not be doing any pre-sale. The only way exchanges like huobi, bitmart and hotbit can get pi is by buying from miners.
Now a merchant stands in between these exchanges and the miners. As a link to make transactions smooth. Because right now in the enclosed mainnet you can't sell pi coins your self. You need the help of a merchant,
i will leave the telegram contact of my personal pi merchant below. 👇 I and my friends has traded more than 3000pi coins with him successfully.
@Pi_vendor_247
NO1 Uk Black Magic Specialist Expert In Sahiwal, Okara, Hafizabad, Mandi Bah...Amil Baba Dawood bangali
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The secret way to sell pi coins effortlessly.DOT TECH
Well as we all know pi isn't launched yet. But you can still sell your pi coins effortlessly because some whales in China are interested in holding massive pi coins. And they are willing to pay good money for it. If you are interested in selling I will leave a contact for you. Just telegram this number below. I sold about 3000 pi coins to him and he paid me immediately.
Telegram: @Pi_vendor_247
what is the best method to sell pi coins in 2024DOT TECH
The best way to sell your pi coins safely is trading with an exchange..but since pi is not launched in any exchange, and second option is through a VERIFIED pi merchant.
Who is a pi merchant?
A pi merchant is someone who buys pi coins from miners and pioneers and resell them to Investors looking forward to hold massive amounts before mainnet launch in 2026.
I will leave the telegram contact of my personal pi merchant to trade pi coins with.
@Pi_vendor_247
NO1 Uk Divorce problem uk all amil baba in karachi,lahore,pakistan talaq ka m...Amil Baba Dawood bangali
Contact with Dawood Bhai Just call on +92322-6382012 and we'll help you. We'll solve all your problems within 12 to 24 hours and with 101% guarantee and with astrology systematic. If you want to take any personal or professional advice then also you can call us on +92322-6382012 , ONLINE LOVE PROBLEM & Other all types of Daily Life Problem's.Then CALL or WHATSAPP us on +92322-6382012 and Get all these problems solutions here by Amil Baba DAWOOD BANGALI
#vashikaranspecialist #astrologer #palmistry #amliyaat #taweez #manpasandshadi #horoscope #spiritual #lovelife #lovespell #marriagespell#aamilbabainpakistan #amilbabainkarachi #powerfullblackmagicspell #kalajadumantarspecialist #realamilbaba #AmilbabainPakistan #astrologerincanada #astrologerindubai #lovespellsmaster #kalajaduspecialist #lovespellsthatwork #aamilbabainlahore#blackmagicformarriage #aamilbaba #kalajadu #kalailam #taweez #wazifaexpert #jadumantar #vashikaranspecialist #astrologer #palmistry #amliyaat #taweez #manpasandshadi #horoscope #spiritual #lovelife #lovespell #marriagespell#aamilbabainpakistan #amilbabainkarachi #powerfullblackmagicspell #kalajadumantarspecialist #realamilbaba #AmilbabainPakistan #astrologerincanada #astrologerindubai #lovespellsmaster #kalajaduspecialist #lovespellsthatwork #aamilbabainlahore #blackmagicforlove #blackmagicformarriage #aamilbaba #kalajadu #kalailam #taweez #wazifaexpert #jadumantar #vashikaranspecialist #astrologer #palmistry #amliyaat #taweez #manpasandshadi #horoscope #spiritual #lovelife #lovespell #marriagespell#aamilbabainpakistan #amilbabainkarachi #powerfullblackmagicspell #kalajadumantarspecialist #realamilbaba #AmilbabainPakistan #astrologerincanada #astrologerindubai #lovespellsmaster #kalajaduspecialist #lovespellsthatwork #aamilbabainlahore #Amilbabainuk #amilbabainspain #amilbabaindubai #Amilbabainnorway #amilbabainkrachi #amilbabainlahore #amilbabaingujranwalan #amilbabainislamabad
Falcon stands out as a top-tier P2P Invoice Discounting platform in India, bridging esteemed blue-chip companies and eager investors. Our goal is to transform the investment landscape in India by establishing a comprehensive destination for borrowers and investors with diverse profiles and needs, all while minimizing risk. What sets Falcon apart is the elimination of intermediaries such as commercial banks and depository institutions, allowing investors to enjoy higher yields.
USDA Loans in California: A Comprehensive Overview.pptxmarketing367770
USDA Loans in California: A Comprehensive Overview
If you're dreaming of owning a home in California's rural or suburban areas, a USDA loan might be the perfect solution. The U.S. Department of Agriculture (USDA) offers these loans to help low-to-moderate-income individuals and families achieve homeownership.
Key Features of USDA Loans:
Zero Down Payment: USDA loans require no down payment, making homeownership more accessible.
Competitive Interest Rates: These loans often come with lower interest rates compared to conventional loans.
Flexible Credit Requirements: USDA loans have more lenient credit score requirements, helping those with less-than-perfect credit.
Guaranteed Loan Program: The USDA guarantees a portion of the loan, reducing risk for lenders and expanding borrowing options.
Eligibility Criteria:
Location: The property must be located in a USDA-designated rural or suburban area. Many areas in California qualify.
Income Limits: Applicants must meet income guidelines, which vary by region and household size.
Primary Residence: The home must be used as the borrower's primary residence.
Application Process:
Find a USDA-Approved Lender: Not all lenders offer USDA loans, so it's essential to choose one approved by the USDA.
Pre-Qualification: Determine your eligibility and the amount you can borrow.
Property Search: Look for properties in eligible rural or suburban areas.
Loan Application: Submit your application, including financial and personal information.
Processing and Approval: The lender and USDA will review your application. If approved, you can proceed to closing.
USDA loans are an excellent option for those looking to buy a home in California's rural and suburban areas. With no down payment and flexible requirements, these loans make homeownership more attainable for many families. Explore your eligibility today and take the first step toward owning your dream home.
3. CASE Network Studies & Analyses No.388 -Cost of Institutional Harmonization in the ENP …
The CASE Network is a group of economic and social research centers in Poland, Kyrgyzstan, Ukraine, Georgia, Moldova, and Belarus. Organizations in the network regularly conduct joint research and advisory projects. The research covers a wide spectrum of economic and social issues, including economic effects of the European integration process, economic relations between the EU and CIS, monetary policy and euro-accession, innovation and competitiveness, and labour markets and social policy. The network aims to increase the range and quality of economic research and information available to policy-makers and civil society, and takes an active role in on-going debates on how to meet the economic challenges facing the EU, post- transition countries and the global economy.
The CASE network consists of:
• CASE – Center for Social and Economic Research, Warsaw,
est. 1991, www.case-research.eu
• CASE – Center for Social and Economic Research – Kyrgyzstan, est. 1998, www.case.elcat.kg
• Center for Social and Economic Research - CASE Ukraine,
est. 1999, www.case-ukraine.kiev.ua
• CASE –Transcaucasus Center for Social and Economic Research, est. 2000, www.case-transcaucasus.org.ge
• Foundation for Social and Economic Research CASE Moldova, est. 2003, www.case.com.md
• CASE Belarus - Center for Social and Economic Research Belarus, est. 2007.
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4. CASE Network Studies & Analyses No.388 -Cost of Institutional Harmonization in the ENP …
The Contents
Abstract........................................................................................................................................5
Introduction.................................................................................................................................6
1. Definition of harmonization costs.........................................................................................7
1.1. Direct budgetary costs....................................................................................................8
1.2. Direct private corporate costs......................................................................................10
2. Ways of measurement of harmonization-related costs.....................................................10
2.1 Survey-based approach..................................................................................................11
2.2. Econometric modeling...................................................................................................12
2.3. The Standard Cost Model (SCM)...................................................................................14
2.4 Impact assessment.........................................................................................................14
2.4.1. European Commission Impact Assessment Guidelines.....................................15
2.4.2. Ofcom’s approach to Impact Assessment............................................................17
2.4.3. Examples of impact assessment...........................................................................17
2.4.4. Conclusions on impact assessment methodologies based on a bottom-up casual model......................................................................................................................19
3. Review of studies on harmonization costs.........................................................................19
4. Harmonization costs in the neighboring countries...........................................................24
4.1. Methodological steps.....................................................................................................24
4.2. Areas and the degree of likely harmonization in the ENP countries.........................24
4.3. Harmonization in Russia...............................................................................................34
4.4. Cost of harmonization in the CEE countries...............................................................35
4.4.1. PHARE......................................................................................................................35
4.4.2. ISPA..........................................................................................................................37
4.4.3. SAPARD...................................................................................................................38
4.4.4. Estimation of total harmonization cost in the CEE countries.............................39
4.5. Estimation of harmonization costs in the ENP countries...........................................41
5. Conclusions...........................................................................................................................44
References.................................................................................................................................45
Appendixes................................................................................................................................48
Appendix 1.............................................................................................................................48
Appendix 2.............................................................................................................................53
Appendix 3.............................................................................................................................55
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5. CASE Network Studies & Analyses No.388 -Cost of Institutional Harmonization in the ENP …
The Author
Veliko Dimitrov is a senior economist at the Institute for Market Economics (IME), Bulgaria. He has worked at IME since May 2005. Veliko studied International Economic Relations at the University of National and World Economics, Sofia and has taken several courses in Economics at Albert Ludwig University, Freiburg, Germany. He has experience in project management, economic research in various areas, occasional lecturing and participation in public policy TV and radio debates. He is a regular columnist in several major Bulgarian newspapers and periodical bulletins published by IME. His main spheres of specialization include the improvement of the national legislation process, labor market reform, reduction of administrative burdens, deregulation of economic activity, telecommunications sector regulation, and cost- benefit analysis.
