Mr Chairman, Excellencies, Ladies and Gentlemen

I am grateful for the opportunity to address this distinguished audience on the important topic of investment, trade and regional cooperation. The range of participants here today is good demonstration of the political will of all South East Europe countries to move forward together both economically and politically and the support they enjoy for these efforts from the business community, the OECD and the EU.

Minister Bartenstein, let me take this opportunity to thank Austria at the end of its successful EU presidency for its strong support for further political and economic development in South Eastern Europe as well as thanking you personally for your long-standing commitment to the Investment Compact for South Eastern Europe.

As you have heard, the prospects for strengthening regional economic co-operation in South East Europe over the years to come are promising, as they can build on solid foundations:

On average, the countries of the region are growing at a rate of 5% per annum. Major privatizations have taken place in all countries and FDI flows have steadily increased, reaching almost 11 billion USD in 2005 demonstrating that SEE is increasingly attractive to investors

Other Stability Pact initiatives are also contributing to improving the overall investment climate. For example:

The region is well advanced in developing a free trade area at the doorstep of the major European Union market. Formal negotiations on a new enlarged and amended CEFTA encompassing all countries and territories in the region are underway in Brussels as we speak and several countries are pressing for these to be concluded by the end of September – an ambitious deadline! . We expect this Agreement to be inclusive, modern and ambitious. It should set up a mechanism to overcome inevitable trade disputes and boost both regional trade and the attractiveness of the region for foreign direct investments.

The Energy Community Treaty signed last October is expected to come into force shortly. Its implementation will speed up reforms in the energy sector and create a favourable environment for private investors, leading to a more efficient and stable supply of energy in the region.

The signing by SEE countries of the European Common Aviation Area agreement is another example of the region integrating into European structures before accession.

Finally, the recent decision of the EBRD, with support of 11 donor countries to create a Western Balkans Initiative will boost private business investment and infrastructure development, particularly in the SME sector

With clear progress on trade, investment and infrastructure (including transport, energy and the very promising Information Technology sector), the region as a whole becomes more attractive to domestic and international investment..

However many challenges still lie ahead:

South Eastern Europe has to attract more greenfield investments – the bonanza of privatisations is virtually over – and for that, it has to compete with highly attractive countries such as China and India. Even though much progress has been done in recent years to improve the investment climate, more efforts are needed to keep pace with these formidable competitors.   

The process of political fragmentation in SEE has not yet come to an end: Montenegro has just become an independent state and the issue of the final status of Kosovo is still unresolved. This creates some degree of uncertainty among investors, but does not represent an insurmountable obstacle, provided the SEE countries demonstrate their commitment to regional co-operation. I cannot stress it enough: the SEE countries will succeed in improving their image as an investment destination if they promote themselves as a region and a total market of 55 million inhabitants, and not just as isolated countries.

The Regional Framework for Investment that you are going to – hopefully - approve today represents a very useful roadmap for further reforms. It is based on an in-depth diagnostic prepared by the competent experts of the OECD Investment Compact Team and validated by representatives of the business community and the governments of each of your countries.

Let me emphasize the importance of the “reality check” made by the private sector on the investment climate. Ultimately, private investors are those who will put their money where their mouth is!   It is therefore crucial to take their views into consideration. It has been a long standing goal of the Stability Pact to promote dialogue between the private and the public sector through the Business Advisory Council for SEE and other bodies represented here today.  I am glad to see that BAC and BIAC as well as local Foreign Investors Councils have been closely associated with the drafting of the Regional Investment Framework and I am looking forward to the presentation by the Chairman of the BAC, Mr Fumagalli.

The Declaration that will be adopted today proposes the transformation of the Investment Compact country missions into a mechanism of peer reviews similar to that of the Investment Committee of the OECD. Let me strongly endorse this proposal. It has been our experience, in the Stability Pact, that peer review mechanisms are an effective driver for exchanges of experiences and enhanced regional cooperation and that they promote both healthy competition and emulation among the participating countries. Such an evolution of the Investment Compact Initiative would certainly enhance the ownership by the countries of the region on the whole process of reviewing periodically the investment climate. It would integrate well into the overall Transition Strategy launched by the Stability Pact to gradually transfer the responsibility for the activities supported under our different initiatives to the countries of the region.

As endorsed by the recent meeting of the Regional Table in Belgrade, the Stability Pact will evolve towards a new framework for regional co-operation called the Regional Co-operation Council. This Council will continue stimulating and monitoring progress on five priority areas: economic and social development, infrastructure, justice and home affairs, security cooperation, building human capital as well as encouraging better parliamentary co-operation. Most of the activities currently underway under these five areas have a direct bearing on the investment climate in SEE. There is no doubt that fighting against corruption and organised crime is as important for reputable investors as the adoption of a good competition law or the facilitation of trade among countries of the region! We hope that this ambitious broad economic agenda will be pursued and implemented swiftly over the next few years.

Before I conclude this address I wish also to put on record our appreciation for Bulgaria who has co-chaired the investment Compact Initiative in an effective manner and to congratulate Serbia as the new co-chair.   We are looking forward to your input to this important Stability Pact Initiative.

I would also like to convey my gratitude to the other co-chairs of the Investment Compact, Manfred Schekulin of the Austrian Ministry of Economics and Labour and Rainer Geiger of the OECD.   Your dedication and that of the Investment Compact team have contributed greatly to the success of this process.

Finally, I would like to reiterate my support for the adoption of the Regional Framework for Investment as a comprehensive, integrated programme of actions aimed at improving the business environment in South East Europe.   This mechanism, which combines tripartite evaluation, peer reviews and country missions, is a useful and legitimate roadmap for further progress and improvement of investment climate in the region. It is also a clear endorsement that SEE countries can be active partner in EU’s and OECD structures.

Thank you.