Emerging Europe must integrate, invest in research, and concentrate resources on value-added export sectors – or fall behind China, India and other rising Asian economies – officials warned yesterday. The era in which the region’s economies gained advantage from globalisation, from the uptake of spare capacity, and from the consumption boom, is coming to an end, Bozidar Djelic said in Kiev. “No-one stands still,” he told an EBRD seminar devoted to long-term economic development issues.
The region’s advantages relative to China and India are being eroded; Russian oil production is falling due to underinvestment; heavy industry across the region needs recapitalisation. EU accession “really matters” in terms of trade integration, Djelic insisted, expressing the hope that his own country wouldn’t be left out. Djelic said that debates on the region’s long-term development often paid too little attention to demographic factors. Russia’s population is falling by 800,000 per year, Ukraine’s by 350,000 and Serbia’s by 80,000.
A “war for talent, for people” is in progress between mature Europe and emerging Europe. The latter has an aging population and “an already emerged middle class, which is demanding very cheap access to public services”, all of which was putting great pressure on financial resources. Ricardo Haussmann, director of Harvard’s Centre for International Development, opened the seminar by arguing that diversification of exports is central to long-run growth. Research at the centre had shown that the less sophisticated the manufacture of a country’s exports, the more difficult it is to diversify. Djelic said he believed that automotive, chemicals and electronics are the key sectors into which eastern Europe needs to diversify.
The region’s many small countries needed to consider regional clusters, such as the expanding automotive belt through Hungary, Slovakia and the Czech republic. Ksenia Yudaeva, chief economist at Sberbank, Russia’s largest bank, said that while the government’s technology programmes were important, diversifying Russia’s exports away from oil and gas would depend more than anything on a new generation of business people. “The government is putting too much stress on state corporations and too little on the market”, she argued.