From Stabilisation to Integration: The Stability Pact for South Eastern Europe. Vol. 1 Articles, Vol. 2 Documents 9783205790327, 9783205782667

Citation preview

E r h a r d Buse k · Björn Kühne (Eds.)

From Stabilisation to Integration The Stability Pact for South Eastern Europe

Vol. 1 – Essays

Böhlau Verlag Wien · Köln · Weimar

This publication has been produced with the financial assistance of the European Union. The contents of this publication are the sole responsibility of the Special Co-ordinator of the Stability Pact for South Eastern Europe and the contributing authors respectively and can in no way be taken to reflect the views of the European Union. The content of the individual articles do not necessarily reflect the views of the editors.

Bibliografische Information der Deutschen Nationalbibliothek : Die Deutsche Nationalbibliothek verzeichnet diese Publikation in der Deutschen Nationalbibliografie ; detaillierte bibliografische Daten sind im Internet über http ://dnb.d-nb.de abrufbar.

ISBN 978-3-205-78266-7 Das Werk ist urheberrechtlich geschützt. Die dadurch begründeten Rechte, insbesondere die der Übersetzung, des Nachdruckes, der Entnahme von Abbildungen, der Funksendung, der Wiedergabe auf fotomechanischem oder ähnlichem Wege, der Wiedergabe im Internet und der Speicherung in Datenverarbeitungsanlagen, bleiben, auch bei nur auszugsweiser Verwertung, vorbehalten. © 2010 by Böhlau Verlag Ges.m.b.H. und Co.KG, Wien · Köln · Weimar http ://www.boehlau.at http ://www.boehlau.de Gedruckt auf umweltfreundlichem, chlor- und säurefrei gebleichtem Papier Druck : General Druckerei, Szeged

Contents



Contents

List of Abbreviations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9

Erhard Busek · Björn Kühne : Note from the Editor . . . . . . . . . . . . . . 11 Olli Rehn, European Commissioner for Enlargement : Foreword . . . . . . . . . . 13

. Introduction 1.1 Gregor W. Koessler : Adapting to a Changing Environment in South Eastern Europe — the different phases and functions of the Stability Pact . . . . . . . 17 1.2 Alessandro Rotta · Mike Mozur : Regional Co-operation in the context of European and Euro-Atlantic Integration . . . . . . . . . . . . . . . . . . . 23

. Working Table I — Democratisation and Human Rights in South Eastern Europe 2.1 Florian Biber : The challenges of Democratisation and Human Rights — 1998 to 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 2.2 Srdjan Cvijic : A bottom-up approach to democratisation : the role of the Stability Pact for South Eastern Europe in strengthening local democracies and enhancing cross-border co-operation in the Balkans . . . . . . . . . . . . 45 2.3 Yasha Lange : Media development in South Eastern Europe . . . . . . . . . . 59 2.4 Sonja Lokar : The shift in international actors’ approach to the situation of women in conflict and post-conflict regions 1999–2008 : The case of the Balkan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 2.5 Petra Bläss · Talia Boati : Parliamentary Co-operation in the framework of the Stability Pact for South Eastern Europe . . . . . . . . . . . . . . . . . . . 75



Contents

2.6 Anton Dobart : Education in South Eastern Europe : from assistance to co-operation — from the Task Force Education and Youth to the Task Force Fostering and Building Human Capital . . . . . . . . . . . . . . . . . . . . . 87

. Working Table II — Economic Reconstruction, Co-operation and Development 3.1 Peter Sanfey : Economic development in South Eastern Europe . . . . . . . . . 97 3.2 Bernard Snoy with contributions by Oswald Hutter : The development of regional infrastructure in South Eastern Europe . . . . . . . . . . . . . . . . 107 3.3 Renaud van der Elst : Creating a Regional Energy Market . . . . . . . . . . . . 117 3.4 Mary O’Mahony : Increasing Investment and Trade in South Eastern Europe — a regional approach . . . . . . . . . . . . . . . . . . . . . . . . . 127 3.5 Mary O’Mahony : The Stability Pact Trade Working Group and the evolution of trade liberalisation in South Eastern Europe . . . . . . . . . . . . . . . . . 137 3.6 Aleksandra Rakovic : Electronic South Eastern Europe — eSEE — a not so easy challenge for South Eastern Europe . . . . . . . . . . . . . . . . . . . . 149 3.7 Frosina Georgievska with contributions by Miet Smet and Björn Gabriel : The social dimensions of regional co-operation in economic development in South Eastern Europ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155

. Working Table III — Security 4.1 Philipp Fluri · Alison Buchanan : Security challenges in South Eastern Europe . . 169 4.2 Melanie Pollard : The Ohrid Process on Border Security and Border Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181 4.3 Thomas Mergel : Defence and Security : Regional co-operation and arms control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 193

Contents



4.4 Diman Dimov : SEESAC — The South East European Small Arms Clearinghouse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 199 4.5 Sorin Sterie · Reto Brunhart : Cross-border co-operation in the fight against organised crime : the Stability Pact initiative against organised crime (SPOC) and Regional Police Co-operation (Police Forum) . . . . . . . . . . . . . . . 205 4.6 Ugo Draetta · Sorin Sterie : The Regional Anti-corruption Initiative . . . . . . . 217 4.7 Trpe Stojanovski · Melanie Pollard : The Migration, Asylum, Refugees Regional Initiative (MARRI) . . . . . . . . . . . . . . . . . . . . . . . . . . 229 4.8 Cvetka Krajic Tomin : The Disaster Prevention and Preparedness initiative for South Eastern Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . 235

. Eight years of the Stability Pact 5.1 Björn Kühne : Transforming the Stability Pact into a ‘regionally owned’ Regional Co-operation Council . . . . . . . . . . . . . . . . . . . . . . . . . 245 5.2 Erhard Busek : Responding to the crisis on our doorsteps — The Stability Pact and regional co-operation in South Eastern Europe : Achievements, shortcomings and lessons for the future . . . . . . . . . . . . . . . . . . . . . 255

Hido Biscevic : Afterword . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 267

List of Abbreviations

ALDA Association of Local Democracy Agencies CARDS EU assistance programme to the Western Balkans CEE Central and East European CEFTA Central European Free trade Agreement CoE Council of Europe EAR European Agency for Reconstruction EBRD European Bank for Reconstruction and Development EC European Commission ECT Energy Community Treaty EGP Enhanced Graz Process ENP European Neighbourhood Policy ERI SEE Education Reform Initiative of South Eastern Europe ESDP European Security and Defence Policy ETF European Training Foundation EU European Union FRY Federal Republic of Yugoslavia IFI international financial institutions IPA Instrument for Pre-Accession Assistance LODE/CBC Local Democracy and Cross-Border Co-operation MAI Migration and Asylum Initiative MARRI Migration, Asylum, Refugees Regional Initiative NALAS Network of Associations of Local Authorities of South Eastern Europe OECD Organisation for Economic Cooperation and Development OSCE Organisation for Security and Cooperation in Europe PHILIA Association of Multiethnic Cities of Southeast Europe RCC Regional Co-operation Council RRI Refugee Return Initiative SECI South East European Co-operative Initiative SEE South Eastern Europe SEECP South East European Co-operation Process SAA Stabilisation and Association Agreement SAp Stabilisation and Association Process TFBHC Task Force on Fostering and Building Human Capital TFEY Task Force for Education and Youth of the Stability Pact UNHCR United Nations High Commissioner for Refugees UNMIK United Nations Interim Administration Mission in Kosovo

Note from the Editors

The Stability Pact for South Eastern Europe was a unique undertaking. It was born in 1999 out of an urgent need for the European Union to formulate a co-ordinated and comprehensive approach towards a region on its doorstep that was riven by conflict. The Pact was given a flexible mandate, allowing it to adapt to the changing environment on the ground. Its mandate was also temporary. There was no desire to create permanent structures liable to cause friction and competition with existing institutions. For these reasons the Stability Pact is one of the few institutions in international relations which phased itself out once its mission was accomplished. It has never been easy to define the Pact in concrete and straightforward terms. Since its foundation, views have differed over what the Pact was or should have been, and what the Pact did or should have done. This is understandable given that the Pact went through a number of different phases over the nine years it existed, adapting to the changing political environment both in South Eastern Europe and among its international partners. But it also generated a serious communication and PR challenge for the organisation and those it co-operated with. In 1999, the Pact started out with attempts to be “all things to all men”, with overblown expectations and project proposals being thrown at it from all sides. It matured into a difficult consolidation phase of identifying and focusing on those issues of priority to the region where it could provide added value. The Pact also endured a phase of regular accusations of mission-creep and calls for its dissolution. Its final phase was mostly dedicated to building regional ownership of Stability Pact processes and preparing the ground for a handover to the region, during which it was also criticised for closing down too soon. While every region and conflict has its specificities, and responses can never be directly transferred from one region or conflict to another, there are general lessons to be drawn from the experience of the Stability Pact in South Eastern Europe and this unique postconflict reconstruction effort. The term reconstruction should be understood in a broad sense here, referring not only to building infrastructure, but also to the re-establishment of people to people relations. This is why we have brought together several practitioners who were engaged in different areas of the Pact, to outline their experience of what happened in their particular field, of what worked, and of what did not. This first volume of the publication is divided into five sections. The first focuses on the conceptual basis of the Stability Pact and its evolution over time. The next three deal



Erhard Busek · Björn Kühne

with the areas of activity of the Stability Pact as undertaken by the three Working Tables on Democratisation, Economic Development and Reconstruction, and Security. These three sections focus on the Pact’s actual work and form the centrepiece of the publication. Each of the sections is introduced by a more analytical article on general developments in the respective area over the past decade. The final section focuses on the lessons learnt from the Pact and its transition into regional ownership by the countries of South Eastern Europe. This first volume is accompanied by a second volume bringing together the key documents, developed in the context of the Stability Pact. The publication is not an analytical or comprehensive assessment of the Pact and all its activities. The full impact of the Pact can be assessed only over the years to come. In addition, all the contributing authors were personally involved with the activities on which they here report. Authenticity was valued over impartiality. The publication therefore provides a vivid “nuts and bolts” insight into the establishment and management of regional co-operation processes in a post-conflict environment. It explores the Stability Pact’s successes, its failures and some of the reasons why. The Stability Pact comprised a large body of people from many countries, organisations and backgrounds. These people focused on rebuilding South Eastern Europe and expediting its efforts so that the region could assume its rightful place in Europe. We are grateful to have had the chance to work with each and every one of them. We would like to thank the individual contributors to this publication for sharing their experience and thoughts on their field of activity. Finally we would like to express my gratitude to Mary O’Mahony and Alessandro Rotta for their support in ensuring that this record of the Pact was produced, even after the Pact officially closed. Furthermore we would like to thank Karl-Philipp Prinzhorn for his efforts in bringing together all the documents for the second volume of the publication. We believe that the Pact was a unique and ultimately successful attempt at post-conflict stabilisation and hope you will find this publication an interesting and thought provoking read. Erhard Busek and Björn Kühne, July 2009

Olli Rehn, European Commissioner for Enlargement

Foreword

The Stability Pact holds a unique place in the history of South Eastern Europe. Created in 1999 to promote stability through regional co-operation, it has pursued this goal with determination over the years, and is now winding down as a measure of a job well done. The European Union was the initiator of the Stability Pact and has remained a driving force throughout its work. The Pact has defied sceptics who thought regional co-operation was unrealistic following the wars in the former Yugoslavia, or deemed the Pact either too ad hoc or too light to have any substantial impact. The Stability Pact is also among those rare institutions that have worked themselves out of a job and chosen to close down accordingly. I pay tribute to the two Special Coordinators who have led the Stability Pact so outstandingly and been key to its success : Mr Bodo Hombach and Mr Erhard Busek. To understand the contribution of the Stability Pact, we have to go back to its beginning. Of course, this book makes ample reference to the Stability Pact’s nine-year history, but allow me to highlight some particular aspects from the outset. The Stability Pact was established after the Kosovo crisis in 1999. The idea to set up a framework for the benefit of the trouble-ridden South East European region had been around for some time, but the Kosovo crisis focused attention once again on the need to promote regional stability. The Pact played a major role in promoting reconciliation through co-operation. At the same time, it became a driver of reconstruction, crucial for creating jobs and economic growth. By bringing together regional and international stakeholders, the Stability Pact brought home an important point : that, instead of struggling alone, the countries in the region could prosper and build their future in co-operation. The Stability Pact’s achievements include setting up many key institutions. The Energy Community Treaty grew out of the Stability Pact’s early efforts. The new Central European Free Trade Agreement (CEFTA) has replaced the network of more than 30 bilateral free-trade agreements in the region that the Stability Pact had helped broker. The initiative for a Transport Community that has just been launched benefits from the work of the Stability Pact in this sector ; and the Southeast European Co-operative Initiative (SECI) Centre in Bucharest, an international organisation aimed to combat and improve co-ordination against trans-border crime, also has its roots in the Stability Pact. There are other achievements that deserve a special mention. Countless refugees and displaced persons have benefited from the Pact’s work in brokering cross-border returns within the region and rebuilding homes and lives. The Investment Compact has helped



Olli Rehn

to create a more investment-friendly environment and, consequently, to introduce new resources into local economies and promote better policies and business practices. Reconstruction assistance has helped boost growth and repair critical infrastructure. Democracy, governance, and human rights initiatives have left their mark as well, as have the Pact’s extensive efforts in the security sector, including the Ohrid Process for Border Management and Security. This list of achievements could go on — and the rest of this book will doubtless elaborate further. This is merely to give an indication of the depth and breadth of the Stability Pact’s work. Since the end of the wars in the former Yugoslavia, the European Union has espoused a broad approach to the region of South Eastern Europe, built on regional co-operation. After all, good neighbourly relations are what the EU is fundamentally about. The Stabilisation and Association process, launched in 1999, became the vehicle for promoting EU integration of the Western Balkan countries individually — each on their own merit — and for strengthening the ties between them. The Zagreb Summit Declaration from 2000 confirmed that rapprochement with the European Union should go hand in hand with the process of developing regional co-operation built on concrete initiatives and specific projects. The Stability Pact would become key in this partnership. The countries of the Western Balkans have come a long way since the launch of the Stabilisation and Association process and the Stability Pact nearly a decade ago. Croatia is negotiating accession to the European Union, and its progress this year could prove decisive. The former Yugoslav Republic of Macedonia has attained candidate country status. Stabilisation and Association Agreements will soon be in place with all the other countries in the region, linking the region ever more closely to the EU. Overall, the Western Balkans is making continuous, albeit uneven, progress : There are particular challenges, like the conclusion of the status process in Kosovo and the fragility of the European orientation in Serbia. But when these challenges are overcome, the region has a bright future. And that future is in the European Union. It is truly positive that the region has taken increased ownership of its own regional integration — and done so in a most impressive way. This was demonstrated by the countries’ ability to take the necessary decisions to set up the new Regional Cooperation Council, which will succeed the Stability Pact and take its work forward, while creating its own legacy based on local ownership. In the end, it is the politicians and people of the region who will determine whether their countries, through reforms, will realise their European perspective. I wish the RCC, the leaders and the people of South Eastern Europe the best of success in achieving this goal. The EU and all our international partners in the Stability Pact will continue to support them as best we can. I trust that this book will provide a useful tool for South Eastern Europe, for the RCC and for other regional initiatives by making the Stability Pact experience accessible to a wider audience.

Gregor W. Koessler¹

1.1 Adapting to a changing environment — different phases and functions of the Stability Pact for South Eastern Europe At the time of writing, the Stability Pact has entered its last weeks of existence. It is a good moment to look back on one particular aspect of its lifespan : how has the changing international environment and the discourse about SEE affected the inner workings of the Pact ? How did it respond to pressures of change in view of its conception as a flexible, non-permanent tool ? Few people can claim to understand the full complexity of the region’s development, and the different responses and initiatives the international community has undertaken to support it. I, for one, do not. The following reflects a subjective view, from within the effort that Europe, its international partners and the region undertook together. To analyse the Stability Pact’s performance, it is convenient to divide its development into three phases : • The build-up phase : 1999–2001 ; • Streamlining the Pact : 2002–2003 ; • Laying the path to ownership : 2003–2008. The last phase contains two distinct components : since mid–2003, the concept of the core objectives was implemented with very tangible results, while as from 2005, sustained efforts allowed for a more active pursuit of the Pact’s ultimate goal — placing the established tools and assets of regional cooperation in the hands of the region itself. This contribution focuses on the phase from 2002–2003, during a particular peak in the management of change for the Pact. Other contributions in this book cover the transformation to ownership, and a brief glance at the Pact’s initial phase would suffice to understand the phase that followed.

Th e f i r s t y e a r s : f i l l i ng t h e Pac t w i t h l i f e ( –   ) The Stability Pact was launched in 1999, during the German Presidency of the EU, as an attempt to prevent conflict in SEE. Amid the disappointment over failing to avoid mili1 Gregor W. Koessler is the former Head of Cabinet of Special Co-ordinator Erhard Busek, 2002–2007. The assessment outlined in this article reflects his personal views.



Gregor W. Koessler

tary intervention in the region, the scheme was built on innovative concepts. It received international prominence with the Sarajevo Summit of July 1999. The first phase of the Pact confronted daunting challenges. It had to infuse life into the Pact, gathering funding and clearly establishing its role in the multi-faceted environment of “Brussels”. This was necessary to provide a new forum that would allow interaction between the countries of the region, which had to forge new relationships with each other. The first phase of the Stability Pact was led by Special Co-ordinator (SC) Bodo Hombach — a former Minister of State at the German Chancellery. It created a secretariat corresponding to the structure of the Pact. It set up the Regional Table and three Working Tables. It also produced the first visible financial mobilisation in the form of the Quick Start Package at the first Regional Funding Conference in Brussels in March 2000, where donors pledged some €2.4 bn. Another €2.4 bn was pledged in October 2001 for a new set of infrastructure projects. Additional funds were also committed to regional efforts to promote refugee return.² It is no secret that not all donors willingly embraced efforts to coordinate donations for the post-war region. The Pact therefore had to bring together partners that released aid in their own manner. The Stability Pact functioned well as a catalyst for many positive developments in the region. But it led to disappointments after its first 2–3 years, when it was unable to meet expectations of “quick” money for citizens and projects, in particular infrastructure projects. SEE governments, for their part, were quick to blame “Brussels” for lack of progress — a first lesson learnt on their path to European integration ? While this contribution does not pretend to give an in-depth analysis of the first phase of the Pact, it is clear that by the end of 2001, it had already launched initiatives that addressed all key areas : promoting the local development of democracy, economic and social development, as well as providing security for genuine regional progress. And while there is an element of trial and error in any build-up phase, the Pact’s first phase succeeded in mobilising the creative potential of many people in the region and re-connecting many ties broken in the previous years.³

2 cf. Hombach, The Stability Pact — Lessons for the future, in Busek (ed.), South Eastern Europe on the road towards European integration, Vienna, Molden 2004, 46. 3 Empowerment, and providing a forum for those willing to co-operate, was certainly one important function of the Pact which is not examined in detail here. Former Foreign Minister G. Svilanovic likes to emphasize the fact that one aspect of the rapprochement of Croatia and (then) Yugoslavia, namely the exchange of military attachés, was greatly facilitated by one initiative of the Pact (RACVIAC) — one of many “smaller” examples that cannot be covered here.

Adapting to a changing environment



R e de f i n i ng pa r t n e r s h i ps a n d e x pe c tat ions — s t r e a m l i n i ng t h e Pac t (  –  ) Adjusting to realities and managing expectations In January 2002, when the second Special Co-ordinator — former Vice Chancellor Erhard Busek of Austria — took over from Bodo Hombach, the Stability Pact’s members lost some of their initial euphoria. Not only was there a sense of unfulfilled hopes among some of the Pact’s beneficiaries, but the European Commission and several EU member states had also become highly critical of the Pact and its secretariat. The Pact went through deep re-evaluation during 2002. Was it still a useful tool ? Had it spread itself too thin over too many areas ? Did it fit with the EU’s ambition to become the main item on SEE’s political agenda ? As early as March 2002, SC Busek made recommendations to the EU’s General Affairs Council on how to bring the Pact more into line with the SAp. In June, an extraordinary session of the Pact’s central decision making body, the Regional Table, defined the first steps for reform. As from then, the Pact was to use a specifically-established clearing-house mechanism, the Informal Consultative Committee (ICC). The committee, comprising the European Commission, the EU Presidency, the EU Council secretariat, the SEECP Chairmanship as well as the SC and his Deputy from the United States, would help in the exchange of information and make for more consistency in policy choices. During the session, the RT also took steps to reduce the number of meetings under the umbrella of the Pact and to define priority objectives. It also decided the Pact was to hold regular co-ordination meetings with other regional formats.⁴ Despite these initial steps to re-calibrate the Pact and to bring it closer to the mainstream of the European Commission’s efforts in the region, the pressure on the Pact continued to mount over the following months. Intensive stocktaking and self-critical discussions followed within the Pact’s secretariat and its stakeholders. In an effort to streamline the organisation, every initiative under the Pact’s aegis was evaluated by contributors, recipients and the secretariat. One of the key results was a “discussion paper” of October 2002. It called for an alignment of the Pact to the new situation in the region, in summary : • Rebalancing resources and activities ; • A move to thematically focussed areas, so-called core objectives ; and • Enhanced efforts towards regional ownership and leadership.⁵

4 Cf. esp. Regional Table of 5 June 2002 (Bucharest), Chairman’s conclusions and related Council documents. 5 Ensuring an Effective Stability Pact, Discussion Document of 18 Oct.2002 (from the author’s archive)



Gregor W. Koessler

Naturally, undertaking a radical review of an organisation such as the Stability Pact is a challenging task. The Pact comprises not only governments, EU institutions, international financial institutions and NATO, but also many different individuals and task force constellations. Although it was judged necessary to make its actions more efficient and coherent, it was also crucial to keep the support of valuable donors and the good will of committed institutions and individuals already on board. The most radical proposals, such as dismantling the Working Tables in favour of thematic clusters, did not find sufficient support in this discussion process. In essence, dismantling the Working Tables would have meant giving up the Pact’s ambition to become a comprehensive tool for change in the region. It would have led to a much more limited agenda focusing on a few key breakthrough areas. The Regional Table in Thessaloniki in December 2002 therefore saw an intense debate on the Pact’s future. Its conclusions, however, led to a clear streamlining process that brought new features to the Pact, including : • The objective of strongly promoting regional ownership was endorsed and SEECP was mentioned in this context ; • “Complementarity” with the SAp would be a guiding principle for the Pact, and a separate report on the matter would be drafted ; • Core objectives (longer-term strategic targets), combined with a first set of “achievables” for the following year, were agreed upon ; • Adjustments to meeting frequencies and the secretariat’s internal arrangements were to follow accordingly. The main positive outcome of this streamlining effort was to enable the Pact to carry on with its broad role of a multiple facilitator while providing all stakeholders with core objectives, offering measurable goals against which performance could be better judged. The core objectives can be seen as flagships making up the backbone and visibility of a larger fleet. Smaller ships may find an opportunity for safe passage within the larger effort involving many contributors.

Th e Th e s s a l on i k i Su m m i t of   : a n e w l e a s e of l i f e f or S ou t h E a s t Eu rope a n hope s — a n d f or t h e Sta bi l i t y Pac t During the Greek EU Presidency of 2003, the European Council endorsed the “Thessaloniki Agenda”, which set the path towards EU accession for SEE countries. It spelled out in unusual detail many areas of homework for both the region and the EU alike, thus providing the first concrete perspective of membership. It contained specific tasks closely

Adapting to a changing environment



corresponding to the Stability Pact’s new priorities. The strategic component of the EU Western Balkans Summit Declaration of 21 June 2003, relating to regional co-operation in general and the Pact in particular, reads as follows : “9. We reiterate that rapprochement with the EU will go hand in hand with the development of regional co-operation. The countries of the Western Balkans and, where applicable, other regional participant countries, commit to promote concrete objectives and initiatives, along the lines prescribed by the Thessaloniki Agenda, in the areas of regional free trade, visa-free movement within the region, collection of small arms, creation of regional markets for electricity and gas, development of transport, energy and telecommunication infrastructures, environment and water management, research technology and development, cross-border co-operation and parliamentary co-operation. We reconfirm our support to the Stability Pact for South-Eastern Europe in its complementary role to the Stabilisation and Association Process and in implementing its agreed core objectives. We invite it to focus in particular on the tasks suggested in the Thessaloniki Agenda. We support regional co-operation initiatives such as the South-East European Co-operation Process (SEECP), the Adriatic-Ionian Initiative, and the Central European Initiative. We encourage further co-operation between the European Commission, the Stability Pact and the SEECP, which is gradually becoming the voice of the region.”⁶ As can be seen from the above, the Pact and its supportive role to the region had been fully embraced by the time of the Thessaloniki Summit. Development of regional co-operation was seen as a precondition to advancing towards EU membership. And the areas in which progress would be measured matched the Stability Pact’s core objectives adopted half a year before. The declaration suggested that the Pact had its strongest impact in three key areas. It established the Energy Community of South Eastern Europe (ECSEE), based on regional markets for electricity and gas. It founded the new CEFTA by building on the regional network of bilateral free trade agreements existing at the time. And it led the way to regional ownership — which was an aim of every initiative, and had a consultative organ in the ICC, as is hinted at in the last sentence of the Thessaloniki Summit Declaration quoted above.

C onc lus ion The Stability Pact was created as a temporary tool. It has constantly fostered resultsoriented transatlantic co-operation in SEE even at times when this was less obvious to the larger public. It has provided a launch pad for new initiatives, which might be described as ‘political feasibility tests’, which were not — yet — ripe for 6 EU-Western Balkans Summit Declaration, 21 June 2003 ; http :/ec.europa.eu/cgi-bin/etal.pl



Gregor W. Koessler

discussion in the EU . And, as has been discussed in this contribution, it has proven to be a flexible instrument. The Stability Pact has managed to adapt its objectives to the changing priorities of the region and of its donors to complete its tasks. Re-calibrating the Pact and adjusting it to new realities and available resources has been an exhausting but rewarding task. Vienna, June 2008

Alessandro Rotta · Michael C. Mozur¹

1.3. Regional Co-operation in the context of European and Euro-Atlantic Integration Regional co-operation in SEE has been, since the end of the 1990s, tightly linked to the process of integrating the region into European and Euro-Atlantic structures. In the second half of the 1990s, supporting regional co-operation came to be seen as a way to achieve a number of key stabilisation objectives, such as consolidating peace agreements and underpinning reconstruction efforts. Moreover, regional co-operation represented a credible means to tackle post-conflict and transition challenges which were common to more than one country in the region. The EU started to reshape its policies towards the Balkans accordingly. EU accession became the driving political impulse for most political and economic actors in the region. Although NATO’s intervention in Bosnia in the mid–1990s may have complicated the integration of certain SEE countries into the broader Euro-Atlantic community, NATO accession also remained a critical, and achievable, goal for most countries of the region. While initially the support for regional co-operation schemes came from a variety of actors (the United States, for example, initiated the SECI), towards the end of the 1990s the EU increasingly took the lead in sponsoring regional co-operation. For its part, NATO launched the Partnership for Peace programme in 1994 and welcomed participation from SEE.

EU i n t e g r at ion Significantly, the first major effort at re-launching EU policy in the region, after the failure to counter organised violence in Croatia and in Bosnia and Herzegovina in the 1990s, was centred on promoting regional co-operation. This new take on relations with SEE was termed the Regional Approach. It was launched in 1996 and was part of the EU conditionality in 1997, which aimed to implement the Dayton and Erdut peace agreements by promoting regional co-operation between the four former Yugoslav countries and Albania. The policy set several conditions that these countries needed to fulfil in order to qualify for trade, aid and deepening relations with the EU. An important element of this was “the readiness of these countries to engage in cross-border co-operation with their neighbours.”²

1 Alessandro Rotta was Political Advisor in the Stability Pact Secretariat from 2006–2008 2006–2008;; Michael C. Mozur was the Deputy Special Co-ordinator of the Stability Pact from 2004–2008. 2 Commission of the EU, “Council conclusions on the principle of conditionality governing the development of the European Union‘s relations with certain countries of south-east Europe”. Bulletin EU 4 (1997).



Alessandro Rotta · Michael C. Mozur

A number of problems stemming from the war could be tackled only through co-operation between the countries of the region, such as the return of refugees, but co-operation was required more generally as well, in such fields as energy, environment protection and transport.³ Regional co-operation after Dayton was thus one of the soft-power tools the EU could deploy once armed conflict had been stopped. However, the subsequent escalation of the crisis in Kosovo and the leading role of the Contact Group and NATO in determining its outcome on the ground soon marginalised the EU again as a relevant political actor in the Balkans. Following the Kosovo war, building on strengthened cohesion between its members and on the political will to play a key role in stabilising the Balkans, the EU revamped its profile by launching two comprehensive strategies towards the region, the Stability Pact and the SAp. Both frameworks relied on regional co-operation to improve the situation in target countries and to upgrade their relations with the EU.

E n t e r t h e Sta bi l i t y Pac t a n d t h e Sta bi l i s at ion a n d A s s o c i at ion pro c e s s The Stability Pact approach recognised the “European perspective” of countries of the region as the main motivator for reform and for engaging in regional co-operation. It was organised in three Working Tables focusing on democracy, economic reconstruction and security.⁴ While initially serving as a means to channel funds for the reconstruction of SEE and as a framework for co-ordinating donors, the Stability Pact evolved into a mechanism to bring several thematic co-operation processes together to encourage the countries of the region to address common issues together.⁵ The SAp launched in May 1999 still represents the main framework for relations between the EU and the Western Balkan countries, a group that was already the target of the Regional Approach and was formalised precisely through the SAp. The SAp can be seen as a quasi-enlargement or a pre-accession policy. It is centred on the negotiation, signature and implementation of a SAA — a contractual relation with the EU. The SAp also offers autonomous trade preferences and a dedicated and enhanced financial assistance programme. The centrality of the SAA in this process implies that the main dynamics unleashed by the SAp are bilateral, based on each country’s progress to meet the necessary conditions to negotiate and conclude an SAA. The process was also given a relevant regional dimension, both political and financial. The European Council of Feira, in October 2000, defined the 3 Ibidem. 4 See the SP founding documents, the Cologne Document and the Sarajevo Declaration 5 See Südosteuropa, “Five years of the Stability Pact” Südosteuropa Mitteilungen, Special issue, Five Years of the Stability Pact. Regional cooperation in South east Europe 04 (2004).

Regional Co-operation in the context of European and Euro-Atlantic Integration



countries of the Western Balkans as “potential candidates” for EU accession. At the same time, it encouraged “the States of the region to increase their regional co-operation.”⁶ At the Zagreb summit in November 2000, when the then Federal Republic of Yugoslavia was included in the process following the ousting of Milošević, and where the countries of the region agreed to the SAp approach, it was stated that “rapprochement with the European Union will go hand in hand with this process of developing regional co-operation” and that “the five countries concerned undertake to establish between their countries regional co-operation conventions providing for a political dialogue, a regional free trade area and close co-operation (inter alia) in the field of justice and home affairs, in particular for the reinforcement of justice and the independence thereof, for combating organised crime, corruption, money laundering, illegal immigration, trafficking in human beings and all other forms of trafficking.”⁷ Consistently, the EU’s CARDS financial assistance programme that supported the SAp also presented a regional envelope to fund projects supporting regional co-operation, on the grounds that “greater economic and political stability in the region can only develop if the countries establish normal relationships between themselves.”⁸ The rationale behind the promotion of regional co-operation and the model applied were seen as “essentially an extension of the EU’s own philosophy that deeper co-operation with neighbouring countries is a route to national as well as regional stability and growth and that such cooperation serves the mutual interests of all countries concerned.”⁹ CARDS earmarked €197 million over the 2002–2004 period for regional co-operation activities in areas that, according to the Commission, were more likely to contribute to regional co-operation or where support could best be delivered at a regional level. Such areas included integrated border management, infrastructure and institution building. Overall, regional programmes received roughly ten percent of the CARDS €4.5 billion budget over the 2000–2006 period.¹⁰

Th e Th e s s a l on i k i Su m m i t : A t u r n i ng p oi n t The June 2003 European Council of Thessaloniki enriched the SAp framework with elements drawn from the enlargement process, such as the European Partnerships. It also 6 European Council Presidency Conclusions of the Santa Maria da Feira European Council, N. 200/1/00. 19 and 20 June 2000. 7 Commission of the EC, CARDS Assistance Programme to the Western Balkans, Regional Stategy paper 2002– 2006. Brussels, 2001, p. 5. 8 Ibidem. 9 Ibidem. 10 European Commission website, Cards reports and publications http http://ec.europa.eu/enlargement/key_docu://ec.europa.eu/enlargement/key_documents/cards_reports_and_publications_en.htm



Alessandro Rotta · Michael C. Mozur

solemnly declared a political commitment to integrate the Western Balkans into the EU through the so-called Thessaloniki agenda. On the same occasion regional co-operation was confirmed as a core objective of EU policy in the region, and co-operation on very specific fields was encouraged. This extended from the completion of bilateral free trade agreements to visa free travel within the region, and to cross-border co-operation, small arms collection, scientific research, water management, and parliamentary co-operation. The EU confirmed that the Stability Pact should have a complementary role to the SAp, and invited the Pact to concentrate on specific topics, such as further development of the regional free trade network, implementation of the MoU on a Regional Energy Market (possibly extending it to the gas market), freedom of movement and cross-border-cooperation at a local level, and fighting organised crime and corruption. At the same time the Council reiterated its support to the SEECP and to other regional co-operation initiatives, such as the Adriatic-Ionian Initiative (AII) and the Central European Initiative (CEI).¹¹ A year later, two major policy innovations appeared, aimed at giving practical application to the Thessaloniki political mandate. One was to transfer responsibilities for the Western Balkans from the European Commission’s External Relations Directorate-General to the Directorate-General for Enlargement. The other was to introduce IPA as the new framework for assistance to the Western Balkans and Turkey under the new Financial Perspective 2007–2013. Both changes underlined that accession was the final goal of EU policies in the region, and that assistance provided to the Western Balkans would aim at facilitating accession. The IPA also includes an envelope for regional and multi-country programmes, reproducing features of the CARDS regional programme and of the multi-country envelope under PHARE and the Turkey pre-accession instrument. According to the European Commission, “programmes funded under this envelope will be complementary to national programmes and will only be eligible if they provide an added value to the pre-accession process.”¹² So-called Multi-Beneficiary programmes would receive funds of €401.4 million in the period 2007–2009, out of a total IPA budget of €4,118.9 million for the same period.¹³

11 European Council, The Thessaloniki Agenda for the Western Balkans, June 2003. 12 Commission of the European Communities, Communication from the Commission to the Council and the European Parliament, Instrument for Pre-accession Assistance (IPA) Multi-annual Indicative Financial Framework (2008–2010). 13 Commission, http http://ec.europa.eu/enlargement/pdf/mipd_multibeneficiary_2007_2009_en.pdf ://ec.europa.eu/enlargement/pdf/mipd_multibeneficiary_2007_2009_en.pdf

Regional Co-operation in the context of European and Euro-Atlantic Integration



S ou t h E a s t e r n Eu rope g oe s At l a n t ic The wars that followed the dissolution of Yugoslavia had an important influence on the role of NATO since the end of the Cold war. The engagement of NATO in the Balkans dated back to the early phase of the war in Bosnia and Herzegovina, when NATO’s foreign ministers, in 1992, declared willingness to support, on a case-by-case basis, peacekeeping tasks under the responsibility of the Conference on Security and Co-operation in Europe (CSCE, the OSCE predecessor). On 28 February 1994, the Alliance engaged in open combat for the first time since its establishment when NATO’s aircraft shot down four warplanes violating the no-fly zone over Bosnia and Herzegovina. The NATO air strikes were instrumental in ending the siege of Sarajevo and changing the course of the war in Bosnia and Herzegovina, as well as in defining the outcome of the crisis in Kosovo. The Alliance provided the bulk of international peacekeeping in the region, in the framework of the Implementation Force (IFOR) and Stabilisation Force (SFOR) in Bosnia and Herzegovina, and within the Kosovo Force (KFOR) — that remains to this day the largest NATO operational deployment in the Euro Atlantic region. Subsequently, NATO developed institutional relations with almost all SEE countries, either through outright membership, or through the Partnership for Peace (PfP) programme or the Euro-Atlantic Partnership Council (EAPC). This contributed to strengthening and underpinning stability in the region, and to complementing the integration of SEE in the European mainstream with an Atlantic dimension. The Alliance has most notably engaged in assisting and supporting reform initiatives in the defence sector of each country, through mechanisms such as the Membership Action Plan (MAP) targeting candidates, the tailored co-operation from which countries benefit prior to joining PfP, and Individual Partnership Programmes (IPPs). By taking part in these mechanisms, SEE countries commit themselves to promoting transparency in national defence planning and budgeting, to establishing democratic control over their armed forces, and to developing the capacity for joint action with NATO in peacekeeping and humanitarian operations.¹⁴ NATO standards thus serve as benchmarks to evaluate defence and associated reforms in the region. At the same time, NATO accession requirements also address civil society, governance, and rule of law concerns as part of the recognition that the Alliance draws strength from its base of common values. As far as regional co-operation is concerned, NATO also acted as a driver, bringing SEE parties together. It initially played a pivotal role in several initiatives and regional platforms under the umbrella of the Stability Pact. It now continues these efforts under the Regional Co-operation Council, and through initiatives such as RACVIAC.¹⁵ Also, more advanced partners, such as Croatia, have tended to engage their neighbours, sharing 14 On contents and scope of PfP, see http http://www.nato.int/issues/pfp/index.html ://www.nato.int/issues/pfp/index.html 15 See respective chapters in this publication.



