Policy Documentation Center

Sv\ue1rovsk\ue1, Gabriela

Kucharczyk, Jacek

English

Strengthening EU democracy support as a task for the Polish Presidency \u2013 lessons learnt and challenges ahead

Bolganschi, Daniela

Rural Out Migration and Land Use in Moldova

D\u105borowski, Tomasz

Szpala, Marta

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Policy
Documentation
Center Feature Article
China’s interest in investing in South-Eastern Europe still 
growing
Tomasz Dąborowski and Marta Szpala
On 19 October the Chinese corporation China Guangdong Nuclear Power Group entered into an agreement 
for access to confi dential information concerning the development of the Cernavoda nuclear power plant in 
Romania. During that same week, two Chinese companies,CEE and SEC, concluded initial agreements for the 
development of the Nikola Tesla power plant and the modernisation of a hard coal mine in Serbia. Although it 
is still uncertain whether the Chinese companies will become engaged in the two investments, these moves are 
examples of the increasing activity from Chinese investors in South-Eastern Europe which has been observed 
since the economic crisis at the end of 2008. The decreasing dynamics of Western capital infl ux and the very 
favourable disposition of the governments in this region towards Chinese investments both contribute to this 
process. Greece and Hungary are also increasingly interested in close co-operation with China. It is diffi cult 
to estimate at the present stage whether all this will bring about a signifi cant economic presence of China in 
this region.
  The crisis has held back Western investments
The global economic crisis caused a deep recession (low economic growth at present), a signifi cant decrease 
in the trade exchange and an increase in unemployment in South-Eastern European countries. Their fi scal 
situation deteriorated, as well. Some countries from this region had to apply to international fi nancial institutions 
for extra funding (Romania, Serbia, Bosnia and Herzegovina and Macedonia). The main cause of the deep 
crisis which countries in this region encountered was the severe reduction in foreign capital infl ux, this being 
the major source of their rapid economic development before 2008. The slowdown concerned not only short-
term portfolio investments but also foreign direct investments, which require longer capital engagement. The 
most spectacular examples of investors withdrawing included: the disengagement of GDF-Suez, Iberdrola, 
CEZ and RWE from the development of the Cernavoda nuclear power plant in Romania; of RWE from the 
construction of the Belene nuclear power plant in Bulgaria; and of CEZ from the upgrading power plant in 
Gacko, Bosnia and Herzegovina. The fi nancial crisis and the perception of this region as politically unstable 
have also led to a signifi cant increase in the costs of gaining capital for fi nancing investments and servicing 
debts. This is seriously impeding the resolution of serious problems in these countries, which are linked to the 
underdeveloped transport infrastructure and electricity shortages.
 China is welcome as a partner
As Western fi rms lost their interest in the Balkan market, the governments of the countries in this region 
embarked on an active search for partners in other parts of the world (China, Turkey and the Arab countries). 
What adds to the attractiveness of China as an economic partner is its practice of fi nancing investments 
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through loans granted on favourable conditions by Chinese fi nancial institutions (long loan and grace periods 
and low interest rates). Chinese entrepreneurs are not as nervous as Western investors about the risk related 
to high corruption levels, bureaucracy and the unstable economic situation. Unlike in most EU member states, 
the engagement of Chinese business is not opposed by the public and entrepreneurs in this region.
The tradition of good political relations is a factor which facilitates the development of economic co-operation. 
This especially concerns Serbia, which signed a strategic partnership agreement with China back in 2009 and 
has been consistently supporting China on the international stage (boycotting the ceremony of awarding the 
Nobel Prize to a Chinese dissident in 2010 and the refusal to support the EU’s declarations condemning human 
rights violations in China). Romania is less eager to manifest its close relations with China. Bucharest avoids 
raising sensitive human rights issues in bilateral relations with Chinese partner. Bulgaria is using a similar 
strategy, as are the other Balkan states, which emphasise the need to keep ‘pragmatic’ relations with China.
 
