Competitiveness and Private Sector Development: Eastern Europe and South Caucasus 2011

Competitiveness Outlook

image of Competitiveness and Private Sector Development: Eastern Europe and South Caucasus 2011

With a total population of over 75 million people and a strategic location between wealthy trading partners, with Russia to the east and a vast market of EU citizens to the west, the Eastern Europe and South Caucasus (EESC) region is attractive as a destination for investment and trade. It is endowed with significant human and resources ranging from the black soil in Ukraine that produces some of the best wheat in the world, to energy reserves in Azerbaijan and unexplored water resources in several countries. However, in spite of recent growth – an average of almost 8% of GDP during 1998-2008 – the region’s productivity levels remain 77% below the world average. The OECD Eastern Europe and South Caucasus Competitiveness Outlook examines the key policies that would increase competitiveness in the countries of the region through developing human capital, improving access to finance for SMEs and creating more and better investment opportunities.


Developing Human Capital

Human capital is a vital element for the competitiveness of any country and amongst the most important areas of investment for economic and social development. The legacy of Soviet education has left the countries of Eastern Europe and the South Caucasus (EESC) with very good performance on education indicators such as enrolment and literacy rates, girls’ participation, progress to higher levels of education and pupil-teacher ratios. Yet on a number of other indicators, especially those related to spending, quality and relevance of education, the EESC countries fail to approach the international benchmarks, and thus to mobilise the full competitiveness potential of their people and economies. Despite, sometimes, considerable budgetary efforts, spending per student is low and is stagnating or declining in many countries. Judging by international surveys, the quality of school education in the EESC countries ranges from average, through significantly below average, to very low. Tertiary enrolment rates in Azerbaijan, Georgia and Republic of Moldova are below the level needed to compete effectively with OECD countries, and vocational education and training (VET) in all of the EESC countries is in urgent need of reform.


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