Alessandro Rotta · Michael C. Mozur

their experience. However, “there is still much room for improvement across the region, and for more concrete measures, especially in increasing local ownership. Further, limited local budgets for defence reform, especially for interoperability, increase the need for innovative models of regional co-operation to benefit all. This should act as the ultimate benchmark for the countries concerned.”¹⁶

R e g ion a l c o - ope r at ion a n d Eu rope a n i n t e g r at ion : a n u n e a s y c oe x i s t e nc e The promotion of regional co-operation features as a cornerstone of EU policies towards SEE in official documents from 1996 onwards. Nevertheless, the relation between the process of European integration and regional co-operation has not always been linear or easy. The 1996–2008 period saw these two goals cycle through phases, and its complexity deserves closer inspection. The two processes were designed to reinforce one another. Regional co-operation was seen as a training ground for European integration. Countries were encouraged to co-operate with their neighbours to prepare them to a culture of negotiations and compromise, a prerequisite for EU politics. Furthermore, fields of regional cooperation were critical to EU accession. Key initiatives included trade liberalisation, transport, fighting organised crime, and helping countries to improve their standards of governance to align themselves to EU requirements. Exposing their officials and experts from public administration to best practices and peer review mechanisms brought positive effects for their professional skills and for the overall administrative capacity of each country. Progress in each of these areas and in co-operation between neighbours was expected to reinforce links between countries, strengthen regional stability and foster economic development. For all these reasons, regional co-operation was considered instrumental in the European integration of SEE countries. Since 1997, good-neighbourly relations have been part of EU conditionality towards the Western Balkans ; regional co-operation has therefore been a precondition of EU integration. Furthermore, reconstruction, peace-building and economic development based on co-operation on concrete issues have been distinctive features of the European project. It follows that promoting regional co-operation in other areas of the world has become a way for the EU to project its own model abroad.¹⁷ 16 A. Watkins and S. Gligorijevic, “NATO and the Balkans Balkans:: The case for greater integration”, NATO review, Summer 2007 17 For example, one could read in the old version of the European Commission webpage dedicated to the EU policies towards SEE : “The EU’s fundamental aim for South East Europe is to create a situation where mili-

Regional Co-operation in the context of European and Euro-Atlantic Integration



Fi n di ng t h e r ig h t a pproac h However, several factors made the relation between the two processes an uneasy one. Endeavours to enhance the SAp to a quasi-enlargement strategy led to the so-called “regatta” principle. This principle asserts that every country is to be considered on its own merits and on its ability to adopt and implement the reforms that the EU considers necessary. This creates a strong bilateral conditionality which is supposed to cohabit with the regional approach, but that in fact can conflict with it. Countries involved in the SAp and later in the full accession process — Croatia, which started negotiations in 2005, and the former Yugoslav Republic of Macedonia, which has candidate status but still awaits a date to start negotiations — are encouraged to invest more, politically and financially, in areas relevant to advancing along the EU accession path, rather than engaging in time consuming, complex and less politically popular schemes of co-operation with their neighbours. Treating each country on its own merits is a necessary pre-condition for the carrot of prospective integration to work, but it drew more dividing lines across the Western Balkans. If SEE is defined, for example, by Stability Pact membership, countries involved can be classified in three groups based on their bilateral relations with the EU, with each group the target of different strategies. Romania and Bulgaria, laggards of the 2004 bigbang enlargement, are now fully fledged EU members ; the Western Balkans are covered by the SAp and are slowly moving towards proper accession policies ; and Moldova belongs to the ENP, which explicitly carries no implications for an accession track. Such differentiation, even if it reflects “different conditions and issues faced by different groups of countries rather than EU bias”¹⁸, poses an obstacle to the development of regional co-operation processes across SEE. Even for countries in the same group, such as the Western Balkans, individual countries are at different stages of EU integration. Croatia has started negotiations, the former Yugoslav Republic of Macedonia is a candidate, and all other countries lag behind at different speeds, depending on whether they have signed a SAA. Also IPA, the new tool for assistance to the Western Balkans and Turkey, was accused of creating additional barriers among countries and consequently of pushing those countries not yet enjoying candidate status into a kind of pre-accession purgatory.¹⁹ tary conflict is unthinkable — expanding to the region the area of peace, stability, prosperity and freedom established over the last 50 years by the EU and its Member States”. See also European Commission, CARDS Strategy Paper, p. 5, and footnote 7, above. 18 , Bechev, D. “Carrots, sticks and norms: norms : The EU and regional cooperation in Southeast Europe”, Journal of Southern Europe and the Balkans 8, no. 1 (April 2006) : 27–43. 19 European Stability Initiative Breaking out of the Balkan Ghetto : Why IPA should be changed, 1 June 2005. This critique derives from the division of beneficiaries in two groups having diversified access to the different components of assistance, depending on them being “candidate” or “potential candidate”. In the first case, all five components are available : transition assistance and institution building ; cross-border cooperation ; regional development ; human resources development, and rural development. Potential candidate countries only have



Alessandro Rotta · Michael C. Mozur

These obstacles complicated the relation between EU integration and regional co-operation. The EU, which argues that regional co-operation is a necessary pre-condition of progress in EU integration, has also indirectly weakened the regional dimension of its policies and come to represent “both the main catalyst and constraining factor of SEE regionalism.”²⁰ Furthermore, even if regional co-operation remained an integral part of EU conditionality, conditions relating to regional co-operation were often open-ended and only vaguely defined. It was also difficult to measure a country’s engagement in regional co-operation. Relations between the European Commission and the Stability Pact were at times politically strained, diminishing the political clout of regional co-operation in SEE. Relations improved only following the major streamlining and adjustment exercise the Stability Pact underwent in 2002 and 2003.²¹ But even following the Thessaloniki Council, when the Stability Pact was mandated with a complementary role to the SAp, a formal link was never established between progress in Stability Pact initiatives and activities and progress in the SAp. Also, it could be argued that other types of conditionality were given more weight than engagement in regional cooperation. This was notably the case for co-operation with the International Criminal Tribunal for the former Yugoslavia (ICTY) and issues such as the rights of minority communities, indicating a gap between the centrality of regional co-operation in EU political discourse and the EU policy practice. Countries in the region gave priority to bilateral relations with the EU, and often regarded regional co-operation with suspicion. The EU’s insistence on regional co-operation was often interpreted as an elegant way of delaying accession, and even dubbed as a plan to reconstruct the Yugoslavia of the Tito years²² — particularly by the front-runners in the EU accession process. ²³

R e g ion a l ow n e r s h i p ta k e s ro o t Despite the flaws in EU policies, the intermittent nature of political support, and the inherent and probably unavoidable contradictions, true progress was nevertheless achieved in several areas of regional co-operation. This progress continued under the framework of the Stability Pact, as is amply illustrated in other parts of this publication. Furthermore, despite the problematic aspects of the EU’s approach, the European perspective was argu-

20 21 22 23

access to the first two components, as funds for regional, human resources and rural development are meant to prepare the beneficiaries for managing structural funds following their accession. For the EC reply to this argument see IPA-Questions and answers D. Bechev, Carrots, sticks and norms, 41. On the early evolution of the Stability Pact and on the reflections on its relations with the EC see chapter 1.1. of this publication Mitic, A. “Too much Yugoslavia or too little EU”. Transitions on line, 6 February 2006. Delevic, “Regional Co-operation in the Western Balkans”, 36.

Regional Co-operation in the context of European and Euro-Atlantic Integration



ably the main incentive for countries to engage in regional co-operation, and the main driver of political and economic progress in the region. Countries were also under pressure for NATO accession, but NATO’s demands on political and economic reforms were generally not perceived by governments in the region as being as stringent as the EU’s. Progress achieved can be clearly seen in a number of fields. Trade liberalisation is a major accomplishment for the region. Implementation will demand active commitment by all parties.²⁴ Most observers maintain that a real improvement of intra-regional trade will necessitate stronger measures, with a customs union covering the entire region heading the list. However, the business community — from the region and beyond — has adopted an extremely positive attitude towards the CEFTA agreement. It is widely expected that not only will intra-regional trade increase significantly but that the region itself will be more attractive for investment, as it can now be seen as a single, bigger market, allowing investors new economies of scale. CEFTA 2006 will help to get the countries in the region “used to the idea that they are part of a common market, which they will become anyway once they join the EU.”²⁵ A similar important breakthrough was achieved in the field of energy. Supported by a number of donors, notably the US, the EU and nine SEE partners (Albania, Bosnia and Herzegovina, Bulgaria, Croatia, the former Yugoslav Republic of Macedonia, Romania, Serbia, Montenegro, UNMIK/Kosovo) signed the Energy Community Treaty (ECT) which entered into force in July 2006 and created the legal framework for a regional energy market for electricity and gas to be integrated into the wider EU market. Most SEE countries suffer from limited resources, shortages of supply, and poor and often damaged infrastructure in the energy sector, making the Treaty a convenient tool to establish more efficient national energy markets and to enhance energy security by connecting to neighbouring, compatible national systems. For the EU, the Treaty provides more security of supply for energy transiting SEE. ²⁶ Agreements, MoUs and platforms for regional co-operation were signed in fields ranging from anticorruption strategies and the fight against organised crime to the co-ordination of migration policies ; they also covered co-operation among parliaments and co-ordinated response to and prevention of natural and man-made disasters. In these areas the formalisation of regional co-operation has attracted less attention than in trade liberalisation and energy, and the EU’s direct involvement has been less relevant. But it is 24 Cfr. E. Busek, Speech, in Busek, E., Speech of the Special Co-ordinator of the Stability Pact for South Eastern Europe at the signing of the agreement to amend and enlarge the Central European Free Trade Agreement, 19 December 2006, in http ://www.stabilitypact.org/pages/speeches/detail.asp ?y=2006&p=470 . 25 Delevic, M. Regional Co-operation in the Western Balkans, Chaillot Paper n. 104, Paris : Institute for Security Studies, July 2007, p. 63. On CEFTA, see the article by Mary O’ Mahony in this publication. 26 Boromisa, A.-M. “In Quest of Regional Ownership between National and Donors’ Interests. The Energy Community”. In Friedrich Ebert Stiftung Dialogues. From International Intervention to National/Local Ownership. 103–120. Bosnia and Herzegovina : Friedrich-Ebert-Stiftung, 2006. See also the chapter on energy and infrastructure in this book.



Alessandro Rotta · Michael C. Mozur

worth mentioning that these developments were accompanied by increased ownership by SEE countries, with the establishment of a number of secretariats and bodies to deal with co-operation processes and to assume more direct financial responsibility. Aside from progress on the ground in specific fields, an increased political and often financial responsibility by SEE countries themselves was signalled by regional ownership of structures and secretariats governing networks of regional co-operation. The importance of this shift should not be underestimated as it represents a major change of pattern compared to the recent history of regional co-operation in SEE. In the past, co-operation was to a large extent driven by external actors and was perceived as being somehow imposed on SEE countries reluctant to engage in close relations with each other due to past conflicts. Since the end of 2005, ownership of single processes was matched and partially driven by the shift towards handing over responsibility for the overall framework governing regional co-operation to the region itself. Over the course of two years, the Stability Pact was gradually transformed to conclude this process. By February 2008 it had matured into the fully regionally-owned RCC, a streamlined regional co-operation programme led by a Secretariat based in Sarajevo. The role and engagement of the EU, both in the build-up process for the RCC and in its formal establishment, was critically important. The EC participated fully in the definition of the new structure while supporting the process and reinforcing the links between the transition exercise and the European prospects of SEE. Representatives from the Commission repeatedly stressed their interest in an efficient and reliable RCC and underscored the need to have a single interlocutor on all regional co-operation matters in SEE. The Commission pledged to contribute €1 million per year to the budget of the RCC Secretariat via IPA funds over 2008–2010. The RCC Secretariat would include a lean liaison office in Brussels to ensure permanent contacts with Euro-Atlantic institutions and to support the integration prospects of the entire SEE region. EU support to transition from the Stability Pact to the RCC was matched by a more pronounced political investment in regional co-operation matters. This was evident in the renewed prominence of regional co-operation in the last of the Enlargement reports in autumn 2007. It could also be inferred from the high level representation at the May 2007 Zagreb SEECP summit establishing the RCC and at the inaugural RCC meeting in Sofia in February 2008. Assessing a decade of co-oper ation One could argue that a regionally owned framework, where SEE countries’ co-operation was driven by their own needs and priorities, was a more promising setting for EU support. Dilemmas over regional co-operation hindering fast-track EU integration — a concern that often made countries in the region suspicious of co-operation schemes — have recently proved to be illusory. There are compelling examples of countries “graduating” in

Regional Co-operation in the context of European and Euro-Atlantic Integration



their EU bilateral relations, gaining confidence that they had nothing to lose by close association with their neighbours and engaging more convincingly in regional co-operation. Bulgaria and Croatia both followed this course. Once they had secured their own target (accession in the first case and steady progress on negotiations in the second), they were keen to put major energy into their regional co-operation efforts. This suggests that “the EU’s regional approach will only deliver the anticipated effects if the EU itself does not drag its feet and remains as serious as ever about the Thessaloniki commitment”. ²⁷ This leads to the issue of how strong and realistic the accession perspective (or the Thessaloniki promise) for SEE countries currently is, and if and how i its perceived strength influences the state of regional co-operation in SEE. The failed referenda on the EU constitution in France and the Netherlands in 2005 sparked a debate on the notion of EU absorption capacity as a limit to further enlargements. Doubts were cast on the EU political will to uphold its commitments towards the region. The EC tried hard to define the issue in more precise terms, introducing the concept of “integration capacity”. It confirmed that the EU policy towards the region would be based on consolidating its commitments, in addition to conditionality and better communication.²⁸ The Lisbon Treaty was supposed to provide a legal basis for a renewed political commitment by the EU towards the Western Balkans but its path was also stalled by a referendum, this time in Ireland. Mixed signals from Brussels and from EU capitals, coupled with lack of progress on the ground, together with ongoing complex unresolved issues (the constitutional and political crisis in Bosnia and Herzegovina and Kosovo’s declaration of independence) have all contributed to shaping a rather negative perception in the Balkans as far as their accession prospects are concerned. This risks altering the delicate balance between conditions and incentives that the policy is based on. Nevertheless, regional co-operation has progressed. Does this mean that the EU incentive is not necessary for promoting regional co-operation in SEE ? Or perhaps that when accession prospects are bleak, regional co-operation offers some degree of compensatory space, and is a way to show good will to the EU ? Part of the answer may be that SEE countries have started to realise the benefits of regional co-operation as such, independently from EU integration prospects. To be sure, a stronger EU commitment would provide additional incentives : the experience of Stability Pact initiatives clearly shows that where the EC was directly involved and had a clear interest, such as in the case of CEFTA and the ECT, more meaningful results were achieved.

27 Delevic, “Regional Co-operation in the Western Balkans”, p. 36. 28 Commission of the EC, Communication from the Commission to the European Parliament and the Council : Enlargement Strategy and Main Challenges 2006–2007 : Including annexed special report on the EU’s capacity to integrate new members, COM (2006) 649.



Alessandro Rotta · Michael C. Mozur

I n gu i s e of a c onc lus ion : r e c onc i l i ng ag e n da s However bleak and distant the accession prospects of some countries may now seem, EU integration in the Western Balkans remains an important matter. The EU bitterly learned in the 1990s that mere containment is not enough to tackle the challenges stemming from the Balkans, and that a long-term integrationist policy is more cost-effective than stabilisation by military means. SEE presents peculiar challenges that do not allow the enlargement policy to display its full transformational potential — thus preventing replication of the largely successful EU expansion to CEE. This is why enlargement in the Balkans is flanked by other EU tools, such as ESDP missions and EU Special Representatives. Integration remains, however, the backbone of the EU strategy in the region. NATO accession can also work as a complementary, supporting element to the EU integration strategy towards the region, enhancing good governance and institutional capacity in the field of defence reform and strengthening the rule of law. There is, however, a clear difference : the nature and scope of the broad-based reforms and legislative requirements demanded by EU accession are more demanding than the criteria countries have to meet to get closer to NATO. But although engaging in reforms related to NATO accession subjects SEE countries to a less comprehensive agenda, the exercise can help anchor them to Euro-Atlantic structures all the same. SEE countries also have few viable alternatives to pursuing integration in Euro-Atlantic structures and complying with the required conditionality. The EU path offers a grid of reforms which are usually necessary in transition countries anyway. All the same, vague and distant accession promises can lead to situations of mutual fictions, where the EU pretends to integrate the Balkans and Balkan countries pretend to transform. Similarly, regional co-operation is more a “natural” priority than a political option in SEE, and increased ownership and progress on concrete agendas seem to indicate that SEE countries are starting to realise this. It would therefore be politically wise for both the EU and the region to stick to their respective commitments on the processes of regional co-operation and of EU integration. This would reconcile the two agendas, making their mantra that much stronger and closer to a tangible reality. The Copernican revolution represented by the creation of the RCC, and the support by the EU to this process, provide two laudable first steps in this direction. They have dispelled some of the stigmas attached in the past to regional co-operation and have lifted the perception that cooperation is driven by forces outside the region. EU support can then be more effectively tuned to regional needs through a regionally owned framework, making achievements more sustainable. And broader integration into Euro-Atlantic structures will strengthen prospects for long-term political and economic development in a key area of Europe.

Florian Bieber

2.1 The challenges of democratisation and human rights in the Balkans

In the late 1990s, the Western Balkans appeared trapped between semi-authoritarian governments and weak states. Croatia was governed by the nationalist Tudjman regime, which prevented the return of Serb refugees, while seeking to marginalise the opposition in the capital Zagreb and penalise independent media with a ‘pornography tax.’ Albania had experienced a total collapse of the state, while Bosnia and Herzegovina was barely holding together as only a few thousand minority returns had taken place and war criminals remained free. The conflict in Kosovo escalated with thousands of victims and helped Milošević in Serbia to rein in the opposition. European integration and democratic consolidation appeared implausible in the region, and continued instability and human rights violations seemed the norm. The crises of the late 1990s also highlighted the failure of the European Union and other international organisations to effectively deal with the disintegration of Yugoslavia and the weak states which emerged in the Balkans. The Dayton Peace Accords signed in November 1995 and the related Erdut Agreement for Croatia were mere ‘band-aids’ to end the immediate conflict without addressing any of the underlying problems. These were peace agreements with those who began the wars and thrived on crises and conflict. War and conflict were not the reflection of any popular will, but tools which allowed predatory elites to maintain political and economic control.¹ Only full democratisation offered the opportunity for the region to emerge from the period of the violence and nationalist tensions. A genuine end to this semi-authoritarian nationalist environment prone to renewed conflict was imperative. 2000 was the annus mirabilis in the Western Balkans, as it was in other parts of Eastern Europe 11 years earlier. With the fall of the Tudjman and Milošević regimes in Croatia and Serbia respectively and the victory of moderate parties in Bosnia and Herzegovina, the 1990s appeared to have slipped definitively into the past. The victory of the various opposition movements was significant for two reasons. First, it confirmed that citizens worried more about corruption and low living standards than about some real or perceived threat against the nation. The nationalist voting machinery failed to work in 2000. Second, it broke the communicating vessels of nationalism, where nationalist parties and rhetoric in Croatia 1 V.P. Gagnon, The Myth of Ethnic War : Serbia and Croatia in the 1990s. Ithaca : Cornell University Press, 2004.



Florian Bieber

thrived on their Serbian counter-parts, and vice versa. Finally, by 2000 the wars of Yugoslav success appeared to have ended. This change promised a rapid transformation of the Western Balkans and a ‘catching up’ with the remainder of CEE. The conflict in Macedonia² only a year later was a stark reminder that stability is not easily achieved and that democratisation and the protection of human rights are not established by the fall of authoritarianism, but grow over a long period of time.

Th e pa r t i a l s uc c e s s e s of de mo c r at i s at ion There is no automatic rule that democratisation either brings stability or protects human rights. In fact, it was the flawed democratisation in 1990 in large swathes of the Western Balkans which gave rise and legitimacy to nationalist governments which claimed to be reflecting popular will. Broader scholarly debates also point to the link between ethnic conflict and democratisation.³ The transition from one system of government to another, the re-shaping of the state through a new constitution, can trigger fears and opportunities for elites or counter-elites to mobilise on a nationalist platform. The second democratic transitions in Serbia and Croatia (after 2000), and arguably also in Albania and Montenegro (after 1997), were likewise vulnerable. There have been four challenges to democracy since 2000, which have dictated the different speeds and degrees of success of countries of the Western Balkans in consolidating their democratic system : – – – –

nationalist spoilers ; the nationalist legacy and discourse ; open territorial questions ; and weak states.

Spoilers Authoritarian and nationalist spoilers remained strong in most countries in the Western Balkans. Spoilers are the opponents of peace agreements, as they quite literally ‘spoil’

2 While the country is officially referred to by the EU as the former Yugoslav Republic of Macedonia, as part of this article the author will use its constitutional name. 3 A number of authors have argued forcefully that the process of democratization and the opening up of previously authoritarian regimes are particularly vulnerable periods of violence and ethnic mobilization. Jack Snyder and Karen Ballentine, “Nationalism and the Marketplace of Ideas,” International Security, 1996, Vol. 21 (2), pp. 5–40.

The challenges of democratisation and human rights in the Balkans



them. I would argue that there are also ‘democracy spoilers’. In the narrow sense, they are often called anti-system parties, i.e. political parties which do not accept the democratic system of government and challenge it either from within (through elections) or from without (through protests or violence). As in many countries, such groups can be broader than parties, so the term spoiler might be more appropriate. They can include ‘uncivil’ society, such as war veterans, organised crime, and rebel groups, as well as political parties. Rarely do such groups reject the democratic system outright. It is more common for them to undermine it by placing greater weight on other issues, such as different collectives, the identification of traitors or the importance of status questions (territory, borders and lines of separation). Spoilers exist in every democracy ; they might be banned or they can be allowed to act legally, depending on the actor and the country’s legal tradition. There is for instance a substantially different approach towards freedom of speech in the USA and Germany. The challenge arises from the ability or at least the risk of spoilers undermining the democratic system in SEE countries. There are four ways spoilers can achieve their goal. The first and obvious route is for them to take over the country through violence or elections. While this has been a pending threat in some cases, such as from the Serb Radical Party in Serbia, no such back-sliding has occurred — so far — since 2000. When previously semi-authoritarian parties or politicians returned to power, such as in Croatia in 2003 or in Bosnia and Herzegovina in 2002, they were no longer systemically opposed to the changes which had taken place in the meantime, and had in fact been largely co-opted. The second way in which spoilers can negatively impact democratisation is by setting the political agenda and undermining reforms. The strong opposition of war veteran associations and the HDZ in Croatia against cooperation with the ICTY in 2001–2, and similar resistance in Serbia against the extradition of Slobodan Milošević by the Djindjić government in 2001, seriously undermined the governments and led to their eventual fall. Spoilers can establish or re-affirm nationalist taboos which reformist or democratic forces are reluctant to break, out of fear (founded or not) of accusations of treachery and loss of electoral support. In this way, some aspects of democratic transition, such as dealing with the past, become particularly difficult to address. The third way is to create a dynamic of outbidding, where democratic parties or groups do not want to be challenged by spoilers and adopt their policies or even seek to outbid them. The last way is for spoilers to challenge the system not only from within a respective group, but by exerting pressure on parties and groups from another ethnic group. The insurgency of the Liberation Army of Preševo, Medveđa and Bujanovac in Southern Serbia in 2001, for example, imposed pressure on the newly elected democratic government in Serbia to clamp down on the group, and could have derailed democratisation in Serbia.



Florian Bieber

Nationalist legacies The difficulties of the democratic transition, however, cannot be put down only to some spoiler groups. One needs to consider the broader nationalist legacy which continues to shape social and political discourse. The wars during the 1990s, isolation, lack of opportunity, nationalist educational systems and limited experience of peaceful interethnic coexistence have meant that the generation which grew up during this period is often more, rather than less, nationalist and authoritarian than their parents. A 2004 UNDP study on diversity in Serbia found for example that 20–23-year-olds had a higher degree of ethnocentrism than any other age group.⁴ It would be insufficient to attribute continued nationalist sentiment to the 1990s alone. Instead, nationalist and ethnocentric perspectives continue to be widely held and are perpetuated in the media and educational system in the region. While there has been a moderation in the official nationalist discourse, many of the underpinning values and self-perceptions often remain unchallenged. The self-perception as victim during the wars and earlier conflicts and the lack of confrontation with war crimes perpetrated by members of the same ethnic background remain prevalent. There is thus both a nationalist counter discourse, which challenges the status quo (i.e. the Ohrid Framework Agreement in Macedonia, the Dayton Peace Accords in Bosnia and Herzegovina or the independence of Montenegro) and a dominant ‘official’ nationalist discourse of the states in the region, such as the way in which national histories continue to be taught in schools across the region.⁵

Status issues The political salience of nationalist discourses and spoilers is enhanced by open territorial questions. While there has been no war or conflict in the Western Balkans since 2001, territorial questions have often overshadowed debates about democratisation and economic reform.⁶ The relationship between Serbia and Montenegro shaped debates in Montenegro until the referendum on independence in 2006, while the status of Kosovo dominated political debates in Kosovo and has similarly asserted itself on the agenda in Serbia since 2004. In Bosnia and Herzegovina, the relationship between the Serb Republic and the state has sidelined most other topics, at least since the failed constitutional reform package in 2006. Finally, in Macedonia, the balance of power between the two largest com4 UNDP, Human Development Report 2005, The Strength of Diversity. Belgrade 2005, p. 41. 5 See Christina Koulouri (ed.), Clio in the Balkans. The Politics of History Education, Thessaloniki : Centre for Democracy and Reconciliation in Southeastern Europe, 2002. 6 See International Commission on the Balkans, The Balkans in Europe’s Future, 2005, p. 18.

The challenges of democratisation and human rights in the Balkans



munities and disputes over the implementation of the Framework Agreement have often delayed other reforms. In the Western Balkans, only Croatia and Albania have been able to avoid such debates since 2000. Of course, the nature and borders of a state are crucial for defining democracy. Democracy is reliant on knowing who the people are and for whom the state is providing services. However, the persistence of these debates has often extended beyond the necessary definition of the basic parameters of statehood and democratic governance. They have become a self-serving tool of parts of the political elite in a number of countries, to distract from other more complicated reforms.

Weak states The weakness of states has rendered the consolidation of democracy more difficult. This weakness refers to a state’s reach, as well as its autonomy and legitimacy. From weak state traditions in Albania to strong ethno-regional challengers in Bosnia and Herzegovina, the reach of many states in the Western Balkans is weak as they struggle to provide services on a territory where their role is contested. This weakness is often all the more visible as expectations from state institutions are unusually high due to the countries’ socialist past (and pre-socialist statist traditions). The situation creates a political culture in which the scope of state activity is expected to be broad and comprehensive. The control exerted by political parties over the state, in particular the civil service and the economy, also weakens the autonomy of the state.⁷ The predominance of parties over the state, best symbolised in Montenegro, where the government rents its building from the dominant Democratic Party of Socialists,⁸ can undermine the continuity and neutrality of the state. Non-professional criteria for recruitment and advancement in many public administrations are another problem. Furthermore, a number of states are weakened by a legitimacy deficit because many citizens identify with other sub-state units or other state projects. This legitimacy deficit undermined the FRY and its successor, the State Union of Serbia and Montenegro, and continues to complicate matters in Kosovo and in Bosnia and Herzegovina.

Hu m a n a n d m i nor i t y r ig h t s During the 1990s states were the main violators of human rights. From falsifying elections to murdering their own citizens and intimidating the media, states have severely curtailed 7 Vesna Pešić, “State Capture and Widespread Corruption in Serbia,” CEPS Working Document No. 262/March 2007. 8 Marijana Trivunović, Vera Devine, Harald Mathisen, Corruption in Montenegro 2007 : Overview over Main Problems and Status of Reforms, CHR Michelsen Institute, Oslo, 2007, p. 16



Florian Bieber

the human rights of their own and neighbouring countries’ citizens. As the region moved away from semi-authoritarian regimes to governments which are (imperfect) democracies, the scale and deliberateness of human rights violations has greatly subsided. The conceptual shift underpinning the changes could be described as moving from preventing state violation of human rights to state protection and promotion of human rights. A senior scholar of a country of the Western Balkans and editor of a publication on human rights joked a few years ago that human rights are today what used to be self-management during the socialist period in Yugoslavia. Human rights are often perceived as an ideology,, resulting in little more than rhetorical phrases invoked in the now prevalent discourse of political correctness. Human rights remain however an essential part of the complex process of European integration of the region. The general lack of appreciation for human rights stems from the public’s unclear understanding of their implications for individuals and the gap between lofty ideals in international convention and the concrete improvement in peoples’ lives.

Non-implementation The formal human rights infrastructure which has emerged in the Western Balkans over the past decade is often exemplary, at least at first glance. Constitutions and laws often routinely and liberally draw from, and in some cases plagiarise, international human rights documents. Much of this framework is the result of external conditionality, rather than domestic commitment to the protection of these rights. As a consequence, this promising base frequently lacks follow up legislation to spell out the details and provide enforcement mechanisms for human rights. The discrepancy between ambitious laws and inadequate implementation has been particularly visible in the field of minority rights, where nationalist resistance often further reduces incentives for implementation.⁹ As international organisations often lack the ability to monitor the implementation of human rights protection, there is little or no systematic pressure to move beyond declarations. This is not to suggest that a declaratory commitment to human rights is meaningless. It creates standards which minorities and other vulnerable groups have used to argue for their rights and it has in some cases significantly shifted the role of the state. In Croatia, for example, the high level of minority rights protection has been increasingly matched by substantial state funding for minorities.¹⁰ At the same time, a human rights framework which is not adapted to a country’s situation, in particular if the state lacks the 9 See Gwen Sasse, “Minority Rights and EU Enlargement: Enlargement : Normative Overstretch or Effective Conditionality”, Gabriel von Toggenburg (ed), Minority Protection and the EU : The Way Forward (Budapest : LGI 2004), pp. 61-84. 10 European Commission, Croatia 2007, Progress Report, Brussels, 6.11.2007, p. 12.

The challenges of democratisation and human rights in the Balkans



means or the institutional structure to support it, often leads to legal commitments that cannot be translated into reality.

Shift from state to society Much of the attention to human rights, both domestically and internationally, has focused on restraining the state and preventing it from committing human rights violations against its own citizens. This focus is understandable considering the events in the region during the 1990s. But this has been accompanied by a shift towards many violations of human rights perpetrated by citizens against other citizens. The mass violence against Serbs in Kosovo in March 2004, the attacks against participants in the gay pride parade in Belgrade in 2001 and more sporadic attacks against vulnerable groups often emanated from extremist groups or radicalised individuals rather than the state.¹¹ This shift requires states to take a role very different from self-restraint. This is not to argue that the state is merely a bystander. Much of the violence which has occurred against ‘others’ has been possible because of the passive and often even permissive attitude of state structures. Often certain types of violence or discrimination remain socially acceptable. While they might be illegal, the state does not treat them on the same footing as other crimes. Thus, the shift in attention from the state to society as perpetrator of human rights violations sheds light on the neutrality of the state in enforcing certain standards and on its will to shift and shape popular attitudes towards xenophobia and other forms of discrimination.

C onc lus ions : a f r ag m e n t e d pic t u r e Democratisation and the protection of human rights are processes, rather than a dichotomy in which democracy exists and human rights are protected or not. Over this last decade, the Western Balkans have consistently and without exception moved towards more democracy and greater human rights protection. The fundamental question for the region is whether the degree of change has been sufficient to allay concerns about backsliding. Has the point of no return been reached ? Here, one cannot draw a uniform picture for the region. Some countries have achieved a degree of democratic stability that makes conflict, state collapse and massive human rights violations seem very unlikely. Democratic stability and the protection of human rights remain vulnerable in other countries, where the main party challenges certain basic values of the democratic system, such as the Radical Party in 11 I have developed this argument in Florian Bieber, “Minority Rights in Practice in South Eastern Europe,” Discussion Paper for the King Baudoin Foundation, 2004.



Florian Bieber

Serbia, or where the state remains contested, as in Bosnia and Herzegovina and Kosovo. These risks are reflected in the concerns of many citizens over renewed conflict or other forms of reversal in the region. A return to all-out war appears extremely unlikely as the region lacks elites in power who promote conflict as a strategy to retain power, as Milošević did in Serbia, and as no government possesses the means for a sustained conflict. Still, the potential for backsliding or at least stagnation remains very real. The reasons for the lack of consolidation are of course largely domestic, as outlined above. At the same time, the pulling power (or lack thereof ) of Euro-atlantic integration is essential to understanding the dynamics of democratisation and reform in the Western Balkans. The transformative framework for 2000 was the unequivocal promise of EU integration. The promise of inclusion has been able to stimulate and underpin reforms across the region which would have been difficult otherwise. The ability to change the domestic agenda has been particularly visible in Croatia, where a political consensus on EU integration and the contingent reforms is broad and no longer challenged. Croatia also highlights the difficulties associated with the approach taken by the EU and other regional institutions. Instruments that rely on conditionality to induce and support reform tend to work slowly. Even nine years after the beginning of the second democratic transition in Croatia, the country still remains at least a few years away from full membership. This drawn-out process for the most prosperous and stable country of the Western Balkans shows how long the time scales can be for EU integration. Furthermore, the ability of individual EU member states to delay (or even block) the accession process has been undermining the credibility of the promise of EU membership underpinning democratic reforms in the region and the grand ‘bargain’ of conditionality and Europeanisation—reforms are rewarded by eventual EU membership. Drawing on the mechanisms developed during the enlargement towards CEE, the EU has not been able to develop an EU member-state building agenda which would increase the incentive and prevent the interference of status issues in the consolidation of democracy and human rights in the Western Balkans. Herein lies the challenge for the next decade, locking in the transformation of the past ten years and making sure that social and political changes bring about open states which consolidate democratic institutions and secure the protection of human rights.

Srdjan Cvijic¹

2.2 A bottom-up approach to democratisation : the role of the Stability Pact in strengthening local democracies and enhancing cross-border co-operation in the Balkans

Th e “Sz e g e d pro c e s s” : t h e or ig i ns of t h e Sta bi l i t y Pac t ’s i n volv e m e n t i n t h e f i e l d of l o c a l de mo c r ac y a n d c ro s s -b or de r c o - ope r at ion Work in the field of local democracy and cross-border co-operation was launched against the background of conflicts, the creation of new nation states on the ruins of the former Yugoslavia and a parallel process of increased centralisation of power in these countries. Fostering sustainable peace and stability in the region was judged to depend heavily on the promotion of democracy at the local level, the overall work on the promotion of human and minority rights, as well as the rehabilitation of multiethnic and multicultural societies. Already at the first meeting of the Regional Table of the Stability Pact, held in Brussels on 16 September 1999, a Work Plan was endorsed which envisaged among the main activities of the Working Table I on Democratisation and Human Rights “[d]evelopment of local democratic government and encouragement of co-operation between local authorities of the region and of other Stability Pact countries ; [p]romotion of ‘best practices’ in

1 Dr. Srdjan Cvijic has been working as an Expert for democratisation and human rights in charge of the Local Democracy and Cross Border Cooperation Task Force, Building Human Capital Core Objective and Media, since 2005. The author would like to thank his predecessors and other stakeholders participating in the work of the Core Group on Local Democracy and Cross Border Cooperation, Steering Committee for Local Democracy and Cross Border Cooperation and the Local Democracy and Cross Border Cooperation Task Force, who made valuable contributions to this article : Mr. Alfonso Zardi Head of the Department of Local Government and Trans Frontier-Cooperation, Dir General 1 — Legal Affairs, Council of Europe ; Ms. Vera Budway, Executive Secretary on Local democracy and Cross Border Cooperation, SP Business Advisory Council Coordinator, Cabinet of the Stability Pact for SEE, from 2002–2004, involved in the SECI since 1996, currently working as the Programme Manager for Corporate Culture and Leadership Development with the Erste Bank Group (Česká spořitelna) in Prague ; Ms Tatjana Pirc, Minister Councillor, Ministry of Foreign Affairs Republic of Slovenia, working in Working Table I of the Stability Pact for SEE from 2000–2003 ; Mr. Haralambos Kontonis, expert on democratisation and human rights, Working Table I of the Stability Pact for SEE, in charge of Local Democracy and Cross Border Cooperation Task Force and other issues from 2003 to 2005, presently working in the Ministry of Foreign Affairs of Greece.



