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IBNA OP-ED/Regional economic area of the Western Balkans

IBNA OP-ED/Regional economic area of the Western Balkans
By Fatmir Besimi*

In the wake of the Berlin Process, the Fourth Summit for the Western Balkans was held on 12 July in Trieste, where the Regional Economic Zone of the Western Balkans was also promoted and this was the reason why last weekend I analyzed some documents and economic statistics for the region. I found some issues to be underlined: [1] Regional Economic Area of the Western Balkans is an initiative of the countries from the region which enjoys full support of the European Commission. [2] This initiative should not be taken as a substitute for the European integration of the region, on the contrary, it should accelerate this process. [3] The purpose of this initiative is to make the region more attractive for investments, both domestic and foreign direct investments by presenting a market of about 20 million people, which further is supposed to accelerate economic growth and creating new jobs. [4] The dynamics of implementation will depend on the countries of the region, and a multi-annual action plan adopted that foresees activities for the period 2017-2020 (with some activities going on until 2023). [5] The Regional Economic Area includes four dimensions: trade, investment, mobility and digital dimension. In terms of advancing the free trade of goods and services, advancement of CEFTA protocols will be conducted. In the context of attracting investment, a common regional agenda will be approved. The free movement of professionals, students, scientists and academics will be affirmed. Meanwhile, digitization will include roaming, internet, cyber security and data protection. [6] Regional co-operation will be advanced through the European Commission's 'Connectivity Agenda' for the Western Balkans for the modernization of transport and energy infrastructure. [7] The Chambers of Commerce of the countries of the region established the Joint Secretariat which should help the Regional Economic Area be a concrete opportunity for regional business.

To highlight the importance of economic integration and to recall the current economic situation of the Western Balkans, we shul consider some relevant economic indicators as follows: [1] Gross domestic product per capita reaches 35% of the EU average and the dynamics of economic convergence has slowed down in the years following the global crisis of 2007-2009. [2] Real GDP growth in the Western Balkans in 2016 is estimated at about 2.8%, while in the EU is around 1.9%. Unemployment in the same year is estimated at about 20% in the Western Balkans, while in the EU it is 8-9%. [3] Macroeconomic stability has been preserved, but in the post-crisis years it has been challenged by increased budget deficits and the public debts of the countries of the regjion. At the regional level the average budget deficit in post-crisis years was up to 4% compared to 1% of GDP in the pre-crisis period, while the public debt also increased from 35% to about 50% of GDP. [4] The countries in the region are mainly with low competitive in the global market, with average export reaching around 40% of GDP in the world market, while about 60-70% of total exports are realized in the European market and around 10% among countries in the Western Balkans. The region continues to show external account deficit (balance of payments) at about 10-12% of GDP, which also reflects the low level of productivity compared to EU countries (the trade deficit is even higher if we consider that foreign direct investment accounts for about 5% of GDP in 2016). [5] Structural reforms are stagnating in recent years which is interlinked with the slowed down the European integration process in the Western Balkans after the global economic crisis and the rise of euro-skepticism in some EU countries as well as the rise of populism and nationalism in the countries of the region.

Part of the above-mentioned list of economic challenges with no doubt will be liste the challenges of the politicial and the geostrategic relevance, such as: [1] Preserving security and peace in the region; [2] Democratization of societies and preservation of political stability; [3] Interethnic reconciliation and respect for cultural diversity; [4] Solving open disputes and good neighborhood relations; and [5] Euro-Atlantic integration and global geostrategic developments (since the awaken Eastern interest for the region).

Given the above mentioned challenges, the Regional Economic Area and European Integration of the Western Balkans should ensure convergence (catching-up) with the living standard and quality of life to that of the EU countries. Viewed in macroeconomic terms, this will be achieved by: [1] Faster and inclusive economic growth; [2] Raising the competitiveness of the regional economy; [3] Increased domestic and foreign direct investment; and [4] Improvement of the external balance, namely the reduction of trade and balance of payments deficit.

As we said above, it turns out that the success of the economic integration will directly depend on: [1] Political will and commitment of the countries of the region. (It should be a 'win-win game’ and there should be mutual solidarity between the Western Balkan countries.) [2] European Union's political and financial support. (This will also increase the interest of regional cooperation.) [3] Progress in Euro-Atlantic Integration. (This will increase the credibility of regional integration initiatives).

In conclusion, I would add to what we repeatedly say: the Euro-Atlantic perspective and regional cooperation are a guarantee of peace and prosperity in the Western Balkans. I recall that in the name of this all countries and nations of the region should give their effort, not in just declarative, but with concrete dedication!

*The author was deputy Prime Minister for European Integration and this opinion was written for IBNA

**Note: The views expressed in this article are the author's own and do not necessarily reflect IBNA’s editorial policy

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