ABSTRACT
The method, particularly at the preparatory stage, requires collaboration or four institutions, namely the Central Plan Bureau (CPB), establishments, policy making body and fiscal and monetary institutions. Policy making body, on the basis of alternative scenarios worked out by CPB, determines exchange rate, level of tariff protection, average wage rate considering the consequences of alternative scenarios in terms of shutdown plants, lost jobs and incomes, and external borrowing requirements. At the preparatory stage fiscal and monetary institutions and schemes required in a market economy should be introduced and be in place before implementation under the method starts. Limited number of establishments in the former socialist countries is mostly public enterprises which enables the method to work. The methods use international prices, adjusted for transport and customs tariff. Hence export prices are fob and import prices are cif, plus/minus local transport charges and customs tariffs applicable to get ex-factory or ex-warehouse prices.
