1.             I am very pleased to see so many Ministers of Economy of South East Europe gathered together again here in Vienna.  Last year you have adopted the Ministerial Declaration on attracting investments in South Eastern Europe and today you will go a step further-committing yourself to a set of concrete measures to improve the business climate in each of your countries.  Allow me, first of all, to thank the co-chairs of the Investment Compact, Austria, OECD and Romania for their hard work and dedication to this ambitious endeavour.

 

2.             I am also pleased about the format of this meeting which is allowing our friends from the private sector to make a meaningful contribution to our debates.  I am grateful to the network of Foreign Investors Associations active in SEE and to the Business Advisory Council for SEE, to the BIAC and others for the constructive dialogue they have engaged with the Ministers and officials of SEE under the auspices of the SP Investment Compact on reform issues at the regional level.  I share their view that a regulatory and institutional environment that generates business confidence and fosters private investment is key to sustained economic growth in SEE.

 

3.             There are two reasons that make the improvement of the investment framework in SEE not only important, but also urgent.  First, the European Union has greatly expanded trade access to the Single European Market for all eight SP countries.  Second, your countries have already completed all bilateral free-trade agreements (except with Moldova) thus creating a virtual free trade area in South Eastern Europe.  Seizing the opportunities created by these developments will be possible only if investment increases substantially.  A Favourable institutional framework for domestic and foreign investments is essential to achieve sustainable growth and alleviation of poverty in the region.

 

4.             The recent progress in privatization and structural reforms in SEE indicates that the region is on the way to recovery from a deep and lengthy recession.  Most of the economies of South Eastern Europe have indeed experienced relatively sustained growth, yet in some cases still somewhat fragile, especially after the end of the Kosovo conflict in 1999.

 

5.             While financial assistance from the international community has assisted SEE to begin the process of reconstruction and re-development, long-term sustainable economic development depends on private sector investment from both foreign and domestic sources.  It is true that the region has received inflows of foreign direct investment, but it is not nearly enough to address the capital, technical and managerial needs of the economies.

 

6.             The reasons behind the low level of FDI in the Balkans are structural and institutional in nature.  Some research shows that there is a positive association between institutional development and the cumulative inflow of FDI per capita in SEE.  Countries where restructuring was delayed, have not been able to attract foreign capital.  Also, those countries with institutionally weaker business frameworks have been less attractive to foreign investors due to insecurity of property rights and contracts, poor governance incentives, underdeveloped infrastructure and utilities and last but not least corruption.

 

7.             Recent improvements in legislation and strengthening of market institutions have started to produce positive results by increasing the flow of FDI to SEE.  Some countries have received more foreign investment in comparison with the rest of SEE in line because of their recent progress in restructuring and privatisation of the enterprise sector and improvements in the institutional environment.  These results should encourage you, policymakers, to pursue more vigorously your reform agendas for strengthening the institutional aspect of the business environment.

 

8.             The worldwide competition for mobile foreign investment is intense and the international marketplace is no place for the faint hearted.  Countries must have a clear, long-term strategy to secure the most appropriate investment for their needs and must create a suitable investment climate to attract and RETAIN investors.

 

9.             During the previous year substantial work by the Investment Compact has been done.  We do hope that this work contributed to the improvement to the Investment Climate in the region.  A new edition of the Monitoring Instruments has shown progress in achieving the planned goals and reforms, but also shortcomings at some countries.  I am pleased that some Regional Flagship Initiatives (RFIs) have produced tangible results like the Regional Round Table on Investments, the Review of Regulatory Governance and the completion of Enterprise Policy Performance assessments for each of the SEE countries.  I am also proud that most of the RFIs are ending with papers that provide a solid base of reference for a deepening of their activities.  Tax policy assessment and Competition Law are good examples for this exercise.

 

10.        I also urge you to promote opportunities for investment in parallel with the implementation of reform.  I firmly believe that the presence of potential investors in your countries can expedite the reform process, as they will quickly identify the obstacles to investment that must be addressed.

 

11.        I would like to highlight the importance of to-day’s declaration for regional co-operation in SEE.  It is recognition by the individual countries that potential investors look at the region as a whole – look at the importance of the network of bilateral free trade agreements in creating a virtual free trade area.  It is only by taking collective responsibility for the investment climate that the individual countries of SEE will secure the FDI flows that are so necessary for their future economic development.  One bad story from the region can spoil ten good stories.

 

12.        The Stability Pact views the Investment Compact as a valuable tool that is available to the countries of SEE.  It brings together a potent combination of resources, experience and expertise which the countries of SEE can avail themselves of to assist with the implementation of much needed reforms and promote investment opportunities to key target markets.  However, it is up to the countries of the region to make the best use of this tool and if you want to maximise the benefits available, you must ensure that you fulfil your obligations as governments. 

 

13.        The Statement you are adopting today is a step forward after the Declaration you have signed last year.  In conclusion, let me emphasise once more that improving the institutional framework for investment is essential to the integration of the South East European countries into the West European structures.  The two mutually reinforcing objectives-accelerating growth in a sustainable way and reducing poverty, on the one hand, and integrating with Europe, on the other, are critical to achieving long-lasting peace and prosperity for all people of the region.

 

14.        I can assure you that I will, as always, take every opportunity to promote your countries as a location for investment and I believe that the result of today’s gathering provides another important signal to investors to look at the potential of the region.

 

Thank you for your attention.