Environmental Assistance to Eastern Europe

2. Comments

By Erik Hoffmeyer, former Governor of the Danish National Bank, Chairman of the Advisory Committee to the Danish Environmental Support Fund for Eastern Europe

As we all know, the transition of the CEEC and the former Soviet Union from a planned economy to a market economy has met far greater problems than anticipated.

The difference between a planned and a market economy requires not only decentralising decisions on production and sales, but also a wide range of new structural systems that were totally foreign to the old regimes.

In the past year, two crucial steps have been taken towards the transition to a market economy.

Firstly, from such analyses as are possible, it appears that the two regions (the CEEC and the former Soviet Union) as a whole have got off the ground, so their production can be expected to increase. Though that does not apply to all the countries, it seems to be the case for the most dominant country - Russia.

Secondly, it is noteworthy that the CEEC as a whole seem to have achieved the same total production as before the political upheaval in 1989 and the following years.

There are big differences between the countries, but Poland seems to have achieved a level of production that is somewhat higher than before the upheaval, while production in the Czech Republic and Hungary is at about the same level as in 1989.

The countries of the former Soviet Union, on the other hand, have not achieved the same satisfactory development; there, total production is estimated to be at half the 1989 level.

That also applies to the weightiest country, Russia.

It is said that the countries must now enter the second phase of the transitional period - where the task is to adapt their institutional structures, including - particularly - their financial systems.

It is therefore pleasing that the Asian crisis, which once threatened to weaken the financial systems, appears not to have had far-reaching consequences.

Denmark's environmental support for the CEEC has so far been concentrated mainly in the region's Northern countries - those closest to Denmark. However, with the economic development described, we should perhaps consider assigning a somewhat larger part of our support to the countries of the former Soviet Union, as they have not managed to re-establish their production as strongly as those in Central and Eastern Europe.

A factor to be considered here is that for the CEEC, qualification for membership of the European Union has been a very powerful incentive for improving environmental standards.

This is also reflected in the fact that CEEC receiving Danish support have proven far more active in participating in the prioritisation of projects.