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Edited by John R. Bryson and Peter W. Daniels
Chapter 10: Service Development in Transition Economies: Achievements and Missing Links
10 Service development in transition economies: achievements and missing links Metka Stare* Introduction Since 1980, service activities in developed countries have had to accommodate to the pervasive trends of technological change and globalisation. In addition, transition economies had to face the gap in economic development, which was particularly evident in the poorly developed service sector. Catching up a moving target presents diﬃcult and challenging tasks for transition economies, bearing in mind the legacies of past developments. Before the start of the reform process, the socio-economic system of transition economies was characterised by state ownership, which hindered private initiative. The central planning system added further to suppressing entrepreneurship and innovation, which foster eﬃciency and growth. Enterprises were isolated from international markets, and foreign trade was carried out through state trading companies. Thus the behaviour of enterprises was not driven by competition, but by the implementation of the central plan. State planning authorities imposed an excessive degree of specialisation in production and an artiﬁcial division of labour.1 Manufacturing was favoured over other economic activities in line with a ‘material concept’ of production. Consequently, the supply of services was deﬁcient. Intermediate services were provided in-house by large manufacturing enterprises (for example, transport, some elementary business services) or by centralised state enterprises (distribution, ﬁnancial services). Providers of services were not exposed to competition from local or foreign suppliers, hence the quality of services was poor. The range of consumer services was also limited. Market-oriented reforms introduced as part of a...
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