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May 2000 - Like many Central Asian republics, Uzbekistan has adopted a gradual, cautious approach in its transition to a market economy. It has had some success attaining macroeconomic stability, but microeconomic reforms have lagged behind. It is time to accelerate structural reform. In Uzbekistan state enterprises are being changed into shareholding companies, and private enterprises account for 45 percent of all registered firms. But business decisions to set prices, output, and investment are often not market-based, nor wholly within the purview of businesses, especially those in commercial manufacturing and services. Lines of authority for corporate governance - from state enterprises to private enterprises - are ill-defined, so there is little discipline on corporate performance and little separation between government and business. Nascent frameworks have been created for competition policy (for firms in the commercial sector) and regulatory policy (governing utilities in the infrastructure monopoly sector). But implementation and enforcement have been hampered by old-style instruments (such as price controls) rooted in central planning, by lack of a strong independent regulatory rule-making authority, by the limited understanding of the basic concepts of competition and regulatory reform, and by weak institutional capabilities for analyzing market structure and business performance. Based on fieldwork in Uzbekistan, Broadman recommends: Deepening senior policy officials' understanding of, and appreciation of the benefits from, enterprise competition and how it affects economic growth; Reforming competition policy institutions and legal frameworks in line with the country's goal of strengthening structural reforms and improving macroeconomic policy; Improving the ability of government and associated institutions to assess Uzbekistan's industrial market structure and the determinants of enterprise conduct and performance; Making the authority responsible for competition and regulatory policymaking into an independent agency - a champion of competition - answerable directly to the prime minister; Strengthening incentives and institutions for corporate governance and bringing them in line with international practice; Subjecting infrastructure monopolies to systemic competitive restructuring and unbundling, where appropriate. For other utilities, depoliticize tariff setting and implementation of regulations; ensure that price, output, and investment decisions by service suppliers are procompetitive (creating a level playing field among users); and increase transparency and accountability to the public. This paper - a product of the Poverty Reduction and Economic Management Sector Unit, Europe and Central Asia Regional Office - is part of a larger effort in the region to assess structural reform in Central Asia. The author may be contacted at hbroadman@worldbank.org.
Business Performance --- Competition --- Competition Policy --- Corporate Governance --- Corporate Law --- Corporate Performance --- Debt Markets --- E-Business --- Economic Theory and Research --- Emerging Markets --- Enforcement --- Finance and Financial Sector Development --- Governance --- Investment --- Labor Policies --- Law and Development --- Legal Frameworks --- Macroeconomic Policy --- Macroeconomic Stability --- Macroeconomics and Economic Growth --- Market Economy --- Market Share --- Market Structure --- Markets and Market Access --- Microfinance --- Monopoly --- National Governance --- Output --- Price --- Prices --- Private Sector Development --- Public Sector Corruption and Anticorruption Measures --- Reform Program --- Social Protections and Labor --- Trade --- Trade Associations
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May 2000 - The absence of new business in Russia is striking. Reforms to make Russia more competitive should start with eliminating regulatory and institutional barriers to the entry of new competitors. Many industrial firms in Russia have undergone changes in ownership, but relatively few have been competitively restructured. Using survey and other data, Broadman suggests that much of Russian industry is immune from robust competition because of heavy vertical integration, geographic segmentation, and the concentration of buyers and sellers in selected markets. Moreover, regulatory constraints protect incumbent firms from competition with new entrants, both domestic and foreign. Broadman sketches a reform agenda for Russia's post-privatization program, which emphasizes the restructuring of anticompetitive structures and the reduction of barriers to entry. Broadman's proposed reform agenda calls broadly for strengthening Russia's nascent rules-based framework for competition policy to reduce discretion, increase transparency, and improve accountability. This paper - a product of the Poverty Reduction and Economic Management Sector Unit, Europe and Central Asia Regional Office - is part of a larger effort in the region to assess structural reform in Russia. The author may be contacted at hbroadman@worldbank.org.
