Panagiota Manoli , University of the Aegean (Greece) Shizuoka, 29 October 2012

Current Regional Dynamics in the Black Sea Area, With Some References to Economic Transactions and Labor Mobility

Panagiota Manoli, University of the Aegean (Greece)

Shizuoka, 29 October 2012

The Wider Black Sea Region: A politically defined region

Who defines the BSR, When and How?- BSEC’s Comprehensive Approach- Littoral States’ Approach (Russia and Turkey)- EU’s Approach

Core statesEU Member States: Greece, Bulgaria and RomaniaEU Candidate Country: TurkeyENP countries: Armenia, Azerbaijan, Georgia, Moldova and UkraineRussia: A Strategic Partner but not EU membership aspirations

Bilateralism versus

Multilateralism (Sectoral versus Comprehensive)

Policy Options

EU(high)

BLACK SEA REGIONALISM

Transnational exchange & demand

(weak)

Economic difficulties

(high)

Benevolent leading country

(weak)

Security dilemma

(high)

Explaining BSR

BS Regionalism: Key Features- Evolving Process (Three Waves of BRS

Phases: post-Cold War, enlargement, post-enlargement)

- Strong Intergovernmentalism /weak institutions (BSEC, GUAM, BS Forum)

- New EU driven initiatives (Synergy, EaP, Black Sea CBC…)

The Black Sea as a Region: ‘Push’ and ‘Pull’ Factors• Low Regional CoherenceDivergence (political, security, economic,

cultural)Low Interdependences and interconnectionsWeak Common Approach

• Gravitational PullRegional InstitutionsCommon Vulnerabilities European Integration Process

•High growth despite diversity of economies- all countries experience positive growth 2002-08

•Over 2000-08 annual real GDP growth averages 5.9%

•Living standards/ per capita income rise, poverty rates decline sharply

•Private capital flows increase- esp. FDI over 4% GDP 2006-08

•Intra-Regional trade, investment, financing, also rise

Regional Trends: 2000-08 Before Economic Crisis

1995-99 Avg

2000-04 Avg

2005 2006 2007 2008 2009 2010 2011 Est.

2012 Proj.

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0% BSEC CEE & Baltics

Year

GD

P G

row

th R

ates

Source: BSTDB (2011)

2000-08: High growth; 2009: Negative; 2010: Recovery; 2011

•Credit to businesses & consumers disappeared reducing liquidity & demand, slowing investment•International trade flows dropped, exports down, contraction in key W. European markets•Problems exacerbated by declines in (i) commodity prices, (ii) remittances•Reversal of fortune- poverty/ unemployment/ fiscal deficits up; current account deficits/ trade flows/ inflation down•Painful adjustment process only course for most

Short but Sharp Economic Crisis in Black Sea

 GDP

Growth InflationBudget /

GDPCur Acc Bal/GDP

Public Debt/GDP

Albania 3.3% 2.3% -7.0% -15.6% 59.7%Armenia -14.2% 3.4% -7.6% -16.0% 40.6%Azerbaijan 9.3% 1.5% 6.6% 23.0% 12.1%Bulgaria -5.5% 2.8% -0.9% -9.8% 16.0%Georgia -3.8% 1.7% -7.7% -12.2% 37.0%Greece -2.0% 1.2% -15.6% -11.0% 126.8%Moldova -6.0% 0.0% -6.4% -9.8% 30.7%Romania -7.1% 5.6% -7.3% -4.3% 28.2%Russia -7.8% 11.7% -6.3% 4.0% 8.3%Serbia -3.0% 8.4% -4.5% -7.1% 35.6%Turkey -4.8% 6.3% -5.5% -2.3% 46.3%Ukraine -14.8% 15.9% -6.2% -1.5% 34.6%

BSEC Region Macroeconomic Summary for 2009

 GDP

Growth InflationBudget /

GDPCur Acc Bal/GDP

Public Debt/GDP

Albania 3.4% 3.6% -3.2% -12.4% 62.8%Armenia 2.1% 8.2% -4.9% -14.0% 44.0%Azerbaijan 5.0% 5.7% 14.3% 29.5% 14.1%Bulgaria 0.2% 2.4% -3.9% -0.8% 16.2%Georgia 6.4% 7.1% -5.1% -10.6% 42.0%Greece -4.5% 4.7% -10.4% -6.5% 144.5%Moldova 6.9% 7.4% -2.5% -9.9% 34.1%Romania -2.0% 6.1% -6.5% -4.2% 34.0%Russia 4.0% 6.9% -3.6% 4.9% 9.5%Serbia 1.7% 6.5% -4.1% -6.5% 39.1%Turkey 8.9% 8.6% -3.6% -6.6% 44.7%Ukraine 4.2% 9.4% -5.2% -2.1% 39.3%

BSEC Region Macroeconomic Summary for 2010

Regional Economic Cooperation• Some progress, but levels still low• Much room for growth in trade, investment &

financing• Many ‘Win – Win’ possibilities exist• Prospects not favorable

Lack of political commitmentConfusion & uncertainty of current policiesEconomic difficultiesIntensifying bilateral rivalriesEU influence- (i) Diverts country focus westwards, (ii)

Rules & restrictions hurt Black Sea cooperation prospects

Regional Relations with EU- Why Important?• Most important external economic actor, directly & indirectly,

high externality impact• Main market for trade, investment, finance• Key exporter of rules, regulations, standards• Steady expansion of engagement with Black Sea up to 2009,

politically and economically.• Ambiguous impact on Regional Cooperation despite BSS &

EaP. Mainly engages countries Bilaterally

Regional Trade: Setback in 2009, Partial Recovery in 2010 (Source: BSTDB 2011)

19992000 20012002200320042005200620072008200920104.0%

8.0%

12.0%

16.0%

20.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

Intra-BSEC Trade/ Total Trade: Left Axis

Features of Intra-Regional Flows

• Regionalization is restrained • Low level of intra-regional trade • Dominant, though slowly declining, role of

Russia (among Black Sea partners)• Strong Bilateral links between Russia-

Turkey and Ukraine • Low dependence of Russia and Turkey on

intra-regional trade• FDI: The outward FDI of Black Sea countries

(but Russia) remains regional

Three key determining factors continue to fuel international Labour Migration:

•- the “pull” of changing demographics and labour market needs in high-income countries;

• - the “push” of unemployment, crisis pressures and wage differentials in less developed countries;

• - established inter-country networks based on family, culture and history.

Labor Mobility - BS as transit, destination and origin for labor

migrants- Two tracks: i) towards western Europe and ii)

towards Russia- Largely informal nature of labour markets in BS

countries (repercussions on how labour mobility takes place and on the rights and working conditions of migrants)

- Brain drain - Trafficking for labour exploitation, including

forced labour, is up in the agenda of policy-makers

Changing Patterns of Labor MobilityLabor movement reflects: •political disruption (1990s)•cultural affinity•return to home country•shifts in patterns of economic

development and the gradual enlargement of the European Union.

Russia

Turkey

Romania

Serbia

Ukraine

Azerbaijan

Bulgaria

Georgia

Moldova

0 10,000 20,000 30,000 40,000 50,000 60,000

Work Permits Granted, 2006Source: IOM (2008)

Labor Migration and Regional Cooperation•Efforts to collaborate (BSEC, IMO, etc)•Free movement of goods and persons is

lacking behind

Thank you