Academic journal article Review of European Studies

On the Significance of Development Banks in the Economies of Post-Soviet Countries

Academic journal article Review of European Studies

On the Significance of Development Banks in the Economies of Post-Soviet Countries

Article excerpt

Abstract

After the collapse of the Soviet Union, each of the new countries which obtained sovereignty had to create a new economy and the respective banking system, as well as to establish international financial and economic relationship in order to ensure progressive social and economic development. The article analyzes the role of international and national development banks for the post-Soviet countries. The main conclusion is that international development banks made certain positive contribution to this process. However, the lack of own development banks, tendencies of the commercialization of state banks and general weakness of banking systems in the post-Soviet countries in terms of resources, along with mistakes in economic reforms, are the factors which give rise to economic problems and hinder further economic and social development in these countries. Establishing and strengthening national and regional development banks can be an important factor for such development.

Keywords: development banks, bank politics, institutional structure of banking system, post-Soviet countries

1. Introduction

Over the past years, the role of development banks and prospects of their future activities has been a matter of debates in scientific, banking and political communities. Back in 2000, the US Congress Committee discussed the transfer of IBRD credit activities to regional development banks (Johannes). Some proponents of market economy argue that international development banks have already accomplished their role, and their significance, scope and efficiency of activities is gradually decreasing in the new architecture of global financial system (Johannes). Based on the analysis of the activity as to one of the largest banks, the Brazilian Development Bank, a group of experts has come to the conclusion that, even at national level, the adoption of decisions on financing the projects is associated with political relations of companies rather than with the efficiency of their projects (Ismaylov & Papava, 2012). At the same time, it is suggested that the accretion of power of international development banks, the refocusing of their activities from poverty reduction to sustainable economic growth and global financial stability, the authorization of a bigger share in their funds and governing bodies of new developing countries with large potential can significantly increase the contribution of these banks into social progress (Johannes; Harvard school of economy, 2011).

Choosing the post-Soviet countries as a research subject, we are aware of considerable conditionality of such a choice. The point is that, being in fact a part of the Russian Empire, and later of the Soviet Union, the peoples of these countries have borrowed a lot of common things from Russian culture, administration, and management system. Later, at the collapse of the Soviet system and economic reforms, these countries often copied forms and methods of market reforms implemented in Russia. Thus, common features of transitional economy have been maintained and expanded in these countries. At the same time, painful processes of the collapse of the Soviet Union, social and economic situation in Russia itself, and the subsequent mistakes of Russian policy towards these countries have forced them to look for allies in other centers of concentration of political and economic power. As a result, by the beginning of the 2000's, some serious discrepancies in social, economic and political orientation of these countries took place. Currently, all Baltic states are members of the European Union and NATO; among the countries of the Caucasus, Georgia withdrew from the CIS, having concluded the agreement of association with the European Union, and set a course to joining NATO; Armenia withdrew from the association with the European Union and joined the Eurasian Union. Azerbaijan keeps pursuing independent policy, while striving to maintain balanced relationship with both Western countries and Russia; in Central Asia, Kazakhstan, Kyrgyzstan and Tajikistan joined the Eurasian Union, while striving to maintain consistent relationship with Western countries. …

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