Developing competitive economies in the Western Balkans in times of hardship

Impacts of the global economic crisis on the Western Balkans, but also new opportunities it may open in strengthening a long-term competitiveness of the region’s economies, was in focus of the Regional Cooperation Council (RCC) organized conference Western Balkans in 2020 – Overcoming the Economic Crisis and Developing Competitive Economies, held in Sarajevo on 24-25 February 2010.

The event, which marked the second anniversary of the RCC establishment, gathered leading economic experts from the EU and the region, in an effort to contribute to the region emerging from the crisis and, in the long run, achieving steady economic development.

The European Commission (EC) and European financial institutions presented a joint project aimed at channeling grants and loans for the Western Balkans countries through a single structure, the Western Balkans Investment Framework (WBIF), to help better use of funds.

It is believed that the move could help the countries of the Western Balkans see the end of the tunnel as most of them are severely affected by the economic crisis.

The WBIF was officially launched in December 2009 in Brussels. The aim is to pool and coordinate different sources of finance and leverage loans with grants for priority projects in Albania, Bosnia and Herzegovina, Croatia, The Former Yugoslav Republic of Macedonia, UNMIK/Kosovo, Montenegro and Serbia.

Experts agree that the RCC could play an important role in the process, offering the countries its expertise and serving as a platform for exchange of ideas.

“Instead of going one by one, we are going together to have more forceful support for the key investments“, Yngve Engstroem, head of an EC regional programmes unit, said.

The countries are now expected to come up with concrete projects, and the WBIF concept encourages them to develop cross-country ones.

“It is absolutely an opportunity for regional projects because doing it together for the whole region at the same time will help to focus on big projects“, Engstroem said.

“The Regional Cooperation Council gives good contribution to the process of policy cooperation“, he underlined.

Economic experts of the RCC Secretariat also point out to a need for the countries in the region to join forces.

“Many of the problems affecting our region are common, and the solutions to these problems often lie in closer regional cooperation”, RCC Secretariat's economic expert Sanjin Arifagic said.

“The RCC, in its advisory role to the WBIF, will make sure that the available synergies are harvested to their maximum potential, to result in a coherent regional approach”, he underlined.

The projects financed through the WBIF are to focus at the beginning on regional networks in transport, railways, highways, electricity networks and regional environmental issues. The focus will later on be expanded to include support to small and medium-sized enterprises (SMEs), energy efficiency and other investment sectors.

The WBIF steering committee decided at the end of the last year to allocate 26 million Euro of grants for technical assistance support to 26 projects across the region in various sectors.

The European Commission has so far allocated some €110 million to support the financing of municipal infrastructure projects and technical assistance projects in the region. The European Investment Bank (EIB), the European Bank for Reconstruction and Development (EBRD) and the Council of Europe Development Bank (CEB) have each pledged €10 million for technical assistance or other grant support.

EU Member States and other donors are also invited to make grant contributions.

The projects are expected to attract EUR 2.2 billion of loans from international financial institutions.

“The crisis has dealt a severe blow to growth and to external performance because the exports have gone down very much“, said Vladimir Gligorov, an economist of The Vienna Institute for International Economic Studies.

“In the medium term, let us say next two or three years, most forecast do not see a return to the growth rates that the region was experiencing in the period 2000-2009,“ he said.  

Gligorov predicted that “financial flows are probably going to be much more cautious or constrained then they were before“. “There has to be more reliance on regional economic cooperation [...] and regional cooperation can actually play a role in this respect”.

Vlastimir Matejić, a professor with the Belgrade-based European Centre for Peace and Development, stressed that the regional countries are currently in the zone of “worrisome non-competitiveness”.

The key policies the countries should implement as a short term action include “re-industrialisation, as the current economic system is infeasible to be competitive”.

“In a long term, in the next 20 years, the main goal should be the transition of the countries’ economies to the zone of fair competitiveness”, he added.

As prerequisites for achieving that goal, Matejić named the specialisation through regional economic cooperation, regional innovation projects and high quality education.

Giulio Moreno, head of the EBRD office in Bosnia and Herzegovina, saw also positive effects of the crisis in the region.

“Crisis also demonstrated resilience of the countries, positive impact of financial, political and institutional integration”, he said.

He stressed that the region has certain advantages over the other parts of Europe, notably skilled but low-cost labour force, natural resources and energy.

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