Banks and Banking Reform --- Barriers --- Barriers To Entry --- Business Environment --- Business Investment --- Competition --- Competition Policy --- Competitive Market --- Debt Markets --- Developing Countries --- E-Business --- Economic Theory and Research --- Emerging Markets --- Finance and Financial Sector Development --- International Accounting Standards --- Liberalization --- Macroeconomics and Economic Growth --- Market Share --- Market Shares --- Markets and Market Access --- Microfinance --- Monopoly --- Output --- Price --- Prices --- Private Sector Development --- Privatization --- Public Sector Corruption and Anticorruption Measures --- Regional Trade --- Small Scale Enterprises --- Transparency --- Transport --- Transport Economics, Policy and Planning --- Vertical Integration
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May 2000 - The absence of new business in Russia is striking. Reforms to make Russia more competitive should start with eliminating regulatory and institutional barriers to the entry of new competitors. Many industrial firms in Russia have undergone changes in ownership, but relatively few have been competitively restructured. Using survey and other data, Broadman suggests that much of Russian industry is immune from robust competition because of heavy vertical integration, geographic segmentation, and the concentration of buyers and sellers in selected markets. Moreover, regulatory constraints protect incumbent firms from competition with new entrants, both domestic and foreign. Broadman sketches a reform agenda for Russia's post-privatization program, which emphasizes the restructuring of anticompetitive structures and the reduction of barriers to entry. Broadman's proposed reform agenda calls broadly for strengthening Russia's nascent rules-based framework for competition policy to reduce discretion, increase transparency, and improve accountability. This paper - a product of the Poverty Reduction and Economic Management Sector Unit, Europe and Central Asia Regional Office - is part of a larger effort in the region to assess structural reform in Russia. The author may be contacted at hbroadman@worldbank.org.
Banks and Banking Reform --- Barriers --- Barriers To Entry --- Business Environment --- Business Investment --- Competition --- Competition Policy --- Competitive Market --- Debt Markets --- Developing Countries --- E-Business --- Economic Theory and Research --- Emerging Markets --- Finance and Financial Sector Development --- International Accounting Standards --- Liberalization --- Macroeconomics and Economic Growth --- Market Share --- Market Shares --- Markets and Market Access --- Microfinance --- Monopoly --- Output --- Price --- Prices --- Private Sector Development --- Privatization --- Public Sector Corruption and Anticorruption Measures --- Regional Trade --- Small Scale Enterprises --- Transparency --- Transport --- Transport Economics, Policy and Planning --- Vertical Integration
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May 2000 - Like many Central Asian republics, Uzbekistan has adopted a gradual, cautious approach in its transition to a market economy. It has had some success attaining macroeconomic stability, but microeconomic reforms have lagged behind. It is time to accelerate structural reform. In Uzbekistan state enterprises are being changed into shareholding companies, and private enterprises account for 45 percent of all registered firms. But business decisions to set prices, output, and investment are often not market-based, nor wholly within the purview of businesses, especially those in commercial manufacturing and services. Lines of authority for corporate governance - from state enterprises to private enterprises - are ill-defined, so there is little discipline on corporate performance and little separation between government and business. Nascent frameworks have been created for competition policy (for firms in the commercial sector) and regulatory policy (governing utilities in the infrastructure monopoly sector). But implementation and enforcement have been hampered by old-style instruments (such as price controls) rooted in central planning, by lack of a strong independent regulatory rule-making authority, by the limited understanding of the basic concepts of competition and regulatory reform, and by weak institutional capabilities for analyzing market structure and business performance. Based on fieldwork in Uzbekistan, Broadman recommends: Deepening senior policy officials' understanding of, and appreciation of the benefits from, enterprise competition and how it affects economic growth; Reforming competition policy institutions and legal frameworks in line with the country's goal of strengthening structural reforms and improving macroeconomic policy; Improving the ability of government and associated institutions to assess Uzbekistan's industrial market structure and the determinants of enterprise conduct and performance; Making the authority responsible for competition and regulatory policymaking into an independent agency - a champion of competition - answerable directly to the prime minister; Strengthening incentives and institutions for corporate governance and bringing them in line with international practice; Subjecting infrastructure monopolies to systemic competitive restructuring and unbundling, where appropriate. For other utilities, depoliticize tariff setting and implementation of regulations; ensure that price, output, and investment decisions by service suppliers are procompetitive (creating a level playing field among users); and increase transparency and accountability to the public. This paper - a product of the Poverty Reduction and Economic Management Sector Unit, Europe and Central Asia Regional Office - is part of a larger effort in the region to assess structural reform in Central Asia. The author may be contacted at hbroadman@worldbank.org.
