CASE Belarus has joined the consortium led by Institute of World Economics, Centre for Economic and Regional Studies HAS in Budapest, Hungary, to overview the macroeconomic relevance of vulnerable sectors of EaP countries and give further sectoral analyses on two major segments, namely the machine-building industry and the energy and energy-intensive chemical sectors.
Project title: Mapping out vulnerable sectors in the Eastern Partnership countries – structural change, Visegrad experience and relevance for EU policy
Project duration: February 2015 – June 2016
In the modernization process of the Eastern Partnership countries some major sectoral issues have particular importance. These sectors constitute large segments of national economy, providing a major input into the macroeconomic performance of the respective countries. At the same time many of them are structurally declining industries, with limited competitiveness, out-worn capital assets, producing predominantly to or being dependent from the domestic or Post Soviet markets. The fate of these sectors are also of great social and economic importance.
These Post Soviet industrial clusters comprise different sectors. Machine-building in Ukraine and Belarus provide more than 10% of the GDP, with an almost exclusive, 90% export share of the CIS. Energy-intensive chemical industries still constitute a considerable segment of economic performance with 5-8% of the GDP, heavily reliant on prices of imported energy. CIS exports form the bigger share of the otherwise promising foreign agricultural trade in Georgia or Moldova, while the smooth entering to the highly competitive EU markets is still to be achieved.
Energy efficiency and demand management drop another challenge to modernization. Gas imports in percentages of GDP range from 7-12% of the EaP countries, compared to 2-3% in Central Europe or 1-1.5% in Western economies. This major macroeconomic burden raises doubts regarding the longer-term macroeconomic affordability of natural gas consumption, puts economic stabilization on a shaky fundament. Nevertheless the imperative to increase energy efficiency, keep the energy-intensive industries competitive and save low-income population from the negative social consequences of market prices would require major capital-investments, high-profile policy efforts and considerable time.
Problems related to these sectoral clusters had remained moderate until the 2008 crisis. Since then their outlook has been turning extremely negative due to a number of factors: worsening foreign terms of trade, slowdown of Post Soviet economies and narrowing markets, more recently the worsening geopolitics of the region. Local governments face complex challenges, comprising of industrial, social, labour and political factors. These problems may stalemate the modernization process, their management constitutes an important prerequisite for the economic and social catch-up of the region.
The aim of this project is three-fold:
- Provide a discussional platform for EaP countries to “speak out”, raise the EU and Visegrad decision makers’ and public awareness to their problems. At this point it is important to demonstrate solidarity at least at the Visegrad level, show empathy and get a full insight into the matter.
- Collect and discuss Visegrad and EaP transitional experience from the 1990s. After the split up of the Socialist system these countries lost or transformed their heavy-, machine-building and energy systems. This wide region provides a high number of different solutions in management of declining industries. These can be differentiated according to the inclusion of foreign capital, state involvement, practices of social or labour policies. By overviewing these sectoral solutions, experts or decision makers from any countries can learn about some useful examples with potential for national adaptation.
- Raising decision makers’ and public awareness to the hardships of these EaP sectors. The deep understanding of the problem’s nature and the challenges in EaP countries at the EU and EU members’ level may contribute to the improvement of the Eastern Partnership. The assessments, case studies and the recommendations shall be also discussed and distributed at Western business, expert and administrative levels.
— macroeconomic overview of the relevance of vulnerable sectors
— sectoral analysis on machine-building industry in EaP countries
— sectoral analysis on energy and energy-intensive chemical sectors in EaP countries.
— April 2015, Warsaw, Seminar: Macroeconomic overview, competitivity problems outlook
— May-June 2015, Bratislava, Panel: Presentation of the project in connection with the V4 Summit, preliminary findings
— September 2015, Kishinov, Seminar: Machine-building and processing industries
— November 2015, Budapest, Seminar: Energy efficiency, residential systems, energy intensive sectors
— February 2016, Kiev, Final Conference: Presentation of the Reports, Findings
— March 2016, Minsk, Panel: Presentation of the Project Findings.
Funding: IVF Extended Standard Grant
Lead Partner: Institute of World Economics, Centre for Economic and Regional Studies HAS — HU
Institute for Development and Social Initiatieves, IDIS – Moldova;
Center for Social and Economic Research, CASE – Poland;
SFPA – Slovakia;
Institute for Economic Research and Policy Consulting – Ukraine.