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6. CASE Network Studies & Analyses No.388 -Cost of Institutional Harmonization in the ENP …
Abstract
This paper analyzes the costs of (partial) institutional harmonization with the EU acquis which countries of the former USSR are expected to conduct under their Partnership and Cooperation Agreements with the EU and European Neighborhood Policy Action Plans. The public sector will have to take an effort of the transposition and adaptation of EU norms, as well as ensuring that they are complied with. Yet, the major part of the adjustment costs will fall on the private sector, as enterprises will have to make substantial investments to comply with new product requirements and business practices.
In this study we used the method of extrapolation of average costs for CEE countries’ harmonization with acquis to estimate the potential harmonization costs for the neighboring countries based on internationally comparative macroeconomic indicators like sectoral and total value added. This involved estimating the EU pre-accession support for the CEE countries by main areas as a percentage of the total or sectoral value added, determining the expected degree of limited harmonization in the ENP countries and estimating “coefficients of limited harmonization”, which was subsequently used for adjustment of the estimated cost of full harmonization.
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7. CASE Network Studies & Analyses No.388 -Cost of Institutional Harmonization in the ENP …
Introduction
Institutional harmonization of the EU Eastern neighbors1 towards EU norms is not going to be without cost both for the public and private sectors in these countries. The public sector will have to take an effort of the transposition and adaptation of EU norms, as well as ensuring that they are complied with. Yet, the major part of the adjustment costs will fall on the private sector, as enterprises will have to make substantial investments to comply with new product requirements and business practices. It should be stressed that the kind of costs we are trying to estimate are not the costs born only by the companies exporting to the EU. These are the costs born by all businesses as they adjust to new norms introduced for the whole economy.
Clearly, the task of estimating such costs would involve tremendous effort, as one would have to work with company-level information and then sum it up for the whole economy. It is also difficult to evaluate which investments are made purely due to harmonization with the EU and which will be made anyway in the process of economic modernization. Moreover, even if one manages to estimate the magnitude of the initial investments, it is close to impossible to estimate the implementation costs, as these relate to numerous changes in lives of people and the ways the companies operate.
One possible way to make the costs estimation for EU Eastern Neighbors would be, first, to look at the experience of Central and East European (CEE) countries that became EU members and then to make an extrapolation to account for the situation and the degree of envisaged harmonization in CIS. In fact, we do follow this route, yet as will be discussed later, such an approach has its own challenge, namely figuring out the extent to which the neighboring countries are going to harmonize (as the agenda of their integration with the EU is quite vague as of the time of writing).
The paper starts with a review of the harmonization costs (Section 1) as well as a discussion of different ways for measuring them (Section 2). Section 3 presents a review of existing studies on harmonization costs. Based on it, in Section 4 we suggest an approach to estimate the costs of harmonization in CIS which must start from defining the areas and the likely degree of
1 Unless otherwise indicated, by neighbouring countries or ENP countries we mean Armenia, Azerbaijan, Belarus, Georgia, Moldova, Ukraine and Russia
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8. CASE Network Studies & Analyses No.388 -Cost of Institutional Harmonization in the ENP …
harmonization in each of them. The next step is to find out how much was spent on harmonization of these areas in CEE. Here, the major source of information are the volumes of EU assistance on enhancement of institutional capacity and investment in infrastructure – PHARE, ISPA and SAPARD programs. To obtain the volume of total investment in CEE we derive coefficients based on the comparison of the EU assistance and total investment for the sectors where such data is available. Finally, to obtain an estimate for the ENP countries, we take an average volume of costs in CEE and adjust them for the level of GDP and multiply them by the coefficient reflecting the degree of harmonization. Sections 5 presents final conclusions.
1. Definition of harmonization costs
Based on the surveyed literature and the economic theory we group the cost of institutional harmonization into two major categories: primary and secondary. Furthermore, costs can be subdivided into direct budgetary, direct private corporate, indirect budgetary and indirect private corporate costs.
Table 1. Classification of harmonization-related costs
Primary costs
Direct budgetary costs – directly paid from the state budget in order to fulfill certain requirements on the governmental level (administrative, regulatory, technical)
Direct private corporate costs – directly payable by companies in order to achieve a minimum required level of compliance with a variety of standards and norms
Secondary costs
Indirect budgetary costs – costs not directly payable by the state budget but emerging due to changes in the institutional environment
Indirect private corporate costs –indirect costs for company owners and investors as a result of company failures and bankruptcies
Source: Own summary
Primary costs are the compliance costs in a narrower sense - regulatory, administrative, and technical. These are expenses at the country or firm level for upgrading existing infrastructure, equipment and technology, training and capacity building, costs related to amending or creating legislation, company compliance with various technical standards and regulations like labeling and packaging, testing, inspections and quarantine requirements, etc. Secondary costs represent the negative economic impact resulting from alterations. They can emerge in the public sector (e.g. reduction of tax receipts from certain sectors, subject to restructuring), and in 7
9. CASE Network Studies & Analyses No.388 -Cost of Institutional Harmonization in the ENP …
the private sector (bankruptcies, output decline due to increased competition or fall in employment in certain sectors).
This division should not be considered ultimate; it is rather used for explanatory purpose and clarification of the twofold nature of sustained costs – private and public even though they can be highly interconnected and dependent upon each other. So, for instance the amount of costs directly paid from the state budget in order to fulfill certain requirements on the government level could also mean drop of other activities or increase in taxation, which in turn could lead to less consumption and/or investments or increase of internal and external debt. Furthermore, purely private costs like smaller profit and production due to higher competitive pressure could also lead to higher unemployment, thus less tax revenues and need for the government to spend more on unemployment benefits, which again could be considered a significant cause for increase of taxes, etc. Yet, it is important to note that even if some companies might find themselves forced to decrease production due to higher pressure and more competitors, the overall impact of harmonization usually brings gains that lead to increase of production and welfare at a national level. In this chapter we make an attempt to estimate only the direct costs of harmonization of the ENP countries with no regard to some possible negative implications, i.e. indirect costs. This is appropriate because generally the negative dynamic impact of policy changes has to be counterbalanced with all positive effects in order to reveal the net impact and this paper is focusing only on the cost side of the process (see Maliszewska, Orlova and Taran, 2009 for estimation of net benefits at the national level based on results of CGE modeling).
1.1. Direct budgetary costs
Regulatory costs
Institutional harmonization measures may require new legislation or the amendment of existing laws in accordance with the national legislative and regulatory process of each country. This, in turn, will involve time and staff specialized in regulatory work both in the line ministries and the center of government and parliament. Resources required for such legislative and regulatory work may differ significantly depending on the country's legislative structures, procedures and frequency of changes in legislation (Moise, 2004).
Upgrade of customs infrastructure, equipment and technology
Equipment and infrastructure are not a prerequisite for trade facilitation measures (as envisaged in the ENP Action Plans), but some of these measures, such as risk assessment or special
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10. CASE Network Studies & Analyses No.388 -Cost of Institutional Harmonization in the ENP …
procedures, are greatly assisted by the availability of appropriate equipment and infrastructure. Border agencies call for information and communication technology (ICT) products, as well as infrastructure and scanners, primarily because of their potential to enhance the effectiveness and efficiency of customs operations and control. Numerous studies show that insufficient equipment and infrastructure will make trade facilitation measures more difficult to implement (Moise, 2004).
Training and capacity building
Usually for the introduction of new policy instruments and the harmonization of wide areas of the economy more civil servants is needed, time is also spent for learning new legislation in details, which is another factor increasing demand for labor force in public administration. More specifically, these are costs related to training, increasing a number of civil servant, assuring the availability of partner-side regulatory bodies for cooperation, time for reorganization of government structures, etc. Training, even if often perceived as a less significant item in harmonization agenda, may be costly. According to Moise (2004), the governments can choose between:
• Recruiting new expert staff (if available);
• Training existing staff in a training center;
• On-the-job training;
• Importing trained staff through personal exchange with other government bodies.
The most commonly observed practice is a combination of (b) and (c). Regular training is a common practice in many customs administrations, varying only in frequency and duration. On- job training usually does not involve additional direct budgetary costs, however, it may temporarily increase costs for traders due to underperformance and incompetence of trainees. Ideally trade policy capacity building in the neighboring countries should involve research, training and institutional funding with the aim of further creation of trade-related knowledge and physical base for trade facilitation and harmonization with EU acquis.
The above-described measures have to be undertaken and financed by the government (or by international organizations, including the EU) and, to a certain extent, depend upon the government’s will and readiness to implement them. The direct estimation of their costs is hardly attainable. First, they depend greatly on how efficiently reforms are carried out, their time horizon 9
11. CASE Network Studies & Analyses No.388 -Cost of Institutional Harmonization in the ENP …
and organization of public administration. Second, they cannot be clearly separated from ongoing and future reforms that would take place anyway. For these reasons, in this study, we will estimate the potential costs in the ENP countries indirectly based on the CEE countries’ experience with the EU pre-accession financial support programs.
1.2. Direct private corporate costs
For private entities, the costs of institutional harmonization related to compliance with standards and regulations. In order to have access to the EU Internal Market, companies in neighboring countries have to fulfill certain criteria regarding quality of their production, labor standards in plants and offices as well as to take appropriate measures for environmental protection according to the EU environmental policy (the last requirements apply now only to EU companies but in future, due to harmonization, they may also apply to export oriented companies in the neighboring countries). This means that resources have to be shifted from production to securing compliance. This involves investing in environmental protection facilities and equipment, securing more space and appropriate clothing for workers, modernization of production capacities, introduction of new production technologies, etc. Now, all EU companies, not only export-oriented ones, are required to comply with the EU norms, otherwise they are not allowed to sell their products on the EU Internal Market. The number of companies in ENP countries that will have to comply with EU norms will likely be smaller than in the EU. The exporting enterprises will have to comply with all EU standards, while other will be subject to the EU norms and regulations only if these norms are implemented at national level. We expect that harmonization costs would vary from country to country depending on its current legislation and administrative and business practices.
