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The Handbook of Service Industries

Edited by John R. Bryson and Peter W. Daniels

Service activities are now acknowledged as key players in economic development, societal change and public policy worldwide. This exciting Handbook not only contributes to ongoing conceptual debates about the nature of service-led economies and societies; it also pushes back the frontiers of current critical thinking about the role of service activities in urban and regional development and the important research agendas that remain to be addressed.
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Chapter 10: Service Development in Transition Economies: Achievements and Missing Links

Metka Stare


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 broader socio-political transformation initiated the process of fast structural changes...

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