Documents

Conclusions by the Chairman Fabrizio Saccomanni and the Co-Chairman Gligor Bishev

The Working Table on Economic Reconstruction, Development and Co-operation held its second meeting on 10 and 11 February, in Skopje. The meeting was formally opened by Macedonian Prime Minister Ljubco Georgievski, followed by introductory remarks of the Minister of Foreign Affairs Aleksandar Dimitrov. Prime Minister Georgievski underlined the expectations of the countries in the region towards the Stability Pact which was seen as an instrument to promote peace, cooperation and economic recovery. The Prime Minister pledged his country's firm commitment to regional stabilisation and domestic reforms and urged the other countries in the region to pursue a comprehensive reform agenda. The Prime Minister also reiterated his expectation that the Pact would soon bring about concrete and visible projects and would consider financial assistance in order to restore growth in the economies of the Region.

Minister Dimitrov added that while the main task of the Stability Pact was to create conditions for economic recovery of the region, the other two areas of the Pact, namely democratisation and security were equally important.

The Working Table examined in detail the contributions that the Stability Pact would provide to the forthcoming meeting of the High Level Steering Group (HLSG), co-chaired by the European Commission and the World Bank, in view of the deliberations of the Regional Financing Conference convened at the end of next March (see paragraph 11 below).

At the end of the two-day session the Special Coordinator Bodo Hombach stressed the need for a dynamic partnership, in which the countries of the region, as owners of the process, would demonstrate their strong determination to carry out the necessary reforms so that the International Community could pledge its material support to reconstruction and recovery.

In parallel with the first day session, a Memorandum of Understanding on Trade and Transport Facilitation in SEE was signed by Albania, Bosnia and Hercegovina, Bulgaria, Croatia, the former Yugoslav Republic of Macedonia and Romania. The aim of this project is to reduce costs to trade and transport, at the same time reducing smuggling and corruption at border crossings. The project will be financed by credits of the World Bank and IDA totaling around $ 68 million, with additional grants to be provided by the US Government and the EU. After the signing the Macedonian Minister of Finance reported back to the Working Table.

1. Stabilisation and Association Process

The EU Presidency informed the meeting about the state of play concerning the Stabilisation and Association process. It gave an overview of the support that has been delivered to the region over the past couple of years. While expressing full support for immediate action, the representative of the Presidency pointed out that the Stability Pact in itself is a long-term process.

The European Commission elaborated on the instruments at its disposal to implement the Stability and Association policies; in this context, it provided information on the process of establishing a single EU assistance programme for the whole region replacing the existing initiatives. The Working Table noted that the Stabilisation and Association process opens a window of opportunity for all the countries concerned and outlines a clear roadmap for their integration in the EU. It also provides a strong incentive for these countries to introduce necessary reforms and to make possible the opening of negotiations and conclusion of the relevant agreements. Negotiations for such an agreement will start soon with the former Yugoslav Republic of Macedonia.

2. Regional Development Strategy

The World Bank presented a Regional Strategy Paper, which provides a comprehensive approach to regional development and stabilisation. The World Bank report stressed that success in achieving peace, stability and progress in the SEE region, requires a joint commitment by all parties; implementation of consistent macroeconomic stabilisation policies and deeper structural reforms by countries of the region are key factors for quick stabilisation. On the other hand industrialised countries must offer a credible and predictable path for the integration of the SEE countries into European and global economic and trading structures. They should also commit themselves to provide financial, technical and political support to magnify the effects of domestic reform programs. The SEE regional strategy relies on a move towards fuller trade integration with the EU and within the SEE region itself; fostering social inclusion and social change within the SEE region; improvement of institutional capacity; governance structures and strengthened anti corruption efforts in the region; and investment in regional infrastructure projects, including initiatives that safeguard the environment.

3. Investment Compact

The Working Table formally approved the Investment Compact, i.e. the document outlining the commitments to be undertaken by countries in the region to create a favourable climate for investment, domestic and foreign.

The OECD and UK briefly presented a progress report on the implementation of the Investment Compact, which contains a road map for the way ahead. The work carried out in the framework of the Investment Compact is based on a sound cooperation between international organisations. The implementation of the Compact will include country specific programmes to take full account of differences between countries but it also includes a regional approach. Bilateral discussions with the countries of the region have started and the ambitious timetable until the summer will require extra efforts from all sides.

