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Contents

MACROECONOMIC REPORT

List of tables and figures
List of abbreviations
Introduction
Post-2000 recovery and its sources - View from the demand side
The evolution of production in Belarus, Moldova and Ukraine
Labor market
Public finances and fiscal policies
  Budget revenues
  Extra-budgetary funds
  Subsidies
  Budget expenditures
  Budget balances and dependence on external financing
International trade and investments
  Balance of payments
  Trade in goods
  Access to markets
  Foreign direct investments
Monetary and exchange rate policies
Economic outlook
Recommendations for institutional reforms
References
Statistical Appendix

MACHINE INDUSTRY REPORT

List of tables and figures
List of abbreviations
Executive summary
Introduction and definition of machine industry
Comparative analysis of main machinery trends in the three countries
  Changes in machinery specialization patterns by output
  Export & import patterns
  Investments in the machine building industry
  Human capital in machinery
  Institutional analysis based on micro-level data and case-studies
  Institutional regulation/economic policy
  Ownership issues and corporate governance
  Innovation-driven reforms
  SWOT analysis of machine building sectors in the countries analyzed
References
Statistical annex

ENERGY INDUSTRY REPORT

List of Abbreviations
List of Tables and Figures
Executive Summary
Introduction
Statistical overview
  Energy trajectories in Europe: the four cases and the three drivers
  Fuel demand trends - on the stormy waters of global gas and oil prices
  Sectoral efficiency relations
Coping with post-Soviet inertia - comparing the EAP3 countries
Energy policy overview
  Moldova
  Belarus
  Ukraine
Residential energy efficiency and district heating
Outlook
References

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Acknowledgements

In the middle of 2014, when we launched this project, it became obvious, that the period of relative prosperity and growth of the 2000s at the Eastern border of the EU came to an end. Economic slowdown in the post-Soviet space, currency crises in Ukraine and Belarus, emerging problems in Moldova signaled, that macro-stability stands on weak fundaments and showed the vulnerability of local economies. Coupled with the fall of the Yanukovich-regime and the conflict in Eastern Ukraine, 2014 very much looked like a historical turning point and the beginning of a new era. The future was misty with only a few points of certainty. It was clear, that Western institutions will have to engage the region more actively, the Russian economy will not be able to maintain its tractional capacity any more and some domestic reforms turn from an option into a must in Belarus, Moldova and Ukraine. Nonetheless, due to the deterioration of the external environment and domestic situations, these processes seemed to be increasingly painful, with uncertain results.

In this Report we analyzed two sectors, namely the machine and energy industries in Belarus, Moldova and Ukraine, that have particular importance in this new era. Due to their sheer size in the local GDPs, labor markets and foreign accounts, Russia's overrepresentation in the sectoral matters, the local governments will have to address the problems of these two branches in a more dedicated way. In one way or another, but some sort of solution to these sectoral problems has to be found in the years to come. Mismanagement may constitute a major impediment to local reforms, while successful responses can ease the process remarkably and improve the domestic business climate significantly. The same is true for the Western assistance and EU policies: even if Western governments usually do not address sectoral issues and focus on the foreign and macroeconomic landscape, in these particular cases problems may easily overspill the regional borders. While a common understanding regarding the necessity of experience transfer has been emerging in the field of energy, machine-building industries are still largely ignored by the Western donors.

The three Reports published in this book hopefully provide an insight into regional sectoral trends and outline some basic understanding of potential cooperation between Western and local industries, governments. I would like to express my gratitude to my colleagues from the partner institutions, to Sierz Naurodski (CASE-Belarus), Ion Muntean (IDIS Viitorul, Moldova), Malgorzata Jakubiak (CASE, Poland), Vladimir Benc (SFPA RC, Slovakia) and Vitaliy Kravchuk and Mykola Ryzhenkov (IER, Ukraine) for authoring the respective Reports and to many others, who enriched them with their observations. I am also indebted to the International Visegrad Fund (main sponsor), the Royal Dutch Government and the Hungarian Academy of Sciences, who supported the project financially. Furthermore, I am very thankful to my colleagues who helped me in organizing the related presentations, events and conferences, in particular Ágnes Szunomár (HAS CERS IWE, Hungary) and Iryna Kosse (IER, Ukraine).

András Deák

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