Development of South-Eastern Europe: The Role of Industrial Policy

Abstract

In the paper are analysed post-socialist development in South-East Europe (SEE) and the role of industrial policy. Countries of the SEE introduced market and other post-socialist transition reforms applying the so-called ‘shock therapy’, with subsequent transitory drop in GDP, standard of living and industrial production. Particularly industrial collapse happened to appear as the ‘Achilles heel’ of the SEE economy. The SEE 2020 Strategy tends to reverse current trends from the consumption-led model of growth to export-led and foreign direct investment (FDI) driven type of growth, based on accelerated technological development, growth of competitiveness and completion of socioeconomic reform. However, there has been no evidence that is the FDI type of growth would be more efficient for regional development than that based on regional savings, remittances and resources of domestic investors. We have shown that the FDI in the SEE are three times lower than the amount of regional savings and remittances. In recent years domestic sources tremendously exceeded the total sum of FDI. The current situation and future prospects call for developing a common approach in this region, and concomitant supra-national regulations and institutional arrangements.