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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.

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Strengthening the Pillars of Competitiveness

The competitiveness of the countries of Eastern Europe and the South Caucasus (EESC) is analysed using the Global Competitiveness Index (GCI) of the World Economic Forum and the 12 pillars which determine the level of productivity of a country. Armenia, Azerbaijan, Georgia, Republic of Moldova and Ukraine are compared to both EU Accession 12 countries and transition countries. As a group, their major competitive advantage is labour market efficiency, while inefficient infrastructure and poor quality of education dominate as challenges. They also differ in their technological readiness, higher education and training, the quality of their infrastructure and the stability of their macroeconomic environment. Their business environment must be more supportive of entrepreneurship, new business, trade and foreign direct investment, as well as reducing the dominance of large firms in key markets. The reforms of their financial markets have taken a step backwards during the recession, with particular problems in access to finance for the business community and a need to stabilise the banking system.

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