In this connection, SEE countries were reminded of the need to appoint by 18 February a senior contact person to supervise the implementation of the Compact together with the Investment Project Team, as well as to establish country economic teams. The donor community was reminded of the urgent necessity to fund the OECD which is the main service provider to prepare and implement the Compact. Those who have already made a financial contribution to the OECD include the US, Greece, Norway, Finland and the UK.

4. Basic infrastructure project

The Working Table welcomed the presentation by the European Investment Bank of its report on regional infrastructure development. The EIB presented this as a contribution to the preparation of the Regional Financing Conference. It assessed, in close co-operation with other IFI's and the EC the project proposals, which were submitted by countries of the region. Out of the 400 initial submissions, approximately 80 appeared appropriate for implementation over the medium term, and about 45 appeared prima facie economically justified and without major sectoral or technical impediments. Given adequate financing, their implementation could begin in the near future.

The Working Table agreed that the European Investment Bank would conduct further consultations on the project proposals in the coming weeks with the IFI's and the European Commission. EIB would also pursue bilateral contacts with countries of the region to finalise priorities in the various sectors. The Working Table noted that the projects and the related figures included in the report are subject to the decisions to be taken by the HLSG and the Regional Financing Conference. The Working Table asked the EIB to examine additional project proposals from Croatia and infrastructure project proposals recently submitted by Montenegro. The Office of the Stability Pact will organise the appropriate meetings in this connection.

The Working Table further noted that, in addition to the assessment process initiated by the Stability Pact, a number of infrastructure projects in the region are already entering the construction phase in the year 2000. The relevant data concerning these projects will be made available by the end of February in connection with the preparation of the Regional Financing Conference.

5. Regional private sector development

The Working Table welcomed the presentation made by the EBRD on its interim report, which underlined the sharp increase in the project pipelines of the EBRD and the IFC, the design of a number of initiatives with a specific regional dimension, and the need for donor funding to implement some of these initiatives rapidly and effectively.

The EBRD stressed that the rapid rise in new private sector projects under consideration reflected improved investor confidence and interest in the region. The experience of EBRD and IFC on the ground showed that the Stability Pact was beginning to bear fruit by stabilising expectations. The Working Table welcomed the evidence of increasing activity by the EBRD and the IFC in support of private investment in the region.

The proposed initiatives with a regional dimension included guarantee and insurance schemes that would lower the risk of cross border trade and investment, facilities that would strengthen bank finance for local businesses bidding for contracts in infrastructure, and a variety of financial and technical support schemes for small businesses. Most of these schemes built on existing project structures and could be implemented relatively quickly in 2000/2001. Lists of detailed technical assistance and co-financing requirements were distributed, and participants were encouraged to comment on these lists and the summary paper within one week; bilateral discussions would also be held with the beneficiary countries in the region. The EBRD would then prepare a revised report in view of the meetings of the HLSG and the Regional Financing Conference.

6. Business Advisory Council (BAC)

The Working Table took note with satisfaction that the BAC of the Stability Pact had been established and had held its first meeting in Berlin on January 19, 2000. The BAC comprises about 20 representatives of major private sector companies from Europe, the US, Canada, Japan and SEE. Mr. Nussbaumer, Co-Chairman of the BAC introduced the mandate and the objectives of the BAC. He stressed the fact that the members of the BAC combined extended knowledge with regional experience. The BAC will focus its future work on four main items: economic, financial, legal and human resources framework for trade and investment; regional co-operation; projects; vocational education and management training.

The BAC also confirmed its readiness to provide its advise on all initiatives taken in the framework of the Stability Pact, such as the Investment Compact. It will also visit the countries of the region and meet with high level authorities. It was announced that the next meeting of the BAC will be held on 16 March in Vienna.

