Leap in productivity boosts growth and quality of life. - Significant gains in the productivity of workers in Eastern Europe and the former Soviet Union during the past decade have helped boost growth and living standards, but more must be done to eliminate red tape and barriers to enable firms to become more productive in a rapidly globalizing world, says a new World Bank report, “Unleashing Prosperity - Productivity Growth in Eastern Europe and the former Soviet Union”. According to the report, the rapid surge in the region's productivity - the amount each worker produces in a period of time - has boosted economic growth, raising income per capita by more than 50% between 1999-2007, while lifting about 50 million people out of poverty. In the 1990s, the countries of the region, particularly in the Commonwealth of Independent States (CIS), saw their output and productivity plummet during the early phase of transition to market economies. But since 1999, output per capita has recovered strongly in many countries, especially in the countries of the former Soviet Union. In most countries of the region, improved domestic polices and greater trade and global integration have played a big role in stimulating investment, spurring innovation, and promoting productivity and growth. Still, the study says more must be done to improve the productivity of the region's workers. It points to the large differences in annual incomes of people in the region, ranging from about purchasing power parity (PPP) $950 per year in Tajikistan to PPP $17,991 in Slovenia. Even the EU10 new member states, such as Hungary and the Czech Republic, have a long way to go to catch up with the incomes of the EU15 member countries. The Unleashing Prosperity study calls for countries to pursue reforms in five areas to enable workers to become more productive: 1) Promoting good governance and macro stability; 2) Strengthening competition; 3) Investing in labour and technology; 4) Investing in infrastructure and 5) Deepening the financial sector. The study says that the types of reforms needed depend on where the countries are in their stage of transition, which falls broadly into two groups. In those countries that are more advanced in economic reforms, such as the EU10 and Turkey, most of the gains in productivity have been made through big changes in the economy and workers moving from unproductive manufacturing positions to underserved service jobs. In those countries, further improvements must now be done by individual firms becoming more efficient. The report notes that “to compete globally, they need to do more to spur innovation, enable workers to become more mobile, and invest more in research and development.” Meanwhile, those countries which are less advanced in economic reforms, such as those countries in Southeast Europe and the CIS, show lower levels of productivity, and most of them are still dealing with the legacy of central planning. The report also noted that “Better investment policies, streamlined regulations, and stronger competition would encourage the entry of new, more productive firms and the exit of obsolete firms, thereby boosting productivity”. However, the report points out that along with these reforms, it is essential that social protection is strengthened. The experts concluded that public policies play an important role but are carefully adapted to each country. (I.L.)