Europe and Central Asia Knowledge Brief

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This is a regular series of notes highlighting recent analyses, good practices, and lessons learned from the development work program of the World Bank’s Europe and Central Asia Region.

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Tajikistan : Reinvigorating Growth in Khatlon Oblast

2014-06, Carneiro, Francisco

This report supports a joint World Bank-IFC initiative to review and evaluate economic growth prospects for Khatlon oblast in order to develop a private sector-driven strategy for accelerating the region's growth over the medium term.

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FYR Macedonia Policy-Based Guarantee : Supporting the Development Agenda and Strengthening Access to Capital Markets

2013-01, Najdov, Evgenij

The ongoing global economic turmoil is seriously impeding client countries access to capital markets, with relatively little regard for the fundamentals of the countries involved. Growing risk aversion among investors has triggered a flight-to-quality that is affecting all but the safest assets (AAA-rated). Small, open, and developing economies in Europe and Central Asia, including FYR Macedonia, are being exceptionally hurt. Despite its history of prudent macroeconomic policies and progress on structural reforms, FYR Macedonia s access to capital markets has been virtually closed or available only on very unfavorable terms. Policy-Based Guarantees (PBG) help well-performing clients with a track record of macro stability and structural reforms mitigate market access risks while advancing a country s development policy dialogue. PBGs also have the added benefit of catalyzing private capital flows by alleviating critical risks. The PBG extended by the World Bank to FYR Macedonia ensured the country s access to markets in a virtually closed market environment and at highly competitive terms.

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A New Jobs Data Tool : Introducing BuDDy--A Business Diagnostics and Dynamics Tool

2012-10, Merotto, Dino, Boccardo, Jessica

The Business Diagnostics and Dynamics Tool (BuDDy) tool uses formal sector business data that governments already collect to analyze patterns and trends in employment and diagnose constraints to growth and job creation. BuDDy gives governments the understanding of business dynamics needed to develop policies that help businesses create jobs. BuDDy quickly and robustly identifies the types of firms that are growing, hiring, investing, raising productivity, and raising real wages, and does this at the national or regional level, or by product. BuDDy is simple and adaptable; it has been developed with varying data sets, and can been linked to spatial information, trade data, and household data sets.

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Transition to a Low-Emissions Economy in Poland

2011-08, Jorgensen, Erika, KÄ…sek, Leszek

Poland is not among the largest emitters of greenhouse gases globally, but its economy is among the least emissions-efficient in the European Union (EU). Poland's global share in greenhouse gas (GHG) emissions is just 1percent and its per capita emissions are similar to the EU overall. Its lower income level, the Polish economy comes out as among the least carbon-efficient. Poland's transition to a market economy since 1989 had a co-benefit of sharply reduced CO2 emissions; however, the link between growth and emissions has re-emerged in recent years. A critical difference in the make-up of Poland's emissions is the dominance of the power sector and its extraordinary dependence on coal. Over 90 percent of electricity in Poland is generated from coal and lignite, the highest share in the EU. This makes Poland an outlier, both globally and in Europe.

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Employment Recovery Stalls in Europe and Central Asia

2013-04, Koettl, Johannes, Saiovici, Gady, Santos, Indhira

Employment recovery stalls in Europe and Central Asia (ECA) and Gross Domestic Product (GDP) continues to recover in most ECA countries, but the recovery remains fragile. Growth prospects remain poor in a number of countries where GDP continues to decline. This slowdown in the economic recovery is also evident at the sub-regional level. Unemployment has stabilized, with an average unemployment rate of 12 percent across the ECA region. Since the start of the crisis, men have been disproportionally hit by unemployment. The recent pace of job creation has not been sufficient to absorb the large pool of unemployed, resulting in growing long-term unemployment. Despite the rise in long-term unemployment, activity rates have increased or remained constant in most countries since 2008. ECA labor markets adjusted to the crisis not only through higher unemployment, but also through fewer work hours. Given the already low levels of employment in the region and a bleak demographic outlook, avoiding labor market detachment among the long-term unemployed, the inactive, and youth is the main challenge for policy makers in the near term.

