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Transition literature has emphasized stabilization and enterprise restructuring. Both cross-country analyses and country-specific studies have tended to focus on fiscal stabilization and its indicators, highlighting the importance of quantitative fiscal adjustment to stabilization outcomes. Less attention has been paid to the qualitative dimensions of fiscal adjustment in transition. Alam and Sundberg take stock of the extent to which fiscal adjustment has occurred during the first decade of transition in both qualitative and quantitative dimensions. They define quality as the extent to which: (1) pro-growth expenditure essential for creating future economic and social assets are maintained; (2) pro-poor expenditure, such as poverty-targeted transfers, necessary to ensure income for the poor and vulnerable are adequately provided; and (3) fiscal risks, impinging on both expenditure and revenue, are managed through transition. The authors conclude that while the quantitative magnitude of the fiscal adjustment was dramatic, the quality of this adjustment has compromised the social and economic objectives of transition, particularly in the Commonwealth of Independent States (CIS). They draw four main conclusions: Investments in public services fell in both absolute and relative terms; Reduced spending on government transfers contributed to a sharp increase in income inequality in the CIS; Fiscal risks increased during the transition; Initial conditions allowed Central European and Baltic countries to maintain higher expenditures, which may have contributed to their faster economic recovery and political support for the reforms. The authors argue that the challenge today for fiscal policy in these countries is to facilitate the transition-particularly in reallocating resources from large state-owned enterprises to new small and medium-size firms, and providing priority public services and targeted transfers to assist those adversely affected by transition and reverse the deterioration in social outcomes. The interplay between fiscal policies and institutional arrangements is increasingly important as transition economies embark on their second decade of reforms. In particular, incentives embedded in the institutional arrangements for fiscal management needs to be strengthened so that policies, resources, and outcomes can be better aligned, and the fiscal adjustment is consistent with qualitative considerations. This paper-a product of the Poverty Reduction and Economic Management Sector Unit, Europe and Central Asia Region-is part of a larger effort in the region to understand economic transition in former centrally planned economies. The authors may be contacted at aalam@worldbank.org or msundberg@worldbank.org.

Banks and Banking Reform --- Debt Markets --- Economic Recovery --- Expenditures --- Finance and Financial Sector Development --- Financial Literacy --- Fiscal Adjustment --- Fiscal Imbalances --- Fiscal Management --- Fiscal Policies --- Fiscal Policy --- Fiscal Risks --- Fiscal Stabilization --- Fiscal Transition --- Incentives --- Macroeconomic Stabilization --- Outcomes --- Public Enterprises --- Public Sector Economics and Finance --- Public Sector Expenditure Analysis and Management --- Public Services --- Revenues --- Social Outcomes --- Structural Reform --- Tax Systems --- Transition Economies

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Recent international experience has shown that excessively complex administrative procedures required to establish and operate a business discourage inflows of foreign direct investment. Morisset and Lumenga Neso present a new database on the administrative costs faced by private investors in 32 developing countries. The database is much more comprehensive than the existing sources, as it contains not only information on general entry procedures, such as business and tax registration, but also captures regulation on land access, site development, import procedures, and inspections. The data include measures on the number of procedures, direct monetary costs, and time. The cost of administrative procedures vary significantly across countries. The most important barriers appear to be the delays associated with securing land access and obtaining building permits, which in several countries take more than two years. Countries that impose excessive administrative costs on entry tend to be equally intrusive in firm operations, thereby weakening the argument that barriers to entry are a substitute for the government's unwillingness or inability to regulate enterprise operations. The level of administrative costs is positively correlated with corruption incidence and exhibits a negative correlation with the quality of governance, degree of openness, and public wages. These correlations suggest that administrative reforms need to be incorporated into the broader agenda for reforms such as trade and financial liberalization, the fight against corruption, and public sector administration. This paper-a product of the Foreign Investment Advisory Service-is part of a larger effort to study the role of administrative barriers in the investment decision of private firms. The authors may be contacted at jmorisset@ifc.org or lumenganeso@hec.unige.ch.

Accounting --- Administrative Costs --- Application Form --- Bank --- Consumer --- Consumer Markets --- Contribution --- Country Strategy and Performance --- Debt Markets --- Direct Investment --- E-Business --- Economic Theory and Research --- Emerging Markets --- Finance and Financial Sector Development --- Financial Literacy --- Foreign Investment --- Information --- Interest --- International Economics & Trade --- Investment and Investment Climate --- Investor --- Investors --- Law and Development --- Macroeconomics and Economic Growth --- Money --- Pension --- Private Sector Development --- Productivity --- Public Sector Economics and Finance --- Public Sector Regulation --- Revenues --- Security --- Stocks --- Trade Law --- Wages