Excellencies, Ladies and Gentlemen, Dear friends,

It is a real pleasure to see so many Ministers of Economy of South Eastern Europe to Vienna once again. I am looking forward to hearing your views on the investment climate in the region.  Last year you made significant steps forward in order to improve the business climate in each of your countries and this year you will maintain an ambitious programme as today you adopt a set of measures that will lead to an even better environment for private investment in South Eastern Europe. This work is being undertaken under the auspices of the Stability Pact’s Investment Compact, which is specifically designed to support you in these challenging reforms.

Therefore, 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 demanding initiative. Special appreciation goes to Romania, the Regional Co-Chair of the Investment Compact, who did an excellent job over the past 18 months. At the same time let me extend a warm welcome to Bulgaria, the country that takes over the regional co-chairmanship as of today. This co-chairmanship provides Bulgaria with an opportunity to highlight its accomplishments and to exercise leadership in promoting investment in the region.

As I have stated on several occasions, Stability Pact initiatives must have a measurable impact on the region and therefore, I am very pleased that a professional and independent evaluation of the Investment Compact has been undertaken. I share the conclusion that the Investment Compact has contributed significantly to the improvement of the policy environment for investment and thereby to increasing investment and employment in the region. 

I also agree that the Investment Compact needs to increase its visibility and improve its external communications, for example through better dissemination of the key conclusions from several of its excellent reports, especially the Monitoring Instruments and the Enterprise Policy Performance Assessments.   Enhanced co-operation with other SP initiatives in areas such as trade liberalisation, anti-corruption and social cohesion is another way to improve communication and synergies.   I am of the same opinion as the authors of the evaluation report regarding the importance of focusing on particular policy areas where the Compact can have the greatest impact with limited resources such as policies on FDI development, promotion and local development including SME development.  

The catalytic role of the Investment Compact in stimulating reform and its vital role in monitoring and supporting the implementation process is needed to support SEE in the future.   As we will hear later today, the region is well and truly consolidating political and economic stability and this achievement should be acknowledged.   South Eastern Europe secured net capital inflows of over € 8 billion in 2003 – including $ 5 billion of FDI.  

On the strength of the progress achieved to date, SEE is now firmly on the radar screens of foreign investors and international capital markets. A window of opportunity has opened up for the region, as increasingly mobile capital flows have been reallocated away from regions perceived as riskier, such as Latin America, towards Eastern and South Eastern Europe, which is perceived as more stable because of its linkages to the EU and the support of dedicated financial institutions such as the EIB and the EBRD.

But being on the radar screens of the investors does not guarantee actual investment. It merely improves your potential for investment leading to greater attention to, and closer screening of, political and economic developments with a view to making a comprehensive assessment of the risks and returns involved.

It important to note that regarding the FDI inflows to the region of € 5 billion 2003, four countries secured approx. Euro 1 billion each with the balance spread among the remaining four.  It is clear that while investors are interested, they will only put their money into those countries that that are firmly committed to economic reforms and who can demonstrate solid progress in implementation.

I am concerned that as highlighted in the latest Monitoring Instruments Report, while all SEE countries have committed themselves to implementing priority reforms to improve the business climate, progress in achieving these reforms can, at best, be described as moderate to good.  Two years on from the original commitments, some countries have only achieved one out of the three reforms identified and, while others have made more progress, some basic elements are still lacking.  This appears to suggest a lack of urgency and lack of vision on the part of some countries.  This means that the window of opportunity presently open to SEE could be missed if the basic policy and regulatory environment is not put firmly in place. 

Today,Ministers are agreeing to take a number of specific actions in five distinct areas including institutional capacity administrative procedures and consultation.  While the specific actions will be tailored to suit the particular situation in each country, I would like to emphasise that implementation and consistent application by successive governments of these core policies will be a crucial factor in developing a business climate conducive to economic growth and sustainable employment.  

I am delighted to see the pledge to improve consultation. The quality, scope and structure of dialogue between governments and the business community – both domestic and international  - are vital components in improving the environment.   In this respect, I would like to congratulate the organisers for the format of these meetings in Vienna, which allows our friends from the private sector to make a meaningful contribution to our debates. I am grateful to the Investment Compact’s network of Foreign Investors Councils active in SEE, to the Business Advisory Council for SEE, to the BIAC and others for the constructive dialogue they have engaged in with the Ministers and officials of SEE both here in Vienna and in the region.  I can only urge all parties to continue, strengthen and intensify this dialogue.

An important consideration for the future is that we are getting closer to the end of privatisation in SEE and that we have to redouble our efforts to attract greenfield investment to the region.  Given the immense competition for investment worldwide, your decision to co-operate on a regional basis to improve the environment and promote investment is critical.  In the context of the globalisation of trade and investment flows, the creditworthiness and attractiveness of the region is regarded as more important than the standing of individual countries. International investors respect and can operate within existing political and institutional realities, but they increasingly require integrated markets, free from trade and foreign exchange restrictions, with reasonable regulatory frameworks and reliable legal systems. Indeed one of the key determinants of attracting FDI is market size and this is one of the reasons another SP initiative has worked so hard to complement the efforts of the Investment Compact, by liberalising the trade regime in SEE so that the countries can offer a market of 55 million consumers to potential investors rather than a series of fragmented small markets.

As you know, we have been busy putting a network of bilateral free trade agreements in place among the eight SEE countries and I am very pleased to inform you that as of today there are 28 FTAs concluded, of which 19 are already in force. The full implementation of these agreements is now our short-term objective. The SP’s Trade Working Group is also focused on the identification and elimination of non-tariff barriers to trade (NTBs) in the region and will shortly contact the Investment Compact’s Foreign Investors Councils for their input on what are the top NTBs to be tackled. I believe that all this work makes a valuable contribution to improving the investment climate and as mentioned earlier, I am looking forward to closer cooperation between the Investment Compact and the Trade Working Group.

Excellencies, Ladies and Gentlemen, to-day’s gathering provides you with a superb opportunity to send another important signal to investors to look at the potential of the region. To ensure that this signal is acted on however rapid and consistent implementation of the commitments you have taken is of the utmost importance.

As always, you can rely on my full support, that of the Investment Compact and other SP initiatives for your efforts.  I will continue to use every opportunity I have to promote SEE as a location for investment and I look forward to being able to highlight the improvements in the regulatory and institutional environment in the coming year.

Thank You