2. Ways of measurement of harmonization-related costs
Estimation of costs of institutional harmonization is a methodologically challenging effort. Countries usually do not undertake trade facilitation and institutional harmonization efforts as an end in itself. Rather, they occur primarily as part of a wider reform effort driven by either a transition to a market economy, or accession to a regional or sub-regional grouping or a trade agreement. As a result, there is often no specific allocation of funding for pursuing institutional harmonization per se, making it very difficult to assess those specific costs.
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There is also no uniform approach in dealing with costs of harmonization in the ENP or CEE countries. Regarding the latter group, most studies have been prepared by national authorities or research teams for a respective country and focused on sectoral transformation or adoption of a single EU directive/standard requirement. The following methodologies have been used most frequently: survey-based approach, econometric modeling and impact assessment, including commonly used quantitative techniques. In the next few paragraphs we review these approaches and assess their strengths and weaknesses.
2.1 Survey-based approach
It gives insights into the cost expectations of different categories of agents, time horizon of implementation or compliance with different requirements in the public and the private sector, their expected scope, depth, etc. Although there is always concern about the credibility of survey-based studies, in cases where information is insufficient or the problem to be solved is too complex, the use of such studies seems to be justified.
Generally, there is a lack of large-scale studies attempting to reveal compliance costs for a whole economy. Probably the only exception is a World Bank survey, which has been completed explicitly for the purpose of the assessment of compliance costs of firms facing technical standards in their potential export markets. The most useful part of the information focusing on harmonization or compliance cost assessment is shown in Table 2.
Table 2. Total investment costs to comply with technical requirements as a share of sales in three CEE countries (in %)
Country / Indicator
Mean
Standard Deviation
Min
Max
Bulgaria
2.15
2.52
0.13
9.68
Czech Republic
5.71
9.12
0.05
31.88
Poland
3.84
10.99
0.03
55.65
Total
3.74
8.26
0.03
55.65
Source: Wilson and Otsuki (2004)
With regard to the raw questionnaire-based data of the WB study, the practical use of these results for the estimation of harmonization costs in other countries (for instance ENP countries) appears questionable for the reason that the results for the total investment compliance costs are survey-based and most probably reflect many other country specificities that are not easily detected and weeded out. The estimation of compliance cost per capita in the three countries more or less supports the sustainability of the above conclusion.
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Table 3. Compliance costs per capita in the three countries covered by the survey
Indicators
Countries
Mean of compliance costs as share in company sales
Nominal GDP per capita in US dollars (2004)
Compliance cost per capita in US dollars
Bulgaria
2.15%
3,096
66.6
Czech Republic
5.71%
10,564
603.2
Poland
3.48%
6,317
221.7
Average
3.74%
6,659
297.2
Source: Wilson and Otsuki (2004), UNCTAD Handbook of Statistics, own calculations
First, the evidence shows that the higher the GDP per capita, the higher the share of the compliance costs and second, that compliance cost per capita is at significantly lower level in Bulgaria compared to relatively more economically developed Czech Republic and Poland. These results are somewhat confusing because intuitively one could think of the need of more investments in comparatively backward countries since the level of harmonization with EU standards that has to be achieved is relatively the same across the Union. The results are a bit controversial as well because part of the costs are bound to international prices (like equipment, production lines, etc.), which are not likely to be influenced by national conditions, thus the lower the standard of living, the higher the percentage of compliance costs should be (driven by the import of special equipment). Given these problems with interpretation of the results, we are unable to use them in our study. Moreover, they represent only the costs for exporters to the EU, yet there are other cost categories that have not been covered by this survey, namely, the compliance costs for all non-export-oriented companies in the case of obligatory harmonization and the costs for institutional building in the public sector.
2.2. Econometric modeling
Using an econometric model or simply linking known costs of harmonization to some observable economic indicators, a calculation of ENP countries’ harmonization costs (or part of them) is theoretically possible. There are some studies in the literature that attempt to estimate different aspects of costs of harmonization, yet this approach is not very popular. Holzinger et al (2006) uses a regression analysis to estimate the correlation between the EU membership and the cross-national environmental policy convergence. Although there is no clear estimation of costs of harmonization or compliance, the findings show a significant correlation between harmonization with EU standards and environmental policy convergence, i.e. the approximation to EU acquis will certainly mean an increase of the harmonization costs. Although regression analysis is not widely used for estimation of harmonization or transition costs, there are also 12
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other studies and authors that have applied such models. For instance, to estimate costs of harmonization of the Romanian accounting system with international standards – EU directives and IAS/IFRS - COTW (2006) tested whether big enterprises and enterprises with double reporting incur higher implementation costs in absolute terms. The necessary data were gathered using questionnaires. To estimate correlations between numerical variables a simple linear regression model was used:
with Ci denoting the cost of implementation by company i, and MCi the market capitalization of company i. The following main regression results were obtained:
Table 4. Linear regression output
Statistics
Values
R
0.696
R squared
0.484
α0
17,479.552
(t)
(4.206)
α1
0.372
(t)
(4.311)
Source: COTW (2006)
Based on regression results authors conclude that big companies incur higher implementation costs. We should point out, however, that R and R squared are on relatively low levels.
The European Institute of Romania has taken a different approach for estimation of the impact of harmonization (Ciupagea et al, 2004). In the theoretical part, a twofold division of accession or harmonization costs is introduced. Costs are separated between those generated by institutional building and formation of human resources and costs related to confirmation with and implementation of the standards defined by the European norms and policies. Furthermore, there is a suggestion to distinguish between costs arising in the public and private sector in the areas like transport infrastructure, labor and social security standards, consumer protection, quality and environmental standards. To estimate these costs, a macro-economic model is used (LINK-Dobrescu model), simulating potential changes in major macroeconomic indicators like GDP, household consumption, employment, etc. (according to two different scenarios – isolation and integration and in two stages: 2000-2004 and 2004-2015). Although such simulations could contribute to understanding future perspectives at macro level, they do not solve the cost- estimation-problem.
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2.3. The Standard Cost Model (SCM)2
The SCM is a method for determining administrative costs for businesses imposed by regulations, i.e. by legislative changes. It is a quantitative methodology that can be applied in all countries at different levels. The method can be also used to measure a single law, selected areas of legislation or to perform a baseline measurement of all legislation in a country. Furthermore, the SCM is also suitable for measuring simplification efforts as well as administrative consequences of new legislative proposals and compliance costs at the firm level. When carrying out the actual measurement in the SCM framework, it is important to get as detailed data as possible. Not only will this increase the level of accuracy, but it will also ensure that data can be compared at the disaggregated level. Comparing aggregated data at the national level may reveal cross-country differences, but this will often not be enough to explain why there is a difference. In order to explain differences, it is often necessary to be able to exclude differences in wages and overhead costs, and mainly focus on the differences in time spent on performing a certain administrative activity. There are several publicly available applications of the SCM3, yet none of them is closely related to the goal of this paper, i.e. estimation of costs of ENP countries’ harmonization with EU standards.
2.4 Impact assessment
Impact assessment could probably retrieve the most accurate results regarding the forthcoming harmonization because this method allows the reflection of country specificities, exact scope and frequency of implementation. Yet the implementation of a bottom-up impact analysis for the whole country is time- and resource-consuming. In many cases, when analyzing regulations, governments, private and international organizations conduct an impact assessment – a cost- benefit analysis that reveals whether legislative requirements are beneficial or not and what will be their net cost. This way of bottom-up calculation relies on summing up all retrieved results – costs and/or benefits of a single directive, standard to be adopted or another unit of harmonization, presenting at the end total investments needed for achievement of compliance in a whole sector or a subsector. There were impact assessments of harmonization costs with EU
2 More information on the assumptions of the model and the applied approach can be found in Kolesnichenko et al. (2007), Ch. 4.
3 Accessible at: http://www.administrative-burdens.com/default.asp?page=140 14
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norms done in some CEE countries, and below we provide a brief description of two commonly used Impact Assessment methodologies: the one of the European Commission and of the Office of Communications in the UK (Ofcom).
2.4.1. European Commission Impact Assessment Guidelines
The impact assessment analysis, according to European Commission (2005) guidelines, aims to predict the likely consequences – both intended and unintended – of implementation of EU regulations on national level. One of the key objectives of this methodology is enable any non- specialist to follow the argumentation and understand the positive and negative impacts of each of the options considered. Analysis is usually carried out in three consequent steps: identification of environmental, economic and social impacts of a policy or a single requirement, why they occur and who is affected. The first step is to identify those impacts that are likely to occur as a consequence of implementing the policy4. A useful approach is to build a casual model – a bottom-up exercise that starts by identifying the impacts that would arise as a result of the policy attaining its objectives. These primary impacts can then form the basis for identifying further rounds of impacts and so on. How far one should develop the casual model is a matter of judgment (a more detailed analysis makes for greater clarity, yet requires greater investments in time and effort). Presented below are some possible areas of economic impact and key questions5 that could be relevant for doing an impact assessment in the ENP countries:
1. Impact on operating cost and conduct of business:
• Will it impose necessity of additional adjustment, compliance or transaction cost on business?
• Does the option affect the cost or availability of essential inputs (raw materials, machinery, labor, energy)?
• Will it entail the withdrawal of certain products from the market?
2. Impact on administrative costs on business
• Does the option impose additional administrative requirements on businesses or increase administrative complexity?
4 Some of the impacts are always intentional and are therefore identified in the form of objectives of the policy to be implemented. 5 They originate from the European Commission Impact Assessment Guidelines and were selected from a set of areas and questions as most relevant in the light of the present study. 15
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• Do these costs weigh heavily on SMEs (this should be rather an optional question)
3. Public authorities
• Does the option have budgetary consequences for public authorities at different levels of government, both immediately and in the long run?
• Does the option require establishing of new or restructuring of existing public authorities?
