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In a free market system, private producers and consumers, rather than the state, determine where investments will be made, what will be produced, what the level of wages and salaries will be, and how much products will cost.
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Transition economies are economies moving from central planning to a free-market system. Specifically, the term refers to Russia and other member countries of the former Soviet Union, as well as to the formerly centrally planned economies of Eastern and Central Europe.
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Developing countries are countries with relatively low per capita income, a relatively high dependence on agriculture, and relatively undeveloped financial sectors. They usually lack sufficient national income or domestic private capital to finance the investment required to reach modern industrial statehood. In the early stages of development these countries usually look to concessional financing, including from multilateral lending institutions for finance. As they become more economically self-sufficient they become more able to tap the international capital markets for loans or finance further development domestically.
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