Appendix I. EBRD Transition Indicators
This classification system is simplified and builds on the judgment of the EBRD'S Office of the Chief Economist. More detailed descriptions of country-specific progress in transition are provided in the transition indicators at the back of the EBRD’s Transition Report. The classification system presented here builds on the Transition Report 1994. To refine further the classification system, pluses and minuses have been added to the 1-4 scale since 1997 to indicate countries on the borderline between two categories.
Private sector share in GDP
The private sector share of GDP represent rough EBRD estimates, based on available statistics from both official (government) sources and unofficial sources. The underlying concept of private sector value added includes income generated by the activity of private registered companies as well as by private entities engaged in informal activity in those cases where data are reliable.
1 Little private ownership.
2 Comprehensive scheme almost ready for implementation; some sales completed.
3 More than 25 percent of large-scale enterprise assets in private hands or in the process of being privatized (with the process having reached a stage at which the state has effectively ceded its ownership rights), but possible with major unresolved issues regarding corporate governance.
4 More than 50 percent of state-owned enterprise and farm assets in private ownership and significant progress on corporate governance of these enterprises.
4+ Standards and performance typical of advanced industrial economies: more than 75 percent of enterprise assets in private ownership with effective corporate governance.
1 Little progress.
2 Substantial share privatized.
3 Nearly comprehensive program implemented
4 Complete privatization of small companies with tradable ownership rights.
4+ Standards and performance typical of advanced industrial economies: no state ownership of small enterprises; effective tradability of land.
Governance and enterprise restructuring
1 Soft budget constraints (lax credit and subsidy policies weakening financial discipline at the enterprise level); few other reforms to promote corporate governance.
2 Moderately tight credit and subsidy policy but weak enforcement of bankruptcy legislation and little action taken to strengthen competition and corporate governance.
3 Significant and sustained action to harden budget constraints and to promote corporate governance effectively (e.g., through privatization combined with tight credit and subsidy policies and/or enforcement of bankruptcy legislation).
4 Substantial improvement in corporate governance, for example, an account of an active corporate control market; significant new investment at the enterprise level.
4+ Standards and performance typical of advanced industrial economies: effective corporate control exercised through domestic financial institutions and markets, fostering market-driven restructuring.
1 Most prices formally controlled by the government.
2 Price controls for several important product categories: state procurement at nonmarket prices remains substantial.
3 Substantial progress on price liberalization: state procurement at non-market prices largely phased out.
4 Comprehensive price liberalization; utility pricing which reflects economic costs.
4+ Standards and performance typical of advanced industrial economies: comprehensive price liberalization; efficiency-enhancing regulation of utility pricing.
Trade and foreign exchange system
1 Widespread import and/or export controls or very limited legitimate access to foreign exchange.
2 Some liberalization of import and/or export controls; almost full current account convertibility in principle but with a foreign exchange regime that is not fully transparent (possibly with multiple exchange rates).
3 Removal of almost all quantitative and administrative import and export restrictions; almost full current account convertibility.
4 Removal of all quantitative and administrative import and export restrictions (apart from agriculture) and all significant export tariffs; insignificant direct involvement in exports and imports by ministries and state-owned trading companies; no major non-uniformity of customs duties for non-agricultural goods and services; full current account convertibility
4+ Standards and performance norms of advanced industrial economies: removal of most tariff barriers; WTO membership.
1 No competition legislation or institutions.
2 Competition policy legislation and institutions set up; some reduction of entry restrictions or enforcement action on dominant forms.
3 Some enforcement actions to reduce abuse of market power and to promote a competitive environment, including break-ups of dominant conglomerates; substantial reduction of entry restrictions.
4 Significant enforcement actions to reduce abuse of market power and to promote a competitive environment.
4+ Standards and performance typical of advanced industrial economies: effective enforcement of competition policy; unrestricted entry to most markets.
Banking reform and interest rate liberalization
1 Little progress beyond establishment of a two-tier system.
2 Significant liberalization of interest rates and credit allocation: limited use of directed credit or interest rate ceilings.
3 Substantial progress in establishment of bank solvency and of a framework for prudential supervision and regulation; full interest rate liberalization with little preferential access to cheap refinancing significant lending to private enterprises and significant presence of private banks.
4 Significant movement of banking laws and regulations towards BIS standards; well-functioning banking competition and effective prudential supervision; significant term lending to private enterprises substantial financial deepening.
4+ Standards and performance norms of advanced industrial economies; full convergence of banking laws and regulations with BIS standards; provision of full set of competitive banking services.
Security markets and non-bank financial institutions
1 Little progress.
2 Formation of securities exchanges, market-makers and brokers; some trading in government paper and/or securities; rudimentary legal and regulatory framework for the issuance and trading of securities.
3 Substantial issuance of securities by private enterprises; establishment of independent share registries, secure clearance and settlement procedures, and some protection of minority shareholders; emergence of non-bank financial institutions (e.g., investment funds, private insurance and pension funds, leasing companies) and associated regulatory framework.
4 Securities laws and regulations approaching IOSCO standards; substantial market liquidity and capitalization; well-functioning non-bank financial institutions and effective regulation.
4+ Standards and performance norm of advanced industrial economies: full convergence of securities laws and regulations with IOSCO standards; fully developed non-bank intermediation.
In covering policies and reforms at the regional level, this paper makes references to these seven countries of the SEE region as well as, where relevant, to the two republics of FR Yugoslavia—Montenegro and Serbia—and to the province of Kosovo. For reasons of brevity and style, these are referred to as Montenegro, Serbia, and Kosovo, respectively.
UNMIK, A Year and a Half in Kosovo, December 2000.
Of this total, euros 2.4 billion has been provided by all donors for regional investment projects.
After Bulgaria’s inflation peaked at 12.4 percent in October 2000, year-on-year inflation returned to the single digits in January 2001.
This section draws on The Road to Stability and Prosperity in South East Europe, World Bank, 2000, as well as subsequent work by World Bank and IMF staff.
The ATPs were initially extended from November 2000 for a period of 26 months. This period has since been extended to December 2005. These measures initially applied to Albania, Bosnia and Herzegovina, Croatia and Kosovo-FR Yugoslavia. In November 2000, the ATPs were extended to FYR Macedonia and, following the collapse of the Milosevic regime, to FR Yugoslavia.