Feature story

Assessing 15 years of transition

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James Leape, Director General, WWF International.

Alexander Kwasniewski, former President of Poland.

Fifteen years after the founding of the EBRD, what does the future hold for the former communist countries of central, eastern and southern Europe? How will they develop relative to the huge impact that rapid growth in Brazil, Russia, India and China – the BRICS – is having on the global economy?

Former Polish President Aleksander Kwasniewski summed up the feeling of many panellists speaking during the EBRD Business Forum Sunday by quipping: “On Monday, Wednesday and Friday I am very pessimistic; on the three alternate days I am optimistic and on Sunday I play tennis.”

On the one hand, Mr Kwasniewski said, “nobody expected 15 years ago that we (in the EBRD region) would change so much, that we would overcome so much” in making the transition from centrally-planned economies in undemocratic states to market economies making progress toward democracy.

Like other speakers in the day, he marvelled at Europe’s achievement in building the European Union which he termed “a unique culture of co-operation. Economic integration is one of the most successful projects in civilisation”, achieved despite two world wars and the Balkan wars in the 20th century.

But he expressed concern over the future of the western Balkans. He also said western European attitudes toward new EU members such as Poland could be more positive.

East’s gift to west

“In London today, everywhere I went I met young Polish people who are working here. It must be one of the most Polish places on earth! This is an opportunity we in central Europe can provide to the west: our well-educated young people”, who bring vitality to “the static and somewhat fat society of the west”.

The economist who coined the acronym BRICS and is credited with raising those countries’ profile as future economic powerhouses said they were getting more important globally at a faster rate than he had anticipated. Jim O’Neill, Head of Global Economic Research for Goldman Sachs International, said he’d originally forecast the BRICS’ importance over a 40-year time frame.

“If they pursued their potential, their combined GDP could be greater than that of the G7…Some of the BRICS have already developed so much that if they continue down the right path, the scenarios could be achieved more quickly.”

Russia’s growth

While China and India are slated to have the greatest impact in the world economy, he noted that Russia “could overtake any of the large (European) continental economies by 2040.” Already Russia’s economic impact is half that of the EU’s biggest economies (UK, France, Germany and Italy).

Goldman Sachs has developed ‘growth environment scores’ for 170 countries, based on assessments of their macro-economic conditions, social and environmental issues, governance and corruption and other issues. Mr O’Neill said the order of the BRICs among those 170 countries on the scale is somewhat surprising: China places highest, followed by Russia, Brazil and India, which he said was an unexpected result for those who laud India’s economic and democratic progress.

“While it’s common in the west to consider Russia a dangerous place to do business, Russia has some advantages over others,” he noted.

Draining planet’s resources

Environmentalist James Leape took a resolutely global view of economic development and its impact on the planet. “We are living beyond the capacity of the planet to sustain us,” said Mr Leape, Director General of WWF International. He said that if all people in the world enjoyed western European-level lifestyles, “we would need two planets to sustain us”.

Of all the pressing environmental issues, Mr Leape said climate change is the most urgent. “The greatest growth in the future will be in developing countries, especially the BRICS…They needs to leapfrog the west in the way that they develop, especially in the way they use energy.” If they follow western energy use patterns, Mr Leape said, “we are toast”.

He cited as an example China’s adoption of better standards for air conditioners. “That will save more energy than will be produced by the Three Gorges Dam,” a colossal hydro and flood prevention project on the Yangzi River.

Asian tigers roar

Asia is home to 10 of the world’s largest economies, said Jiquin Jin, Vice-President with the Asian Development Bank. He noted that rapid growth in the Asian region has reduced poverty: the number of people living on less than $1 per day has fallen by 300 million in recent years. But, he warned, income disparities in Asia are widening.

Asian countries are learning to co-operate and to deepend regional integration by following the European Union’s lead; he said the EU has much to learn from the economic dynamism of Asia. “The ADB and the EBRD have common objectives…to translate globalisation into benefits for all, with wider prosperity and better security.”

Written by EBRD Senior Writer Kate Dunn.

21 May 2006