East Capital’s Marcus Svedberg points to reform benefits in Eastern Europe

East Capital chief economist Marcus Svedberg cites World Bank data pointing to improving prospects for Eastern Europe.

The World Bank’s annual Doing Business survey is not perfect but is probably the most respected international business climate survey. The results from the latest survey confirmed that Eastern Europe is the most business-friendly emerging region in the world, being second only to the high-income OECD countries.

The high score is a combination of countries that are doing really well in an absolute score – Georgia is top ten in the world and the Baltic states are top 25 – and that a number of laggards tend to reform a lot each year.

Over the past year, Ukraine was the country that did most reforms globally and Russia came in third. Kosovo and Macedonia also made it on the top ten list. And it has been the same almost every year. Last year, Poland was number one while Ukraine, Serbia and Kazakhstan were among the top ten reformers. Since 2005, when the first survey was made, six out of the eight countries that have reformed the most are from Eastern Europe.

Top Reformers 2013  Top reformers 2012  Top reformers since 2005
 Ukraine  Poland Rwanda
 Rwanda   Sri Lanka Georgia
 Russia  Ukraine Belarus
 Philippines  Uzbekistan Ukraine
 Kosovo  Burundi Macedonia
 Djibouti  Costa Rica Burkina Faso
 Cote d’Ivoire  Mongolia Kyrgyz Republic
 Burundi   Greece Tajikistan
 Macedonia Serbia Burundi
Guatemala Kazakhstan Egypt

So what reforms have been done and why are they being done? The progress is fairly broad based, especially among the top reformers.

Ukraine improved their score in eight out of the ten categories and Russia in five categories. It should be pointed out that it is obviously easier to reform a lot when the base is low and Ukraine and Russia are still ranked at relatively modest 112th and 92nd place out of 189. But Russia is now the highest ranked BRIC after jumping 20 spots and we believe the positive trend will continue as there is support from the highest political level. President Putin has made it a goal to move up the ranking and there a working groups for each category in Moscow, suggesting that the reform push will continue.

Elsewhere in the region, ambitions to join European and global institutions, such as the EU, OECD and WTO, has proved to be a powerful reform driver.

 

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