Business Performance --- Competition --- Competition Policy --- Corporate Governance --- Corporate Law --- Corporate Performance --- Debt Markets --- E-Business --- Economic Theory and Research --- Emerging Markets --- Enforcement --- Finance and Financial Sector Development --- Governance --- Investment --- Labor Policies --- Law and Development --- Legal Frameworks --- Macroeconomic Policy --- Macroeconomic Stability --- Macroeconomics and Economic Growth --- Market Economy --- Market Share --- Market Structure --- Markets and Market Access --- Microfinance --- Monopoly --- National Governance --- Output --- Price --- Prices --- Private Sector Development --- Public Sector Corruption and Anticorruption Measures --- Reform Program --- Social Protections and Labor --- Trade --- Trade Associations
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June 2000 - Economists in the field of industrial organization, antitrust, and regulation have long recognized certain factors as potent determinants of opportunistic behavior, corruption, and capture of government officials. Only now are these relationships becoming conventional wisdom among specialists in economies in transition. Ten years into the transition, corruption is so pervasive that it could jeopardize the best-intentioned reform efforts. Broadman and Recanatini present an analytical framework for examining the role market institutions play in rent-seeking and illicit behavior. Using recently available data on the incidence of corruption and on institutional development, they provide preliminary evidence on the link between the development of market institutions and incentives for corruption. Virtually all of the indicators they examine appear to be important, but three are statistically significant: · The intensity of barriers to the entry of new business.
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May 2000 : Russia gets relatively little foreign direct investment and almost none of the newer, more efficient kind, involving state-of-the-art technology and world-class competitive production linked to dynamic global or regional markets. Why? And what should be done about it? Foreign direct investment brings host countries capital, productive facilities, and technology transfers as well as employment, new job skills, and management expertise. It is important to the Russian Federation, where incentives for competition are limited and incentives to becoming efficient are blunted by interregional barriers to trade, weak creditor rights, and administrative barriers to new entrants. Bergsman, Broadman, and Drebentsov argue that the old policy paradigm of foreign direct investment (established before World War II and prevalent in the 1950s and 1960s) still governs Russia. In this paradigm there are only two reasons for foreign direct investment: access to inputs for production and access to markets for outputs. Such kinds of foreign direct investment, although beneficial, are often based on generating exports that exploit cheap labor or natural resources or are aimed at penetrating protected local markets, not necessarily at world standards for price and quality. They contend that Russia should phase out high tariffs and nontariff protection for the domestic market, most tax preferences for foreign investors (which don't increase foreign direct investment but do reduce fiscal revenues), and many restrictions on foreign direct investment. They recommend that Russia switch to a modern approach to foreign direct investment by: Amending the newly enacted foreign direct investment law so that it will grant nondiscriminatory national treatment to foreign investors for both right of establishment and post-establishment operations, abolish conditions (such as local content restrictions) inconsistent with the World Trade Organization agreement on trade-related investment measures (TRIMs), and make investor-state dispute resolution mechanisms more efficient (giving foreign investors the chance to seek neutral binding international arbitration, for example); Strengthening enforcement of property rights; Simplifying registration procedures for foreign investors, to make them transparent and rules-based; Extending guarantee schemes covering basic noncommercial risks. This paper - a product of the Poverty Reduction and Economic Management Sector Unit, Europe and Central Asia Regional Office - is part of a larger effort in the region to assist the Russian authorities in preparing for accession to the World Trade Organization. The authors may be contacted at hbroadman@worldbank.org or vdrebentsov@worldbank.org.
