Six Western Balkans leaders endorse plan on regional economic area

Six Western Balkans leaders endorse plan on regional economic area
EU and Western Balkans leaders at the Western Balkans summit in Trieste.
By Valentina Dimitrievska in Skopje, Clare Nuttall in Bucharest July 13, 2017

The leaders of the six Western Balkans countries approved a multi-annual action plan (MAP) for a regional economic area in the Western Balkans at a summit in the Italian city of Trieste on July 12. The six leaders also signed a treaty to integrate their transport networks.

The plan envisages greater trade integration and mobility across the region, but it falls short of the common market discussed by regional leaders at an earlier summit in Sarajevo in March, and there was no mention of a regional customs union in the post-summit announcements. 

Instead, the MAP envisages measures that will help the private sector to place products on a market of some 20mn people — comprising the six Western Balkans states Albania, Bosnia & Herzegovina, Kosovo, Macedonia, Montenegro and Serbia — and the acceptance of a regional model of development.

Adoption of the MAP comes as trade within the region, which includes five countries that used to be part of a single state — Yugoslavia — has dwindled, EU Enlargement Commissioner Johannes Hahn pointed out. 

The Western Balkans regional economic area “will create a welcoming business environment, stimulate entrepreneurship, build a knowledge-based society, provide good quality jobs, and ensure competitive markets. I believe it has the power to transform,” Hahn told businesspeople in Trieste on July 12. 

However, he added that while trade between the Western Balkans and the EU has more than doubled in the last decade to reach €44bn in 2016, “By contrast, trade within the region has stagnated”. 

“There is a great untapped economic potential here, including your possibilities to create value chains with your neighbours who are close economically and physically. One of the main objectives of the Regional Economic Area is to remove those barriers that still exits to trade, business and investment between your countries,” Hahn said. 

“Individually, each actioned market is small. Together you represent almost 20mn people. With reform-oriented governments in office across the region we are at exactly the right time for a more business-driven approach. This is the regional economic approach for the Western Balkans, building on the ‘Berlin process’.” 

The signing of the MAP was also welcomed by the Regional Cooperation Council (RCC), which promotes regional cooperation and the European and Euro-Atlantic integration of Southeast Europe. 

“This will provide important impetus to the EU accession paths based on individual merits, speed up full compliance with the Copenhagen economic criteria and unleash greater economic potentials,” the RCC said in a statement.

“The MAP has been created to enable unobstructed flow of goods, services, capital and highly skilled labour, making the region more attractive for investment and commerce, accelerating convergence with the EU, thus bringing prosperity to Western Balkans citizens,” the RCC added. 

However, while the agreement covers a range of areas such as trade integration, introducing a dynamic regional investment space, facilitating regional mobility, and creating a digital integration programme, it falls well short of the common market previously envisaged. 

In the last few months, divisions have emerged between countries from the region on the desirability of a regional customs union, even though Hahn previously claimed it would create up to 80,000 jobs in a region plagued by extremely high levels of unemployment. 

The idea was pushed by Serbia’s then prime minister. now president, Aleksandar Vucic, back in February. At the time he stressed that the richer all countries in the region are “the better it will be for us”. Vucic said at the time that he had already discussed the idea with the prime ministers of Albania and Bosnia. 

There is a strong case for economic integration — or reintegration in the case of the former Yugoslavian countries. All the Western Balkans countries face the same challenges, such as weak economies and a prolonged transition period, and share the same goals, such as EU membership. Regional coexistence and collaboration are crucial for stability, since the countries are too small to develop economically except in partnership with their neighbours.

Despite this, lingering ethnic and political tensions in the region have ensured that pan-regional integration initiatives are relatively rare; the RCC is one of the few examples, although there are an increasing number of bilateral efforts. 

But the idea of a common market now seems to have fallen flat. One of the sceptics is Isa Mustafa, Kosovo’s acting prime minister. Mustafa wrote on his Facebook page that there would be little advantage for Kosovo to join a common market with fellow Western Balkan countries, saying that countries in the region do not reap equal benefits from joint trade. “We don't view this proposal with enthusiasm ... and we don't want past experiences under a new wrapper." Mustafa wrote in March. Montenegro is also understood to have some reservations. 

Moreover, there are fears among local politicians that a regional common market could serve to slow their progress towards EU accession by becoming a substitute for entry to the European common market, even though Hahn and other European officials have sought to allay such fears. 

There was also frustration from Brussels when domestic political rifts kept Bosnia from signing up to the transport community treaty endorsed by other countries from the region. 

#TransportCommunity Treaty: #BiH failed to sign due to domestic problems.Very discouraging signal for their further European perspective,” Hahn tweeted. 

Nonetheless, Brussels is set to extend more funding for transport projects in the region. Hahn said on the sidelines of the Trieste summit that the EU will finance the construction of a railway link alongside Corridor VIII to connect the Adriatic Sea in Albania and the Black Sea in Bulgaria via Macedonia, Macedonian news agency MIA said. In total, the EU will finance six transport corridors in the Western Balkans, including four motorways and two railway lines, Hahn told Deutsche Welle. 

The European Investment Bank (EIB) plans to provide an additional €3.5bn for infrastructure projects in the Western Balkans in the next three years, of which 50% will be aimed at Serbia, EIB regional representative for the Western Balkans Dubravka Negre told Serbian news agency Tanjug on July 12. The finance will be aimed at road and railway infrastructure projects.

Despite this, EU leaders struggled to reassure the six Western Balkans countries that accession is still in their future. 

All six countries from the region are keen to join the EU, and are at varying stages in the accession process — ranging from Montenegro which has most of its accession negotiation chapters already opened, to Kosovo which has been unable to apply for membership as five EU countries do not recognise it as an independent state. 

However, as the EU has focussed on other issues such as the migration crisis, the Greek debt crisis, and Brexit recently, the impetus for further expansion of the bloc has faded. This has led to a crisis in confidence in the region, with some politicians increasingly disinclined to make reforms and yield to persuasion from Brussels. 

In its closing statement, the summit’s host Italy stressed that accession still lay ahead for countries in the region. Prime Minister Paolo Gentiloni said that the EU must keep its doors open to membership for the six Western Balkan countries or risk allowing Russia and other global powers to increase their influence in the region.

Earlier, German Chancellor Angela Merkel, who has been one of the initiators of the Berlin process aimed at integrating the Western Balkans with the EU,  said it was the bloc’s duty to bring countries from the region "slowly but surely” towards accession. 

Regular summits bringing together the EU and aspiring members from the region will continue. The UK has agreed to host the EU-Western Balkans summit next year,  even though it is planning its own exit from the European Union.