TheplanforaregionaleconomicareaintheWesternBalkans

WillBartlettLSE

Outline

• ThebackgroundtoMAPforREA• Trade• Regionalinvestmentagenda• Mobility• Digitalintegration• Conclusions

RealGDPgrowthinWB6region

-4

-2

0

2

4

6

8

10

2000 2002 2004 2006 2008 2010 2012 2014 2016

Average

Av2000-08

Av2009-16

Background• TriesteSummitofBerlinprocessJune2017• Multi-annualActionPlan(MAP)foraRegionalEconomicArea,2017-2020

• KeycomponentsareTrade,Investment,Mobility,Digital– Withinthese,PolicyAreas,eachwithObjectives

• KeyaimisintegrationofWB6intoEuropeanandglobalvaluechains

• EachcountryhasaMAPCoordinatorinitsgovernmentstructures

AimofMAP• BasedonCEFTAlegalframeworkandindividualSAAs• Itaimstofosteragradualandprogressiverule-basedeconomicintegrationintheareasof– trade,– investment– mobility– digital

• Toenableunobstructedflowofgoods,services,investmentandhighlyskilledlabourthroughouttheregion,thusdevelopingaWesternBalkanRegionalEconomicArea

REGIONALTRADE

• Averagetradeopenness(thesumofexportsandimportsasapercentageofGDP)oftheWB6islow,just65%of“EU11”,dueto– poortransportinfrastructure– poorbusinessenvironment– failuretodevelopvaluechainswithEUmarkets,orwithintheregion

• Intra-regionaltradeintheWesternBalkansislessimportantthantradeoutsidetheregiondueto:– Customsandtraderegulations– Highcosttoexportwithinregion– Lengthoftimetoexport

TradeandtheMAP

• MAPpoliciesinclude:– Facilitationoftradeingoodsthroughtradedisputesettlements,jointbordercontrols,closercooperationbetweentheindividualmarketsurveillanceauthorities

– Facilitationoftradeinservices,throughadoptionoftheAdditionalProtocol6anddialogueonregulatoryissuesinelectroniccommerce

– Creatinganon-tariffmeasures(NTMs)freeregion,includingthroughinformationexchangebetweencompetitionandstateaidauthorities

REGIONALINVESTMENTAGENDA

Whyaregionalinvestmentagenda?

• Lowlevelofinvestmentinsomecountriesinhibitsgrowth

• RegionhasverypoorrecordinattractingFDI

0

5

10

15

20

25

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35

2008 2009 2010 2011 2012 2013 2014 2015

FDI flow, % GDP (3-year moving average)

ALBAMKMERS

CompetitionforFDI

• RecentlySerbiaandtheformerYugoslavRepublicofMacedoniahaveintroducedasetofsubstantialinvestmentincentives– Thishascreateda“racetothebottom”inwhichcorporatetaxrateshavebeenreduced

– Taxholidaysareavailableinsomecircumstances(e.g.10yeartaxholidayinMacedonianSEZs)

– Morebroadlybasedemploymentsubsidiesrelatedtoemploymentcreation

• Dothesesubsidiesconflictwithstateaidrules?

Corporateincometaxrates

15%

10% 10% 10%9%

15%

23%

0%

5%

10%

15%

20%

25%

AL BA XK MK ME RS EU

Goodsexports(%GDP)

14.0 14.812.3 11.9 11.3

28.529.9

32.234.0 35.1

0

5

10

15

20

25

30

35

40

2012 2013 2014 2015 2016

AL,BA,ME,XK

MK,RS

MAPRegionalinvestmentpolicyareas

• Develop,formaliseandimplementaregionalinvestmentreformagenda

• PromoteWB6asauniqueinvestmentdestination

• Diversifyfinancialsystemstoboostinvestment

• Smartgrowth

Developingaregionalinvestmentreformagenda

• Investmentattraction:– Harmoniseinvestmentincentivesataregionallevel

• Investmentpromotion:– EBRDRegionalInvestmentPlatformCommonplatformisausefulinstrumentforinvestmentpromotion

• Investmentimpact– LinkSMEsassupplierstoforeigninvestors– Createa– Providetrainingtosuppliercompanies

MOBILITY

Mobility

• Mobilityofresearchers• Mobilityofprofessionals• (Mobilityofstudentsandhighlyskilledworkers)

Mobilityofresearchers:benefits

• Increasedmobilityofresearcherscanimprovecompetitivenessofeconomies

• Economieswithmoreopenresearchsystemsperformbetteroninnovation

• IntegrationtotheEuropeanResearchAreacanbeassistedbymorecollaborationbetweenresearcherswithintheregion(andviceversa)