 The scale and the special features of the Chinese engagement
Economic co-operation between countries in this region and China is not intensive. In some countries in this 
region, China is ranked among the top twenty or top thirty trade partners. Investment and capital co-operation 
is still marginal, especially in comparison to that with partners from the West (see Appendix). The main goal of 
China’s investment activity before the fi nancial crisis was to maximise trade exchange, for example by building 
shopping centres.
A change in the nature of China’s engagement in this region, namely the desire to enhance capital and 
investment co-operation, has been observed since 2009. Chinese investors are interested above all in the 
electric energy sector (see Appendix). The largest of the projects being implemented include the construction 
of the Stanari coal power plant in Bosnia and Herzegovina (it will cost US$415 million) and the modernisation 
of the Kostolac coal power plant in Serbia (750 million euros). Chinese companies are implementing both these 
investments as subcontractors and are providing them with a large amount of funding. Chinese investors are 
also engaged in intensive talks with the aim of joining the projects for the development of the Nikola Tesla 
power plant in Serbia (1.5 billion euros) and the Cernavoda nuclear power plant in Romania (4 billion euros). In 
both cases, Chinese engagement would mean a breakthrough, given the scale and the strategic signifi cance of 
these two investments. Additionally, Chinese companies would for the fi rst time obtain shares in the operator 
companies which manage these plants.
Chinese fi rms have also shown interest in participating in the development of transport infrastructure (the 
modernisation of railways and road connections). Projects of this kind are usually implemented as part of 
public and private partnership. However, Chinese fi rms have thus far taken part in only one enterprise, the 
construction of a bridge on the Danube in Belgrade. Chinese fi rms have chosen not to become engaged in the 
production sector despite incentives from the countries of the region. One exception is the consortium formed 
by China’s car market giant, Great Wall Motor, and Bulgaria’s Litex, which will start production of cars to be 
sold on the EU market in 2011.
 
 Possible future developments
 The small South-Eastern European countries are not overly signifi cant from the point of view of the realisation 
of the Chinese global investment expansion. Nevertheless, it may be expected that Chinese investment and 
capital engagement will grow in this region. In addition to the economic benefi ts, it will also enable China 
to gain political infl uence in what are now present and future EU member states at a relatively low expense. 
China’s desire to improve its reliability as an investor is also not insignifi cant. A successful implementation of 
the investment projects in South-Eastern European countries (in accordance with the principles applicable in 
the EU, with high quality and low implementation costs) could offer China a strong argument in its relations 
with the EU, which is still reluctant to let in Chinese investors.
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The chances that Chinese entrepreneurs will replace Western investors on a large scale in this region are low 
because they are focused on specifi c non-production sectors, and their activity is still very limited. Chinese 
investments are also unlikely to contribute signifi cantly to the resolution of economic problems that the 
countries in this region have to cope with, such as high unemployment and low enterprise. Chinese investors 
have shown little fl exibility in co-operation with local partners so far. Nevertheless, if the programme which 
envisaged the development of infrastructure and the electric energy sector is implemented with Chinese 
support, the countries in this region will become more attractive to investors.
Appendix
China’s capital and investment engagement in individual South-Eastern European countries
Country Total foreign di-
rect investments as 
of end of 2010[1] 
(million euros) 
Total Chinese di-
rect investments as 
of end of 2010[2]
(US$ million) 
Th e most important investments being implemented 
and  considered
Albania 2,312* 4.4 - n/a 
Bosnia and Her-
zegovina 
4,906 6.0 Dongfang Electric Corporation:
- construction of the Stanari coal power plant (approxi-
mately US$415 million).
- participation in the construction of a water power 
plant (1.68 MW) is being considered
Bulgaria 36,172 16.6 – the construction of a car factory in Lovech was com-
pleted this year, investors: Grand Wall China and Litex 
(133 million euros)
– possible sale of shares in the planned Belene nuclear 
power plant is being negotiated (approximately 2.5 bil-
lion euros).
- intergovernmental memorandum on the modernisa-
tion of railroads and rolling stock (December 2010)
Croatia 25,649 8.1 No major investments 
Macedonia 3,350 0.8 - a group of 12 water power plants on the Vardar river 
(approximately 1 billion euros, negotiations with China 
Development Bank on the fi nancing of this project are 
pending)
Romania 49,984* 125.0 – China Town shopping centre (30 million euros), 
opened in 2011
– Huawei European Design Centre (approximately 200 
million euros) due to be completed in 2012
– CGNPG is interested in participating in a company 
which is implementing the Cernavoda nuclear power 
plant project
 (a 35-45% block of shares worth 1.5–2 billion euros);
an agreement off ering access to confi dential informa-
tion on the development has been signed
and in October 2011 CGGC confi rmed its intention to 
participate in the construction of the Tarniţa-Lapustest 
water power plant (1,000 MW capacity).
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Country Total foreign di-
rect investments as 
of end of 2010[1] 
(million euros) 
Total Chinese di-
rect investments as 
of end of 2010[2]
(US$ million) 
Th e most important investments being implemented 
and  considered
Serbia 15,780 4.8 – China Road and Bridge Corporation is building a 
bridge on the Danube in Belgrade. Investment cost: 
175 million euros (85% from a loan granted by China’s 
Eximbank)
– the revitalisation of two energy blocks in the Kostolac 
coal power plant by China’s CMEC – the fi nal phase of 
loan negotiations with Eximbank
– development of the Nikola Tesla coal power plant 
complex by Environmental Energy Holdings and the 
Shenzhen Energy Group – an initial agreement with no 
fi nancing guaranteed.
Montenegro 2,766 0.3 – Sinohydro Corporation is taking part in the fi nal 
phase of the tender for building a group of water power 
plants on the Moraca
* as of end of 2009
[1] Data from central banks in individual countries.
[2] Data from China’s Ministry of Trade.


