Jonathan Scheele
Some 140 participants attended the First SE Europe Ministerial Conference jointly organised, on 14 February, by the International Business and Development Exchange (IBDE) and SEESOX, at Europe House, Smith Square, London SW1. Key speakers included: Mimoza Kusari-Lila, Deputy PM of Kosovo, Majlinda Bregu, Albania’s EU Integration Minister, Alexandar Pejovic, Montenegro’s Chief Accession Negotiator, Alain Bregant of the Bled Strategic Forum, Oleg Levitin, Senior Political Advisor at the EBRD, Rudi Guraziu CEO of IBDE, and David Madden, Jonathan Scheele and Max Watson from SEESOX.
The conference was divided into two sessions, the first on the challenges of political reform and regional cooperation, and the second on progress on economic reform. Inevitably, these two areas are not independent and the discussion switched between the two throughout the afternoon. As well as the main speakers, there were also some challenging questions raised from the floor.
We heard a strong statement from Majlinda Bregu on the critical need for the “European perspective” (i.e. the prospect of EU accession) to remain clear for would-be members, but also for mutual respect between all countries in the region. It was time for a common sense of identity to be promoted, not the reopening of old wounds, whether in the dialogue between Belgrade and Pristina or elsewhere in the region. She stressed the importance of all political actors sharing a common vision and not undermining a country’s case through domestic quarrels. Reform was necessary for the good of the country, not just for accession. But the EU also needed to shed its fears of enlargement, if the momentum of the reform process was to be maintained, and avoid any perception of double standards.
Alexandar Pejovic underlined the value of the negotiation process itself, and its focus on rule of law issues, as a support for FDI. The negotiations were a welcome opportunity to deal with long-standing problems. Regional cooperation seemed to be working fine in theory, but there was still far too little real sense of dialogue and sharing of experience between the different countries.
Oleg Levitin questioned whether the issue was one of a lack of discussion at the regional level or rather its failure to lead to the implementation of joint projects; this was certainly a problem seen from the EBRD perspective. He had few concerns about “integration fatigue” among the countries of the region, providing the momentum of the accession perspective could be maintained; in Serbia support for EU accession would certainly rise once negotiations were actually opened. There was little real alternative to EU accession for Serbia; indeed 43% would vote for accession even today. Declarations by politicians in the region should not be confused with what they actually did; there was very strong public identification with Europe throughout the region.
The subsequent Q & A saw potential investors in the region questioning how far accession to the EU for these countries would actually benefit the EU, as well as asking about specific measures needed to support development. In response, it was pointed out that regional cooperation would only improve if a series of measures could be taken, covering transport infrastructure, common border management, visa free travel within the region and joint environmental measures. The benefits of reform in the Western Balkans were seen as going well beyond the region to the EU as a whole; conflict in the region in the 1990s had been a problem for all of Europe and reform and stability was thus a common benefit. As was pointed out, we had seen what happened without the glue to hold countries together in other parts of Europe. In response to another question about the value of the concept of SE Europe as a whole, it was recognised that each country had to be seen on its own merits, but that this did not undermine the case for consideration of the region as a whole, given the huge number of interconnections between the countries and the potential that greater regional integration represented.
In the second session, Mimoza Kusari-Lila focused on the economic implications of accession. For Kosovo, politics had from the start of the process tended to come ahead of economic considerations, so that post-was reconstruction had been consumption-led, with the EU as the biggest donor by far, even if the status issue meant that it was, in some ways a “pale” presence on the ground. The very liberal approach followed under UN administration meant that Kosovo had a major trade deficit within CEFTA; and Croatia, for example, had maintained far more restrictions on trade. Kosovo was carrying out reforms and was moving up in the “doing business” ratings, but the lack of visa liberalisation into the Schengen states remained a real handicap. Removal of red tape was also key, since it also reduced the “space for corruption” that was so damaging to both business and the potential for foreign investment. She called on potential investors to “look beyond their prejudices”; “we have to be trusted, not judged for every act”.
Alain Bregant stressed the importance of the EU’s maintaining the same approach to all candidates; the bar should not be set ever higher each time. Equally, there should be perceptible progress with all the countries of the region; Croatia was an important step, but only one. The process would only be complete once all of the countries of the region, together with Turkey, had joined. At the same time, the EU should give an appropriate push when one or other of the candidates stumbled. Political support for enlargement was an issue not only among the candidate countries but also within the EU; there was need to ensure appropriate political-level attention for the process within the EU.
Max Watson recognised the intertwined nature in the region of economic convergence and political reconciliation. Economic convergence offered an alternative to nationalism and rent-seeking behaviour of elites. But the credibility of the economic strand had been weakened during the crisis. To counter this, a more targeted set of structural reforms is needed; though the exact make-up of these reforms varies between countries, there are common threads, such as a deficient business environment, a skills gap, and key infrastructure shortages. Alongside this, regional networks and linkages need to be strengthened; cooperation between central banks in the region is beginning to work well and should be emulated in other areas. Finally, the importance of maintaining high level political engagement in the EU will remain critical for future progress.
Jonathan Scheele focused on how best the EU could support a reform process that, if in the end it is to be successful, needed to be “owned” at domestic level in each country. Investment decisions depended on a number of factors, but the credibility of the accession perspective was very important. Alongside this, the reality of regional integration, between markets that were individually relatively insignificant, was critical to such decisions. Similarly, transport cooperation in the region needed to go beyond merely ensuring physical infrastructure links to permit the development of integrated systems. He also underlined the need for tailor-made approaches to each country, while pointing out however that the failure of individual countries to carry through the necessary reforms also impacted negatively on the prospects of its neighbours. IN that sense, the concept of SE Europe was real and meaningful.
In the Q & A, one questioner wondered whether it was not better to allow the SEE countries to find their own markets, while another asked how the SEE countries might be able to tap into the benefits of a future US-EU FTA. A further question looked at how the region might market itself collectively. The importance of a consistent strategic approach to infrastructure development was also highlighted. In response, mention was made of the need to ensure that, with rising standards among the candidate countries, the situation in existing EU member states shouldn’t be neglected. It was also pointed out that, although growth in the region was slowing, it was still averaging ¾% per annum; it was important to focus also on the good news coming from the region, not just the bad. In conclusion, panellists were asked what they felt were the three fundamental things governments in the region needed to focus on to facilitate integration. Ideas that came up included: actually implementing a strategic approach to regional cooperation; transparent and credible judicial systems; maintaining a consistent reform strategy within governments and between successive ones; building the skills of the labour force; and enhancing infrastructure linkages.
In summary, this conference was a useful opportunity to introduce the London private investment community to the challenges of reform in the region in a way that, while avoiding minimising the real difficulties, also demonstrated the positive potential of the region. It was in addition an opportunity to show that work done here in SEESOX is firmly based on the economic realities of the region.
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