Srdjan Cvijic

municipal governance, public works, and public administration with the broader aim of reforming the civil services, where appropriate.”² Moreover, at the first Regional Table meeting, the methodology and objectives of what was later to be known as the “Szeged process” were agreed. In the initial phase the political significance of the “Szeged process” was considerable, since it served the purpose of establishing institutional links with the FRY that was, due to the nature of Milosevic’s regime and political decisions of the Stability Pact founding partners, initially excluded from participation in the activities of the Stability Pact.³ As long as Yugoslavia remained excluded from the SP, the “Szeged Process” was designed to maintain some kind of an institutional link with Serbia, to help opposition-governed towns, and to support independent media in Serbia and Montenegro. Launched at the Conference that took place 8-9 October 1999 in Szeged (Hungary), the “Szeged process” brought together democratic opposition mayors from the Serbian municipalities and their counterparts from cities from Stability Pact countries/organisations, for a joint evaluation of what the latter could concretely offer the former to improve the situation in their towns. The first Szeged Conference led to clear commitments in favour of the FRY opposition-led cities, and resulted in the twinning of municipalities in Serbia and Montenegro with neighbouring countries. It was judged that these partnerships could present a way to encourage “islands of democracy in Serbia” in developing a democratic political culture, promoting education and providing humanitarian and other basic assistance to the FRY opposition-led municipalities. Moreover, the “Szeged process” was built on the realisation that without democracy in Serbia, with its strategic importance, genuine regional co-operation could hardly be achieved. The follow-up work to the first conference was carried out within the framework of the Stability Pact’s Good Governance Task Force⁴, more concretely one of its sub-entities, the so-called cluster on local government and public administration. The second Conference of the “Szeged Process”, which took place 23–24 March 2000, marked further progress in including Yugoslav municipalities in the activities of the Stability Pact. Hungary led the process by earmarking $1.5 million for this effort. The “Szeged process” was further backed financially by the United States, Canada and Norway, and it created a political momentum that led to significant financial support from the EC to oppositionrun municipalities : the “Energy for Democracy” (EfD) programme (€8.8m) in winter 1999–2000 and the programme “Schools for a democratic Serbia” in July 2000 (€3.8 m). 2 See Work Plan, 16 September 1999, Brussels. http ://www.stabilitypact.org/rt/990916-workplan.asp (accessed on 14 April 2008). 3 FRY was admitted to the SP 26 October 2000, immediately after the 24 September 2000 elections and the subsequent non-violent revolution that brought down Milosevic’s regime on 5 October 2000. 4 The Good Governance Task Force focused on the development of local governments and the establishment of ombudsman institutions and the reform of the public administration. It ceased all its activities at the end of 2002.

A bottom-up approach to democratisation



This mechanism led to the creation of more than 40 “sister city links”, partnerships with cities and local authorities governed by opposition parties in Serbia and the towns and municipalities in neighbouring states. At the second Regional Table of the Stability Pact, held in Thessaloniki, in June 2000, further action on the Szeged Process was taken through the adoption of the “Agenda for Stability”. Finally, in March 2001, within the framework of the so-called “Enhanced Szeged Process”, the partnership programme with Serbian municipalities was extended beyond the original beneficiary FRY to include the local authorities in the former Yugoslav Republic of Macedonia, Bosnia and Herzegovina, and Albania. Later the involvement of the Stability Pact in the field was to cover all countries in the region. Since the June 2001 Brussels Regional Table, Working Table I was to focus on four priority areas, among them interethnic dialogue and cross-border co-operation. The Regional Table meeting concluded that “…trans-frontier co-operation at local level contributes to enhancing good-neighbourly relations and conflict prevention.” The “International Conference on Cross-border Co-operation in SEE : Obstacles and Opportunities for Euroregional Co-operation”, held in Osijek and Bizovac, Croatia, 18– 19 November 2002, was a turning point in the Stability Pact’s involvement in the field. The conference — held under the auspices of the Stability Pact, co-organised by the Danube-Sava-Drava Euroregional co-operation, the CoE and the EastWest Institute — was important as it managed to put local democracy and cross-border co-operation on the map of international efforts in the Balkans. The fourth Regional Table, that took place in December 2002, in Thessaloniki, agreed that local democracy and cross-border cooperation should be one of the Stability Pact’s Core Objectives. This was based on the conviction that systematic co-operation of local actors across national borders provided the practical underpinning to regional co-operation in SEE. The desired outcome was twofold : to achieve economic convergence and social cohesion both within the Balkans and with the EU, and to provide a functional approach to reconciliation in areas affected by the conflicts of the 1990s. The Stability Pact recognised that local capacity building is a key element for effective cross-border cooperation and in doing so the Stability Pact used the experience of the Szeged Process in promoting work in this field. Moreover, the Stability Pact used the valued contribution of the Szeged process in promoting enhanced cross-border co-operation through support for Euroregions in SEE.



Srdjan Cvijic

A g r a dua l i ns t i t u t ion a l i s at ion of t h e Sta bi l i t y Pac t ’s ac t i v it i e s i n t h e f i e l d of l o c a l de mo c r ac y a n d c ro s s -b or de r c o - ope r at ion : Th e C or e Grou p a n d t h e St e e r i ng C om m i t t e e f or L o c a l De mo c r ac y a n d C ro s s B or de r C o - ope r at ion A further step in the development of the activities in the field of local democracy and cross-border co-operation was the launch in 2003 of the Core Group on Local Democracy and Cross Border Cooperation⁵ and the Steering Committee for Local Democracy and Cross Border Cooperation⁶ (hereinafter the Core Group and the Steering Committee). The Stability Pact assumed the responsibility of the two bodies at the beginning of 2003, after the Osijek Conference and the Thessaloniki Regional Table. The intention of the Core Group and the Steering Committee, both operationally supported by the Executive Secretariat for LODECBC, which was operating in the Stability Pact Brussels secretariat within the framework of the Working Table I, was to bring together all relevant actors in the field and work towards the implementation of the goals set at the Stability Pact Regional Tables in 2000 and 2001. Due to the fact that the Stability Pact was essentially an inter-governmental body, and the governments of SEE were its main players, there was a tendency to give preference and more visibility to activities directed at state building at the central government level than at the local government level. While leading the cluster on local governance and public administration within the Task Force, the CoE often faced inertia when trying to convince the EC and the governments of the region⁷ to support reform at local level or to oversee 5 The Core Group was a Stability Pact-led informal group tasked with dealing with technical work in the field. Before being incorporated in the Steering Committee, the Core Group started to meet informally at the beginning of 2003. The purpose of the Core Group was to make the Steering Committee’s involvement in the field of local democracy and cross border cooperation more dynamic. This avant-garde of the international involvement in the field of local democracy and cross border cooperation in the region included the Stability Pact, CoE Department of Local Government and Trans Frontier-Cooperation, East West Institute, as well as the Local Government Initiative of the Open Society Institute (hereinafter LGI). The task of the Core Group was to prepare conferences and regular meetings of the Steering Committee, including other events, as well as to oversee the policy developments in the field of local democracy in the region and offer support to the programmes in the field. 6 The Steering Committee, on the other hand, was charged with offering a political framework for the activities in this field. The Steering Committee was made up of key institutions promoting local democracy and cross border cooperation in the Balkans, namely the members of the Core Group, but also the Congress of Local and Regional Authorities of Europe, the European Commission, other donors, the Association of European Border Regions, non-governmental organisations, SEE government representatives (ministries in charge of the field), Szeged process etc. The Steering Committee for LODECBC was officially launched in April 2003 in Brussels. Elizabeth Rehn, Stability Pact Chairwoman at the time, and Joszef Kozma, Deputy Mayor of Szeged, were chairing and co-chairing the meetings of the Steering Committee. 7 Most often SP beneficiary countries were represented through the institution of a national coordinator, usually officials of the state’s Ministry of Foreign Affairs.

A bottom-up approach to democratisation



cross-border co-operation between local governments. The SEE governments often did not understand how developing “human capacity” at the local level would contribute to democratisation. This problem persisted within the Steering Committee, but as will be demonstrated, it was gradually surmounted in the preparatory phase to the so-called Zagreb Conference in 2004. The political significance of launching the Steering Committee was considerable, as its establishment in 2003 recognised by itself the importance of local governance and cross-border co-operation. One of the important goals of the Steering Committee was to involve the EC more closely in its activities relating to local democracy. While there were concerns that decentralisation could present an obstacle to good governance at the central level due to a complication of governing procedures through dilutions of responsibilities, the involvement of the EC in this field was enhanced over the following period, with positive effects. But the engagement of the EU in developing democracy at the local level was burdened by the dilemma between focusing on strengthening central governments or paying closer attention to government at the local level. The preference for a single strong interlocutor in the countries of the region favoured capacity building at the central government level, often to the detriment of efficient engagement with local government levels in the region. Moreover, bearing in mind the legacy of the 1990s, part of the problem when dealing with local governments resulted directly from the influence of secessionist claims on many of the demands for increased decentralisation in the region. The approach of the CoE on the other hand was clearly in favour of decentralisation as “…[it is] now evident that democracies cannot function properly without a sufficient degree of territorial decentralisation.”⁸ But there was overall consensus among the Core Group that the Stability Pact’s main achievement lay in co-ordinating donors, supporting and developing the Euroregions in SEE, and encouraging the decentralisation process by supporting twinning and training activities. In addition, the fifth Szeged Process Conference of March 2003 reaffirmed the commitment of Hungary’s government to facilitate the latter two areas, and the inaugural meeting of the Steering Committee on 16 April 2003 in Brussels endorsed that strategic direction of SP’s work in this field. The strategy in the field of local democracy and cross-border co-operation consisted of three groups of activities : Euroregions (cross-border co-operation), local capacity building (local democracy), and co-ordination and facilitation (covering both areas). Drafting the strategy in 2003 saw the gradual profiling of two unified but distinct areas that were maintained until the Stability Pact’s phase-out : local democracy and cross-border co-operation. 8 The Council of Europe, “Strengthening local democracy and developing cross-border cooperation in South Eastern Europe : The Council of Europe’s contribution to a comprehensive strategy for stabilisation, democratisation and reconciliation in the region”, Strasbourg, 7 June 2006, p. 1.



Srdjan Cvijic

The Stability Pact’s work on supporting existing Euroregions and establishing new ones required as the first task the drafting of an inventory of existing and emerging Euroregions and cross-border co-operation structures, in order to better assess their needs and create the basis for a viable network of Euroregions in SEE. ⁹ The SP did not see establishing Euroregions as an end in itself, but rather as an instrument to boost cross-border co-operation in SEE in all its forms. Already in 2000, in Sofia, an awareness-raising conference on “The role of Euroregions in promoting good-neighbourly relations” was organised by the CoE within the framework of the Stability Pact. The valuable work of the Association of European Border Regions and the EastWest Institute significantly contributed to this effort. Apart from the work on the establishment of Euroregions, the Stability Pact worked together with the CoE and the SEECP to promote the adoption of a Memorandum of Un9 The SP helped the establishment or supported the following Euroregions in its area of involvement and neighbouring states : Danube 21 Euroregion (Calafat — Romania, Zajecar — Serbia, Vidin — Bulgaria) officially established on January 18, 2002 ; Danube-Cris-Mures-Tisa Euroregion (Autonomous Province of Vojvodina — Serbia, Arad, Resita, Deva, Timisoara — Romania, Kecskemet, Szeged, Solnok, Bekescaba — Hungary) officially established in 1997 ; Danube — Drava — Sava Euroregion (Somogy, Baranya — Hungary, Osijek — Croatia, Novi Sad — Serbia, Tuzla — Bosnia and Herzegovina) officially established on November 28, 1998. The micro-region Osijek (Croatia) Tuzla (Bosnia and Herzegovina) Novi Sad (Serbia) a sub-region within the Danube — Drava — Sava Euroregion ; Drina — Sava — Majevica Euroregion (Bijeljina and the surrounding region of Croatia, Bosnia and Herzegovina and Serbia) the Euroregion was formally established on May 7, 2003 in Brcko ; Southern Adriatic Euroregion (Trebinje, Mostar, Revno, Dubrovnik, Dubrovnik Neretva County, Zupa Dubrovacka, Konavle, Herceg Novi, Kotor — BiH, Croatia and Montenegro) the process of systematic and institutional co-operation in this region was launched on October 2002 ; Ohrid — Prespa co-operation (This triangle of co-operation includes the cross-border regions of the three neighbouring countries having Prespa/Ohrid Lakes as a connective point. This includes the Region of West Macedonia in Greece (Kozani, Kastoria, Florina and Grevena), the Region of Korça in Albania (Districts of Korça, Pogradec, Kolonja and Devoll), and the Municipalities of Bitola, Resen, Prilep and Ohrid, in FYRoM).The official framework of co-operation between regions in the aim of establishing a Euroregion was launched September 2002. Yet, until today the Euroregion was not established due to political reasons related to the name issue of Republic of Macedonia (Constitutional name used by the government in Skopje) and former Yugoslav Republic of Macedonia (the internationally recognised name — UN, EU) The Council of Europe implicitly recognizes this, “…the formal setting-up of the Euroregion, planned in December 2004, was postponed for ‘techical reasons’ [quotation marks in the original text]” (op. cit. 5, p. 11) ; Euroregion Belasica (Kilkis, Gevgelija, Petrich — Bulgaria, FYROM and Greece). This Euroregion was officially established on February 24, 2003 ; Nestos — Mesta Euroregion (Bulgaria and Greece). Nestos — Mesta was formally established on November 3, 1997 by the agreement between the Association of Border Region Nestos (Greece) and the Association of Border Region Mesta (Bulgaria) ; Nis — Skopje — Sofia Euroregion (Serbia, Macedonia, Bulgaria). Activities of Cross-border co-operation between Niš (FRY), Sofia (Bulgaria) and Skopje (FYROM) were formalized on October 26, 2002 by establishing the Euroregion. The Euroregion is grouping together more than 60 municipalities in Bulgaria, Macedonia and Serbia and it was supported by the EastWest Institute and the Council of Europe ; Gnjilane, Presevo, Kumanovo, Trgoviste Cross-Border co-operation project of the East West Institute.

A bottom-up approach to democratisation



derstanding on Enhanced cross-border co-operation in the region which would be based on the CoE’s Outline Convention on Trans Frontier Co-operation between Territorial Communities and its two Protocols. The work in this direction was based on the political decision by the Summit of the SEECP Heads of State and Government held in Skopje on 22–23 February 2001, that encouraged the creation of Euroregions in SEE. In local capacity building, in co-operation with CEE countries, the Stability Pact was engaged in the development of twinning programs in order to apply their experience in the field of decentralisation to the Balkans. It was judged that developing targeted twinning programmes between local authorities from CEE countries and their SEE counterparts could achieve this goal. The Stability Pact also engaged the “Szeged Process” and the Congress of Local and Regional Authorities in Europe to benefit from their experience in this endeavour. However, with respect to twinning municipalities, capacity building and training at the local level, the most important partner of the Stability Pact and the CoE was the Association of Local Democracy Agencies. ALDA worked directly with local communities in assuming greater responsibility for managing their affairs. The association was launched in 1999 as an umbrella organisation of the Congress of Local and Regional Authorities whose goal was to co-ordinate a network of local democracy agencies that were already operating in the region since 1993. What began as a small initiative of the CoE’s Congress of Local and Regional Authorities gradually grew into one of the major European human rights organisations. The CoE report on Strengthening local democracy and developing crossborder co-operation in South Eastern Europe argues with regard to ALDA, “[I]n the decade since its founding, ALDA has grown from a small pilot programme to one of the most important local actors in promoting a stable, democratic South Eastern Europe.”¹⁰ Since the outset ALDA was a member of the Steering Committee of the Stability Pact and it brought into the Stability Pact structure the valuable concept of local democracy agencies. ALDA’s partnership with the Stability Pact was to grow stronger over the years and it was to reach its peak when in 2008 ALDA took over the mandate of the Stability Pact in the field of local democracy and cross-border co-operation. Another important partner of the Stability Pact was PHILIA, the Association of Multiethnic Cities of SEE. PHILIA came about within the framework of the Igman Initiative, a network of over 140 NGOs from Bosnia and Herzegovina, Croatia and Serbia and Montenegro, dedicated to normalising relations between the countries of the Dayton Triangle. The project’s forerunner built co-operation between the cities in the Tuzla-Osijek-Novi Sad triangle, based on the Agreement on Interethnic Tolerance.¹¹ Since this model of cooperation produced very good results, similar circles of co-operation in the entire region of SEE were created. In April 2006 PHILIA was to become an official member of the Sta10 Op. cit. 5, pp. 12–13. 11 See footnote 6.



Srdjan Cvijic

bility Pact structure in the field of local democracy and cross-border co-operation. Other organisations whose creation was affected by this momentum were the Conference of Mayors of Capital Cities of Central and South-Eastern Europe, the Association of Mayors BALSINET, and the Citizens Pact for SEE. The Citizens’ Pact is a network of NGOs and municipalities from the region, whose goal is to contribute to the development of civil society and stability in SEE by strengthening cross-border co-operation and partner relations among local governments and non-governmental organisations. The Citizens’ Pact was founded in July 2000 in response to the SP’s launch in 1999. Many civic organisations welcomed the Stability Pact but believed it focused too much on the governmental level. The Citizens’ Pact sought to complement certain shortcomings of the Stability Pact. The partnership between Stability Pact and the Citizens’ Pact was valuable not only in the field of local democracy and cross-border co-operation, but more generally by bringing the message of the Stability Pact closer to the citizens of the region.¹² Another organisation established under the auspices of the Stability Pact and the CoE was NALAS, created in 2001 following the first Forum of Cities and Regions of SEE held in Skopje in November 2000. NALAS is a network of associations of local authorities of SEE bringing together 12 national associations. During its first years, NALAS functioned as an informal organisation with regular meetings, seminars and training programmes. In July 2005, it became an officially registered association with its headquarters in Strasbourg. Today NALAS has an observer status in the Committee of the Regions of the EU and in the Congress of Local and Regional Authorities of the CoE. The NALAS secretariat, based in Skopje, was established in March 2007 and is responsible for the overall co-ordination and implementation of the activities of the organisation. For co-ordination and facilitation of local democracy and cross-border co-operation projects in the region, the goal of the Stability Pact Steering Committee was to organise regular meetings of “friendly donors” (representing both governments and foundations engaged in the field of local democracy and cross-border co-operation). As at that time the SAp and the main financial instruments of the EC (i.e. CARDS) did not specifically cover this subject, the Stability Pact also acted as a complementary mechanism, bringing together, within its Steering Committee, relevant policy makers in the EU, other governments, international organisations, foundations and other stakeholders in order to consult and provide strategic input to the regional dimension of the programmes — covering the field of local democracy and cross-border co-operation.

12 Thanks to the Citizens Pact and the organisation of the EXIT Festival in Novi Sad SP and the European Commission organised two high profile awareness raising events with the participation of Commissioners Olli Rehn (enlargement) and Janez Potocnik (research). The first event entitled, „Myths and legends about White Schengen List -- When are we going to travel like normal people ?“ took place in July 2006 and the second, “Knowledge Circulation between West Balkans and European Union” took place in 2007.

A bottom-up approach to democratisation



Also in 2003, in co-ordination with the Local Government Initiative (LGI) of the Open Society Institute, the Steering Committee decided to produce a Donors Assistance Mapping Exercise (DAME) on local democracy and cross border co-operation whose goal was to provide an overview of donor activity and ongoing projects in the Balkans. DAME was conceived as a tool for both donors and beneficiaries to help set the priorities of their involvement in the region. The entire exercise was undertaken in co-operation with the OECD and was completed in April 2005. In order to understand the scope of international involvement in support of the development and strengthening of local self-government in SEE, it is useful to consider the main findings of DAME. The exercise demonstrated that the share of specific aid to local government in terms of the total amount of donor assistance to the Stability Pact countries is 10–15%. The largest recipients of local government assistance in the region remain Albania and Serbia and Montenegro with 31% and 22% of the local assistance respectively (Croatia, the former Yugoslav Republic of Macedonia, Romania and Moldova follow, representing 6–13% of all local government assistance). Twenty donor countries were funding local governmental assistance projects in the region, but with large variations in the contributions among these donors : more than two thirds of assistance was provided by Germany, Greece, the EC and the International Development Association of the World Bank. More than one third of local government-related assistance supported water supply and sanitation projects. One fifth of aid funds were spent on education and government/civil society projects. One fourth was spent on other fields such as health and population programmes. These findings guided the Stability Pact and its partners as they intensified their engagement within the Steering Committee and the Core group.

Th e L o c a l De mo c r ac y a n d C ro s s B or de r C o - ope r at ion Ta s k Forc e a n d t h e “ Z ag r e b pro c e s s” The creation of the Core Group and the Steering Committee was a step forward in terms of profiling local democracy and cross border co-operation. The intention was to raise awareness of the subject among central governments and stress the importance of local democracy and increased cross-border co-operation for the democratisation of countries in the region. At the beginning of 2004, it was recognised that more political buy-in and guidance by the SEE governments was required, and this resulted in the decision to organise a ministerial conference on local democracy and cross border co-operation, which the Croatian governments subsequently agreed to host in Zagreb. The resulting SEE Regional Ministerial Conference on “Effective Democratic Governance at Local and Regional Level” was held in Zagreb on 25–26 October 2004. The purpose of this Conference was “to review the current state of local government in the Stability Pact beneficiary countries, to elicit commitments to promoting local democracy, de-



Srdjan Cvijic

centralisation and capacity building, and to encourage partnerships between state authorities at the central and local levels and the respective associations of local authorities.”¹³ The conference led ministers of the region to sign a Memorandum of Understanding on the Commitments of the Ministers Responsible for Local Government of South Eastern Europe, with a commitment to “fully implementing the principles of the European Charter of Local Self-Government.”¹⁴ Furthermore, individual National Work Programmes for Better Local Governance were drafted and adopted. The conference demonstrated that despite their heterogeneous history, size and population, the countries of the region face similar problems when engaging in the reform of democracy at the local level. Moreover it showed that despite the adoption at local level of basic legislation concerning the institutional set-up and responsibilities in line with the European Charter of Local Self-Government, significant problems arise in terms of implementation. For example, merging or splitting municipalities has often been the sole remedy to respond to functional requirements and democratic demand at the local level. In the former Yugoslav Republic of Macedonia for example, the reforms of 1996 led to resizing municipalities in line with European examples : 34 municipalities from the communist period were replaced by 123. Yet in 2004, as a result of the 2001 Ohrid agreement, the territorial reform had to be conducted once again, and this time it required the creation of larger municipalities. In Bosnia and Herzegovina, the exaggerated devolution of powers between cantons in the Federation of BiH “has fostered economic fragmentation, making the development of initiatives more difficult”.¹⁵ Often, decentralisation was led more by purely political rationale leaving aside economic, social and functional considerations. On other occasions, general reorganisations simply emulated European patterns, paying very little attention to administrative costs and possible social tensions. In addition to examining territorial patterns and government levels, the conference also concentrated on the relationships between government levels and the distribution of responsibilities, and on democratic practice at the local level and within local institutions. Particular attention was given to the creation of regional government and to co-operation between local authorities, cross-border co-operation, distribution of responsibilities and powers, financial decentralisation, ethnic divisions, citizen participation and local public service. The process leading up to the Zagreb Conference proved the importance of drafting National Work Programmes for Better Local Government, which were concluded in February 2005, under the supervision of the CoE. As a result the dialogue between central

13 Gerard Marcou and Kenneth Davey (eds.), “Proceedings of the South Eastern Europe Regional Ministerial Conference : Effective Democratic Governance at the Local and Regional Level”, Local Government and Public Service Reform Initiative — the Council of Europe, Budapest, 2005, p. 5. 14 Ibid., p. 135. All countries of the region have ratified the European Charter of Local Self-Government and their constitutions recognise and guarantee local self-government at least at the municipal level. 15 Ibid., p. 25.

A bottom-up approach to democratisation



and local authorities and their associations improved considerably. In the aftermath of the conference the main challenge was to monitor and evaluate the programmes’ implementation on a state-by-state basis. This process eventually led to a second evaluation conference in 2006. Regional players wanted to use this success in implementing the commitments made in Zagreb to stimulate the EC to go beyond its involvement in the field of cross-border cooperation and actively engage in the reform process in the field of local democracy. As a consequence of the Zagreb Conference, the Steering Committee and the Core Group merged into the Local Democracy and Cross Border Cooperation Task Force (hereinafter the Task Force). The Task Force operated from 2005 until the final phase of the Stability Pact. Following previous experience, the Task Force informally divided its activities in two pillars : local democracy and cross-border co-operation. Beyond finalising these Work Programmes for Better Local Government, the real challenge lay in monitoring and evaluating their implementation on a state-by-state basis. This view was reiterated at the CoE’s Congress of Local and Regional Authorities Plenary Session held in Strasbourg in June 2005. Concerns were justified given the uneven progress in the implementation of different Programmes — in some cases progress was evident, while in others there was a clear lack of infrastructure and coordination. The Task Force meeting held in October 2005 in Belgrade and the following meeting of the Task Force held in Brussels on 28 April 2006 dealt with the preparation of the evaluation conference. The follow-up conference to the Zagreb Ministerial Conference was to take place in Skopje at the end of 2006. A thorough evaluation and analysis of measures taken in each country to implement the national Work Programmes and overall progress made since Zagreb was conducted. It involved individual national roundtable debates and a regional roundtable meeting in Durres, Albania, in September 2006, resulting in concrete policy recommendations, individual country reports, and a consolidated report that served as an important tool for the preparation of the ministerial review conference. Finally, on 8-9 November 2006, the Second Ministerial Conference on Effective Democratic Governance at Local and Regional Level in the Balkans was held in Skopje. As an outcome of this conference, ministers of the region adopted a Final Declaration underlining the fundamental importance of strengthening local democracy and further decentralising in the Balkans.

Tr a nsf e r ph a s e : De c e m be r     – Fe brua r y    The Skopje Conference was held just as the Stability Pact entered the final phase of transferring to a more regionally owned structure, the RCC. As a consequence of this process the Task Force was to be transferred into regional ownership.



Srdjan Cvijic

At the end of 2006, ALDA and the Stability Pact agreed to work in synergy to promote local democracy and cross border co-operation in the Balkans. ALDA and its network of local democracy agencies implemented part of the Task Force’s agenda for 2007. The overall goal of the Task Force was to strengthen regional co-operation and links between local authorities, their associations and citizens groups, particularly in border areas. In the final year of the Task Force’s operation the emphasis was placed on activities that enhanced the role of civil society in cross border co-operation processes in the region, including programmes that strengthened democracy at grass-root level. The one-year partnership with ALDA covered a lot of ground towards this goal. The co-operation activities between ALDA and Stability Pact included several partner meetings of the local democracy agencies in the Balkans, as well as activities within the framework of the project “Youth : The Right Direction”, capacity building events with small and medium sized enterprises, and other activities that provided the Balkans access to ALDA’s wider European projects : “Cities for Peace and Democracy” project, EURACTION — Citizens Acting for Europe, the follow-up to the project on youth entrepreneurship and others. As a consequence of the transformation of the Stability Pact into the RCC, a Memorandum of Understanding was signed between the Stability Pact and ALDA on 22 February 2008 providing the basis for ALDA to continue in the legacy of the Stability Pact activities in the area of local democracy and cross-border co-operation. An overall estimate of the success of the Stability Pact’s involvement in the field of local democracy and cross border co-operation remains difficult. Despite many positive results, local self-government in the region remains burdened by numerous problems. It faces a lack of capacity to deal with delegated powers (the ‘brain drain’ from the Balkans is first felt at the local level). Its public services are insufficiently independent. It also suffers from high degrees of corruption, low average public spending at the municipal level (5% in the Balkans, while the European average is 25%), and limited fiscal decentralisation. But due to continued engagement over the past nine years, good governance at the local level has reached a much higher political visibility and commitment from governments in the region. The very fact that, after the Zagreb and Skopje conferences, the principle of subsidiarity was virtually uncontested in governing circles of the SEE countries can be considered a success. Implementation of the Work Programs for Better Local Government and other recommendations of the Zagreb and Skopje conferences remain a task for the future. An appropriate balance must be found between political claims to decentralisation and a purely functional approach, between democratic legitimacy and governability. In order to achieve this, the international community must continue to promote good governance at the local level, strengthen existing forms of cross-border co-operation and develop new ones . Conveying the importance of good governance at the local level for the process of democratization as well as for EU accession requires a more active engagement from the

A bottom-up approach to democratisation



EC. Despite the fact that local democracy and cross-border co-operation are not priorities of the RCC¹⁶, the successful reform process in this field remains heavily dependent on political support from the organisation that will succeed the Stability Pact.

16 “Priority areas for cooperation in the framework of the Regional Cooperation Council are as follows follows:: economic and social development, infrastructure, justice and home affairs, security cooperation, building human capital, as well as parliamentary cooperation as an overarching theme, in the context of these priority areas gender mainstreaming, social cohesion and the involvement of civil society actors will be important factors.” See Statute of the Regional Cooperation Council (RCC), in Annex to the Chairman’s Conclusions : Meeting of the Stability Pact’s Regional Table, Zagreb, 10 May 2007.

Yasha Lange¹

2.3 Media development in South Eastern Europe

At the time the Media Task Force was initiated, the media landscape in SEE looked distinctly different to what it does now. It used to be characterised by governmental control, harassment of journalists, few independent broadcasting media, no commercially viable outlets and a mental trauma going back to the role the media played in the breakup of Yugoslavia. The state-controlled broadcasting channels played a role in igniting the war. They fuelled hatred and forged suspicion among SEE countries. At times they may even have directly incited violence. But it was not only the state-controlled channels that were irresponsible : individual journalists and media outlets went along with the propaganda, and thus helped to set the tone and lay the foundations upon which war could start. After the war ended, a ‘never-again’ feeling prevailed among many journalists in the Balkans. The urge to have ‘independent’ media, to be ‘professional’, was widespread, not just among those professional journalists who already protested when the war was ongoing, but also among those who had silently been a part of it. Unfortunately, development of an independent media takes time. The first problem was that the political situation was not always prepared for a free media and that societies were often not free themselves. In Croatia and Serbia, the state extended a firm grip over the media until at least 1999 and 2000 respectively. Media regulation and legislation did not allow for commercially viable media. There was a moratorium on frequencies, distribution of papers was controlled by a state monopolist, and newsstands were not private companies but state businesses. Furthermore, since markets were not functioning, businesses with political connections had significant influence. Financial independence was impossible, and the media therefore had to rely on sponsors. Decisions were not about the business, but about the message and politics. Another setback was that journalists themselves had to come to grips with what had happened and reorganise and re-invent their profession in a new landscape. They were also operating in an often hostile environment where intimidation, threats, physical assaults and even killings took place. They felt unprotected when attacked, and unsafe and unsupported afterwards. In the meantime, many international organisations tried to change and improve the media situation, creating a large number of ‘media development projects’ to help the media fulfil its role in a democracy. 1 Yasha Lange was the Executive Secretary of the Media Task Force.



Yasha Lange

Th e M e di a Ta s k Forc e This was the background against which the MTF was formed. It aimed to improve the media situation by calling upon governments in SEE to open up the media landscape, adhere to international standards, and maximise the impact of international support. The Media Task Force was designed from the beginning as a co-operative effort. It worked very closely with Foreign Ministries of Stability Pact members, the CoE, the EC, EuropeAid, Open Society Institute and various international NGOs in the field of media (IREX ProMedia, Norwegian People’s Aid, Swedish Helsinki Committee, Press Now) to co-ordinate activities. At the same time, the MTF established Media Working Groups in Bulgaria, Romania, Croatia, Bosnia and Herzegovina, Serbia, the former Yugoslav Republic of Macedonia, Moldova, Albania and Montenegro. Most are comprised of media professionals, members of civil society and government representatives. In some cases, participation of the stateowned media and local authorities was limited. Together with these groups, the MTF generated carefully selected projects and proposed these for funding to interested donor countries. Through the Media Working Groups, the MTF also worked with governmental authorities in SEE to promote necessary measures for legislative reform. In 2002 a first round of projects was reviewed by local experts and the secretariat of the MTF. Eventually, 13 projects were recommended for international support. Of these, 11 were funded with a total amount of over €3 million. Additionally, nine projects were implemented upon the direct suggestion of the Media Working Groups. These projects all addressed legal and regulatory issues. Examples included a broadcasting frequency map for Albania, an access to information law in Montenegro and contractual rights for journalists in Bosnia and Herzegovina. This process was repeated in 2003, 2004 and 2005, bringing the total funds channelled through the MTF approximately €15 million. Examples of these activities included media legislation reform in Montenegro, access to information legislation in various countries, the production of a variety of programmes and documentaries, local training courses for journalists, and support for covering corruption and organised crime issues. Besides the project related work, the MTF and its Secretariat developed into a co-ordinating and advisory body for donor governments on a variety of issues related to media development in SEE, such as : • (bilateral) support to media development, requests for background notes on media-related issues or feedback on running projects : For example, the MTF co-operated closely with the German Foreign Ministry in the selection of media assistance activities. • Development of legal reform : For example, the MTF was closely involved in advising the EC and the CoE on legal developments in the media sector in a variety of countries.

Media development in South Eastern Europe



• Co-ordination of bilateral assistance : The MTF bi-annual meeting provided a venue for bilateral donors to discuss media development, support and projects. The MTF mapped all the assistance provided to the media in SEE on a yearly basis to prevent duplication and to increase co-ordination. And every month, it distributed an update on media legislation developments in all countries. In its work, the MTF focused on three issues in particular : • improving the legal framework ; • supporting quality production and investigative journalism, and • addressing journalistic professionalism. A couple of examples, to illustrate these activities : • In Moldova, the media working group issued statements on the need to decriminalise defamation. The issue was brought up again at a Stability Pact conference in Chisinau. Eventually, the government did decriminalise defamation. • In the former Yugoslav Republic of Macedonia, the MTF initiated the drafting of a new broadcasting law. Under the auspices of the MTF, support was provided to a local NGO to prepare a first draft in cooperation with all those concerned. The draft was reviewed by experts from the CoE and submitted to the government. Eventually the former Yugoslav Republic of Macedonia adopted a new broadcasting law in line with European standards. • Over 200 hours of television co-productions were made with support through the MTF. Video-letters — a series of programmes reconciling friends and families separated during the war — was broadcast on public channels in 6 countries of former Yugoslavia at the same time. • In the framework of the Stability Pact, regional conferences were organised on crucial issues such as access to information, broadcasting legislation and media ownership concentration.

