Dubravko Mihaljek (Bank for International Settlements, Basel)
Abstract
This paper attempts to elaborate the main principles of an economic development strategy suitable for Croatia over the next 10–15 years. Based on brief analyses of advances made in development theory and policy and experiences of the emerging market economies in Asia, Latin America, and Central Europe, the paper identifies critical factors necessary for launching an accelerated process of economic development. These factors are: leadership commitment to economic development; the level and quality of social and human capital; application of modern (especially information) technology; stable and consistent macroeconomic policies; and efficient market-based institutions. The paper then analyses Croatia’s strengths and weaknesses in terms of these factors in comparison with a select group of economies: Slovenia, Hungary, the Czech Republic, Portugal, Ireland, Chile, Uruguay, Hong Kong and Singapore. In addition, the paper analyses implications of “new economy” developments in the United States and other advanced industrial countries for a small open economy like Croatia. Against this background, the paper proposes seven basic principles for elaborating a long-term strategy of Croatia’s economic development: (i) Setting a clear development goal—the paper proposes a doubling of real per capita GDP to US$10,000 in the next 10–15 years, which would require an average annual growth rate of about 5.5%, and that this growth rate is achievable; (ii) Ensuring transparency and equal access to development opportunities, as opposed to following specific industrial policy; (iii) Adjusting to globalisation of economic activity and absorbing “new economy” developments; (iv) Implementing fundamental reform of labour markets, with a view to reducing the high non-wage labour costs through pension and health care reforms; (v) Actively promoting financial market development by accelerating corporate and bank restructuring, and legal and judicial system reforms; (vi) Deciding on the economic role of the state in such areas as education, legal and judicial systems, market regulation, infrastructure, and science and technology; and (vii) Maintaining stable and consistent macroeconomic policies to facilitate structural reforms. The paper briefly discusses the main benefits and costs of a possible “euroisation” of Croatia’s economy, and arrangements for a possible transition from the current monetary and exchange rate regime, characterised by a high degree of factor and commodity price indexation to the Deutsche mark, toward a more flexible interim regime that would facilitate the eventual adoption of the euro and be consistent with the overall development strategy outlined.
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Publisher Info
Paper provided by Institute of Public Finance in its series Occasional paper series with number
11.
Length: 38 pages Date of creation: Jun 2001 Date of revision: Publication status: published in the journal “Financijska teorija i praksa”, Volume 24, Number 4/ 2000, pp. 527-603 Handle: RePEc:ipf:occasi:11
Find related papers by JEL classification: O10 - Economic Development, Technological Change, and Growth - - Economic Development - - - General P20 - Economic Systems - - Socialist Systems and Transition Economies - - - General E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
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