Barriers --- Corporate Governance --- Debt Markets --- Developing Countries --- Domestic Market --- Economic Theory and Research --- Emerging Economies --- Emerging Markets --- Enforcement --- Finance and Financial Sector Development --- Financial Literacy --- Foreign Direct Investment --- Foreign Investment --- Foreign Investor --- Foreign Investors --- Global Market --- International Economics & Trade --- Investment and Investment Climate --- Investor --- Labor Policies --- Law and Development --- Macroeconomics and Economic Growth --- Natural Resources --- Outputs --- Price --- Private Sector Development --- Property Rights --- Public Sector Corruption and Anticorruption Measures --- Social Protections and Labor --- Tax --- Technology Transfers --- Trade --- Trade and Regional Integration --- Trade Law --- Transition Countries
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May 2000 : Russia gets relatively little foreign direct investment and almost none of the newer, more efficient kind, involving state-of-the-art technology and world-class competitive production linked to dynamic global or regional markets. Why? And what should be done about it? Foreign direct investment brings host countries capital, productive facilities, and technology transfers as well as employment, new job skills, and management expertise. It is important to the Russian Federation, where incentives for competition are limited and incentives to becoming efficient are blunted by interregional barriers to trade, weak creditor rights, and administrative barriers to new entrants. Bergsman, Broadman, and Drebentsov argue that the old policy paradigm of foreign direct investment (established before World War II and prevalent in the 1950s and 1960s) still governs Russia. In this paradigm there are only two reasons for foreign direct investment: access to inputs for production and access to markets for outputs. Such kinds of foreign direct investment, although beneficial, are often based on generating exports that exploit cheap labor or natural resources or are aimed at penetrating protected local markets, not necessarily at world standards for price and quality. They contend that Russia should phase out high tariffs and nontariff protection for the domestic market, most tax preferences for foreign investors (which don't increase foreign direct investment but do reduce fiscal revenues), and many restrictions on foreign direct investment. They recommend that Russia switch to a modern approach to foreign direct investment by: Amending the newly enacted foreign direct investment law so that it will grant nondiscriminatory national treatment to foreign investors for both right of establishment and post-establishment operations, abolish conditions (such as local content restrictions) inconsistent with the World Trade Organization agreement on trade-related investment measures (TRIMs), and make investor-state dispute resolution mechanisms more efficient (giving foreign investors the chance to seek neutral binding international arbitration, for example); Strengthening enforcement of property rights; Simplifying registration procedures for foreign investors, to make them transparent and rules-based; Extending guarantee schemes covering basic noncommercial risks. This paper - a product of the Poverty Reduction and Economic Management Sector Unit, Europe and Central Asia Regional Office - is part of a larger effort in the region to assist the Russian authorities in preparing for accession to the World Trade Organization. The authors may be contacted at hbroadman@worldbank.org or vdrebentsov@worldbank.org.
Barriers --- Corporate Governance --- Debt Markets --- Developing Countries --- Domestic Market --- Economic Theory and Research --- Emerging Economies --- Emerging Markets --- Enforcement --- Finance and Financial Sector Development --- Financial Literacy --- Foreign Direct Investment --- Foreign Investment --- Foreign Investor --- Foreign Investors --- Global Market --- International Economics & Trade --- Investment and Investment Climate --- Investor --- Labor Policies --- Law and Development --- Macroeconomics and Economic Growth --- Natural Resources --- Outputs --- Price --- Private Sector Development --- Property Rights --- Public Sector Corruption and Anticorruption Measures --- Social Protections and Labor --- Tax --- Technology Transfers --- Trade --- Trade and Regional Integration --- Trade Law --- Transition Countries
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