Closeness to the EU explains the difference in the agglomeration dynamics observed between Central and Eastern European (CEE) countries and the Eurasian countries. After the overthrow of their socialist regimes in 1989–90, most CEE countries rapidly adopted market-based economic systems and redirected their political and economic relations toward the EU. One of the main benefits of the EU enlargement has been the boost in economic activity in both accession countries and member states. Eurasian countries, at the other end of the former communist empire, were exposed to weaker global trade flows. Russia remained the major trading partner for Central Asia, the South Caucasus, and other CIS countries, confining their exposure to the market forces of agglomeration, migration, and specialization to a Russiacentric bloc (Broadman 2005; World Bank 2009a).

All capitals and leading cities of Eurasia attracted labor-intensive economic activities, but countries closer to the EU experienced the emergence of specialized urban centers along the border region. Cieślik (2004), looking at the difference in the attractiveness for foreign direct investment (FDI) of various Polish regions, found that regions bordering Belarus, Russia, and Ukraine were less attractive than regions along the European Union-15 (EU15) border of Poland. And Traistaru, Nijkamp, and Longhi (2003) found similar results for the geographic concentration of manufacturing in Bulgaria, Estonia, Hungary, Romania, and Slovenia. They found that other things equal, industries with large economies of scale tended to locate close to large urban centers while research-oriented industries were attracted by regions closer to the EU15. Using regional data for 1996–2000, Brülhart and Koenig-Soubeyran (2006) also found similar results in their analysis of the structures of wage and employment within the Czech Republic, Hungary, Poland, the Slovak Republic, and Slovenia.

Entrepreneurs prefer to concentrate production when their activities generate increasing returns to scale. By contrast, public policy in Eurasia is still concerned with spatial equity, even after the breakup of the Soviet Union (World Bank 2009b). The same concern is expressed in Kazakhstan, as reflected in the country’s territorial development strategy. Most Eurasian countries have designed or are thinking about designing national strategies to facilitate the adoption and coordination of policies for regional and spatial development. Looking ahead, policymakers need to promote the changes that will make Eurasian cities the main drivers of growth in their countries. For this, they need to promote the policies that can unleash the positive externalities of agglomeration economies while containing negative externalities such as congestion and pollution.

# **_New realities of migration_**

The early years of transition saw high levels of cross-border migration, as populations previously unable to move because of Soviet restrictions relocated to their ethnic or cultural homelands (Mansoor and Quillin 2006). These flows emerged simultaneously with refugee movements resulting from erupting civil and transborder conflicts among the region’s newly emergent countries. As conflicts abated and economic reforms took root, economic motivations became the main driver of migration in Eurasia. The result of these trends has been a broad biaxial pattern of migration among the transition economies, with one axis from the western part of the region to the EU and another from the southern to the northern countries of Eurasia. Although most migrants from the poorer Eurasian countries traveled to middle-income Eurasian countries, many also moved west, toward the EU and Turkey, seeking higher earnings. A number of Eurasian migrants spent time in CEE countries or Turkey, hoping to move to Western Europe.

The collapse of the Soviet Union provoked a large-scale repatriation, the most massive of which was that of Russians (table 1.2). Between 1990 and 1994, 1.7 million Russians residing in non-Slavic republics— 14 percent of the total Russian population in those areas—moved to Russia. The numbers moving from areas of armed conflicts were substantially higher: 42 percent of Russian residents left Tajikistan and 37 percent left the Trans-Caucasian countries. Repatriations became the norm in the former Soviet Union and were not limited to Russians. In the early 1990s all titular nationalities began to leave Russia for their homelands, though this pattern shifted again in 1993 and 1994.

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