10th June 2023, Skopje – New possibilities “to bring EU home” were opened last week, when European Commission President Ursula von der Leyen announced the new plan to bring the Western Balkans closer to the EU and extend economic support. The Plan is lending a helping hand to the countries in the region, the accession process of which was accompanied by many challenges throughout the years. As Ursula von der Leyen herself pointed out at the GLOBSEC Bratislava Forum, “We do not only ask our partners to take new steps towards us. We also take a big step towards them. Our shared goal is to speed up their journey towards the EU”.
If it is to be judged by this statement, we are to feel as part of the Union with this Plan through the many benefits rendered to the Western Balkan countries and their economies. This is a very encouraging message, considering the very moment of a war wedged on European soil, varying of the optimism in the region regarding the accession to the EU, and the political ordeal we are facing locally. Moreover, we are all drained by the several overlapping global economic crises we faced in the past three years. We are to seize the positive momentum from the point of view of both the EU accession and “bringing Europe home”, so as to make the most of the membership benefits even before we become its member states.
Four Pillars for Western Balkans Growth
As EC President announced, the new initiative for Western Balkans support and bringing the Wester Balkans closer to the European Union is built on four pillars: 1) bring the Western Balkans closer to the EU Single Market, 2) deepen regional economic integration, 3) accelerate fundamental reforms and 4) encourage economic growth by increasing pre-accession funds, this implying a broad spectrum of the announced package, with diverse economic benefits arising therefrom. Western Balkan countries will be given the possibility to reap, much earlier, the benefits from the main driver of the EU economic growth – the Single Market. Most probably, announced approach will pertain to a broader segment thereof, i.e. the Digital Single Market, as the means of trade in goods and services via digital channels. It incorporates areas such as e-commerce, cybersecurity and facilitation of payment services and trade in goods. Common regional market may provide for speeding up the EU accession process, whereby the regional economic integration is also crucial in unlocking the huge economic potential of the region, thus making it a more attractive place for foreign investors. The same is the case with the pre-accession reforms, since rule of law and efficient and reliable judiciary are a positive signal for the foreign investors, whereby green transition and ensuring energy sustainability are of crucial importance for the stability and the sustainable growth. There is a dire need of investments in the region, thus increasing the living standard, while also smoothing the way into the EU. As mentioned above, increase of the pre-accession funds for Western Balkan countries is planned, which will provide for boosting the economic activity, as well as creating additional fiscal space.
EU Plan on Growth of the Western Balkans and National Growth Acceleration Plan
EU integration has continuously been my inspiration throughout my writings. I have repeatedly touched upon, through economic theory and via empirical analyses, the benefits of the European Single Market, the important role the EU membership plays for foreign investors, boosting of the competitiveness of domestic companies, improving the doing business conditions, the significance of pre-accession funds for the economy and the living conditions, etc. “To bring EU home” is the axiom which, I have always been guided by and strived for when creating and implementing the respective policies, keeping in mind the ultimate goal of the EU integration – ensuring economic progress and well-being for our citizens. Our Growth Acceleration Plain based upon the identical postulates is aimed at accomplishing the same goal. With this in mind, while also being intrigued by the newly presented EU Plan on Growth of the Western Balkans, I dedicated this column on the comparative analysis of both plans and the strategies to be implemented thereunder, as well as the synergy that may arise from the their parallel implementation.
Primarily, the analysis of the structure of the EU Plan on Growth of the Western Balkans demonstrates its focus on economic recovery and connectivity and ties of the region, boosted competitiveness of the economies and scaled-up investments. When considering the national Growth Acceleration Plan, it is evident that much of its structure, as well as the goals thereof are just the same therewith. The ultimate goal, “bringing EU home”, i.e. contributing to the citizens’ well-being will be guaranteed by implementing both plans, along with the EU support and the clear vision therefor.
Economic Connectivity and Single Market
Undoubtedly, the Single Market with half a billion consumers is the largest benefit and driver of the EU’s economic growth, because of which, the EU has become a trading superpower. EU Single Market ensures free movement of goods, services, citizens, and capital with no customs duties, quotas and visas, as well as free transfer of capital for natural persons and legal entities. Common market sets common values and standards, thus helping companies to grow and underpinning the innovations thereof. The common market requires everyone to produce goods and services according to the same rules and standards, thus creating trust, among the consumers, in the product quality, as well as the production process in view of respecting the workers’ rights and protecting the environment. On the other hand, the Single Market is a chance for companies, in particular small companies, to attract new customers and investments so they can keep growing and flourishing further on. This is also considerably significant from the point of view of the supply and value chains that allow easier access to new suppliers. At the same time, the Single Market is part of the resolution of global issues, such as climate change, by developing a circular economy and taking advantage of the digital revolution, as well as coming up with innovative solutions.