The areas and questions represent an example of how the impact assessment works at this level; they are neither exhaustive nor definitive. Most of these questions can have a quantitative answer using simple arithmetic and proper information for the respective sector or the economy. Fundamental limitation of the approach is related to the fact that accurate calculation can be made when dealing with a single requirement or directive focused on a certain area but not on a variety of areas combined with many different alterations. More sophisticated quantitative methods can be used as well. Table 5 presents suitability of the major model types with respect to the range of the coverage of the measure.
Table 5. Model suitability with respect to the range of coverage of the measure
Analysis
CGE models
Macroeconometric models
Sectoral models
Single-market analysis without economy- wide impacts
X
Single-market analysis with economy-wide impacts
X
X
Multi-market analysis with effects in secondary markets
X
X
Source: European Commission Impact Assessment Guidelines
As underlined by the Commission, these models are appropriate for the estimation and valuation of legislative measures’ impacts on GDP, unemployment, international trade, household income, etc. We call such effects, as to their negative side, as “indirect costs”. What we need in this study are the costs borne by private entities in all sectors (or the main sectors, in which harmonization effort is expected) given a variety of options and costs of institutional building understood as costs of transformation of existing or creation of new government bodies.
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2.4.2. Ofcom’s approach to Impact Assessment
A key principle of Ofcom (2005) Impact Assessment is its proportional character to the impact of the decision that has to be made. This means that the more wide-ranging the impact on stakeholders is, the more comprehensive the Impact Assessment should be (the depth of the analysis naturally depends on the information available as well). According to the Ofcom’s official guidelines, producing an Impact Assessment normally involves six stages:
• Defining the issue that needs to be considered and identification of citizens’ or consumers’ interests;
• Definition of the policy objective;
• Identification of possible options of compliance;
• Identification of the impact on different types of stakeholders;
• Identification of any impact on competition;
• Assessing the impact and choosing the best option (if available)
This approach, due to the comprehensiveness of its analytical tools is greatly suitable for the purpose of the present study. Yet, as evident from the above outlined stages, it is very demanding in terms of input information – its proper application would require either conduct of surveys or collection of highly disaggregated data.
2.4.3. Examples of impact assessment
The National Program for the Adoption of the Acquis (NPAA) in Slovakia can serve as an example of application of the impact assessment method. According to the estimation results, around 4.8 billion Euros were needed for securing compliance with all environmental requirements (see Table 6). The Government of Slovakia used the Environmental Impact Assessment6 for the estimation of costs and benefits of different legislative proposals on harmonization with EU directives and regulations, yet the exact methodology was not described. The total investments needed have been calculated as a sum of the investments needed in individual subsectors, which was a data intensive procedure.
6 Act No. 127/1994 on Environmental Impact Assessment, Decree No. 52/1995 of the Ministry of the Environment on the Register of Persons Professionally Qualified for Environmental Impact Assessment
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Table 6: Structure of expenditures for securing compliance with environmental acquis in Slovakia over 1999 – 2008
Sectors
Investment
(Million EUR)
Non-investment7
(Million EUR)
Horizontal legislation
2.07
4,9
Air protection
756.34
71,20
Waste management
412.54
19,64
Water protection
3,388.84
68,75
Nature conservation
19.64
7,36
Industrial pollution control and risk management
22.09
12,27
Chemical substances and genetically modified organisms
12.27
6,14
Noise from vehicles and machinery
0.0
2,05
Total
4,616.64
192,32
Investment + non-investment
4,808.59
Source: Government Office of the Slovak Republic, 2000
Ciupagea et al (2004) cite estimates done for Romania, in particular, for the transport and the environmental domain both prior and after the accession. There is no clarity about how the amounts have been estimated, what is known is that they have been provided by the Romanian authorities – the Ministry of Transport, Construction and Tourism, and the Ministry of Environment and Water Administration. The estimated total financing needed for acquis implementation in the transport area amounted to 18,293 million EUR for the period 2004-2013 or 1,829.3 million EUR annually, and 29,523 million EUR for the period 2004-2021 or an average annual amount of 2,271 million EUR in the environmental area. A detailed breakdown is presented in Tables 7 and 8.
Table 7. Financing needs estimated for Acquis implementation in the transport sector in Romania (million EUR)
Item
Total
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
I. Infrastructure (A+B), out of which:
16,697
478
1,565
1,923
2,591
1,457
1,152
1,275
1,545
1,575
1,412
A. Infrastructure
10,629
245
1,259
1,396
1,650
649
580
817
991
881
899
- Road
0
0
0
0
0
- Railway
8,650
166
1,044
1,188
1,462
492
420
620
849
749
755
- Constanta seaport
344.6
17.5
64
67
90
40
38
18
10
0
0
- Seaports and inland waters
1,206
29
117
115
81
111
116
124
78
78
96
- Aerial
418
33
33
26
7
6
6
54
54
54
48
B. National roads’ rehabilitation
6,068
234
306
526
941
808
572
458
553
694
513
II. Cost of acquis application
1,595
296
277
280
255
198
145
144
0
0
0
Total (I+II)
18,293
775
1,842
2,203
2,846
1,655
1,297
1,419
1,545
1,575
1,412
Source: European Institute of Romania (EIR), according to an estimation provided by the Romanian Ministry of Transports, Constructions and Tourism - http://www.ier.ro/PAIS/PAIS2/En/study12.pdf
7 No clear definition of non-investment costs is provided; we would suggest that these are pure administrative expenditures like filling out or typing documents, inter and intra coordination, communication costs, etc. 18
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Table 8. Estimation of environment costs in Romania with the financing sources in the period of 2004 – 2021 (in million EUR)
Out of which:
Item
Total
Total budget
Total EU funds
Total economic agents
Total other sources
Horizontal legislation
9.05
9.01
0.04
Air quality
804.28
19.97
3.20
774.51
6.6
Waste management
2,474.78
571.48
1,010.18
648.98
244.14
Air quality
16,282.06
3,427.84
7,008.88
2,198.34
3,647
Industrial pollution control
9,797.64
1,655.26
540.26
6,909.32
692.8
Protection of nature
7.32
7.32
Chemicals
29.73
6.23
1.0
22.5
0.0
CNCAN
31.80
27.03
4.77
Noise
1.15
1.15
Civil protection
85.52
22.43
63.09
General total
29,523.32
5,747.73
8,563.52
10,553.64
4,658.43
Source: European Institute of Romania (EIR) according to an estimation of the Romanian Ministry of Environment and Water Administration - http://www.ier.ro/PAIS/PAIS2/En/study12.pdf
2.4.4. Conclusions on impact assessment methodologies based on a bottom-up casual model
• The models allow for a deep analysis on the level of separate activities and therefore, the estimations could be highly realistic;
• They are suitable for measurement of the impact of single regulations but not process- related costs in general; at the same time, the detailed approach speaks in favor of applying the models in small-scale studies;
• The proper application of the models requires both deep knowledge of a country, sector and subsector specificities and highly disaggregated statistical or sociological data.
3. Review of studies on harmonization costs
This section provides a brief overview of several studies that describe major cost categories related to the EU accession of the CEE countries. In broader sense, we could talk about institutional harmonization costs. When talking about expenditures related to complying with various kinds of standards and norms we mean investment expenditures and, in particular, expenditures on the implementation of environmental protection norms, improvement of sanitary conditions in food production, costs of increasing safety at work, etc. According to a study dealing with costs and benefits of Poland’s EU integration (CEN, 2003), these and similar types
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of expenditures should not be treated as costs, but as investments (even when considering short or medium term). The authors stress that labeling the expenditures related to adaptation of acquis, as costs of accession to the EU is a misunderstanding. It is pointed out that those measures and the related costs bring important – although hardly measurable – benefits for the society such as clear environment, good health and fewer incidents at work.
Another study (Tupy, 2003) takes a different point of view. Although the accession of CEE countries brings important benefits (or more precisely creates conditions for them) such as reduced barriers to trade and investment, completely free movement of labor by 2010 – 2013 and economic liberalization in some sectors, it also accounts for stringent environmental, sanitary, etc. regulations, which are generally costly and represent a significant entry barrier especially for the SME sector (solely complying with environmental standards is estimated to impose a cost of up to 120 billion euro on the eight CEE countries that joined the EU in 2004). The European Commission (2001) also expected that the environmental legislation alone will cost between 2 and 3% of annual GDP of CEE countries during the transition period of five to seven years.
Angelov (2001) discusses the cost of Bulgaria’s compliance with EU acquis regardless of source of their financing – domestic private or public, FDI or external borrowing. It amounted to 25-35% of the overall investment needs before accession or in real terms about 15 billion EUR (6% of the annual GDP for 20 years). His estimation also show that for compliance with EU regulations in the transport sector the CEE countries had to invest over 90 billion EUR, with a figure for Bulgaria of 5.3 billion EUR. According to estimation of the European Commission (2001), for achievement of environmental standards alone, the CEE countries that joined in 2004 needed 122 billion EUR.
The above figures should not to be taken exactly – first, it is very difficult to anticipate the overall volume of investment and second, if some investments are easier to identify for each group, others are more difficult. For instance, environment protection standards could be met not only, and not even mainly, by cleaning and protective equipment, but rather by modern energy saving and environment friendly technologies. Some authors (CEN, 2003) suggest that costs or losses incurred by particular sectors could be considered as adaptation costs that accompany the process of structural change and compliance related to the accession to the EU. Therefore, negative sectoral effects, which in the end turn to be positive for the economy as a whole, and 20
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which are unavoidable in a long-term perspective, should not be treated as costs of harmonization, but instead considered as expenses on modernization.
There are also studies that look at the indirect costs of harmonization that fall on the economy as a whole. So Tupy (2003) shows that all kinds of additional regulations that have to be implemented should be seen as a job-killing factor, i.e. an indirect cost. Following his research, most of the EU regulations that prevail nowadays were developed to suit the need of the society for social justice, consumer protection and environmental preservation. Yet, in the case of less developed countries these regulations may hamper higher growth rate and job opportunities. Table 9 demonstrates that less business regulation guarantees lower unemployment rate.
