and Opportunites for
Countries in Transition
by Mojmir Mrak
THE INTEGRATION OF
INDUSTRY IN THE REGION
INDUSTRIAL DEVELOPMENT ORGANIZATION
The views expressed in this document are those of the authors and do not necessarily reflect the views of the Secretariat of the United Nations Industrial Development Organization (UNIDO). The designations employed and the presentation of material in this publication do not imply the expression of any opinion whatsoever on the part of the Secretariat of the United Nations Industrial Development Organization concerning the legal status of any country, territory, city or area, or of its authorities, or concerning the delimitation of its frontiers or boundaries.
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Globalizationthe process of continuing integration of the countries in the worldis strongly underway in all parts of the globe. Supported by accelerating pace of technological change, by price and trade liberalization, and by growing importance of supranational rules, globalization has exposed national economies to much more intense competition than ever before. In countries in transition, the process of their integration into global economy has been characterized by at least two region specific features. First, this is the only region in the world that was practically de-linked from other parts of the world before the late 1980s. Second, the countries of the region have been faced with a highly challenging process of transition from centrally-planned socialist-type economy into a full-fledged market economy based on private ownership.
The combination of transition and globalization processes affects overall development of transition economies in most fundamental ways. Rapid advancement in the process of transition accompanied by full participation in the global economy enables countries in a region and their economic agents to seize the new opportunities and reap benefits of globalization. Without basic developmental capabilities and the appropriate policy framework, however, economic actors in countries in transition will find themselves unable both, to advance efficiently the process of transition and to compete successfully in the global environment. This paper has two main objectives, first, to review globalization and to analyse to what extent have transition economies already become integrated into the global economy, and second, to provide an assessment of the transition process over the last decade and to discuss the prospects for the future of transition.
World as a global economy
Globalization, a highly complex and controversial concept, is not a new phenomenon but a continuation of developments that have been going on for some considerable time. The recent trend of globalization of economic activities is qualitatively different, however, as the world has definitely ceased to be a collection of relatively autonomous economic agents that are only marginally connected and are more or less immune to events in their neighbourhoods. Today, globalization involves numerous features, but the following three seem to be the main engine driving global economic integration: (a) internationalization of production accompanied by changes in the structure of production, (b) expansion of international trade in trade and services, and (c) widening and deepening of international capital flows.
Globalization is now a forceful process that is unlikely to be reversed. The future policy alternatives for countries and regions have thus to be analysed in the context of the global economy with free trade of goods and services, free movement of capital, technology and skills and with improvements in transportation and communication links. In spite of significant differences...