CEECs’ markets put under scrutiny

Date: 31/10/1996

By Mark Turner

THE ten countries of Central and Eastern Europe which have applied for EU membership are a mixed bag when it comes to industrial liberalisation.

In certain sectors such as telecoms and railways, some are more advanced than their western neighbours.

But in more sensitive areas such as energy, monopolies and subsidies continue to characterise the business.

This varying pace of change creates a complex picture for the European Commission to evaluate as it considers the CEECs' readiness to join the Union.

Work on the first step in the applicants' formal candidacy assessment process was due to be completed by the end of this month. Based on answers to a 165-page questionnaire, the Commission's directorates-general will channel an appraisal of each country's transition to a market economy through officials in Foreign Affairs Commissioner Hans van den Broek's directorate-general.

The results will be crucial. Countries must be in a position to accept the acquis communautaire by the time they join the Union, probably around the year 2002 or later.

If fine intentions were all that were needed, many could join now, with most CEECs demonstrating their enthusiasm to catch up and even go beyond current EU rules.

In the telecoms sector, all except Slovenia have opened value-added services up to competition already and all but Slovenia and Latvia have, or will soon have, more than one operator in public data transmission services.

Seven out of the eight CEECs which provide satellite services do so under a liberal regime, and all but two have multiple existent or planned GSM providers.

In public voice-telephony, which is still not fully liberalised in the EU, all countries except Latvia promise liberalisation by 2002, one year before Greece's possible derogation runs out.

“If telecoms were the yardstick by which CEEC entry were to be measured, they would not have to lose much sleep,” said a diplomat.

Developments in the transport sector are also encouraging. All the CEECs have taken major steps in road transport and their railway sectors are fast approaching Union standards.

In the latter case, since the EU is used to large state-owned railway infrastructures, the CEECs have found it relatively easy to keep pace with and even go beyond Union rules.

Aviation is less well advanced, but Union officials say the industry has moved on considerably since 1990, albeit at different paces in different countries.

Encouraged by the progress made so far, this month's meeting of transport ministers granted permission for negotiations to extend EU aviation market rules to take off eastwards.

If there is a grey cloud on the horizon, it is the potential gap between intentions and results. The enforcement of competition rules, for example, is proving a tough task for the CEEC free marketeers.

“Nearly all the CEECs have draft laws in place to free up maritime transport, waterways, civil aviation, roads and road transport. But it is less clear how soon they will be able to implement and enforce the basic legislation,” said one official.

This is partly due to the fact that central and eastern European administrations are still young and are going through an intense period of restructuring. But more worrying is a tendency for trained staff to move into the private sector, where wages are higher.

The political will to overcome this problem does exist. This is more than can be said for the CEECs' energy sector, which continues to cause concern among western observers.

Although, in formal terms, foreign investors are given similar access to markets as domestic investors, old monopolies still abound.

Fearful of a public outcry at rising prices, many governments have continued to subsidise and protect their power plants from competition.

Information is also difficult to come by. “We do not have a perfect view of the monopoly structure,” said a European Energy Charter official who is helping the CEECs to overcome these difficulties.

While Hungary is progressing fast, even top EU membership contenders such as the Czech Republic are proving slow to dismantle the existing structure, and insiders say Poland is planning no significant policy initiatives before the turn of the century.

But these criticisms appear less damning in the light of the enormous resistance put up by France and other Union countries to electricity liberalisation, and continued delays on gas.