Table 9 Regulatory environment and level of unemployment in EU15, Norway and USA
Country
Business freedom* - 2007** (%)
Unemployment rates
(%) – 2006
Norway
97.0
3.5
Denmark
95.3
3.9
Netherlands
88.3
3.9
Ireland
92.8
4.4
United States
94.5
4.6
Luxembourg
90.0
4.7
Austria
79.8
4.7
United Kingdom
92.1
5.3
Italy
73.7
6.8
Sweden
95.0
7.1
Finland
95.3
7.7
Portugal
79.6
7.7
Belgium
90.8
8.2
Spain
77.1
8.5
Greece
70.2
8.9
France
86.1
9.2
Germany
88.2
9.8
* The ability to create, operate and close an enterprise quickly and easily. The indicator measures how burdensome regulatory rules are. ** Calculated with data for 2006
Source: Eurostat, Index of Economic Freedom (2007), own summary 21
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Figure 1: Unemployment and Business Freedom Unemployment and Business freedom0246810126065707580859095100Business freedom Unemployment (%)
Source: Eurostat, Index of Economic Freedom (2007), own summary
The same is demonstrated by Figure 1: a negative correlation between the score of business freedom and the unemployment rate (yet, the number of outliers is significant as well). However, one must remember that unemployment rate is also dependent on labor market regulations, monetary and the fiscal policy, etc. There is also evident that within the EU there is a different level of freedom and each country can determine its own internal economic policy and regulations (because the EU directives leave a great room of flexibility of how they can be transposed into a national legislation). In particular, higher standards and intense competition may drive some companies and even industries out of business, which is going to lead to a rise of unemployment, yet this effect will certainly not hold in the long run. Moreover, all negative effects can be mitigated thanks to labor migration not only within a country, but also between countries.
Table 10 summarizes the results obtained in various studies and official documents dealing with the expected cost of harmonization in the agricultural, environmental and transport areas in the EU candidate countries. 22
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Table 10. Costs of compliance with EU standards according to different studies
Country/ Indicator
Agriculture
Environment
Transport
Bulgaria
Total investment costs – 2.15% of domestic company’s sales (Wilson and Otsuki, 2004)
- 15 billion EUR (Angelov, 2001);
- 8.6 billion EUR (EC, 2001);
- 11.7 – 15.0 billion EUR (IIASA, 1999)
5.3 billion EUR (Angelov, 2001)
Cyprus
1.1 billion EUR (EC, 2001)
Czech Republic
Total investment costs – 5.71% of domestic company’s sales (Wilson and Otsuki, 2004)
- 6.6 – 9.4 billion EUR (EC, 2001);
- 10.4 – 13.4 billion EUR (IIASA, 1999)
Estonia
- 4.4 billion EUR (EC, 2001);
- 1.5 billion EUR (IIASA, 1999)
Hungary
- 4.1 – 10 billion EUR (EC, 2001);
- 10.4 – 13.4 billion EUR (IIASA, 1999)
Latvia
- 1.5 – 2.4 billion EUR (EC, 2001);
- 1.71 billion EUR (IIASA, 1999)
Lithuania
2-2.5% of GDP (205 million EUR from SAPARD in the period 2000-06, accounting for 75% of the total cost) (CEPS, 2006)
- 1.6 billion EUR (EC, 2001);
- 2.38 billion EUR (IIASA, 1999)
Poland
Total investment costs – 3,84% of domestic company’s sales (Wilson and Otsuki, 2004)
2-2.5% of GDP (172 million EUR annually, representing 75% of the total cost); (CEPS, 2006)
- 30.4 billion EUR in 1999 (CEN, 2003);
- 22.1 – 42.8 billion EUR (EC, 2001);
- 34.1 – 35.2 billion EUR (IIASA, 1999))
Romania
538 million EUR (Ciupagea et al.,, 2004)
- 22 billion EUR (EC, 2001);
- 29.5 billion EUR (Ministry of Environment of Romania);
- 20.2 – 22.0 billion EUR (IIASA, 1999)
18,3 billion EUR (Ciupagea et al., 2004) *
Slovakia
- 4.8 billion EUR (EC, 2001);
- 4.8 billion EUR (NPPA, 2000)
- 4.1 – 5.4 billion EUR (IIASA, 1999)
3.5 billion EUR (NPAA, 2000)
Slovenia
- 2.4 billion EUR (EC, 2001);
- 1.84 billion EUR (IIASA, 1999)
CEE countries
- 79 – 120 billion EUR (estimation of the European Commission);
- 78 – 85 billion EUR (IIASA, 1999)
90 billion EUR (Angelov, 2001)
Sources: CEPS, IFW, ICPS, European Commission, CEN, BAS, NPAA Slovakia, EIR, IIASA, The World Bank, own summary, * Information initially provided by the Romanian Ministry of Transport, Construction and Tourism
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4. Harmonization costs in the neighboring countries
4.1. Methodological steps
For purpose of measuring the potential harmonization costs in the ENP countries we decided to use costs incurred by other countries as a benchmark and then adjust them for ENP countries specifics. This approach is less reliable than the impact assessment and could be less or more reliable in comparison with the survey-based method depending on the latter’s quality, depth and coverage. However, difficulty in conducting an impact assessment for the ENP countries and the lack of appropriate questionnaire-based data, has limited our choice8.
As the first step, we defined the major areas of harmonization of the ENP countries and their respective degree. The next step was to find out costs of harmonization in these areas in the CEE countries, in order to work out a relationship to an observable macroeconomic indicator, which we can use later for the estimation of such costs in the neighboring countries. Here, the major source of information was the volumes of EU assistance on enhancement of institutional capacity and investment in infrastructure and agriculture – PHARE, ISPA and SAPARD programs, including national co-financing. Yet, the resources allocated under these programs represent only a part of all harmonization-related costs in the CEE countries, therefore to obtain the volume of the total investment, we derive coefficients based on the comparison of the EU assistance and total investment for the sectors where such data is available (see Table 10). Finally, to obtain an estimate for the ENP countries, we take an average volume of costs in CEE and adjust them for the level of GDP and multiply them by the coefficient reflecting the degree of limited harmonization.
4.2. Areas and the degree of likely harmonization in the ENP countries
In this section we review major types of activities and economic sectors that the neighboring countries are supposed to harmonize according to the provisions of the ENP Actions Plans and the Partnership and Cooperation Agreements (PCAs)9. These activities are of different nature,
8 The research team decided not to use regression analysis due to limited number of observations 9 Original texts are accessible at: http://ec.europa.eu/external_relations/ceeca/pca/index.htm
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yet most of them are crucial for trade facilitation, ensuring better market access and closer integration in energy and transport sectors. In particular, the rules to be harmonized fall into the following areas: agriculture and food safety, competition, customs, employment and social policy, environment, external trade, internal market (free movement of people, single market for goods, single market for services, free movement of capital), company law, public procurement, intellectual property rights, transport and energy policy10. Furthermore, we have attempted to define the degree of limited harmonization for the neighboring countries as envisaged in the ENP strategic papers.
Internal market:
Free movement of people – abolishment of all discriminatory measures based on nationality of migrant workers in respect to working conditions, remuneration and dismissal.
The rules related to free movement of EU citizens within the Union, Schengen information system, penetration of external borders, visas, asylum, immigration, rights of non-EU nationals, relations with non-EU member countries, recognizing qualifications, skills and mobility and social protection of workers will not be harmonized.
Single market for goods – gradual removal of all export and import restrictions according to the PCAs, gradual liberalization of trade in steel products and gradual removal of export duties on ferrous scrap and voluntary harmonization with EU technical requirements.
An explicit harmonization is not to be expected in respect to consumer health, including genetically modified organisms, quality of goods and services, community patents, biotechnological inventions, duty free treatment, management of pollution and waste, energy efficiency and the general rules establishing the Single European Market.
Single market for services - Removal of obstacles identified, taking into account WTO services commitments, effective implementation of legislation setting out basic principles of non- discrimination, compliance with the recommendation of the International Monetary Fund, independent and well-trained supervisory authorities in accordance with internationally
10 In a few cases there are rules that apply to more than one area.
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recognized standards, as well as effective implementation of adequate company law, accounting and governance rules.
No explicit harmonization is expected regarding recognition of qualifications, “Services” Directive, competitiveness of services related to businesses, liberal professions, inland navigation, intra-Community air routes, postal services, etc.
Free movement of capital – free movement of capital related to direct investments or other investments made in accordance with the provisions of the PCAs, protection of foreign investments as well as to liquidation or repatriation of these investments and of any profits resulting from them.
No explicit harmonization is expected regarding the free movement of capital and the relations within the Union, consumer credit, actions for injunctions, common taxation of parent companies and their subsidiaries, indirect taxes on raising of capital, Statute for a European Company, Investor compensation schemes and late payments.
Other horizontal areas:
Food safety - legislative approximation in the sphere of food hygiene, including food processing, convergence with EU food traceability legislation, general food safety principles and requirements (Regulation (EC) No 178/2002), implementation of the Hazard Analysis Critical Control Point system at enterprises and controlling bodies, including the fish industry.
No explicit harmonization is expected to take place regarding labeling, presentation and advertising of foodstuffs, deregulation of pack sizes, prices of products offered to consumers, frozen food, genetically modified organisms, novel foods and novel food ingredients, nutrition and allergens, foods for infants and young children, food packaging and containers, imports from third countries and intra-community trade, genetically modified feeding stuffs, animal waste and pathogenic agents, etc.
Competition – state aid policy, anti-trust legislation, control regimes.
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No explicit harmonization is foreseen regarding calculation of fines, immunity from and reduction of fines, information on infringements and complaints, exemptions of agreements of minor importance as well as the competition rules applicable to specific sectors: agriculture (state aid in the agricultural sector, state aid to small businesses), postal services and telecommunications.
