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

Executive Summary
The BSEC region has experienced significant macroeconomic, political, institutional and
regulatory reforms in the last decade, with the effect of dramatically altering the business
environment in which firms operate and creating an enabling framework for fostering foreign
investment in emerging manufacturing and service sectors.
The Member States of the Black Sea Economic Cooperation (BSEC) are diverse in terms of
population size, economic power, production and export structures, as well as the depth and
breadth of trade and investment policies. The performance of trade is equally disparate, with
Russia, Turkey and Greece dominating trade flows, owing in particular to their economic size
since they account for over four fifths of the GDP of BSEC, but also due to the diversification
of their production base. Member States remain predominantly entrenched in merchandise
trade. Total trade in goods represents between 33 percent (Greece) and 120 percent of GDP
(Moldova), while total trade in services represents between 8 percent of GDP (Russia) and 30
percent of GDP (Moldova). Thus the outward orientation varies between countries though all
countries trade more in goods than services.
The study on trade and investment potential for the BSEC is a quantitative analysis of trade
and investment flows amongst Member States, and identifies a number of sectors in which
trade between Member States is underperforming according to the estimated potentials. The
study draws on a number of trade indicators which are used to calculate trade
complementarity in intra and inter industry trade, as well as more classical theoretical
economic models to identify underperformance of trade.
According to the indicators computed in the study, the highest levels of trade complementarity
exist between Azerbaijan (exporter) and Ukraine (importer), Greece (exporter) and Bulgaria
(importer), Romania (exporter) and Ukraine (importer), Russia (exporter) and Romania
(importer) and Ukraine (importer), and Ukraine (exporter) and Russia (importer). The level of
intra-industry intra-regional trade for Bulgaria, Romania, Greece, Russia and Turkey is
relatively high, whereas it is very low for Albania, Armenia, Azerbaijan, Serbia and
Montenegro, and Ukraine.
Using an econometric model for estimating bilateral untapped potential, a number of key
sectors which present opportunities for intra-regional trade appear to be under exploited. The
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