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Stability Pact for South Eastern Europe
Round Table on Regional Cooperation in SEE
INVESTMENT OPPORTUNITIES IN THE
SOUTH EASTERN EUROPE
Belgrade
3rd October, 2005
Most promising market in Europe
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SEE cover an area about the size of Germany and
Italy combined
Population (55 million) comparable to Italy or CEB
countries
Dynamic growth, regional integration, as well as
integration into the EU, accelerate catching-up
process with the EU and CEB countries
1990s as lost decade, first decade of 21st century
could become a decade of SEE
Potentially, the most promising market in Europe political stability, faster economic reforms, improved
legal framework and greater legal security being
crucial prerequisites in the medium-term
SEE integrating into the EU
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Accession to the EU high on the agenda of
8 SEE countries
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Bulgaria and Romania expected to accede in
2007 or 2008
5 Western Balkan countries in SAP concluded or
negotiating SAA
Moldova – part of the EU “Wider Europe”
initiative
EU and the Balkans
Stabilization and Association Process presents a long
term policy of EU towards this region aiming to:
 Support structural reforms of these countries in
order to prepare them for EU membership,
 Strengthen the stability in the region through the
association process,
 Putting emphasis is on trade policy harmonization,
improved border management and administrative
capacity building,
 Signing of the Stabilization and Association
Agreement.
Stabilization and Association Agreement
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Stabilization and Association Agreement is
modified according to the specific conditions of
each Western Balkans country.
The country which signs the SAA is being
recognized as a potential EU candidate.
SAAs have to be ratified by the country in
question, the EU and all of its member states.
The aims of the SAA:
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Political stabilization
Development of regional cooperation
Establishing closer links and dialog with WB countries.
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With the entry of 10 new members in the EU
in 2004, the agenda for the next round of
enlargement focuses on candidates from
South Eastern Europe.
SEE countries - relations with EU
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Romania – candidate for membership.
Bulgaria – candidate for membership.
Croatia – candidate for membership.
Macedonia – submitted the candidature.
Albania – negotiations on SAA.
Bosnia and Herzegovina – Feasibility study.
Serbia and Montenegro – Feasibility study
(negotiations on SAA – scheduled for 5. October).
Moldova – Partnership and Cooperation
Agreement.
Regional organizations/initiatives in
SEE
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SEECP - South East Europe Cooperation Process
Stability Pact for South Eastern Europe
SECI - South East Europe Cooperation Initiative
BSEC - Black Sea Economic Cooperation
CEI - Central European Initiative
AII - Adriatic – Ionian Initiative
DCP - Danube Cooperation Process
CEFTA - Central European Free Trade Area
General characteristics of regional
initiatives
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Main goal: regional cooperation and EU integration.
Need for building up "regional perspective" during preaccession period .
Developing regional ownership – mobilizing initiatives
coming from the region – needed regional leadership.
Positive influence.
Insufficient coordination.
Overlap of initiatives.
Lack of financial resources.
Wide range of activities.
Top down character.
South Eastern Europe
Slovenia
Italy
Hungary
Romania
Croatia
Bosnia and
Herzegovina Serbia and
Montenegro
FYRM
Albania
Greece
Western Balkans
Bulgaria
Business environment
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Macroeconomic stability sustained
Early transition phase completed
Structural changes initiated
Private sector accounts about 62% of GDP in
SEE – vibrant source of growth and employment
Privatization is well advanced
Labor costs well below those in CEB
Initiated institutional reforms critical for private
sector development, integration into the EU and
long-term prosperity
Growing business opportunities
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Robust growth
Economic and political stability is returning
Considerable foreign investment inflow
Continuing improvement of business climate
Increased access to trade, domestic finance and
foreign investment – expanding opportunities
International community important catalyst for
other investors through selected assistance
Private sector in SEE – engine of growth
SEE economic forecast for 2005
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GDP growth remains strong - the average
rate of seven SEE countries is expected to
be around 5%.
Domestic demand remains the main engine
of economic growth in the region.
Foreign demand is weak and the growth of
exports will be slower in 2005, compared to
the previous year.
SEE economic forecast for 2005
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In 2005 the current account balances will improve,
especially in those economies where CA deficits
are the highest (Bosnia-Herzegovina and Serbia
and Montenegro).
Slight improvement is expected in most SEE
countries regarding the unemployment rate due to
the strong economic growth and new investments
by foreign investors.
But, progress in privatization process may have a
dampening effect on the employment in these
countries.
General characteristics of SEE
economy
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Insufficient harmonization with the European
standards.
High share of black economy.
Inadequate competitiveness.
Lack of working capital and credit support.
Unsatisfactory infrastructure.
Problem regarding trade balances and budgets.
Corruption and criminal.
Small economies.
Slow pace of reforms.
High unemployment.
Brain drain – emigration of young and qualified
Foreign support and investments needed
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Further recovery and growth largely depend on
foreign financial inflows and know-how
Cumulative net FDI to the region about US$ 32
billion in 1989-2003 (US$ 125 billion in CEB)
450 multinational companies in the region (of
which 50% are present in more than one SEE
country
Over 550.000 jobs
The Regional Network of Foreign Investors
Councils in SEE
Trade cooperation in the SEE
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Small share of mutual trade in the overall
trade with the world.
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Average 13%, varies from 10 – 20%.
High percentage of trade with EU.
Average from 50 – 80%
 Italy and Germany dominate.
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Main barriers for doing business in SEE
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Starting up is still costly and time consuming
Ineffective implementation of regulations
Corruption and red type
Underdeveloped financial intermediation and
lack of access to sources of finance
Restrictive and poor quality labor legislation
Size of informal sector
Why to invest in the Balkans?
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Low cost area (labor costs, taxes)
High profits
Low competition
Preferential trade regime with the EU
Growing bilateral and multilateral
cooperation in the region (FTA, Regional
Energy Market, REBIS)
Trade
Liberalization
Trade Liberalization
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Network of 29 bilateral Free
Trade Agreements (8
countries).
Serbia is in the middle of the
SEE Free Trade Area – duty
free access to a market of 60
mill people.
Serbia and Montenegro is the
only country outside the CIS
that has an FTA with the
Russian Federation – market
of 150 million people.
Identification and elimination
of non-tariff barriers.
Establishment of a multilateral
free trade agreement.
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Commonwealth of the Independent States
Crossroads of 2 Pan-European
Transportation Corridors