FRIEDRICH-EBERT-STIFTUNG – A NEW GROWTH MODEL IN EU-CEE 4 SWOT This chapter attempts to bring together the various themes introduced in Chapter 3 into a SWOT analysis to serve as a basis for the policy proposals in Chapter 5. Here, we at­tempt to address both EU-CEE at large while acknowledg­ing the major country differences and individual exceptions. A key takeaway from Chapter 3 is that we often cannot treat the EU-CEE region as a monolith. All general state­ments in this section should be understood as generally ap­plicable to most or all of EU-CEE. Where clear differences or exceptions exist, these will be explicitly mentioned. 4.1 STRENGTHS High level of income convergence with Western Eu­rope and broad-based stability by CESEE standards: As the introduction to this paper showed, the growth mod­el pursued in EU-CEE over the past decades has deficien­cies. Nevertheless, looked at from the Western Balkans or the non-Baltic Former Soviet Union, it looks like at least a partial success. Most EU-CEE countries have achieved a rel­atively high level of per capita income convergence with Western Europe(much of EU-CEE is now wealthier than Greece and Portugal), have quite good(largely EU-financed) public infrastructure, access to a large share of the EU budget relative to their GDP, various other advantages con­ferred by EU membership, and are generally situated quite close to the EU’s wealthiest countries. They have achieved this with some low levels of income inequality. 51 EU-CEE’s broader integration into Euro-Atlantic institutions has con­ferred a high degree of stability in domestic and interna­tional politics that would also be the envy of most other parts of CESEE. Sophisticated and high value export sector: The Viseg­rád countries and increasingly Romania have converged in terms of their export structure with Western Europe, in­cluding in high-tech industries. Their export basket is so­phisticated and includes automotives and electronics. High value FDI from Western Europe has improved production technology and driven knowledge transfer. The region has retained its attractiveness as a destination for FDI since the global financial crisis. Certain functional comparative advantages: Apart from the generally successful case of Slovenia, the key strength in terms of functional specialisation that we identify is in the pharmaceutical industry. Here, especially the Czech Republic and Poland are functionally specialised in post-production services, and the former also in R&D. Although otherwise very limited outside of production, both Croatia have Latvia have functional comparative advantages in sales, logistics, and support services. Meanwhile, Romania and Latvia have relatively high results in the value chain production function for R&D activities. Environmental progress: EU-CEE as a whole has man­aged to significantly increase energy efficiency since 1990 and made significant progress towards lowering emissions. In energy production, we identify clear progress in the Baltic States, Slovenia, and Croatia, for whom renewables amount­ed to almost 28 percent of the final energy consumption and about 35 percent of all electricity generation in 2018. Quality of workforce: The Czech Republic and Estonia in particular have a high quality workforce, with Poland, Slo­vakia, and Slovenia not far behind. Estonia, Poland, Slove­nia, and the Czech Republic have PISA scores for maths and science above the OECD average, while Latvia also does in maths. Slovenia and Poland have a share of tertiary gradu­ates in science and technology above the EU average. Digital economy: Estonia is a frontrunner, not only in EU­CEE but in the whole of the EU, as evidenced by its large ICT sector, the high share of ICT specialists employed, and extensive digital public services. Latvia, Hungary, and Ro­mania are also among the top eleven in the EU for digital infrastructure, while Latvia and Lithuania are strong in dig­ital public services. Croatia and Estonia score highly in the whole EU for above basic ICT skills of young people. 4.2 WEAKNESSES 51 There are various important caveats to this statement. Income inequality is rather higher in some parts of EU-CEE, such as the Baltics, Bulgaria, and Romania. Despite generally low inequality in the Visegrád countries, certain minority groups(e.g. the Roma) are affected by deprivation. Shrinking working-age populations: EU-CEE is in the midst of a decline in its working-age population that is un­precedented in peacetime. Despite high immigration in re­48