Tradeflow Study - UNDP Black Sea Trade and Investment Promotion ...

Table 1 presents some interesting indicators related to private sector, trade and infrastructure
development. The share of the private sector in the national economy varies from 55 percent
in the case of Serbia to 75 percent in the cases of Albania and Armenia. The private sector
accounts for the largest share of employment, though in general this corresponds
approximately to the ratio of the private sector in GDP.
Table 1. Basic structural indicators of transition BSEC economies, 2005
Albania Armenia Azerbaijan Bulgaria Georgia Moldova Romania Russia Serbia Ukraine
Macroeconomic
Private sector share in GDP (%) 75.0 75.0 60.0 75.0 65.0 60.0 70.0 65.0 55.0 65.0
Private sector share in employment (%) 80.0 na 68.1 71.0 77.7 60.0 na na na na
Investment/GDP (%) 26.6 23.2 56.1 28.0 26.3 29.8 22.7 20.9 na 22.2
International Trade
Share of trade with non-transition countries (%) 87.4 69.2 65.7 75.0 57.2 37.7 77.3 73.2 na 48.6
Finance
Non-performing loans (in per cent of total loans) 2.3 2.1 14.9 3.8 3.8 5.3 6.1 2.8 23.8 19.0
Domestic credit to private sector (% of GDP) 10.3 8.0 6.2 26.0 14.8 25.4 10.2 25.7 na 35.2
Telecommunications
Fixed-line (mobile) penetration rate (per 100 inhabitants) 8.6 (39.5) 19.3 (10.6) 13.0 (26.7) 32.1 (80.8) 15.1 (32.6) 22.1 (25.9) 20.2 (61.5) 27.9 (83.6) 32.9 (64.0) 25.8 (37.0)
Internet penetration rate (per 10,000 inhabitants) 1.7 6.3 0.4 84.7 14.0 31.2 22.6 59.4 33.8 27.7
Source : EBRD Transition Report 2006
The financial sector reforms in a number of BSEC countries have created a more enabling
environment for business, in particular for bridging inter-temporal consumption-investment
constraints. However, the share of non-performing loans remains significant for a number of
economies in the region and is of concern to the stability of the financial sector.
Figure 2 presents the inflows and outflows of FDI in BSEC countries. Outflows signify more
often than not, disinvestment in the country as opposed to new investment abroad. Azerbaijan
is by far the largest recipient of FDI as a proportion of GDP in the region, which is entirely
absorbed by the energy sector. Other countries enjoy far smaller levels of FDI though these
tend to be more evenly distributed across sectors of the economy. The larger economies
tend to be far smaller recipients of FDI, in part because the national contribution to gross fixed
capital formation is large and in part because BSEC’s ability to attract FDI outside of the
energy sector is relatively limited.
Gross Fixed Capital Formation (GFCF) ranges from 17 percent in Serbia and Montenegro to
30 percent in Armenia. GFCF is exceptionally high in Azerbaijan owing to Azerbaijan’s
singularity with exceptionally high FDI in the energy sector. In absolute terms, Russia’s
domestic investment dwarfs other members of BSEC, since it accounts for half of all BSEC’s
GFCF.
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