The Berlin Wall 20 years on: Akopian's view

The fall of the Berlin Wall 20 years ago marked the end of the crude and utopian communist experiment that divided Europe for over four decades, says Hexam's Marina Akopian.

Both Central Europe and the new Russia, soon after 1989, began building market economies through mass privatisations. The newborn domestic equity markets were attempting to define the value of the once state-owned enterprises.

Hungary, Poland, the Czech Republic, and Russia became known as the European Emerging markets. Shrewd investors sensing opportunities, in the countries with highly educated and skilled work force, began hunt for bargains.

In 1989 Hungary, for example, had about 40 listed companies and its total market capitalization was some $116m - about 0.5% of GDP. The stock market was open infrequently with most shares traded over the counter.

How times change. As defined by the BUX Index, the market capitalisation of the Hungary's listed stocks now stands at some $13.5bn or 11% of the country's GDP. Hungary is arguably one of the most efficient stock markets in the emerging markets' universe in terms of analyst coverage and the availability of information.

Since the inception of MSCI Russia, MSCI Hungary and MSCI Czech Republic in 1995 to the end of October 2009, the indices are up 945%, 913% and 607% in dollar terms respectively. Emerging Europe has left emerging Asia firmly behind. A great achievement. But only a few comprehend the immense successes that the former Soviet countries have accomplished in such a short time period.

The scale of the privatization task was enormous. To compare, in 1985 the state-controlled sector in the UK was around 11%, while in Poland the figure was 82%, in Russia 100% and in Czechoslovakia 97%.

Thatcher's Britain in the 1980s looked astounding to the rest of the world with its privatization achievements. It took eleven years for the British government to privatise 20 major companies, which accounted for about 5% of the UK GDP. Central Europe and Russia had to privatise tens of thousands of major companies, accounting for the vast bulk of GDP.

But that is now history, as much as the Berlin Wall is. The nations of Central Europe and Russia can celebrate this year and be proud both of their victory for freedom, the achievement of phenomenal economic transformation and a legacy of ambition and work ethic that many developed markets have long forgotten.

I was in Central Europe then. I have lived in the UK over the last decade. Britain is now my home. I fear for the future of my country. The fall of the Berlin wall was not a miracle. It was a result of social and economic momentum. The momentum for change that is missing in the UK and many other developed countries.

The Berlin Wall has many messages. For me one is pertinent. The economic change cannot occur without a social change or a change in perceptions. The key obstacle to social change is inability to reflect on other countries' models and successes.

Marina Akopian is a partner of Hexam Capital.