Competing in the Single Market - SMEs and ... - Erhvervsstyrelsen

It is also remarkable that the B4 countries have managed to stabilise their economies and attract largeinflows of foreign direct investment (see Table 2) at the same time as their political systems, at leaston the surface, have been characterised by a large degree of instability. Thus on average, each of thesecountries has had at least 10 changes of government since 1990 (The Economist, “Teething troubles”,February 14, 2004). Overall, it appears that the frequent changes of government in the B4 countrieshave not had any significant effect on these countries’ political stability or their commitment to farreachingstructural and economic reforms.Table 2: Foreign Direct Investment in the Baltic Sea CountriesInward Stock % of GDP1995 2002Inward Stock(bn US$)2002Latvia 12.5 32.4 2.7Lithuania 5.8 31.4 3.9Estonia 14.4 65.9 4.2Poland 6.2 23.9 45.2Central andEastern Europe5.3 20.8 187.9Source: UNCTAD (2003)The success of the B4 in achieving macroeconomic stability is acknowledged in the conclusionsreached by the European Commission in its monitoring reports of the New Member Countries’preparations for EU membership. Thus the Commission stated in its 2002 reports that each of thecountries was “a functioning market economy” and that “[t]he continuation of … [the] currentreform path should enable …[these countries] to cope with competitive pressure and market forceswithin the Union”. 3From Transition to InnovationHaving established the B4 countries’ success in achieving macroeconomic stability, it would behasty to conclude, however, firstly, that these countries no longer need to concern themselves withmacroeconomic stability, or, secondly, that all the framework conditions for enabling the developmentof a competitive business sector are now in place. Considerable work remains to be done in areas suchas improving the functioning of labour markets, changing county and local government structures,reforming education systems, continuing restructuring and privatisation efforts, strengtheninginfrastructure, and reforming the banking sector, among other things. 4While the B4 have come a long way in making the successful transition to a market economy, theywill not be able to rest once they get there. In a sense, one could argue that the bar is being raised orthat they are now entering the start of another race. This is due, firstly, to the accession to the SingleMarket which will place new demands on enterprises with regard to EU regulatory requirements, and3European Commission (2003f,g,h,i).4see, for example, recommendations by the European Commission in its 2003 monitoring reports (European Commission (2003f,g,h,i) and Smallbone andWelter (2003) and OECD (2000b).16