China\u2019s interest in investing in South-Eastern Europe still growing

Horvath, Aniko

Vidra, Zsuzsanna

Fox, Jon

Tolerance and Cultural Diversity Discourses in Hungary

M\ue4nd, Kristina

Noor, K\ufclvi et al

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Policy 
Documentation 
Center Feature Article
Charitable giving: analysis and recommendations for Estonia
by Kristina Mänd, Külvi Noor, Annika Uudelepp and Maiu Uus
Active and knowledgeable people use diverse ways and channels to participate in the decision-making 
processes that affect their lives and are engaged as volunteers, members of associations and donors, and 
organisations that enable such activism form the corner stone for the sustainability of civil society. With the 
analysis of practices and trends of philanthropy, we are targeting one of the main challenges of civil society – 
how to secure strategic, regular and transparent giving. This analysis is our contribution to strengthening civil 
society in Estonia. 
The purpose of the analysis was to describe the experiences and patterns of charitable giving in Estonia 
and abroad, to draw conclusions and to present recommendations and suggestions for the advancement of 
philanthropy in Estonia. We described the factors affecting the environment of charitable giving: 
1. positive image and recognition of charitable giving; 
2. smart and considerate donors; 
3. ethical and effective organisations; 
4. favourable tax environment; 
5. prevention of fraud and misuse of giving and ethics of philanthropy; 
6. statistics and research on charitable giving. 
To learn from other countries, we studied the practices of giving in Canada, New Zealand and Great Britain 
and examined the trends around the world. Finally, we studied the taxation and legal environment/ conditions 
affecting charitable giving around the world and the good practices and ethical methods related to charitable 
giving that are used. In addition to the analysis, we also published a handbook for organisations describing 
best practice to effectively collect, use and report donations. 
In order to understand the situation in Estonia, we analysed statistics of charitable giving between the years 
of 2005–2009, highlighted the trends, examined the work and practices of five Estonian organisations which 
collect donations and analysed Estonian legal environment affecting charitable giving. Based on what we 
learned from Estonia and from other countries, we prepared recommendations and suggestions for the 
advancement of charitable giving. 
Official statistics tells us that charitable giving in Estonia is progressing – 5,4% of tax payers declared donations 
in year 2009 (in comparison to 3,7% in 2005). According to the World Giving Index 2010, Estonia is in the 
121st place with 12% of people saying they had given money in the month preceding the study. Economic 
downturn has had no serious effect on individual giving, but it has negatively influenced corporate giving. 
Here are the key findings and recommendations: 
Charitable giving needs to be recognised and valued in the society. 
The most significant task ahead of us lies in recognising the value of charitable giving to be supported by 
the improvement of legal environment, the advancement of donors and organisations and the promotion of 
info technological solutions. In Estonia, we are still far from donating being an intrinsic part of our behaviour 
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and thinking. For that purpose, we are recommending to form a working group of organisations, donors and 
government officials to launch a programme for the promotion, communication and advancement of charitable 
giving. Although there are organisations whose work touches upon philanthropy, it is not the main mission 
of any organisation in Estonia. In addition, we suggest that donors and organisations discuss and compose a 
code of good practice for charitable giving. 
Charitable giving needs supportive legal environment that does not set obstacles. 
Although there are no universal laws or international treaties on charitable giving, two conclusions can be 
drawn: first, countries with stronger economies and fiscal climate offer bigger direct and indirect support to 
civil society in general, and second, donations that do not directly benefit donors, should offer tax incentives 
for donors and should be tax exempt for recipients (in Estonia, the latter is not relevant since legal entities do 
not pay taxes on their income, unless it is further distributed). 
We are recommending: 
• to clarify the definition of charities (i.e. which organisations should enjoy tax incentives on the 
donations they receive); 
• to calculate the actual cost of various tax incentives to the Estonian state; 
• to raise the limits of tax incentives on donations both for individuals and legal entities.
In Estonia, donations given to public benefit foundations and associations (organisations) that have been 