Customs – general legislation aligned with the international practice, adoption of the harmonized system in use, risk based customs control, well-trained customs officials
No harmonization is expected to take place regarding the Community customs code, the Common Customs Tariff and the Integrated Tariff, customs check and exemptions at internal and external borders, the specific schemes and the agreements with third countries.
Employment and Social Policy – closer approximation to EU practices, non-discriminatory treatment of migrant workers, trade unions’ rights and core labor standards based on European standards
No explicit harmonization is foreseen regarding the partnership for growth and employment, the legal instruments for Community employment policies, incl. the quality of employment as well as reporting and statistics, job creation measures, social protection, third-country nationals, organization of working time, cross-industry social dialogue, protection of specific groups of workers, the workplace, the female employment and entrepreneurship, etc.
Enterprise – national registration system for companies, based on best practice in EU Member States, non-discriminatory, transparent and predictable business conditions, adoption and implementation of a system of impact assessment of regulatory measures, consultation of stakeholders, and prior notification of regulatory changes to economic operators, developed domestic securities markets and improved regulatory and supervisory framework for non-bank financial institutions, approximation of legislation on liability for defective products and general product safety, consolidated and strengthened market surveillance capacities of state institutions based on best practice of EU Member States.
No explicit harmonization is to be expected in the areas of small and medium-sized enterprises, multiannual program for enterprises and entrepreneurship, financing, corporate social
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responsibility as well as regarding the rules for specific industries like automobile, chemical, pharmaceutical, textile industry and tourism.
Environment - Strategic planning of environment issues and co-ordination between relevant actors, establishment of procedures regarding access to environmental information and public participation, structures and procedures to carry out environmental impact assessments, implementation of the provisions under the Kyoto Protocol, and the UN Framework Convention on Climate Change.
No explicit harmonization is expected regarding biodiversity, genetically modified organisms, management of specific soil types, discharge of substances, civil protection measure, noise management and the cooperation with third countries.
External trade – Gradual removal of restrictions and non-tariff barriers that impede bilateral trade and implementation of the necessary regulatory reforms, gradual liberalization of trade in steel products and gradual removal of export duties on ferrous scrap, harmonization of the remaining import licensing and registration requirements with those of the EU, removal of the existing discriminative measures against imported products in terms of measures covering the weight, composition, labeling manufacture and description of products (see also customs).
Harmonization will not take place in respect to export credit insurance rules, dual-use items and technology, exports of cultural goods, rules for imports from certain non-EU member countries, anti-dumping measures, anti-subsidy measures, defense against trade barriers, etc.
Public procurement - approximation to the EU legislation on procurement for goods, services and works across all relevant public bodies at all levels, open and competitive award of contracts, in particular through calls for tenders, possibility of independent/ judicial review in the event of disputes and effective dissemination of tendering opportunities and time-limits (above agreed thresholds), which allow EU as well as domestic suppliers to prepare and submit tenders.
Sectors:
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Transport - National sustainable transport policy for development of all transport modes, coherent with the EU’s White Paper on transport, infrastructure policy in order to identify and evaluate the priority projects in various sectors, co-operation in satellite navigation (including joint research actions and applications), improved efficiency of freight transport services (including issues of border crossing procedures), incl. multi-modal services and address issues of interoperability, implementation of relevant international IMO (International Maritime Organization) conventions.
Harmonization is not expected in respect to carriage of passengers, employment and working conditions, technical harmonization of motor vehicles, inland waterways navigation, the Single Sky and air traffic management, biofuels, passenger rights, intelligent transport systems, European space policy and regarding rules applicable to anti-trust and state aid legislation in transport.
Energy - gradual convergence towards the regulatory principles of the EU internal electricity and gas markets, including price formation, participation in EU related energy events as appropriate, including gradual involvement in the European Gas and Electricity Regulatory fora, increased performance of networks and reduction of network losses (oil, gas, electricity), increased performance, safety and security of the gas transit networks, restructuring of the solid fuels mines, compliance with the internationally accepted nuclear safety standards, accession to the agreement concluded with EURATOM on peaceful uses of nuclear energy and the adoption of a nuclear waste strategy.
No explicit harmonization is foreseen in the areas of climate change, greenhouse gas emission allowance trading scheme, energy taxation, European Strategic Energy Technology Plan, sustainable power generation from fossil fuels, “Intelligent Energy – Europe” program for innovation and competitiveness.
As previously indicated, the institutional harmonization in the neighboring countries will not be equally distributed among sectors, primarily focusing on trade in goods and important infrastructure sectors like energy and transport, with a rather limited scope of harmonization in services and agriculture. According to the ENP Action Plans and the Partnership and Cooperation Agreements, foreseen harmonization measures and objectives are very similar
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across countries, with the exception of some country specificities like nuclear power plants, hazardous areas, etc.
Although the agenda is generally quite wide in scope and concrete efforts undertaken by each country may differ even if final goal is the same, this similarity makes the assessment of cost and benefits of the integration easier, allowing the use of a uniform approach. On this basis we found it appropriate to treat all countries equally, attempting also to assign to each area a separate coefficient representing the expected degree of limited harmonization. Estimates of the harmonization-degree-coefficients provided in Table 11 are based on the arbitrary authors’ judgment after studying EU policies in each area and measures foreseen in the ENP strategic documents, as summarized above.
For example, in the public procurement area harmonization will encompass the establishment of open and competitive award of contracts in all areas – goods, services and construction works, possibility of independent review in the event disputes and effective dissemination of tendering opportunities and time-limits. On the other hand, no explicit harmonization is expected to take place in the public awarding in the water, energy, transport and postal services sectors, defense procurement, e-Government measures, public procurement partnerships and concessions under the Community law.
The number of public procurement areas to be and not to be harmonized is generally the same for all ENP countries, yet the first category encompasses more general and wide-ranging measures, i.e. presumably more resource-intensive while the second one consists of specific and some sector-oriented measures, i.e. presumably as a weighted share in the public procurement area as a whole and all harmonization-related costs, their value would be less than 50%. For this reason, we decided to assign a limited-harmonization-coefficient to the public procurement area of 0.75. Indeed, this approach could be only a very rough measure for the harmonization efforts across areas, yet the large scale of the study does not allow any closer examining of each domain and the application of more sophisticated metrics.
Table 11 shows the most relevant EU policy areas and activities as well as an assessment of the degree of institutional approximation of the ENP countries.
Table 11. Evaluation of ENP countries’ foreseen harmonization
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Areas
Expected harmonization in ENP countries, by subareas
Coefficient of harmonization [0;1] (1=full harmonization)*
Agriculture / Food safety
- Legislative approximation in the sphere of food hygiene, including food processing (see “Food Safety”);
- Convergence with EU food traceability legislation, general food safety principles and requirements (Regulation (EC) No 178/2002);
- Implementation of the Hazard Analysis Critical Control Point system at enterprises and controlling bodies, including the fish industry.
0.15
Competition
- State aid policy compatible with that of the EU;
- Prohibition of state aids which distort trade;
- Adequacy and compatibility with the EU, of the domestic anti-trust legislation and control regimes.
0.5
Customs
- Customs legislation aligned with international and EU standards;
- Adoption of the Harmonized System in use, with a view to adopt the Combined Nomenclature in the longer term, as agreed in the PCA;
- Risk based customs control and set the necessary organizational framework;
- Customs-related legislation: provisions on customs control of precursors, counterfeit and pirated goods, dual use goods, and cultural goods;
- Well-trained customs officials, higher computerization of the customs administration and upgraded Customs laboratories.
0.4
Employment and Social Policy
- Closer approximation to EU standards and practices in the area of employment and social policy;
- Non-discrimination of migrant workers on a ground of nationality;
- Trade unions’ rights and core labor standards based on European standards and in accordance with relevant ILO conventions;
- Effective employment creation and poverty reduction;
- Sustainable systems for education, health and other social services with access for all.
0.1
Energy
- Gradual convergence towards the principles of the EU internal electricity and gas markets;
- Price convergence of the neighboring countries’ and the EU markets;
- Participation in EU related energy events as appropriate, including gradual involvement in the European Gas and Electricity Regulatory fora;
- Increased performance of networks and reduction of network losses (oil, gas, electricity);
- Increased performance, safety and security of the gas transit network;
- Restructuring of the solid fuels mines;
- Compliance with the internationally accepted nuclear safety standards;
- Accession to the agreement concluded with EURATOM on peaceful uses of nuclear energy;
- Adoption of a nuclear waste strategy.
0.7
Enterprise
- Implementation of a national registration system for companies, based on best practice in EU Member States (possible accession to the European Business Register);
- Non-discriminatory, transparent and predictable business conditions, simplified administrative procedures and fight against corruption;
- Adoption and implementation of a system of impact assessment of regulatory measures, consultation of stakeholders, and prior
0.2
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Areas Expected harmonization in ENP countries, by subareas
Coefficient of
harmonization
[0;1] (1=full
harmonization)*
notification of regulatory changes to economic operators;
- Privatization program, including large-scale privatization, and increased transparency of the process;
- Reduction of the involvement of the state in setting prices;
- Strengthening banking regulation and supervision;
- Developed domestic securities markets and improved regulatory and supervisory framework for non-bank financial institutions;
- Harmonization of the necessary framework and sectoral legislation with the EU technical regulations in the priority sectors (priority sectors not stated);
- Transparent and predictable regulatory environment for the economic operators;
- Approximation of legislation on liability for defective products and general product safety;
- Gradual simplification of procedures of conformity assessment of industrial products, in accordance with the requirements of the Technical Regulations (EU Directives), and with the objectives of avoiding compulsory certification of non-risk products and multiple testing of products;
- Consolidated and strengthened market surveillance capacities of state institutions based on best practice of EU Member States.
