Reform strategies in transitional economies: Lessons from Asia

To date, with the possible exception of Mongolia, liberalization efforts have generally been more successful in the transitional economies of Asia (TEAs) than in Eastern Europe and the former Soviet Union. This paper argues that both initial conditions and policies were important in explaining the difference in economic performance. The TEAs (except Mongolia) placed microeconomic reforms ahead of macroeconomic ones. Similarly, there were differences in the approaches taken in areas such as enterprise reform, price deregulation and financial sector reform. The TEAs need, however, to supplement their reform program with fiscal, monetary and external sector reforms on an urgent basis. Without such actions, the successes acheived so far could be at stake. Some general lessons for transitional economies are also derived.