granted tax-exempt status may, up to a certain extent, be deducted from the income of the donor. The basis 
for the tax relief is the inclusion of the foundations and associations in the government’s list of organisations 
benefiting from income tax incentives. The list includes only organisations registered in Estonia. For individual 
donors, the total of donations deducted from the taxable income cannot exceed 5% of the donor’s total 
income. For corporate donors, the total of donations deducted from taxable income can be either up to 
3% of the sum of the salaries paid during the year and subject to social insurance tax, or up to 10% of the 
calculated profit of the latest fiscal year. The treatment of non-monetary donations is the same as for monetary 
donations, and taxation is based on their market value. In addition, we are suggesting introducing the concept 
of payroll giving and a modification of the Gift Aid system used in Great Britain in Estonia. 
Charitable giving needs smart and motivated donors. 
The more focused and planned the actions of the donors are, the more advanced and effective their giving is. 
The empowerment of donors contributes to the same aim as the development of philanthropy – to increase 
the donations that go to organisations for public benefit and common good. Charitable giving is valuable to 
corporations’ competitive advantage since it is an investment in the future and in the internal culture of the 
business. For individuals, giving provides satisfaction and allows people to help and promote issues and groups 
that are important to them. We are recommending the launch of a programme (mentioned above) to promote 
charitable giving, help corporations to find good causes, facilitate their philanthropic deeds, and raise the value 
of donating among individuals. We are suggesting a focus on younger donors who are increasingly discerning 
about the causes they wish to support. In addition, we suggest promoting leaving legacies to charitable 
organisations.  
Charitable giving needs skilful and empowered organisations. 
Not all organisations receive donations but for many, that is the main income. It is important to develop a 
strategic approach to secure regular donations that can be factored into the budgetary planning process. We 
are recommending organisations to better communicate the value of charitable giving to their target groups 
and donors, use social media in collecting and reporting donations and be transparent and accountable about 
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the actual cost and benefit of donations. In counselling and training the organisations, we are suggesting that 
good governance and the prevention of fraud should be treated seriously. Also, we suggest investment in 
the improvement of a joint web portal to promote and facilitate donations that is especially useful to smaller 
organisations. 
Charitable giving requires the prevention of deception and fraud. 
For charitable giving to be a valued and recognised conduct, donors need to be reassured that any potential 
risks of donations being misused have been addressed by the organisations. In addition to the principles of good 
practice (mentioned above), we are suggesting a cross-departmental group consisting of organisations, donors 
and civil servants to continue their joint meetings and recommending them to collect reliable information about 
the cases of deception and to analyse the risks on charitable giving. In addition, the programme of charitable 
giving should focus also on the legitimacy, accountability and transparency of charitable giving. 
Charitable giving requires proper statistics and research. 
Charitable giving needs to be treated seriously and with precision in official statistics and research. It is 
important that data on charitable giving is accessible and public. Otherwise it is hard to analyse and evaluate 
the true volume of donating and donors. We are recommending several amendments to the current system 
and suggesting that four distinct categories be identified: (1) volunteering time, (2) giving money regularly, (3) 
giving money as a single act or response to a call for help, and (4) giving things or services. 
We believe that these conclusions and following recommendations will advance charitable giving in Estonia and 
that charitable giving will become a custom valued and recognised by people, corporations and the society. 
It is vital to understand that charitable giving requires collective approach from the parties involved and is an 
opportunity to invest in the future and in the quality of life in the widest sense. 
The full report is available in Estonian at : http://www.praxis.ee/index.php?id=917 (raport) 
and for any comments, please contact Ms. Kristina Mänd Kristina.mand@praxis.ee or Ms. Külvi 
Noor kylvi.noor@praxis.ee at Praxis Center for Policy Studies, Estonia. 