Environment
- Strategic planning of environment issues and co-ordination between relevant actors;
- Waste management and water protection;
- Establishment of procedures regarding access to environmental information and public participation, including implementation of Aarhus Convention, particularly by establishment of structures and procedures for ensuring an acceptable level of service to those wishing to have access to information;
- Structures and procedures to carry out environmental impact assessments, including in relation to trans-border issues;
- Implementation of the provisions under the Kyoto Protocol and the UN Framework Convention on Climate Change;
- Possible participation in selected European Environment Agency activities.
0.4
External Trade
- Gradual removal of restrictions and non-tariff barriers that impede bilateral trade and implementation of the necessary regulatory reforms;
- Gradual removal of all export and import restrictions according to the PCA;
- Gradual liberalization of trade in steel products and gradual removal of export duties on ferrous scrap;
- Harmonization of the remaining import licensing and registration requirements with those of the EU;
- Removal of the existing discriminatory measures against imported products in terms of measures covering the weight, composition, labeling manufacture and description of products;
- Full and effective implementation of most favored nation and national treatment.
0.6
Internal Market – 0.55 on average
- Free movement
- Full application of the best endeavor clause by abolishing all discriminatory measures based on nationality which affect migrant
0.3
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Areas Expected harmonization in ENP countries, by subareas
Coefficient of
harmonization
[0;1] (1=full
harmonization)*
of people
workers, as regards working conditions, remuneration or dismissal.
- Single market for goods
- Gradual removal of all export and import restrictions in the spirit of the PCA;
- Gradual liberalization of trade in steel products and gradual removal of export duties on ferrous scrap.
0.85
- Single market for services
- Removal of obstacles identified, taking into account WTO services commitments;
- Effective implementation of legislation that sets out basic principles of non-discrimination and introduction of more detailed secondary or sector-specific legislation where necessary;
- Compliance with the recommendations of the IMF's Financial Sector Assessment
Program (FSAP) of November 2003;
- Effective implementation of independent and well-trained supervisory authorities in accordance with internationally recognized standards;
- Effective implementation of adequate company law, accounting and governance rules.
0.3
- Free movement of capital
- Free movement of capital related to direct investments or other investments made in accordance with the provisions of the PCAs;
- Protection of foreign investments as well as liquidation or repatriation of these investments and of any profits stemming there from.
0.65
- Company law
- Adoption and implementation of effective competition and bankruptcy legislation;
- Abolishment of discriminatory measures affecting the operation of EU companies;
- Full and effective implementation of most favored nation and national treatment;
- Progressive removal of restrictions on company establishment;
- Improved competences and independence of auditors.
0.2
- Public procurement
- Approximation to the EU legislation on public procurement. These principles should apply to procurement for goods, services and works across all relevant public bodies at all levels;
- Open and competitive award of contracts, in particular through calls for tenders;
- Ensure the possibility of independent/judicial review in the event of disputes;
- Effective dissemination of tendering opportunities and time-limits (above agreed thresholds), which allow EU as well as domestic suppliers to prepare and submit tenders.
0.75
- Intellectual property
- Level of protection similar to that in the EU, including effective means of enforcement;
- In particular, legislation on trademarks and geographical indications sanctions for infringements of intellectual and industrial property rights, effective measures against counterfeit/pirated goods in specifically targeted sectors.
0.8
Transport
- National sustainable transport policy for the development of all transport modes, coherent with the EU’s White Paper on transport;
- Infrastructure policy in order to identify and evaluate the priority infrastructure projects in various sectors and continue participation in the joint development of the Pan-European Corridors and Areas as well as in the TRACECA program;
- Co-operation in satellite navigation (including joint research actions
0.3
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Areas Expected harmonization in ENP countries, by subareas
Coefficient of
harmonization
[0;1] (1=full
harmonization)*
and applications);
- Introduction and enforcement of mandatory driving times and rest periods in the international transport sector complying with international standards;
- Adoption of an action plan for improving road safety;
- Improved efficiency of freight transport services (including issues of border crossing procedures), incl. multi-modal services and address issues of interoperability;
- Obtaining a full member status in the European Joint Aviation Authorities (JAA);
- Implementation of relevant international IMO (International Maritime Organization) conventions.
* No exact formula is used; the numbers are chosen based on the author’s own expert assessment.
Source: European Commission, EU/ENP partners Action Plans, Partnership and Co-operation Agreements, own summary; Belarus is excluded because it has not signed an Action Plan.
4.3. Harmonization in Russia
Russia is an important geopolitical, security and trade partner of the EU and its largest neighbor. Although Russia’s engagement with the EU is aimed more towards building a strategic partnership and cooperation in diverse areas rather than unilateral harmonization, the coverage and the essence of this cooperation is quite close to what is being done in the context of the ENP, especially in the economic domain. EU-Russia relations draw on a large spectrum of particular EU policies, including the Common Foreign and Security Policy, trade policy, external aspects of EU general policies such as energy, transport, environment and the external dimension of freedom, security and justice affairs.
The provisions of the PCA also cover a wide range of policy areas including political dialogue, trade in goods and services, business and investment, financial and legislative cooperation, science and technology, education and training, energy, nuclear and space cooperation, etc. At the St. Petersburg Summit in 2003 EU and Russia agreed to create four common spaces in the framework of the PCA – common economic space, common space of freedom, security and justice, space of cooperation in the field of external security and a common space of research and education.
There are also ongoing negotiations on Fishery Agreement, Energy Charter Treaty, agreement for trade in nuclear materials, the Kyoto Protocol, agreement for nuclear safety and nuclear fusion, EU-Russia action plan on combating organized crime, agreement on satellite navigation
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(Galileo/Glonass), etc. As result, these various forms of cooperation may certainly bring EU and Russia closer in terms of policies and formal rules. The project team believes that there are enough reasons to estimate the potential harmonization costs for Russia in the same way they are calculated for ENP countries. This will also guarantee higher accuracy in cross-country comparisons.
4.4. Cost of harmonization in the CEE countries
The volume of the EU pre-accession assistance to the CEE can serve as an indicator of the costs of harmonization, as the EU financed a big part of them. The three main programs that financed institutional and infrastructural harmonization in CEE were PHARE, ISPA and SAPARD.
4.4.1. PHARE
The PHARE program funded modernization of CEE counties for over a decade. In 1997 and 1999 it was modified to meet better the requirements of accession and prepare EU candidates for absorption of the Structural Funds. It was designed to meet the following six main broad objectives:
• Strengthening the public administration and judiciary at all levels;
• Improving transparency, financial control and the fight against corruption and fraud;
• Promoting economic growth, competitiveness and social cohesion;
• Integration of minority and vulnerable groups into mainstream society and the creation of more dynamic and pluralistic civil society;
• Improvement of the administrative and judicial capacity to implement and enforce legislative measures and assume obligations of the EU membership;
• Improvement of the strategic planning and effective utilization of EU funds.
Although PHARE was generally not sector-oriented like ISPA or SAPARD, there have been many projects undertaken to support development of specific sectors of the EU accession economies. Those initiatives and PHARE funds depended on national sector performance and thus no general rule of distribution can be devised.
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In the Bulgarian agricultural sector, for instance, PHARE projects aimed at the improvement of phytosanitary control and plant protection, mainly through training of experts on different control mechanisms and methods, on improvement of veterinary control through supporting the alignment of legislation and control systems and on the establishment of adequate border veterinary control measures. What concerns the environmental sector in Bulgaria, there were projects providing assistance for the closure of Eleshnitsa uranium mines, improving the administrative framework and institutional capacities necessary for implementation and enforcement of the Seveso Directive, etc.
In Romania’s transport sector, several projects were implemented for improvement of traffic safety infrastructure, e.g. the rehabilitation of a railway-testing centre and the completion of the interlocking systems in three main railway stations, a river information system on Danube and a video surveillance system on the national road no. 1. In the environmental sector, there were PHARE projects focused on the cost assessment and the preparation of a financial strategy for the so-called “heavy investment” directives, development of an environmental administration capable to cope with relevant EU requirements, including compliance with industrial pollution and Water Framework Directives. PHARE funds were generally allocated to several different areas and for various different objectives – administrative capacity improvement, internal market, agriculture, energy and nuclear safety, employment, social affairs and health11.
The most comprehensive data on distribution of PHARE funds across areas and countries, including nuclear decommissioning, is available for the years 2001 and 2003. Based on this information an average distribution of the total funds is calculated (see Table 12).
Table 12. Distribution of PHARE commitments by areas and countries (1990 – 2004), EUR millions12
Administrative capacity
Internal market
Agriculture
Transport
Energy and nuclear safety
Environment
Employment, social affairs and health
Bulgaria
362.0
-
-
-
756.3
-
480.3
Czech Republic*
365.8
48.6
-
-
26.3
-
491.4
11 In our analysis some areas are omitted, due to their minimal or no relevance to the harmonization process in the ENP countries, for example, justice and home affairs, internal statistical issues, regional policy and internally managed community programs.
12 We have the total (1990-2004) PHARE allocation across countries but not across areas; to estimate the latter we take the average allocation for 2001 and 2003 across areas (as provided in Appendix 1) and assume that it is the same or similar for the whole period.
