Increased Regional Integration and the Role of EU Accession: During and After the Crisis

1. Western Balkans in 2020 Overcoming the Economic Crisis and Developing Competitive Economies Sarajevo, 24-24 February 2010 Increased Regional Integration and the Role of EU Accession:During and After the Crisis Visnja Samardzija, Ph.DInstitute for International Relations – IMO, Zagreb visnja.samardzija@irmo.hr

2. Key points of presentation Regional cooperation could contribute to economic recovery of SEE, through strengthening regional trade attracting FDI human potential development sharing experiences, policy development and coordination, reforms and EU accession …in context of EU integration

3. Priorities in SEE regional co-operationin economic recovery • Regional cooperation could contribute to economic recovery • “New achitecture” in SEE cooperation established (SEECP, RCC) • Regional “ownership” principle strengthed • Impact on SEE political and economic developments • Synergy of participation in numerous coordinated regional initiatives and networks • Project oriented cooperation, generationg new values • Economic, infrastructure, social, security dimension • Participation of donors and EU institutions • Linking the people!

4. Perception of ties between neighbours in SEE region Relations are not strong enough! Source: Analytical Report 2008, Gallup Balkan Monitor. Insights and Perceptions: Voices of the Balkans

5. Regional trade cooperation in SEE • Exports are vital for growth and current account sustainability • Growth of region should be export led • CEFTA 2006 • CEFTA helped reducing impacts of the crisis • Alignment with trade related issues of the acquis • Still limited trade flows in SEE region, poor export performance (low-skill based, natural resource-intensive exports) • Exports well below potential and needs • EU integration also requires increased exports!

6. Towards export-led growth in SEE… • Strengthen regional trade through joint projects! • Move towards skill-intensive exports • Reducing market segmentation through (joint) policies • Elimination of barriers to trade in services, FDI friendly policies, coordination of sectoral policies, joint development of policies (industry, R&D?) • Capacity building in strengthening policy design • Specialisation through regional economic cooperation • Promoting cooperation among customs administrations • Achieving full benefits in implementing diagonal cummulation of RuO • Intra CEFTA diagonal cummulation scheme • Bilateral EU/SEE cummulation in force • Inclusion in Pan-Euro-Med diagonal cummulation necessary

7. Doing Business 2010: Rankings in the Area of Trade Source: www.doingbusiness.org

8. How to achieve stronger FDI inflow to SEE • External environment has changed dramatically • FDI decreased after stronger growth • FDI stimulated investment but not directed towards export oriented projects, mostly related to privatisation process, greenfield marginal • Structure and quality of investment is not stimulating rapid growth • Geography matters for investors • investors target individual SEE countries, but not entire region as one market

9. Overview of FDI in Central, East and Southeast Europe Source: wiiw Database on FDI incorporating national bank statistics

10. Number of greenfield FDI projects, 2004-2009 (concluded) Source: World Investment Report 2009: Transnational Corporation, Agricultural Production and Development

11. Attracting FDI through regional co-operation • Crisis might be opportunity for SEE • short-term actions combined with strategic measures • Policy development for attracting FDI in SEE • Offering foreign investors opportunity to serve „regional“ market (investing in one country - „access“ to the region) • Reducing market segmentation, deeper integration - regional cooperation in services • Linking foreign and domestic investors at regional level • Reduction of barriers (services), pro-business initiatives, low tax regime, effective deregulation • Acceleration of structural reforms • on labour / product markets, improving quality of public spending, increasing competitive capacity of SEE for attracting FDI during recovery period • Regional investment strategy

12. Building knowledge based society in SEE • Shift to more skill-intensive exports needed • Increasingproductivity and fostering “knowledge based” regional competitiveness through research, education and innovation (“knowledge triange”) • Designing integrated research policies and strategies for SEE • from fragmented to integrated approach in the region… • Modernising research capacity, focus on value-added services and innovation • Increasing links between research and business • finding innovative ways to increase participation of private sector in policy formulation and funding of R&D; establish competitive regional centres of excellence • Promoting human capital development • Encouraging transfer of knowledge (networks) • Visa free trade regime important!

13. Global Competitiveness Index - ranking SEE and CEE countries according to performance in education and innovation Source: The Global Competitiveness Report 2009-2010, and 2007-2008, World Economic Forum Note: Global Competitiveness Report 2007-2008 is based on survey and data of 131countries, while for 2009-2010, N=133.

14. Comparative ranking scores of EU and SEE countries according to selected Lisbon criteria, WEF(2006 and 2008) Source: World Economic Forum. The Lisbon Review 2006. Measuring Europe's Progress in Reform.World Economic Forum. The Lisbon Review 2008.Measuring Europe's Progress in Reform. Note: WEF ranking 2006 (N = 31) included EU and SEE countries only, while the WEF ranking in 2008 (N=44) encompassed EU, SEE and Central Asian economies.

15. Expenditure on research and development (R&D) in the SEE Source: Pocketbook on candidate and potential candidate countries, 2009 edition. EUROSTAT Lack of comparable data!

16. Croatia – priorities and experiences in regional co-operation • Synergy of participation in numerous regional initiatives (SEE, Mediterranean, Danube region) • Transformation from aid recipient into the aid supporter • Support to coordinated and focused joint activities in different areas • Initiative

17. Croatia’s participation in regional co-operation initiatives • RCC • Trans regional projects: South-East European Firefighting Centre – SEEFRC, Public-private Partnership co-operation network in SEE • Trade integration – CEFTA 2006 • Central European Initiative (CEI) • Intraregional and cross-border project based cooperation: turism, culture, environment protection, human resurces development, SMS • Adriatic Ionian Intiative • Promoting regional tourism, maritime management, environment protection, SMS • Establishing new EU Adriatic-Ionian macro region • Danube Cooperation Process, Danube Commission • Navigational, transport and socio-economic regional co-operation aspects • Migration, Asylum and Refugees Regional Initiative – MARRI • Energy Community Treaty • Other…

18. Role of EU Accessionin regional cooperation and recovery • EU accession perspective helped to retain confidence in WB economies • EU accession related reforms crucial in the recovery proces: • competitiveness, trade, investment, business climate, structural reforms • Regional cooperation complementary to EU integration • Danger of delayed accession!

19. EU accession forecastor other time frame (?)

20. EU accession as a challenge for regional cooperation Joint efforts in solving problems: cross-cutting issues Rule of law, judiciary, fight against corruption, organised crime, strengthening capacities Bilateral issues easier to solve through regional cooperation Accession generates regional cooperation Exchange of knowledge and experince – Protocols on cooperation between SAP countries Establishing visa free regime people to people contacts are the basis for regional cooperation

21. Europe 2020Western Balkans 2020? Europe 2020 Creating values based on growth and knowledge Enpowering people in inclusive societies Creating competitive, sonnected and greener economy Global and regional context? Western Balkans 2020