Reiner Weichhardt
Deputy Director
NATO Economics Directorate

The 1995 NATO Economics Colloquium - an element of the North Atlantic Cooperation Council (NACC) Work Plan - dealt with economic reforms in Cooperation Partner countries at this mid-decade juncture. Comparative assessments were made with regard to reform experiences and progress in individual countries as well as major reform areas, singling out specific features and common elements.

Chaired by NATO's Director of Economic Affairs, Daniel George, the Colloquium heard presentations by 25 speakers from Allied and Cooperation Partner countries, organised in five panels. A Keynote Speech was delivered by the Minister of Engineering, Military-Industrial Complex and Conversion of Ukraine, Mr. Victor Petrov, and a special lecture on ecological problems of the CIS countries was presented by Dr. Murray Feshbach of Georgetown University in Washington.

The review of reforms in specific countries by Panel I revealed the difficulty of reaching clear, quantitative measures of success. The scope and reliability of statistics are often skewed by unreported developments in the shadow economy and at regional and local levels. Russia, in particular, is characterised by vastly differing regions, in terms of economic resources and political and social conditions. The yardstick used to measure reform in rural areas is totally unsuitable for Moscow and St. Petersburg. In other countries the lack of sound accounting standards, weak financial institutions, and disputes over the pace of reform makes impossible the use of an abstract "reform model" against which progress can be measured.

The key to reform in all countries - the people - was examined by Panel II which covered reform's effect on living standards and social welfare. There was general agreement that essential restrictive policies during the transition period (whether short or long) can impair people's welfare. The necessary balance must be found to provide a social safety net without setting back control of monetary and fiscal policies. This becomes particularly important, and difficult, during election periods when "pork barrel" politics often emerge to appeal to voters.

Privatisation, an element of all reforms, has taken different forms for the various transition economies. Speakers on Panel III noted that so-called voucher (or coupon) privatisation has been successful for some countries while not for others. The key to success or failure has been the degree to which new capital has flowed into the enterprises and whether the change to private ownership has resulted in competent management. The restructuring of enterprises, whether carried out under state ownership or after privatisation, is also a necessary factor for successful reform.

A major goal of all transition countries is to become an active player in world markets. A number of multilateral and bilateral cooperation schemes and initiatives were discussed by Panel IV speakers. There was agreement that private foreign investments, rather than official aid programmes, will be essential for reform and growth.

The concluding presentation of Panel V noted the linkages between economic reform and stability and the growth of democracy and international security. The transition is complex and many-faceted, and political opportunists will constantly try to utilise temporary setbacks to prove that reforms are unnecessary and detrimental to national welfare. While much attention has been devoted to reduction of military outlays and conversion of unneeded defence industries, this important part of the economies continues to be a heavy burden for many countries. NATO's economic activities under the annual NACC Work Plans will be focused on this essential area of reform.

This book contains all the Colloquium papers. Since only a few up-dates have been made during the editing process, the contributions reflect as accurately as possible the state of information available at the time of the conference. Taking into account the conference focus on crucial reform areas and on the link between economic performance, stability and security, the assessments made also provide a most valuable basis for judging future trends.

Michael Devlin, Editorial Services, Brussels, provided editorial support and coordination in preparing this book. He also produced the useful summaries introducing each paper.

I also wish to express appreciation to Felix Dorough and Margaret Grant of the Economics Directorate staff for further editorial assistance, and to Ulrich Gerza who, as an intern with the Directorate, produced the summary of Colloquium discussions.

December 1995

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