Mobilityofresearchers:obstaclesinWB6

• Relativelyfewbarrierstoshorttermmobilitylessthanthreemonths(researchvisit)inWB6

• Mainbarriersaretolong-termmobility(employment)beyondthreemonths– OftennotcoveredbybilateralagreementsbetweenHEIs

– Institutionalbarriersarealsolinkedtonon-meritbasedpromotioncriteria

• OnlyBA&MEhavesimplifiedproceduresforobtainingworkpermitsandresidencepermits

• OnlyMEhasresearchinfrastructureroadmap

Mobilityofprofessionals:challenges• Asymmetricinformationbetweenprofessionalsandconsumersenablesprofessionalstoraisepricesandreducequalityofservices.– Consequently,professionalservicesareoftensubjecttoregulationtoensureminimumstandardsofserviceprovision

• Yet,regulationmayrestrictthesupplyofservices,drivingupconsumerpricesandreducinginternationalmobility.– Professionsmayinfluencepolicy-makerstoprovideexcessiveregulationtoprotecttheirprivilegedpositions

– WithinCEFTA, liberalisationofinternationaltradeinprofessionalservicesaimstoeliminateexcessiveregulations

MobilityofprofessionalsinWB6:obstacles

• MAPaimstoprovideincreasedcompetitionamongfourregulatedprofessions– DoctorsofMedicine,Dentists,ArchitectsandCivilEngineers

– SupportsMode4oftradeinservices• Mobilityishinderedbylackofmutualrecognitionofprofessionalqualifications– RecognitiondecisionsmadeindifferentwaysacrossCEFTAregion

– Procedureslengthyandburdensome– CredentialevaluatorsdonotapplyLisbonRecognitionConventionproperly

ProgressinmobilityofprofessionalsinWB6

• HarmonizationwithEUServicesDirectiveandProfessionalQualificationsDirectivewillencouragealignmentbetweenWB6economies– AL:LawonRegulatedProfessions2011– BA:RoadmapforImplementingEUDirectiveonRegulated

Professions,2016– XK:onlyfourprofessionsregulatedbylaw– ME:LawonRecognitionofForeignQualificationsforAccessto

RegulatedProfessions2012– MK:LawonRecognitionofProfessionalQualifications2011– RS:Asyetnounifiedlistofprofessionalqualifications

• RCC-WGMRPQhasrecommendedopeningofnegotiationsonMRAsfor4professions– butlongwaytogo

Mobilityofstudentsandhighlyskilledworkers

• Mobilityofstudentsraisesgraduates’skilllevelsandimprovestheiremployability

• ItisacentralobjectiveoftheBolognaProcessandEHEA

• Exx:CEEPUSexchangeprogrammeforstudentsinDanuberegion

Mutualrecognitionofacademicqualifications

• Mutualrecognitionofacademicqualificationsisrequiredtopromotemobility,but:– LisbonRecognitionConvention1997unevenlyorincorrectlyapplied

– NationalQualificationsFrameworksunevenlydeveloped

– ENIC-NARICinformationcentresunderfunded– HEaccreditationpoliciesareuneventhroughoutregion– aretheyindependent?

DIGITALAGENDA

DigitalAgenda:policies

• Networksandconnectivity• Trustandsecurity• Digitaleconomy• Digitisationandstandards

Digitaldividend&digitaldivide

• Digitaleconomycanraiseproductivityandreducecostsofinternationaltrade– Knownas“digitaldividend”

• But– Digitaleconomyisvulnerabletomonopolizationbenefitingincumbents

– Inequalityofwageincomesmayincreaseduetoincreasedreturnstodigitalskills

– Digitaldivideininternetaccess

ME

MK

RS

BA

EU

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90

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

PercentageofhouseholdsthathaveInternetaccessathome

Montenegro TheFormerYugoslavRepublicofMacedonia

Serbia BosniaandHerzegovina

EU-28

DigitalEconomy

• Internetenablesfirmstoreachnewmarketsandmayboostinternationaltrade– A10%increaseininternetuseincreasesthenumberofproductstradedbetweentwocountriesby1.5%

– Onlineplatformsopenupnewmarketstosmallsuppliers

• Digitalskills– Schoolsnotuptospeedinteachinguseofdigitaltechnologies

– Skillgapsandskillmismatchesarewidespread

DigitalintegrationoftheWB6economies

• Steadygrowthofinternetpenetration,partlyledbynewentrantssuchasUnitedGroup

• Newchallengersarebeginningtotakemarketsharefromincumbents– Pushbackfromincumbentsvianon-independentregulators

– Regulatorybarriersbutalsoreputationalattacksonnewentrants

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