M e di a de v e l opi ng While implementing these projects and co-ordinating media assistance, the market developed and political reforms took place. As a consequence, the media landscape in SEE has become increasingly free and professional, as well as economically viable. New conglomerates entered the market. Investments were made — including from foreign media companies. A number of strong conglomerates with access to capital entered the market, leading at times to the closure of previous media outlets and consequently to



Yasha Lange

a concentration of ownership in some countries. This raised fears of a renewed decline in diversity, this time caused by the market. However, the foreign capital also brought increased professional and technical capacity, political independence and better working conditions for the employees of the foreign-owned media outlets. Overall the transition has been positive. Associations and unions have defended the interests of the media, both for business and professional purposes. Trade unions for journalists were not always united or sufficiently strong to defend the interests of their members, in particular concerning working conditions and payment. Professional associations of broadcasters and publishers’ unions however were fairly successful in lobbying for their interests in distribution, transmission, fees and taxes. Leading commercial stations that focused on entertainment, broadcasting a lot of foreign programmes and some domestic production, started to dominate the television market. The former state broadcasters grew into public channels and now provide, according to a recent regional study, balanced news. The limited circulation of some newspapers and the strong position of others led to takeovers, mergers and closures, which was a necessary consolidation resulting in a mix of some high-circulation tabloids and several lower-circulation broadsheets. Internet penetration took off in the past two years with broadband penetrations in double digits. The number of webjournals, blogs and internet radio stations mushroomed in the past years. For better or for worse, the media landscape in SEE increasingly looks like the media landscape in Western Europe. In response to these developments, the decision was taken to consider the mission of the MTF as accomplished. There are certainly some media outlets in SEE that remain sub-standard, the legal framework can always be improved, and professional ethics can be debated. But this is also the case in Western Europe. In short, the added value of tackling these issues collectively and in collaboration on a regional level had been reduced, while remaining issues can be addressed on the national level.

L e s s ons l e a r n e d Looking back, I believe that the MTF played an important role in this development, by bringing protagonists together, collectively deciding on strategies and activities, setting the agenda for media development and ensuring the issues stayed high on the international agenda. Still, there are many lessons to be learnt. To name a few, donor co-ordination was proven a conditio sine qua non. It provides synergy and cost-effectiveness, increases impact, prevents duplication, and allows for a division of labour according to capacities. In prac-

Media development in South Eastern Europe



tice however, it remains difficult to operate even with a clear mandate and willingness. The MTF could work on common strategies, but not always on common projects. Local partners have played an essential and admirable role. Yet the large number of different organisations also proved confusing to some bilateral donors. Choosing partners remains essential. More attention should have been given to including the media industry, rather than media NGOs. Reform of the legal framework has been most effective when it combined the involvement of experts, local pressure groups, government officials and international organisations. The combination of the leverage of the EC, the technical expertise of the CoE and the presence of the OSCE on-the-ground worked especially well. Too much emphasis on short term vocational training can result in fatigue. It was too often seen as an easy solution for a difficult problem (unwilling owners, lack of decent salaries, too little time). Many international organisations contributed to the development of the media in SEE, and in particular domestic organisations made it work in the end. Through this co-operation, alternative political voices were heard, independent media and journalists could remain engaged, pressure to reform state broadcasters was translated into action, access to information laws were adopted, journalists were increasingly protected, and the market opened up. In a relatively short period of time, the media in SEE had made a remarkably successful transition.

Sonja Lokar¹

2.4 The shift in the approach of international actors to the situation of women in conflict and post-conflict regions 1999–2008 : the case of the Balkans

When the Stability Pact came into being in July 1999, international actors involved in the stabilisation of the post-war Balkans did not have as clear a perception of the possible new, active role of women in conflict and post-conflict areas as they have now. The Dayton Peace Agreement of 1995 and the Kosovo Peace Accords² of 1999 were drafted and signed without any representation of the women of the region. This, despite the fact that women pacifists and other women’s groups were well connected and organised. They contributed, for example, to the Beijing 4t UN World Conference on Women, where, for the first time ever, rape in war was defined as a crime against humanity, and UN member states committed themselves to count on the potential of women to prevent, appease and take an active role in overcoming the consequences of armed conflicts³. The Stability Pact was put together only four years after this conference. The appeal for the establishment of a Gender Task Force (GTF) under the auspices of the Stability Pact was launched in July 1999, when the UN Security Council Resolution 1325, which defined more closely the obligations of the member states and other actors with regard to the role of the women in armed conflicts, was still being drafted⁴. The appeal gathered 150 signatures in 10 days, across 10 countries of the CEE and SEE region (Slovenia, Hungary, Bulgaria, Romania, Croatia, Bosnia and Herzegovina, The Former Yugoslav Republic of Macedonia, FRY, Albania, Greece). Signatories included civil society women’s organisations, women’s party organisations, women parliamentarians, and even some powerful men, such as European Commissioner Laszlo Kovács. Enshrined in the appeal is a clear vision not only of the new role of women in the region and the manner in which this new role could materialise, but also of the new politics and a new perspective for this part of the world. In its last part, this short appeal says : 1 Sonja Lokar was Chairwoman of the Gender Task Force. 2 See Kvinna till Kvinna gender analysis of the Dayton Peace Agreement in 2000: 2000 : Engendering the Peace Process. A Gender Approach to Dayton- and Beyond www.kvinnatillkvinna.se/english/news/2003/030820_tenyears.htm — 34k 3 Beijing Declaration and Platform for Action, Fourth World Conference on Women, 15 September 1995, A/CONF.177/20 (1995) and A/CONF.177/20/Add.1 (1995). Critical area of concern E : Women in armed conclicts 4 UN Security Council Resolution 1325 — www.unfpa.org/women/1325.htm -



Sonja Lokar

“We the undersigned no longer accept that women of this region are victims of predominantly male politics. We demand and accept — as a vital part of civil society — the responsibility to work together with representatives of our governments and of the international community towards lasting peace, good neighbourly relations and stability for our individual countries as well as for SEE, as conditions for further European integration. Women are the stakeholders and have a vital interest in peace, prosperity and sustainable human development of this region, which cannot be achieved without the active participation of more than half its population. Therefore we demand : • Women to be equal partners in political decision making at all levels in development and implementation of the Stability Pact and that all components of the Stability Pact include the gender aspect. • That national governments are held responsible for the implementation of the Convention on the Elimination of All Forms of Discrimination Against Women (CEDAW) and other international instruments they have signed which guarantee equality between men and women and respect for women’s economic, political, social and personal human rights. • Active promotion of the gradual political empowerment of women through the electoral laws in all the countries of this region. • A shared strategy for development of democratisation and human rights, including minority rights, civil society building, protection and return of refugees and displaced persons, the rights of children, especially the right to an education, in the spirit of mutual respect and tolerance in accordance with European standards, and social rights which enable men and women to combine their professional and private lives…” This appeal was a positive surprise for the Sarajevo Stability Pact summit, and a group of women who launched it were invited to meet with the first Stability Pact Special Co-ordinator, Bodo Hombach. It seemed initially that it would be easy to incorporate this initiative formally in the Stability Pact structure. The autumn of 1999 showed that this was not the case, even though the aim was ultimately achieved. The civil society initiators from SEE came together, again with the support of the OSCE mission in Sarajevo and the CEE Network for Gender Issues, in October 1999 in Budapest, in order to analyse the situation of women, to make an assessment of their crucial needs, to decide a strategy and to set a clear focus. For them, it was obvious that the overall political, economic, social and security situation of women was disastrous. The economic and social rights of women were under attack, and violence against women was on the rise due either to transition “shock therapies”, or to wars or spill-over effects from wars. Women felt that they had to set an ambitious agenda of transformative politics, where the politics of legalised robbery, violent conflict and exclusion were replaced by

The shift in the approach of international actors to the situation of women



politics of reconciliation, democratisation, sustainable development, inclusion and mutual respect. Limited resources forced them to focus on the crux of the problem. They concluded that the main issue was political empowerment of women. It took a lot of effort and lobbying by organised women from the SEE region, influential political women in the EU, and the OSCE mission to Bosnia and Herzegovina, before this initiative got the green light. The main barrier for the Stability Pact was the question of legitimacy of women’s representation. So the GTF initiators were asked to bring the representatives of SEE national governments into the process. This was a very difficult task, as at this time the governments of the region were nearly all male, with no awareness of gender equality trends in the EU, and often with a strong aversion to NGO women’s activities in their countries. Romania, Croatia, the former Yugoslav Republic of Macedonia and Albania were the only countries that had a state gender equality mechanism. Not one of the war-ridden countries had a gender equality body within its parliament, and the average proportion of women in SEE state parliaments was 7%. Nevertheless the prospect of a different, more peaceful, democratic and prosperous European future motivated all the governments of SEE strongly enough to consent to co-operation within the GTF (with the exception of Serbia, where Milosevic was still in power). In November 1999, the GTF was formally established as a working body of Working Table I, when I was nominated its chair. The inaugural meeting was held in Sarajevo, under the auspices of the OSCE mission to Bosnia and Herzegovina. Around the table were the representatives of the governments of several Stability Pact donor countries, representatives of the governments and civil society women’s organisations from most of the countries of SEE as well as the representatives of the most important international organisations with a gender equality mandate such as OSCE, ODIHR, UNDP, UNIFEM, and the World Bank. The initiative for the GTF would never have been possible had the women’s movements in SEE not reached a level of serious regional and global co-operation years before, not only within women groups in civil society but also regarding their integration in the global political associations of women, such as Socialist International Women (SIW), and the European Trade Union Confederation. The social democratic CEE Network for Gender Issues had been active in the region since 1994, and women’s networks existed in trade unions operating in transition countries since 1997. The second decisive factor was the tireless support and gender equality approach of the OSCE mission to Bosnia and Herzegovina, where Ambassador Robert Barry as Head of Mission and Elisabeth Rasmusson as head of the mission’s democratisation department started a very original Women in Politics programme. Their efforts brought together active women from all walks of life and in 1998 succeeded in enacting the first 30% quota regulations in the provisional electoral legislation of Bosnia and Herzegovina, making the percentage of women MPs jump from 3% to 26%.



Sonja Lokar

Th e t r ic k y qu e s t ion of i ns t i t u t ion a l i s at ion The GTF was formally established in Sarajevo in November 1999. Its offices hosted its chair, its co-chair and even a small board with a consultative function. It had focal points from NGOs, from governments, and as from 2001, from the parliaments of 12 countries and territories in the region. But it had no core funds for institutionalised, strategic work. It was a regionally owned and region-based initiative from its inception, albeit with no serious support from the governments of the region. It had different random or issue-based supporters but never secured sponsorship from any donor government or international organisation, as was the case with other task forces such as for Youth and Education, Media and Trafficking. These peculiarities had significant negative, but also positive, consequences. For example, when preparing its first action plan, from November 1999 till March 2000, the GTF had to rely on its first supporters, the CEE Network for Gender Issues with its seat in Budapest and the OSCE mission in Sarajevo. The preparation of this plan presented at the UNECE Beijing + 5 Conference in Geneva, in January 2000 and then to the Stability Pact donors in March 2000, was funded by a small grant from UNIFEM. Its first project-based funds came from UNIFEM for a strategic women’s conference in Serbia in February 2000. Donor countries’ funding came only after the first Stability Pact donor’s conference in March 2000. The main donors for GTF core operations were Norway, Denmark, and Italy. The first GTF Regional office was based in Sarajevo, and operated from mid 2000 till mid 2002. Since mid 2002 the GTF Regional Centre for Gender Equality is based in Zagreb. The office space for the Regional Centre has been provided in kind by the Croatian Government since 2003. Attempts to develop national offices in countries of the SEE region were not very successful. Nevertheless GTF national offices were founded in Ljubljana (Chair’s Office), in Skopje and in Sarajevo. Until it moved its regional office to Zagreb, the GTF did not have its own legal status. It was registered as a Croatian non-governmental organisation in 2002, in order to legally accept, manage and account for its grants. The GTF had to fundraise and improvise. It could not keep any permanent professional staff in the region apart from the Chair and Executive Director ; other staff was either short-term project staff, or volunteers and interns. The most harmful effect of project based funding was the lack of funding for regular regional strategy meetings and for the meetings of the board, after 2004. Likewise the loss of momentum for the best GTF regional projects due to lack of continued funding and national and regional activity is causing a backlash against positive gender advances throughout the region. Political empowerment of women is a long-term process. It has been possible for one generation of women to be empowered and become active citizens and activists in NGOs, trade unions and political parties, parliaments and governments, supported by three rounds of “Women Can Do It” trainings from 2000–2004 of the

The shift in the approach of international actors to the situation of women



GTF. But the next generation does not automatically follow. A strategic regional intervention needs to repeat the same exercise of awareness raising and capacity building again and again, to ensure that the national women’s movements will continue to exist. These movements must grow in numbers, and impact and influence women in society and in politics. But donor countries did not share this opinion and mostly did not agree to support continuous empowerment work. This is why in some countries’ national women’s movements are weak or could not become strong enough to bring about significant change. There was an advantage to this predicament, however. Our partners in the field could never become lethargic. Their work was based on hundreds of women activists regularly co-operating, on thousands of volunteers, on imagination and innovation of the women who had to work miracles in order to make things change. It had to be based on the permanent work of all involved, to enlarge the GTF’s outreach and power base, including advocacy and lobbying. Women activists who the day before were just human rights protesters on the streets, or seminar facilitators, became local councillors, mayors of major cities, MPs, MEPs and ministers.⁵ For the future success of the gender equality efforts in this region, it is crucial to transform the GTF into a formal regional institution for gender mainstreaming led by women activists with the stable support of the EC and of all governments and parliaments of the region, which will operate until the entire SEE region is integrated into the EU. The GTF should remain active and strong within the Stability Pact and within the future SEE Regional Co-operation Council structure, under the auspices of the EU. In this process the GTF, gradually accepted as a new EU regional institution for supporting gender equality in EU neighbouring countries in SEE, should play a crucial role, as a regional think tank, regional, training and advocacy centre dealing with gender equality, and as an organised regional point of exchange of best practices on local, national, regional, EU and UN levels. The Conference suggests to all the donors in the Stability Pact to enable the normal functioning of the GTF Regional Centre in Zagreb, as well as a continuation of its regional projects, in order to make possible the smooth transfer of the GTF into the new EU institutional environment. From Conclusions 1st SEE Women’s Ministerial Conference, July 5, 2006 All these efforts to become a formal and full-fledged institution for gender equality work within the Stability Pact were worthwhile and showed remarkable results. With the political clout of the Stability Pact, the GTF could bring together EU and SEE governments, parliaments, state gender equality mechanisms, political parties, trade unions, NGOs and experts from across borders as across ethnic and political divisions. The visibility of our work was much greater than it would have been without the GTF’s status 5 The First SEE Women Ministerial conference, coorganized by the GTF and the Croatian Foreign Ministry was held in Dubrovnik in July 2006, and was crucial for the successful survival of the GTF in the process of the transfer of the SP mandate to the SEECP and RCC.



Sonja Lokar

within the Stability Pact. It was easy to approach donor countries, furthermore as they all gathered at Regional Table meetings, making fundraising efforts more efficient and cost effective. It gave organised women in all the countries of SEE direct access to the highest international and national decision makers. The grants for region-wide projects enabled women activists to carry out more successful work at national and local level. With small investments from donor countries, the region as a whole started slowly but steadily to catch up on EU gender equality standards.

GT F i n novat ions Understanding the process, local ownership, home grown projects The success of any social or political endeavour is local ownership. This meant gaining a clear understanding of the needs and priorities of those for whom we were working. It was crucial that a number of donors trusted this regionally-made analysis and supported GTF regional priorities and projects. Some donors suggested dealing only with trafficking or with gender mainstreaming. To which, having done our homework and prepared our own plan of action with local women activists and politicians, we answered no. We would not deal with women as victims, even if we agreed and knew that many of them, objectively speaking, were victims. We wanted to create an opportunity for all women to become agents of change. And no, we would not do “gender mainstreaming”. How could we where there was no stream ? No nationwide women’s movements, nearly no gender aware women in politics, no gender equality state mechanisms, no legislation to support gender equality ? First, we had to create this stream by bringing larger numbers of well-trained women into politics and by transforming our legal and institutional framework.

Clear focus Before 1999, international donors never really thought to empower women in a way that they could take on their share of political power. They invested in bringing to life women’s NGOs, or in creating state gender equality machineries, or in disseminating information about the existing international commitments on gender equality. Some international political foundations also offered a sort of gender programme for political parties. But all in all these efforts were not co-ordinated or did not aim to bring women in big numbers quickly to leading political positions. In the GTF strategy, political empowerment of women and their open and persistent request for equal participation was seen as the first step. The goal was set high : to change the political culture and the pattern of development of the countries of SEE.

The shift in the approach of international actors to the situation of women



Creating innovative tools in political and social action Since its inception, the GTF transferred best EU or global practices and exchanged best solutions within the region. The task of getting women to power was difficult and took several steps. The GTF built on the empowerment training model “Women Can Do It” from the Women of the Norwegian Labour Party, and adapted it to SEE conditions to sensitise women from NGOs, trade unions, and political parties to why power matters and how it should be used. It took a special effort to help women organise and become stronger within political parties. Here, the GTF trained gender-sensitive SEE women politicians and activists, in order to subsequently work as facilitators with nearly all the SEE parliamentary political parties. It took even more time and effort to persuade women activists and politicians to start co-operating across the divisions of ethnicity, religion, political orientation, different spheres of public life, and personal competition. These efforts have however resulted in the formation of long-term coalitions such as the Macedonian Women’s Lobby in the former Yugoslav Republic of Macedonia, the Coalition for Parity in Slovenia, or the Women’s Network of Politicians, NGO, trade union activists and journalists in Serbia. The GTF also invented parallel women’s electoral campaigns and used them to get quota regulations enacted in the former Yugoslav Republic of Macedonia, in Serbia, and in Slovenia. Political parties are campaigning from one election to the other, but the intensity of the campaigns is not the same one day after one election as it is a year before the next. The GTF discovered that political parties are more prone to listen to organised women’s pressure groups close to election times. In consequence, organised women’s national movements prepared their own pre-electoral strategies and started to advocate gender quotas, gender related electoral party promises, gender aware women candidates on eligible positions exactly in the natural rhythm of party electoral campaigns. This is how, for example, women’s networks in Serbia entered parliament and the government after 2000 with the full fledged action plan for gender equality which was later successfully implemented from 2000 till 2006. The same was true for women in the former Yugoslav Republic of Macedonia. In four intense parallel electoral campaigns a new national women’s movement, organised and supported by the GTF, succeeded in enacting strict quota rules, and pushing the representation of women in the parliament from 6% in 2000 to 30 % in 2008. These newly elected women parliamentarians started to change the laws on violence against women, they prevented paid family leave from being shortened and put in place renewed universal prevention of breast and uterus cancer. Since 2003 the GTF has been developing a special methodology for gender mainstreaming in the work of parliamentarians. It helps women and men in the legislature to jointly understand and take into account gender aspects of the legislation or policies they are promoting. In 2003, women activists from the trade unions and NGOs entered organised social dialogue for the first time, trying to improve the situation of working



Sonja Lokar

women. They were later joined by men that shared their convictions. Special care in the work of the GTF was given to raising awareness and building the capacity of the Roma and other minority women. Results — is the glass half empty or half full ? National indicators of gender equality in 12 SEE countries/ territories in the period July 1999 /April 2008

1999

2008

CEDAW ratified

8

12

Law on gender equality/anti-discrimination law enacted

0

11

National gender equality mechanism in place

4

12

Quota enacted in electoral legislation Average percentage of women in lower or single houses of the national parliaments

1

5

7%

17%

Despite legal frameworks for gender equality having been put in place, their results remain modest.

Women in national parliaments  When the intensive awareness raising work of the GTF was no longer financially supported, the representation of women in the national parliaments, after the jump in 2000–2004, started to dwindle (BiH and Bulgaria already had higher women’s representation in their parliaments), or to stagnate (in Albania, Croatia, Hungary, Romania, Montenegro and Slovenia). The same goes for the representation of women ministers. Lower or single house elections

Seats

Women

Current % of women in parliaments

Albania

07/2005

140

10

7,10

Bosnia Herzegovina

10/2006

42

5

11,90

Bulgaria

06/2005

239

51

21,30

Croatia

11/2007

153

33

21,50

Hungary

04/2006

386

40

10,40

The former Yugoslav Republic of Macedonia

07/2006

120

36

30,00

Country/Territory

Moldova

03/2005

101

21

20,80

Romania

11/2004

329

31

9,42

Serbia

01/2007

249

51

20,40

Montenegro

09/2006

81

10

12,30



The shift in the approach of international actors to the situation of women Lower or single house elections

Country/Territory

Seats

Women

Current % of women in parliaments

Slovenia

10/2004

90

12

13,30

Kosovo

03/2008

120

36

30,00

Average

17,4%

Percentage of women ministers 1999/2008 1999 COUNTRIES Albania Bosnia Herzegovina Bulgaria Croatia Kosovo the former Yugoslav Republic of Macedonia Moldova Romania Serbia Montenegro Slovenia Average

2008

Women/Total ministries

Percentage (%)

Women/Total ministries

Percentage (%)

2/17 0/12 3/16 2/18 NA 5/26 0/20 1/15 4/36 0/22 1/20 18/202

11,8 0,0 18,8 11,1 NA 19,2 0,0 6,7 11,1 0,0 5,0 8,9%

1/16 0/10 4/18 4/18 2/16 3/23 6/21 0/17 4/25 1/16 3/18 28/198

6,3 0,0 22,2 22,2 12,5 13,0 28,6 0,0 16,0 6,3 16,7 14,1%

I n c onc lus ion With nine years of hindsight one can see how visionary the GTF initiative was. It led to the first involvement of an organised women’s agency as a formal part of a regional intergovernmental effort to stabilise a devastated post-conflict area in the heart of Europe. But its mission is not finished. There is a long way to go from improving the legal framework to changing practices and mentalities, or from a critical mass of women in the legislative powers of two SEE countries to gender parity in all decision making bodies of all SEE countries. The time is still to come when brave women parliamentarians will no longer need to risk their political career in order to safeguard the next step forward towards equality of women in politics. The best proof of the GTF’s success and efficiency lies in its renewal. Gender mainstreaming will have its rightful place within the SEECP and the RCC, which are replacing the outgoing Stability Pact, and the GTF will remain its main implementing tool in the future.

Petra Bläss · Talia Boati¹

2.5 Parliamentary co-operation in the framework of the Stability Pact Functioning and efficient democratic processes are a prerequisite for political stability, economic development, social cohesion and overall trust in democratic institutions. However, despite the recognition that parliaments, as law making bodies and the highest representatives of the people, are an essential component of democratic reforms and European integration processes, for a number of years international assistance to SEE has mostly focused on governments. It has gradually become more recognised that in order to increase the efficiency and transparency of the governing structures in the region, more attention should be directed towards building legislative capacities and to enhancing parliamentary co-operation between countries. Since 1999, the Stability Pact’s partners undertook several projects aimed at helping members of parliaments to better fulfil their mandates and at promoting inter-parliamentary contacts. The key intergovernmental actors in this effort have been the European Parliament², the Parliamentary Assembly of the Council of Europe³ and the Parliamentary Assembly of the Organization for Security and Co-operation in Europe (OSCE)⁴, which together constituted the Parliamentary Troika on the Stability Pact. The Troika organised annual conferences with SEE parliamentarians and parliamentary staff.⁵ A relevant role was also played by OSCE field missions, which promoted regional co-operation through their parliamentary support programmes. In addition, several prominent donors, most notably the United States of America, Sweden, Germany, the Netherlands and Switzerland, have been active in this field, thus guaranteeing the implementation of a number of complementary projects. These projects were initiated within the Stability Pact and were usually run by various NGOs. Their activities ranged from the development of parliamentary tools for effective legislation and the establishment of closer relations with NGOs in the phase of drafting legislation to inter-parliamentary trainings, visits and exchange programmes, as well as MP Networks in SEE. Parliamentarians from each SEE country have welcomed these activities. The experi-

1 Petra Bläss was Senior Advisor on Parliamentary Co-operation at the Stability Pact; Pact ; Dr. Talia Boati was Expert on Parliamentary Co-operation in Working Table I of the Stability Pact Secretariat. 2 www.europarl.europa.eu 3 www.assembly.coe.int 4 www.oscepa.org 5 http ://www.stabilitypact.org/wt1/Troika.asp



Petra Bläss · Talia Boati

ence gained as a result of these projects led MPs and senior parliamentary officials from the region to acknowledge the need to improve the co-ordination of planned projects and to propose joint, targeted projects. This task was undertaken from 2004 to mid–2007 by the Stability Pact via its Task Force on Parliamentary Co-operation⁶, which brought together representatives from the SEE Parliaments, the Parliamentary Troika on the Stability Pact, donors, international organisations, foundations and NGOs active in the field of parliamentary co-operation. Their responsibility was to ensure co-ordination of enhanced parliamentary co-operation activities while further advancing the parliamentary dimension of the Stability Pact initiatives, in a cross-table and cross-task force approach. The engagement of the Stability Pact Parliamentary Co-operation Task Force led to an increased flow of bilateral and regional parliamentary co-operation activities, fuelled by the common perspective of a full EuroAtlantic integration process. Consultations with partners led to the identification of the following priorities : • Strengthening the democratic efficiency and effectiveness of parliaments in SEE ; • Promoting bilateral and multilateral co-operation among parliaments in SEE ; • Contributing to bringing the parliamentary structures of the region closer to the EU. In order to respond to these challenges, the Stability Pact Parliamentary Co-operation Task Force engaged actively through : • Capacity-building seminars and initiatives for MPs and parliamentary staff with a variety of partners such as the OSCE, the International Monetary Fund, the National Democratic Institute, the Friedrich Ebert Stiftung, the East West Parliamentary Practice Project etc ; • Support to regionally initiated parliamentary co-operation structures such as the Western Balkans COSAP, the Cetinje Parliamentary Forum and the SEE Women MPs network ; • Promotion of internal reforms bringing the SEE parliamentary structures closer to the EU through activities in the framework of the Parliamentary Troika and other regionally owned structures. A strong regional demand for support mechanisms to be put in place in order to increase the efficiency of parliaments was acknowledged. Parliaments of the region face many similar challenges in their work. A long-term regional approach was therefore seen as appropriate. Assistance was aimed at providing advice on targeted common issues, while at the same time taking into consideration the specific legislative needs of each country. 6 See the links to national parliaments in http http://www.stabilitypact.org/parliament/default.asp ://www.stabilitypact.org/parliament/default.asp

Parliamentary co-operation in the framework of the Stability Pact



In this framework, programmes provided assistance with a) drafting, adopting and ratifying legislation and controlling its implementation ; b) assistance to committees in preparing and reviewing legislation ; c) effective use of parliamentary procedures ; d) developing expertise in consensus building ; e) increasing the professional skills of politically neutral parliamentary staff ; f ) creating effective links between elected officials and their constituencies ; g) developing a nexus between civil society and parliaments and h) assistance in finding solutions to problems of a technical nature. The Stability Pact Parliamentary Co-operation Task Force focussed its attention on : a) promoting the harmonisation of legislation with EU standards ; b) enhancing the exchange of information on parliamentary co-operation activities between the SEE parliaments and beyond ; c) developing and strengthening links between committees of different parliaments dealing with similar issues ; d) institutionalising training programmes for newly elected MPs and for parliamentary staff and e) promoting twinning between parliaments within the region and between SEE parliaments and EU Parliaments, especially with new EU member states, taking advantage of their transformation experiences. Over time, following the launch of the regional ownership process at the Stability Pact Regional Table in Sofia in 2005, SEE parliaments started to express a stronger interest in having a Secretariat for Parliamentary Co-operation based in one of the parliaments of the region. To this end, a call for proposals was launched at the end of 2006 and following the evaluation of the applications, the National Assembly of Bulgaria was selected to host the Secretariat for Parliamentary Co-operation in SEE. The Regional Secretariat, which has taken over the role of the Parliamentary Co-operation Task Force, and has expanded its mandate, became fully operational in autumn 2007.

Pol i t ic a l gu i da nc e : SE EC P M e e t i ng s of t h e P r e s i de n t s of Pa r l i a m e n t A sort of political guidance for overall parliamentary co-operation activities in SEE has been provided by the SEECP, particularly through the meetings of SEECP Speakers of Parliaments. The Meetings of the SEECP Speakers of Parliament have been taking place since 1997, and are considered the highest-ranking summit of parliamentary diplomacy in the region. In their final joint statements, Speakers have always accentuated the unique function and increasing responsibility of the national parliaments as the most genuine expressions of the common will of the peoples of the region as well as their commitments to the values of good neighbourly relations, democratisation, the establishment of rule of law and respect for human rights. They also regularly reiterate the common goal of further Euro-Atlantic integration, and they reaffirm the need to promote regional ownership and co-operation. In addition, a number of fora for parliamentary co-operation have developed in recent years, within the framework of the Stability Pact as well as outside.



Petra Bläss · Talia Boati

A r e g ion a l ly ow n e d i n i t i at i v e : t h e C e t i n j e Pa r l i a m e n ta r y Foru m The Cetinje Parliamentary Forum is an initiative designed to encourage and promote parliamentary dialogue and co-operation between SEE Parliaments.⁷ It was initially undertaken by the former Assembly of Serbia and Montenegro and, since 2004, by the Parliament of Montenegro. In its first days, the initiative was funded by the Parliament of Montenegro, the OSCE and the Government of the United Kingdom. Over time it has developed as an important pillar of sustainable regional co-operation, especially at committee level. The participating countries agreed on the necessity of developing inter-parliamentary co-operation between countries of the region and designed the Cetinje Parliamentary Forum as an appropriate tool. The aims of the initiative are : a) to promote regional co-operation in the fields of regional states’ interests in keeping up with the principles applicable in the process of EU integration as a path towards realisation of a policy of peace, co-operation and development in the region ; b) to provide a forum for the exchange of experiences and best practices in fields of common interest, such as defence and security, environment, and judicial reform processes ; c) to strengthen the fight against organised crime, terrorism, trafficking, and drugs smuggling in order to promote regional security ; d) to foster the economic development of the region ; e) to promote economic co-operation through joint projects in infrastructure and environmental protection ; f ) to advance co-operation in social, cultural and educational fields and in all the other domains that are important to the citizens of the region ; g) to co-operate and support a joint approach in dealing with all other topics that are of interest for the region ; h) to examine questions and interpellations posed by parliaments from third countries and international institutions and organisations.⁸ Although the forum has been forced to slow down its activities due to financial constraints, and because of the political situation that led to the dissolution of the Assembly of Serbia and Montenegro, seven meetings have taken place so far. They focussed on issues such as foreign affairs and European integration, defence and security, economy, education and environment. The debates analysed the deficiencies observed while drafting and implementing legislation, and explored the exchange of best practices and experiences. The Cetinje Parliamentary Forum has proven to be an effective instrument to promote dialogue and to improve existing legislation. Exchanges at the level of parliamentary committees and beyond –e.g. at the level of the Presidents of Parliament and/or Secretaries of Parliamentary Committees and expert associates — will therefore be promoted further.

7 www.skupstina.cg.yu 8 Joint Statement adopted at the Second Meeting of the Presidents and Speakers of the Parliaments of the Countries of the Region at the Cetinje Parliamentary Forum, Cetinje, May 31, 2005

Parliamentary co-operation in the framework of the Stability Pact



A k e y P i l l a r : t h e C on f e r e nc e of t h e Eu rope a n I n t e g r at ion Pa r l i a m e n ta r y C om m i t t e e s of t h e Stat e s pa r t ic i pat i ng i n t h e Sta bi l i s at ion a n d A s s o c i at ion P ro c e s s ( We s t e r n Ba l k a ns C OS A P) A clear and uncontested perspective of full membership in the EU represents the most needed and the most effective incentive to pursuing and accomplishing reforms in SEE countries, thus promoting regional co-operation and granting regional stability and internal democratic, economic and social development. To this end, the European Integration Parliamentary Committees of States participating in the Stabilisation and Association Process, namely Croatia, Bosnia and Herzegovina, Albania, the former Yugoslav Republic of Macedonia and Serbia and Montenegro, gathered in Sarajevo on 16–18 June 2005 to establish the Western Balkans COSAP as a tool to promote fundamental internal reforms through the common pursuit of EU integration. The process, supported by the German Konrad Adenauer Foundation, was initiated by the State Parliament of Bosnia and Herzegovina and the Assembly of the Former Yugoslav Republic of Macedonia. The Western Balkans COSAP, which has been structured along the guidelines of the Conference on Community and European Affairs Committees of Parliaments of the European Union, COSAC,⁹ constitutes the first institutionalised SEE parliamentary structure to strengthen the dialogue between SEE parliaments and EU institutions, in particular the European Parliament. This Conference reinforces the role of the EU integration committees of SEE parliaments and benefits the process of harmonisation of national legislation with the acquis communautaire. According to the Western Balkans COSAP rules of procedure, adopted at its first meeting, the conference has a rotating chairmanship, held in alphabetical order by the chairman of the committee for European affairs of the presiding country, and meets regularly to discuss issues related to the SAp and to EU enlargement.¹⁰ The meetings, multilateral in nature, are usually scheduled taking into consideration the COSAC meetings calendar and are organised and hosted by the presiding country. The Western Balkans COSAP asked for special guest status to the COSAC, and regularly attends it through the delegations of the EU candidate countries Croatia and the former Yugoslav Republic of Macedonia. Participants of the 3rd COSAP meeting held in Skopje in December 2006 sent a clear signal to encourage all the participants in the SAp to continue with the progress made towards Euro-Atlantic integration.¹¹ They shared the view that this im9 http http://www.cosac.eu/en/ ://www.cosac.eu/en/ 10 http://www.stabilitypact.org/wt1/COSAP.asp http ://www.stabilitypact.org/wt1/COSAP.asp 11 Joint Statement. Adopted at the III Conference of Parliamentary Committees on European Integration of countries participants in the Stabilization and Association Process on South Eastern Europe, Skopje, 13–14 December 2006., see http ://www.stabilitypact.org/wt1/COSAP.asp



Petra Bläss · Talia Boati

portant goal could be achieved by carrying out the necessary reforms and implementing measures that will strengthen the democratic and institutional capacity in their countries, as well as the functioning of their market economies. They also pointed out the decisive role of parliaments in this process. The Western Balkans COSAP is also strongly supported by the European Parliament and by individual EU Member States. The parliament of the United Kingdom has expressed its willingness to support it further financially. In fact, funding is a major challenge for the structure, and more self-sustainable arrangements should be found in the medium term.

A be s t pr ac t ic e : SE E wom e n M Ps e xc h a ng e proj e c t Thanks also to the efforts undertaken by the Stability Pact Gender Task Force (GTF), the share of women in SEE parliaments has increased over the years and currently women MPs constitute a critical mass able to initiate gender-sensitive reforms in key policy areas.¹². Since 1999, the GTF has favoured the political, economic and social advancement of women in SEE. In the field of parliamentary co-operation, it is worth mentioning the SEE Women’s Parliamentary Caucus Project, which was implemented in 2003–2004 with funding from Switzerland. The project brought together women MPs from Bosnia and Herzegovina, the former Yugoslav Republic of Macedonia and Montenegro. It resulted in the opening of resource centres and women’s lobbies for women MPs in their parliaments. The need for a broader project which would make possible region-wide exchanges between women MPs while giving them an insight in EU gender-equality policies and standards was the main conclusion of this pioneer project of sustainable regional parliamentary co-operation. In 2005 and 2006 the GTF started to implement the SEE Women MPs Exchange Project, with German funds. A second phase of the project is being implemented in 2008. The methodology used in this project has introduced a new way of working for MPs. It involves increasing the role of the committees, and using regional events as a networking and information tool, which gives them resources to return with to their parliaments. First of all, before organising a regional workshop, the GTF holds consultations with the speakers of SEE parliaments as well as with relevant committee members. Preparatory parliamentary hearings and/or national consultations with relevant actors (experts, NGOs, officials) and women MPs of different party backgrounds take place prior to each workshop, in order to evaluate the current state of legislation in key fields such as the Convention for the Elimination of all forms of discrimination against women (CEDAW)¹³ 12 http http://www.gtf.hr/ ://www.gtf.hr/ 13 All SEE countries have ratified the Convention for the Elimination of all forms of discrimination against women (CEDAW).

Parliamentary co-operation in the framework of the Stability Pact



implementation measures, education, legislation aimed at promoting a better balance between work and family life, poverty reduction strategies etc. National reports, strategies and recommendations on the chosen theme are prepared and diffused among participants before every regional workshop. Women MPs and representatives of civil society then take part in a two-day regional workshop in order to exchange experiences and best practices on a given issue, as well as to learn about European standards. Following the regional workshops, women MPs meet nationally to share experience gained, to transfer knowledge to relevant institutions, and to encourage governmental and parliamentary action on specific issues through specialised follow-up meetings and/or hearings. All of these interventions aim to assist Parliaments in integrating a gender-sensitive approach in the ongoing process of harmonizing legislation according to EU standards. The methodology applied to the organisation of these workshops has proved to be very challenging for the parliaments, but, at the same time, has demonstrated their high motivation to participate. Moreover, not only has it helped improve communication among MPs and parliamentary staff within the region ; it has also favoured an inclusive and bottom-up approach between parliaments, governments, experts and representatives of civil society, thus benefiting both vertical and horizontal accountability.

