The challenges faced by small national economies
- Author(s):
- Parliamentary Assembly
- Origin
- Text adopted by
the Standing Committee, acting on behalf of the Assembly, on 25
November 2011 (see Doc.
12779, report of the Committee on Economic Affairs and
Development, rapporteur: Mrs Coleiro Preca).
- Thesaurus
1. Council of Europe member states
differ significantly in terms of size and level of development and
are not confronted with the same policy challenges. In considering
economic and social policy issues, much attention tends to focus
on large economies, while the particular characteristics, development
problems and vulnerabilities of small national economies often get
overlooked. Because 21 of the 47 member states with a population
of less than 4.5 million can be considered as small national economies,
the Parliamentary Assembly believes it is necessary to raise awareness
and stimulate public debate on this issue both in these countries and
among their international partners – whether they be states or organisations.
2. Moreover, as the Council of Europe seeks “to achieve a greater
unity between its members for the purpose of safeguarding and realising
the ideals and principles which are their common heritage and facilitating their
economic and social progress”, it is necessary to ensure that the
development potential and capacity of the smaller states is fully
exploited, through adequate policy choices at national and European
levels.
3. Although their economic and social profiles vary considerably,
all the small Council of Europe member states have been heavily
affected by the global financial and economic crisis and some, faced
with particularly serious problems (such as Iceland, Latvia and
Moldova), have required emergency assistance. The crisis has highlighted
these countries’ economic and social vulnerability, which is due
to a combination of factors: small domestic markets, limited diversification
of local production and exports, high dependence on foreign markets, insufficient
local resources, weaknesses in public and private sector capacities,
difficulties in managing cross-border capital flows and attracting
investment, as well as susceptibility to population movements and
natural disasters.
4. The Assembly therefore insists on the importance of good governance
through institutions, human resources and legal order in underpinning
development. It views efforts to ensure sound macroeconomic fundamentals,
diversify national economies, strengthen institutional capacity,
build up competitiveness, optimise use of local resources, secure
adequate transport and energy interconnections, and foster human progress
as the key drivers of a long-term and sustainable development strategy
for small states.
5. The Assembly is convinced that small states have no choice
but to be open to investment, trade, new ideas and change, to constantly
adapt and transform their economies in order to raise living standards, enhance
the quality of life of their population and secure the benefits
of globalisation in the increasingly liberal global trading environment.
It believes that international organisations can play a very useful
role in ensuring a level playing field and greater solidarity between
small and big actors on the global economic scene. They can also
assist capacity building in small states.
6. Given the importance of the financial sector to the development
of small economies, the Assembly points to the need to seek a better
balance between financial services and the rest of the economy.
It is particularly concerned about the prevalence of monopoly situations
(private or public) with a risk of market distortions and undue
influence of vested interests in small national economies. It also
stresses the need to rein in budget deficits and to return to a
balanced budget situation. Resorting to domestic rather than external
borrowing would increase resilience of national economies to external
shocks.
7. The Assembly notes a growing public concern over the quality
of life and the sustainability of development. It underscores the
huge economic potential of the environment sector in this respect,
not least through the emphasis on green and cultural tourism, as
called for in its Recommendation 1835 (2008) on sustainable development
and tourism: towards quality growth. The Assembly, moreover, considers
that small states could lead the way in Europe by testing green
development options.
8. The Assembly believes that in order to fully tap their development
potential, small states need to enhance their human capital through
social policies. Moreover, they should seize the opportunities of
the economy of speed rather than the economy of scale by using e-governance
and high technologies that make it possible to boost efficiency,
create new jobs, render information more accessible and help transform competitors
into partners, irrespective of their size or location.
9. The Assembly therefore invites the small Council of Europe
member states to:
9.1 build a
national consensus around the efforts of constant improvements in
the functioning of justice systems and the rule of law, macroeconomic
stability, tax administration and public resources management, social
services, entrepreneurial activity, personal security, civil society
participation, transparency and accountability;
9.2 closely monitor the role of monopolies, oligopolies and
monopsonies play in their economies and, if necessary, to reassess
their policies on privatisation and regulation in order to spread
economic well-being more evenly across the population and to fully
involve the private sector in the implementation of national development
strategies;
9.3 seek the closest possible regional ties, alliances with
other small states and partnerships with multilateral development
institutions and international organisations such as the European
Union, the European Investment Bank (EIB), the Council of Europe
Development Bank (CEB), the European Bank for Reconstruction and
Development (EBRD), the International Monetary Fund (IMF), the World
Bank and the World Trade Organization (WTO);
9.4 use public–private collaboration and the support of multilateral
development banks in exploiting new technologies fully to boost
national welfare systems, infrastructure and regulatory frameworks;
9.5 consider ways of not only improving the regulation and
transparency of financial services they provide, but also of using
them to develop other types of domestic economic activity, thus
gradually reducing the reliance of national well-being on the financial
sector;
9.6 use fiscal incentives to encourage microcredit schemes,
to ensure fair access of all economic players, especially small
entrepreneurs, to financial resources and to promote socially responsible investment
policies so that a sufficient share of corporate profits is reinvested
locally;
9.7 accord high priority to the provision of affordable, accessible
and efficient services for education, training and health care;
9.8 accelerate a shift towards the green economy through a
dedicated national strategy and investment in this field;
9.9 put in place policies and incentives for retaining highly
skilled members of the population and attracting back to the country
those who have emigrated;
9.10 foster investment in recycling waste and its transformation
into energy and new resources;
9.11 develop their transport and energy interconnections by,
as appropriate, taking full advantage of their European Union membership
or Eastern Partnership facilities, action plans for the development
of Trans-European Networks and the related financing schemes through
the EIB loans and European Union funds, including the Structural
Funds and the Cohesion Fund.
10. The Assembly also invites the relevant international organisations
to assist capacity building in small national economies and to take
into account the latters’ specific needs in their work on policy
advice and development strategies.