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Administrative
capacity
Internal
market Agriculture Transport
Energy
and
nuclear
safety
Environment
Employment,
social affairs
and health
Estonia
85.7
48.6
89.8
-
-
48.6
32.1
Hungary
735.7
81.9
124.3
71.1
8.8
81.9
97.9
Latvia
62.4
57.9
15.2
-
12.7
-
32.4
Lithuania
66.9
29.5
73.3
9.6
376.2
20.7
11.9
Poland
601.4
228.0
365.6
-
-
129.7
1 639.2
Romania
242.3
29.9
-
-
13.6
108.9
1 179.1
Slovakia*
33.5
27.8
29.4
-
278.6
13.1
117.6
Slovenia
26.4
44.7
-
-
7.0
-
98.2
* The funds provided to former Czechoslovakia (EUR 230 millions) are equally divided between the Czech Republic and Slovakia
Source: Official reports of the European Commission, own summary and calculations
4.4.2. ISPA
The Pre-Accession Structural Instrument provided funding to transport and environmental projects in all the CEE countries since early 2000s, along the same lines as the Cohesion Fund designed for the lower-income EU members. The program had two main objectives:
• To help candidate countries to catch up with EU environmental standards;
• To upgrade and expand their links with the trans-European transport networks
ISPA provided an overall financing of 1,040 million EUR per year or 7,280 million EUR for the whole period of 2000-2006. The objective was to have an equal division of the budget between the two sectors, i.e. 520 million EUR per year per each of them13. Generally the rate of the Community assistance14 granted under ISPA might be up to 75% of the public or equivalent expenditure, including expenditures of bodies whose activities are undertaken within an administrative or legal framework by virtue of which they are regarded as equivalent to public bodies (the European Commission could propose to increase this rate to up to 85%, in particular where it was required for achieving ISPA’s general objectives). Table 13 presents the actual distribution of ISPA funds across areas and countries according to Commission’s official reports (a more detailed breakdown is provided in Appendix 2, Table A2.2).
13 A breakdown by country of actually provided ISPA funds and the total estimated project costs are provided in Appendix 2, Table A2.1.
14 According to the official statement of the Commission, the available ISPA funding for all EU candidate countries was distributed according to size of population, GDP per capita, and the specific needs of the country.
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Table 13. Distribution of overall ISPA support (including national contribution) over 2000- 2004, EUR million
Country
Environment
Transport
Technical assistance / EDIS
Bulgaria*
507.7
947.9
11.7
Czech Republic
373.4
440.0
4.4
Estonia
129.3
86.0
24.0
Hungary
550.7
627.2
15.3
Latvia
178.5
230.2
26.5
Lithuania
214.9
288.0
18.3
Poland
2,047.3
1,695.5
60.4
Romania*
1,301.1
1,621.9
44.6
Slovakia
304.8
313.9
18.8
Slovenia
90.4
74.3
3.4
* - for Bulgaria and Romania the period covered is 2000-2006
Source: European Commission, own summary and calculations
4.4.3. SAPARD
In the beginning of 2000, the European Union reinforced its pre-accession assistance for the rural development by creating the Special Accession Program for Agriculture and Rural Development (SAPARD). Financial support provided under this program was intended to assist the countries to make structural improvements of their agricultural and rural environment in anticipation of joining the EU. In particular, the European Union provided financial support to improve product processing, marketing and observation of the quality standards in the agricultural sector in order to help EU candidates meeting the requirements of several EU policies and objectives (see Table 14).
Table 14 Total SAPARD commitments by countries, 2000-2004, EUR million
Country
Total commitments
Bulgaria
286.8
Czech Republic
92.8
Estonia
51.0
Hungary
160.0
Latvia
91.9
Lithuania
125.4
Poland
709.4
Romania
791.2
Slovakia
76.9
Slovenia
26.7
Source: European Commission staff working document, annex to the SAPARD annual report, 2004, own summary and calculations 38
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4.4.4. Estimation of total harmonization cost in the CEE countries
Table 15 summarizes numbers analyzed in the previous three subsections, and presents the total amount of resources allocated in different harmonization areas in the EU accession countries (these are also the main areas that are expected to be harmonized in the ENP countries to the degree identified earlier in this section).
Table 15. Total EU support to the CEE countries by area, EUR million
Country
Administrative capacity *
Internal market
Agriculture **
Transport ***
Energy and nuclear safety
Environment ****
Employment, social affairs and health
Bulgaria
373.7
-
286.8
947.9
756.3
507.7
480.3
Czech Republic
370.2
48.6
92.8
440
26.3
373.4
491.4
Estonia
109.7
48.6
140.8
86
-
177.9
32.1
Hungary
751
81.9
284.3
698.3
8.8
632.6
97.9
Latvia
88.9
57.9
107.1
230.2
12.7
178.5
32.4
Lithuania
85.2
29.5
198.7
297.6
376.2
235.6
11.9
Poland
661.8
228.0
1,075.0
1,695.5
-
2,177.0
1,639.2
Romania
286.9
29.9
791.2
1,621.9
13.6
1,410.0
1,179.1
Slovakia
52.3
27.8
106.3
313.9
278.6
317.9
117.6
Slovenia
29.8
44.7
26.7
74.3
7.0
90.4
98.2
* PHARE support + technical assistance provided under ISPA
** PHARE + SAPARD support
*** PHARE + ISPA support
**** PHARE + ISPA support
Source: Own summary and calculations
Obviously, the financial assistance provided in these areas represents only a part of the total harmonization costs in the CEE countries. It is mainly related to projects and programs carried out and (co-) financed by the public sector and, to a very limited extent, represents the cost of compliance with EU technical standards and requirements of the private sector (as part of the overall harmonization costs). Therefore, the estimated amount of resources has to be adjusted in order to account for a wider spectrum of costs, which we do by comparing the volumes of EU financing with the volume of total investments in the areas where estimates on the total investments are available – environment and transport (see Table 10). Based on the comparison of the total costs and the EU financial support, an average cost/support ratio is calculated and subsequently applied to all sectors.
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41. CASE Network Studies & Analyses No.388 -Cost of Institutional Harmonization in the ENP …
Table 16. Comparison between costs of compliance with EU standards according to different studies in the environmental and transport sectors and EU financial support programs in the same area, EUR millions
Country
EU environmental support
Environmental costs - average of all studies
Environmental cost/support ratio
EU support in transportation
Transport costs – average of all studies
Transport cost/support ratio
Bulgaria
507.7
12,200
24.0
947.9
5,300
5.6
Czech Republic
373.4
9,950
26.6
440
-
-
Estonia
177.9
2,950
16.6
86
-
-
Hungary
632.6
9,250
14.6
698.3
-
-
Latvia
178.5
1,850
10.4
230.2
-
-
Lithuania
235.6
1,990
8.4
297.6
-
-
Poland
2177
31,600
14.5
1,695.5
-
-
Romania
1410
23,900
17.0
1,621.9
18,300
11.3
Slovakia
317.9
4,800
15.1
313.9
3,500
11.2
Slovenia
90.4
2,120
23.5
74.3
-
-
Average
17.1
9.4
Sources: CEPS, IFW, ICPS, European Commission, CEN, BAS, NPAA Slovakia, EIR, IIASA, The World Bank, Table 10, own summary and calculations
There is significant difference between the costs that were covered by the EU pre-accession financial instruments in the environmental and transport domain and the total cost of compliance as estimated in different studies. Undoubtedly the EU assistance (and related national co- financing) covered only part of the cost resulting from harmonization efforts in the CEE countries. Unfortunately, due to lack of appropriate studies and information, the cost/support ratio in the remaining areas cannot be estimated. One possible solution is to take the average ratio as estimated for the environmental and transport domain and to assume that it is similar in all other areas. Although there is a risk of under- or overestimation of the harmonization costs in the CEE countries (i.e. of the ENP countries as well), given the existing information limitations, we consider it appropriate. Table 17 provides estimates of the harmonization cost in the EU accession countries calculated according to the above-described approach15.
15 For the purpose of adjustment we used the arithmetic average of the transport and environmental cost/support ratio (13.25)
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42. CASE Network Studies & Analyses No.388 -Cost of Institutional Harmonization in the ENP …
Table 17. Estimated total harmonization costs in the CEE countries by main area, EUR millions
Country
Administrative capacity
Internal market
Agriculture
Transport
Energy and nuclear safety
Environment
Employment, social affairs and health
Bulgaria
4,951.5
-
3,800.1
5,308.2
10,021.0
12,200
6,364.0
Czech Republic
4,905.2
644.0
1,229.6
4,136.0
348.4
9,950
6,511.1
Estonia
1,453.5
644.0
1,865.6
808.4
-
2,950
425.3
Hungary
9,950.8
1085.2
3,767.0
6,564.0
116.6
9,250
1,297.2
Latvia
1,177.9
767.2
1,419.1
2,163.9
168.3
1,850
429.3
Lithuania
1,128.9
390.9
2,632.8
2,797.4
4,984.7
1,990
157.7
Poland
8,768.9
3,021.0
14,244.0
15,938.0
-
31,600
21,719.0
Romania
3,801.4
396.2
10,483.0
18,328.0
180.2
23,900
15,623.0
Slovakia
693.0
368.4
1,408.5
3,515.7
3,691.4
4,800
1,558.2
Slovenia
394.9
592.3
353.8
698.4
92.75
2,120
1,301.2
Source: Own calculations
4.5. Estimation of harmonization costs in the ENP countries
To enable cross-country comparisons, the next step is to calculate these amounts as a percentage of the total or sectoral value added. The analysis of funds’ allocation to the CEE countries has not allowed detecting any clear and economically justifiable rule of distribution. The only exception is the relationship between the nominal GDP or the value added and the average annual allocation of resources – the higher nation’s income, the more projects has been contracted, yet not proportionately and not in all the cases.
We assume that the volume of the financial resources needed for harmonization is proportional to the level of GDP (or value added in particular sectors). In other words, the larger the size of the economy is, more financial resources is needed for improvement and compliance with EU standards and technical requirements. On the other hand, the larger the economy and the greater the need for compliance in production in absolute terms, the more infrastructure and administrative capacity is needed to facilitate and administer the flows of goods, services and capital as well as the administrative paperwork. This also means higher demand for resources to achieve a certain level of harmonization.
On the basis of the above conclusions we calculated the harmonization costs in the CEE countries as a percentage of their total value added (in the agricultural and energy sector as a percentage of their sectoral value added) and then we use the average ratios in each area for 41