A s uc c e s sf u l e x a m pl e : t h e C on f e r e nc e f or SE E pa r l i a m e n ta r i a ns on t h e E n e rg y C om m u n i t y Tr e at y After the ratification of the Energy Community Treaty between the EU and SEE in October 2005,¹⁴ national parliaments were confronted in spring 2007 with a new responsibility concerning regional co-operation, as well as harmonisation of legislation with EU standards. Moreover, when a treaty such as CEFTA or the Energy Community is signed, the national parliaments are invited to ratify it in line with prevailing constitutional arrangements. Recognising the need for a regional exchange among the SEE parliaments involved in the ratification procedure of the Energy Community Treaty, the Committee for European Affairs of the Parliament of the former Yugoslav Republic of Macedonia, the Stability Pact, and the EC organised a conference for SEE parliamentarians in June 2005 in Skopje.¹⁵ An initiative from local stakeholders allowed the parliamentarians to familiarise themselves with the key features of the Treaty, the specific mechanisms of the ratification procedures, and the possible length of the legislative process in their respective countries.

14 Treaty establishing the Energy Community, Athens, October 25, 2005 2005:: http http://www.energy-community.org/ ://www.energy-community.org/ portal/page/portal/ENC_HOME/ENERGY_COMMUNITY/Legal/Treaty 15 Conclusions of the Parliamentary Conference, Skopje, June 10, 2005.



Petra Bläss · Talia Boati

This kind of regional exchange offers an opportunity to express points of view on the benefits and costs of the proposed transformation. It also allows MPs to discuss regional integration, including specific challenges faced in their own country, and possible impacts and solutions. Parliamentarians, as elected representatives and multipliers, also get the opportunity to share experiences and best practices on advancing public acceptance of the implementation of international and/or regional treaties, including the relevant reforms they imply. One of the outcomes of the Skopje Conference was the suggestion to have national follow-up conferences and public hearings where members of the concerned committees of the parliaments would be given the opportunity to communicate the main features, impact and benefits of the Treaty to the public, thus raising its public awareness. Parliamentarians focussed their exchanges on the harmonisation of national legislations, which is essential to fulfil the legally binding obligations of the Treaty. Identifying the priorities for legal changes in SEE is an opportunity to bring MPs from different countries closer together and to create cross-border working connections. Parliamentarians in the region stand to benefit from being briefed on the comparative experiences of the national parliaments of the EU member states in the harmonisation process and/or the implementation of the acquis communautaire. This is especially relevant in the framework of the EU integration process. Finally the implementation of the Energy Community Treaty obligations discussed at this regional parliamentary conference was recognised as a pilot experience and a good opportunity for the Committees on European Affairs of the SEE parliaments to develop practices for scrutinising EU legislation.

De v e l opm e n t s i n Pa r l i a m e n ta r y C o - ope r at ion i n SE E s i nc e    The relevance of the role parliaments play in democratisation and Euro-Atlantic integration reform processes is increasingly being recognised. This is however a process that takes time to become fully visible. The common perspective of EU accession is the main source of development for stronger regional parliamentary co-operation. The growing number and increasing co-ordination in both bilateral and regional co-operation activities in the region is a significant sign of the SEE Parliaments’ increasing interest in exchanges. There is still a long-term need to support the SEE parliaments, especially the parliamentary staff. Over time a new trend could be observed : huge, rather abstract parliamentary conferences where statements were simply read without much room for dialogue gradually gave way to more practice-oriented, smaller workshops focussed on concrete issues. So the Parliamentary Troika on the Stability Pact, established in 2001 by the European Parliament, the Council of Europe Parliamentary Assembly and the OSCE Parliamentary Assembly, changed its format from an Annual big conference for SEE Parliamentarians to two smaller but more concrete workshops. Thus in 2005, the CoE Parliamentary Assembly chairmanship of the Troika decided, in agreement with the EP, the OSCE PA and

Parliamentary co-operation in the framework of the Stability Pact



the Stability Pact, to tackle migration issues and education for democratic citizenship. In 2006, the European Parliament Troika chairmanship, in agreement with the CoE PA, the OSCE PA and the Stability Pact, decided to discuss freedom of the media, European standards of auditing and budgetary control, and parliamentary control of the security sector and judicial reforms, and for the first time decided to organise one of the seminars in the region, thus promoting regional ownership. Since 2007, the Parliamentary Troika has decided to organise activities in a looser, less institutionalised format. The European Parliament, in particular it’s bilateral or multilateral Delegations, the Committee on Foreign Affairs and the Directorate for Relations with national parliaments, holds a unique position in offering expertise to the SEE parliaments. Its motivation derives from the same need to co-operate in a unified manner as parliaments coming from one region. In this context, SEE Parliaments already benefited from the exchange with the Baltic Assembly, which constitutes a good example of regional co-operation in the framework of the EU integration process.¹⁶ Indeed on numerous occasions the Assembly has shown its interest to share experiences in strengthening parliamentary democracy and in supporting the development of parliamentary capacity and integration of SEE countries into the EU. Another opportunity that is under consideration is to create special SEE chapters within existing international networks, such as the Parliamentary Network of the World Bank.¹⁷ Since 2006, parliamentary capacity-building activities for MPs and parliamentary staff have focussed more on the harmonisation of legislation with the EU acquis communautaire. Following the needs and priorities expressed by SEE parliamentarians, the focus has been shifted to the field of parliamentary oversight capacities, implementation of legislation, macro-economic and social policies and parliamentary budgeting process. Furthermore, a priority of paramount importance was to promote the creation of sustainable working structures amongst SEE parliaments, ensuring better coordination and communication of donors’ activities, and providing expertise and information to SEE parliaments, especially on the EU instruments and tools available. Moreover, the activities aim to strengthen and institutionalise links between committees of different parliaments dealing with similar issues, as well as channelling efforts towards training and capacity building of MPs and staff. Particular attention is given to supporting regional parliamentary co-operation structures originating from SEE, such as the Western Balkans COSAP, the Cetinje Parliamentary Forum and the SEE Women MPs Exchange Project. It is hoped this support will allow them to become more operational and institutionalised and to develop a common strategy for SEE parliaments, with a special focus on the EU integration process. Finally there is a consensus that the single free trade agreement, the visa regime, the fight against organised crime, infrastructure development and investment policy will have to be dealt with in further parliamentary co-operation. 16 www.baltasam.org 17 www.pnow.org



Petra Bläss · Talia Boati

Some of the international donors’ activities have recently developed into sustainable pillars for enhancing regional parliamentary co-operation. Since 1999, the Friedrich Ebert Stiftung has organised annual Parliamentary Conferences in the framework of the Stability Pact.¹⁸. The so-called Dubrovnik Conferences have always focussed on priority issues confronting parliaments in the EU integration process. They provided an opportunity for fruitful dialogue with parliamentarians from the German Bundestag and the European Parliament. Other success stories include the Western Balkans Programmes funded by the Dutch Government since the 1990s, and the East West Parliamentary Practice Project.¹⁹ The latter, especially within its Legislature and Citizens Programme, focussed on co-operation between parliament and civil society, and was implemented through bi- and trilateral exchange visits, regional roundtables, and an annual regional conference that strengthened the parliamentary dialogue in the region. Following the high number of internationally supported regional parliamentary meetings, it has to be recognized that the necessary added value to guarantee sustainable results is reached only if the final declarations or joint statements adopted are focussed on parliamentary practice (e.g. the “10 points for MPs on how to fight organised crime in SEE” presented as the outcome of the conference on “Engaging SEE Parliaments in the fight against organised crime”, organised with Austrian funds by the Assembly of Albania, the OSCE Mission in Albania, and the Stability Pact Initiative against Organised Crime in April 2006)²⁰, and if a national follow-up procedure through workshops or consultations is offered. Another huge contribution was given by the National Democratic Institute and the OSCE, that have a daily contact with MPs and parliamentary staff through their country missions and field offices in Albania, Bosnia and Herzegovina, Kosovo/UNMIK, Montenegro, the former Yugoslav Republic of Macedonia and Serbia. Furthermore, the OSCE Parliamentary Support Programmes are directed both at MPs and at parliamentary staff. In 2005 and 2006 in particular, the OSCE Mission in Kosovo organised two regional parliamentary conferences focussed on parliamentary oversight capacities ; especially over the security sector. These efforts play a key role in capacity building and in supporting regional parliamentary co-operation.

18 See www.fes.de 19 www.ewppp.org 20 10 points for MP how to fight organized crime. Engaging SEE Parliaments in the fight against organised crime, Tirana, April 11/12, 2006. http ://www.stabilitypact.org/rt/Tirana%20Final%20Agenda.pdf.

Parliamentary co-operation in the framework of the Stability Pact



L at e s t de v e l opm e n t s : Pa r l i a m e n ta r y c o - ope r at ion i n t h e RC C a n d t h e rol e of t h e R e g ion a l Se c r e ta r i at In the framework of the regional ownership process, regionally driven parliamentary cooperation initiatives will play a more important role. At the Regional Table of the Stability Pact held in Belgrade in May 2006, participants agreed on the continued need for a regional co-operation framework focused in particular on five priority areas — namely Economic and Social Development, Infrastructure, Justice and Home Affairs, Security cooperation and Building Human Capital. Parliamentary co-operation was defined, along with civil society and gender issues, as an overarching theme for the newly established RCC. The rationale behind this is the cross-taskforce dimension of these issues. Parliaments deal with all five of these priority areas. At the same time this choice reflects the success of the increasing quality and quantity of regional parliamentary exchange activities and recognises the growing importance of parliaments in the ongoing process of EuroAtlantic integration . Enhancing parliamentary co-operation was considered an efficient way of building necessary capacities in parliaments as well as of facilitating networking between parliaments in the region and between SEE and the EU. Moreover, it stressed that dedicated structures should be considered to provide frameworks for such co-operation, and that co-operation between parliaments in SEE would also support activities in other thematic areas. In line with the decision on a phased evolution from the Stability Pact into the RCC, the activities of the Stability Pact Parliamentary Co-operation Task Force were to be gradually handed over to local hands. To guarantee a full handover of the activities, and at the request of the parliaments of the region, it was decided to institutionalise all existing co-operation by establishing a Regional Secretariat for Parliamentary Co-operation. The Secretariat was to be hosted by one of the SEE Parliaments. To this end a Call for Proposals for the establishment of the Regional Secretariat for Parliamentary Co-operation in SEE in one of the SEE parliaments was launched in December 2006. Following the evaluation of the proposals received, the National Assembly of Bulgaria was selected to host the new structure. The main reasons for this choice lay in the high quality of the Bulgarian application as well as in its ability, as a new EU member state, to provide the best link between the regional co-operation dimension and the European perspective. The decision was endorsed by the SEECP Speakers of Parliament at their Sixth meeting held in Zagreb on 15–17 April 2007.²¹ According to its Terms of Reference, the Regional Secretariat aims to intensify regional parliamentary co-operation at different levels, to ensure coordination, and to foster political support for the formulation and execution of regional activities. The Secretariat 21 http ://www.rspcsee.org/files/fin_decl_en.pdf



Petra Bläss · Talia Boati

provides an efficient information network between and for the different Parliaments, and helps to establish and consolidate networks between sector-specific parliamentary committees, paving the way and preparing the ground for a more institutionalised co-operation in this field. Moreover, the secretariat contributes to strengthening the democratic efficiency and effectiveness of the parliaments in SEE by promoting bilateral and multilateral co-operation among them and by bringing the parliamentary structures of the region closer to the EU. The Regional Secretariat became fully operational in summer 2007. As a first step towards a much more institutionalised co-operation among the parliaments in the region, each SEE parliament appointed National Co-ordinators at administrative level, who meet regularly. Close co-operation was also immediately established with relevant partners, such as the European Parliament, the Baltic Assembly, the IPAIT, the Friedrich Ebert Stiftung, and the World Bank, and different capacity building activities were implemented. Close co-operation with the European Parliament will guarantee that SEE parliaments remain linked to the EU integration process. Four joint seminars on issues such as visa questions, harmonisation of EU legislation, parliamentary communication strategies and budgetary laws were agreed for 2008. Moreover, close co-operation with EU institutions is also guaranteed by another series of events which are funded under TAIEX and through other ad hoc seminars such as those in the framework of the COX Programme. However, a real breakthrough was reached at the Seventh SEECP Speakers of the Parliament Meeting on “Enhancing the Overarching Role of Regional Parliamentary Cooperation in South Eastern Europe” on 14–16 April 2008 in Sofia. On that occasion the SEECP Speakers signed a “Memorandum of Understanding on Interparliamentary Co-operation in South Eastern Europe”. With this agreement at the highest parliamentary level a new institutional framework for the enhancement of regional parliamentary co-operation in SEE was reached.

Anton Dobart¹

2.6 Education in South Eastern Europe : from assistance to co-operation From t h e Ta s k Forc e E duc at ion a n d You t h t o t h e Ta s k Forc e Fo s t e r i ng a n d Bu i l di ng Hu m a n C a pi ta l

In 1998 Austria chaired its first presidency of the Council of the European Union. It was at that time when, in the wake of the armed confrontations in former Yugoslavia, the Austrian Federal Ministry of Education hosted a presidency conference on “European Educational Co-operation for Peace, Stability and Democracy”. It sought to raise awareness of the importance of education in promoting democratic and peaceful development in SEE, and of the role of education reforms in achieving this goal. The conference also marked the beginning of more co-ordinated support from the EU and its member states for education reforms in SEE and of enhanced co-operation between education authorities and governmental and non-governmental players in the region. This gave birth to the so-called Graz Process, and subsequently shaped it into an international initiative under Austrian patronage, focused on the promotion and support of education reforms in the countries of SEE through regional co-operation and capacity building. Following the establishment of the Stability Pact in 1999 the Enhanced Graz Process (EGP) took over the co-ordination of the education and youth agenda of the Pact and became widely known as the Task Force for Education and Youth (TFEY) of the Stability Pact. Austria was entrusted with the chairmanship of the Task Force, with Romania as co-Chair. The principle goal of the EGP/TFEY was to facilitate and support the reform processes in the countries of the region, contributing to their integration in the emerging European area of education. The establishment, and in some cases re-establishment, of networks of educational experts, initiatives and institutions at local, regional, European and international level was considered of utmost importance to this end. By systematically involving key European and international organisations and institutions active in education reform across SEE, the process soon brought together all relevant institutional stakeholders. The initial activities of the EGP/TFEY in 2000 and 2001, in line with the commonly agreed strategic priorities, concentrated on the design and implementation of a substantial number of focused cross–border “quick start” projects. 1 Anton Dobart was Chairman of the Task Force Education and Youth.



Anton Dobart

Due to the slow but increasing reform momentum in SEE, it became increasingly important for the Task Force’s work to ensure the continuity of educational co-operation and of education reforms in the region at system level. Therefore, within the “Strategy 2001” concept, two key activities were launched to foster the sustainable impact of reform initiatives and changes in the education systems in the region : the South Eastern European Education Co-operation Network (SEE ECN) and the OECD thematic reviews. SEE ECN (www.see-educoop.net) established itself as the key regional information backbone in educational co-operation, and the OECD Thematic Reviews delivered the basis for the effective formulation of national reform priorities and strategies. At the same time the TFEY continued to lobby for education to be placed higher on the political agenda in both the region and the EU.

A c h a ng e d f r a m e wor k The initial focus of the Task Force on education as a factor in the democratisation and stabilisation in a post-war region was to be replaced by the shared insight that education is a key factor for the European integration process of the countries of SEE — and for the overall development of the region. That period was marked not only by the strategic reorientation of the Enhanced Graz Process, but also by profound changes in Europe and in the education reform agenda at the European level as well. Education and training were given a crucial position in the so-called Lisbon Strategy for helping the Union to become “the most competitive and dynamic knowledge-based economy in the world, capable of sustainable economic growth with more and better jobs and greater social cohesion” by 2010 (European Council, Lisbon, March 2000). The Lisbon Process was named the driving force for the ongoing education reform efforts at EU level. Consequently, in 2002 the Commission endorsed the 10-year “Detailed Work Programme on the Follow-up of the Objectives of Education and Training Systems in Europe”. In 2003, in the Thessaloniki Declaration of the EU Summit under the Greek EU Presidency, the Union committed itself to fostering the perspective of European membership for countries of the Western Balkans. It established concrete measures and instruments, reiterating that the future of the Western Balkans lies within the European Union. A year later, ten accession countries became full members of the Union, proving the feasibility of EU membership for countries in transition. The new, strategic role of education in the context of the Lisbon strategy as well as the option of political affiliation of the Western Balkans to the European Union were of decisive importance for the future planning within the TFEY/EGP. In 2003 the Task Force members and working group co-ordinators agreed to shift the classic, assistance-based work to a longer term, systemic level regional approach.

Education in South Eastern Europe : from assistance to co-operation



Th e e duc at ion r e f or m I n i t i at i v e i n S ou t h E a s t e r n Eu rope Following these developments, the Ministers for Education and Higher Education of SEE committed themselves to the goals of the Lisbon European Council and the “Work Programme 2010” in a Memorandum of Understanding signed in Nicosia (2003/2004). This was also a commitment to foster the European dimension of education reforms in SEE through regional ownership and co-operation. By 2004 the Memorandum was signed by Albania, Bosnia and Herzegovina, Bulgaria, Croatia, the former Yugoslav Republic of Macedonia, Moldova, Montenegro, UNMIK/Kosovo, Romania and Serbia, and also by the TFEY and the Stability Pact. In the Memorandum the Ministers of Education and Science stated that SEE is part of the evolving wider European Area of Education, and proposed the founding of a regional Education Reform Initiative as a tool for supporting national reform efforts through capacity building at system and expert levels, taking into account both country-specific needs and current EU developments. Based on this political mandate, the Education Reform Initiative of South Eastern Europe (ERI SEE) was found in 2004, with an institutional structure consisting of a governing board, a consultative body and a secretariat (agency). The members of the governing board are the signatories of the Memorandum of Understanding of Nicosia and the Task Force. The members of the consultative body are institutional partners such as the European Training Foundation (ETF), OECD, the European University Association (EUA), CoE, as well as donor countries (Austria, Norway, Switzerland, The Netherlands). The seat of the Stability Pact in the board will be taken over by the RCC in the future. The secretariat of the initiative is being hosted by Croatia and is based in Zagreb. The work of ERI SEE is based on annual and bi-annual work plans, which are elaborated by the secretariat and approved by the governing board. The governing board in this way provides the opportunity for ministries to identify topics of importance for their respective education reform efforts, and to take responsibility for both the working program of ERI SEE and for fundraising and lobbying. The design and implementation of activities of ERI SEE developed in line with the commitments of the Memorandum of Understanding to ongoing European initiatives, inter alia to the implementation of the “Detailed Work Programme on the Follow-up of the Objectives of Education and Training Systems in Europe”, the implementation of the objectives of the “Bologna Process” and the implementation of the objectives of the “Copenhagen Process”. The instruments of ERI SEE in its agreed thematic areas include regional and multicountry seminars, briefings of high-level national officials, round-tables, study visits as well as regional and international conferences. Several events are organised every year in co-operation with and with the support of national authorities and experts from the ERI SEE partner countries and institutions in the areas identified as priorities. Since its



Anton Dobart

founding, the initiative has organised or contributed to around 50 events, covering issues such as equity in education, assessment and evaluation, quality in higher education and vocational and educational training, information and communication technology and sustainable development. Recent examples for 2008 include a meeting of vocational education and training agencies in Tirana as well as a networking conference on education for democratic citizenship in Zagreb. ERI SEE’s objective for 2010 is to become a sustainable, increasingly regionally owned platform for implementation of the education objectives and activities foreseen in the Istanbul Memorandum of Understanding and its Framework for Action. In line with the defined ERI SEE outputs 2008–2010, the work of the initiative in 2008 currently focuses on : Project Cycle Management Training for the EU LLL Programme ; European Qualification Framework and National Qualification Frameworks in SEE countries ; quality and equity in education ; as well as the “knowledge triangle”, education, research and innovation.

St r e ng t h e n i ng e duc at ion i n Eu rope In 2006, Austria took over the Presidency of the EU and concentrated on fostering the dialogue with the Western Balkans, in particular in the area of education and training. The Task Force Education and Youth was charged with supervising and managing this priority area for the Presidency. The results of the expert and political deliberations shaped the future orientation and priorities of the TFEY and ERI SEE, and confirmed them as central political and institutional structures for supporting education reforms and co-operation in the region of the Western Balkans. The Austrian Presidency continued the long-standing tradition of regular dialogue on the highest level with the countries of SEE on current matters in the field of European education policy. The conference of European ministers of education “Strengthening Education in Europe”, in March 2006 in Vienna, concentrated on the role and significance of education within the revised Lisbon strategy, on ways to achieve the objectives, and on the significance of the partnership with the Western Balkans for strengthening the European area of education. The Vienna conference reaffirmed the insight that education and training are paramount for the overall development of the Western Balkan countries. Support for reforms and investment in educational co-operation was therefore confirmed as a long-term investment in the economic and social development of the region, and a substantial factor in its European integration process.

Education in South Eastern Europe : from assistance to co-operation



Fo s t e r i ng a n d bu i l di ng h u m a n c a pi ta l Following the overall positive developments in the region, the Stability Pact launched “fostering and building human capital” as a new core objective at the meeting of the Regional Table in May 2006 in Belgrade. The move underlined the crucial role of human capital development for the overall stabilisation and prosperity of SEE. Soon after, a decision was taken to phase out the Stability Pact and hand over the leadership and the initiative for regional co-operation to a RCC on behalf of the SEECP. By declaring education, higher education and research under the joint name of “Fostering and Building Human Capital” as a priority area for the RCC, the continuity of the Pact’s goals and activities in this regard were secured. The new core objective embraces the areas of education and research co-operation to help mobilise the human potential of the region through fostering a regular dialogue between these areas. Consequently, the link between the development of education, research and innovation and the development of the region’s economy and social capital also became a main reference for action for the TFEY. In light of these developments, in particular the successful shift since 2003 from assistance-based work to a genuine partnership and co-operation in and with the Western Balkans, the Task Force drafted a new Memorandum of Understanding to widen the scope of regional co-operation to the area of science and research. The new Memorandum, signed by SEE Ministers responsible for education, science and research in Istanbul in May 2007, contained a renewed regional commitment to the development of human capital by underlining the significance of co-operation in education and research. It also defined new common reform priorities and implementation instruments in the sectors concerned, and looked beyond the year 2010. It placed regional co-operation in the political context of the RCC and confirmed ERI SEE and the Steering Platform on Research with the Western Balkans as the main instruments for its implementation. By signing this document, SEE countries have opened a new phase in regional educational co-operation. In August 2007, Austria handed over the chairmanship of the TFEY to Romania, a SEECP member country and long-standing co-chair, and remained involved in the work as co-chair. The need for political focus on “building human capital” remains urgent and more lobbying is needed for this cause. Because of the complexity of co-ordinating education and research co-operation under the umbrella of the RCC, the TFEY proposed a new Task Force on Fostering and Building Human Capital (TFBHC) which would act on behalf of the RCC. This Task Force would also secure the continuity of political co-operation and of the achievements of the TFEY within the priority area of BHC. The proposal for the new Task Force was unilaterally endorsed at the last meeting of the Working Table I of the Stability Pact on 3 December 2007 in Tirana. The TFEY was



Anton Dobart

entrusted with co-ordinating the elaboration and adoption of a proposal for the profile and the structure of the new Task Force. Its goal was to create a political framework for co-operation in the field of building human capital under the umbrella of the RCC. With the importance of fostering and developing the human capital of SEE in mind, the new Task Force BHC has a crucial function for the years to come, in particular in facilitating regular co-operation and partnerships between the areas of education and research co-operation. Its main aim is to ensure a platform for regular dialogue and co-ordination between these and related priority areas. Its mandate is therefore to raise awareness, to lobby for an appropriate agenda in education and research, and to formulate recommendations for the work of the RCC in the priority area of fostering and building human capital. Designed to be a “network of networks”, the Task Force is meant to meet the increasing need for efficient regional communication and co-ordination among the relevant stakeholders active in the “knowledge triangle” of education, research and innovation. The structure of the TFBHC was agreed upon by some of the key stakeholders in the region. The Secretary General of the RCC, the signatories of the Memorandum of Understanding of Istanbul, the Task Force Education and Youth, the Members of the ERI SEE, and the Steering Platform on Research were invited to participate in the meetings of the TFBHC as its founding members. Based on the principle of one vote per country, countries were entitled to be represented by up to two members. In the future, the members of the TFBHC will decide about accepting new members. The TFBHC will be led by a core team comprising a chair and two co-chairs, with twoyear mandates. Chair and co-chair positions are taken by the representatives of the founding members, with one of the two co-chairs from the country hosting ERI SEE. The first mandate will be ensured by Romania as chair and Austria and Croatia as co-chairs.

Ne x t s t e ps The planning and implementation of Task Force activities will take place in close co-operation with the respective Chairmanships in Office (CiO) of the SEECP. First fruitful collaborations and contacts have already been established in this regard with the Bulgarian and Moldovan CiO in 2008. The need for Task Force networking in a high-level regional political framework was acknowledged and stressed in the Final Statement of the High Level Conference “Towards SEE Regional Competitiveness (Contribution to the EU policy of building knowledge based societies)” under the umbrella of the Bulgarian Chairmanship-in-office of the SEECP, organised by the Balkan Political Club and the European Commission in Sofia in April 2008. Following the RCC board’s endorsement of the Task Force’s profile and structure, TFBHC held its constituent meeting on 13 June 2008 in Ljubljana. The event was held

Education in South Eastern Europe : from assistance to co-operation



back-to-back with the meeting of the Steering Platform on Research for the Western Balkan Countries which was co-chaired by the Slovenian EU Presidency, the European Commission (DG Research) and the Montenegrin Ministry of Education and Science. The next Task Force meeting is scheduled for September 2008. Its aim will be to discuss and elaborate a mid-term strategic plan of action. A Task Force conference on building human capital is planned for 2009 in Romania. The results of this mid-term strategy development will be presented in the framework of the upcoming SEECP chairmanship of Moldova. One of the main tasks of the new structure will remain the continuity of the political and expert dialogue with the countries of the Western Balkans on both current EU developments and on the co-ordination of regional approaches. As with the Task Force Education and Youth, this challenge will be met in close co-operation with the upcoming EU Presidencies and in the framework of regular expert and ministerial level conferences. The Slovenian EU Presidency has maintained excellent co-operation with the region. Another crucial challenge for the new TF will be the creation of partnerships, networks and co-operation with all relevant sectors which go beyond the areas of education and research. In order to contribute to a coherent and sustainable approach, it will have to co-ordinate with the socio-economic reform agenda and other priority areas of the RCC in order to establish a cross-priority co-operation also encompassing the business sector and civil society. Developing human capital represents one of the biggest, but also most rewarding challenges in SEE today. Serving the need for progress in the fields of socio-economic development and EU accession requires sustainable and implementable reforms in all sectors of relevance for the development of human capital and potential in the region. While many of these reforms will have to take place at the national level in the core sectors of education and research, regional co-operation has proven its long-term added value through capacity-building, networking, transfer of expertise and ensuring participation in current EU discussions. The challenge of building human capital is key not only to making progress in the field of EU accession and economic competitiveness, but also to building equitable and inclusive societies. In this context, the importance of promoting innovation and innovation capacities in developing knowledge-based societies concerns not only the economic, but also the social dimension. Focusing on building the innovative potential and creativity of individuals is therefore as important as the development of innovative partnerships and capacities of institutions in the RCC region. Yet the promotion of social innovation and investment in education are long term endeavours that go beyond the electoral term of a single government or parliament. The promotion of innovation and competitiveness is also beyond the scope of a single sector, stretches beyond the area of education, and includes private business networking and the development of active citizenship. The continuity of joint activities in the priority area



Anton Dobart

“Fostering and Building Human Capital” of the RCC is therefore paramount for the competitiveness, the positioning, and the economic and social development of SEE and the Western Balkans, in particular in a European setting.

Peter Sanfey¹

3.1 Economic development in South Eastern Europe

SEE has recovered strongly from the political upheavals of the 1990s and is catching up with the rest of Europe. The period 2000-08 saw broad-based and sustained economic growth across the region. This is the encouraging story that is often overlooked by commentators who focus on the unresolved, mostly political, problems, rather than on the opportunities. As of mid–2009, the region is suffering from the contagion effects of the global economic crisis. Notwithstanding that fact, this paper will argue that we should be optimistic about the long-term prospects for SEE, but it will add an appropriate cautionary note that daunting challenges for prosperity are still ahead. The paper focuses first on the drivers of growth and on the underpinnings of this growth — macroeconomic stability, an improved investment climate and progress in structural reforms. It then looks at the obstacles to further reform, and it concludes by discussing briefly some of the main economic issues that still face policy-makers in the region. The reasons for the improved economic picture are varied. Businesses throughout the region have shown resilience, adaptability to new circumstances, and a strong entrepreneurial spirit. Governments and other state authorities have generally accepted the need for a thorough reform agenda and, to varying degrees, have pushed through and begun to implement difficult reforms. The positive effects of these reforms are increasingly clear in terms of strong growth, record investment flows and wider opportunities for entrepreneurship. However, many people, both inside the region and outside, fail to see things in a positive light. Recent survey evidence (discussed below) suggests that people in SEE are generally gloomy and nostalgic for the past, compared with those in other transition regions. Outside the region, there is still an image problem — for many potential foreign investors, the mention of the word “Balkans” conjures up troubled images of war and conflict, rather than opportunity and potential. Some of the positive aspects of recent economic performance may therefore come as a surprise. During the present decade, SEE has become a region of strong economic growth. Starting from the year 2000, no country has failed to grow in any year, with the sole exception of former Yugoslav Republic of Macedonia in 2001, when the country was paralysed for several months by a deep security crisis. Remarkably, average weighted growth in the region has exceeded that in the countries of CEE and the Baltic states (CEB) every year (except 2005 and 2007, where the two rates were virtually identical in both cases) be-

1 Lead Economist, European Bank for Reconstruction and Development.



Peter Sanfey

tween 2001 and 2008.² Furthermore, this strong growth performance has been combined in most cases with low inflation, as well as tangible progress in market-oriented reforms. However, several countries still have an estimated level of GDP that is below that of 1989. On current trends, the former Yugoslav Republic of Macedonia will need a couple more years of good growth to exceed their 1989 level of economic output, while Bosnia and Herzegovina, Montenegro and Serbia will require 6-7 years. The current (mid–2009) economic crisis that is affecting all countries of the region means that achieving this target is likely to be postponed.

Grow t h dr i v e r s How can the strong pre-crisis growth of recent years be explained ? On the demand side, consumer spending rose sharply, fuelled by an explosion of credit growth, which in turn has reflected the fundamental overhaul of the region’s banking systems. Credit has been expanding rapidly in this region for a number of years, under the influence of a major improvement in the banking sector, and many individuals and households were routinely borrowing from banks to fund purchases of durable goods, holidays and even house purchases. More than one-third of households in SEE have at least one credit or debit card, according to a survey in 2006.³ This credit expansion slowed down markedly in the second half of 2008 and first half of 2009, as a direct fall-out from the “credit crunch” problems that have beset more mature western financial markets since mid–2007. A second factor that drove growth was the revival of export markets. The conflicts of the 1990s had a disastrous impact on trade, both within the region and with the outside world. Within the region, there is evidence from numerous studies that cross-border trade is well below the levels seen in similar size markets and regions in other parts of the world. Outside, the main market for the region is the EU, but although access to EU markets has been duty-free for most non-agricultural goods since 2000, in practice there are numerous obstacles to reaching these markets, such as the failure to satisfy EU quality standards. Increasingly, however, these problems are being overcome. Cross-border trade is one of the most vibrant parts of the region’s economy, and the implementation of the expanded Central European Free trade Agreement (CEFTA) will help cement the gains of recent years. A third driver of growth was the remarkable turnaround recently of certain key industries in several countries. Major investments into once moribund industries produced significant results, for example in the steel industry in Bosnia and Herzegovina, the former Yugoslav Republic of Macedonia, Romania and Serbia. These investments resulted in sig2 All economic data and statements in this paper are drawn from the EBRD Transition Report 2008 and the EBRD database, unless otherwise stated. 3 See Life in Transition : a Survey of People’s Experiences and Attitudes. London, EBRD, 2007.

Economic development in South Eastern Europe



nificant production increases, which translated directly into export growth. This process was helped by the general upturn in commodity markets, and in particular the large demand for steel and other metal products coming from emerging Asian markets (notably China). Of course, these investments also increased the vulnerability to a global downturn, as the events of late–2008 and 2009 bore out. But the region is well placed to take advantage of the upturn in global economic activity, whenever that occurs.

M ac roe c onom ic p ol ic y Macroeconomic policies over the past decade have generally been prudent. Two of the main indicators of macroeconomic stability — inflation and the general government deficit — are typically low, although inflation rose sharply in the region in late-2007/early2008, partly under the influence of global inflationary forces. All governments and central banks in the region recognise the importance of stabilisation and low inflation for economic growth. And all know that it is not possible for these countries, which are mostly small and increasingly open economies, to try to boost economic activity over the longterm by running large fiscal deficits or by increasing inflation. But different countries have adopted different approaches to the way they run monetary and exchange rates policy, and to the size of government. One of the interesting features of the region is the wide variety of exchange rate regimes adopted by the different countries. Albania, Croatia, Romania and Serbia all float their currencies to some extent, with varying degrees of management by the central banks. Other countries have adopted a more self-restrained approach. The former Yugoslav Republic of Macedonia has a fixed peg policy to the euro (previously the DM) with very small room for adjustment in either direction. There have been no devaluations since July 1997. Bosnia and Herzegovina and Bulgaria have currency boards, with the currency fixed to the euro. The authorities in Bulgaria have signalled firmly and repeatedly their intention to maintain this peg right up to the point at which the country joins the eurozone. And Montenegro has taken the unconventional approach of simply adopting, first, the DM and then the euro as the sole legal tender. The size of government varies across the region. Countries in the former Yugoslavia have a tradition of strong state revenue collection powers, leaving a legacy of large government that continues to this day. General government spending relative to GDP is high across all former Yugoslav countries compared with other countries at a comparable stage of economic development. At the other end of the scale, the collapse of communism in Albania left the country with a weak state and limited ability to collect tax revenue from firms and households. However, most countries have been largely successful in coming close to budget balance, as shown by the latest estimates for 2007, which range from a deficit of 3.4 per cent of GDP in Albania to a surplus of 6.3 per cent of GDP in Mon-



Peter Sanfey

tenegro. These low fiscal deficits (or surpluses in some cases) are a sign of several things — buoyant tax collection on the back of growing economies, fiscal prudence and a lack of access to international capital markets. Most countries are now rated by some or all of the main ratings agencies but are hesitant at present to tap these markets to any great extent. The turmoil that hit international capital markets in the second half of 2007 meant that this will remain the same for some time.

I n v e s t m e n t a n d t h e bus i n e s s e n v i ron m e n t One of the most encouraging signs of the region’s recent progress has been the huge influx in recent years of foreign direct investment (FDI). The headline numbers are impressive : US$ 12 billion in 2004, US$ 16 billion in 2005 and, in 2006, a record US$ 28 billion, with a further US$ 28 billion in 2007. The bulk of this is flowing to the more advanced countries (in terms of progress in reform — on which more below) : Bulgaria and Romania (both now EU members) and Croatia (an EU candidate, currently in negotiations for membership). Serbia has also attracted large amounts of FDI in recent years, mostly related to important privatisations and acquisitions, but inflows to other western Balkan countries and Moldova have been limited. Nevertheless, the fact that such large amounts of money are flowing to the region is a welcome sign of the increasing confidence of investors. The quality of the business environment has also improved steadily over the past decade. One way of seeing this is by examining hard data on concrete measures of practical matters such as the number of days needed to set up a business, the number of licences needed, the degree of contract enforcement and such like. In recent years, the World Bank has set up a comprehensive database, updated annually and now covering 181 countries worldwide, known as the “Doing Business” indicators. This is a valuable and increasingly used resource that gives an important perspective on the problems the region faces. Since it is updated annually, it enables us to see which countries are making progress on a yearby-year basis. The latest results show that Bulgaria and Romania stand out in the region as the best performers at 45t and 47t place respectively. FYR Macedonia is next best at 71st place, followed by Albania, Montenegro and Serbia (86t, 90t and 94t places respectively), Moldova at 103rd place and then, with a surprisingly low ranking, Croatia at 106t. Bosnia and Herzegovina brings up the rear at 119t and 136t respectively. An examination of selected sub-components of the overall index makes it possible to single out particular areas of weakness. Problems of contract enforcement and dealing with licenses are pervasive across the region. In contrast, there is wide variation in the level of investor protection, with Montenegro coming out particularly well, followed by Bulgaria and Romania, whereas Albania is among the worst countries in the world in this area.

