(delivered by Deputy Special Co-ordinator of the Stability Pact, John Riddle

The Stability Pact has been placed under the auspices of the Organization for Security and Co-operation in Europe (OSCE) at its inception in Cologne in June 1999 due to the latter's status as the only pan-European security organisation and its comprehensive concept of security, encompassing issues such as military security, economic and environmental security, as well as democratisation and human rights.
As provided for in the Cologne Document, the Special Co-ordinator of the Stability Pact, Erhard Busek, thus submits herewith the Progress Report for 2002 to the OSCE.

Achievements in 2002

After consultation with all the partners involved in the Stability Pact, the Special Co-ordinator has taken the decision in the beginning of the year to focus on six concrete objectives for 2002, which have then been endorsed by the Regional Table in June. The following has been achieved in these areas in the course of the year:

Trade and Investment - Completing the network of Bilateral Free Trade Agreements

A Memorandum of Understanding on Trade Liberalisation and Facilitation has been signed in June 2001 by seven countries of SEE (Albania, Bosnia-Herzegovina, Bulgaria, Croatia, FYR Macedonia, Romania and FR Yugoslavia - Moldova associated itself to the process through a statement of intent and has an extended timeline). Under article 1 of the MoU, the Signatory Countries undertook to complete a network of bilateral Free Trade Agreements (FTAs) between all countries of the region by 31 December 2002, in accordance with specified provisions. This network of bilateral free trade agreements will provide the basis for a free trade area in SEE covering approx. 55 million consumers. Out of the total of 21 FTAs, 13 agreements have been concluded and 8 are under active negotiation.

Infrastructure (incl. Energy) - Timely implementation of agreed infrastructure projects and removal of obstacles to implementation as well as strengthening regional energy cooperation, particularly in the field of electricity

The infrastructure projects agreed at the two SP Regional Conferences have been merged into one comprehensive list. These 46 infrastructure projects include projects in the field of transport, energy, water and environment and cross border trade facilitation. The number of projects started by June 2002 has doubled compared to December 2001 and amounts to 50 % of all projects.

The Infrastructure Steering Group, which oversees the infrastructure development in SEE, is continuously working on identifying barriers to project implementation, as well as regional strategies for future infrastructure development. Information flow between the Infrastructure Steering Group and the countries of the region is improving.

The European Commission with the active support and assistance of the Stability Pact launched the South East Europe Electricity Regulatory Forum (SEEERF) to improve the stability of electricity supply for the countries of the region, which is fundamental for economic development and political stability. In a Memorandum of Understanding signed in Athens in November, the signatory states undertook to open their national electricity markets by 2005. This market will be based on the principles of the EU Electricity Directive (96/92) and its relevant secondary legislation and will allow the electricity systems and companies of the region to participate fully in the Internal Electricity Market of the European Union.

Refugee Issues - to provide sustainable solutions for at least 100,000 refugees and displaced persons by increasing the level of return and integration assistance and credits for self-assistance, providing employment opportunities, accelerating the repossession of properties

With regard to returns and sustainable solutions, more than 125.000 persons have found sustainable solutions during the first seven months of 2002. The Refuge Return Initiative (RRI) has successfully established inter-ministerial housing secretariats in Serbia/FRY and in Bosnia-Herzegovina and has secured interaction expertise to support the in-country developments. In addition, 7 million Euro of direct investment from a housing association has been secured for construction of apartments in Sarajevo. Ongoing housing programs are estimated at 250 million Euro in 2002. The Property Legislation Implementation Programme (PLIP) in Bosnia Herzegovina has in August reached an implementation rate of 59%. Repossession of property will be enhanced by the establishment of an RRI regional data exchange mechanism on property related information in the next months. At the request of the region and several donors, the RRI has launched a Collective Centre Initiative in order to close these centres and find sustainable solutions for the remaining 55.000 inhabitants.

Small Arms and Light Weapons - establishing a "Regional Clearinghouse" in Belgrade under UNDP auspices

On 8 May, the "Regional Clearinghouse" for Small Arms and Light Weapons was opened in Belgrade under the auspices of the UNDP. The Clearinghouse is now elaborating programs in several countries aimed at reducing the excess supply and illicit trafficking of SALW throughout the region. The response of countries throughout the region has been uniformly supportive and donors also have responded to the opportunities afforded by such an excellent capacity building operation.

Organised Crime - establishing a SPOC executive secretariat at the SECI Centre for Combating Transborder Crime and Corruption in Bucharest to be operational in the region

In an attempt to streamline ongoing initiatives to fight organised crime, the Secretariat of the Stability Pact Organised Crime Initiative (SPOC) is being established at the Regional Crime Fighting Centre in Bucharest to be operational in the region. The Centre is a good example of regional ownership and the Stability Pact hopes to concentrate the majority of its law enforcement activities at the Centre, which has been endorsed at the recent London Conference on Organised Crime in South Eastern Europe. The aim is to combine the efforts of the Centre with those of SPOC in the field of legislative reform and capacity building. Interpol has established a liaison at the Centre and negotiations with Europol are ongoing. Having mobilised sufficient donor support, the SPOC secretariat will be fully operational early 2003.

Sub-regional Co-operation - starting-up an informal sub-regional dialogue and cooperation process between key principals on functional cross-border issues

A process of promoting sub-regional cooperation was initiated by an August meeting in Salzburg between SRSG Michael Steiner, HR Paddy Ashdown, EUSR Alain Le Roy and SC Erhard Busek and followed up by a second discussion in November. This process is embedded in wider consultations initiated by the Council (HR/SG Solana) and Commission (Commissioner Patten). The four principals agreed to focus on trade liberalisation, the fight against organised crime, refugee returns and media development. Practical and pragmatic solutions are now being explored and applied to translate this commitment into reality in close cooperation with the governments concerned in order to give real ownership of the process to the region.

