The Dual Challenge of Transition and EU Accession

The World Bank’s new Country Economic Memorandum (CEM) on Bulgaria entitled "The Dual Challenge of Transition and European Union Accession," was the subject of a panel presentation organized by the European Policy Center and the World Bank for officials of the European Commission, the EU Council, members of the European Parliament, NGOs, members of the diplomatic corps, media, academics, private sector representatives and various other experts from civil society.

Discussions were led by Vladimir Kissiov, Bulgarian Deputy Minister of Foreign Affairs and European Union Accession Chief Negotiator, who elaborated on the Bulgarian Government development policy and the country’s economic outlook. The Minister stated that: "We are glad to see Bulgaria’s consistent economic policy over the last four years recognized by the World Bank – the Bank's report developed through joint efforts with Bulgarian economist – sets an excellent basis for future work and analysis. In fact, our economy is developing so rapidly, that progress in some areas is going beyond that noted in the study. Bulgaria is moving ever closer towards EU accession…".

Andrew Vorkink, World Bank Country Director for the South Central European countries, gave an overview of the CEM and outlined Bulgaria’s economic development and challenges. "Bulgaria’s achievements over the last three years have been remarkable. The macroeconomic policies and the structural reforms implemented by the government have succeeded in putting an end to a decade of economic instability and political uncertainty. However, Bulgaria will need to maintain high and fast growth and implement enhanced social policies for the benefits from transition to full reach the general population," said Vorkink.

A World Bank Country Economic Memorandum is part of the Bank's analytic and advisory services for its client governments. These reports provide analysis and policy advice on economic sectors of importance to the country. In the case of candidate countries for EU enlargement, several governments have requested that the World Bank focus this report on the issue of accession to the European Union. Alignment of legislation to that of the EU, and preparations for EU enlargement have the potential to bring about significant economic benefit to the countries. These reports, which have also been prepared for the Czech Republic, Estonia, Hungary, Poland, Slovak Republic, and Slovenia, aim to provide sound economic and policy advice on meeting EU accession requirements in a way that maximizes the economic benefits for the country while minimizing the costs.

An analysis of the key issues in Bulgaria’s transition and EU accession was made by Leila Zlaoui, World Bank Lead Economist, and Serverin Kodderitzsch, World Bank Senior Agricultural Economist, while an European Commission perspective on the Country Economic Memorandum was given by Joly Dixon, Director, Economics and Financial Affairs Directorate, European Commission. The Bulgarian Government perspective of the report was detailed by Mariella Nenova, Executive Director, Bulgarian Agency for Economic Analyses and forecasting.

The Country Economic Memorandum was prepared with the cooperation of Bulgarian Government officials and with input from development partners, including the European Commission and experts from Bulgaria and abroad. The study analyzes the economic developments through the 1990s, describes the structural and institutional reforms that have taken place, and the challenges ahead for further economic growth and progress towards accession to the European Union (EU). The main objective of the analysis is to identify key issues to be addressed, pre-accession options and their implications, and a sequencing taking into account macroeconomic and social considerations.

The report draws attention to the 1997 introduction of the Currency Board Arrangement, the subsequent implementation of sound macroeconomic policies and a comprehensive program of structural reforms in recent years. Together this has encouraged a remarkable turnaround in Bulgaria’s economic performance. The reform program of the last three years has radically transformed the economy. For example fiscal and monetary stances are robust and the banking sector has been put on a sound footing. First generation reforms including price and trade liberalization have largely been implemented. Progress in moving assets from state to private ownership, and reducing state intervention in the economy, has been substantial. Steps have been made to build up the public framework by drafting and enacting market-oriented primary legislation. And sector specific initiatives have moved forward strongly, such as in harmonizing environmental laws with those of the EU.

The expert analysis sheds light on the principal challenges in the coming years facing policy makers and other partners seeking to promote growth and improve living standards in Bulgaria. As an example, boosting private and public investment, including through improvements to the business environment and a deepening of structural reforms, is a priority. The report argues that investments in human capital, administrative restructuring and infrastructure will crowd in foreign and domestic private investment. Administrative and judicial capacity needs to be strengthened and special emphasis given to improving enforcement, ethics and accountability. With corruption a matter of public concern, further actions are needed to build upon the 1998 National Strategy for combating corruption. And across key sectors, several recommendations are made to enhance performance and help in meeting the EU accession agenda.