Economic development in South Eastern Europe



Over recent years peer pressure to improve their business climate has grown among countries in the region. This process is most visible within the OECD-led Investment Compact (IC) for SEE. The IC is an initiative under the general umbrella of the Stability Pact. It provides a forum within which countries from the region can work together, with the support of the OECD and other international institutions and bilateral donors, on common areas of interest for investment policy. A new IC initiative began a couple of years ago to analyse more explicitly a number of reforms, and to construct an “investment reform index”, on a scale of 1 to 5, for seven different aspects of the reform agenda. The most recent results show Bulgaria and Romania above the average for the region in all aspects, whereas Albania, Bosnia and Herzegovina and the former Yugoslav Republic of Macedonia lag behind. The Investment Compact has played an important role in promoting dialogue among the countries of the region about investment climate issues and in encouraging the introduction of best practice on issues such as implementation of VAT, access to finance for SMEs and competition policy. It has also drawn on the lessons of business environment surveys such as the EBRD/World Bank Business Environment and Enterprise Performance Surveys. The investment reform index is a logical extension of this process ; the widespread consultation process gives countries a sense of involvement and ownership, rather than the feeling of being dictated to by international organisations. This is contributing to the growing sense that SEE is increasingly open for business and that the situation is much better across the board than it was a decade ago.

St ruc t u r a l r e f or m The pace of reform in SEE has been mixed, and the variation within this region is greater than in other transition regions. An advanced group of reformers — Bulgaria, Romania and Croatia — have led the way. The prospect of EU integration has been perhaps the strongest driver of reforms across transition countries. Bulgaria and Romania had been lagging behind in the late–1990s, partly influenced by the macroeconomic crises both countries suffered at the time, but once there was a clear prospect of membership, the reforms accelerated. Croatia has made steady progress in reforms over the years and has long been considered an advanced transition country, with a level of transition and economic development similar to those in central Europe. All three countries are at a similar stage of reform to the level in those transition countries that joined the EU in 2004. Any evaluation of how far countries have gone in transition requires a methodological framework, and the EBRD’s methodology has received wide attention across the transition region. Every year the EBRD tracks reform developments across all countries in which it invests, through a set of nine transition indicators covering three stages of reform : market-enabling, market-deepening and market-sustaining. Market-enabling re-



Peter Sanfey

forms are those that countries usually do first, since they are the easiest and quickest to implement. They include price liberalisation, trade and foreign exchange liberalisation, and privatisation of small enterprises. Market-deepening reforms come later and refer to the privatisation of large companies and assets, and the strengthening of financial institutions both in the banking sector and in other, non-banking institutions such as leasing, pensions and equity funds. Market-sustaining reforms are the most difficult to carry out and are usually done last. On the EBRD classification, these are governance and enterprise reform, competition policy and infrastructure reform in five sectors — electricity, railways, roads, telecommunications, and water and waste water — covering such issues as commercialisation, tariff reform, quality of the regulatory framework and involvement of the private sector. Each indicator is measured on a scale of 1 to 4+, where 1 represents little or no change from a rigid centrally planned economy and 4+ represents the standards of an industrialised market economy. Chart 1 below shows the average transition score for each country in transition, enabling a comparison of SEE with the other transition regions (CEB and the Commonwealth of Independent States plus Mongolia, or CIS+M). Several interesting points emerge from this comparison. According to the chart, Bulgaria, Croatia and Romania have all reached a level of transition close to the CEB average. In contrast, the remaining countries lag behind, and show much more variation among themselves. Leading this group is the former Yugoslav Republic of Macedonia, an EU candidate, followed by Albania and Moldova (a CIS country), and then the laggards in transition — Montenegro, Bosnia and Herzegovina and Serbia. Perhaps surprisingly, the latter three countries lag behind a number of CIS countries in terms of progress in transition. The surprise is diminished — but perhaps not completely eliminated — when account is taken of the late start to transition of these three. In Bosnia and Herzegovina, Montenegro and Serbia, the transition has been overshadowed by the legacy of the violent break-up of Yugoslavia. Transition began in Bosnia and Herzegovina in 1996, but it was some years before any kind of genuine “local ownership” of reforms took root. The process has been, at times, frustrating in Bosnia and Herzegovina. The main success story is probably the banking sector, which is well capitalised and highly competitive, with strong foreign banks competing aggressively for market share. But there is still a significant privatisation agenda ahead, and while the Republika Srpska (one of the two entities) has made much progress recently, attracting large sums of money for flagship sales such as in the telecoms sector, the process in the other entity, the Federation, is mostly stuck. There is a growing conviction in Bosnia and Herzegovina that constitutional reform is vital not just for political reasons but also for putting the reform process back on track.



Economic development in South Eastern Europe

Chart 1 : Progress in transition by country, 2007 Transition score 4.3 4.0 3.7 3.3 3.0 2.7 2.3 2.0 1.7 1.3

Belarus

Turkmenistan

Tajikistan

Uzbekistan

Azerbaijan

Kyrgyz Rep.

Georgia

Moldova

Mongolia

Kazakhstan

Russia

Ukraine

Armenia

Serbia

Bosnia and Herz.

Albania

Montenegro

Romania

FYR Macedonia

Croatia

Bulgaria

Latvia

Slovenia

Lithuania

Slovak Rep.

Poland

Czech Rep.

Estonia

Hungary

1.0

Source : EBRD. Note : The transition indicators range from 1 to 4+ (shown in the chart as 4.3), with 1 representing little or no change from a rigid centrally planned economy and 4+ (4.3) representing the standards of an industrialised market economy.

The transition has followed different paths in Montenegro and Serbia since the late– 1990s. In many ways, Montenegro has made impressive progress in transition given the limitations (in terms of administrative capacity) of the government. The country entered independence with an economy that is liberal in areas such as trade policy and small-scale privatisation (which was effectively completed several years ago), but at an early stage of reform regarding institutions and infrastructure. Banking sector reform has progressed significantly and the sector is now completely privatised. The high growth that the country is now enjoying and the recent boost from the EU (notably the signing of the SAA in October 2007) give encouragement that reforms can be pushed ahead in future years, with support from the EU and other international actors. Meanwhile, in Serbia, the transition has been somewhat “stop-go”. Serbia is a country with great potential and, when transition finally got underway in late–2000, the conditions looked right for the country to make up quickly for lost time. During the first couple of years, the progress in reform was indeed rapid, and the country was singled out by many for special praise in terms of progress in reform. The energy and charisma of Prime



Peter Sanfey

Minister Zoran Djindjic and his team of dynamic young reformers captured the imagination, and the country quickly implemented key reforms. These included a comprehensive liberalisation of many prices and trade barriers, a privatisation programme with an emphasis on attracting outside investment, and a fundamental overhaul of the banking system. The coalition government formed after elections in May 2008 has managed to further the European agenda, notably by unilaterally implementing an interim trade agreement with the European Union, but as elsewhere in the region, the government is preoccupied (as of mid–2009) with fighting the worst effects of the economic downturn.

At t i t u de s t o t r a ns i t ion Why have the reforms not gone faster in the region ? One explanation might be that people are fed up with reforms and the effects the transition has had on their lives. It has been recognised for some time that transition has been a difficult experience for many people, but until recently there was no comprehensive survey of individuals’ attitudes and experiences across the transition region. This is no longer the case. In 2006, the EBRD and the World Bank jointly carried out a “Life in Transition survey” (LiTS) of 29,000 individuals in 29 transition countries (1,000 people per country). People were asked a range of questions about, inter alia, their experience of transition over the previous 15 years or so, their attitudes to markets and democracy, their overall life satisfaction today and their view on public services and institutions, corruption and trust. The results provide a fascinating insight into how people view the transition process and the way it has shaped their lives. The most striking thing about the results in SEE is how unhappy people are in this region relative to both CEB and the CIS, and how few people think that things are better today than they were in 1989. People in most former Yugoslav republics (Bosnia and Herzegovina, the former Yugoslav Republic of Macedonia, Montenegro and Serbia) overwhelmingly believe that the economic and political situations were better under the old (pre-transition) regime ; this belief is less prevalent in Croatia and Slovenia. Such results are not surprising, given the relative prosperity that people in the former Yugoslavia enjoyed before the country’s break-up. More puzzling, perhaps, is the fact that a majority of people in Bulgaria and Romania also hold the same view. In contrast, Albanians tend to regard transition in a much more positive light, no doubt remembering the bleak economic conditions and oppressive political regime that prevailed up to the end of the 1980s.

Th e way a h e a d At the time of writing (mid–2009), the short-term economic outlook is rather bleak. Most economies are in recession and facing significant real output falls in 2009, possibly

Economic development in South Eastern Europe



by up to 7 or 8 per cent. However, if one looks beyond the current crisis, it is clear that SEE has the potential to resume rapid growth over the medium-term. But how likely is it that this potential can be realised, and what are the main risks ? The answers to these questions cannot be definitive. Consistent growth over the long term depends on a variety of factors : sound macroeconomic management, a sustained commitment to structural reforms, an openness to trade and investment, and finally luck. There is little that countries in the region can do to affect the last requirement, but much that can be, and still needs to be, done about the others. What makes predictions difficult is that we cannot be sure that each country will keep on track with reforms, but we can at least be confident that there will be no serious back-tracking. Among the many reasons why we believe that economies in SEE can continue to grow, two are worth mentioning up front. The first is that the region still has a long way to go to catch up on central European and Baltic states. Not only is average GDP per capita well below that of the typical country in central Europe and the Baltic states, but in four of the eight countries, GDP is still below estimated 1989 levels, measured in constant currency. Even the two EU members of the region — Bulgaria and Romania — have a GDP per capita well below half (in purchasing power parity terms) the EU average. The second reason is that all countries will, almost certainly, eventually be part of the European Union. Whatever its faults, the EU has shown unparalleled success in promoting prosperity among its members, not just after membership is secured but even beforehand. The prospect of membership, once it is clear that it will be attained, is a powerful incentive for investors. The private sector already dominates economic activity in the region and will continue to do so, provided the right conditions continue to hold. One key factor is political stability, but there are other important questions to address. Will macroeconomic policies be appropriate for promoting growth ? Will the authorities take firm action to improve the business environment ? Will finance be readily available for new business opportunities and will banks and other financial institutions work properly ? Will there be easy access to international markets ? And will there be real investment opportunities, with the appropriate incentives and human capital available to make a profit ? Positive answers to all of these questions are likely, but the risks remain considerable. Countries in SEE have demonstrated considerable expertise in bringing about a relatively sound fiscal environment and low inflation — the two main prerequisites for a stable economy. However, the solutions that were applied in the early years of transition may no longer be appropriate. For example, a fixed exchange rate may be the right policy when there is rampant inflation and little confidence in the domestic currency, but it may not be appropriate when there is a period of strong global turbulence and large movements of capital across borders. Similarly, fiscal challenges can be even greater as countries become more integrated into international capital markets and as the need increases to upgrade infrastructure to EU standards. In terms of the business environment, countries in SEE have made progress but could



Peter Sanfey

do better. The main problem appears to lie in the implementation. Laws on the books are often in line with best international practice. This offers however little comfort to business people who encounter constant difficulties in making a profit. In addition, it is very difficult for businesses to expand operations without having access to some form of finance, usually loans. This is an area that has been transformed over the past decade. Businesses can routinely access loans from banks at rates that would have been unthinkable even a few years ago. However, access to finance is still limited for small and medium enterprises and for businesses in rural areas. In many cases, businesses have to rely on more informal sources such as remittances. Once businesses grow, they want to trade more, and many look to expand their markets abroad. New trade opportunities have opened up, mainly as a result of improved economic stability and closer intra-regional cooperation. The implications of the new regional free-trade agreement (the expanded CEFTA) that entered into force in 2007 are profound and are likely to lead to significantly more trade within the region over the medium-term. Also, there has been dramatic progress over recent years in creating the right business environment for FDI, and the numbers are there to prove it. But much of this FDI has been privatisation-related, and it is by no means assured that the levels of inward FDI achieved by the region in recent years can be sustained in the future. However, given the investment needs of the region, it is imperative that every effort is made to improve further the investment climate in order to attract fresh FDI, with its associated new skills and processes.

Bernard Snoy with contributions by Oswald Hutter¹

3.2 The Development of Regional Infrastructure in South Eastern Europe When the Stability Pact was created, infrastructure in SEE was generally below European standards and had been severely affected by direct and indirect war damage which destroyed or rendered unusable important components of the infrastructure. This was particularly the case in Serbia and in Bosnia-Herzegovina. Roads, railway lines, ports, airports and energy infrastructures were affected. The destruction of bridges across the Danube and Sava rivers also severely impeded inland navigation as well as road and rail traffic flows. Furthermore, neglect and under-investment, which led to severely curtailed maintenance work and renewal activities throughout the region. There was a crucial need not only to upgrade existing infrastructure and rehabilitate those that had been damaged but also to build new infrastructure to meet the region’s growing demands and improve integration, within SEE as well as with the rest of Europe. Total investment needs were estimated at €4 billion for road, €12 billion for rail and a tentative figure of €21 billion for power generation (excluding transmission and distribution). For other sub-sectors such as inland waterway transport, pipelines and air traffic, no reliable estimates are available. Given the already high level of debt, the precarious macro-economic situation and the limited implementation capacities of most countries of SEE at the time, it was obvious that the countries would need the support of international institutions to fund these developments. It was essential both for the countries and for international organisations to adopt a strategic approach at a regional level. This was necessary to avoid inconsistencies or duplications in the investments undertaken or the policies adopted. It offered the opportunity to agree on a common methodology and to define priorities between projects and sectors. It also allowed appropriate sequencing or co-ordination to take place among interdependent investments. This was the purpose of the Infrastructure Steering Group (ISG) set up following a meeting of Stability Pact Working Table II in Tirana in May 2001. The ISG was chaired from the outset by the EC, and provided a unique forum to co-ordinate the actions of the EC with those of the four main international financial institutions (IFIs) involved in the financing of infrastructure projects in SEE, namely the World Bank, the European Investment Bank (EIB), the European Bank for Reconstruction and Development (EBRD) and 1 Bernard Snoy is the former co-ordinator of OSCE Economic and Environmental Activities and Director of Working Table II of the Stability Pact.



Bernard Snoy wtih contributions by Oswald Hutter

the Development Bank of the Council of Europe (CEB). The Stability Pact was also a member of the ISG. Through the ISG, the IFIs, which traditionally operated independently on the basis of country strategies, were encouraged to develop co-ordinated approaches based on regional sectoral strategies. The Secretariat of the ISG was provided by the Joint Office set up by the World Bank and the EC to support reconstruction efforts in SEE. The ISG created a data base with an overview of the activities and the policy of the IFIs and the EC in the infrastructure sector in SEE. A joint list was drawn up of about 50 infrastructure projects deemed to be of priority for the region as a whole, with a total cost of about €4.97 billion. The implementation of these projects was monitored by the ISG and its members. The list of projects evolved over time with the completion of specific projects and the addition of new ones. Whenever the difficulties faced by these projects were of a political rather than a technical nature, the Special Co-ordinator of the Stability Pact often played a valuable role, intervening personally to ensure co-operation among neighbouring countries. Much to the disappointment of SEE citizens, the pace of implementation of many of the priority infrastructure projects in the SEE was slower than expected. Implementation and absorption capacities at national and local level were — and remain — key challenges in SEE. For instance, the lack of properly-established cadastres made it difficult to plan new roads, while other delays resulted from lack of familiarity with the procurement rules mandated by the IFIs, and from uncertain or inadequate procedures for expropriation or for consultation about the environmental impact of new investments. Moreover, the Stability Pact had to regularly combat attempts to politicise investment priorities in the region. While many projects moved more slowly than envisaged, the ISG was instrumental in promoting the adoption of sectoral strategies and setting the priorities for technical assistance resources (for example the EU Transport Project Preparation Facility) in support of these strategies. The ISG started with the transport and energy sectors and moved later to environmental infrastructures, in particular the supply and treatment of water. There is no doubt that the ISG strengthened the consensus among its members and the countries concerned on the need for a regional approach. Following a review period prompted by concerns expressed by several members, including the Stability Pact, that the potential of the ISG was not fully exploited, the EC proposed in early 2007 the creation of the IFI Advisory Group (IFIAG) as a successor body to the ISG. The IFIAG’s core objective remains the same : to facilitate the implementation and maintenance of necessary infrastructure, as well as supporting institutional capacity building and policy reform in the region through the promotion of overall co-ordination between the IFIs and the EC. However, the membership has been widened to include other regional and bilateral banks active in SEE, such as the Nordic Investment Bank, the Nordic Environment Finance Corporation, the Black Sea Trade and Development Bank

Economic development in South Eastern Europe



and the Kreditanstalt für Wiederaufbau (KfW). Since April 2008, the Stability Pact’s seat in the Group has been assumed by the RCC. The remit of the Group has been broadened to enhance co-operation in all EU candidate countries (including Turkey) and potential candidate countries — including co-operation under the new IPA. The Group’s scope has been extended beyond regional transport, energy and environmental projects to include the social sectors of health, education and employment. The Group also addresses horizontal issues such as fiscal sustainability and the right financing mix, coherence of IFIs’ support with national public expenditure programmes, preventive measures against the crowding-out of social expenditures, Public Private Partnerships (PPPs), transparency in bidding procedures, and overall public investment prioritisation. The new IFIAG meets twice a year, and is supported by four sectoral Working Groups (transport, energy, environment and social sectors), which also meet twice a year. The meetings of the sectoral Working Groups are proving a good forum for sharing and updating information on activities being undertaken by all members of the IFIAG, for proposing new initiatives (e.g. a regional approach to railway development), and for identifying obstacles to development. A particular focus of the EC is to ensure that the funds being made available under the regional IPA programme for project preparation in different infrastructure sectors are fully utilised. The IFIAG, as successor of the ISG, has the potential to provide a unique forum for the identification of obstacles to the development of the necessary regional infrastructure in SEE. It also offers IFIs and the EC the opportunity to set up co-ordinated approaches in terms of both policy development and project implementation. The first year of operation has been promising, but it remains to be seen whether it will provide the necessary platform for a more co-ordinated approach. While IFIs may compete for certain projects in terms of lending operations, the overall improvement of the policy environment for infrastructure will benefit all. Considering the scale of infrastructure development required in Turkey, its inclusion in the remit of the IFIAG has the potential to reduce the attention paid to the other SEE countries. Co-operation and collaboration with regional co-ordination bodies such as the Energy Community Treaty Secretariat, the SEE Transport Observatory (SEETO, see below) and the Regional Environment Centre for Central and Eastern Europe (REC) are vital to ensure that the work being undertaken and the assistance being provided to all of these bodies are maximised. The following sections will review mainly the Stability Pact’s achievements in promoting regional co-operation in the transport sector, including the integration of SEE in the Single European Sky, and Sava and Danube River Co-operation. The Stability Pact’s achievements in promoting regional co-operation in energy infrastructure are reflected in Chapter 3.3.



Bernard Snoy wtih contributions by Oswald Hutter

R e g ion a l Tr a nsp or t C o - ope r at ion Transport infrastructure and facilitation is a cornerstone for economic development. However, in addition to the low-quality transport infrastructure in the region, the breakup of the former Yugoslavia into new independent countries led to a multiplication of international borders/check-points and decision-making centres for planning, regulating and investing in the region’s transport sector. The situation has created impediments for integrated regional economic development and trade over the past decade. The low quality of transport infrastructure in SEE and the relatively high transport costs were discouraging foreign investment in the sector, hampering trade flows and therefore limiting the international competitiveness of the countries of the region. A regional approach is better suited than a national one to several important issues in transport infrastructure, including planning and prioritising major transport links, ensuring compatibility of technical standards, setting up regulations and facilitating border-crossing procedures. Establishing adequate transport networks in SEE, linked to and compatible with trans-European networks (the Corridors IV, V, VII, VIII and X), was a joint objective of the countries of the region. The network constituted an important part of their efforts to integrate the region into the political and economic mainstream of Europe. In the 1990s, the EU carried out extensive planning exercises to define the trans-European transport networks (TEN) for the member states and the accession countries. Bulgaria and Romania, both still candidates for EU membership at the time, were included at an early stage in this process. Following this experience, the need was recognised for further planning in SEE, to involve the countries participating in the SAp in the TEN. A variety of studies were carried out under the auspices of the ISG, including the EC October 2001 Strategy Paper “Transport and Energy Infrastructure for SEE”, which laid out the concept of a “Core Transport Network”. This was further clarified and elaborated by the Transport Infrastructure Regional Study (TIRS) and the Regional Balkans Infrastructure Study — Transport (REBIS) technical studies of 2002 and 2003, respectively. All these and other studies concluded that efficient planning of public investment in the SEE transport sector required building four main blocks : (i) a core regional transport network as a jointly agreed reference for planning investment of regional relevance ; (ii) prioritisation of investments of regional importance, which were financially affordable and suitable for international financing ; (iii) commitment to policy reforms — notably aimed at improving sector management and addressing cross border issues ; and (iv) an institutional framework for efficient co-ordination among the countries of the region. This activity culminated in the 11 June 2004 signature of a Memorandum of Understanding (MoU)² on the Development of the SEE Core Regional Transport Network 2 the full text of the MoU is available at www.seerecon.org

Economic development in South Eastern Europe



(hereafter Core Network). By signing up to the MoU, the EC, Albania, Bosnia and Herzegovina, Croatia, the former Yugoslav Republic of Macedonia, Serbia and Montenegro and UNMIK/Kosovo committed themselves to co-operate in the development of regional transport networks in SEE. The MoU provides for reciprocal consultations on transport policy and for institutional reforms needed to make investments sustainable, and opened the door to implementing a major infrastructure programme. The Core Network includes 4,300 km of railways across five SEE countries in the Western Balkans, 6,000 km of roads, major ports and airports, and the inland waterways Danube and Sava. The total cost of developing the Core Network was estimated at over €16 billion, and 17 priority projects were initially identified. The MoU also enabled a regional mechanism for co-ordination to be set up — the Regional Steering Committee. Its purpose is to supervise and promote the implementation of the Core Network. Its members are senior transport officials from the signatory parties and the EC. The Committee is supported by a small secretariat known as the SEETO, headquartered in Belgrade, which started working in 2005 and which each year produces a rolling Multi-Annual Plan (MAP) for the Development of the SEE Core Regional Transport Network. Preparation of priority projects investments by the EBRD/EIB and World Bank was supported under the EC/CARDS funded Transport Projects Preparation Facility (TPPF). Through this facility, various feasibility and other studies which were required to launch agreed priority investments were undertaken in close co-operation with the countries and the financial institutions. The success of this scheme has led the EC to provide additional funding under IPA to fund technical assistance not only for preparation but at all stages of the development and implementation of selected infrastructure projects (transport, energy and environment). A major challenge for SEETO is to identify appropriate projects in its Multi-Annual Plan that can attract much needed investments from the private sector and IFIs. It is also important to bear in mind the need for intermodality between the transport modes. The transport ministries of the region must implement the necessary institutional reforms, collect reliable data on a timely basis and conduct affordability studies to ensure that users can afford to pay the tolls of new infrastructures and secure a decent payback. Railway infrastructure presents a particular challenge to the region. The poor management of railways, drastic falls in usage, and the rail system’s poor productivity are the main reasons for their rapid decay. Since each railway in the region is highly dependent on the structure of neighbouring countries, the SEE Rail Transport Area has been proposed to synchronise restructuring. It is designed to modernise the region’s railway system through five pillars : • building effective regulatory institutions for the rail sector • unbundling, management independence, market orientation and social dimension



Bernard Snoy wtih contributions by Oswald Hutter

• access to the market, interoperability and railway safety • financial stability and transparent involvement of governments • facilitation of border crossings The Energy Community Treaty was viewed as a potential model for such a Railway Area. Subsequent discussions on the matter led to an even more ambitious proposal from the EC — that the region and the EU negotiate and sign a Transport Community Treaty incorporating road, rail and inland waterway transport. The incentives for local policy makers to create a transport area are similar to those that led to the establishment of the Energy Community. There is an urgent need to invest in the region’s transport sector and modernise it in a context of limited fiscal means. There is an obligation to provide a public service and an opportunity to draw on the EU’s extensive regulatory practice. The transport area also resonates with the SEE governments’ desire to become further integrated into the EU. Given that such a transport area will require national transport companies, in particular within the railway sector, to be restructured, substantial redundancies can be expected. It will therefore be of the utmost importance to pre-empt social conflicts early in the process in order to galvanise political will around the treaty. This consideration has been recognised by all parties. In stark contrast to the Energy Community Treaty, the negotiating mandate of the EC and the SEE governments for the transport area specifically included social issues.

A i r Tr a nsp or t — Mov i ng t o t h e Si ng l e Eu rope a n Sk y ? While civil aviation in SEE was not subject to the same degree of neglect as road and rail, this sector has suffered from the closure of sections of airspace in the region. The most notable example is the airspace over Kosovo, which has been controlled by NATO since 1999 and closed for civil aviation. Airspace closures have had an impact on commercial air traffic and its management, as re-routing air traffic towards northerly and southerly routes carries additional costs in terms of time, fuel and overflight fees. An initial attempt by the Stability Pact, the EC and the International Civil Aviation Organisation (ICAO) was unable to resolve the impasse between Serbia and UNMIK/Kosovo on control of the airspace over Kosovo. The efforts however initiated the process that led to the countries of SEE and UNMIK/Kosovo signing the European Common Aviation Area Agreement (ECAAA) in June 2006. In doing so, the region has become a part of yet another sector in the EU’s internal market, in advance of actual membership. The EC and the Stability Pact subsequently established and co-chaired a Working Group on the South East European Functional Airspace Block Approach (SEE FABA) to work on one specific element of the ECAAA (often referred to as the Single European Sky regulations), to avoid fragmentation of air traffic management in the region.

Economic development in South Eastern Europe



Although the Working Group made progress in determining criteria for potential functional airspace blocks in the region, over time it became obvious that weak institutional structures and capacities as well as competing initiatives jeopardised proper implementation. To overcome these difficulties, it was decided in 2007 to create a High Level Task Force to review ongoing activities, assess air traffic management in the region, and examine the possibility of extending the initiative to cover all aspects of Single European Sky (SES) in SEE. Following the recommendations of this High Level Task Force, SEE FABA was replaced by the ISIS programme (Implementation of Single European Sky in South East Europe). ISIS includes new objectives and a modified governance framework involving all relevant parties and interested stakeholders. The specific objectives are now : • to enhance the current safety standards for general air traffic in the area ; • to optimise capacity, flight efficiency and cost effectiveness, while taking into account environmental issues and defence requirements ; • to address operational and technical matters in order to facilitate the implementation of the SES Regulations in the area, and to co-ordinate with relevant, similar initiatives ; • to enhance when required the number of staff in national organisations and harmonise their level of knowledge in accordance with SES standards ; • to the extent possible, to co-operate, to co-ordinate and to harmonise the work in the spirit of Single European Sky. On April 22 2008, eight countries of SEE, UNMIK/Kosovo, the EC, the Stability Pact, and the RCC, formally launched ISIS. The RCC has inherited the Stability Pact’s seat as co-chair of the Governing Body and the Management Committee of ISIS. This places the RCC in a very strong position to encourage SEE parties to implement this more integrated approach as they meet the myriad of demands placed on air transport and air traffic under the ECAAA. The development of a realistic work programme for the adoption and implementation of legislation, the creation of institutions, and the introduction of new practices will be critical, particularly in the light of the administrative and institutional weakness in the region. In addition to its contribution to the Governing Body, the RCC could play a useful role in highlighting what would happen if SEE parties do not adhere to the ECAAA, and promoting consensus on how to overcome some of the difficulties the region currently faces.

I n l a n d Wat e rway s Inland waterway transport (IWT) has been neglected in SEE, and the Stability Pact has tried to focus attention on it, particularly given its environmentally-friendly nature and



Bernard Snoy wtih contributions by Oswald Hutter

its substantial potential in the region. Since 2002, the Stability Pact has tried to increase co-operation among the riparian countries of the Danube across a number of sectors. The Stability Pact has focused its efforts on the Danube Co-operation Process (DCP) and has complemented this political process with a series of Danube technical meetings. The DCP, which was established in 2002, is a largely political forum aimed at initiating and backing regional and pan-European projects in co-ordination with other regional organisations and initiatives. It covers the sectors of navigation, the environment, economic development, tourism, culture and sub-regional co-operation. The Stability Pact along with the EC, Austria and Romania was a founding member of the Process. The Process is led by the Ministries of Foreign Affairs of the 13 Danube Basin member states, the EC and the Stability Pact, and a large number of technical organisations and institutions are involved in its different dimensions. While several ministerial meetings have been held, progress on project identification and, more importantly, implementation has been very slow, and the DCP Ministerial Conference in Belgrade in April 2007 requested senior officials to further review the concept of “enhancing the co-ordination and effectiveness within and across the dimensions of the DCP”, as proposed by the Stability Pact. Part of the rationale of the Stability Pact’s call for enhanced co-ordination in the DCP is promotion of the visibility of the process and encouragement of progress in the region. The DCP is to secure agreements on specific projects in the different sectors within which it operates. By doing so, it will provide demonstration projects for wider co-operation in the Danube Basin. While it is recognised that securing agreement from the 15+ members of the DCP will not be easy, the Stability Pact has secured the support of its founding partners — Austria, Romania and the EC — for its proposal, that seeks to ensure that the DCP does not become a mere talking shop. The Danube Technical Meetings have tried to provide a more technical forum to discuss topics related to the Danube and to identify concrete projects. These meetings, jointly organised by the Stability Pact, SECI and TINA Vienna, have addressed flood prevention, container traffic, inland ports and the potential development of hydropower stations in the Danube Basin. Complementary to these initiatives and processes, one of the key achievements of the Stability Pact in this area was the creation of the International Sava River Basin Commission. The basin of the Sava River, one of the most important tributaries of the Danube, used to lie entirely within the borders of former Yugoslavia. Following the political transformation of the 1990s, it was split between Slovenia, Croatia, Bosnia and Herzegovina and Serbia. The significant achievement of the Stability Pact was to bring together the four riparian countries, and help negotiate and successfully conclude an international agreement to address the main transport, environmental and economic issues raised by the management of the Sava River. The Sava River initiative, launched under the auspices of the Stability Pact in June 2001, led to the Framework Agreement on the Sava River Basin that was signed on 3

Economic development in South Eastern Europe



December 2002 in Kranjska Gora, Slovenia. This, the first multilateral agreement to be signed among ex-Yugoslav states since the 1995 Dayton Agreement, entered into force on 29 December 2004 after ratification by all four countries. A key provision of the agreement was the establishment of a multilateral organisation, the International Sava River Basin Commission (ISRBC), to support implementation in the key areas of navigation, sustainable water management and prevention/limitation of dangers. The agreement also defined the general principles of action of the parties. They would co-operate on the basis of sovereign equality, territorial integrity, joint benefit and good will. And they would operate in mutual respect of national laws, institutions and organisations, and act in accordance with European Directive 2000/607EC (the EU Water Framework Directive). The Agreement also provides for the necessary collaboration with international organisations (International Commission for Protection of the Danube River, the Danube Commission, the United Nations Economic Commission for Europe and institutions of the European Union). The Sava Commission consists of eight members representing the four riparian countries. It meets at least once a year and is funded through annual contributions from the parties as well as from other sources. Unfortunately it took two years of negotiation to finalise the seat of the commission in Zagreb, and it was only officially established there on 27 June 2005. The secretariat finally came into action in January 2006.

E n v i ron m e n ta l c o - ope r at ion At the outset of the Stability Pact, all parties agreed on the critical importance of regional co-operation on environmental matters. In 2000, the Regional Environmental Reconstruction Programme (REREP) was set up under the auspices of the Stability Pact. It brought together countries in Central, Eastern and South Eastern Europe with International Financial Institutions (EBRD, EIB, World Bank), the EC, interested EU member states and other bilateral donors. The aims of the REReP are to : • foster regional environmental co-operation in SEE ; • create conditions for sustainable environmental protection whilst focusing on institution building, civil society, support to existing regional mechanisms and reducing environmental health threat ; • support the countries of the region in meeting their obligations in terms of regional co-operation within the SAp and • enable effective co-ordination of international assistance and initiatives on environmental issues in order to complement the SAp.



Bernard Snoy wtih contributions by Oswald Hutter

The REREP Taskforce, consisting of the ministers of environment of the countries of SEE, NGOs, and the donor community, meets at least once per year. The Regional Environmental Centre for Central and Eastern Europe (REC) provides the secretariat for the REReP. The substantial support provided by the EC combined with the excellent technical and administrative assistance of the REC have allowed the initiative to make substantial progress and have quietly made a considerable contribution to strengthening the capacities of environmental institutions in SEE. A key outcome was the development of a Balkan Environmental Enforcement and Compliance Network (BERCEN), which is designed in the long-term to run in parallel to the EU’s network for the Implementation and Enforcement of Environmental Law (IMPEL) in SEE. Other notable outcomes include : • a regional Environmental Investment Strategy approved by all SEE countries ; • participation in the activities of the European Environmental Agency ; • the signature of a series of bilateral Memoranda of Understanding on cross-border environmental co-operation ; • the establishment of a SEE NGO network, that continues to raise awareness on regional environment issues ; • the creation of a database available online, containing details of REReP projects ; and • the setting up of an informal donor network under REReP to enable an overview of bilateral projects to be developed. Further information is available at www.rec.org A key challenge now facing the region is the substantial cost of adopting and implementing the EU acquis communautaire in this sector.

Renaud van der Elst¹

3.3 Creating a Regional Energy Market

The Stability Pact’s energy initiative in the SEE was created on the compelling assumption that prosperity is hard to achieve without an adequate, reliable and affordable supply of energy, through up-to-date infrastructure and properly functioning energy markets. Based on the experience of CEE countries, one could safely predict that regional economic growth and recovery combined with higher expectations for living standards were likely to increase the energy demand in the short to medium term, with the prospect of reaching equilibrium at a later stage as SEE countries either diversify away from energy-intensive industries or reduce energy intensities through energy efficiency measures. Furthermore, it was obvious that social cohesion could not materialise if some people were still to suffer from significant power cuts, especially in remote rural areas, or simply could no longer afford to pay their electricity and heating bills. Against a background of significant concerns for energy security in the Balkans, the Stability Pact instigated the concept of a regional energy market as the best way to pool reserve capacity across countries, to better balance supply and demand during peak load and base load periods through the generation mix of hydro and thermal production, and also to set the stage for private investment in new power utilities. The Stability Pact accordingly played a catalytic role among international financial institutions, donors and national and international policy makers in launching the Athens Process that eventually led to the Energy Community Treaty (ECT). This article aims to explain how the advantages of formalising a regional approach to energy security became clear after taking stock of the energy situation in the region. It recalls the objectives that the Stability Pact assigned to its energy initiative based on the initial state of play, as well as the milestones of the so-called Athens Process. It briefly describes the main features of the Energy Community and examines the contribution of the Stability Pact to the success factors behind the creation of the Energy Community. Finally this article analyses the difficulties encountered on the way to implementing the ECT and the challenges lying ahead. I n i t i a l s tat e of pl ay of e n e rg y i n f r a s t ruc t u r e a n d m a r k e t s Thanks to various studies commissioned under the auspices of the Stability Pact, including the World Bank’s Regional Strategy Paper on the Road to Stability and Prosperity in 1 Renaud van der Elst worked on energy issues with the Stability Pact Working Table II.



Renaud van der Elst

SEE (March 1, 2000), the shortcomings of the power supply in the region could be clearly identified. At the beginning of the Athens Process in 2002, most SEE countries were net energy consumers, with energy imports from outside the region representing approximately 40% of the total energy consumption. Insufficient power capacity was caused by the lack of investment in new power plants over the last decades, by technical losses in transmission and distribution networks following poor maintenance and, in some cases, by damage caused during the recent wars. The power companies were typically owned by the state and poorly managed in vertically integrated structures operating with an excessive workforce. The state often had to subsidise the heavy losses incurred by these companies. Not only did they not charge the full cost of power generation, transmission and production to end consumers, they also failed to collect what revenues they expected because of the lack of electricity metering systems and appropriate billing and debt-collection policies. The energy markets were fragmented into national markets for various reasons. Crossborder interconnection capacity was rare. National import and export monopolies prevented markets from opening up to competition. There were no clear and transparent rules on congestion management and capacity allocation. Furthermore, the regulatory frameworks governing the legal and technical requirements of the grid codes were often disparate. The existing thermo power plants contributed heavily to the region’s overall greenhouse gas emissions. Here the blame was to be directed at the lack of environmental standards and investment in retrofitting the plants (for instance, with clean coal technologies and energy efficiency measures). While the energy mix across the region was acceptable, many countries individually showed a poor energy mix. Some countries had little or no gas at all and others relied too heavily on a single source of power. The supply routes in terms of transmission lines and hydrocarbon pipelines also needed to be diversified and reliance on a single supplier for nearly 90% of the gas did not present a secure and healthy situation.

