The sixth edition of the Bucharest Forum, organized by the Aspen Institute Romania and the GMFUS office in Romania, took place between 4-6 October, and focused on an overarching theme – „Center and Periphery – Bridging the Divide”. As a media partner, we were mostly interested on how relevant remains the label of “emerging market” for Romania nowadays.
For many years now, Emerging Europe had been seen by many mostly as an important market for the companies in the developed countries of Europe. Many would say that this is what happened in fact during the last 10-15 years, as the countries in the Emerging Europe evolved and the companies from Western Europe benefitted a lot from the EU enlargement.
Emerging to being more self-confident
„I fully agree”, told us Andrew Wrobel, Head of Editorial, Emerging Europe, a think tank headquartered in London, whose mission is to foster the economic and social development of the CEE region. “I believe that the EU enlargement was done, in the first place, because it would create an important market where Western companies could produce and manufacture their products at significantly lower costs. At the same time, it was also a market for those countries where they could sell their products. I think that the time when they would try to take benefit from the fact that the labor costs were significantly lower has already passed”, said Andrew Wrobel, one of the speakers in the 2017 Bucharest Forum. “We can see that, for example, recently there were strikes in Slovakia, in VW’s plant, with employees demanding more money for their work. You can see that production costs are going up, and with so many different companies already present here, the unemployment rate is very low across the region, so it is very difficult to maintain this status quo”, he continued.
“In my definition, Emerging Europe is not related to economy”, explained Andrew Wrobel. “My understanding of the term is in a more social and psychological manner. If you look at our map again you see countries that are richer than some old EU member states or roughly at the same level. We also see countries that are in a very poor situation, but we still put them into the same basket, because they share the same post-communist experience. From our point of view, those countries have to emerge from this social and sociological point of view, and they need to understand internally that they can emerge not only by becoming richer, they also have to be more self-confident.”
Emerging to good governance
From a financier’s perspective, such as Yosuke Kawakami, Director for Japan, Board of Directors – European Bank for Reconstruction and Development, the dividing line is placed between developed and developing countries. And an institution like EBRD aims to achieve some of the external effect, or external good, by defusing technology, but also good governance. “When we talk about developing countries, it’s more or less the same; it’s the lack of governance, not necessary corruption, but transparency issues. And this is so, not only here in the Central-Eastern Europe of the former communist countries, but also in Asia, Africa and Latin America”, Yosuke Kawakami said to energynomics.ro. “In my opinion, the EBRD’s role is to provide not only finance, but the technical know-how expertise for moving to a truly market economy, that has good governance, transparency, and accountability.”
Emerging out of the Emerging Europe
The term “emerging market” has a clear and technical sense in the stock markets, and it refers to economies with a certain financial depth that become a destination for very large pension funds and other institutional investors, says Cornel Ban, Assistant Professor, The Frederick S. Pardee School for Global Studies, Boston University. In the financial world, Romania is still not considered an “emerging market”, but a “frontier country”. However, it is true that literature and financial media include Romania among emerging economies.
On the other hand, in the common understanding, the term refers to former low-income or middle-income countries, which are heading towards higher average income. “From this point of view, Eastern Europe is a spectacular case of growth in GDP per capita, but also of the increased complexity of exports, and increased role played in the export heart of the European economy, which is Germany. From this point of view, Eastern countries are more important to Europe’s industrial center than South Europe.”
“At the same time“, continues Cornel Ban, “if we look at economic and social development data, two countries in the region – the Czech Republic and Slovenia – not only make the transition to relatively industrialized and stable economies, but also to knowledge economy, while Estonia and Slovakia are also closing to this category.”
There are countries in the East which from some perspectives, and especially in some regions, are already in a very interesting economic convergence with developed countries in the European Union. Also, in terms of social convergence, “the Czech Republic and Slovenia have a lower poverty and inequality rate than countries considered rich in Europe, such as France or the UK, and more similar to those in Northern Europe. The gap is still high between the levels of wages, these remaining closer to those in the poorest countries in the Union”, notes Professor Ban.
According to Cornel Ban, the “Emerging Europe” formula has a long future ahead, given the lack of interest and updated information about the region, which is still treated as a homogeneous group, despite the extremely high differences among its members. Cornel Ban estimates that the group of emerging countries will gradually dissolve as more and more countries will no longer be considered as emerging: “Already, the Czech Republic is no longer considered an emerging country, Slovenia is a success story which is the least known in the West, and also Poland has a different status than its neighbors in the area”.
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This article firstly appeared in the printed edition of energynomics.ro Magazine, issued in December 2017.
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