7. Trade Issues

The European Commission presented its strategy to further advance the liberalisation of trade within the region and with the European Union. The Working Table took note with satisfaction of the establishment under its aegis of a "Working Group on trade liberalisation and facilitation" comprising most members of SEE and several international institutions, under the chairmanship of Mr. Bogoevski of the former Yugoslav Republic of Macedonia, who provided a first report on the activity of the Group. The main objective of the Group should be liberalisation and facilitation of trade through the reduction and elimination of tariff and non tariff barriers to trade, in line with internationally agreed multilateral rules and principles in the framework of the WTO, and in the context of future integration of the countries of the region into the European mainstream. The Working Table stressed the importance of promotion of intra-regional trade, alongside opening the region to trade with the rest of Europe and the World.

8. Vocational Education and Training

The Working Table renewed its priority for Human Resource Development (HRD) as an integral part of economic reconstruction and development. It welcomed the framework and approach prepared by the European Training Foundation (ETF) and OECD for discussion at the meeting and it supported the setting up of a coordination group led by ETF. A first meeting of the group took place in the margins of the Skopje Working Table meeting.

The Working Table noted the coordination group's recommendations to focus on SME development and infrastructure management in the short term. It also welcomed the proposal of the group to emphasise the regional dimension to HRD through focusing on projects in institutional capacity building, networking and policy actions. The Table supported the consultative process proposed by the coordination group and expects receiving concrete actions from the group following its meeting planned on 20 March.

9. Environmental issues

The Macedonian Minister of Environment, Mr. Popovski reported in the plenary meeting on a parallel session on environmental issues. He briefed the Working Table on the regional meeting which took place in Skopje on 26/27 January with the participation of senior environmental officials of the SEE countries, the European Commission, donor countries and international institutions and reported on developments within the Regional Environmental Reconstruction Programme (RERP). The Working Table welcomed the joint statement issued at the end of the meeting and endorsed the RERP as a basis for further work. The Working Table invited donor countries and interested parties to participate in the programme and finance its implementation. Participants recognised that civil society plays a crucial role in environmental decision-making and suggested it could play a useful role in other activities under Working Table II. The Working Table endorsed the establishment of an ad-hoc group on environmental issues in the framework of Working Table II of the Stability Pact.

10. Anti corruption initiative

The Office of the Special Coordinator and the US provided information on the progress made by the drafting group at its meeting in Vienna on 8 February with the countries of the region. The revised text of the Compact and Action Plan are available on the Stability Pact website. The initiative is expected to be formally approved during the Sarajevo meeting of Working Table III (15/16 February).

11. Regional Funding Conference

The European Commission and the World Bank reported on the preparations for the Regional Financing Conference. The Conference will be held in Brussels on March 29-30, 2000; the first day will be at political level whereas the second will be at technical level. The invitation letter to the Conference will be issued shortly. The Conference will be a first step in a continuing process to be carried out over a number of years. The Conference will be dealing primarily with projects of a regional nature and not replace the country specific donor conferences. It would consider also proposals for funding projects connected with the process of institutional reforms and arising from the activities of Working Tables I and III. Several delegations underlined the special character of the Conference which would be looking for concrete commitments from countries of the region with respect to political and economic reforms enabling the International Community to support these measures with pledges at the Conference.

12. Date and venue of the next meeting

The next meeting of the Working Table will take place in October in Turkey, at a date and venue that will be announced after consultations with the Turkish authorities.

13. Other Business

The Chairman requested the Austrian delegation in its capacity as chair of the Danube Commission, to give an update on the discussion concerning the clearing of the Danube. The European Commission confirmed that it had received a project proposal in this respect, the evaluation of which is being finalised. In this connection, the conditions for inclusion of the FRY in economic assistance were recalled, as indicated in the HLSG statement of 13 July 1999. The Working Table agreed to examine a suggestion by the US on the need to promote local procurement in SEE. The US stressed the need to use local suppliers for donor-financed procurements in order to maximise the impact of foreign assistance programs.

The Chairman and the participants of the Working Table warmly thanked the Macedonian authorities for the very effective organisation of the meeting and for the generous hospitality extended throughout.

NB: In the margins of the Working Table an informal meeting was organised by the Stability Pact secretariat with representatives from the former Yugoslav Republic of Macedonia, UNMIK, the EIB, the EC and potential donors to discuss the issue of the Blace border crossing between the former Yugoslav Republic of Macedonia and Kosovo. The minutes of this meeting will be posted on the website (www.stabilitypact.org).