18th November 2023, Skopje – European perspective of our country is clear and certain. High officials, politicians and analysts in our country, the region and Europe have all recognized the Growth Plan for the Western Balkans as an express lane on the road to EU of the countries in the region. The Plan is a sizable political and financial investment of the European Union in the region. An important message EU has send the Republic of North Macedonia is that we have made a flying start as regards implementation of the activities under the Plan. Yesterday, the first Regional Ministerial Meeting of the Wester Balkan countries took place at the Government building, dedicated to the presentation of the EU’s Growth Plan for the region. Vice Prime Minister of European Affairs and I hosted the Director-General of DG NEAR, Jan Koopman, as well as Ministers of Serbia, Montenegro, Bosnia and Herzegovina, Kosovo and Albania and the lead negotiators for the EU integration process in the region. It is exceptionally encouraging message as regards our European perspective.
We have launched a new cycle of accelerated socio-economic convergence between the countries in the region and the European Union. I am exceptionally pleased my peers and I share the same drive for faster implementation of the Plan, by preparing reform agendas and its commissioning at the beginning of the next year. There is still quite a lot of work to do, but hard work always pays off. I recall a well-known Edison’s quote “Opportunity is missed by most people because it is dressed in overalls and looks like work”. Therefore, I would like to point out that the Plan is an opportunity – a lot of work, much effort and expectations, with adequate reward at the end. As Mr. Koopman said at yesterday’s meeting, Growth Plan for the Western Balkans looks at doubling the size of our economies, doubling the GDP per capita, i.e. average income at the moment in the region is EUR 6,000 per person, in 10 years time it should be EUR 12,000 per person. This is an excellent, in fact, one of the most realistic opportunities to accelerate growth in the region and convergence between the Western Balkans and the EU.
The public has already been informed about the Growth Plan for the Western Balkans. President of the European Commission, Ursula Von der Leyen, announced it for the first time five months ago. Possibility to reap the benefits of the EU membership, even before becoming its Member State, has immediately intrigued both the political and the economic analysts. We are talking about a regional economy with a GDP of more than EUR 100 billion and a population of 17 million, aiming to join a market with a population of 450 million people, with a GDP of more than EUR 15 trillion, i.e. GDP in the region accounts for only 0.6% EU’s GDP.
What does the Growth Plan for the Western Balkans Offer?
On 8th November, the European Commission adopted the Growth Plan for the Western Balkans, with the aim of bringing some of the benefits of membership to the region in advance of accession, boost economic growth and accelerate the socio-economic convergence. In addition, Regulation on establishing the Reform and Growth Facility for the Western Balkans, which is part of the respective Growth Plan, was adopted, providing EUR 6 billion financial assistance. The objective is to support the candidate countries or potential candidates to step up reforms and boost their economic potential to accelerate the speed of the enlargement process.
The Plan is based on four pillars, aimed at: 1) enhancing economic integration with the European Union’s single market; 2) boosting regional economic integration within the Western Balkans; 3) accelerating fundamental reforms, improving sustainable economic growth including through attracting foreign investments and strengthening regional stability and 4) increasing financial assistance to support the reforms through a Reform and Growth Facility for the Western Balkans.
Opening the European Union’s Single Market to the Western Balkan Countries
Integration with the EU’s single market has been the main driver of economic growth for all countries that joined the EU. Vividly demonstrated, if the EU was the vehicle, the single market would have been its engine. Closer association of the countries in the region with the EU’s single market would bring benefits that could be felt directly by their citizens. This is indeed the essential element of the Growth Plan for the Western Balkans. The Plan identifies seven initial priority areas, which the EU could offer to the Western Balkan countries: 1) free movement of goods, 2) free movement of services and workers, 3) access to the Single Euro Payments Area, 4) facilitation of road transport, 5) integration and de-carbonisation of energy markets, 6) Digital Single Market and 7) integration into industrial supply chains. The principle to access these segments is such that when WB countries reach a certain level of preparedness, they can access a particular segment of the EU market, i.e. it will depend on their alignment with the EU Directives and Regulations (EU Acquis). Thereby, it has to be underlined that most of the work will be completed through the activities to which the six partners committed to in the context of the Common Regional Market, the advancement of which is again a pre-condition for closer integration with the EU’s single market. As the European Commission said “Partners that are not fully committed to the Common Regional Market cannot expect to benefit from the Growth Plan in terms of opportunities for single market integration”. No Western Balkan partner will be able to block access to the EU single market for the other five.
Access to the European Union’s Single Market in Brief
Since it is the crucial benefit under the Growth Plan for the Western Balkans, I will elaborate on the seven priority areas within the first pillar. The first pillar under the EU’s Growth Plan includes the four freedoms of the EU’s single market, i.e. free movement of goods, services, workers and capital, as well as certain sub-segments of the market.
As regards the free movement of goods, the Plan includes agreements on conformity assessment to unlock the single market for goods manufactured in the Western Balkans following alignment with the relevant horizontal EU product acquis. Improved customs and tax cooperation is also envisaged to reduce waiting times at borders, which will contribute to reduced export costs (in its study, the World Bank noted that waiting times reduced by just three hours is equivalent to removing a value-based tariff of 2 percent). Moreover, participation of all Western Balkans partners in the Convention on Common Transit is envisaged as well.