David Ricardo’s comparative advantage theory states that the specialization good in each country should be that good in which the country had a comparative advantage in production, thus attaining greater productivity and lower costs per production unit. On the other hand, as per Michael Porter’s theory, and in line with the endogenous growth theories, innovations, human capital, infrastructure and financial capital are drivers of growth. Looking through the prism of our economy, by entering the European market, our enterprises will be able to reap the benefits from both the comparative advantages and the achievement of an economy of scale, thus also being motivated to improve their output and introduce innovations, which will make them more competitive. Thereby, Government will contribute to boosting the competitiveness of our economy, scaling up the investments and accelerating the economic growth by making investments in upgrading the infrastructure, strengthening the human capital and supporting investments and innovations in the private sector. I would also like to hereby emphasize the good governance, in respect of the rule of law, as well as in terms of enhancing the capacity of the institutions and improving the quality of public services. As per these premises, the national Growth Acceleration Plan contains mechanisms in support of both the competitiveness and the innovations of domestic enterprises by allowing access to finances and funds, as well as other instruments to support exports and development of the respective companies.
When it is a matter of regional connectivity and ties, it is worth mentioning that the Western Balkans recorded substantial economic and social progress during the past two decades. Given the population of 17.6 million of citizens, as a market, this poses a severe challenge for the small developing economies, being an integral part thereof. Initiation for integration in a single market has existed over the years backwards, and so far, certain efforts have been made to that end. However, by considering the benefits that can arise from further integration of the markets in the region, the EU raises the question of a single market in the Western Balkans as a pillar in the EU plan for growth of this region. Access to new customers, strengthening and access to new supply and value chains, reducing export costs and increasing the competitiveness of products in the region, increasing attractiveness for foreign investors as a single market – all these factors would contribute to the economic strengthening of the region, as well as boosting the economic growth. Hence, as same as the case with the EU Single Market, the benefits of connectivity and ties in the region must not be neglected, on the contrary, they play a significant part in the further development of the Western Balkan countries, being also a precondition for pursuing their European path. From the aspect of national policy, multilateral initiatives for connectivity and ties in the region have always been enthusiastically accepted, whereby in order to support the companies for participating in the regional market, plenty of tools have been put in place.
When touching upon structural reforms aimed at enhancing the system and the administration in support of democratic society and market economy, I would like to hereby underline the foreseen measures and policies geared towards good governance, i.e. rule of law, eradication of corruption and capacity building of institutions. Fiscal sustainability concept, which we strive for, is of exceptional significance, with an Action Plan being developed therefor, coupled by macroeconomic and fiscal stability maintenance, also including the measures intended for supporting the fiscal decentralisation, ensuring local and balanced regional development, sustainable and healthy environment and digitalization of the economy and the public services.
Moreover, activities are also undertaken aimed at improving the business environment and reducing the grey economy, improving the access to finances, adapting the technologies, as well as modernizing the agriculture.
From the aspect of supporting the companies’ competitiveness, apart from the financial assistance, I will hereby stress the measures being undertaken, in terms of the human capital development and the mismatch between the supply and the demand on the labour market. Under a comprehensive Human Capital Development Strategy, all areas contributing to raising the quality thereof are being handled in our country, by making investments in the field of education, health and social protection. Moreover, the active measures on the labour market and the continuous increase of the funds intended therefor, provide for increasing the labour force adequacy as per the ongoing needs of the companies.
Additional EU Funds and Investments
Latest and highly significant pillar in the EU Plan on Growth of the Western Balkans, as well as the national Growth Acceleration Plan, is the encouragement of investments, both private and public ones, which will contribute to creating new values, boosting the economic activity and providing for both better living conditions for the citizens and economic development. To that end, EU announced new Funds, which are to be made available for the Western Balkans, the purpose of which is economic development of the region. Although their amount was not specified, the EU has unquestionably provided enormous support, as a partner underpinning the development of the Western Balkans over the years. If we take the example of our country alone, the support the EU extended during the past 30 years is estimated at over EUR 3.3 billion via grants and macro-financial support.
As regards our national Growth Acceleration Plan, I would like to hereby stress the ambitious medium-term framework foreseen thereunder, being worth EUR 4 billion as public investments, mostly major infrastructure projects, which would attract twice as many private investments, resulting from the multiplying effect thereof. Within the Growth Acceleration Plan, in addition to the development funds of the international organizations, plenty of financial instruments have been put in place, being aimed at mobilizing primarily the domestic capital for development purposes, among which the development of the government securities market as well.
Lending a Helping Hand
In order to briefly summarize this topic given its wide scope, I would like to conclude that a milestone event is ahead of us, when it comes to resolving a decade-long issue, accomplishing an important goal, coupled by providing a better life for our citizens in the long run. A chance recognized is half the goal accomplished. We should accept the EU support, while keep working on improving the living conditions in our country, “bringing Europe home” and becoming part thereof. This can only be accomplished with a clear vision in place, as well as by prioritizing the national over the personal interests. Pursuing a sound policy implies always keeping the economy in mind, since the economy is the very decisive factor when it comes to a high quality of life for our citizens.