Th e obj e c t i v e s of t h e e n e rg y i n i t i at i v e Based on this diagnosis of the situation, the Stability Pact identified three ambitious objectives. The first objective — in line with the overall mandate of the Stability Pact — was to get local governments to commit to co-operation in the field of energy and then move to a legally binding agreement. This meant integrating local jurisdictions into the EU single energy market ahead of possible full EU membership, in the same way that the European Coal and Steel Community had paved the way for closer integration for its signatories.

Creating a Regional Energy Market



The second objective was to create a stable and reliable supply of energy as a prerequisite for growth and social cohesion. This could be achieved by : • Promoting regulatory reforms conducive to a safe and predictable legal framework in line with the main regulations of the acquis communautaire in the field of energy ; • Reducing the costs associated with the huge investment needs by creating an integrated regional market and a better investment climate ; • Taking advantage of the geopolitical opportunity to diversify the energy mix and supply routes and to reduce reliance on one or two supply sources. The third objective stemmed from the notion that political stability cannot be achieved without social cohesion. Therefore it was necessary to ensure that : • Public service obligations in terms of universal energy supply be met whether end-consumers are located in large cities or in remote rural areas ; • Affordability problems be addressed for the most vulnerable customers, after hiking energy prices to cost-reflective levels ; • Social partners be involved in the restructuring process of power utilities (redundancies) further to the unbundling and privatisation processes ; and help for them to manage change (through investment in human capital and life-long learning to improve the adaptability of low-skill workers).

Th e m i l e s t on e s of t h e At h e ns P ro c e s s Eager to swiftly achieve tangible results, the Stability Pact embarked together with the Joint Office of the World Bank and the EC on the compilation of “bankable” projects in the so-called Quick Start Projects list. The Stability Pact played an instrumental role in gathering the international financial institutions and donors around these projects, either to fund feasibility studies and technical assistance, or to finance the projects themselves. In addition to the Infrastructure Steering Group (ISG) set up in May 2001 at the Stability Pact’s initiative, donors meetings specifically dedicated to energy were organised on an ad hoc basis. International donors included in particular the European Agency for Reconstruction (EAR), the World Bank, the European Bank for Reconstruction and Development (EBRD), the European Investment Bank (EIB), the Kreditanstalt für Wiederaufbau (KfW), the United States Agency for International Development (USAID), the Canadian International Development Agency (CIDA), the Swiss State Secretariat for economic affairs (SECO) as well as bilateral donors including Italy, France, Germany and Greece. The Stability Pact realised however that the pragmatic approach of Quick Start Projects would soon have to address the need to create a regulatory framework that would provide



Renaud van der Elst

investors with some legal comfort concerning their operations in the region. The Stability Pact therefore asked the EC to take the lead in designing an energy policy and accordingly mandated the EC to extend its lead of the Management Committee for a Regional Electricity Market to all interested parties at the Working Table II meeting held in Istanbul in October 2000. The so-called Athens Process formally began in March 2002 when the EC brought forward its proposals for the creation of a Regional Electricity Market (REM). These proposals were subsequently translated into the first Athens Memorandum of Understanding on electricity, signed on 15 November 2002 with the EC and the Stability Pact as sponsors. This memorandum was then supplemented on 8 December 2003 by a second Athens Memorandum of Understanding with new provisions regarding gas markets. Another highly symbolic achievement was to reconnect the electricity grids of SEE with the European network. This historic task was performed by the Union for the Coordination of Transmission of Electricity (UCTE) on 1 November 2004 and contributed to ending a long era of isolation. In the meantime, even though some countries had begun implementing regulatory reforms, the signatories of both memoranda agreed that the most efficient manner to create a market-friendly environment was to turn the memoranda into a binding treaty. This would allow investors to reap the benefits of a safe and predictable legal framework and create a level playing field among the signatories. As a result, the Athens Process culminated with the signature of the Energy Community Treaty on 25 October 2005. That Treaty came into force on the 1st of July 2006, marking a significant turning point in the energy sector in SEE. Subsequently, the Energy Community also reached a significant milestone in the area of social cohesion. Ministers of social affairs of the regions gathered in Vienna on 18 October 2007 to sign a Memorandum of Understanding on Social Issues in the context of the Energy Community. The Stability Pact supported the efforts of European Public Service trade Unions (EPSU) in obtaining such a social pillar within the Energy Community. This list of achievements would not be complete if we omitted to mention some of the numerous studies funded by donors and public stakeholders. These studies proved useful in the decision-making process of the national and international policy makers. • The Generation Investment Study, commissioned by the World Bank and published in December 2004, identified the least-cost options to improve the generation capacity of the region and calculated that a regionally integrated approach (as opposed to purely national approaches) could save nearly 10% in total investment needs. It was updated in January 2007 to take into account the rise of hydrocarbon prices, the benefits of the carbon credit market and the possibility of importing electricity from Ukraine. • The SECI report on the Evaluation of Investments in the Transmission Networks to sustain generation and market development in SEE.

Creating a Regional Energy Market



• A draft of the SEE Regional Gasification study commissioned by both the World Bank and KfW was presented at the First Gas Forum in Maribor on 9 November 2007 with a view to help stakeholders bring more gas to the region in the most cost-effective manner. This study depicts a coherent vision of an Energy Community gas ring that would link the domestic gas markets of the region. The Energy Community secretariat officially made reference to these studies, alongside the guidelines for trans-European energy networks (TEN-E) adopted by the European Parliament and the Council in 2006, when it set up an indicative list of priority infrastructure projects. The Energy Community Ministerial Council held in Belgrade on 18 December 2007 formally endorsed them with a view to update the list on a yearly basis.

Th e m a i n f e at u r e s of t h e E n e rg y C om m u n i t y The Energy Community represents the achievement of the largest internal market for electricity and gas in the world, with 34 participating countries, including the Member States of the European Union and the countries of the Western Balkans. In the short to medium term this market is likely to be enlarged to Georgia, Norway, Moldova, Ukraine and Turkey, that all obtained the status of Observer to the Energy Community. Currently the ECT deals only with gas and electricity markets and defines parts of the acquis communautaire that the contracting parties have to transpose into their legal frameworks and effectively implement following a specific timetable. In addition to the gas and electricity directives, parties also have to comply with EU competition law and jurisprudence, as well as a selection of regulations relating to environment and renewable energy. The Energy Community is a market without internal frontiers, which entails the prohibition of customs duties and quantitative restrictions inside countries of SEE and the European Union, but also calls for the adoption of a common external energy trade policy regarding third countries. The Treaty also creates an innovative obligation of mutual assistance in case of a severe disruption in energy supply experienced by any of its members. However, the Ministerial Council of 29 June 2007 extended the deadline foreseen in article 46 by three years in order to allow for further reflection on this very technical and political provision. Since the ECT was consciously modelled on the European Coal and Steel Community, many of its institutions bear a strong resemblance too. In its capacity as sponsor of the Athens Process, the Stability Pact always took part in the meetings of these institutions, sometimes speaking on behalf of the IFIs and donors. The main institutions of the Energy Community are :



Renaud van der Elst

• The Ministerial Council, that takes place every six months with the participation of the Ministers of Energy of the member countries and the European Commissioner for Energy, embodies the political will, takes strategic decisions and gives directions to the Treaty or formally adopts or endorses secondary legislation. The Presidency of this Council rotates every six months. • The Permanent High Level Group is composed of representatives of the Ministers of Energy of the Member States of the ECT and the EC. The Group usually meets four times per year upon the initiative either of the EC or the country holding the Presidency at the time, in order to prepare the Ministerial Council and to ensure its decisions are followed up. It is also responsible for reporting on the progress made by the parties in implementing the Treaty. • The Secretariat has its seat in Vienna and acts as the central co-ordinating body for the Treaty. It plays an important initiating role in developing the Treaty and in making use of the secondary law provisions of the Treaty. It is also responsible for co-ordinating international donors, in validating work and in proposing technical, legal and regulatory developments. The secretariat is largely funded under the EC’s assistance programme for SEE, originally the CARDS programme and now IPA. • The Energy Community Regulatory Board is a supranational regulatory body that is expected to play a central role in the enlarged market. It analyses issues of regulatory co-operation and may develop into a regulatory decision-making body and/or a dispute settlement mechanism. • The Athens Forum is a venue dedicated to electricity, designed to advise the Energy Community. It brings together representatives of the EC, the Stability Pact and in future the RCC, governments, regulators and transmission system operators of the countries of SEE, the Council of European Energy Regulators (CEER), the European Transmission System Operators (ETSO), UCTE, representatives of donors, electricity producing companies, and consumers. • The Maribor Forum is a venue dedicated to gas. The first official gas forum took place only in November 2007 as the stakeholders decided to first focus their attention on the electricity markets. This decision was taken on the basis that power outages, especially during the winter season, were threatening growth and social cohesion. Gas markets were also substantially less developed. • The Social Forum has been recently institutionalised by the Social Memorandum. The Ministerial Council of 18 December 2007 supported the proposal of the Permanent

Creating a Regional Energy Market



High Level Group to organise this forum as a separate yearly event. This forum is meant to address the practicalities of properly designing and funding the social action plans described in the Memorandum. One might wonder why there is no institution mirroring the functions of the European Parliament and question the democratic accountability of the Energy Community. Actually, a democratic control was exercised ex ante when the ECT was presented to the European Parliament and when it was ratified by all parliaments of the region and UNMIK on behalf of Kosovo. Furthermore, since the Ministerial Council has to submit an annual report on activities of the Energy Community to the European Parliament and to the Parliaments of the adhering parties, regional members of parliaments can still exercise an indirect control of the activities of their governments. In tandem with the European Parliament, the Stability Pact ensured that the Athens Process remains accountable to local parliaments. The Ministerial Council held in Montenegro on 29 June 2007 adopted a budget ceiling of €2.038 million for the functioning of the Energy Community in the financial year 2007. The European Community met 98% of the costs and other Parties to the Treaty the remainder.

Th e s uc c e s s fac t or s be h i n d t h e E n e rg y i n i t i at i v e Convincing the parties to the Treaty to implement politically sensitive and sometimes painful reforms was a task fraught with difficulties. Its success may be attributed to the following reasons. The Athens Process was backed at its inception by strong political will. It was precisely the role of the Stability Pact to ensure that national stakeholders remained on board, and the Stability Pact did so by requesting bilateral meetings with relevant national ministers, by organising prime ministers’ advisors meetings and organising and sponsoring conferences with local members of parliaments. Furthermore, the Treaty ensures that SEE governments and parliaments remain involved in the process through the Permanent High Level Group, the Ministerial Council meetings and annual activity reports. The governments of SEE had few compelling alternatives. The structural electricity deficit in the region and the poor state of power utilities, combined with a limited capacity to borrow money and even to issue state guaranties, gave parties to the Treaty limited room for manoeuvre. Market-oriented reforms were necessary to attract investors and to integrate fragmented markets into a regional market. Here also the Stability Pact played an important role by organising energy roundtables, conferences and energy weeks and by providing ad hoc guidance to investors. SEE governments were presented with an opportunity to model their reforms on a clear legal framework, drawing on more than 15 years of EU experience in energy policy.



Renaud van der Elst

The prospect of further integration into the EU through the single energy market also worked as a powerful incentive for the contracting parties. At the same time, it was an opportunity to show the credibility of their efforts to join the EU. The Energy Community secretariat’s pragmatic approach to devising implementation roadmaps played an essential part in the initiative’s overall success. It was important to set judicious deadlines and have parties to the Treaty report on the status of their reforms’ implementation. The roadmaps were tailored to the specificities of each party and provided advisory assistance where required. The contracting parties also benefited from the technical and financial support of the EC, the donors and the international financial institutions. The Stability Pact fulfilled its traditional role of co-ordinator and honest broker by promoting the creation of the Infrastructure Steering Group, co-chairing the Energy Community donors’ meetings until May 2005, and through various bilateral meetings with major international financial institutions and the EC.

C h a l l e ng e s ly i ng a h e a d Despite its success so far, there is no time for a pause or for complacency. Some observers even report that the reform drive is running out of steam. The lack of administrative capacity and experience with these new policies certainly impedes the swift implementation of the Treaty. In this light, the Ministerial Council of 30 June 2007 has extended by one year the deadline for implementing the gas and electricity directives. The Energy Community is thus still a success in the making that requires the Contracting Parties to push ahead with difficult reforms, the most challenging being to open up the markets. True, to date, most of the relevant acquis communautaire has been transposed into primary legislation, but many provisions are still missing in secondary legislation. During an investment conference organised in Athens in September 2007, the invited panellists and participants from the private sector had the opportunity to voice their concerns about the current state of play of energy markets. Their main findings were : • As local economies are still growing rapidly with galloping real estate developments and rising expectations in terms of living standards, the region will face a structural electricity deficit in the short term ; • Investments are lagging behind schedule. Not only were the regional authorities slow in getting their new power capacity programmes started, but further delays are expected if sourcing of equipment proves as difficult as feared. It is reported that prices for equipment have increased by 40% in 2007 and that the timeline for delivery is estimated somewhere between 2014 and 2015 ; • There is some resistance by the countries to accept the price hikes requested by utilities.

Creating a Regional Energy Market



The supposedly “fully independent” regulators often have a tough task balancing the interests of power utilities, households and non-household customers ; • Opening up national markets to competition is clashing with the vested interests of national transmission system operators, as national regulators are working towards transparent and unconstrained trading of electricity across the borders. As a result, there is still no regional market, but rather small national markets ; • SEE governments must perform an environmental assessment before proposing a project, and must organise their tender procedures in a fair and transparent manner. Lack of experience has led to some of these processes being incomplete before the launch of the tender and thereby causing delays afterwards. Moreover, parties still struggle to define regional priority projects they all adhere to. While the two guided information studies commissioned on the subject indicated that the countries had to diversify their energy mix and operate as an integrated trading area, they did not deliver clear-cut conclusions as to the best projects. It follows that SEE countries are inclined to develop projects that give them the highest level of energy security and the prospect of becoming “net electricity exporters”, irrespective of the studies’ recommendations. One last important obstacle is that the SEE gasification study does not solve the problem of sourcing gas supplies. Given the huge cost of building gas pipelines, those that will bring gas to EU markets (Italy or the Baumgarten gas hub in Austria) are likely to be built first. For the Energy Community Gas Ring to become a reality, the study warns that 50% of the anchor load (i.e. demand) must be created upfront with gas-fired power plants. Given the uncertainties concerning gas sourcing and the rivalry between numerous gas pipeline projects, one can understand that parties have second thoughts before acting.

C onc lus ions — t h e way f orwa r d The contracting parties are legally bound to implement all the provisions of the Energy Community Treaty in due time and there is no doubt that their ability to live up to their commitments will influence the pace of their integration into the EU. To be fair to the countries of SEE, many member states of the EU struggle with similar problems ranging from ineffective unbundling of dominant power utilities to lack of coordination regarding external energy policy, especially in sourcing their supplies. If the EC can use the powers of DG Competition to a certain extent, it will encourage political consensus around its energy policies. The Energy Community is not subject to a supranational competition authority, making it harder to prompt contracting parties to effectively proceed with reforms. The prospect of being deprived of voting rights following a dispute settlement mechanism may not be sufficiently compelling. The situation calls for diplo-



Renaud van der Elst

macy and consensus building, and therefore the intervention of political organisations such as the Stability Pact or the RCC. Against the backdrop of challenges ahead, the RCC will certainly prove useful in urging the contracting parties to focus their action on energy efficiency and cross-border trading. On the one hand, local governments should bolster all measures and incentives aiming at improving energy efficiency and energy savings ; this implies a strong commitment by policy makers to create awareness and stimulate action among both household and non-household customers. On the other hand, priority should be given to cross-border trade of electricity in order to optimally balance supply and demand throughout the region. This can be achieved only by : • Creating more cross-border transmission lines, • Improving cross-border capacity allocation and congestion management procedures, • Setting up as soon as possible a regional Co-ordinated Auction Office that provides a transparent, fair and safe cross-border transmission allocation platform. In the longer term, the RCC can play a useful role in facilitating the difficult co-ordination of gas utility projects in the region. The Stability Pact has often used the example of the Nabucco gas pipeline project, designed to bring gas from the Caspian region to Baumgarten in Austria, to convince stakeholders of the Athens Process of how geo-politically usefulness the Energy Community can be. Nabucco is an enabling project that will test how far political will can change the status quo. The negotiation and implementation to date of the Energy Community Treaty certainly give cause for optimism.

Mary O’Mahony¹

3.4 Increasing Investment and Trade in South Eastern Europe — a regional approach When the Stability Pact began to examine the issue of economic development in 2000, the economies of the region were at very different stages in the reform process — as they continue to be today. Disparities reflected each country’s particular starting conditions and timing, but also the capacities and strength of their pro-reform forces. In most cases, the level of domestic savings was very low and the financial system underdeveloped. Some countries needed more assistance than others, while others, on account of their previous experience, were seen to provide important lessons from their reform processes. In general, the reform process in the region started with small-scale privatisation, trade and foreign exchange liberalisation. This was usually followed by larger scale privatisation and financial development. Finally, the reform process led governments to tackle issues of governance, competition and long-term infrastructure development. Given the weak state of the domestic economies all governments, from the outset, recognised the need for foreign direct investment. It was considered essential to secure capital as well as managerial and technical know-how. The governments also recognised the need to boost trade and strengthen domestic enterprises. The Stability Pact therefore considered whether regional initiatives could complement the individual efforts of the countries as they pursued three inter-related economic objectives : • transition to a market economy ; • greater opening to foreign trade and investment ; • deeper economic integration with the European Union. These deliberations led to the creation of two regional initiatives — the Trade Working Group (which is covered in a separate article) and the Investment Compact for SEE that contributed to all three of these objectives. The activities undertaken as part of these largely policy focused initiatives were complemented by efforts to engage and harness the support of the private sector which amongst other things ultimately led to the creation of the Business Advisory Council for South East Europe.

1 Mary O’Mahony joined Working Table II of the Stability Pact in 2002 as an economic expert, and latterly served as the Director of the Working Table.



Mary O’Mahony

Bac kg rou n d All enterprises, whether foreign investors or domestic companies, crave stability and a predictable business environment to foster their growth. In 2000, while progress had been made in so far as armed conflicts had ended, SEE still had to prove that this stability was sustainable. The region entered an intensive period of economic reforms required to allow for the transition to a market economy, to attract greater foreign direct investment, increase in international trade, and allow for deeper integration with the EU. While, at the end of the day, countries compete for foreign direct investment projects, the creation of the Investment Compact for SEE, under the auspices of Working Table II of the Stability Pact in January 2000, demonstrated that the countries understood the need for co-operation as a condition for success in the highly competitive global market for foreign investment. The battered, war-torn and politically unstable image of the region in 2000 made such co-operation even more important as any perception of instability and economic chaos in one country would have a negative impact on the foreign investment prospects of its neighbours. The countries were also anxious to learn from the experience of more developed economies in designing and implementing economic policies that attract investment — both domestic and foreign. Thus the Investment Compact was designed to support the countries of the region with practical tools to increase investment, growth, employment and EU integration processes, through evaluation and monitoring of progress in investment reform, support for policy implementation, assistance in structuring productive dialogue between the public and private sector, and maintaining the necessary political support on specific investment issues. The initiative found two committed and “hands-on” co-chairs in the Austrian Ministry of Economics and Labour and the OECD’s Directorate for Financial and Enterprise Affairs, later supplemented by a co-chair from SEE. The Initiative has also benefited from the management, technical and administrative support of the dedicated Investment Compact Project Team located at the OECD in Paris. Apart from the political support and interest among the SEE countries, several bilateral donors have supported the process both politically and financially.² Through its work, the Investment Compact has enhanced the region’s investment environment. It has accelerated reforms by identifying policy priorities and guiding their implementation, moving SEE countries closer to OECD and EU standards. It has also (i) promoted a culture of continuous improvement through the systematic monitoring and evaluation of policy reforms ; (ii) built the capacity of policy makers for effective 2 Long-standing donors to the Investment Compact include Austria, Ireland, Norway, Switzerland, and the United States of America. More recently the EC has emerged as a significant provider of support and Bulgaria and Romania — two “beneficiaries” of the initiative — have also become financial donors

Increasing Investment and Trade in South Eastern Europe — a regional approach



policy design through the dissemination of good practices and transfer of OECD methodologies, tools and instruments ; (iii) helped establish a sustainable process for reform by institutionalising high level political support, boosting the private sector’s advocacy role, and encouraging regional ownership of the reform process, and (v) improved the region’s overall image as an attractive destination for investment. This article focuses on the Investment Compact’s activities in terms of benchmarking the reform process through monitoring and evaluating the investment climate in the region, its move to enhance regional ownership of the reform process, and the dialogue and co-operation it has instigated with the private sector. It also looks briefly at the complementary nature of the Business Advisory Council in this latter task. Further information on the Investment Compact’s many other activities can be found at www.investmentcompact.org and further information on the Business Advisory Council can be found on www.bacsee.net.

Be nc h m a r k i ng t h e R e f or m P ro c e s s Many Stability Pact initiatives have published comparisons of the progress achieved across the different areas they deal with. Studies of this kind conducted by the Investment Compact have had a considerable impact. The regular publication of the Investment Compact’s comprehensive assessments of economic policy reform in the different countries has not only provided valuable information for policy makers and the business community ; it has spurred the countries to improve the scope and pace of their reforms. As is often the case, competition helps to improve quality and reduce costs as countries learn from each other’s experiences and seek to ensure that they do not fall behind in the race to secure muchneeded investment. For every country in the region, political and economic approximation and integration into the EU is the top policy priority, and the main driving force behind economic reforms. However, through the Investment Compact, the SEE countries have recognised that if they are to maximise the benefits of economic integration into the EU, they need to follow a parallel process to strengthen regional economic co-operation, reduce development gaps within the region, and overcome the disadvantages of market fragmentation. The trade liberalisation process started under the auspices of the Stability Pact’s Trade Working Group, and now continued by CEFTA, complements the Investment Compact’s work, but addresses only one element of the overall investment climate. Phase One — Monitoring and Evaluation of Policy Reform 2001–2005 The monitoring and evaluation of investment related policy reform initially started in 2001 with the first of five annual editions of the Monitoring Instruments report aimed at



Mary O’Mahony

setting the short and medium term priorities for each country. The priority areas selected for monitoring and evaluation were grouped into policies relating to : 1) investment and trade facilitation, 2) enterprises (privatisation, enterprise restructuring, private sector development), and 3) the framework for commercial relations (competition, company law, regulatory mechanisms). In 2002 the monitoring process was further enhanced by introducing the Critical Time-bound Targets (concrete policy actions) for short-term implementation, and Top Policy Priorities for medium-term reform programmes. In addition to its yearly updates on progress across the various areas, the monitoring process expanded to peer-review workshops on common regional issues and Enterprise Performance Policy Assessments³. These assessments reflected the region’s substantial capacity to boost the development of small and medium sized enterprises (SMEs) in the region, which lags considerably behind that in the EU. While the region has made progress in improving the climate for the development of SMEs, progress is uneven across the different countries and across the different policy dimensions.

Evolution from Monitoring to the Investment Reform Index — 2006 to date While the annual Monitoring Instruments reports provided valuable snapshots of the progress made (or lacking) in the region, the SEE countries and interested parties sought further information on issues such as why insufficient progress was made in certain priority areas or what the emerging priorities were for reform both nationally and regionally. Hence the Monitoring Instruments evolved into the more comprehensive Investment Reform Index (IRI) and a first IRI report was published in November 2006. The IRI was created with a desire to answer questions related to : (i) the areas where SEE countries made most progress in reforms targeting investment, trade, growth and employment ; (ii) the reform priorities at national level ; (iii) the policy areas where they needed support and the practical guidelines that the Initiative can offer. Existing policies in each country were evaluated using a set of comparative indicators structured around the OECD Policy Framework for Investment, which provided a comparative assessment along nine dimensions of government policy⁴ defining both regional and country specific reform priorities. The Index has four main benefits for both governments and the business community : it (i) provides them with an overview of each country’s performance on investment policy reform ; (ii) allows them to benchmark progress relative to other countries in the region ; 3 OECD 2002–2005 Enterprise Policy Performance Assessments for South East Europe 4 The nine dimensions are: are : Investment Policy, Investment Promotion, Tax Policy, Trade Policy, Anti-corruption, Human Capital Development, Infrastructure, SME Policy and Better Business Regulation.

Increasing Investment and Trade in South Eastern Europe — a regional approach



(iii) supports them in setting priorities to further improve the investment environment ; and (iv) provides direction on how to make improvements within each policy dimension by adopting OECD good practices. A key feature of the process is that it is tripartite, requiring self-evaluation by governments, surveys and dialogue with the private sector, and an independent OECD assessment. According to The Economist, “the methodology is solid and the results revealing”.⁵ The IRI has been complemented by assessments of the progress made in terms of SME development, carried out using the SME Policy Index 2007⁶, based on ten policy dimensions of the European Charter for Small Enterprises.

The Findings The IRI 2007 Report showed that although the region made considerable progress in many areas, there is still an important gap between the number and quality of government policies adopted and what is required to achieve the region’s full investment potential. Policy co-ordination has improved and the most recent credit ratings signal greater stability and investor confidence. However, economic growth and selected policy reforms have not reduced unemployment in the region, which is over 20% on average. FDI inflows continue to depend heavily on privatisation, and 90% of the inflows in 2007 were concentrated in four countries — Romania (€10.9 billion), Bulgaria (€7.9 billion), Croatia (€4.8 billion) and Serbia (€3.1 billion). The IRI and SME Policy Index highlighted a number of common problems the region faces in seeking to improve the overall business climate, including : • the lack of a proactive investment promotion approach, which leads to a weaker image ; • limited contact with potential investors, and limited linkages between foreign investors and local enterprises ; • persistent high levels of corruption, that continuously discourage investment and competition ; • the need for additional efforts in enforcing laws and implementing and monitoring strategies — especially in customs and public procurement ; • unstable legal frameworks, associated with weak processes for reviewing, consolidating and validating laws and regulations ; 5 The Economist 9 November 2006 6 OECD/EC (2007), SME Policy Index 2007 — Report on the Implementation of the European Charter for Small Enterprises in the Western Balkans. The Charter is a pan-European instrument developed under the framework of the Lisbon Agenda



Mary O’Mahony

• the need to introduce impact evaluation to avoid contradictory laws ; • restrictive labour laws, accompanied by a rigid and highly regulated labour market, often dilute the competitive advantages of low labour costs and a highly skilled labour force. The Investment Compact has now established four working groups⁷, comprising SEE government officials, OECD experts and representatives of the private sector, to devise recommendations on how best to address these different problems.

Future Assessments and Challenges The active engagement of the SEE countries in the regular monitoring of the investment climate and SME development, through participation in the process of developing IRI 2006 and SME Policy Index 2007, stimulated the Investment Compact team to continue with the evaluation process. They have now developed an even more comprehensive instrument, IRI 2009, to better evaluate, design and implement government policies. The new Index is broader in depth and scope than the original 2006 IRI, expanding on a number of new policy dimensions, including regional integration, corporate governance, corporate social responsibility, infrastructure, and labour policy. This reflects the increasing complexity of the reform process in SEE and the inter-related nature of the reforms. The Index is meant to evolve into a holistic regional process for reform. This approach will allow it to leverage existing diagnostic and implementation work conducted in the region by the World Bank, the OECD and other international organisations. It will also liaise with governments and the private sector to ensure maximum national and regional ownership. Its ultimate goal will be to integrate its findings into national economic plans and reform agendas, and then measure and monitor their impact on the overall business environment in SEE countries. The IRI 2009 is complemented with sector specific analysis⁸ to make more targeted policy recommendations. It facilitates the application of these recommendations by offering step-by-step guidance on implementing reforms. Continuous improvement of the overall business climate in the region is vital if SEE is to compete with other regions of the world for foreign investment and stimulate the development of SMEs.

7 Regulatory Reform, Human Capital Development, Investment Promotion and Anti-Corruption 8 Textile, automotive components, Information and Communication Technologies and Business Process Outsourcing

Increasing Investment and Trade in South Eastern Europe — a regional approach



R e g ion a l O w n e r s h i p of t h e R e f or m P ro c e s s Country Economic Teams and Co-Chairing Part of the Investment Compact’s success in producing sustainable results can be attributed to its close collaboration with SEE governments and a progressive transfer of ownership of the reform process. In this area, the Investment Compact was an “early adaptor”, setting up a network of Country Economic Team Leaders. These senior officials from the ministries of economy in various countries have facilitated liaison and co-ordination among SEE governments from the outset of the Investment Compact’s operation. In 2003, the initiative introduced a system of regional co-chairmanship for the programme, with Romania (2002/3), Bulgaria (2004/5) and now Serbia holding this position. These regional inputs have been supported by a network of regional offices (previously in Serbia, Bulgaria and Romania, and currently in Croatia and Moldova).

The South East Europe Investment Committee This focus on regional ownership was given extra emphasis with the creation of a new regional institutional structure : the South East European Investment Committee (SEE IC). Anticipating the evolution of the Stability Pact towards the more regionally owned RCC, SEE countries and the Investment Compact launched this Committee in April 2007. The Committee, which consists of deputy ministers of economy, the OECD, key donors and representatives of the private sector, provides a forum for co-ordination, peer-review mechanisms and exchange of best practices, as well as for identifying and supporting the implementation of key reforms. Its work is driven by the regionally chaired working groups referred to above, which focus on policy priorities identified through the Investment Reform Index evaluations. The working groups, composed of experts from SEE and OECD countries, are responsible for developing specific ‘how-to’ guidelines to improve policy design and implementation in priority areas. Clearly the priority areas being addressed by the SEE Investment Committee are interdependent with other regional initiatives. Increasing trade and investment will require reliable energy flows and adequate infrastructure. Building human capital will contribute to economic and social development. Enhancing parliamentary co-operation will facilitate the adoption of treaties and legislation required to improve the business and security environment. Tackling organised crime contributes to a better security environment, leading to an improved investment climate and more social stability. There are many other similar interactions. The Investment Compact must intensify co-operation with related regional initiatives such as CEFTA, the Regional Anti-Corruption Initiative and the Transport Community.



Mary O’Mahony

The RCC has a valuable role to play in this respect and a modus operandi for close co-operation has been put in place to ensure that the Investment Compact can operate effectively as the “investment arm” of the RCC

Th e Ne e d f or I n volv e m e n t of t h e P r i vat e Se c t or Establishing Mechanisms for Dialogue Governments involved in the Investment Compact are putting the different elements of an attractive business framework into place. However, until the business community starts actively using this framework and encouraging the governments to improve it, it will not translate into much-needed jobs and revenues for the region. It is therefore important that governments and the private sector communicate effectively on policy design and implementation. The necessary mechanisms for this dialogue are under-developed in SEE, where communication between governments and companies can be looked upon with suspicion — sometimes with good reason. One of the legacies of the former economic system is a dearth of business organisations and professional lobbying bodies, making it difficult for the government to identify who to engage with. The Investment Compact, in an effort to bridge this gap, played a critical role in establishing Foreign Investor Committees (FIC) in the different countries. These are composed of senior representatives of foreign companies that have invested in the country. The committees meet on a regular basis and make joint representations to the government on current issues of concern. The most dynamic of the FICs has been in Serbia ; it publishes an annual White Book on economic policy in the country, which is taken very seriously by the Serbian government in the preparation of economic policy. By preparing the Investment Reform Index, the Investment Compact has developed a mechanism that facilitates dialogue between governments and the private sector. Using organisations such as the FICs the Business Advisory Council (outlined below) and Chambers of Commerce, the IRI process allows the private sector to comment on different aspects of various economic policies. Through their participation on the four working groups established by the Investment Compact, business representatives can also make recommendations.

Business Advisory Council The Business Advisory Council for SEE (BAC) is a Stability Pact initiative resulting from the merger of a predominantly international body set up under the Stability Pact and a

Increasing Investment and Trade in South Eastern Europe — a regional approach



more regional body that took root under SECI. The BAC is composed of over 45 members that comprise senior executives from multinational and local SEE companies currently active or seeking opportunities in the region. All key sectors of the economy are present on the BAC : banks such as Hypo Alpe Adria Bank, transport and infrastructure companies such as Deutsche Bahn and Bouygues, energy companies like ABB, and agricultural processing companies such as Agrokor. Each quarterly meeting of the BAC takes place in a different SEE country, allowing executives to meet with local businesses as well as with ministers and government representatives to exchange views on the business climate in the country and any key issues arising. The meetings provide a valuable opportunity for governments to highlight the advances they are making and for companies to identify opportunities and to emphasise obstacles that they face. As a regional body, the BAC can also identify region-wide issues, make recommendations and support initiatives to address them. The BAC has been a strong supporter of the Energy Community Treaty and CEFTA. It plays an active role on the SEE Investment Committee and participates in the IRI. It has funded a pilot initiative to improve education for the public administration, established an ICT Forum and is seen as the private sector arm of the RCC.

… but more is needed As noted by Special Co-ordinator Busek in an article in the Financial Times in April 2008, while the efforts of the Investment Compact, the BAC and the FICs go some way to filling the gap in government and private sector dialogue, they are not enough, and the local business community in particular must find ways to come together so that it can exert influence on policy development in the region. This is particularly important in these transition economies given the complete overhaul of legislation and regulation required by the EU accession process, and where the concept of social partnership is in its infancy. The business community can bring a lot to such processes, but it needs to develop the effective, efficient and credible mechanisms that business routinely uses in the EU to make its voice heard.

Mary O’Mahony¹

3.5 The Stability Pact Trade Working Group and the Evolution of Trade Liberalisation in South Eastern Europe E s ta bl i s h m e n t of t h e Tr a de Wor k i ng Grou p ( T WG) Following the establishment of the Stability Pact in the summer of 1999, the need to boost the trading capacity of SEE — a prerequisite for economic growth in the aftermath of the conflicts and economic transformation of the 1990s — was one area that secured broad agreement both within the region itself and among the international community. A study commissioned by the UK’s Department for International Development (DfID) at that time, carried out by TDI Group of Ireland, highlighted the very low rates of intraregional trade (less than 5% of total trade at that time), and the ever increasing number of non-tariff barriers that were being created through differing administrative regimes. The report highlighted the trade- and investment-related benefits of accession to the EU and the World Trade Organisation (WTO) for these countries, and the need to ensure that any actions taken did not jeopardise or delay such processes. Finally, the report considered how the governments of the region might focus on the fundamental reforms required to improve the interlinked trade and investment climates in the region. The report concluded that action should be taken at both national and regional level, noting in particular the political, economic and administrative benefits that could be derived from regional co-operation. With the support of several members of the international community — notably the UK, Switzerland, USA and the World Bank — the Stability Pact established the Working Group on Trade Liberalisation and Facilitation (TWG) in January 2000. This article outlines the convoluted process from the establishment of the Trade Working Group in January to its closure and full transfer of responsibility for regional trade cooperation to the SEE countries in April 2008. It was a long series of proposals, meetings, disagreements, compromises, tenacious negotiations with occasional political interventions. What it ultimately showed, however, was that regional free trade agreements were not only beneficial economically but could also be agreed upon by actors with difficult and different political and economic histories, facilitated and co-ordinated by the Stability Pact and its diverse members.