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Cities as Drivers of Growth along the Silk Road

2013-01, Coulibaly, Souleymane

Major events have reshaped the internal population flows of Eurasia, including the breakup of the Soviet Union, the development of market economies, and the rising influence of regional powers. Looking ahead, policy makers need to promote reforms to make Eurasian cities the main drivers of growth. This can be done by rethinking strategies to better plan, connect, and green the region s important urban centers. Improved planning means promoting policies to develop land and housing markets and enhance public service delivery. Greening Eurasian cities refers to ensuring their sustainable development through strong markets and institutions that encourage the efficient use of resources, address pollution, and build livable cities. To appropriately fund these needed changes, subnational finances will have to be reformed and new ways to finance cross-country connectivity explored.

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Accountability in State Noncommercial Organizations in Armenia : An Approach

2012-09, Vatyan, Arman

A World Bank-supported project in Armenia was successful in developing a control framework that balances the need to increase the transparency and accountability of the country s state noncommercial organizations (SNCOs), while also recognizing their financial, administrative, and managerial independence. An innovative approach involving the use of earlier results to guide later ones was used to address the dire need for SNCOs, which account for 70 percent of the total number of state organizations, to make greater efforts to responsibly administer and safeguard the government s assets. The aim was to reduce the market distortions caused by SNCOs that are engaged in significant commercial activities by addressing SNCOs heterogeneity and the need for specific fiduciary control requirements for distinct groups.

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Croatia : A Strategy for Smart, Sustainable and Inclusive Growth

2013-02, Madzarevic-Sujster, Sanja

Croatia`s current economic challenges include sluggish growth, excessive public spending, high unemployment, and a deteriorating external environment. Croatian economy was making a fragile recovery and dealing with slow export growth, low investment, and persistent unemployment. At the end of 2011, Croatia gross domestic product (GDP) per capita (in purchasing power terms) declined to 61 percent average, a loss of 2 percentage points since 2008.The country incomplete structural reform agenda needs attention and action to promote greater competitiveness and a shift to productivity-based, private sector-led growth. It also faces the strategic challenge of maximizing the benefits of European Union (EU) membership, especially in terms of access to markets and the use of EU structural funds, requiring structural changes in the social sectors, education system, and business environment. Accelerating economic recovery requires Croatia to complete its currently unfinished structural reform agenda and shift to productivity-based, private sector-led growth. The government could also do more to: (i) reform product market regulation; (ii) remove administrative barriers to investments; (iii) reduce the logistics costs in trade; (iv) make the bankruptcy process more efficient; and (v) modernize contract enforcement and property rights.

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Active Labor Market Programs : How, Why, When, and To What Extent are they Effective?

2012-12, Brown, Alessio J.G., Koettl, Johannes

Active labor market programs (ALMPs) aim to keep workers employed, bring them into employment, increase their productivity and earnings, and improve the functioning of labor markets. ALMPs to retain employment, for example, work-sharing schemes, should be used only for short periods during severe recessions. More cost-effective and useful during recoveries are ALMPs to create employment, which strengthen outsiders labor market attachment and support the outflow out of unemployment. Training programs are especially effective over the long term, particularly the more they target disadvantaged outsiders. ALMPs that improve labor market matching are highly beneficial, but effective only in the short run. ALMPs in general might be more cost effective over the long term (3-10 years) and some may even be self-financing, suggesting that long-term evaluations are needed to better ascertain the impact of individual policies.

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Tajikistan - Economic and Distributional Impact of Climate Change

2012-04, Heltberg, Rasmus, Zaidi, Salman

Tajikistan is highly vulnerable to the adverse impacts of global climate change, as it already suffers from low agricultural productivity, water stress, and high losses from disasters. Public awareness of the multiple consequences of climate change is high, with possible impacts on health, natural disasters, and agriculture of greatest public concern. Climate change can potentially deepen poverty by lowering agricultural yields, raising food prices, and increasing the spread of water-borne diseases as well as the frequency and severity of disasters. Regions with greater dependence on agriculture and lower socioeconomic indicators, particularly the east mountain area of the Region of Republican Subordination (RRS), the Southern Sughd hills, and Khatlon hills and lowlands, are most vulnerable to climate change, with rural areas more at risk than urban locations. Faster socioeconomic development is the best tool for adaptation, since greater income diversification, improved health and education, and better access to services and infrastructure enhance the capacity of households, particularly the poor, for autonomous adaptation.