Outlook for 2003

The Stability Pact will be building on these achievements in the next year. But it is an initiative that does not, and cannot know stasis. The situation in South Eastern Europe as well as in Europe overall is constantly changing, and the Stability Pact has to change with it. In the end, success for South Eastern Europe will be judged against three related but separate criteria:

• Its ability to work together effectively in the region to solve practical issues of common concern - considering the numerous fora, in which representatives of countries, which fought each other only a few years ago are now sitting together, much has been achieved already;
• The steady elaboration of the region's perspective towards the EU, resulting in a truly European Integration process - the Stabilisation and Association Process created by the EU is clearly the most important tool in this respect;
• And the region's capacity for undertaking and implementing international commitments made within a wide scope of international initiatives and organisations.

Its ability to support the region in these directions should also be the criteria by which success of the Stability Pact be judged. But one has to keep in mind that the Stability Pact is not able, nor should it deal with every issue at hand. It needs to focus and come in with strength on those issues, where it can actually bring an added value.

In this light, Core Objectives for the coming year and beyond are being established, which will show some continuity, but will have to adapt to the changing environment as well. The Stability Pact should deepen its engagement in local democracy and cross border cooperation, strengthen media standards, foster the building of the regional energy market, actively facilitate implementation of the free trade agreements, solidify an initiative to manage and stabilize population movements and develop an operational arrangement between the Bucharest Crime Centre and Europol, based on the conclusions of the London Conference on Organised Crime in South Eastern Europe.

In addition, the Stability Pact is currently - together with interested parties - exploring ways and possibilities on how to embark on an enhanced reconciliation initiative in South Eastern Europe. In order to add value and bring greater coherence to the wide variety of initiatives in the area of reconciliation, the planned initiative would focus both on the political as well as the project level - areas which could be envisaged are i.a. Education, Youth, Media, Local Democracy and Cross-border cooperation. With its proven track record in the area of confidence-building, the OSCE is for obvious reasons a key partner in this possible future initiative.

Co-operation with the OSCE

In past and present, many Stability Pact initiatives are working closely with OSCE institutions, most of all with the field missions in South Eastern Europe. This is a partnership based on comparative advantages - the Stability Pact offering its regional approach and issue-specific expertise, whereas the OSCE Missions providing country-specific expertise and an invaluable presence on the ground.

Several areas of successful cooperation between the OSCE and the Stability Pact should be highlighted:

• The OSCE is hosting the Stability Pact Task Force against Trafficking in Human Beings in Vienna. This is an issue of great concern for the region - and Europe as a whole - and several Field Missions are working actively in this area and cooperating closely with the SP Task Force in Vienna.
  
• Regarding Parliamentary Cooperation, the Stability Pact Parliamentary Troika was established in June 2001, comprising the Parliamentary Assemblies of the OSCE, the Council of Europe and the European Parliament. One of the recommendations of the Parliamentary conferences organised by the Troika was the establishment of ad hoc parliamentary committees on the Stability Pact. Unfortunately, progress in this respect has been slow. Such committees would be important to ensure parliamentary participation in the Stability Pact and could one day form the backbone of a regional parliamentary structure. Such a structure could develop into a forum for sharing information and experience and facilitate the collective task of harmonisation of legislations in line with the EU acquis communautaire, as a prelude to EU association and/or accession. The OSCE Missions play an important role in preparing the Parliaments for this important task through training and capacity building. Closer links in this respect would be useful.
  
• Several OSCE Missions have used the Stability Pact emphasis on empowering local government as a starting point for their own efforts to promote the relevant legislation and train local government officials. The aim often has been to deepen and speed up the decentralization process and to obtain the commitment and support of external partners. A Stability Pact conference on Local Democracy and Cross-border cooperation in November in Osijek has reaffirmed the commitment of the Stability Pact to this important aspect of democratisation and confidence building.
  
• All of the OSCE Missions in South Eastern Europe have supported Gender Task Force projects. With the ongoing institutionalisation of the Task Force, the role of OSCE as the main administrator is shifting to the Regional Centre of the Task Force in Zagreb, which co-operates closely with the OSCE Secretariat in Vienna. The Task Force is contributing to the sustainability of regional gender equality developments in South Eastern Europe.
  
• The Stability Pact Initiative on Organised Crime (SPOC) was elaborated together with OSCE Field Missions, laying out standards according to the EU acquis communautaire. A possible future role of the OSCE Field Missions would be to help develop and implement National Action Plans together with the initiative, to improve regional cooperation by facilitating the exchange of information and harmonization of legislation. The SPOC secretariat will be fully operational in early 2003. It now needs to be promoted and used as an instrument by the countries of the region.
  
• Regarding Small Arms and Light Weapons, the Stability Pact Small Arms Clearing House in Belgrade (SEESAC) is cooperating closely with OSCE Missions on the ground. The OSCE Economic Forum in Prague next year will be focusing on the economic aspects of trafficking in small arms and light weapons and we are looking forward to work closely with the OSCE to make the event a success.

In the field of Media, the Stability Pact Media Task Forces has helped establish Working Groups in the countries of South Eastern Europe comprised of representatives from media outlets, NGOs and government. Closer cooperation would be useful with OSCE Missions, especially in the areas of determining priorities for legal reform as well as ensuring implementation.