1 Mary O’Mahony joined Working Table II of the Stability Pact in 2002 as an economic expert, and latterly served as the Director of the Working Table



Mary O’Mahony

Membership and mandate At the outset, the Group comprised Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Hungary, the former Yugoslav Republic of Macedonia, Romania, Slovenia, Turkey, the EC, UNECE, WTO and the World Bank. Representatives of interested Stability Pact partner countries — Switzerland, the UK and the USA — also joined the Group, and the Federal Republic of Yugoslavia (FRY) joined in late 2000. The Ministry of Economy of the former Yugoslav Republic of Macedonia was appointed to chair the Group, and DfID agreed to fund (initially on a short-term basis) a small secretariat provided by TDI Group to support the work of the TWG². Between 2001 and 2003, Moldova and UNMIK/Kosovo joined the Group, as did interested donors, including Germany and Sweden. The initial mandate of the Group, to improve trade liberalisation and trade facilitation, can be interpreted very broadly. However, at the outset, as with many other Stability Pact initiatives, there was considerable confusion among different members as to the exact role and responsibilities of the Group. Was it to focus on trade policy, trade promotion or trade facilitation (e.g. customs) ? This confusion could have stalled the Group’s work. For instance, there was no consistency among the representatives nominated by countries to participate in the Group. Some participants were senior trade policy officials, others were middle and junior officials from ministries of foreign affairs, and others were representatives of Chambers of Commerce. The decision to appoint senior trade policy officials to the Group, taken by SEE Ministers at the first Ministerial meeting in Geneva in January 2001, represented a significant breakthrough. One of the most important consequences of this decision was that the focus shifted to developing and implementing a regional framework for trade liberalisation rather than merely creating a range of trade promotion activities.

Structure and “modus operandi” The Group’s activities were guided by annual strategy and action plans that were approved by the Group members and endorsed by SEE Ministers and the international community at the regular ministerial meetings. The Group met three to four times per year, always under the chairmanship of a senior trade official from the region³, to review progress, discuss key issues and agree on next 2 The Secretariat consisted of a managing consultant, senior technical adviser and ad hoc technical experts (all on a part time basis) and a full-time administrative assistant. Its resources were complemented by political and managerial support from the Stability Pact Secretariat — again on a part-time basis 3 Mr Jani Bogievski, Ministry of Economy, the former Yugoslav Republic of Macedonia — January 2000 — June 2002, Ms Violeta Madzova, Ministry of Economy, the former Yugoslav Republic of Macedonia,

The Stability Pact Trade Working Group and the Evolution of Trade Liberalisation



steps. The Stability Pact office and the small DfID-funded Secretariat provided comprehensive management, technical, administrative and co-ordination support. Regular high-profile ministerial meetings complemented by the plenary meetings of the Stability Pact’s Working Table II and Regional Table provided the necessary impetus and political support to ensure that the agreed actions were implemented. Extensive information on the Group’s activities and progress was constantly made available on the trade section of the Stability Pact website — see www.stabilitypact.org/trade.

From a s tat e m e n t of i n t e n t t o a r e g ion a l f r e e t r a de ag r e e m e n t Statement of Intent to Memorandum of Understanding — January to June 2001 Based on a draft paper on options for free trade agreements in SEE⁴, and with the support of Fabrizio Saccomanni, the Chairman of Working Table II, seven SEE countries agreed, at a DfID-sponsored Ministerial Meeting in Geneva in January 2001, on a Statement of Intent to prepare a comprehensive Memorandum of Understanding on Trade Liberalisation and Facilitation for SEE. Following intense negotiations, chaired by the Stability Pact, and despite tensions between the countries of the region (and also between some members of the international community over whether EU or other international standards should be followed), the MoU was signed at the Regional Table Meeting of the Stability Pact in Brussels on 27 June 2001. The key feature of the MoU was that the SEE countries agreed to negotiate a network of bilateral free trade agreements by December 2002. While external experts had expressed a preference for a “big bang” approach, creating only one regional free trade agreement, the lack of political trust and day-to-day contacts among the administrations of the region in 2001 led the countries to opt for a network of standardised free trade agreements. The MoU was an ambitious document in terms both of substance and of timelines. A total of 21 FTAs would be required, of which 5 existed already but would have to be revised to meet standards set by the MoU. The MoU provided the TWG with a clear mandate to monitor and facilitate this process and to identify further actions required to liberalise trade.

September 2002 — February 2003, Ms Adriana Civici, Ministry of Economy and Energy, Republic of Albania, May 2003 — April 2006, Mr Krum Efremov, Ministry of Economy, the former Yugoslav Republic of Macedonia January 2007 — April 2008 4 “Which Free Trade Agreement in South Eastern Europe” Jean Christophe Maur and Patrick A Messerlin in association with TDI Group Ireland, March 2001 (DfID)



Mary O’Mahony

Negotiations and ratifications — June 2001 to February 2003 The bilateral free trade agreements had a slow start. Countries with EU accession status were reluctant to actively engage in a regional programme (a common problem for Stability Pact initiatives), and personnel resources were limited in all countries. This posed a major challenge for the seven signatory countries, and thus the TWG focused almost entirely on facilitating the negotiating process. A special meeting of the TWG in December 2002 had the effect of intensifying the ongoing negotiations, and the last outstanding bilateral agreement was concluded in mid February 2003. This was a significant achievement, against the background of the tensions in the region and the weaknesses in administrative capacity. Unfortunately, ratification of the FTAs encountered significant problems in the course of 2003. Serbia and Montenegro adopted a new constitution and Bosnia and Herzegovina failed to complete some of the official ratification procedures on time. These factors slowed down the entry into force of the agreements by approximately one year. Regular TWG meetings offered SEE countries the opportunity to raise such issues and discuss pragmatic technical solutions. The EU’s Trade Commissioner and the Special Co-ordinator of the Stability Pact intervened directly to guide the process. And a Ministerial meeting in Rome, chaired by the then Italian EU Presidency, secured the necessary political support for the agreements. These efforts helped resolve the obstacles and allowed ratification to proceed during 2004.

No black holes — inclusion of Moldova and UNMIK/Kosovo Moldova joined both the Stability Pact and hence the trade liberalisation process in mid 2001, so its negotiations took a little longer ; but it completed the necessary six FTAs by mid–2004. Thus by 1 December 2004, 28 bilateral agreements were in force between the eight countries. In line with the Stability Pact’s mandate and the United Nations Security Council Resolution 1244, the TWG looked at ways to facilitate the inclusion of UNMIK/Kosovo in regional co-operation processes. Over time a modus operandi was devised, and by early 2006 UNMIK had negotiated and signed four FTAs — all in line with UNSCR 1244, the MoU and the current status of Kosovo.

From thirty two bilateral FTAs to one regional FTA — 2005–2006 Once implementation of the FTAs was underway, it became increasingly apparent that the lack of transparency was a major obstacle to launching the FTA network within the

The Stability Pact Trade Working Group and the Evolution of Trade Liberalisation



business communities. As a result, the hoped-for increase in foreign trade and investment and the deepening of liberalisation were not being achieved in the effective manner envisaged in the MoU. This eventually led to the question of whether it was possible to consolidate the bilateral agreements into a single free trade agreement. This question was politically and technically complex. It raised different concerns with each party in SEE regarding the “desirability” of one free trade agreement, the potential impact on the EU accession process for different members, the level of ambition of such an agreement, and the ability of different members to comply with its terms and conditions. At the time, the membership of the Central European Free Trade Agreement (CEFTA) had contracted following the accession of eight Central European countries to the EU. In late 2004/early 2005, CEFTA comprised Bulgaria, Romania and Croatia, which had recently joined. The former Yugoslav Republic of Macedonia had applied for membership. A World Bank-financed paper on harmonisation options presented to the TWG in October 2004⁵ advised against expanding the current CEFTA to all SEE countries, on the grounds that the CEFTA was out-of-date. It favoured instead the creation of a new, modern agreement : a “SEEFTA”. There was a distinct split among the SEE Parties on these matters. Those countries with accession or candidate status favoured the CEFTA option. but the others favoured the new SEEFTA. Among the concerns over a revamped CEFTA were that the then criteria for membership including WTO membership and a contractual relationship with the EC would rule some Parties ineligible for some time to come. Progress was made at the Ministerial Meeting in June 2005 where the Ministerial Statement specifically charged the Trade Working Group to : “intensify its exploratory talks concerning a single free trade agreement based on the text of the Central European Free Trade Agreement and characterised by modern and comprehensive provisions, a high level of liberalisation and open to all Parties in the region under conditions to be mutually agreed.”

The extensive discussions held by the TWG on how to meet this ministerial request led to two key breakthroughs. The first was the Zagreb Declaration following the CEFTA Summit, chaired by Croatia in November 2005, which amended the entry criteria for membership of CEFTA such that all SEE countries and territories were eligible for membership. The second was the non paper submitted by Romania as Chair of CEFTA at the February 2006 meeting. This non-paper set out an approach that would allow for a simultaneous enlargement and amendment of CEFTA through simplified procedures.

5 Harmonisation of FTAs in South-East Europe Europe:: The Options Ahead. Patrick A Messerlin and Sebastian Miroudot, October 2004



Mary O’Mahony

These represented significant shifts in positions by the then CEFTA members, and required considerable political interventions and support, particularly in Croatia where a single free trade agreement was perceived by some as an attempt to delay its EU membership and revive Yugoslavia. At a special CEFTA Summit in Bucharest on 6 April 2006, the Prime Ministers of all SEE Countries and the Special Representative of the Secretary General representing UNMIK/Kosovo formally launched negotiations on the newly expanded CEFTA in the presence of the EU’s Commissioners for Trade and Enlargement, the EU Presidency and the Special Co-ordinator of the Stability Pact. The Stability Pact was asked to chair these negotiations and also provided technical and secretariat support. The European Commission provided both technical and financial support for the various meetings. Some international members of the Stability Pact Trade Working Group, in particular the WTO and Switzerland, provided technical advice. Four rounds of negotiations were held between June and October. In general the negotiations were characterised by a constructive and positive tone and the majority of the agreement was negotiated quite quickly. There were, of course, several stumbling blocks, including initial disagreement on the need for a secretariat to support the parties in implementing the ambitious agreement, and the level of ambition in terms of meeting targets in areas such as competition and government procurement. Other major stumbling blocks included Serbia’s request to maintain some forms of fiscal discrimination, and some countries, particularly Croatia and the former Yugoslav Republic of Macedonia, balked at Bosnia and Herzegovina’s request for exceptional protection of imports of some sensitive agricultural products. These were eventually resolved following intensive negotiations in which the Stability Pact and EC played a key role. Serbia accepted the existing text of the agreement, and a new Article was introduced into the text allowing for specific safeguard measures on agricultural products. As a result, all ten Parties signed the CEFTA 2006 agreement on 19 December in Bucharest in the presence of Commissioner Rehn and Special-Coordinator Busek.

Regional ownership and implementation of CEFTA — 2007 onwards As foreseen, Bulgaria and Romania opted out of CEFTA 2006, in accordance with their accession to the EU in January 2007. The signing of the newly enlarged and amended CEFTA signalled the transfer of responsibility for the development and implementation of regional trade policy from the Stability Pact Trade Working Group to the CEFTA Parties themselves. It was agreed that until the Secretariat established under the agreement was operational, the Stability Pact’s Trade Working Group, and in particular its Secretariat, would support the regional trade process.

The Stability Pact Trade Working Group and the Evolution of Trade Liberalisation



In addition to organising three Trade Working Group meetings to facilitate progress, the TWG Secretariat supported the Chair in Office throughout 2007 in the preparation for and follow-up to all CEFTA-related meetings held during the year, including the Joint Committee Meeting in September and the CEFTA Summit, held in Skopje on 21 November. At the Joint Committee meeting, ministers of the CEFTA parties adopted several important decisions, including the establishment of three sub-committees (agriculture, customs and non-tariff barriers), and the mandate for the CEFTA secretariat. CEFTA 2006 entered into force on 26 July with five Parties — Albania, the former Yugoslav Republic of Macedonia, Moldova, Montenegro and UNMIK/Kosovo. Following completion of the ratification process, Croatia began to apply the agreement from 22 August and Serbia from 24 October. The agreement entered into force in Bosnia and Herzegovina on 22 November. Thus the Parties met the requirement set by SEE ministers in June 2005 that the new single agreement should come into force by the end of 2007. In 2008, the focus has been on establishing the CEFTA Secretariat and securing the necessary finances. The CEFTA parties have formally agreed on a cost-sharing mechanism for their contribution that will increase over the years. The EC has agreed to provide financial assistance under the IPA programme for the initial operation of the Secretariat and for other elements of CEFTA implementation. Ireland, Sweden and Switzerland have also committed funds to support the Secretariat, and other bilateral donors have indicated their interest in supporting regional trade activities. In parallel to these activities, the process to recruit staff for the CEFTA Secretariat was launched in December 2007 and finalised just before the closure of the Stability Pact Secretariat in June 2008. Following some largely political delays, the headquarters agreement with Belgium, which provides the Secretariat with its legal basis to work was finalised and the CEFTA Secretariat, albeit not fully staffed, commenced operations in September 2008.

Ac h i e v e m e n t s a n d s hor t c om i ng s The enlarged and amended CEFTA represents a substantial achievement for the SEE Parties. It is the first internationally binding agreement negotiated and implemented among the SEE Parties themselves and an increasing sense of ownership of the trade liberalisation policy among SEE politicians and officials accompanied the CEFTA negotiations and subsequent ratification. It is a modern, comprehensive and ambitious trade agreement that, if properly implemented, will contribute to boosting trade among the Parties and will substantially increase the entire region’s attraction to both foreign and domestic investors. Given that it is fully in line with SEE countries’ obligations towards the EU and the WTO, and requires the adoption of many EU norms and standards, CEFTA will also facilitate the implementa-



Mary O’Mahony

tion of the SAA agreements, and contribute to their preparation for eventual membership of the EU’s competitive single market. The Trade Working Group provided the SEE Parties with a unique forum where trade policy issues could be discussed among themselves and with international experts, and appropriate strategies could be devised, implemented and adjusted as necessary. The Group proved to be an excellent forum to catalyse political, technical and financial support from the international community, and facilitated co-ordination of this work. Apart from DfID’s continuous and highly valuable support for the Secretariat, the EC, the USA, Switzerland, Germany and Sweden all provided funding for much-needed technical assistance to support the implementation of the Group’s strategies and action plans. In addition to its high-profile work in trade policy, the Group also worked on non-tariff barriers (NTBs) and improved knowledge in the key area of trade in services. The EC and the Swiss Government funded comprehensive studies into the extent of NTBs in the region, which helped develop a procedure to monitor, reduce and eliminate NTBs. The Swedish Government (via OECD) and the EC funded work on trade in services and provided training for many SEE officials in this important area. However, the attention required by the trade policy work — first the network of FTAs, then the feasibility study on a single FTA, and finally the negotiation and implementation of the new CEFTA — meant that the Group was unable to devote as much resources to these important areas as it ideally should have. The level of available resources also influenced the Stability Pact’s ability to resolve bilateral trade disputes among Parties. Technical advice and guidance, and sometimes political interventions, proved successful in several cases. Nevertheless, for protracted and complex disputes such as those involving Bosnia and Herzegovina, and Croatia and Serbia, the necessary resources were simply not available. While the Trade Working Group did activate and monitor substantial amounts of technical assistance, it very much focused on its narrow field of activity. Attempts were made to gather and analyse information on the wide range of trade-related technical assistance being provided by multilateral and bilateral donors. However, the resources required to contact and constantly follow-up with all the donors were simply too great for the quality of information received.

L e s s ons l e a r n t Many of the lessons learnt during the evolution of the region’s trade policy from 2000 to 2008 are in line with the general Stability Pact experience. These include :

The Stability Pact Trade Working Group and the Evolution of Trade Liberalisation



“Doing a few things well” The need to focus on concrete, specific activities and “doing a few things well” rather than trying to be “all things to all men” became apparent after some time. In line with several other Stability Pact initiatives, the TWG lost valuable time in the first year or so as it tried to address an enormous range of trade related issues. The agreement to prepare an MoU, and the subsequent agreement that the TWG should comprise senior trade policy officials, allowed for a more dedicated, professional and focused approach.

EU perspective and explicit support from EU institutions and Member States The importance of the EU accession perspective and consistent and active political and technical support — particularly from the EC — cannot be overstated. While initially wary of this Stability Pact initiative, the EC’s DG Trade came fully on board following the signing of the statement of intent in January 2001. From then on, DG Trade and the Stability Pact Secretariat worked closely in developing and implementing the agreed strategy, including day-to-day co-operation and co-ordination, offering ad hoc high-level political interventions and mobilising tailored technical assistance. As SAA negotiations were in many cases proceeding in parallel with the various FTAs and the eventually revised CEFTA, the active involvement of DG Trade reassured the countries that any actions they took on the regional front were in line with their bilateral commitments with the EU. This Stability Pact/EC and EU member state co-ordination was vital to the success of the trade process, given the extreme reluctance (particularly at the outset of the process) of those countries with EU accession or candidate status to participate fully. This was a common experience across most Stability Pact initiatives. Despite strenuous statements to the contrary, SEE countries generally perceived that enhanced regional co-operation, particularly initiatives involving international treaties, would be used as a delaying mechanism or even a substitute for EU membership. Counteracting this misconception required huge efforts on behalf of the Stability Pact, the EC and various EU member states. In the case of the trade liberalisation process, challenges included securing Bulgaria’s and Romania’s participation in the network of FTAs and subsequent negotiation of the FTAs ; securing the agreement of Bulgaria, Romania, Croatia and the former Yugoslav Republic of Macedonia to the enlargement and amendment of CEFTA ; and the reaction in Croatia to the EC’s Communication on the Western Balkans issued in January 2006, which supported a regional free trade agreement. While the situation has improved considerably and there is greater acceptance among SEE countries of the benefits of regional co-operation, this reflex has not completely dis-



Mary O’Mahony

appeared, and it is something the EU and its various institutions still need to consider when referring to the region.

Consistent approach from the international community Throughout the life of the TWG, political interventions at all levels were co-ordinated by the Stability Pact, the EC and other members of the international community to ensure that a consistent approach was maintained as far as possible. Occasionally this was not possible. For instance, EC and USA positions differed on specific trade questions. However, in the vast majority of cases the international community presented a united front, and the SEE Parties received a clear message regarding the expectations of the international community, as well as more co-ordinated assistance.

Strong supporters and some dedicated, long–term resources The TWG benefited greatly from the support provided by governments and institutions throughout its existence. At the start, the UK, Switzerland, the USA and the World Bank were the Group’s main driving forces. From 2002 onwards, the trade process was anchored in the Stability Pact Secretariat, and benefited from increased support from the EC’s DG Trade, complemented by the WTO and the continuing support of the founders. The flexibility and pragmatism of several bilateral donors also contributed to the success of the Group. The UK’s DfiD provided the financial support for the TWG Secretariat from 2000 to its closure in 2008 — ensuring consistent technical and administrative support. The USA funded the participation of the SEE members in the various TWG meetings, thereby ensuring consistent attendance of the relevant experts rather than representatives from embassies. Germany’s GTZ provided funds for a range of technical workshops providing support tailored to the specific requirements of the different countries, to facilitate the implementation of the FTAs. The TWG also benefited from the “longevity” of some of its members. In addition to their specific responsibilities, individuals from the Stability Pact Secretariat, the TWG Secretariat, DG Trade and some bilateral donors provided valuable institutional continuity throughout the TWG’s work⁶.

6 Mary O’Mahony, Stability Pact Working Table II, the TDI Group Secretariat namely Per Magnus Wijkman, Senior Technical Adviser and , Liudmila Nistor Mihajlova, Administrator, Leopoldo Rubinacci, DG Trade, Hanspeter Tschani, Switzerland, Metka Jerina, Slovenia

The Stability Pact Trade Working Group and the Evolution of Trade Liberalisation



C h a l l e ng e s f or t h e f u t u r e CEFTA 2006 is an inclusive, modern and ambitious agreement. It can contribute greatly to the economic and political development in SEE. Yet, it will also test the administrative capacity and political will in the region. Continued high-profile support and monitoring from the EU, particularly the EC, will contribute to ensuring that successful implementation remains high on the agenda of the CEFTA Parties. It is vital that the CEFTA Secretariat is adequately staffed, and gains the trust and support of the CEFTA Parties and the various donors. It is also important that the differences in the role and responsibilities of the TWG — a broad based political structure and the new Secretariat which serves the CEFTA Parties is understood by its various interlocutors. As mentioned, many of the targets and objectives set are both highly ambitious and necessary, such as adopting various EU or WTO norms and standards. The technical assistance offered by donors will be critical in ensuring these objectives are reached. The EC, through the DG Enlargement managed IPA Programme and other bilateral donors e.g. Germany have committed funds to support implementation but more will be required. In several cases bilateral tensions among the different members may impact on implementation. For instance, Bosnia and Herzegovina continues to apply tariffs on certain agricultural imports from Croatia and Serbia that are not in line with the terms of CEFTA. This may lead to the first trade disputes under the agreement. Ensuring that such disputes are handled in line with the terms of the agreement will be important for its credibility. While CEFTA was negotiated by the governments of the region, and these governments are responsible for its implementation, it is the business community who will use the agreement. Better communication between the different CEFTA structures and the business community is required to ensure that obstacles to implementation are identified swiftly and removed. Trade liberalisation and facilitation is only one of the many elements required to ensure stability and foster economic growth in the region. The benefits that CEFTA will bring to SEE will depend on the successful implementation of other regional initiatives, such as the Investment Compact, the Energy Community Treaty, the regional transport network and the Regional Anticorruption Initiative. The RCC, which is a member of the Steering Committee for the CEFTA Secretariat, has a key role to play in ensuring co-operation across these initiatives.

Aleksandra Rakovic¹

3.6 eSEE — a not so easy challenge for South Eastern Europe

Building a knowledge based economy is currently seen as the only way for middle income, transition economies to grow, create jobs, develop stability and prosper. This is particularly true for SEE, which based on the experience of CEE over the past ten years is unlikely to remain a low labour-cost environment for long. SEE must develop an environment conducive to the use and evolution of Information and Communication Technologies (ICT). This means using ICT as a tool for improving the region’s economic competitiveness and enhancing interaction between its governments and citizens. ICT will also facilitate better integration within Europe and globally, a hugely important issue for the region. It is not just an economic matter. ICT’s potential for social and cultural exchanges with the rest of the world are particularly important at this time when travel abroad remains difficult. These were some of the reasons behind the establishment of the Stability Pact initiative known as electronic South Eastern Europe — eSEE. In creating this initiative, the countries of the region and their international supporters recognised the need for adequate, coordinated and sustained investments in ICT infrastructure, capacity building and transfer of technology and know-how. They also recognised that in the light of the common problems faced by the different countries, a regional approach could in many cases help them to overcome these difficulties faster and more cost-effectively. Common problems faced by the different countries include : • • • • • • •

shortage of capital for investments limited availability of hardware and software underdeveloped infrastructure for telecommunications telecommunications monopolies low public awareness lack of ICT skills and education institutional weaknesses including lack of enabling legislation

P ro g r e s s M a de A brief look at some figures for the use of ICT in the region in 2002 and again in 2007 illustrates both the low base that SEE started from and the substantial progress that has 1 Aleksandra Rakovic has worked with Working Table II of the Stability Pact.



Aleksandra Rakovic

been made. The eSEE initiative cannot claim that the progress is due to its efforts alone, but its contribution is undeniable. Table 1. ICT Development Indicators 2002

15

Internet Accessibility per 100 inhab. 1

BiH

29

23

2.2

n/a

Croatia The former Yugoslav Republic of Macedonia Moldova

35

+F +/) &F + F &F  DF F F +0*F +5F #F F +/F F F1 &F #+0*F   F F F *! F FF*+F#+0*F/3F*+0 +F F&F F+ F!!F !F F) &5FF ++F!+/ !*F )* / F  F F+/*F+0*F+F+%FF*F F  F+&F+FF1 &F#+0*F+ F % F+F + F/+F F!!F) &5F#F

!/F F+F%+*!+0*F0+F F+&F )+ F+ F+ +*F+0*F+F +%F F F  /F / 5F #F / +F  *F *+ F 0F F  !+F ! +F

+ F F%F+F+F% F FF F)+F+!*+*F++ 5F#F 'F  F . F F ++ F +F F !/F *+*F * F F '=F )F  F +F F !*F +  F F ::F (!5F  ** )F !F ! 3F F

!/F+ FF FF)F /+**F+  5F





Regional Table Documents

C5F , , , ,, , ,,,, ,, , ,,, #F +*F 4  + F !*+ F +F  F  F  !F  4+F F +F !04 +*F

+* !F+F+F *F F+ F *F% 5F#F 4+F% F+F+F0+F F

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



  " % %"   %    0%/ '% %  % /"  #             (  )  )     *     < &"/      "0%     

       !                   #++, !  -.*  /

        ! )(  /! !   = /%%   %        /!!+0*1 %*   !      % (  %      /!!!         

   ,

 %    %  / %    '     (

   1         %  % %  %         2    1      3    "0%      +     #    ! !%       !        ! ' B  8 %%&  %   

      "  &     %           %  !

                          '  !"    '"     -..     -../ /..  

        %!" -..@                      %     %

 %  % "   B %     %"! !% %   /  %      &"/    
         !       1 % % "' %     %      "0%       

  $   %  ! %   % %%   %               
1/  %

   (             ! !%       !                  @    8 %%&  %    ('   %   /   %           %  !  '  *   $

'61  '  !"    '"  /  1-%    7   

        %!"
  $            %     %

 %  % "     '     -5   $ %     %"! !% %   /  %      &"/     * 
        % "' %     %      "0% %  ! %   % %%   %     
1/  %

    ! !%       !      8 %%&  %    %           %  !  '  !"    '" 

        %!"  %     %

 %  % "  %     %"! !% %   /  %      &"/     % "' %     %      "0% B **)*B * B (B * B  B  B *B   3B "B *) B %  ! %   % %%   %  () . B B    B  B B B  *)B 2  * B  B / )B  * B    
1/  %

  (B *)B*$B* B ** BB* B*  B B*B  3BB   ! !%       !     "B  *)B "*/)B () . B B  *)B  B B */)B *B *$3B #B  8 %%&  %    $( BB )  B .BB0 %B"*/)B.B* BB  B.* B %           %  ! BB*9B*$3B* *B*

* BB B  *%BBB-B B  '  !"    '" /!$B* BB $ B B**3B#B*) B   B (B/B B $ .B 

        %!" /*)B B . ).* 3B  B *B 0 %B "*/)1B * *B ) B B  %     %

 %  % "   )) (B 4BB %     %"! !% %   /  %      &"/    
( #3 %'$3!3/& %3% 3&%313())B  B B  . B % "BB
! /)!**3BB %           %  !  '  !"    '" 

        %!"  %     %

 %  % "  %     %"! !% %   /  %      &"/     % "B "* B *)B 1B *B *)) B  B B B "*) %B *3BB


2 B  * B * B . ).* B B $.B  B  .B 2&  "0%    %      = /)* B B )*B  B ?BB     % %%"%  
#B    B  /*%B  .B $*B  B  B  $.B 2B  B  )*B %   %  "   % !  " /  & 

*)  B$*B B $ B )B* B B#$ B )B.3BB %    / '      8 %%
#*B *(*B B . ) .B * B  /  B B  B B       %  0%  " ! #$.BB     %/ %    4% !
 . B / B

 B B B 2B ** B B * 5 B * * B B

*

 *B  .  *)B* B  B $) .B$3BB


1& /  %

 /? 3 % 3&3

!      % @  

v

0 & 0 '0  0
 0    0 0 ' 0 ( 0 0 0 ' 0  0   0 #,      "&  %% %        *  0 '&"'0 $0  '&+0 ' 0 ( 0  ( 0  0 &'&0 ' 0 (0

!   '    % ! &( 0 00 0 00-00' 0( 000  '&0   !% <      %  %* 0  0 ! &( 0 0  0  0 ' 0   0  0  '&0  (0 ' 0  0 &'%0  ( 0 -0  0 '! 0 0  0 +0 0 '&'0  0  0   ''+0  0 v      % %   % %   %&0 ')& 0 0 '&0  0' 0 0('0'"0'"0 +0' 0'( 0  %     /%  '0 ''0 )& +0 (!0  0 & '&0 '( %"0 ' 0 ,) 0  '0 %0  0 00 ! +0 0' 0 -0    %    





             . )*B * B .  B ) )B B . ).* B B B *). B &B $ B    !%%%    **B"** *)B* B .1BB * )*B BB* B B(B %   4 %  %   %    

  B.*.3BB     % !  % "*  B *)* B B *)  B /(B B  *)B "*/  B .B B

Chairman’s Conclusions of the Regional Table, Tirana, 05 December 2003

;. ! //      



  " % %"   %    B* B B)*(B .B*1B * )*)B&
B(BB*.B B 0%/ '% %  % /"  *B  .*)B * *)B -*B B * B .B $* 3B B ())B  < &"/      "0%   B  B *))B B &B ../B *B  B   B * $ B  B B  *)B "*/  B .BB 3BB

= /%%   %      


B B *B B  2/  B .2)* B * .* B - B  .B  .B *)B  *B&B../B*B BB 3BB   % (  %    
 BB

B B **/)B* *)B* B *)B*2*%B )B B

 %    %  / %  *

B*%BB .*B/1B) B 2 * B(BB& B(B   '     ( B*.( %B BB) /*)B *..B**B"*%BB .*B3BB   %  % %  %    
B *))B B B  B B B  B  B *B * B . ).B * *)B  B   "0%    ' %     %      "0% %  ! %   % %%   %  ' 0 )0  0 0   ! 0 '0  0  '&"0 ((+0  0 '0 &(0    
1/  %

    0  0 '! 0 . /0 '(0 0 ' '0  0 '  0 0 ' & 0 &'0   ! !%       !     (! ( 0 0  0  0 0 '0 ( 0 (  ! 0 (' 0 0 ('" 0 0 &0  8 %%&  %    '')& +0 %0 '0   ! 0 0   0 ''&0 '0 ( 0  ! 0 0  0 ' '0 0 %           %  ! '&(+0& '&0' 0&& '&0('0'0% &&0'0) 0('' ( -0  '  !"    '" 

        %!"
*)*B B *)* B B  **/)B  )  B  B *B )*B @71777B  B * B  )* B 3BB  %     %

 %  % " 
 B $) .B B *B  *)B *

 *B  B  2 .* B *B  B B %     %"! !% %   /  * B 6BB %      &"/    
*/).B B*B *)B  .B B* 1B) .1B+*1B  B**.B % "3BB


- * B BB .* B-*B  !B* B- B BB B B( %BB



B B B#B*$3BB 2&  "0%    %     
$) .B B*B *)B B* B )*B* B*)* B B*B  BB)$)B     % %%"%    B 3BB %   %  "   % !  " /  & 
  B 

B  B B . ).* B B * *)B  B )*B =?B B B %    / '      8 %% **B B*) .1B.* 1B/  B.**.B* B$*B )3BB       %  0%  " !
  B) B  * B* B . ).*B B#B*$B(BB3B     %/ %    4% !


1& /  %

 /? v

!      % @        "&  %% %       

!   '    %   !% <      %  %*

v

     % %   % %   %     /%     %                     !%%%    %   4 %  %   %         % !  % "*





Regional Table Documents

;. ! //      
 



  " % %"   %    0%/ '% %  % /"     < &"/      "0%     = /%%   %         % (  %    

 %    %  / % 
 
          '     (               !"    %  % %  %     #$   "0%    ' %     %      "0%     (  $        %  ! %   % %%   %    (           
1/  %

  :  %    %                        ! !%       !             (             %/  8 %%&  %        $ %           %  !  '  !"    '"    &
 !'( # ) 

        %!" (%           %     %

 %  % "       =   ($
 %( %     %"! !% %   /        %      %      &"/                  

%     .     % "   0+A   )%$ 
 = %  ! %   % %%   %   ( % >   % $ 
    
1/  %

                     %  (       ! !%       !     (=         8 %%&  %   

           $  
  B       %           %  !                        (  '  !"    '"      % %     %%          

        %!"          (   .   %     %

 %  % " 

   (   $   %     %"! !% %   /  (         %      %      &"/                               ( % "' %     %      "0% %  ! %   % %%   %     
1/  %

    ! !%       !      8 %%&  %    %           %  !  '  !"    '" 

        %!"  %     %

 %  % "  %     %"! !% %   /  %      &"/     % "' %     %      "0%               )             %  ! %   % %%   %   !   , !    
1/  %

       ,    * !     (*)+,    6/*   ! !%       !      1! &  8 %%&  %    v     !        !           %           %  !      !  !       '  !"    '"         & 

        %!" v 6    ! !   +  %     %

 %  % "      !   6 * ! + %     %"! !% %   /   3!  (3)+ ,   ! %      &"/      3  * !   & % "' %     %      "0%

The means: Establish a Regional Co-operation Council (RCC) to take over the %  ! %   % %%   %  responsibilities of the Regional Table and Working Tables. The RCC would be    
1/  %

  chaired by a Secretary General designated by SEECP. The Secretary General   ! !%       !     should be a strong political figure from the region whose task would also be to  8 %%&  %    support the rotating SEECP Chairmanship and to head a small, operational %           %  ! secretariat staffed largely from the region.

 '  !"    '" 

        %!" The tasks of the RCC: to co-ordinate regional co-operation processes, to provide guidance to the Secretariat and the Secretary General and to operationally support  %     %

 %  % "  DQG SUHSDUH ± DV DSSURSULDWH ± 6((&3 0LQLVWHULDO PHHWLQJV DQG 6XPPLWV  7KH %     %"! !% %   /  RCC, open to all partners active in South Eastern Europe, would meet annually at %      &"/     the Senior Civil Servant level or above in an inclusive format and quarterly in a % "' %     %      "0%

%  ! %   % %%   % 

The RCC’s focus on monitoring and co-ordination and providing input for political    
1/  %

  decisions combined with the rate of progress in the development of the various regional   ! !%       !     co-operation processes mean that a review of the existing taskforces and initiatives  8 %%&  %    listed under the auspices of the SP was timely. Just as the SP makes the transition to %           %  ! the RCC and enhanced regional ownership, the various initiatives should also follow a  '  !"    '" transition process to stronger regional ownership and self-sustaining management. 

        %!" Stronger regional ownership will require greater regional leadership and management. It also implies greater regional input in terms of political commitment and human and  %     %

 %  % "  financial resources. Given the constraints on administrative capacity and financial means %     %"! !% %   /  in the region, the stakeholders, particularly the SEE parties will have to prioritise the %      &"/     various processes to ensure that those deemed most important for the development of % "' %     %      "0% chairmanship of Special Co-ordinator Erhard Busek on 10 May 2007 in Zagreb. %  ! %   % %%   % 

   
1/  %

 

Participants underlined that regional co-operation remains of the highest priority in   ! !%       !     order to underpin political stability and economic recovery in the region, to facilitate  8 %%&  %    confidence building and as a supporting instrument for European and Euro-Atlantic %           %  ! integration.

 '  !"    '"



        %!" The Table praised the significant progress made over the past months in moving ahead  %     %

 %  % "  with the phased evolution of the Stability Pact into the Regional Co-operation Council %     %"! !% %   /  (RCC) as a more regionally owned, streamlined and effective regional co-operation framework in South Eastern Europe. %      &"/     % "' %     %      "0% progress, albeit to varying degrees, in implementing the Energy Community Treaty and %  ! %   % %%   %  in addressing Information Society development. The Table noted the continued need    
1/  %

  to promote the integration of social issues into broader economic policy, including, the   ! !%       !     development of the MoU on Social Issues under the Energy Community Treaty. The  8 %%&  %    EC's proposal to transform the Infrastructure Steering Group into an IFI Advisory Group %           %  ! with a slightly wider remit was also welcomed by the Table, underlining the continued  '  !"    '" crucial involvement of the international financial institutions in the region. 

        %!" On the part of Working Table III, the Table noted significant progress in transferring  %     %

 %  % "  responsibility for initiatives to the region, in particular regarding the Stability Pact Anti %     %"! !% %   /  corruption Initiative (SPAI), where Ministers from seven regional partners have recently %      &"/     signed a MoU, thereby significantly increasing their commitment to the initiative, % "' %     %      "0% %  ! %   % %%   %     
1/  %

    ! !%       !      8 %%&  %    %           %  !  '  !"    '" 

        %!"  %     %

 %  % "  %     %"! !% %   /  %      &"/     % "' %     %      "0% %  ! %   % %%   %     
1/  %

    ! !%       !      8 %%&  %    %           %  !  '  !"    '" 

        %!"  %     %

 %  % "  %     %"! !% %   /  %      &"/     % "1--21* 18B1--21 %)51

= /%%   %         % (  %     $1*111!1*1!-.1 1*)1 11*-121*1 1 1-1 !) 1.1 -*& 1.1*1*)1!-.1 )* 1*. %11 *1 1*-1 11 !.)1 1  **21 1

 %    %  / %  .) (11(  14*.411*1*)1 1 1.*1  **1 *1 1*-51   '     (   %  % %  %       "0%