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Mr Chairman, Ladies and Gentlemen

The plenary meeting of Working Table II (WTII) that took place yesterday noted the continuing economic progress being made in South Eastern Europe which secured net capital inflows of $ 10 billion in 2003 – including $ 6 billion of FDI. WT II continues to develop the necessary policy framework to expedite economic growth and the meeting again emphasised the importance of underpinning economic reforms with practical social policies.

Our key message is the need to press on with the implementation of socio-economic reforms - through many of our initiatives we have agreed the relevant criteria and guidelines – we must now deliver on implementation. A good example of this is the network of 28 free trade agreements. Yes securing these agreements was a substantial achievement, but it is only through full implementation that we will actually make a tangible contribution to improving the economic climate in SEE.
Aside from these general issues, we concentrated our debate on two main issues: job creation and energy. As regards the first issue, every single initiative in WT II directly or indirectly contributes to job creation in the region. The improvement of the business climate, ensuring a reliable supply of energy, developing infrastructure, enhancing the social sector - all of these contribute to establishing an environment which can generate and sustain employment for all sectors of society.

However, the WT meeting yesterday agreed that greater emphasis should be placed on job creation and we endorsed the results of the recent conference organised by WT II in conjunction with the Romanian SEECP Presidency and the Irish EU Presidency in Bucharest on the topic of entrepreneurship and employment with a particular focus on SMEs – the backbone of every successful economy.

The Irish experience is one that many countries would like to replicate, but I would like to highlight one the points made by the former Irish Prime Minister Garret FitzGerald at the conference, that the consistent application by successive governments of several core policies including fiscal rigour, education, a social contract and further building of capacities to fully benefit from EU facilities, was a crucial factor in developing a business climate conducive to economic growth and full employment.

The business climate in SEE must continue to improve if the region is to generate the investment - both domestic and foreign, particularly greenfield - necessary for growth and employment. 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 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 many countries. So I will reiterate the point that the window of opportunity presently open to SEE will be missed if the basic policy and regulatory environment is not put firmly in place.

The issue of consistency is also important in this respect. In some countries there is insufficient continuity in the staffing of agencies and government departments that are in charge of implementing reforms. This severely limits the effectiveness of external assistance.

Another area for improvement is that of government dialogue with the business community and with social partners. The quality, scope and structure of that dialogue are vital components in improving the environment. The importance of this dialogue is recognised in each of our initiatives.

The importance of education for job creation was noted – education should be seen as a source of economic growth, not a cost and engaging all social partners into the process of developing and implementing a broad education system is a crucial element for success. Developing suitable packages of financial and technical assistance is also critical, particularly for the indigenous SME sector.

The second major theme of our meeting was the evolving regional energy market in SEE - or as it will now be known - the Energy Community of South East Europe. The meeting expressed unanimous support for this initiative, through which the region will become part of the EU internal market in energy. Substantial and rapid progress has already taken place under this initiative since the signing of the first MoU in Athens in November 2002 and there is clear evidence of regional ownership of this process. The recent decision of the EU Council to issue a mandate to the European Commission to negotiate a legally binding agreement with the SEE countries is a major and most welcome milestone in this process and has generated genuine enthusiasm. It is expected that the EC will present a first draft of the agreement by 1 July and that a first meeting will take place on 14 July. Negotiations should last for approximately six months.

The ECSEE process is a highly inclusive one and incorporates a range of political, technical, social and financial aspects. For example the issue of affordability is being examined closely to identify options to ensure that appropriate pricing systems and /or social safety nets can be put in place.

Apart from the SEE countries, many neighbouring countries such as Greece, Italy, Turkey and Austria as well as IFIs and trans Atlantic donors are actively involved in the process and all reaffirmed their support.

In addition to energy, the development of infrastructure in general is yet another critical component of an improved business climate. Since we last met, the Infrastructure Steering Group (ISG) has had its mandate reaffirmed and expanded to cover environmental infrastructure. The regional infrastructure programme is an extremely dynamic one with several projects now complete and new projects added to the programme that is now worth € 4.1 billion. I was particularly happy to see the special pilot approach being developed for Albania whereby the different multilateral and bilateral donors and the Albanian Government will develop and implement a much more co-ordinated approach for transport infrastructure.

As mentioned at the outset, economic reforms must be underpinned by good social policies and I would like to highlight the recently agreed revised action plan of our Initiative for Social Cohesion. Under this plan, the various partners have committed themselves to deliver specific outputs in the different sectors.

Overall I think our meeting demonstrated clearly that SEE is well and truly consolidating political and economic stability and this achievement should be acknowledged. However our meeting also concluded that we must address several factors that slow down implementation if we are to have sustainable economic development and hence enhance job creation throughout the region. These barriers include lack of political will, limited administrative, technical and absorptive capacity in SEE countries and insufficient donor co-ordination. The different WT II initiatives already play a valuable role in the socio-economic development of the region and will continue to play an important role in overcoming these barriers.

Thank you