Free movement of services covers e-commerce related services, including parcel delivery services, as well as tourism services. Furthermore, as regards free movement of workers, EC builds its plan on mobility agreements agreed in context of the Common Regional Market, including recognition of professional qualifications of doctors, dentists, veterinary surgeons, pharmacists, nurses and midwifes, and freedom of movement with identity cards on the territory of the Western Balkans.
Access to the Single European Payment Area (SEPA) will be a considerable benefit for the citizens and the business by boosting the cross-border commerce. Further alignment of the national regulations, as well as the technical features, will provide for Western Balkan countries to access SEPA.
Facilitation of road transport implies supporting Western Balkan countries to further integrate in the region by adopting the relevant EU acquis and granting access to the relevant EU information systems. EU could further facilitate the transport with the Western Balkans through a separate agreement complementing the Stabilization and Association Agreements.
Integration of energy markets is envisioned via integration of the electricity market in the region with that of the EU.
Integration in the EU Digital Single Market was one of the EU Single Market segments, being accessible for the countries in the region when the Plan was initially presented. Opportunity will be considered in view of extending the agreement between the region and the EU aimed at reducing the roaming costs, while also strengthening the cooperation in the field of cyber security, as well as by integrating the region into EU trust services, such as the Digital Identity, and similar.
Integration into industrial supply chains includes development of strategic partnerships on sustainable raw materials value chains (including battery projects) and supply of certain critical medicines.
Regional integration to add 10% to their economies
Despite the extensive elaboration on the benefits from the EU Single Market, the regional integration, being actually the second pillar under the Growth Plan for Western Balkans, is worthy of attention, since it is an exceptional potential for boosting the growth. As per a World Bank study, GDP in the region could increase by 10% on average, resulting from the regional integration. Moreover, the Common Regional Market is based upon the EU Rules and Standards, thus being a significant mechanism in making progress in the EU accession negotiations. Simply put, the Common Regional Market represents a stepping-stone to integrate the region more closely with the EU Single Market already before accession.
Financial Assistance Worth EUR 6 billion
This already adds to the third and fourth pillar of the Growth Plan for Western Balkans, i.e. reform implementation and the respective financial assistance, to be unlocked once these reforms are completed. In fact, EU will provide a financial assistance worth EUR 6 billion covering the next 4-year period, EUR 2 billion out of which as non-repayable support and EUR 4 billion as concessional loans, to be allocated through the mid-term revision of the EU Multi-Year Financial Framework. EUR 3 billion out of these funds, will be available as direct loans for the national budgets, whereby EUR 3 billion will be earmarked for supporting the investments projects through the Western Balkans Investment Framework (WBIF). These funds will be geared towards investments in the field of transport, energy, digitalization, education and skill development, whereby 37% of the grants will be focused on green projects, i.e. fulfilling the climate objectives. Payments will be made twice per year in line with the fulfillment of the social and economic reforms by the countries.
In our country, the implementation of the third and fourth pillar will be monitored by Ministry of Finance, as coordinator of the Reform Agenda. Reform agenda will pertain to the structural reforms under the latest Economic Reform Program (ERP) and the related Joint Conclusions of the Economic and Financial Dialogue, as well as the revised Enlargement Strategy, the most recent Enlargement Package and the Economic and Investment Plan for the Western Balkans. This Reform Agenda will identify the priority reforms, which will serve as payment conditions, i.e. upon achievement, they will trigger the release of funds by the EU, according to a pre-determined timeline.
Once EC adopts the Reform Agenda, Ministry of Finance will, every 6 months, submit a request to the EU for disbursement of funds, while EU monitors whether the tranche-related terms and conditions have been met. Accordingly, depending on the degree of their fulfillment, the funds will be fully or partially released.
It is expected for 860 million to be allocated to North Macedonia, one third of which as non-repayable support intended for infrastructure investments.
Headwinds for the Economies in the Region
EU assistance provided through this Growth Plan is the much-needed headwinds for the Western Balkan countries, which are developing economies, undergoing the transition period not that long ago, confronting afterwards several global and geopolitical crises, which further hampered the convergence process.
However, these economies have proven to be considerably resilient. Western Balkan countries managed to successfully overcome the latest crises, starting from the COVID-19 pandemic onwards, while keeping the growth trajectory and getting closer to the developed economies (although slower than desired). For instance, as of mid-2022 and throughout 2023, new 103000 jobs were created on the labor market in the region. However, the still present structural obstacles should be addressed, such as the ones related to the labor market (substantial gender gap and increasing workforce shortage). All this is coupled by the climate change and its impact on most of the economic branches, the fiscal sustainability, the digitalization and the state apparatus enhancement, as part of the structural challenges, which should be appropriately tackled, as early as possible.
In conclusion, I would like to hereby emphasize our historic chance in view of both making progress to the EU integration, as well as providing social and economic conditions by following the EU example. We should put maximum efforts and have common awareness to seize this chance. Every high-ranking official, civil servant, politician, social actor and citizen should recognize his own role and responsibility in creating a better tomorrow in this country. Bringing EU home, implies a functional society and economy in line with the European values and rules, thus getting the opportunity to join the EU, as quickly as possible. Bringing Europe home – as soon as may be!