Charitable giving: analysis and recommendations for Estonia

Preiherman, Yauheni

Kascjuhova, Valieryja, et al.

Belarus' Foreign Policy Index, April-May 2011

  
Azerbaijan Economy in 2010 
 
Comparative report by the CESD 
Center for Economic and Social Development (CESD),  
www.cesd.az  
According to government sources, last year Azerbaijan economy was noticeable for its 
decreasing trends of crisis. However, the amounts of international debts have 
increased, after 2008-2009 of deflation, there was significant increase in inflation rate. 
2010 was not favorable for agricultural sector as well. The production of agricultural 
goods decreased significantly last year compared the previous year. Analysis of State 
Statistics Committee indicates the GDP of Azerbaijan rose 5% in the eleven months of 
2010 and was more than 42 billion manat ($51 billion). We should remind that this 
number was 9% in 2009. 3,8 % GDP growth is forecasted for 2011 meanwhile Center 
for Economic and Social Development (CESD) forecasts 2,5 % (more about CESD 
forecasts, please visit; http://www.cesd.az/prognose.htm)  
However, the balance of payment was positively affected by increasing prices of 
exported goods, the recovering of ability of banks to bring credits from abroad, and 
foreign financial flows. In the 9 months of last year the surplus of current financial 
operations rose 69% compared to the same period of 2009 and reached to 12 billion 
USD. This allowed increasing the currency reserve of Azerbaijan by 9.7 billion USD. 
This number is equal to three year import of goods and services. In 2010 15.5 billion 
manats ($ 19,3 billion) were invested in  the economy. 
Main Economic Figures 
Activities Government Report   CESD Report   
GDP Growth    5,0 %  3,0 % 
Inflation Rate 5,7 % 9,6 % 
Monetary reserves $ 29 billion - 
State and private debt $ 9,5 billion - 
Foreign currency reserves 
share in GDP 
60,0 % 63,0 % 
The current account 
surplus 
$ 15  billion - 
FDI $19,3 billion - 
Poverty Line 9,1 % 14,5 % 
Source; State Statistics Committee of Azerbaijan Republic and Center for Economic 
and Social Development (CESD), 2011 
According to the Ministry of Economic Development, Azerbaijan produced 51 million 
metric tons of oil and 27 billion cubic meters of gas last year. On average, Azerbaijan’s 
economy grew by 17 percent each year between 2003 and 2010. During the report 
period, the real economy grew by 4 times, exports - 15 times, state budget - 15 times, 
investment costs - 96 times and strategic currency reserves - 31 times. In 2003-2010, 
the economic growth in Azerbaijan amounted to 17 percent. 
According to the Central Bank, Azerbaijan was able to maintain its stability and 
development dynamics during the global economic crisis. Thus, over the past three 
years, the real economic growth on average hit over 8 percent and macroeconomic and 
financial stability was maintained. In 2008-2010, the country's strategic currency 
reserves increased by $ 23 billion. Over the past three years the average annual growth 
in the bank assets exceeded 25 percent, and deposits - 20 percent. 
In 2010, the populations' deposits in banks increased by 23 percent and the growth rate 
of bank assets, loans and total capital exceeded 8 percent. About 2,435 mortgage 
loans, including 473 on concessional terms, were granted to people in 2010. Thus, 
6,200 families took the advantage of this opportunity. The current account surplus is 
expected to exceed $15 billion as of late 2010, resulting in a strategic currency reserves 
exceed $ 29 billion. 
The reserves cover the country's total debt for more than three times, including private 
sector debt and public debt, amounting to $9.5 billion, which has become one of the 
most important indicators of the macroeconomic stability of the country in the context of 
the crisis. Azerbaijan engaged in the trade with 145 countries in the 11 eleven months 
of 2010. The country's foreign trade turnover increased by 34.8 percent and amounted 
to $25.1 billion, and surplus -- $13.7 billion 
The official exchange rate is 0.7974 manat to $1 January 21, 2011 
For more information, please contact to Leyla Aliyeva at leyla.aliyeva@cesd.az  


Azerbaijan Economy in 2010

Popa, Ana

Simulation of economic impact of visa-free regime between Moldova and EU

Oprunenco, Alex

Gherghelegiu, Evelina

Investigation of transparency and economic efficiency in the use of the National Health Insurance Company\u2019s Funds

Prohni\u21bchi, Valeriu

Lupu\u219or, Adrian

Culiuc, Elena

Real Economy nr. 19