Managing the transition : enhancing the efficiency of Eastern European governments

The transition to a market economy in Eastern Europe requires eliminating some institutions and practices and introducing new agencies with new goals, staffed by people with different attitudes and behavior. After interviewing 42 World Bank experts and other experts in the donor and academic communities, the author synthesizes their views on World Bank member countries in Central and Eastern Europe (Bulgaria, Czechoslovakia, Hungary, Poland, Romania, and Yugoslavia): Giving a broad-brush overview of what is known about capacity constraints in key public institutions involved in the transition. Identifying current and proposed actions of the World Bank and other donors. Indicating critical institutional issues on which future operational work and research might focus. The author finds that a consensus has emerged on five principles that establish the socially acceptable domain for government economic activity in Eastern Europe: (1) Retreat from the discredited central government, as subnational governments and private enterprises assume many functions of central government. (2) Improved channels of communication between governments and their citizens, in response to increasing demand for more transparent policy and an institutionalized voice for the public in policymaking. (3) A hospitable business environment, which means clarification of property rights; policy stability, consistency, and accountability; low-cost provision of government services and infrastructure; and the protection of agents from abuses in the marketplace. (4) Concern for public welfare and social justice, as citizens of post-communist Eastern Europe hope to obtain both the familiar basic securities (job security, subsidized consumption, and universal access to basic health care and education) as well as new rights and freedoms. (5) Efficient government administration at all levels, under the scrutiny ofelected legislatures, citizens groups, and internal audit and review agencies. The author identifies five areas in which external institutional assistance is needed: (1) policy advice on a range of issues; (2) more in-depth technical assistance; (3) a large-scale training effort to help close Eastern Europe's massive skills gap in economics and business; (4) diagnostic research; and (5) the design of broad, medium-term action plans. For each of these issues, the author describes numerous measures to be pursued.