EASTERN AND CENTRAL EUROPE 2000 Final Report June 1994 EASTERN AND CENTRAL EUROPE 2000 FINAL REPORT EUROPEAN COMMISSION EUROPEAN INSTITUTE FOR REGIONAL AND LOCAL DEVELOPMENT INSTITUTE FOR HUMAN SCIENCES Grzegorz Gorzelak Bohdan Jatowiecki Antoni Kuklinski Leszek Zienkowski 1994 Published by the EUROPEAN COMMISSION Directorate-general XII Science, Research and Development LEGAL NOTICE Neither the European Commission nor any person acting on behalf of the Commission is responsible for the use which might be made of the following information Cataloguing data can be found at the end of this publication Luxembourg: Office for Official Publications of the European Communities, 1995 ISBN 92-826-954 7-6 © ECSC-EC-EAEC, Brussels • Luxembourg, 1995 Printed in Belgium Table of Contents EXECUTIVE SUMMARY INTRODUCTION Chapter 1. INTERNATIONAL SETTING OF THE CENTRAL EUROPEAN COUNTRIES 1.1. General problems 1.2. Integration with the European Union 1.3. The neighbours 1.4. Intra-regional relations of the Visegrad Group Chapter 2. SCENARIO OF ECONOMIC DEVELOPMENT UNTIL 2005 Introduction 2.1. The Central European countries vis-a-vis the European Union 2.2. The starting point: economic situation in 1992 2.3. The scenario: general assumptions 2.3.1. Outline of the approach and common assumptions 2.3.2. Assumptions concerning the production factors: labour 2.3.3. Assumptions concerning the production factors: capital 2.3.4. Assumptions concerning the production factors: science, technology, organisation 2.4. The scenario: Results 2.4.1. Population 2.4.2. Gross domestic product and the social productivity of labour 2.4.3. Selected characteristics of the economic growth 2.4.4. Final demand components 2.4.5. Structural change in the CEC economies 2.4.6. Overall assessment of results 2.5. Major challenges for the economic scenario 2.5.1. Availability of resources to finance ambitious investment programs 2.5.2. Foreign debt burden 2.5.3. Access to major foreign markets 2.5.4. Appropriate choice of technology 2.5.5. Creation of the market friendly environment 2.5.6. Microeconomic change on the firms' level and privatisation 2.5.7. Macroeconomic imbalances 2.5 .8. Restructuring the agricultural sector 2.5.9. Long term problems of the social security financing 2.5.10. Central European countries vis-a-vis Maastricht Chapter 3. SOCIO-POLITICAL PROCESSES 3.1. Social structure 3.2. Social attitudes during systemic transformation 3.2.1. Factors determining socio-political attitudes 3.2.2. General assessment of transformation 3.2.3. Evaluation of economic transformation 3.2.4. Attitudes towards private property and privatisation - III - 3.2.5. Attitudes towards democracy and democratic institutions 3.2.6. Attitudes toward national minorities 3.3. Political developments 3.3.1. Political elites 3.3.2. The role of trade unions 3.3.3. Political scene 3.4. Legal regulations with relation to the European standards 3.5. Scenario of socio-political change until the year 2005 Chapter 4. SCIENCE, TECHNOLOGY AND EDUCATION 4.1. Introductory remarks 4.2., Postbus The heritage from the 'old regime' 4.3. General tendencies of transformation 4.3.1. General processes 4.3.2. Financial situation 4.3.3. Employment 4.3.4. The 'scientific product' 4.3.5. Institutional restructuring 4.4. Technology 4.4.1. Innovations 4.4.2. Industrial technologies 4.5. Education 4.6. Science, technology and education: prospects and policy recommendations 4.6.1. Introduction 4.6.2. Education systems 4.6.3. Science, R&D and economic transformation 4.6.4. Science of the Central European countries on the global scene 4.6.5. The special role of transfer sciences 4.6.6. Innovation as the key of the technological future 4.6.7. The Central European countries and the new belt of innovation in Europe Chapter 5. REGIONAL PATTERNS OF CENTRAL EUROPEAN TRANSFORMATION, 1990-2005 Introduction 5.1. The heritage 5.1.1. The long tradition 5.1.2. The socialist heritage 5.2. Territory and territorial organisation 5.3. Factors of the regional potential for transformation 5.3.1. Demography and the settlement system 5.3.2. Natural environment 5.3.3. Economic restructuring and the labour market 5.3.4. Science and higher education centres 5.3.5. Central European regions in the new international setting 5.3.6. Foreign investment 5.3.7. Transport ties with Europe 5.3.8. The regional patterns of transformation: Summary 5.4. The regional potential for transformation, 1990-2005 -IV- 5.5. Regional policies 5.5.1. For prospective regional policy 5.5.2. For integrated regional policy 5.5.3. For internationally oriented regional policies 5.5.4. For regionally targeted regional policies 5.5.5. For environment-sensitive policies CONCLUSIONS List of tables List of figures Lists of general, national and background studies -V- EXECUTIVE SUMMARY Introduction The scenario of development of the four Central European countries (The Czech and Slovak Republics, Hungary and Poland) presented in this report is based on realistic assumptions concerning the external and internal conditions for development. It indicates the most probable situation of these countries in the year 2005. Generally speaking, it is assumed that an 'average coincidence' of all factors influencing socio-economic development will take place. There is a possibility that certain factors may occur more favourable than assumed but then probably others may be less favourable. Four blocs of problems are examined: economic development, socio-political processes, development of science and education and technological advancement, regional differen­ tiation. Four Central European countries (called also the 'Vise grad Group') occupy an area of 533,600 sq km and have the population of 64.2 million, thus being a great population and economic potential on the European scale. Until 2005 the number of population will grow by 2.3 million, out of which almost 2 million will be located in Poland only. Hungary will lose population (decrement of almost 90 thousand). The inhabitants of Central Europe will become older. In three countries: Czech and Slovak Republics and Poland the after-working age group will grow by 8-12% (the slowest growth in Poland, the fastest in the Czech Republic) and only in Hungary this age group will decrease in number by over 15%. In Poland and Slovakia the population in the working age will grow by some 10%, thus creating additional tension to the unbalanced labour market. International setting for the Central European countries The external factors represent an important constraint for the development of the Cen­ tral European Countries until 2005. The Central European countries - as countries with a relatively small economic potential - will have to assume more passive than active role in shaping their economic and political relations with the outside world. Prolonged recession and increasing trends of protection in international trade might make the situation of Central European countries more difficult. The trade restrictions practised by the EU give grounds to suppose that some EU countries are in fact opposed to a full integration of Central and Eastern European countries since they are afraid of their competition in the particularly sensitive segments of the market. However, the scenario presented herein assumes that Central European countries will become members of the Union before the year 2005. But it should be made clear that the fulfilment of this assumption is not only dependent on the Visegrad group. The rela­ tions with the immediate neighbours of the four Central European countries should be considered as an important factor of their future development. In general. these relations are good, though some tensions might emerge in the future. The stability of political and economic situation in the post-soviet republics, and in Russia in particular, will be no doubt of crucial impoprtance for the Central European countries. Mutual relations of the four Central European countries are good, except for some ten­ sion between Hungary and Slovakia (due to the dispute over ecological and frontier problems). The tightening of mutual cooperation gives each country better chances of its integration with the European Union and closer cooperation with NATO. -VII- Economic development The economic scenario was based on a formalised model. The basic features of this scenario are presented in the table on the next page. The economic scenarios for all Central European countries, are strongly growth-oriented. Investment effort and replacement of old and obsolete fixed assets of low technical level by new equipment are the basic assumptions of the scenarios. The possibility of high growth rates in the long run without an appropriate level of investment were rejected. A high efficiency of the investment process seems to be indispensable if the program is to be feasible. The scenarios assume slower growth of consumption than of the GDP. Fixed capital for­ mation will note the highest rates of growth. Public consumption is assumed to grow in a slower pace. The Czech Republic will demonstrate the slowest, but the most balanced path of growth. The budget deficit will be the lowest there (2.5% of GDP), as well as inflation rate (6.0) and the burden of foreign debt. Hungary, and especially Poland, will demonstrate more rapid, but also more unbalanced pattern of growth. Economic development, 1992-2005 Czech Slovak categories Republic Hungary Poland Republic GOP/inhabitant, 2005 (PPP, USD of 1992) 9463 8809 8510 8505 2005/1992 GDP rate of growth, yearly average 2.5 3.4 4.5